AS FILED WITH THE SEC ON APRIL 29, 1997 REGISTRATION NO. 333-06701
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
(Check appropriate box or boxes)
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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)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
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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. The Rule 24f-2 notice for fiscal year 1996 was filed on
February 28, 1997.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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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; Payout Provisions
9. Death Benefit Death Benefit; Payout Provisions
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; Payout
Provisions
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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May 1, 1997
PROFILE
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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This Profile is a summary of some of the more important points that you should
consider and know before purchasing the Contract. The Contract is more fully
described in the full prospectus which accompanies this Profile. Please read the
prospectus carefully.
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1. THE DISCOVERY SELECT VARIABLE ANNUITY.
The Discovery Select Variable Annuity is a contract between you and Pruco Life
Insurance Company that uses investment portfolios which accumulate cash value on
a tax-deferred basis. This allows the variable annuity to combine the advantages
of a tax-deferred investment with the flexibility and versatility of
professionally managed portfolios to meet your long-term financial goals, such
as retirement. Tax deferral simply means that you do not pay taxes on your
investments' income, dividends and capital gains each year; instead, taxes are
due when you take withdrawals or otherwise receive funds from the annuity. The
results of tax-deferred compounding can grow your assets faster than it would in
a similar taxable investment. In addition, your family receives the added
protection of a guaranteed death benefit.
The Discovery Select Variable Annuity offers a diverse selection of money
managers and variable investment options. Amounts that you allocate to a
variable investment option will fluctuate in response to market forces. You can
also select a fixed-rate option with a stipulated rate of interest for one year
or a market-value adjustment option which guarantees a stipulated rate of
interest if held for a seven year period. If you make a withdrawal or transfer
prior to the maturity date of a market-value adjustment option, the value will
be adjusted up or down or not at all, depending upon the difference in interest
rates between the date when funds were allocated to the option and the date of
the withdrawal or transfer.
The Discovery Select Contract, like all deferred annuity contracts, has two
phases: the accumulation phase and the income phase. During the accumulation
phase, you invest money in your Contract and earnings accumulate on a
tax-deferred basis. Your earnings are based on the investment performance of the
variable investment options and/or the interest rate earned on the fixed
investment options to which your money is allocated. During the income phase you
receive regular payments from your Contract. Among other factors, the growth of
your Contract during the accumulation phase will determine the amount or
duration of your payments during the income phase.
The automated withdrawal feature enables you to set up a regular income schedule
on a monthly, quarterly, semiannual or annual basis without annuitizing your
Contract. Of course, withdrawals are subject to tax and a 10% federal tax
penalty may apply if you are under age 59 1/2.
2. PAYOUT PROVISIONS.
If you want to receive regular income from your Contract, you can choose one of
these options: (1) equal installments for a fixed period; (2) monthly payments
for your life with 120 payments certain;
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PROFILE
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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(3) certain other annuity options; or (4) we will hold an amount at a stated
interest rate and pay the interest annually, semi-annually, quarterly or
monthly. The interest payment option is not available for Contracts sold in
connection with individual retirement annuities ("IRAs").
During the income phase you can only choose the above options to be payable on a
fixed basis. Once you begin receiving regular payments, you cannot change your
payment plan.
3. PURCHASING A DISCOVERY SELECT ANNUITY.
You can buy a Contract through your financial representative who can also help
you complete the proper forms. You can buy a Contract with $10,000 or more.
Additional payments of $1,000 or more may also be made during the accumulation
phase. Restrictions apply to IRA Contracts.
4. INVESTMENT OPTIONS.
You can put your money in any or all of the investment options listed below:
THE PRUDENTIAL SERIES FUND, INC.
Advised by: Prudential
Investment Corporation
Money Market Portfolio Equity Income Portfolio
Diversified Bond Portfolio Equity Portfolio
High Yield Bond Portfolio Global Portfolio
Stock Index Portfolio Prudential Jennison Portfolio
(a growth portfolio)
AIM VARIABLE INSURANCE FUNDS, INC. JANUS ASPEN SERIES
Advised by: Aim Advisors, Inc. Advised by: Janus Capital Corporation
AIM V.I. Growth and Income Fund Growth Portfolio
AIM V.I. Value Fund International Growth Portfolio
MFS VARIABLE INSURANCE TRUST OCC ACCUMULATION TRUST
Advised by: Massachusetts Financial Advised by: OpCap Advisors
Services Company Small Cap Portfolio
Emerging Growth Series Managed Portfolio (a balanced
Research Series (a growth portfolio) portfolio)
T. ROWE PRICE EQUITY SERIES, INC.
Advised by: T. Rowe Price T. ROWE PRICE INTERNATIONAL
Associates, Inc. SERIES, INC.
Equity Income Portfolio Advised by: Rowe Price-Fleming
International, Inc.
WARBURG PINCUS TRUST International Stock Portfolio
Advised by: Warburg, Pincus
Counsellors, Inc.
Post-Venture Capital Portfolio
(an aggressive growth portfolio)
Depending upon market fluctuations, you can make or lose money in any of these
portfolios.
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PROFILE
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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You may also allocate money to the one year fixed-rate option which guarantees a
stipulated rate of interest for a one-year period or to the Market-Value
Adjustment (the "MVA") option which guarantees a stipulated rate of interest if
held for a seven year period.
Each time you allocate or transfer money into either the fixed-rate option or
the MVA option a new interest cell is established. The interest rate for an
interest cell within the fixed-rate option is guaranteed for one year. During
the interest rate period the value of each interest cell within the MVA option
varies with changes in interest rates in the same way that the value of a bond
changes. For example, 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 end of the interest cell, the value of the MVA option will be
adjusted up or down or not at all, depending upon the difference in the interest
rates between the date when the interest cell was established and the date of
withdrawal or transfer.
5. EXPENSES.
The Discovery Select Contract has the following cost-related product features,
outlined below.
There is an administrative charge of $30 that is imposed on each Contract
anniversary and at the time of a full withdrawal for Contracts of less than
$50,000. We deduct insurance and expense charges which total 1.40% annually of
the average daily value of your Contract allocated to the variable investment
options. There are also investment charges imposed on Contracts with money
allocated to the variable investment options which in fiscal year 1996 ranged
from 0.40% to 1.40% annually of the average daily value of the investment
portfolio. If applicable, you may be assessed a state premium tax which ranges
from 0% to 5%, depending upon the state and whether the Contract is
non-qualified or issued in connection with an IRA.
If you withdraw money in excess of the free withdrawal amount allowed in the
Contract during the first 7 years of the Contract, a withdrawal charge is
assessed. The charge is based upon the amount withdrawn and starts with 7% in
the first year and decreases 1% each year until in the 8th and later years there
is no charge.
The following chart will help you understand the charges in the Contract. The
column "Total Annual Charges" shows the total of the $30 administrative charge
(which is represented as .10%), the 1.40% insurance charges and the investment
charges for each variable investment option. The next two columns show you
examples of the charges, in dollars, you would pay under a Contract. The
examples assume that you invested $1,000 in each investment option within the
Contract earning 5% annually and that you withdraw your money (1) at the end of
year 1, and (2) at the end of year 10. For year 1, the Total Annual Charges are
assessed as well as the withdrawal charges. For year 10, the examples show the
aggregate of all the annual charges assessed for the 10 years with no withdrawal
charge. The premium tax is assumed to be 0% in both examples.
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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TOTAL TOTAL
ANNUAL ANNUAL
TOTAL TOTAL CHARGES CHARGES
ANNUAL ANNUAL TOTAL AT END OF AT END OF
INSURANCE PORTFOLIO ANNUAL 1 YEAR 10 YEARS
PORTFOLIO CHARGES CHARGES CHARGES (1) (2)
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THE PRUDENTIAL SERIES FUND, INC.
Money Market 1.50% 0.44% 1.94% $ 83 $231
Diversified Bond 1.50% 0.45% 1.95% $ 82 $223
High Yield 1.50% 0.63% 2.13% $ 84 $244
Stock Index 1.50% 0.40% 1.90% $ 82 $219
Equity Income 1.50% 0.45% 1.95% $ 82 $220
Equity 1.50% 0.50% 2.00% $ 83 $231
Prudential Jennison 1.50% 0.66% 2.16% $ 84 $244
Global 1.50% 0.92% 2.42% $ 87 $267
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income 1.50% 0.78% 2.28% $ 85 $254
AIM V.I. Value 1.50% 0.73% 2.23% $ 85 $250
JANUS ASPEN SERIES
Growth 1.50% 0.69% 2.19% $ 85 $247
International Growth 1.50% 1.26% 2.76% $ 90 $305
MFS VARIABLE INSURANCE TRUST
Emerging Growth 1.50% 1.00% 2.50% $ 88 $279
Research 1.50% 1.00% 2.50% $ 88 $276
OCC ACCUMULATION TRUST
Managed 1.50% 0.90% 2.40% $ 87 $272
Small Cap 1.50% 1.02% 2.52% $ 88 $278
T. ROWE PRICE EQUITY SERIES, INC.
Equity Income 1.50% 0.85% 2.35% $ 86 $265
T. ROWE PRICE INTERNATIONAL SERIES, INC.
International Stock 1.50% 1.05% 2.55% $ 88 $281
WARBURG PINCUS TRUST
Post-Venture Capital 1.50% 1.40% 2.90% $ 91 $314
</TABLE>
The portfolio charges reflect any expense reimbursement or fee waiver that may
be in effect. For more detailed information, see the Fee Table in the Prospectus
for the Contract.
6. TAXES.
Earnings in your Contract are tax-deferred until you take them out. In addition,
if money is taken out before age 59 1/2, there may be a 10% tax penalty assessed
on the amount that is deemed to be income. In general, for tax purposes, if you
take money out, earnings are deemed to be taken out first and are taxed as
income. For Contracts sold in connection with IRAs, the entire distribution
amount is generally considered taxable income.
7. ACCESS TO YOUR MONEY.
You can take money out at any time during the accumulation phase. Each year you
can take up to 10% of your total purchase payments without any charge plus any
charge-free amount still available from the immediately preceding Contract year.
If you withdraw money in excess of the free withdrawal amount, a percentage of
the amount you withdraw may be assessed a decreasing
4
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PROFILE
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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withdrawal charge during the first seven Contract years (7%-6%-5%-4%-3%-2%-
1%-0%). This charge will be waived for payment of the death benefit and under
the Critical Care Access provision of the Contract, if applicable. A withdrawal
may be subject to income tax and to a tax penalty.
8. PERFORMANCE.
The value of the Contract will fluctuate depending upon the performance of the
investment option(s) you choose. From time to time, we may advertise total
return figures for each variable investment option. As of the date of the
Prospectus, we had offered the Contract for less than 1 full year, and therefore
no performance information is presented here.
9. DEATH BENEFIT.
If you die during the accumulation phase, the person you have chosen as the
beneficiary will receive a death benefit. The death benefit will be the greatest
of three amounts: 1) the money you have put in the Contract less any money you
have taken out including the related withdrawal charges; 2) the value of your
Contract as of the date of due proof of death; and 3) the greatest value of your
Contract calculated on every third Contract anniversary reduced by all
subsequent withdrawals and withdrawal charges. The death benefit will be subject
to tax.
10. OTHER INFORMATION.
Free Look. You may return your Contract for a refund within 10 days after you
receive it. Some states allow a longer period of time during which a Contract
may be returned for a refund. Simply deliver or mail the Contract to the
Prudential Annuity Service Center or to the representative who sold it to you.
We will return your money or Contract value in accordance with applicable law
and the Contract will be canceled. Special rules apply for Contracts issued in
connection with IRAs.
Asset Allocation. An asset allocation program is available, at no cost, to
assist you in determining how to allocate your purchase payments.
Dollar Cost Averaging. Dollar Cost Averaging allows you to have a regular amount
of money automatically transferred from the fixed-rate option or one of the
variable investment options into one or more variable investment options.
Auto-Rebalancing. Auto-rebalancing will help keep your investment in line with
the investment mix you selected. We will maintain your allocation mix by
adjusting your money between the selected variable investment options based on
the percentage allocations that you choose. This will be done at specified
intervals as elected by you.
Critical Care Access. Under certain circumstances, we will waive any
administrative and withdrawal charges if you need to access your money while
confined to a nursing home or hospital, or if you become terminally ill.
5
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PROFILE
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PRUCO LIFE INSURANCE COMPANY
DISCOVERY SELECT VARIABLE ANNUITY CONTRACT
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11. INQUIRIES.
If you need more information, please contact us at:
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
(800) 445-4571
If you need Contract owner services (such as changes in Contract
information, inquiries as to Contract values, or to elect or modify
Contract options) please contact us at:
PRUDENTIAL ANNUITY SERVICE CENTER
300 Columbus Circle
Edison, New Jersey 08837
1-888-PRU-2888 (toll free)
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PROSPECTUS
MAY 1, 1997
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
("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
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JANUS ASPEN SERIES MFS VARIABLE INSURANCE TRUST
Growth Portfolio International Growth Portfolio Emerging Growth Series Research Series
OCC ACCUMULATION TRUST T. ROWE PRICE EQUITY SERIES, INC.
Managed Portfolio Small Cap Portfolio Equity Income Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC. WARBURG PINCUS TRUST
International Stock Portfolio Post-Venture Capital Portfolio
</TABLE>
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
market-value adjustment option is not available to residents of Maryland,
Oregon and Washington.
Continued on next page
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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 U.S. 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 Prudential.
DISSEL-1 Ed 5-97 Cat. No. 64M8836
<PAGE>
Continued from front cover
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
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.
This prospectus provides information a prospective investor should know before
investing. Additional information about the Contract has been filed with the
U.S. Securities and Exchange Commission in a Statement of Additional
Information, dated May 1, 1997, 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 Funds. Additional Funds and subaccounts may be offered in the future.
The Contents of the Statement of Additional Information with respect to the
Contract appear on page 25 of this prospectus.
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PROSPECTUS CONTENTS
Page
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS .................. 1
FEE TABLE ............................................................. 2
GENERAL INFORMATION ABOUT PRUCO LIFE, THE PRUCO LIFE FLEXIBLE
PREMIUM VARIABLE ANNUITY ACCOUNT, AND THE INVESTMENT OPTIONS
AVAILABLE UNDER THE CONTRACT ......................................... 7
Pruco Life Insurance Company ......................................... 7
Pruco Life Flexible Premium Variable Annuity Account ................. 7
The Funds ............................................................ 7
The Interest-Rate Investment Options And Investments by Pruco Life ... 9
DETAILED INFORMATION ABOUT THE CONTRACT ............................... 10
Requirements for Issuance of a Contract .............................. 10
Short-Term Cancellation Right or "Free Look" ......................... 10
Allocation of Purchase Payments ...................................... 10
Asset Allocation Program ............................................. 10
Cash Value ........................................................... 11
Guaranteed Interest Rate Periods ..................................... 11
What Happens When an Interest Cell Reaches its Maturity Date? ........ 11
Transfers ............................................................ 11
Dollar Cost Averaging ................................................ 12
Auto-Rebalancing ..................................................... 12
Withdrawals .......................................................... 12
Automated Withdrawals ................................................ 13
Market-Value Adjustment .............................................. 13
Death Benefit ........................................................ 13
Valuation of a Contract Owner's Contract Fund ........................ 13
CHARGES, FEES AND DEDUCTIONS .......................................... 14
Premium Taxes and Taxes Attributable to Purchase Payments ............ 14
Administrative Charge ................................................ 14
Charge for Assuming Mortality and Expense Risks ...................... 15
Expenses Incurred by the Funds ....................................... 15
Withdrawal Charge .................................................... 15
Transaction Charge ................................................... 15
Critical Care Access ................................................. 15
Other Charges ........................................................ 16
FEDERAL TAX STATUS .................................................... 16
Diversification and Investor Control ................................. 16
Taxes Payable by Contract Owners ..................................... 16
Withholding. ......................................................... 17
Impact of Federal Income Taxes ....................................... 18
IRS Required Distributions on Death of Owner ......................... 18
Contracts Used in Connection with Tax Favored Plans .................. 18
IRAs ................................................................. 19
SEPs ................................................................. 19
Simple-IRAs .......................................................... 20
TDAs ................................................................. 20
Minimum Distribution Option .......................................... 20
Withholding on Tax Favored Plans ..................................... 21
Penalty for Early Withdrawals ........................................ 21
ERISA Disclosure ..................................................... 21
Additional ERISA Requirements ........................................ 21
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PAYOUT PROVISIONS ..................................................... 22
1. Annuity Payments for a Fixed Period ............................... 22
2. Life Annuity with 120 Payments Certain ............................ 22
3. Interest Payment Option ........................................... 22
4. Other Annuity Options ............................................. 22
Legal Considerations Relating to Sex-Distinct Annuity Purchase Rates . 23
OTHER INFORMATION ..................................................... 23
Misstatement of Age or Sex ........................................... 23
Sale of the Contract and Sales Commissions ........................... 23
Voting Rights ........................................................ 23
Substitution of Fund Shares .......................................... 24
Ownership of the Contract ............................................ 24
Performance Information .............................................. 24
Reports to Contract Owners ........................................... 24
State Regulation ..................................................... 25
Experts .............................................................. 25
Litigation ........................................................... 25
Statement of Additional Information .................................. 25
Additional Information ............................................... 26
Financial Statements ................................................. 26
ACCUMULATION UNIT VALUES .............................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................. 29
DIRECTORS AND OFFICERS ................................................ 30
EXECUTIVE COMPENSATION ................................................ 32
FINANCIAL STATEMENTS OF THE PRUCO LIFE FLEXIBLE PREMIUM
VARIABLE ANNUITY ACCOUNT ............................................. A-1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE
COMPANY AND SUBSIDIARIES ............................................. B-1
MARKET-VALUE ADJUSTMENT FORMULA ....................................... C-1
ii
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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.
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
certain required documentation.
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. A person who purchases a DISCOVERY SELECT(SM) Contract and
makes the purchase payments. The Contract may be owned by joint owners. An owner
will usually also be an annuitant, but need not be. An 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
<PAGE>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchase Payments ............................. None
Maximum Withdrawal Charge:
- - --------------------------------------------------------------------------------
THE WITHDRAWAL CHARGE WILL BE EQUAL
FOR WITHDRAWALS DURING THE CONTRACT TO THE FOLLOWING PERCENTAGE OF THE
YEAR INDICATED 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
- - --------------------------------------------------------------------------------
* The withdrawal charge is not imposed on any charge-free withdrawal
amounts, withdrawals made under Critical Care Access, see page 15, 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 Charge ................. 1.25%
Administrative Fee ................................ 0.15%
----
Total Separate Account Annual Expenses ............ 1.40%
====
ANNUAL EXPENSES OF THE FUNDS
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND ANNUAL
INVESTMENT OTHER EXPENSES (AFTER EXPENSE
MANAGEMENT FEE EXPENSES REIMBURSEMENTS)
-------------- -------- -----------------------
THE PRUDENTIAL SERIES FUND(1)
<S> <C> <C> <C>
Money Market Portfolio .............. 0.40% 0.04% 0.44%
Diversified Bond Portfolio .......... 0.40% 0.05% 0.45%
High Yield Bond Portfolio ........... 0.55% 0.08% 0.63%
Stock Index Portfolio ............... 0.35% 0.05% 0.40%
Equity Income Portfolio ............. 0.40% 0.05% 0.45%
Equity Portfolio .................... 0.45% 0.05% 0.50%
Prudential Jennison Portfolio ....... 0.60% 0.06% 0.66%
Global Portfolio .................... 0.75% 0.17% 0.92%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND ANNUAL
INVESTMENT OTHER EXPENSES (AFTER EXPENSE
MANAGEMENT FEE EXPENSES REIMBURSEMENTS)
-------------- -------- -----------------------
AIM VARIABLE INSURANCE FUNDS, INC.(2)
<S> <C> <C> <C>
AIM V.I. Growth and Income Fund ..... 0.65% 0.13% 0.78%
AIM V.I. Value Fund ................. 0.64% 0.09% 0.73%
JANUS ASPEN SERIES(3)
Growth Portfolio .................... 0.65% 0.04% 0.69%
International Growth Portfolio ...... 0.05% 1.21% 1.26%
MFS VARIABLE INSURANCE TRUST(4)
Emerging Growth Series .............. 0.75% 0.25% 1.00%
Research Series ..................... 0.75% 0.25% 1.00%
OCC ACCUMULATION TRUST(5)
Managed Portfolio ................... 0.80% 0.10% 0.90%
Small Cap Portfolio ................. 0.80% 0.22% 1.02%
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%
WARBURG PINCUS TRUST(7)
Post-Venture Capital Portfolio ...... 0.62% 0.78% 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, 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.
(2) AIM Variable Insurance Funds, Inc. AIM may from time to time voluntarily
waive or reduce its respective fees. Fee waivers or reductions, other than those
contained in the agreement with the adviser, may be modified or terminated at
any time.
(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, 1996, 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, 1998. Without fee waivers or reductions, the
Management Fee, Other Expenses and Total Fund Annual Expenses would have been
0.79%, 0.04% and 0.83% for the Growth Portfolio and 1.00%, 1.21% and 2.21% for
the International Growth Portfolio.
(4) MFS Variable Insurance Trust. The Adviser has agreed to bear expenses for
each Series, subject to reimbursement by each Series, such that each Series'
"Other Expenses" shall not exceed 0.25% of the average daily net assets of the
Series during the current fiscal year. See "Information Concerning Shares of
Each Series--Expenses." Otherwise, "Other Expenses" for the Emerging Growth
Series and the Research Series would be 0.41% and 0.73%, respectively, and
"Total Operating Expenses" would be 1.16% and 1.48%, respectively, for these
Series.
3
<PAGE>
(5) The annual expenses of OCC Accumulation Trust Portfolios (the "Portfolios")
as of December 31, 1996 have been restated to reflect new management fee and
expense limitation arrangements in effect as of May 1, 1996. Additionally, Other
Expenses are shown gross of certain expense offsets afforded the Portfolios
which effectively lowered overall custody expenses. Effective May 1, 1996, the
expenses of the Portfolios were contractually limited by OpCap Advisors so that
their respective annualized operating expenses (net of any expense offsets) do
not exceed 1.25% of their respective average daily net assets. Furthermore,
through December 31, 1997, the annualized operating expenses of the Managed and
Small Cap Portfolios will be voluntarily limited by OpCap Advisors so that
annualized operating expenses (net of any expense offsets) of these Portfolios
do not exceed 1.00% of their respective average daily net assets. Without such
contractual and voluntary expense limitations and without giving effect to any
expense offsets, the Management Fees, Other Expenses and Total Portfolio Annual
Expenses incurred for the fiscal year ended December 31, 1996 would have been:
.80%, .10% and .90%, respectively, for the Managed Portfolio, and .80%, .26% and
1.06%, 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 Pincus 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 0.82%, and Total Fund Annual Expenses
would equal 2.07%. Other Expenses for the Fund are based on annualized estimates
of expenses for the fiscal year ending December 31, 1997, net of any fee waivers
or expense reimbursements. The investment adviser and co-administrator have
undertaken to limit the Portfolio's Total Portfolio Operating Expenses to the
limits shown in the table above through December 31, 1997.
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.
4
<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 15.)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Prudential Series Fund
Money Market Portfolio ................... $83 $ 97 $122 $231
Diversified Bond Portfolio ............... $82 $ 95 $118 $223
High Yield Bond Portfolio ................ $84 $101 $128 $244
Stock Index Portfolio .................... $82 $ 94 $116 $219
Equity Income Portfolio .................. $82 $ 94 $117 $220
Equity Portfolio ......................... $83 $ 97 $122 $231
Prudential Jennison Portfolio ............ $84 $101 $128 $244
Global Portfolio ......................... $87 $108 $140 $267
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth And Income Fund .......... $85 $106 $133 $254
AIM V.I. Value Fund ...................... $85 $103 $131 $250
Janus Aspen Series
Growth Portfolio ......................... $85 $102 $130 $247
International Growth Portfolio ........... $90 $117 $159 $305
MFS Variable Insurance Trust
Emerging Growth Series ................... $88 $109 $145 $279
Research Series .......................... $88 $119 $144 $276
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 $139 $265
T. Rowe Price International Series, Inc.,
International Stock Portfolio ........... $88 $112 $147 $281
Warburg Pincus Trust
Post-Venture Capital Portfolio ........... $91 $122 $164 $314
</TABLE>
5
<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 ................... $20 $62 $107 $231
Diversified Bond Portfolio ............... $19 $60 $103 $223
High Yield Bond Portfolio ................ $21 $66 $113 $244
Stock Index Portfolio .................... $19 $59 $101 $219
Equity Income Portfolio .................. $19 $59 $102 $220
Equity Portfolio ......................... $20 $62 $107 $231
Prudential Jennison Portfolio ............ $21 $66 $113 $244
Global Portfolio ......................... $24 $73 $125 $267
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth And Income Fund .......... $22 $69 $118 $254
AIM V.I. Value Fund ...................... $22 $68 $116 $250
Janus Aspen Series
Growth Portfolio ......................... $22 $67 $115 $247
International Growth Portfolio ........... $27 $84 $144 $305
MFS Variable Insurance Trust
Emerging Growth Series ................... $25 $76 $130 $279
Research Series .......................... $25 $76 $129 $276
OCC Accumulation Trust
Managed Portfolio ........................ $23 $74 $127 $272
Small Cap Portfolio ...................... $24 $76 $130 $278
T. Rowe Price
T. Rowe Price Equity Series, Inc., .......
Equity Income Portfolio ................. $23 $72 $124 $265
T. Rowe Price International Series, Inc.,
International Stock Portfolio ........... $25 $77 $132 $281
Warburg Pincus Trust
Post-Venture Capital Portfolio ........... $28 $87 $149 $314
</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. Each
year (and upon surrender), Pruco Life deducts a $30 fee with respect to a
Contract having a Contract Fund valued less than $50,000. As of the date of this
prospectus, no such annual charge has been collected, although the number of
Contracts with initial purchase payments above and below $50,000 is known. The
above Examples use as the annual Contract fee the average fee that would be
derived if the $30 annual fee were assessed based on the value of the initial
purchase payment for each Contract issued as of the date of this prospectus.
This average fee is allocated to each of the subaccounts assuming a $19,000
average Contract Fund. Your actual fees will vary based on the amount of your
Contract Fund and your specific allocation.
The required table of accumulation unit values, which sets out certain
historical information about the value of interests in each subaccount, appears
in the Appendix to this prospectus on Page 27.
6
<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 Prudential, a mutual insurance company founded in
1875 under the laws of the State of New Jersey. As of December 31, 1996,
Prudential has invested over $442 million in Pruco Life in connection with Pruco
Life's organization and operation. Prudential intends from time to time to make
additional capital contributions to Pruco Life as needed to enable it to meet
its reserve requirements and expenses in connection with its business.
Prudential is under no obligation to make such contributions and its assets do
not back the benefits payable under the Contract. Pruco Life's consolidated
financial statements appear on page B-1 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 U.S. 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 A-1.
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.
7
<PAGE>
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.
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 issuers.
Current income, if any, is incidental.
Prudential is the investment advisor for the assets of each of the portfolios of
the Prudential Series Fund. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that, subject to Prudential's supervision, PIC will furnish investment
advisory services in connection with the management of the Prudential Series
Fund. In addition, 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,
convertible 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.
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.
8
<PAGE>
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-Venture 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 2 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
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
9
<PAGE>
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. Any 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.
The initial purchase payment is credited to the Contract Fund as of the Contract
Date. If the initial purchase payment that you submit is not accompanied by all
the information we need to issue the Contract, we will contact you to get the
needed information. If we cannot obtain all the needed information within five
business days after receipt, we will either return your initial purchase payment
or get your consent to retaining it until we have received all the necessary
information. 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"
You can cancel the Contract within 10 days after receiving it (or whatever
greater period is required in your state). A refund may be requested by mailing
or delivering the Contract to the representative who sold it or to the
Prudential Annuity Service Center. You will receive whatever your Contract is
worth as of the day we receive your request plus or minus the market-value
adjustment with respect to any values in the MVA option. This may be more or
less than your original payments. Some states require that we return your
payments, less any previous withdrawals. If this Contract was purchased as an
IRA, and you exercise this cancellation right, the purchase payments or the
total value of the Contract Fund (whichever is greater) will be refunded to you.
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). Subsequent
purchase payments are credited to the Contract Fund as of the end of the
valuation period in which a proper request is received at the Prudential Annuity
Service Center. 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
11.
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 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
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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 12 and FEDERAL TAX STATUS, on page 16.
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. 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.
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 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 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.
The Contract was not designed for professional market timing organizations or
other organizations or individuals using programed, large or frequent transfers.
A pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Funds and will be discouraged. If such a pattern were to be
found, we may be required to modify the transfer procedures, including but not
limited to, not accepting transfer requests of an agent acting under a power of
attorney on behalf of more than one Owner.
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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 15. 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 16.
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 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 13.
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 15. 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
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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.
The minimum automated withdrawal amount is $250. An automated withdrawal will
generally have federal income tax consequences, which could include tax
penalties. See FEDERAL TAX STATUS, on page 18.
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. If the Contract owner dies, and is not the
last surviving or sole annuitant, this death benefit is not applicable. For a
discussion of the required distribution rules, See TAXES PAYABLE BY CONTRACT
OWNERS, page 16.
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.
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
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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. Currently, no such deduction is made from
purchase payments in any state. In some states, however, 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 0% to 5%. Pruco Life 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.
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.
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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.
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 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 C-1 as part of the
example of how the Market-Value Adjustment works.
If your withdrawal of purchase payments exceeds the charge-free amount and it is
made within the first seven Contract years, a percentage charge will be applied.
The withdrawal charge is based on Contract Date and not deposit date. The
following table sets forth the rates that apply:
- - --------------------------------------------------------------------------------
THE WITHDRAWAL CHARGE WILL BE EQUAL
FOR WITHDRAWALS DURING THE CONTRACT TO THE FOLLOWING PERCENTAGE OF THE
YEAR INDICATED 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 PAYOUT PROVISIONS, page
22. Pruco Life may reduce or eliminate the amount of the withdrawal charge when
the Contract is sold under circumstances which reduce its sales expenses. Some
examples are: if there is a large group of individuals that will be purchasing
the Contract or a prospective purchaser already has a relationship with Pruco
Life or its affiliates.
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.
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
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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 is terminally ill (i.e., has 6 months or less
to live).
OTHER CHARGES
The Account is not a separate taxpayer for purposes of the Code. The earnings of
the Account are taxed as part of the operations of Pruco Life. No charge is
currently being made against the Account for company federal income taxes
(excluding any charge for taxes attributable to premiums). Pruco Life will
review the question of a charge to the Account for company federal income taxes
periodically. Such a charge may be made in future years for any company federal
income taxes that would be attributable to the Account.
Under current law, Pruco Life may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant
and they are not charged against the Account. If there is a material change in
the applicable state or local tax laws, the imposition of any such taxes upon
Pruco Life that are attributable to the Account may result in a corresponding
charge against the Account.
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, and increases in the value of the Contract will be subject to current
tax.
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.
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.
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Amounts withdrawn before annuity payments begin which represent a distribution
of investment income will be taxable as ordinary income and may, under certain
circumstances, be subject to a penalty tax. For non-qualified Contracts, amounts
which represent a withdrawal of purchase payments will not be taxable as
ordinary income or subject to a penalty tax. For non-qualified Contracts, those
used in connection with favored plans. 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 those used in connection with tax favored plans, 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 withdrawals: (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) allocable
to investment in the Contract before August 14, 1982; (6) under a qualified
funding asset (defined by Code section 130(d)); or (7) under an immediate
annuity contract (within the meaning of section 72(u)(4)).
If the 10% penalty tax does not apply to a withdrawal by reason of the exception
for withdrawals in the form of a level annuity (clause (4) above), but the
series of payments is modified (other than by reason of death or disability),
either (a) before the end of the 5-year period beginning with the first payment
and after the Contract Owner reaches age 59 1/2, or (b) before the Contract
Owner attains age 59 1/2, the Contract Owner's tax for the year of the
modification will be increased by the penalty tax that would have been imposed
without the exception, plus interest for the deferral period.
Where a contract is issued in exchange for a Contract containing purchase
payments made before August 14, 1982, favorable tax rules may apply to certain
withdrawals from the Contract. Consult a tax advisor for information regarding
these rules.
Election of the interest payment option is not considered 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. 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 18.
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 24.
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
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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 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, such portion of 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.
CONTRACTS USED IN CONNECTION WITH TAX FAVORED PLANS
Currently, the Contract may be purchased for use in connection with individual
retirement accounts or annuities ("IRAs") which are subject to Sections 408(a)
and 408(b) of the Code. At some time in the future, we may allow the Contract to
be purchased in connection with other retirement arrangements which are entitled
to favorable federal income tax treatment ("tax favored plans"). These include:
simplified employee pension plans ("SEPs") under Section 408(k) of the Code,
saving incentive match plans for employees-IRA ("SIMPLE-IRAs") under Section
408(p) of the Code, and tax deferred annuities under Section 403(b) of the Code
("TDAs"). 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
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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),
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; (4) except in the case of a
"rollover" contribution, the annual premium may not exceed $2,000; (5)
generally, the annuity date may be no later than April 1 of the calendar year
following the calendar year in which the annuitant attains age 70 1/2; and (6)
annuity and death benefit payments must satisfy certain minimum distribution
requirements. Contracts issued as Section 408(b) 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 16). 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 calendar year
following attainment of age 70 1/2 and are subject to certain minimum
distribution requirements.
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 a free
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look after making an initial contribution in which to affirm or reverse their
decision to participate. Therefore, within the free look 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. See SHORT-TERM
CANCELLATION RIGHT OR "FREE LOOK", page 10.
SIMPLE-IRAS
Under a SIMPLE-IRA, an employee can elect to contribute up to $6,000 (in 1997,
indexed) per year to an IRA. Employer contributions are also provided as either
a match (up to 3% of compensation) or 2% nonelective contribution. These
contributions are not taxable until withdrawn, and are fully vested.
Distributions are generally taxed under the rules applicable to IRAs.
SIMPLE-IRAs are not subject to the general nondiscrimination rules and
simplified reporting rules apply.
To qualify for a SIMPLE-IRA, the employer may employ no more than 100 employees
(on a controlled group basis) who received at least $5,000 in compensation from
the employer in the preceding year, and may not maintain other
employer-sponsored retirement plans to which contributions were made or benefits
accrued.
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 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 SEC 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 from a TDA generally must commence by April
1 of the calendar year following the later of the calendar year in which the
employee: (i) attains age 70 1/2; or (2) retires. Distributions must satisfy
minimum distribution requirements similar to those that apply to qualified plans
generally.
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
calendar year following the later of the calendar year in which the employee:
(1) attains age 70 1/2; or (2) retires (part 2 is not applicable to IRAs). 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.
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
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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
elects 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 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.
PENALTY FOR EARLY WITHDRAWALS
A 10% penalty tax will generally apply to the taxable part of distributions
received from an IRA, SEP, SIMPLE-IRA (25% penalty in certain situations),
Section 403(b) annuity, and qualified retirement plan before age 59 1/2. Limited
exceptions are provided, such as where amounts are paid in the form of a
qualified life annuity, upon death of the employee, to pay certain medical
expenses, or in certain instances disability or upon separation from service on
or after the attainment of age 55.
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 14. Information about sales
representatives and commissions may be found under SALE OF THE CONTRACT AND
SALES COMMISSIONS, page 23. 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 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.
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PAYOUT PROVISIONS
The Contract can be annuitized any time after the end of the first Contract
year. 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.
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
(which may be less in some states), 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 0%
to 5% of the amount applied to effect an annuity. See PREMIUM TAXES AND TAXES
ATTRIBUTABLE TO PURCHASE PAYMENTS, page 14. 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 the forms listed below. 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 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.
1. ANNUITY PAYMENTS FOR A FIXED PERIOD
Payments will be made 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.
2. 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. No surrender
charge is applicable under this option.
3. 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.
Special provisions may apply if the Contract is issued in connection with an
IRA.
4. OTHER ANNUITY OPTIONS
Currently, you may choose to receive the proceeds of your Contract Fund in the
form of payments like those of any annuity or life annuity then regularly
offered by Prudential or by Pruco Life that (1) is based on United States
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currency; (2) is bought by a single sum; (3) does not provide for dividends; and
(4) does not normally provide for deferral of the first payment. Prudential and
Pruco Life currently offer a number of different annuity options, including
joint and survivor annuities covering more than one person.
Under Option 4, unless a fixed period annuity of less than 10 years is selected,
Pruco Life will waive withdrawal charges that might be applicable under other
annuity options. Further, if you select Option 1 without a right of withdrawal,
Pruco Life will effect that option under Option 3 if doing so provides greater
monthly payments.
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.
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 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
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 213 Washington
Street, Newark, New Jersey 07102-2992. The Contract is sold by registered
representatives of Prusec and may also be sold through other broker-dealers
authorized by Prusec. 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 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.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account are
invested in shares of the corresponding 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
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 1940 Act. 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 Funds 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 Fund's fundamental investment policy, Contract owners participating
in such funds will vote separately on the matter.
The number of Fund 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 Fund.
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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.
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, the annuitant. Ownership of the
Contract may, however, be transferred to another person who need not be the
person who is to receive annuity payment. 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
24
<PAGE>
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 annual and semi-annual reports for the applicable Funds.
If a single individual or company invests in the Prudential Series Fund through
more than one variable insurance contract, then the individual or company will
receive only one copy of each annual and semi-annual report issued by the
Prudential Series Fund. However, if such individual or company wishes to receive
multiple copies of any such report, a request may be made by calling the
toll-free telephone number listed on the cover page of this prospectus.
STATE REGULATION
Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
In addition to the annual statements referred to above, Pruco Life is required
to file with Arizona and other jurisdictions a separate statement with respect
to the operations of all its variable contract accounts, in a form promulgated
by the National Association of Insurance Commissioners.
EXPERTS
The financial statements included in this prospectus for the year ended December
31, 1996 have been audited by Price Waterhouse LLP, independent accountants, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Price Waterhouse LLP's principal business address is 1177 Avenue of
the Americas, New York, New York, 10036.
The financial statements included in this prospectus for years ended December
31, 1995 and December 31, 1994, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two Hilton Court, Parsippany, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statements disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.
LITIGATION
Several actions have been brought against Pruco Life alleging that Pruco Life
and its agents engaged in improper life insurance sales practices. Prudential
has agreed to indemnify Pruco Life for losses, if any, resulting from such
litigation. No other significant litigation is being brought against Pruco Life
that would have a material effect on its financial position.
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
25
<PAGE>
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC, 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 of Pruco Life is 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. This prospectus also contains financial
statements for the Account.
26
<PAGE>
APPENDIX
ACCUMULATION UNIT VALUES
THE DISCOVERY SELECT VARIABLE ANNUITY SUBACCOUNTS OF THE
FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY MARKET DIVERSIFIED BOND HIGH YIELD BOND
------------ ---------------- ---------------
0/07/96* 10/07/96* 10/07/96*
TO TO TO
12/31/96 12/31/96 12/31/96
------------ ---------- ----------
<S> <C> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.03576 $ 1.03731 $ 1.11250
2. Accumulation unit value at end of period ................... $ 1.04505 $ 1.06033 $ 1.12263
3. Number of accumulation units outstanding at end of period .. 16,621,393.391 6,007,103.917 8,231,177.952
<CAPTION>
-----------------------------------
OCC ACCUM. TRUST PRUDENTIAL
MANAGED PORTFOLIO STOCK INDEX
----------------- -----------
10/07/96* 10/07/96*
TO TO
12/31/96 12/31/96
----------- ------------
<S> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 0.99909 $ 1.07837
2. Accumulation unit value at end of period ................... $ 1.05185 $ 1.13652
3. Number of accumulation units outstanding at end of period .. 8,643,613.602 7,481,300.307
<CAPTION>
PRUDENTIAL AIM V.I. T. ROWE PRICE
EQUITY INCOME GROWTH & INCOME FUND EQUITY INCOME PORT.
------------ -------------------- -------------------
10/07/96* 10/07/96* 10/07/96*
TO TO TO
12/31/96 12/31/96 12/31/96
------------ ---------- ----------
<S> <C> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.13494 $ 1.00065 $ 0.99996
2. Accumulation unit value at end of period ................... $ 1.23339 $ 1.03757 $ 1.04885
3. Number of accumulation units outstanding at end of period .. 2,784,920.648 3,408,549.878 6,578,342.434
<CAPTION>
PRUDENTIAL PRUDENTIAL
EQUITY JENNISON
------------ -----------
10/07/96* 10/07/96*
TO TO
12/31/96 12/31/96
----------- ------------
<S> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.13479 $ 1.12169
2. Accumulation unit value at end of period ................... $ 1.20807 $ 1.13943
3. Number of accumulation units outstanding at end of period .. 8,287,180.736 4,882,616.029
<CAPTION>
AIM V.I. JANUS ASPEN MFS
VALUE FUND GROWTH PORTFOLIO RESEARCH SERIES
------------ ---------------- ---------------
10/07/96* 10/07/96* 10/07/96*
TO TO TO
12/31/96 12/31/96 12/31/96
------------ ---------- ----------
<S> <C> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.00223 $ 1.00191 $ 1.00228
2. Accumulation unit value at end of period ................... $ 1.04935 $ 1.00830 $ 1.02610
3. Number of accumulation units outstanding at end of period .. 4,033,863.906 5,459,308.662 2,727,173.841
MFS OCC ACCUM. TRUST
EMERGING GROWTH SERIES SMALL CAP. PORTFOLIO
---------------------- --------------------
10/07/96* 10/07/96*
TO TO
12/31/96 12/31/96
----------- ------------
<S> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.00860 $ 0.99623
2. Accumulation unit value at end of period ................... $ 0.95812 $ 1.05106
3. Number of accumulation units outstanding at end of period .. 5,755,823.499 2,345,892.859
<CAPTION>
WARBURG PINCUS PRUDENTIAL JANUS ASPEN
POST VENTURE CAP. PORT. GLOBAL INTERNATIONAL GROWTH PORT.
---------------------- ----------- -------------------------
10/07/96* 10/07/96* 10/07/96*
TO TO TO
12/31/96 12/31/06 12/31/96
---------- ---------- ----------
<S> <C> <C> <C>
1. Accumulation unit value at beginning of period ............. $ 1.00587 $ 1.14330 $ 1.00130
2. Accumulation unit value at end of period ................... $ 0.95745 $ 1.19505 $ 1.05349
3. Number of accumulation units outstanding at end of period .. 1,786,114.670 1,375,155.605 5,902,196.099
*Commencement of Business
T. ROWE PRICE
INTERNATIONAL STK PORT.
-----------------------
10/07/96*
TO
12/31/96
----------
<S> <C>
1. Accumulation unit value at beginning of period ............. $ 1.00159
2. Accumulation unit value at end of period ................... $ 1.03988
3. Number of accumulation units outstanding at end of period .. 2,951,073.568
*Commencement of Business
</TABLE>
27
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for Pruco Life Insurance Company and
Subsidiaries should be read in conjunction with the CONSOLIDATED FINANCIAL
STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES and notes thereto
included in this prospectus beginning on page B-1.
<TABLE>
<CAPTION>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
GAAP BASIS STATUTORY BASIS
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums and other revenue ........... $ 408,154 $ 401,287 $ 303,627 $ 591,660 $ 541,248
Net investment income ................ 247,328 246,618 241,132 260,939 274,037
--------------------------------------------------------------------------
Total revenues ........................ 655,482 647,905 544,759 852,599 815,285
Benefits and expenses:
Current and future benefits and
claims .............................. 305,119 280,913 235,660 534,354 478,148
Other expenses ....................... 122,006 134,790 179,173 157,557 129,701
--------------------------------------------------------------------------
Total benefits and expenses ........... 427,125 415,703 414,833 691,911 607,849
--------------------------------------------------------------------------
Income before income tax provision .... 228,357 232,202 129,926 160,688 207,436
Income tax provision .................. 79,135 79,558 48,031 83,640 96,578
--------------------------------------------------------------------------
Net income ............................ $ 149,222 $ 152,644 $ 81,895 $ 77,048 $ 110,858
==========================================================================
Assets ................................ $9,678,427 $8,471,638 $7,713,183 $7,172,104 $6,709,958
==========================================================================
</TABLE>
In 1996, the Company retroactively adopted applicable accounting pronouncements
to present its financial statements in conformity with generally accepted
accounting principles. Refer to footnote 1.B. of the Consolidated Financial
Statements.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Pruco Life Insurance Company consists of Pruco Life Insurance Company and its
subsidiaries (collectively, the Company). Pruco Life Insurance Company is a
wholly owned subsidiary of The Prudential Insurance Company of America
(Prudential). The Company markets individual life insurance and annuities
primarily through Prudential's sales force in the United States and in Taiwan.
The Company held $9.7 billion in assets at December 31, 1996, $5.3 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 policy
loans.
The business climate in the United States was characterized by moderate economic
growth, low inflation, and growing investor confidence that fueled bond and
stock prices. Merger and consolidation activity accelerated, as well as
expansion of US companies into foreign markets. Those economic trends impacted
the insurance industry during the year, prompting them to implement strategies,
including consolidation, and sales of certain lines of business to counter risk,
control expenses and diversify products to remain competitive. Regulatory
changes which opened the insurance industry to other financial institutions,
particularly banks and mutual funds, heightened competition in investment type
products since those institutions were positioned to deliver the same products
through large, stable distribution channels. In addition, the industry has been
beset by negative publicity following the discovery of unacceptable sales
practices that resulted in investigations of most large insurers, including
Prudential. In spite of the difficult operating environment, 1996 was a year of
progress for the Company. It achieved solid performance in core businesses,
instituted significant cost reduction programs, and strategic initiatives which
are expected to place it on a firm course of continued growth.
The Company's assets were $9.7 billion at December 31, 1996 compared to $8.5
billion at December 31, 1995. Net income amounted to $149.2 million, a decrease
of $3.4 million or 2.2% compared to the $152.6 million earned in 1995.
1. RESULTS OF OPERATIONS
(a) 1996 VERSUS 1995
Premiums increased by $9.4 million from $42.1 million in 1995 to $51.5 million
for the same period in 1996. This change is primarily due to increased sales of
$6.2 million related to traditional life insurance products in our Taiwan branch
which continued to expand its business throughout 1996.
Policy charges and fee income increased approximately $5.9 million during the
current year as compared to 1995. This is primarily attributable to the
increased sales of new variable annuity products and fees earned on policyholder
withdrawal and surrender activity.
Other income decreased $6.2 million for the year ended December 31, 1996 from
the year ended December 31, 1995. This decrease is due to a reduction in
separate account net gains.
Policyholders' benefits increased $32.9 million during the current year to
$186.9 million. Approximately $10 million of this increase is attributable to
the mortality costs associated with the Company's products. The additional $22
million results from the increase in reserves associated with new and existing
contracts at December 31, 1996.
Interest credited to policyholders' account balances decreased by $8.7 million.
This decrease is primarily attributable to the decrease in policyholders'
account balances due to the Company experiencing increased policyholder
withdrawals and slightly lower interest rates.
Other operating expenses decreased $12.8 million for the year ended December 31,
1996 compared to the same period for 1995. This is attributable to a decrease in
the amortization of deferred policy acquisition costs, and a company wide
initiative to reduce expenses resulting in a decrease in general expenses.
(b) 1995 VERSUS 1994
The Company recorded net income of $152.6 million and $81.9 million for 1995 and
1994, respectively.
Premiums increased by $19.4 million from $22.7 million for the year ended
December 31, 1994 to $42.1 million for the same period in 1995, stemming from
increased sales of life insurance in the Taiwan branch and a steady flow of
renewals in the US.
Policy charges and fee income increased $10.3 million from $308.8 million for
the year ended December 31, 1994, to $319.1 million for the same period in 1995.
This is primarily attributable to the increased sales of new variable annuity
products and fees earned on policyholder withdrawal and surrender activity.
29
<PAGE>
Net investment income increased $5.5 million for the twelve months ended
December 31, 1995, from the same period in 1994. Policy loans increased $75.4
million, which resulted in additional policy loan interest income of $2.4
million. Secondly, the Company's income from equity securities increased $2.0
million as a result of favorable stock market conditions.
Net realized investment gains increased $54.3 million, to $13.2 million for the
year ended December 31,1995 from a loss of $41.1 million for the same period in
1994. The Company restructured its investment portfolio to more closely align
with the liability duration and to reduce the portfolio's interest rate risk.
Sales activity of the Company's fixed maturities produced favorable gains as a
result of falling interest rates during 1995.
Policyholders' benefits increased $32.0 million to $154.0 million in 1995, from
$122.0 million in 1994. This change is primarily attributable to the increase in
reserves for new and existing policies.
Interest credited to policyholders' account balances increased $13.2 million for
the twelve months ended December 31, 1995, from the same period in 1994. This
change was a result of increased interest rates offset with decreasing
policyholder account balances.
Other operating costs and expenses decreased $44.4 million for the year ended
December 31, 1995 due to a decrease in the allocation of costs from Prudential,
a decrease in the amortization of deferred policy acquisition costs, and a
company wide initiative to reduce expenses resulting in a decrease in general
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 in 1996, 1995, and
1994 were $186.9 million, $154.0 million, and $122.0 million, respectively. Cash
flows are anticipated to be sufficient to meet the Company's liquidity needs for
the foreseeable future.
3. CAPITAL RESOURCES
The primary components of the Company's total assets of $9.7 billion at December
31, 1996 are as follows (as a percentage of total assets): fixed income
securities 27.3%, separate account assets (fixed income and equity securities)
55.1%, policy loans 6.6%, and other assets 11.0%.
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUCO LIFE
WILLIAM M. BETHKE, Director. -- President, Prudential Capital Markets Group
since 1992.
IRA J. KLEINMAN, Director. -- Executive Vice President, International Insurance
Group since 1997; 1995 to 1997: Chief Marketing and Product Development Officer,
Prudential Individual Insurance Group; 1993 to 1995: President, Prudential
Select; Prior to 1993: Senior Vice President of Prudential.
MENDEL A. MELZER, Director. -- Chief Investment Officer, Mutual Funds and
Annuities, Prudential Investments since 1996; 1995 to 1996: Chief Financial
Officer of the Money Management Group of Prudential; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; Prior to 1993: Managing Director, Prudential Investment Corporation.
ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of Prudential.
I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of Prudential.
KIYOFUMI SAKAGUCHI, Director. -- President, Prudential International Insurance
Group since 1995; 1994 to 1995: Chairman and Chief Executive Officer, The
Prudential Life Insurance Co., Ltd.; Prior to 1994: President and Chief
Executive Officer, Asia Pacific Region-Prudential International Insurance, and
President, The Prudential Life Insurance Co., Ltd.
WILLIAM F. YELVERTON, Chairman and Director. -- Chief Executive Officer,
Prudential Individual Insurance Group since 1995; Prior to 1995: Chief Executive
Officer, New York Life Worldwide.
30
<PAGE>
OFFICERS WHO ARE NOT DIRECTORS
SUSAN L. BLOUNT, Secretary. -- Vice President and Secretary of Prudential since
1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.
C. EDWARD CHAPLIN, Treasurer.-- Vice President and Treasurer of Prudential since
1995; 1993 to 1995: Managing Director and Assistant Treasurer of Prudential;
1992 to 1993: Vice President and Assistant Treasurer, Banking and Cash
Management for Prudential.
LINDA S. DOUGHERTY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President and Comptroller, Prudential Individual Insurance Group since
1997; Prior to 1997: Vice President, Accounting, Prudential.
JAMES C. DROZANOWSKI, Senior Vice President. -- Vice President and Operations
Executive, Prudential Individual Insurance Group since 1996; 1995 to 1996:
President and Chief Executive Officer, Chase Manhattan Bank; 1993 to 1995: Vice
President, North America Customer Services, Chase Manhattan Bank; Prior to 1993:
Operations Executive, Global Securities Services, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of Prudential since 1995; 1994 to 1995: Associate General Counsel
with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management of the Securities and Exchange Commission.
FRANK P. MARINO, Senior Vice President. -- Vice President, Policyowner Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.
MARIO A. MOSSE, Senior Vice President -- Vice President, Annuity Services,
Prudential Investments since 1996, Prior to 1996: Vice President, Chase
Manhattan Bank.
SHIRLEY H. SHAO, Senior Vice President and Chief Actuary. -- Vice President and
Associate Actuary, Prudential.
KAREN L. SHAPIRO, Senior Vice President. -- Vice President, Prudential
Individual Insurance Group since 1996; Vice President and Associate General
Counsel, Prudential Securities Incorporated 1993 to 1996; Prior to 1993: Senior
Associate with Shaw, Pittman, Potts and Trowbridge.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
* SUBSIDIARY OF PRUDENTIAL
31
<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 1996. Directors of Pruco
Life who are also employees of Prudential do not receive compensation in
addition to their compensation as employees of Prudential.
-------------------------------------------------------------------
NAME & PRINCIPAL ALLOCATED CASH
POSITION YEAR COMPENSATION ($)
-------------------------------------------------------------------
Esther H. Milnes 1996 $21,136
President 1995 $14,250
1994 $ 9,846
Linda S. Dougherty 1996 $55,931
Vice President & Comptroller 1995 -------
1994 -------
Hwei-Chung S. Shao 1996 $21,048
Chief Actuary 1995 -------
1994 -------
Clifford E. Kirsch 1996 $54,190
Chief Legal Counsel 1995 $30,962
1994 -------
Frank P. Marino 1996 $12,076
Senior Vice President 1995 -------
1994 -------
-------------------------------------------------------------------
------- Did not hold position during this year.
-------------------------------------------------------------------
32
<PAGE>
(This page intentionally left blank.)
<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, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
OCC
PRUDENTIAL ACCUMULATION
PRUDENTIAL PRUDENTIAL HIGH TRUST PRUDENTIAL
MONEY DIVERSIFIED YIELD MANAGED STOCK
MARKET BOND BOND PORTFOLIO INDEX
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Shares of the Pruco Life
Flexible Premium Variable Annuity Account
at Net Asset Value [Note 3]................... $ 40,957,248 $ 26,066,486 $ 26,027,869 $ 10,595,881 $ 25,213,744
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 36,937,945 $ 23,949,348 $ 22,915,039 $ 9,091,785 $ 23,134,691
Equity of Pruco Life Insurance Company.......... 4,019,303 2,117,138 3,112,830 1,504,096 2,079,053
-------------- -------------- -------------- -------------- --------------
$ 40,957,248 $ 26,066,486 $ 26,027,869 $ 10,595,881 $ 25,213,744
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
OCC
PRUDENTIAL ACCUMULATION
PRUDENTIAL PRUDENTIAL HIGH TRUST PRUDENTIAL
MONEY DIVERSIFIED YIELD MANAGED STOCK
MARKET BOND BOND PORTFOLIO INDEX
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 668,125 $ 1,034,567 $ 1,307,513 $ 0 $ 203,986
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 5A and 5B].............. 178,173 127,526 96,727 9,797 59,096
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 178,173 127,526 96,727 9,797 59,096
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 489,952 907,041 1,210,786 (9,797) 144,890
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 0 0 0 199,451
Realized gain (loss) on shares redeemed
[average cost basis].......................... 0 (25,544) 1,894 0 0
Net unrealized gain (loss) on investments....... 0 (230,889) (588,812) 44,881 529,306
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 0 (256,433) (586,918) 44,881 728,757
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 489,952 $ 650,608 $ 623,868 $ 35,084 $ 873,647
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
AIM V.I. T. ROWE
GROWTH PRICE
PRUDENTIAL AND EQUITY
EQUITY INCOME INCOME PRUDENTIAL PRUDENTIAL
INCOME FUND PORTFOLIO EQUITY JENNISON
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Shares of the Pruco Life
Flexible Premium Variable Annuity Account
at Net Asset Value [Note 3] $ 29,273,846 $ 4,839,284 $ 8,527,021 $ 83,093,388 $ 33,711,026
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners $ 27,842,276 $ 3,536,609 $ 6,899,694 $ 79,623,690 $ 31,923,947
Equity of Pruco Life Insurance Company 1,431,570 1,302,675 1,627,327 3,469,698 1,787,079
-------------- -------------- -------------- -------------- --------------
$ 29,273,846 $ 4,839,284 $ 8,527,021 $ 83,093,388 $ 33,711,026
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
JANUS
AIM V.I. ASPEN MFS
VALUE GROWTH RESEARCH
FUND PORTFOLIO SERIES
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in Shares of the Pruco Life
Flexible Premium Variable Annuity Account
at Net Asset Value [Note 3] $ 5,021,231 $ 6,664,677 $ 3,817,888
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners $ 4,232,935 $ 5,504,621 $ 2,798,353
Equity of Pruco Life Insurance Company 788,296 1,160,056 1,019,535
-------------- -------------- --------------
$ 5,021,231 $ 6,664,677 $ 3,817,888
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
AIM V.I. T. ROWE
GROWTH PRICE
PRUDENTIAL AND EQUITY
EQUITY INCOME INCOME PRUDENTIAL
INCOME FUND PORTFOLIO EQUITY
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 666,149 $ 21,740 $ 46,824 $ 1,323,338
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 5A and 5B] 158,635 4,206 7,424 432,392
-------------- -------------- -------------- --------------
NET EXPENSES 158,635 4,206 7,424 432,392
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) 507,514 17,534 39,400 890,946
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 751,896 4,713 29,797 6,017,025
Realized gain (loss) on shares redeemed
[average cost basis] 0 0 0 0
Net unrealized gain (loss) on investments 1,523,505 (11,169) (27,600) (1,007,503)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS 2,275,401 (6,456) 2,197 5,009,522
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,782,915 $ 11,078 $ 41,597 $ 5,900,468
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
JANUS
AIM V.I. ASPEN MFS
PRUDENTIAL VALUE GROWTH RESEARCH
JENNISON FUND PORTFOLIO SERIES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 41,725 $ 13,062 $ 41,134 $ 6,113
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 5A and 5B] 168,568 4,523 6,068 2,970
-------------- -------------- -------------- --------------
NET EXPENSES 168,568 4,523 6,068 2,970
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) (126,843) 8,539 35,066 3,143
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 0 126,631 0 49,126
Realized gain (loss) on shares redeemed
[average cost basis] 4,129 0 0 0
Net unrealized gain (loss) on investments 1,748,413 (84,462) (8,457) (54,352)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS 1,752,542 42,169 (8,457) (5,226)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,625,699 $ 50,708 $ 26,609 $ (2,083)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A2
<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, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
OCC WARBURG JANUS
MFS ACCUMULATION PINCUS ASPEN
EMERGING TRUST POST-VENTURE INTERNATIONAL
GROWTH SMALL CAP CAPITAL PRUDENTIAL GROWTH
SERIES PORTFOLIO PORTFOLIO GLOBAL PORTFOLIO
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Shares of the Pruco Life
Flexible Premium Variable Annuity Account
at Net Asset Value [Note 3]................... $ 7,475,301 $ 3,569,219 $ 2,178,615 $ 14,850,451 $ 7,052,604
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 5,514,770 $ 2,465,674 $ 1,710,115 $ 14,174,948 $ 6,217,905
Equity of Pruco Life Insurance Company.......... 1,960,531 1,103,545 468,500 675,503 834,699
-------------- -------------- -------------- -------------- --------------
$ 7,475,301 $ 3,569,219 $ 2,178,615 $ 14,850,451 $ 7,052,604
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
OCC WARBURG JANUS
MFS ACCUMULATION PINCUS ASPEN
EMERGING TRUST POST-VENTURE INTERNATIONAL
GROWTH SMALL CAP CAPITAL PRUDENTIAL GROWTH
SERIES PORTFOLIO PORTFOLIO GLOBAL PORTFOLIO
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 0 $ 0 $ 0 $ 139,160 $ 16,917
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 5A and 5B].............. 6,073 2,618 1,760 81,055 6,698
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 6,073 2,618 1,760 81,055 6,698
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... (6,073) (2,618) (1,760) 58,105 10,219
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 63,150 0 0 207,745 0
Realized gain (loss) on shares redeemed
[average cost basis].......................... 0 0 0 6,038 0
Net unrealized gain (loss) on investments....... (207,849) 64,219 10,615 796,437 112,687
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... (144,699) 64,219 10,615 1,010,220 112,687
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (150,772) $ 61,601 $ 8,855 $ 1,068,325 $ 122,906
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------
T. ROWE
PRICE
INTERNATIONAL
STOCK
PORTFOLIO
--------------
<S> <C> <C>
ASSETS
Investment in Shares of the Pruco Life
Flexible Premium Variable Annuity Account
at Net Asset Value [Note 3] $ 3,816,459
--------------
NET ASSETS, representing:
Equity of Contract owners $ 3,068,762
Equity of Pruco Life Insurance Company 747,697
--------------
$ 3,816,459
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------
T. ROWE
PRICE
INTERNATIONAL
STOCK
PORTFOLIO
--------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 20,166
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 5A and 5B] 3,220
--------------
NET EXPENSES 3,220
--------------
NET INVESTMENT INCOME (LOSS) 16,946
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 12,100
Realized gain (loss) on shares redeemed
[average cost basis] 0
Net unrealized gain (loss) on investments 32,193
--------------
NET GAIN (LOSS) ON INVESTMENTS 44,293
--------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 61,239
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A4
<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 years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY MARKET DIVERSIFIED BOND HIGH YIELD BOND
------------------------------ ------------------------------ ------------------------------
11/22/95* 11/22/95* 11/22/95*
TO TO TO
1996 12/31/95 1996 12/31/95 1996 12/31/95
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...... $ 489,952 $ 123 $ 907,041 $ 434 $ 1,210,786 $ 1,032
Capital gains distributions
received........................ 0 0 0 23 0 0
Realized gain (loss) on shares
redeemed
[average cost basis]............ 0 0 (25,544) 0 1,894 0
Net unrealized gain (loss) on
investments..................... 0 0 (230,889) (104) (588,812) (758)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS......... 489,952 123 650,608 353 623,868 274
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS..... 36,320,424 144,295 23,222,899 8,998 22,289,699 9,090
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7].......................... 4,002,463 (9) 2,173,627 10,001 3,094,028 10,910
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS........ 40,812,839 144,409 26,047,134 19,352 26,007,595 20,274
NET ASSETS:
Beginning of year................. 144,409 0 19,352 0 20,274 0
-------------- -------------- -------------- -------------- -------------- --------------
End of year....................... $ 40,957,248 $ 144,409 $ 26,066,486 $ 19,352 $ 26,027,869 $ 20,274
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
OCC
ACCUMULATION
TRUST
MANAGED PRUDENTIAL PRUDENTIAL
PORTFOLIO STOCK INDEX EQUITY INCOME
-------------- -------------- ------------------------------
10/07/96* 05/01/96* 11/22/95*
TO TO TO
12/31/96 12/31/96 1996 12/31/95
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (9,797) $ 144,890 $ 507,514 $ 259
Capital gains distributions
received 0 199,451 751,896 431
Realized gain (loss) on shares
redeemed
[average cost basis] 0 0 0 0
Net unrealized gain (loss) on
investments 44,881 529,306 1,523,505 (395)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 35,084 873,647 2,782,915 295
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 9,023,181 22,208,546 25,008,509 65,753
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7] 1,537,616 2,131,551 1,395,127 21,247
-------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS 10,595,881 25,213,744 29,186,551 87,295
NET ASSETS:
Beginning of year 0 0 87,295 0
-------------- -------------- -------------- --------------
End of year $ 10,595,881 $ 25,213,744 $ 29,273,846 $ 87,295
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commencement of Business
<CAPTION>
AIM V.I. T. ROWE PRICE
GROWTH AND EQUITY INCOME PRUDENTIAL
INCOME FUND PORTFOLIO EQUITY
-------------- -------------- ------------------------------
10/07/96* 10/07/96* 11/22/95*
TO TO TO
12/31/96 12/31/96 1996 12/31/95
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 17,534 $ 39,400 $ 890,946 $ 142
Capital gains distributions
received 4,713 29,797 6,017,025 337
Realized gain (loss) on shares
redeemed
[average cost basis] 0 0 0 0
Net unrealized gain (loss) on
investments (11,169) (27,600) (1,007,503) 3,048
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 11,078 41,597 5,900,468 3,527
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 3,509,876 6,841,311 73,501,350 253,239
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7] 1,318,330 1,644,113 3,437,427 (2,623)
-------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS 4,839,284 8,527,021 82,839,245 254,143
NET ASSETS:
Beginning of year 0 0 254,143 0
-------------- -------------- -------------- --------------
End of year $ 4,839,284 $ 8,527,021 $ 83,093,388 $ 254,143
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A6
<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 years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------------
JANUS ASPEN MFS MFS
AIM V.I. VALUE GROWTH RESEARCH EMERGING
PRUDENTIAL JENNISON FUND PORTFOLIO SERIES GROWTH SERIES
------------------------------ -------------- -------------- -------------- --------------
11/22/95* 10/07/96* 10/07/96* 10/07/96* 10/07/96*
TO TO TO TO TO
1996 12/31/95 12/31/96 12/31/96 12/31/96 12/31/96
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...... $ (126,843) $ 0 $ 8,539 $ 35,066 $ 3,143 $ (6,073)
Capital gains distributions
received........................ 0 0 126,631 0 49,126 63,150
Realized gain (loss) on shares
redeemed
[average cost basis]............ 4,129 0 0 0 0 0
Net unrealized gain (loss) on
investments..................... 1,748,413 759 (84,462) (8,457) (54,352) (207,849)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS......... 1,625,699 759 50,708 26,609 (2,083) (150,772)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS..... 30,279,548 70,817 4,169,841 5,482,511 2,799,671 5,650,514
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7].......................... 1,734,655 (452) 800,682 1,155,557 1,020,300 1,975,559
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS........ 33,639,902 71,124 5,021,231 6,664,677 3,817,888 7,475,301
NET ASSETS:
Beginning of year................. 71,124 0 0 0 0 0
-------------- -------------- -------------- -------------- -------------- --------------
End of year....................... $ 33,711,026 $ 71,124 $ 5,021,231 $ 6,664,677 $ 3,817,888 $ 7,475,301
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
OCC
ACCUMULATION WARBURG PINCUS
TRUST POST-VENTURE
SMALL CAP CAPITAL PRUDENTIAL
PORTFOLIO PORTFOLIO GLOBAL
-------------- -------------- ------------------------------
10/07/96* 10/07/96* 11/22/95*
TO TO TO
12/31/96 12/31/96 1996 12/31/95
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (2,618) $ (1,760) $ 58,105 $ 138
Capital gains distributions
received 0 0 207,745 193
Realized gain (loss) on shares
redeemed
[average cost basis] 0 0 6,038 0
Net unrealized gain (loss) on
investments 64,219 10,615 796,437 (259)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 61,601 8,855 1,068,325 72
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 2,410,812 1,710,288 13,112,774 19,677
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7] 1,096,806 459,472 646,280 3,323
-------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS 3,569,219 2,178,615 14,827,379 23,072
NET ASSETS:
Beginning of year 0 0 23,072 0
-------------- -------------- -------------- --------------
End of year $ 3,569,219 $ 2,178,615 $ 14,850,451 $ 23,072
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commencement of Business
<CAPTION>
JANUS ASPEN T. ROWE PRICE
INTERNATIONAL INTERNATIONAL
GROWTH STOCK
PORTFOLIO PORTFOLIO
-------------- --------------
10/07/96* 10/07/96*
TO TO
12/31/96 12/31/96
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 10,219 $ 16,946
Capital gains distributions
received 0 12,100
Realized gain (loss) on shares
redeemed
[average cost basis] 0 0
Net unrealized gain (loss) on
investments 112,687 32,193
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 122,906 61,239
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 6,099,790 3,008,537
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[Note 7] 829,908 746,683
-------------- --------------
TOTAL INCREASE IN NET ASSETS 7,052,604 3,816,459
NET ASSETS:
Beginning of year 0 0
-------------- --------------
End of year $ 7,052,604 $ 3,816,459
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 THROUGH A14.
A8
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF THE DISCOVERY
SELECT VARIABLE ANNUITY SUBACCOUNTS OF THE PRUCO LIFE
FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1996
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,
Discovery Preferred Variable Annuity Contracts ("Discovery Preferred") and
Discovery Select Variable Annuity Contracts ("Discovery Select") invest in the
Account.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are twenty-three subaccounts within the
Account. Discovery Select Contracts offer the option to invest in nineteen of
these subaccounts, each of which invests in either a corresponding portfolio of
The Prudential Series Fund, Inc. (the "Series Fund"), or any of the
non-Prudential administered variable subaccounts shown in Note 3. The Series
Fund is a diversified open-end management investment company, and is managed by
Prudential.
Discovery Select Contracts became available to the Contract owner on October 7,
1996.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with generally
accepted accounting principles (GAAP). The preparation of the financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
Investments--The investments in shares of the Series Fund or non-Prudential
administered subaccounts are stated at the net asset value of the respective
portfolio.
Security Transactions--Realized gains and losses on security transactions are
reported on an average cost basis. Purchase and sale transactions are recorded
as of the trade date of the security being purchased or sold.
Distributions Received--Dividend and capital gain distributions received are
reinvested in additional shares of the Series Fund or non-Prudential
administered subaccounts and are recorded on the ex-dividend date.
Equity of Pruco Life Insurance Company--Pruco Life maintains a position in the
Account for the purpose of administering activity in the Account. The activity
includes unit transactions, fund share transactions, and expense processing.
Pruco Life monitors the balance daily and transfers funds based upon anticipated
activity. At times, Pruco Life may owe an amount to the Account, which is
reflected in Pruco Life's equity as a negative balance. The position does not
have an effect on the Contract owner's account or the related unit value.
A9
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. AND
NON-PRUDENTIAL ADMINISTERED VARIABLE SUBACCOUNTS
The net asset value per share for each portfolio of the Series Fund or
Non-Prudential administered variable subaccount, the number of shares of each
portfolio held by the subaccounts of the Account and the aggregate cost of
investments in such shares at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------
OCC ACCUMULATION
PRUDENTIAL PRUDENTIAL PRUDENTIAL TRUST MANAGED
MONEY MARKET DIVERSIFIED BOND HIGH YIELD BOND PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Number of shares: 4,095,725 2,355,669 3,308,281 292,623
Net asset value
per share: $ 10.00000 $ 11.06543 $ 7.86749 $ 36.21000
Cost: $ 40,957,248 $ 26,297,479 $ 26,617,439 $ 10,551,000
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
AIM V.I. T. ROWE PRICE
PRUDENTIAL PRUDENTIAL GROWTH & INCOME EQUITY INCOME
STOCK INDEX EQUITY INCOME PORTFOLIO PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Number of shares: 1,061,868 1,581,531 321,975 558,782
Net asset value
per share: $ 23.74471 $ 18.50982 $ 15.03000 $ 15.26000
Cost: $ 24,684,438 $ 27,750,736 $ 4,850,453 $ 8,554,621
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
AIM V.I JANUS ASPEN
PRUDENTIAL PRUDENTIAL VALUE SERIES GROWTH
EQUITY JENNISON FUND PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Number of shares: 3,081,540 2,353,598 287,256 429,702
Net asset value
per share: $ 26.96489 $ 14.32319 $ 17.48000 $ 15.51000
Cost: $ 84,097,843 $ 31,961,854 $ 5,105,693 $ 6,673,134
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
MFS OCC ACCUMULATION WARBURG PINCUS
MFS EMERGING GROWTH TRUST SMALL CAP. POST-VENTURE CAPITAL
RESEARCH SERIES SERIES PORTFOLIO PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Number of shares: 290,776 564,600 157,860 223,219
Net asset value
per share: $ 13.13000 $ 13.24000 $ 22.61000 $ 9.76000
Cost: $ 3,872,239 $ 7,683,150 $ 3,505,000 $ 2,168,000
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------
JANUS ASPEN
SERIES T. ROWE PRICE
PRUDENTIAL INTERNATIONAL INTERNATIONAL STOCK
GLOBAL GROWTH PORTFOLIO
---------------- ----------------- -------------------
<S> <C> <C> <C>
Number of shares: 831,737 448,639 301,935
Net asset value
per share: $ 17.85474 $ 15.72000 $ 12.64000
Cost: $ 14,054,274 $ 6,939,917 $ 3,784,265
</TABLE>
A10
<PAGE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding Contract owner units, unit values and total Contract owner equity
for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------
OCC ACCUMULATION
PRUDENTIAL PRUDENTIAL PRUDENTIAL TRUST MANAGED
MONEY MARKET DIVERSIFIED BOND HIGH YIELD BOND PORTFOLIO
----------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Discovery
Preferred):...... 18,724,231.329 16,579,588.790 12,180,746.727 N/A
Unit value
(Discovery
Preferred):..... $ 1.04505 $ 1.06033 $ 1.12263 N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Preferred):..... $ 19,567,758 $ 17,579,835 $ 13,674,472 N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Units
Outstanding
(Discovery
Select):........ 16,621,393.391 6,007,103.917 8,231,177.952 8,643,613.602
Unit value
(Discovery
Select):........ $ 1.04505 $ 1.06033 $ 1.12263 $ 1.05185
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Select):........ $ 17,370,187 $ 6,369,513 $ 9,240,567 $ 9,091,785
----------------- ----------------- ------------------- --------------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 36,937,945 $ 23,949,348 $ 22,915,039 $ 9,091,785
----------------- ----------------- ------------------- --------------------
----------------- ----------------- ------------------- --------------------
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------
AIM V.I. T. ROWE PRICE
PRUDENTIAL PRUDENTIAL GROWTH & INCOME EQUITY INCOME
STOCK INDEX EQUITY INCOME PORTFOLIO PORTFOLIO
----------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Discovery
Preferred):...... 12,874,426.991 19,788,860.548 N/A N/A
Unit value
(Discovery
Preferred):..... $ 1.13652 $ 1.23339 N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Preferred):..... $ 14,632,044 $ 24,407,383 N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Units
Outstanding
(Discovery
Select):........ 7,481,300.307 2,784,920.648 3,408,549.878 6,578,342.434
Unit value
(Discovery
Select):........ $ 1.13652 $ 1.23339 $ 1.03757 $ 1.04885
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Select):........ $ 8,502,647 $ 3,434,893 $ 3,536,609 $ 6,899,694
----------------- ----------------- ------------------- --------------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 23,134,691 $ 27,842,276 $ 3,536,609 $ 6,899,694
----------------- ----------------- ------------------- --------------------
----------------- ----------------- ------------------- --------------------
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------
PRUDENTIAL AIM V.I JANUS ASPEN
PRUDENTIAL JENNISON VALUE SERIES GROWTH
EQUITY PORTFOLIO FUND PORTFOLIO
----------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Discovery
Preferred):...... 57,622,650.499 23,134,855.147 N/A N/A
Unit value
(Discovery
Preferred):..... $ 1.20807 $ 1.13943 N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Preferred):..... $ 69,612,196 $ 26,360,548 N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Units
Outstanding
(Discovery
Select):........ 8,287,180.736 4,882,616.029 4,033,863.906 5,459,308.662
Unit value
(Discovery
Select):........ $ 1.20807 $ 1.13943 $ 1.04935 $ 1.00830
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Select):........ $ 10,011,494 $ 5,563,399 $ 4,232,935 $ 5,504,621
----------------- ----------------- ------------------- --------------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 79,623,690 $ 31,923,947 $ 4,232,935 $ 5,504,621
----------------- ----------------- ------------------- --------------------
----------------- ----------------- ------------------- --------------------
</TABLE>
A11
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------
MFS OCC ACCUMULATION WARBURG PINCUS
MFS EMERGING GROWTH TRUST SMALL CAP. POST-VENTURE CAPITAL
RESEARCH SERIES SERIES PORTFOLIO PORTFOLIO
----------------- ----------------- ------------------- --------------------
Contract Owner
Units Outstanding
(Discovery
Preferred):...... N/A N/A N/A N/A
<S> <C> <C> <C> <C>
Unit value
(Discovery
Preferred):..... N/A N/A N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Preferred):..... N/A N/A N/A N/A
----------------- ----------------- ------------------- --------------------
Contract Owner
Units
Outstanding
(Discovery
Select):........ 2,727,173.841 5,755,823.499 2,345,892.859 1,786,114.670
Unit value
(Discovery
Select):........ $ 1.02610 $ 0.95812 $ 1.05106 $ 0.95745
----------------- ----------------- ------------------- --------------------
Contract Owner
Equity
(Discovery
Select):........ $ 2,798,353 $ 5,514,770 $ 2,465,674 $ 1,710,115
----------------- ----------------- ------------------- --------------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 2,798,353 $ 5,514,770 $ 2,465,674 $ 1,710,115
----------------- ----------------- ------------------- --------------------
----------------- ----------------- ------------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------
JANUS ASPEN
SERIES T. ROWE PRICE
PRUDENTIAL INTERNATIONAL INTERNATIONAL STOCK
GLOBAL GROWTH PORTFOLIO
----------------- ----------------- -------------------
<S> <C> <C> <C>
Contract Owner
Units Outstanding
(Discovery
Preferred):...... 10,486,229,266 N/A N/A
Unit value
(Discovery
Preferred):..... $ 1.19505 N/A N/A
----------------- ----------------- -------------------
Contract Owner
Equity
(Discovery
Preferred):..... $ 12,531,568 N/A N/A
----------------- ----------------- -------------------
Contract Owner
Units
Outstanding
(Discovery
Select):........ 1,375,155.605 5,902,196.099 2,951,073.568
Unit value
(Discovery
Select):........ $ 1.19505 $ 1.05349 $ 1.03988
----------------- ----------------- -------------------
Contract Owner
Equity
(Discovery
Select):........ $ 1,643,380 $ 6,217,905 $ 3,068,762
----------------- ----------------- -------------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 14,174,948 $ 6,217,905 $ 3,068,762
----------------- ----------------- -------------------
----------------- ----------------- -------------------
</TABLE>
NOTE 5: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
1.25% are applied against the net assets representing equity of Discovery
Preferred and Discovery Select Contract owners held in each subaccount.
Mortality risk is that Annuitants may live longer than estimated and expense
risk is that the cost of issuing and administering the policies may exceed
the estimated expenses. For 1996, the amount of charges paid to Pruco Life
for Discovery Preferred was $1,870,725. For 1996, the amount of charges paid
to Pruco Life for Discovery Select was $113,273.
B. Administration Charge
The administration charge at an effective annual rate of .15% is applied
against the net assets representing equity of Discovery Preferred and
Discovery Select Contract owners held in each subaccount. Administration
charges include costs associated with issuing the Contract, establishing and
maintaining records, and providing reports to Contract owners. For 1996 the
amount of these charges paid to Pruco Life for Discovery Preferred was
$225,711. For 1996 the amount of these charges paid to Pruco Life for
Discovery Select was $13,667.
C. Withdrawal Charge
Subsequent to a Contract owner redemption, 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
A12
<PAGE>
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.
For 1996, the amount of these charges paid to Pruco Life for Discovery
Preferred was $88,036. For 1996, the amount of these charges paid to Pruco
Life for Discovery Select was $2,633.
NOTE 6: TAXES
Pruco Life is taxed as a "life insurance company" under the Internal Revenue
Code and the operations of the Account form a part of and are taxed with those
of Pruco Life. Under current federal law, no federal income taxes are payable by
the Account. As such, no provision for tax liability has been recorded.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM EQUITY TRANSFERS
The increase (decrease) in net assets resulting from equity transfers represents
the net contributions (withdrawals) of Pruco Life to (from) the Account.
A13
<PAGE>
NOTE 8: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments in the
Series Fund, Inc., and non-Prudential administered subaccounts were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------
OCC ACCUMULATION
PRUDENTIAL PRUDENTIAL PRUDENTIAL TRUST MANAGED
MONEY MARKET DIVERSIFIED BOND HIGH YIELD BOND PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 41,218,000 $ 26,276,000 $ 25,393,000 $ 10,551,000
Sales............. $ (1,019,000) $ (1,007,000) $ (106,000) $ 0
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
AIM V.I. T. ROWE PRICE
PRUDENTIAL PRUDENTIAL GROWTH & INCOME EQUITY INCOME
STOCK INDEX EQUITY INCOME PORTFOLIO PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 24,281,000 $ 26,245,000 $ 4,824,000 $ 8,478,000
Sales............. $ 0 $ 0 $ 0 $ 0
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
AIM V.I JANUS ASPEN
PRUDENTIAL PRUDENTIAL VALUE SERIES GROWTH
EQUITY JENNISON FUND PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 76,538,000 $ 33,037,000 $ 4,966,000 $ 6,632,000
Sales............. $ 0 $ (1,185,000) $ 0 $ 0
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------
MFS OCC ACCUMULATION WARBURG PINCUS
MFS EMERGING GROWTH TRUST SMALL CAP. POST-VENTURE CAPITAL
RESEARCH SERIES SERIES PORTFOLIO PORTFOLIO
---------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 3,817,000 $ 7,620,000 $ 3,505,000 $ 2,168,000
Sales............. $ 0 $ 0 $ 0 $ 0
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------
JANUS ASPEN
SERIES T. ROWE PRICE
PRUDENTIAL INTERNATIONAL INTERNATIONAL STOCK
GLOBAL GROWTH PORTFOLIO
---------------- ----------------- -------------------
<S> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 13,860,000 $ 6,923,000 $ 3,752,000
Sales............. $ (182,000) $ 0 $ 0
</TABLE>
A14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
Discovery Select Variable Annuity Subaccounts of
Pruco Life Flexible Premium Variable Annuity Account
and the Board of Directors of
Pruco Life Insurance Company
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of Prudential Money Market Subaccount,
Prudential Diversified Bond Subaccount, Prudential High Yield Bond Subaccount,
OCC Accumulation Trust Managed Portfolio Subaccount, Prudential Stock Index
Subaccount, Prudential Equity Income Subaccount, AIM V.I. Growth and Income Fund
Subaccount, T. Rowe Price Equity Income Portfolio Subaccount, Prudential Equity
Subaccount, Prudential Jennison Subaccount, AIM V.I. Value Fund Subaccount,
Janus Aspen Growth Portfolio Subaccount, MFS Research Series Subaccount, MFS
Emerging Growth Series Subaccount, OCC Accumulation Trust Small Cap Portfolio
Subaccount, Warburg Pincus Port-Venture Capital Portfolio Subaccount, Prudential
Global Subaccount, Janus Aspen International Growth Portfolio Subaccount and T.
Rowe Price International Stock Portfolio Subaccount of Pruco Life Flexible
Premium Variable Annuity Account at December 31, 1996, and the results of each
of their operations and the changes in each of their net assets for the year
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of Pruco Life Insurance Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of shares owned in The Prudential Series Fund, Inc. at December 31,
1996, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
March 31, 1997
A15
<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 changes in net assets of Pruco
Life Flexible Premium Variable Annuity Account of Pruco Life Insurance Company
(comprising, respectively, the Money Market, Diversified Bond, Equity, Flexible
Managed, Conservative Balanced, High Yield Bond, Equity Income, Natural
Resources, Global, Prudential Jennison, and Small Capitalization Stock
subaccounts) for the periods presented in the year ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the changes in net assets of each of the respective subaccounts
constituting the Pruco Life Flexible Premium Variable Annuity Account for the
respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
A16
<PAGE>
<TABLE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<CAPTION>
DECEMBER 31,
1996 1995
----------- ------------
(000'S)
ASSETS
<S> <C> <C>
Fixed maturities
Held to maturity $ 405,731 $ 437,727
Available for sale 2,236,817 2,144,854
Equity securities 3,748 4,036
Mortgage loans 46,915 64,464
Investment real estate - 4,059
Policy loans 639,782 569,273
Other long term investments 4,528 4,159
Short term investments 169,830 228,016
----------- ------------
Total invested assets 3,507,351 3,456,588
----------- ------------
Cash 73,766 41,435
Deferred policy acquisition costs 633,159 566,976
Premiums due 9,084 6,367
Accrued investment income 62,110 59,862
Receivable from affiliates 1,901 8,275
Federal income tax receivable 7,191 6,375
Reinsurance recoverable on unpaid losses 27,014 27,914
Other assets 20,000 12,578
Separate Account assets 5,336,851 4,285,268
----------- ------------
TOTAL ASSETS $9,678,427 $8,471,638
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Future policy benefits and other policyholders'
liabilities $ 557,351 $ 501,200
Policyholders' account balances 2,188,862 2,218,330
Deferred federal income tax payable 148,960 141,048
Payable to affiliate 51,729 41,584
Other liabilities 55,090 37,387
Separate Account liabilities 5,277,454 4,263,896
----------- ------------
Total Liabilities 8,279,446 7,203,445
----------- ------------
Contingencies - Note 9
Stockholder's Equity
Common Stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding at
December 31, 1996 and 1995 2,500 2,500
Paid-in-capital 439,582 439,582
Net unrealized investment gains (less deferred
income tax) 12,402 30,836
Retained earnings 944,497 795,275
----------- ------------
Total Stockholder's Equity 1,398,981 1,268,193
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $9,678,427 $8,471,638
=========== ============
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
<TABLE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-----------------------------------
(000'S)
REVENUES
<S> <C> <C> <C>
Premiums $ 51,525 $ 42,089 $ 22,689
Policy charges and fee income 324,976 319,012 308,753
Net investment income 247,328 246,618 241,132
Realized investment gains (losses) 10,835 13,200 (41,074)
Other income 20,818 26,986 13,259
-----------------------------------
Total Revenues 655,482 647,905 544,759
-----------------------------------
BENEFITS AND EXPENSES
Policyholders' benefits 186,873 153,987 121,949
Interest credited to policyholders' account
balances 118,246 126,926 113,711
Other operating costs and expenses 122,006 134,790 179,173
-----------------------------------
Total Benefits and Expenses 427,125 415,703 414,833
-----------------------------------
Income before income tax provision 228,357 232,202 129,926
-----------------------------------
Income tax provision 79,135 79,558 48,031
-----------------------------------
NET INCOME $ 149,222 $ 152,644 $ 81,895
===================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-----------------------------------
(000'S)
Common Stock
<S> <C> <C> <C>
Balance, beginning of year $ 2,500 $ 2,500 $ 2,500
Issued during year - - -
-----------------------------------
Balance, end of year 2,500 2,500 2,500
-----------------------------------
Paid in Capital
Balance, beginning of year 439,582 439,582 439,582
Paid in during year - - -
-----------------------------------
Balance, end of year 439,582 439,582 439,582
-----------------------------------
Net Unrealized Investment Gains (Losses)
(Less Deferred Income Tax)
Balance, beginning of year 30,836 (1,349) -
Adoption of SFAS 115 - (39,762) -
Net change in unrealized investment
gains (losses) (18,434) 71,947 (1,349)
-----------------------------------
Balance, end of year 12,402 30,836 (1,349)
-----------------------------------
RETAINED EARNINGS
Balance, beginning of year 795,275 642,631 560,736
Net income 149,222 152,644 81,895
-----------------------------------
Balance, end of year 944,497 795,275 642,631
-----------------------------------
TOTAL STOCKHOLDER'S EQUITY $1,398,981 $1,268,193 $1,083,364
===================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-3
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
------------------------------------------
(000'S)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 149,222 $ 152,644 $ 81,895
Adjustments to reconcile net income to net cash from
operating activities:
Increase in future policy benefits and other policyholders'
liabilities 56,151 22,877 31,932
General account policy fee income (50,286) (56,637) (48,401)
Interest credited to policyholders' account balances 118,246 126,926 113,711
Net decrease (increase) in Separate Accounts (38,025) (3,520) (4,121)
Net realized investment (gains) losses (10,835) (13,200) 41,074
Amortization and other non-cash items 26,709 (8,106) 6,228
Change in:
Accrued investment income (2,248) (480) (2,597)
Premiums due (2,717) (1,957) (1,374)
Receivable from affiliates 6,374 (758) (637)
Note receivable from affiliate -- -- 50,000
Deferred policy acquisition costs (66,183) 31,318 34,124
Federal income tax receivable (816) 12,031 (28,908)
Other assets (6,522) (12,689) (11,121)
Payable to affiliate 10,145 11,327 (24,029)
Deferred federal income tax payable 7,912 30,779 --
Other liabilities 17,703 (61,306) (5,293)
-----------------------------------------
Cash Flows From Operating Activities 214,830 229,249 232,483
-----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Held to maturity 138,127 144,898 2,710,423
Available for sale 3,886,254 1,886,687 --
Equity securities 7,527 5,557 1,910
Mortgage loans 19,226 7,395 10,821
Other long term investments 288 1,559 607
Investment real estate 4,488 2,926 8,677
Payments for the purchase of:
Fixed maturities:
Held to maturity (114,494) (135,092) (2,561,082)
Available for sale (4,008,810) (1,741,139) --
Equity securities (4,697) (4,279) (2,436)
Mortgage loans -- -- (35,276)
Other long term investments (657) (1,674) (1,584)
Policy loans (70,509) (75,411) (73,591)
Net proceeds (payments) of short term investments 58,186 (36,482) 9,845
-----------------------------------------
Cash Flows From Investing Activities (85,071) 54,945 68,314
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 536,370 95,039 114,105
Withdrawals (net of transfers to/from separate accounts) (633,798) (365,578) (387,793)
-----------------------------------------
Cash Flows From Financing Activities (97,428) (270,539) (273,688)
-----------------------------------------
Net increase in Cash 32,331 13,655 27,109
Cash, beginning of year 41,435 27,780 671
-----------------------------------------
CASH, END OF YEAR $ 73,766 $ 41,435 $ 27,780
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid $ 61,760 $ 53,107 $ 56,089
=========================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Pruco Life Insurance Company (Pruco Life), a stock life insurance company,
and its subsidiaries (collectively, the Company). Pruco Life is a
wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential), a mutual life insurance company. The Company markets
individual life insurance and deferred annuities primarily through
Prudential's sales force in the United States, and in Taiwan. All
significant intercompany balances and transactions have been eliminated in
consolidation.
B. Basis of Presentation
The Financial Accounting Standards Board (FASB) issued Interpretation No. 40
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", as amended by Statement of Financial
Accounting Standards (SFAS) No. 120 "Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts", effective for fiscal years beginning after
December 15, 1995. Financial statements of mutual life insurance companies,
and their wholly owned stock life insurance subsidiaries, for periods
beginning after December 15, 1995 which are prepared on the basis of
statutory accounting practices will no longer be characterized as in
conformity with generally accepted accounting principles (GAAP). As a
result, the Company has prepared its 1996 consolidated financial statements
in accordance with all applicable GAAP pronouncements. The 1995 and 1994
consolidated financial statements, which were previously prepared on the
statutory basis of accounting, have been restated in accordance with GAAP.
The cumulative effect of adopting GAAP as of January 1, 1994 was an increase
in retained earnings of $378.3 million. See Note 7 for a reconciliation of
the Company's surplus and net income determined in accordance with statutory
accounting practices with equity and net income determined on a GAAP basis.
On January 1, 1995, the Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expanded the use of fair
value accounting for those securities that a company does not have positive
intent and ability to hold to maturity. Implementation of this statement
decreased stockholder's equity by $39.8 million net of deferred income tax
benefit of $21.4 million. In 1994 prior to the adoption of SFAS 115, all
fixed maturities were carried at amortized cost.
C. Investments
Fixed Maturities - Securities held to maturity are those that the Company
has the positive intent and ability to hold to maturity and are principally
reported at amortized cost. Amortized cost is adjusted to estimated fair
value for impairments which are deemed to be other than temporary.
Where the Company may not have the positive intent to hold fixed maturities
until maturity, the securities are classified as "Available for Sale." These
securities are reported at market value based principally on their quoted
market prices. The associated unrealized gains and losses, net of income
taxes and deferred policy acquisition costs, are included as a component of
equity or if deemed to be other than temporary, are included as a realized
loss.
Equity Securities consist primarily of common and preferred stocks.
Marketable equity securities are reported at market value based principally
on their quoted market prices. Cost basis of the equity securities is $3.9
million and $5.3 million as of December 31, 1996 and 1995, respectively. The
associated unrealized gains and losses are included as a component of
equity.
Mortgage Loans and Policy Loans are stated primarily at unpaid principal
balances, net of unamortized discounts. Interest income is recognized as net
investment income earned.
B-5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
Investment Real Estate acquired through foreclosure during 1994 was sold in
1996 for $4.5 million.
Other Long Term Investments, which consist of limited partnerships, are
valued at the aggregate net equity in the partnerships. Certain investments
in this category were non-income producing at December 31, 1995. These
investments were $.3 million at December 31, 1995. There were no non-income
producing investments at December 31, 1996 and 1994.
Partnership and joint venture interests in which the Company does not have
control and a majority economic interest are reported on the equity basis of
accounting. Non real estate related interests of $4.5 million and $4.1
million are included in other long term investments, at December 31, 1996
and 1995, respectively. The Company's share of net income from such entities
was $1.4 million, $.3 million, and $1.9 million for the years ended December
31, 1996, 1995, and 1994, respectively, and is reported in net investment
income.
Realized investment gains and losses are reported based on specific
identification of the investments sold.
Short-term investments are fixed maturities that mature within one year, and
are reported at estimated fair value.
D. Revenue Recognition and Related Expenses
Universal life contracts are long duration life insurance contracts that
involve significant mortality and morbidity risk with both fixed and
guaranteed terms. Investment contracts are long duration contracts that do
not subject the insurance enterprise to risks arising from policyholder
mortality or morbidity. Amounts received as payments for these contracts are
reported as deposits to policyholders' account balances. Revenues from these
contracts consist primarily of amounts assessed during the period against
policyholders' account balances for mortality charges, policy administration
fees and surrender charges. Policy benefits and claims that are charged to
expenses include benefit claims incurred in the period in excess of related
policyholders' account balances.
Premiums, policy benefits and claims from traditional life and annuity
policies, generally are recognized in operations when due.
E. Deferred Policy Acquisition Costs
Acquisition costs consist of commissions and other costs which vary with and
are primarily related to the production or acquisition of new business.
Acquisition costs related to universal life products and investment-type
contracts are deferred and amortized in proportion to total estimated gross
profits arising principally from investment results, mortality, expense
margins and surrender charges based on historical and anticipated future
experience. Amortization of deferred policy acquisition costs was $9.3
million, $54.4 million, and $76.0 million for the years ended December 31,
1996, 1995, and 1994, respectively. Deferred policy acquisition costs are
analyzed to determine if they are recoverable from future income, including
investment income. If such costs are determined to be unrecoverable, they
are expensed at the time of determination. The effect on the deferred policy
acquisition asset that would result from realization of unrealized
investment gains (losses) is recognized with an offset to unrealized
investment gains (losses) in consolidated stockholder's equity.
B-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
F. Future Policy Benefits and Policyholders' Account Balances
Benefit reserve liabilities for payout annuities such as matured deferred
annuities and supplementary contracts represent the present values of
estimated future benefits payments and related expenses. Present values for
these contracts are computed using interest rates ranging from 6.5% to 11%.
The mortality assumption for these contracts is the 83 IAM tables. Reserves
for supplementary benefits are stated at interest rates that vary from 4% to
6.5% using mortality and morbidity assumptions either from company
experience or various actuarial tables.
When liabilities for future policy benefits plus the present value of
expected future gross deposits are insufficient to provide expected future
policy benefits and expenses, unrecoverable deferred policy acquisition
costs are written off and thereafter, if required, a premium deficiency
reserve is established as a charge to income.
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account values
represent an accumulation of gross deposits plus interest credited less
expense and mortality charges and withdrawals.
Interest crediting rates on life insurance products range from 3.35% to 7%.
G. Separate Accounts
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life Modified Guaranteed
Annuity Account. The Pruco Life Modified Guaranteed Annuity Account is a
non-unitized separate account, which funds the Modified Guaranteed Annuity
Contract and the Market Value Adjustment Annuity Contract. Owners of the
Pruco Life Modified Guaranteed Annuity and the Market Value Adjustment
Annuity Contracts do not participate in the investment gain or loss from
assets relating to such accounts. Such gain or loss is borne, in total, by
the Company.
All Separate Account assets are carried at market value. Deposits to all
Separate Accounts are reported as increases in Separate Account liabilities,
which equal the Separate Account policy account fund values. Charges
assessed against Policyholders' account balances for mortality, policy
administration and surrender charges are included in policy charges and fee
income. Mortality and expense risk charges are applied against the
Policyholders' account balance. The Separate Account assets are legally
segregated and are not subject to claims that arise out of any other
business of the Company.
H. Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
B-7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
2. FIXED MATURITIES
Gross unrealized gains and losses for securities classified as Held to Maturity
and Available for Sale, by major security type, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
- - ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ - $ - $ - $ -
Foreign government bonds - - - -
Corporate securities 405,731 10,947 576 416,102
Mortgage-backed securities - - - -
Other fixed maturities - - - -
- - ---------------------------------------------------------------------------------------------------
Total $ 405,731 $ 10,947 $ 576 $ 416,102
- - ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1996
- - ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available For Sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 32,055 $ 30 $ 174 $ 31,911
Foreign government bonds 90,447 857 205 91,099
Corporate securities 2,087,250 30,365 4,206 2,113,409
Mortgage-backed securities 398 - - 398
Other fixed maturities - - - -
- - ---------------------------------------------------------------------------------------------------
Total $ 2,210,150 $ 31,252 $ 4,585 $ 2,236,817
- - ---------------------------------------------------------------------------------------------------
</TABLE>
B-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- - ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ - $ - $ - $ -
Foreign government bonds - - - -
Corporate securities 437,727 18,629 1,805 454,551
Mortgage-backed securities - - - -
Other fixed maturities - - - -
- - ---------------------------------------------------------------------------------------------------
Total $ 437,727 $ 18,629 $ 1,805 $ 454,551
- - ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1995
- - ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available For Sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 324,854 $ 6,830 $ 61 $ 331,623
Foreign government bonds 73,042 3,055 - 76,097
Corporate securities 1,507,248 54,545 2,168 1,559,625
Mortgage-backed securities 169,190 8,717 398 177,509
Other fixed maturities - - - -
- - ---------------------------------------------------------------------------------------------------
Total $ 2,074,334 $ 73,147 $ 2,627 $ 2,144,854
- - ---------------------------------------------------------------------------------------------------
</TABLE>
B-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
The amortized cost and estimated fair value of fixed maturities at December 31,
1996, categorized by contractual maturity, are shown below. Actual maturities
will differ from contractual maturities because borrowers may prepay obligations
with or without call or prepayment penalties.
DECEMBER 31, 1996
- - ------------------------------------------------------------------------------
Estimated
Amortized Fair
(000's) Cost Value
- - ------------------------------------------------------------------------------
Held to Maturity
Due in one year or less $ 28,653 $ 28,762
Due after one year through five years 156,013 158,183
Due after five years through ten years 194,765 202,766
Due after ten years 26,300 26,391
Mortgage-backed securities -- --
- - ------------------------------------------------------------------------------
Total $ 405,731 $ 416,102
- - ------------------------------------------------------------------------------
DECEMBER 31, 1996
- - ------------------------------------------------------------------------------
Estimated
Amortized Fair
(000's) Cost Value
- - ------------------------------------------------------------------------------
Available For Sale
Due in one year or less $ 130,400 $ 131,301
Due after one year through five years 1,561,854 1,578,979
Due after five years through ten years 398,090 404,920
Due after ten years 119,408 121,219
Mortgage-backed securities 398 398
- - ------------------------------------------------------------------------------
Total $2,210,150 $2,236,817
- - ------------------------------------------------------------------------------
Proceeds from the sale of fixed maturities during 1996, 1995, and 1994 were $3.8
billion, $1.8 billion, and $2.6 billion, respectively. Gross gains of $28.7
million, $28.8 million, and $16.8 million and gross losses of $19.7 million,
$17.5 million, and $49.8 million were realized on those sales during 1996, 1995,
and 1994, respectively.
B-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
3. Net Investment Income YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Net investment income consists of:
Gross investment income
Fixed maturities
Held to maturity $ 33,419 $ 33,458 $ 196,909
Available for sale 152,445 160,740 --
Equity securities 44 104 14
Mortgage loans 5,669 7,757 4,041
Investment real estate 613 647 2,146
Policy loans 33,449 29,775 25,692
Short term investments 16,780 15,092 12,676
Other 9,438 3,949 5,075
-------------------------------------------
251,857 251,522 246,553
Investment expenses (4,529) (4,904) (5,421)
===========================================
Net investment income $ 247,328 $ 246,618 $ 241,132
===========================================
4. Investment Gains (Losses)
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Realized investment gains (losses)
Fixed maturities - Available for sale $ 9,036 $ 11,359 $ (38,180)
Equity securities 781 2,020 503
Mortgage loans 1,677 (90) (4,581)
Investment real estate 487 (99) 1,184
Other (1,146) 10 --
-------------------------------------------
Realized investment gains (losses) $ 10,835 $ 13,200 $ (41,074)
===========================================
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Net unrealized investment gains
(losses), beginning of period $ 30,836 $ (1,349) $ --
Net unrealized investment gains (losses)
Fixed maturities - Available for sale (43,853) 131,712 --
Equity securities 1,403 827 (2,108)
-------------------------------------------
(42,450) 132,539 (2,108)
Deferred income tax benefit (provision) 15,398 (47,714) 759
Deferred policy acquisition costs
(net of deferred income taxes) 8,618 (12,878) --
-------------------------------------------
Net change in unrealized
investment gains (losses) (18,434) 71,947 (1,349)
Adoption of SFAS 115 -- (39,762) --
-------------------------------------------
Net unrealized investment gains
(losses), end of period $ 12,402 $ 30,836 (1,349)
===========================================
</TABLE>
B-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
5. Fair Value Information
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies. Considerable judgment is
applied, as necessary, in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a current
market exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values.
The following methods and assumptions were used in calculating the fair values.
Fixed Maturities - Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities are
estimated using a discounted cash flow model which considers the current market
spreads between the U.S. Treasury yield curve and corporate bond yield curve
adjusted for the type of issue, its current quality and its remaining average
life.
Equity Securities - Fair value is based on quoted market prices.
Mortgage Loans - The fair value of the mortgage loan portfolio is primarily
based upon the present value of the scheduled cash flows discounted at the
appropriate U.S. Treasury rate, adjusted for the current market spread for a
similar quality mortgage.
Policy Loans - The estimated fair value is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.
Policyholders' Account Balances - Fair values for policyholders' account
balances are equal to the policy account values.
Short-term Investments - Fair values for short-term investments are based on
quoted market prices or estimates from independent pricing services.
The following table discloses the carrying amounts and estimated fair values of
the Company's financial instruments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------- ---------- -------------- ----------
(000'S)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Held to maturity $ 405,731 $ 416,102 $ 437,727 $ 454,551
Available for sale 2,236,817 2,236,817 2,144,854 2,144,854
Mortgage loans 46,915 46,692 64,464 63,635
Policy loans 639,782 623,218 569,273 577,975
Equity securities 3,748 3,748 4,036 4,036
Short-term investments 169,830 169,830 228,016 228,016
Financial Liabilities:
Policyholders'
account balances $ 2,188,862 $ 2,188,862 $ 2,218,330 $ 2,218,330
</TABLE>
B-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
6. Income Taxes
The Company is a member of a group of affiliated companies which join in filing
a consolidated federal income tax return in addition to separate company state
and local tax returns. The Internal Revenue Code limits the amount of nonlife
insurance losses that may offset life insurance company taxable income.
Companies operating outside the United States are taxed under applicable foreign
statutes.
Pursuant to the tax allocation arrangement, total federal income tax expense is
determined on a separate company basis. Members with losses record tax benefits
to the extent such losses are recognized in the consolidated federal tax
provision. The Company has a net receivable from Prudential of $7.2 million and
$6.4 million as of December 31, 1996 and 1995, respectively.
Deferred income taxes are generally recognized when assets and liabilities have
different values for financial statement and tax reporting purposes.
The components of income taxes are as follows:
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------
(000'S)
Current income tax provision:
Federal income tax $ 59,489 $ 65,131 $ 59,641
State and local income tax 703 1,876 3,036
Foreign income tax 4 7 7
-------------------------------------
Total current income tax 60,196 67,014 62,684
Deferred income tax provision
(benefit):
Federal income tax 18,413 12,196 (14,246)
State and local income tax 526 348 (407)
-------------------------------------
Total deferred income tax 18,939 12,544 (14,653)
-------------------------------------
Total income tax provision $ 79,135 $ 79,558 $ 48,031
=====================================
The income tax provision is different from the amount computed using the
expected federal income tax rate of 35% for the following reasons:
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------
(000'S)
Expected federal income tax expense $ 79,926 $ 81,271 $ 45,474
State income taxes 1,229 2,224 2,629
Other (2,020) (3,937) (72)
=====================================
Total income tax provision $ 79,135 $ 79,558 $ 48,031
=====================================
B-13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
The components of net deferred income taxes payable are as follows:
YEAR ENDED
DECEMBER 31,
1996 1995
------------------------------
(000'S)
Deferred Income Tax Assets
Insurance liabilities $ 38,532 $ 40,732
Other -- --
------------------------------
Total deferred income tax assets $ 38,532 $ 40,732
==============================
Deferred Income Tax Liabilities
Deferred acquisition costs $ 173,785 $ 153,526
Net investment gains 12,502 28,157
Other 1,205 97
------------------------------
Total deferred income tax liabilities 187,492 181,780
------------------------------
Deferred federal income tax payable $ 148,960 $ 141,048
==============================
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns through 1989. The Service is examining
the years 1990 through 1992. Discussions are being held with the Service with
respect to proposed adjustments. However, management believes there are adequate
defenses against, or sufficient reserves to provide for, such adjustments.
B-14
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
7. Stockholder's Equity Reconciliation
The reconciliation of statutory net income to GAAP net income, and statutory
surplus to GAAP equity as of December 31, 1996, 1995, and 1994 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------
(000'S)
<S> <C> <C> <C>
Statutory net income $ 73,847 $ 157,751 $ 52,955
Deferred acquisition costs 48,862 (6,103) (34,124)
Deferred premium 1,295 (743) 1,122
Insurance liabilities 10,211 22,890 31,780
Income taxes (7,780) (27,669) 42,755
Interest maintenance reserve 365 5,480 (24,704)
Separate accounts and other 22,422 1,038 12,111
---------------------------------------------------------
GAAP net income $ 149,222 $ 152,644 $ 81,895
=========================================================
Statutory surplus $ 901,645 $ 829,022 $ 676,087
Investment valuation 26,678 70,776 -
Deferred acquisition costs 633,159 566,976 598,294
Deferred premium (11,859) (13,154) (12,412)
Insurance liabilities (124,781) (153,995) (71,076)
Income taxes (124,823) (128,070) (82,167)
Asset valuation reserve and interest
maintenance reserve 68,733 64,551 23,690
Other 30,229 32,087 (49,052)
---------------------------------------------------------
GAAP stockholder's equity $ 1,398,981 $ 1,268,193 $ 1,083,364
=========================================================
</TABLE>
The New York State Insurance Department ("Department") recognizes only
statutory accounting for determining and reporting the financial condition
and results of operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to its stockholders.
No consideration is given by the Department to financial statements prepared
in accordance with generally accepted accounting principles in making such
determinations.
B-15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
8. Related Party Transactions
A. Service Agreements
The Company, Prudential, and Pruco Securities Corporation, an indirect
wholly-owned subsidiary of Prudential, operate under service and lease
agreements whereby services of officers and employees, supplies, use of
equipment and office space are provided. The net cost of these services
allocated to the Company were $102 million, $98 million and $78 million for
the years ended December 31, 1996, 1995, and 1994, respectively.
B. Pension Plans
The Company is a wholly-owned subsidiary of Prudential which sponsors
several defined benefit pension plans that cover substantially all of its
employees. Benefits are generally based on career average earnings and
credited length of service. Prudential's funding policy is to contribute
annually the amount necessary to satisfy the Internal Revenue Service
contribution guidelines.
No pension expense for contributions to the plan was allocated to the
Company in 1996, 1995, or 1994 because the plan was subject to the full
funding limitation under the Internal Revenue Code.
C. Postretirement Life and Health Benefits
Prudential also sponsors certain life insurance and health care benefits for
its retired employees. Substantially all employees may become eligible to
receive a benefit if they retire after age 55 with at least 10 years of
service. Prudential elected to amortize its obligation over twenty years. A
provision for contributions to the postretirement fund is included in the
net cost of services allocated to the Company discussed above for the years
ended December 31, 1996, 1995, and 1994.
D. Reinsurance
The Company currently has three reinsurance agreements in place with
Prudential (the reinsurer). Specifically: reinsurance Group Annuity
Contract, whereby the reinsurer, in consideration for a single premium
payment by the Company, provides reinsurance equal to 100% of all payments
due under the contract, and two yearly renewable term agreements in which
the Company may offer and the reinsurer may accept reinsurance on any life
in excess of the Company's maximum limit of retention. The Company is not
relieved of its primary obligation to the policyholder as a result of these
reinsurance transactions. These agreements had no material effect on net
income for the years ended December 31, 1996, 1995, and 1994.
9. Contingencies
Several actions have been brought against the Company on behalf of those
persons who purchased life insurance policies based on complaints about
sales practices engaged in by Prudential, the Company and agents appointed
by Prudential and the Company. Prudential has agreed to indemnify the
Company for any and all losses resulting from such litigation.
10. Dividends
The Company is subject to Arizona law which limits the amount of dividends
that insurance companies can pay to stockholders. The maximum dividend which
may be paid in any twelve month period without notification or approval is
limited to the lesser of 10% of surplus as of December 31 of the preceding
year or the net gain from operations of the preceding calendar year. Cash
dividends may only be paid out of surplus derived from realized net profits.
Based on these limitations and the Company's surplus position at December
31, 1996, the Company would be permitted a maximum of $48 million in
dividend distribution in 1997, all of which could be paid in cash, without
approval from The State of Arizona Department of Insurance.
B-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Pruco Life Insurance Company
In our opinion, the accompanying consolidated statement of financial position
and the related consolidated statements of operations, of stockholder's equity
and of cash flows present fairly, in all material respects, the financial
position of Pruco Life Insurance Company and its subsidiaries at December 31,
1996, and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
- - --------------------------
PRICE WATERHOUSE LLP
New York, New York
March 21, 1997
B-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of
Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying consolidated statement of financial position of
Pruco Life Insurance Company and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, stockholder's equity and cash
flows for the years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying financial statements presents fairly, in all
material respects, the consolidated financial position of Pruco Life Insurance
Company and subsidiaries as of December 31, 1995, and the consolidated results
of operations and cash flows for the years ended December 31, 1995 and 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company has
retroactively adopted all applicable generally accepted accounting principles
relating to stock life insurance subsidiaries of mutual life insurance companies
and has changed, as of January 1, 1995, the method of accounting for fixed
maturity investments.
/s/ DELOITTE & TOUCHE LLP
Parsippany, N.J.
December 19, 1996
B-18
<PAGE>
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 rates, 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: Interpolate the interest rates Pruco Life of New Jersey 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 interpolated 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 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 duration of 5 years (4 whole years remaining until September 30, 2004, plus
1 year) is 11%.
C-1
<PAGE>
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
----------
$ 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 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 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
C-2
<PAGE>
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 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.
C-4
<PAGE>
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.
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 approximately 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
C-5
<PAGE>
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
o AIM VARIABLE INSURANCE FUNDS, INC.
o JANUS ASPEN SERIES
o MFS VARIABLE INSURANCE TRUST
o OCC ACCUMULATION TRUST
o T. ROWE PRICE EQUITY SERIES, INC.
o T. ROWE PRICE INTERNATIONAL SERIES, INC.
o WARBURG PINCUS TRUST
===========================================
_______________________________________________________________________________
===========================================
---------------------
| BULK RATE |
| U.S. Postage |
| PAID |
| Jersey City, N.J. |
| Permit No. 60 |
---------------------
A Subsidiary of
[LOGO] PRUDENTIAL
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-3777
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
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 ("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 May 1, 1997, 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 Prudential.
Catalog No. 40M259J
<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 indirect wholly-owned subsidiary
of 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 net assets of the
subaccount for that day by the value of the net 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") or other Fund
held by that subaccount by the net asset value of each share and adding the
value of dividends declared by the Series Fund or other Fund but not yet paid.
PERFORMANCE INFORMATION
The tables that follow provide performance information for each subaccount
through December 31, 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 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 December 31, 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 12/31/96 12/31/96 12/31/96 12/31/96
================================== ================ =============== =============== ============= ===============
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO 6/83 -1.92% 5.88% 6.82% 8.18%
HIGH YIELD BOND PORTFOLIO 2/87 4.97% 10.58% N/A 7.30%
STOCK INDEX PORTFOLIO 10/87 15.99% 13.04% N/A 14.74%
EQUITY INCOME PORTFOLIO 2/88 15.17% 13.39% N/A 13.13%
EQUITY PORTFOLIO 6/83 12.00% 15.58% 13.52% 13.37%
PRUDENTIAL JENNISON PORTFOLIO 5/95 7.95% N/A N/A 19.23%
GLOBAL PORTFOLIO 9/88 13.16% 11.04% N/A 8.89%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND
INCOME FUND 5/94 13.40% N/A N/A 16.72%
AIM V.I. VALUE FUND 6/93 8.55% N/A N/A 16.12%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 11.93% N/A N/A 13.97%
INTERNATIONAL GROWTH
PORTFOLIO 5/94 27.95% N/A N/A 16.88%
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES 7/95 10.53% N/A N/A 19.89%
RESEARCH SERIES 7/95 15.76% N/A N/A 18.58%
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO 8/88 16.24% 17.43% N/A 18.48%
See Note 2
SMALL CAP PORTFOLIO 8/88 12.29% 12.80% N/A 13.10%
See Note 2
</TABLE>
Note 1: This table assumes deferred sales charges.
Note 2: Based on results of the Quest for Value Accumulation Trust and its
predecessor. On September 16, 1994, an investment company which had commenced
operations on August 1, 1988, then called Quest for Value Accumulation Trust
(the "Old Trust"), was effectively divided into two investment funds - the Old
Trust and the present Quest for Value Accumulation Trust (the "Present Trust")
- - - at which time the Present Trust commenced Operations.
2
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
================================== ================ =============== =============== ============= ===============
<S> <C> <C> <C> <C> <C>
T. ROWE PRICE EQUITY SERIES,
INC.
EQUITY INCOME PORTFOLIO 3/94 13.03% N/A N/A 19.24%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK
PORTFOLIO 3/94 8.24% N/A N/A 7.23%
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL
PORTFOLIO 9/96 N/A N/A N/A -27.54%
</TABLE>
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)[superior n] = ERV. In the formula, P is a
hypothetical investment of $1,000; T is the average annual total return; "n" is
the number of years; and ERV 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 12/31/96 12/31/96 12/31/96 12/31/96
=================================== ================== =============== =============== ============= ==============
<S> <C> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO 6/83 2.88% 6.01% 6.82% 8.18%
HIGH YIELD BOND PORTFOLIO 2/87 9.77% 10.68% N/A 7.30%
STOCK INDEX PORTFOLIO 10/87 20.79% 13.14% N/A 14.74%
EQUITY INCOME PORTFOLIO 2/88 19.97% 13.49% N/A 13.13%
EQUITY PORTFOLIO 6/83 16.80% 15.67% 13.52% 13.37%
PRUDENTIAL JENNISON PORTFOLIO 5/95 12.75% N/A N/A 21.76%
GLOBAL PORTFOLIO 9/88 17.96% 11.15% N/A 8.89%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND 5/94 18.20% N/A N/A 17.73%
INCOME FUND
AIM V.I. VALUE FUND 6/93 13.35% N/A N/A 16.57%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 16.73% N/A N/A 14.50%
INTERNATIONAL GROWTH 5/94 32.75% N/A N/A 17.89%
PORTFOLIO
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES 7/95 15.33% N/A N/A 22.95%
RESEARCH SERIES 7/95 20.56% N/A N/A 21.65%
</TABLE>
Note 1: This table assumes no deferred sales charges.
Note 2: Based on results of the Quest for Value Accumulation Trust and its
predecessor. On September 16, 1994, an investment company which had commenced
operations on August 1, 1988, then called Quest for Value Accumulation Trust
(the "Old Trust"), was effectively divided into two investment funds - the Old
Trust and the present Quest for Value Accumulation Trust (the "Present Trust")
- - - at which time the Present Trust commenced Operations.
4
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
=================================== ================ =============== ================ ============= ==============
<S> <C> <C> <C> <C> <C>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO 8/88 21.04% 17.51% N/A 18.48%
See Note 2
SMALL CAP PORTFOLIO 8/88 17.09% 12.90% N/A 13.10%
See Note 2
T. ROWE PRICE EQUITY SERIES,
INC.
EQUITY INCOME PORTFOLIO 3/94 17.83% N/A N/A 20.17%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK 3/94 13.04% N/A N/A 8.35%
PORTFOLIO
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL
PORTFOLIO 9/96 N/A N/A N/A -6.23%
</TABLE>
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 12/31/96 12/31/96 12/31/96 12/31/96
=================================== ================ =============== ================ ============= ==============
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND 6/83 2.88% 33.86% 93.51% 190.43%
PORTFOLIO
HIGH YIELD BOND 2/87 9.77% 66.12% N/A 100.14%
PORTFOLIO
STOCK INDEX PORTFOLIO 10/87 20.79% 85.41% N/A 254.52%
EQUITY INCOME PORTFOLIO 2/88 19.97% 88.27% N/A 198.64%
EQUITY PORTFOLIO 6/83 16.80% 107.02% 255.40% 448.96%
PRUDENTIAL JENNISON 5/95 12.75% N/A N/A 38.94%
PORTFOLIO
GLOBAL PORTFOLIO 9/88 17.96% 69.62% N/A 102.45%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND 5/94 18.20% N/A N/A 54.54%
INCOME FUND
AIM V.I. VALUE FUND 6/93 13.35% N/A N/A 73.24%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 16.73% N/A N/A 56.34%
INTERNATIONAL GROWTH 5/94 32.75% N/A N/A 55.09%
PORTFOLIO
MFS VARIABLE INSURANCE
TRUST
EMERGING GROWTH SERIES 7/95 15.33% N/A N/A 34.66%
RESEARCH SERIES 7/95 20.56% N/A N/A 32.61%
</TABLE>
Note 1: This table assumes no deferred sales charges.
Note 2: Based on results of the Quest for Value Accumulation Trust and its
predecessor. On September 16, 1994, an investment company which had commenced
operations on August 1, 1988, then called Quest for Value Accumulation Trust
(the "Old Trust"), was effectively divided into two investment funds - the Old
Trust and the present Quest for Value Accumulation Trust (the "Present Trust")
- - - at which time the Present Trust commenced Operations.
Note 3: All tables assume a $30.00 annual charge for contracts under $50,000.
6
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
================================ ================ ============== ============== ============= ===================
<S> <C> <C> <C> <C> <C>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO 8/88 21.04% 124.11% N/A 316.82%
See Note 2
SMALL CAP PORTFOLIO 8/88 17.09% 83.40% N/A 181.81%
See Note 2
T. ROWE PRICE EQUITY
SERIES, INC.
EQUITY INCOME PORTFOLIO 3/94 17.83% N/A N/A 65.86%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK 3/94 13.04% N/A N/A 24.71%
PORTFOLIO
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL 9/96 N/A N/A N/A -1.61%
PORTFOLIO
</TABLE>
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 December 31, 1996 were 3.72% and 3.79% 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
(1) Financial Statements of the Pruco Life Flexible Premium Variable
Annuity Account (Registrant) consisting of the Statements of Net
Assets as of December 31, 1996; the Statements of Operations for the
period ended December 31, 1996; the Statements of Changes in Net
Assets for the periods ended December 31, 1996 and December 31, 1995;
and the Notes relating thereto appear in the prospectus (Part A of the
Registration Statement).
(2) Consolidated Statements of Pruco Life Insurance (Depositor) and
subsidiaries consisting of the Consolidated Statements of Financial
Position as of December 31, 1996 and 1995; and the related
Consolidated Statements of Operations of Stockholder's Equity and Cash
Flows for the years ended December 31, 1996, 1995 and 1994; and the
Notes to the Consolidated Financial Statements.
(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 3)
(b) Form of Selected Broker Agreement between Prudential Securities
Incorporated and Pruco Securities Corporation with respect to
sale of the Contracts. (Note 3)
(4) (a) The Prudential DISCOVERY SELECT Contract. (Note 3)
(5) (a) Application form for the Contract. (Note 4)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company, as
amended October 19, 1993. (Note 5)
(b) By-laws of Pruco Life Insurance Company, as amended June 18, 1996.
(Note 6)
(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 3)
(9) Opinion of Counsel as to legality of the securities being registered.
(Note 2) and (Note 7)
(10) (a) Written consent of Price Waterhouse LLP, independent auditors.
(Note 1)
(b) 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) William M. Bethke, Ira J. Kleinman, Mendel A. Melzer, Esther H.
Milnes, I. Edward Price and William F. Yelverton (Note 8)
(b) Linda S. Dougherty, (Note 6)
(c) Kiyofumi Sakaguchi (Note 9)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Form N-4, Registration No.
33-61125, filed July 19, 1995 on behalf of the Pruco Life
Flexible Premium Variable Annuity Account.
(Note 3) Incorporated by reference to Form N-4, Registration
No. 333-06701, filed June 24, 1996 on behalf of the Pruco Life
Flexible Premium Variable Annuity Account.
(Note 4) Incorporated by reference to Pre-Effective Amendment No. 1 to
Form N-4, Registration No. 333-06701, filed September 12, 1996
on behalf of the Pruco Life Flexible Premium Variable Annuity
Account.
(Note 5) Incorporated by reference to Form S-6, Registration No.
333-07451, filed July 2, 1996 on behalf of the Pruco Life
Variable Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 3 to
Form S-1, Registration No. 33-86780, filed April 9, 1997 on
behalf of the Pruco Life Variable Contract Real Property Account.
(Note 7) Incorporated by reference to Registrant's Form 24f-2 filed on
February 28, 1997.
(Note 8) Incorporated by reference to Form 10-K, Registration
No. 33-08698, filed March 31, 1997 on behalf of the Pruco Life
Variable Contract Real Property Account.
(Note 9) Incorporation by reference to Post-Effective Amendment No. 8 to
Form S-6, Registration No. 33-49994, filed April 25, 1997, on
behalf of the Pruco Life PRUvider Variable Appreciable Account.
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, ("Prudential"), a mutual life insurance company
organized under the laws of New Jersey. The subsidiaries of 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 Prudential and certain of
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 Maryland 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 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 Prudential, all of which are registered as open-end, diversified,
management investment companies under the Investment Company Act of 1940 and
with the Prudential Variable Contract Account-24, a registered unit investment
trust.
The subsidiaries of Prudential and short descriptions of each are listed under
Item 25 of Post-Effective Amendment No. 32 to the Form N-1A Registration
Statement for The Prudential Series Fund, Inc., Registration No. 2-80896, filed
February 28, 1997, the text of which is hereby incorporated.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 3, 1997, there were 3,253 Contract owners of qualified Contracts and
4,404 owners of non-qualifed Contracts offered by the Registrant.
ITEM 28. INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance program, purchased by Prudential from Aetna Casualty & Surety Company,
CNA Insurance Companies, Lloyds of London, Great American Insurance Company,
Reliance Insurance Company, Corporate Officers & Directors Assurance Ltd.,
A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and Zurich-American
Insurance Company, provides reimbursement for "Loss" (as defined in the
policies) which the Company pays as indemnification to its directors or officers
resulting from any claim for any actual or alleged act, error, misstatement,
misleading statement, omission, or breach of duty by persons in the discharge of
their duties in their capacities as directors or officers of Prudential, any of
its subsidiaries, or certain investment companies affiliated with Prudential.
Coverage is also provided to the individual directors or officers for such Loss,
for which they shall not be indemnified. Loss essentially is the legal liability
on claims against a director or officer, including adjudicated damages,
settlements and reasonable and necessary legal fees and expenses incurred in
defense of adjudicatory proceedings and appeals therefrom. Loss does not include
punitive or exemplary damages or the multiplied portion of any multiplied damage
award, criminal or civil fines or penalties imposed by law, taxes or wages, or
matters which are uninsurable under the law pursuant to which the policies are
construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal, dishonest or fraudulent acts or omissions or the willful violation
of any law by a director or officer, (2) claims based on or attributable to
directors or officers gaining personal profit or advantage to which they were
not legally entitled, and (3) claims arising from actual or alleged performance
of, or
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 Prudential,
can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The
relevant provisions of Arizona law, Arizona being the state of organization of
Pruco Life, can be found in Section 10-005 of the Arizona Statutes Annotated.
The text of Prudential's by-law 26, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit 1.A.(6)(b) of
Post-Effective Amendment No. 1 to Form S-6, Registration No. 33-61079, filed
April 25, 1996, on behalf of The Prudential Variable Appreciable Account. The
text of Pruco Life's by-laws, Article VIII, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit (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 Pruco Life of New Jersey Flexible 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
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: 213 Washington Street, Newark, NJ 07102
(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 U.S.
Securities and Exchange Commission to the American Council of Life
Insurance on November 28, 1988.
(e) Pruco Life hereby represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by
Pruco Life.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that this Amendment is filed solely for one or more of the purposes
specified in Rule 485(b)(1) under the Securities Act of 1933 and that no
material event requiring disclosure in the prospectus, other than one listed
in Rule 485(b)(1), has occurred since the effective date of the most recent
Registration Statement which included a prospectus and has caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this 25th day of April, 1997.
(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 Post-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
-------------------
April 25, 1997
/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>
(10) (a) Written Consent of Price Waterhouse LLP, independent accountants. Page C-12
(b) Written Consent of Deloitte & Touche LLP, independent auditors.
(13) Schedule of Performance Computations. Page C-13
</TABLE>
C-6
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 1 to the registration statement on Form N-4 (the
"Registration Statement") of our report dated March 31, 1997, relating to the
financial statements of Pruco Life Flexible Premium Variable Annuity Account,
which appears in such Prospectus.
We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated March 21, 1997, relating to the
consolidated financial statements of Pruco Life Insurance Company and
Subsidiaries, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 24, 1997
We consent to the use in this Post Effective-Amendment No. 1 on Form N-4 to the
Registration Statement No. 333-06701 of The Pruco Life Flexible Premium Varible
Annuity Account of the Pruco Life Insurance Company (1) of our report dated
February 15, 1996, relating to the financial statements of The Discovery Select
Variable Annuity Subaccounts of the Pruco Life Flexible Premium Variable Annuity
Accounts; and (2) of our report dated December 19, 1996, relating to the
financial statements of The Pruco Life Insurance Company, which is part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 25, 1997
<TABLE>
<CAPTION>
Date: 22-Apr-97
Filename: C:\POSTDATA\1996YE\DSASAI.WK4
ANNUALIZED RATES OF RETURN
AVG POLICY SIZE 40000 30/40000*1000 = $0.75 ANNUAL CHG
DISCOVERY SELECT MMKT BOND STOCK HIDIV HIYLD
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 3.77% 2.95% 16.88% 20.05% 9.85%
ERV(ENDING REDEEMABLE VALUE) 1037.75 1029.51 1168.75 1200.49 1098.48
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
ERV LESS ADMIN CHARGE 1037.00 1028.76 1168.00 1199.74 1097.73
ROR BEFORE LOAD 3.70% 2.88% 16.80% 19.97% 9.77%
CHARGE FREE AMOUNT 200.00 200.00 200.00 200.00 200.00
AMT SUBJ TO LOAD 800.00 800.00 800.00 800.00 800.00
1ST YEAR SALE CHARGE 6.00% 6.00% 6.00% 6.00% 6.00%
AMT OF LOAD 48.00 48.00 48.00 48.00 48.00
ERV LESS ADMIN CHG & LOAD 989.00 980.76 1120.00 1151.74 1049.73
RETURN W/SALES LOAD AND ADM CHG -1.10% -1.92% 12.00% 15.17% 4.97%
<CAPTION>
DISCOVERY SELECT GLEQ GROWTH STIX TRINST TREQST
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 18.04% 12.83% 20.87% 13.12% 17.91%
ERV(ENDING REDEEMABLE VALUE) 1180.37 1128.28 1208.66 1131.17 1179.09
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
ERV LESS ADMIN CHARGE 1179.62 1127.53 1207.91 1130.42 1178.34
ROR BEFORE LOAD 17.96% 12.75% 20.79% 13.04% 17.83%
CHARGE FREE AMOUNT 200.00 200.00 200.00 200.00 200.00
AMT SUBJ TO LOAD 800.00 800.00 800.00 800.00 800.00
1ST YEAR SALE CHARGE 6.00% 6.00% 6.00% 6.00% 6.00%
AMT OF LOAD 48.00 48.00 48.00 48.00 48.00
ERV LESS ADMIN CHG & LOAD 1131.62 1079.53 1159.91 1082.42 1130.34
RETURN W/SALES LOAD AND ADM CHG 13.16% 7.95% 15.99% 8.24% 13.03%
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 32.83% 16.81% 15.40% 20.64% 18.28%
ERV(ENDING REDEEMABLE VALUE) 1328.28 1168.09 1154.04 1206.40 1182.77
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
ERV LESS ADMIN CHARGE 1327.53 1167.34 1153.29 1205.65 1182.02
ROR BEFORE LOAD 32.75% 16.73% 15.33% 20.56% 18.20%
CHARGE FREE AMOUNT 200.00 200.00 200.00 200.00 200.00
AMT SUBJ TO LOAD 800.00 800.00 800.00 800.00 800.00
1ST YEAR SALE CHARGE 6.00% 6.00% 6.00% 6.00% 6.00%
AMT OF LOAD 48.00 48.00 48.00 48.00 48.00
ERV LESS ADMIN CHG & LOAD 1279.53 1119.34 1105.29 1157.65 1134.02
RETURN W/SALES LOAD AND ADM CHG 27.95% 11.93% 10.53% 15.76% 13.40%
<CAPTION>
DISCOVERY SELECT AIMVAL OPPMAN OPPSMC WARVCP
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR % OF RETURN 13.43% 21.12% 17.17% N/A
ERV(ENDING REDEEMABLE VALUE) 1134.30 1211.19 1171.68 N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A
ERV LESS ADMIN CHARGE 1133.55 1210.44 1170.93 N/A
ROR BEFORE LOAD 13.35% 21.04% 17.09% N/A 290.W/OUT
CHARGE FREE AMOUNT 200.00 200.00 200.00 N/A
AMT SUBJ TO LOAD 800.00 800.00 800.00 N/A
1ST YEAR SALE CHARGE 6.00% 6.00% 6.00% N/A
AMT OF LOAD 48.00 48.00 48.00 N/A
ERV LESS ADMIN CHG & LOAD 1085.55 1162.44 1122.93 N/A
RETURN W/SALES LOAD AND ADM CHG 8.55% 16.24% 12.29% N/A 204.WITH
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN 30/40000*1000 = $0.75 Date: 22-Apr-97
AVG POLICY SIZE 40000 Filename: C:\POSTDATA\1996YE\DSASAI.WK4
DISCOVERY SELECT MMKT BOND STOCK HIDIV HIYLD
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 5.00
'91(OR INCEPT) TO '92 ROR 2.34% 5.69% 12.58% 8.60% 15.90%
'91 TO '92 ERV 1023.38 1056.91 1125.83 1086.03 1159.04
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'91 TO '92 ERV LESS ADMIN CHG 1022.63 1056.16 1125.08 1085.28 1158.29
'92(OR INCEPT) TO '93 ROR 1.54% 8.62% 20.19% 20.59% 17.62%
'92 TO '93 ERV 1038.33 1147.17 1352.24 1308.77 1362.43
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'92 TO '93 ERV LESS ADMIN CHG 1037.58 1146.42 1351.49 1308.02 1361.68
'93(OR INCEPT) TO '94 ROR 2.60% -4.57% 1.36% 0.04% -4.06%
'93 TO '94 ERV 1064.60 1094.01 1369.83 1308.50 1306.34
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'93 TO '94 ERV LESS ADMIN CHG 1063.85 1093.26 1369.08 1307.75 1305.59
'94(OR INCEPT) TO '95 ROR 4.33% 19.07% 29.48% 20.03% 15.94%
'94 TO '95 ERV 1109.93 1301.71 1772.70 1569.68 1513.72
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG 1109.18 1300.96 1771.95 1568.93 1512.97
'95(OR INCEPT) TO '96 ROR 3.77% 2.95% 16.88% 20.05% 9.85%
'95 TO '96 ERV 1151.05 1339.35 2070.97 1883.49 1661.96
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 1150.30 1338.60 2070.22 1882.74 1661.21
ANNUALIZED ROR BEFORE LOAD 2.84% 6.01% 15.67% 13.49% 10.68%
CHARGE FREE AMOUNT 600.00 600.00 600.00 600.00 600.00
AMT SUBJ TO LOAD 400.00 400.00 400.00 400.00 400.00
5TH (OR INCEPTION) SALE CHARGE 2.00% 2.00% 2.00% 2.00% 2.00%
AMT OF LOAD 8.00 8.00 8.00 8.00 8.00
ERV LESS LOAD 1142.30 1330.60 2062.22 1874.74 1653.21
ANN.5YR RET W/LOAD AND ADM CHG 2.70% 5.88% 15.58% 13.39% 10.58%
<CAPTION>
<S> <C> <C> <C> <C> <C>
DISCOVERY SELECT GLEQ GROWTH STIX TRINST TREQST
- - -----------------------------------------------------------------------------------------------------------------------------------
5 YR RATE OF RETURN
YEARS IN EXISTENCE 5.00 N/A 5.00 N/A N/A
'91(OR INCEPT) TO '92 ROR -4.77% N/A 5.64% N/A N/A
'91 TO '92 ERV 952.31 N/A 1056.37 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 951.56 N/A 1055.62 N/A N/A
'92(OR INCEPT) TO '93 ROR 41.17% N/A 8.16% N/A N/A
'92 TO '93 ERV 1343.34 N/A 1141.73 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1342.59 N/A 1140.98 N/A N/A
'93(OR INCEPT) TO '94 ROR -6.20% N/A -0.39% N/A N/A
'93 TO '94 ERV 1259.41 N/A 1136.56 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1258.66 N/A 1135.81 N/A N/A
'94(OR INCEPT) TO '95 ROR 14.28% N/A 35.18% N/A N/A
'94 TO '95 ERV 1438.42 N/A 1535.34 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'94 TO '95 ERV LESS ADMIN CHG 1437.67 N/A 1534.59 N/A N/A
'95(OR INCEPT) TO '96 ROR 18.04% N/A 20.87% N/A N/A
'95 TO '96 ERV 1696.98 N/A 1854.81 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'95 TO '96 ERV LESS ADMIN CHG 1696.23 N/A 1854.06 N/A N/A
ANNUALIZED ROR BEFORE LOAD 11.15% N/A 13.14% N/A N/A
CHARGE FREE AMOUNT 600.00 N/A 600.00 N/A N/A
AMT SUBJ TO LOAD 400.00 N/A 400.00 N/A N/A
5TH (OR INCEPTION) SALE CHARGE 2.00% N/A 2.00% N/A N/A
AMT OF LOAD 8.00 N/A 8.00 N/A N/A
ERV LESS LOAD 1688.23 N/A 1846.06 N/A N/A
ANN.5YR RET W/LOAD AND ADM CHG 11.04% N/A 13.04% N/A N/A
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE 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
'91 TO '92 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'92(OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'93(OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'94(OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'95(OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A
CHARGE FREE AMOUNT N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD N/A N/A N/A N/A N/A
5TH (OR INCEPTION) SALE CHARGE N/A N/A N/A N/A N/A
AMT OF LOAD N/A N/A N/A N/A N/A
ERV LESS LOAD N/A N/A N/A N/A N/A
ANN.5YR RET W/LOAD AND ADM CHG N/A N/A N/A N/A N/A
<CAPTION>
DISCOVERY SELECT AIMVAL OPPMAN OPPSMC WARVCP
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE N/A 5.00 5.00 N/A
'91(OR INCEPT) TO '92 ROR N/A 17.06% 20.28% N/A
'91 TO '92 ERV N/A 1170.56 1202.80 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'91 TO '92 ERV LESS ADMIN CHG N/A 1169.81 1202.05 N/A
'92(OR INCEPT) TO '93 ROR N/A 8.95% 18.09% N/A
'92 TO '93 ERV N/A 1274.55 1419.55 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'92 TO '93 ERV LESS ADMIN CHG N/A 1273.80 1418.80 N/A
'93(OR INCEPT) TO '94 ROR N/A 1.32% -2.78% N/A
'93 TO '94 ERV N/A 1290.67 1379.40 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'93 TO '94 ERV LESS ADMIN CHG N/A 1289.92 1378.65 N/A
'94(OR INCEPT) TO '95 ROR N/A 43.55% 13.64% N/A
'94 TO '95 ERV N/A 1851.71 1566.65 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'94 TO '95 ERV LESS ADMIN CHG N/A 1850.96 1565.90 N/A
'95(OR INCEPT) TO '96 ROR N/A 21.12% 17.17% N/A
'95 TO '96 ERV N/A 2241.86 1834.73 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'95 TO '96 ERV LESS ADMIN CHG N/A 2241.11 1833.98 N/A
ANNUALIZED ROR BEFORE LOAD N/A 17.51% 12.90% N/A 103.39%
CHARGE FREE AMOUNT N/A 600.00 600.00 N/A
AMT SUBJ TO LOAD N/A 400.00 400.00 N/A
5TH (OR INCEPTION) SALE CHARGE N/A 2.00% 2.00% N/A
AMT OF LOAD N/A 8.00 8.00 N/A
ERV LESS LOAD N/A 2233.11 1825.98 N/A
ANN.5YR RET W/LOAD AND ADM CHG N/A 17.43% 12.80% N/A 102.44%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN Date: 22-Apr-97
Filename: C:\POSTDATA\1996YE\DSASAI.WK4
DISCOVERY SELECT
10 YR RATE OF RETURN MMKT BOND STOCK HIDIV HIYLD
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.00 10.00 10.00 8.87 9.85
'85 TO '86 ERV LESS ADMIN CHG 1,000.00 1,000.00 1,000.00 N/A N/A
'86 TO '87 ROR 5.06% -1.09% 0.26% N/A N/A
'86 TO '87 ERV 1,050.57 989.13 1,002.59 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'86 TO '87 ERV LESS ADMIN CHG 1,049.82 988.38 1,001.84 N/A N/A
'87 TO '88 ROR 5.90% 6.70% 15.44% N/A N/A
'87 TO '88 ERV 1,111.71 1,054.61 1,156.53 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'87 TO '88 ERV LESS ADMIN CHG 1,110.96 1,053.86 1,155.78 N/A N/A
'88(OR INCEPT) TO '89 ROR 7.74% 11.92% 27.94% N/A N/A
'88 TO '89 ERV 1,196.98 1,179.54 1,478.69 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1,196.23 1,178.79 1,477.94 N/A N/A
'89(OR INCEPT) TO '90 ROR 6.65% 6.81% -6.54% N/A N/A
'89 TO '90 ERV 1,275.81 1,259.07 1,381.33 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 1,275.06 1,258.32 1,380.58 N/A N/A
'90(OR INCEPT) TO '91 ROR 4.70% 14.83% 24.27% N/A N/A
'90 TO '91 ERV 1,334.93 1,444.96 1,715.66 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,334.18 1,444.21 1,714.91 N/A N/A
'91(OR INCEPT) TO '92 ROR 2.34% 5.69% 12.58% N/A N/A
'91 TO '92 ERV 1,365.37 1,526.40 1,930.71 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1,364.62 1,525.65 1,929.96 N/A N/A
'92(OR INCEPT) TO '93 ROR 1.54% 8.62% 20.19% N/A N/A
'92 TO '93 ERV 1,385.58 1,657.12 2,319.61 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1,384.83 1,656.37 2,318.86 N/A N/A
'93(OR INCEPT) TO '94 ROR 2.60% -4.57% 1.36% N/A N/A
'93 TO '94 ERV 1,420.88 1,580.63 2,350.34 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1,420.13 1,579.88 2,349.59 N/A N/A
'94(OR INCEPT) TO '95 ROR 4.33% 19.07% 29.48% N/A N/A
'94 TO '95 ERV 1,481.66 1,881.12 3,042.26 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'94 TO '95 ERV LESS ADMIN CHG 1,480.91 1,880.37 3,041.51 N/A N/A
'95(OR INCEPT) TO '96 ROR 3.77% 2.95% 16.88% N/A N/A
'95 TO '96 ERV 1,536.81 1,935.86 3,554.77 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'95 TO '96 ERV LESS ADMIN CHG 1,536.06 1,935.11 3,554.02 N/A N/A
ANNUALIZED ROR BEFORE LOAD 4.39% 6.82% 13.52% N/A N/A
CHARGE FREE AMOUNT 1,000.00 1,000.00 1,000.00 N/A N/A
AMT SUBJ TO LOAD 0.00 0.00 0.00 N/A N/A
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% N/A N/A
AMT OF LOAD 0.00 0.00 0.00 N/A N/A
ERV LESS LOAD 1,536.06 1,935.11 3,554.02 N/A N/A
ANN.10YR RET W/LOAD AND ADM CHG 4.39% 6.82% 13.52% N/A N/A
<CAPTION>
DISCOVERY SELECT
10 YR RATE OF RETURN GLEQ GROWTH STIX TRINST TREQST
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 8.28 1.67 9.20 2.75 2.75
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'87 TO '88 ROR N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'88(OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'89(OR INCEPT) TO '90 ROR N/A N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'90(OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'91(OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'92(OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'93(OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'94(OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'95(OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A
CHARGE FREE AMOUNT N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD 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
AMT OF LOAD N/A N/A N/A N/A N/A
ERV LESS LOAD 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
<CAPTION>
DISCOVERY SELECT
10 YR RATE OF RETURN JANINT JANGRW MFSEMG MFSRSR AIMGRI
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 2.67 3.30 1.44 1.44 2.67
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'87 TO '88 ROR N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'88(OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'89(OR INCEPT) TO '90 ROR N/A N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'90(OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'91(OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'92(OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'93(OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'94(OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'95(OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A
CHARGE FREE AMOUNT N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD 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
AMT OF LOAD N/A N/A N/A N/A N/A
ERV LESS LOAD 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
<CAPTION>
DISCOVERY SELECT
10 YR RATE OF RETURN AIMVAL OPPMAN OPPSMC WARVCP
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEARS IN EXISTENCE 3.58 8.42 8.42 0.25
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A
'87 TO '88 ROR N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A N/A N/A
'88(OR INCEPT) TO '89 ROR N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'88 TO '89 ERV LESS ADMIN CHG N/A N/A N/A N/A
'89(OR INCEPT) TO '90 ROR N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'89 TO '90 ERV LESS ADMIN CHG N/A N/A N/A N/A
'90(OR INCEPT) TO '91 ROR N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'90 TO '91 ERV LESS ADMIN CHG N/A N/A N/A N/A
'91(OR INCEPT) TO '92 ROR N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'91 TO '92 ERV LESS ADMIN CHG N/A N/A N/A N/A
'92(OR INCEPT) TO '93 ROR N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'92 TO '93 ERV LESS ADMIN CHG N/A N/A N/A N/A
'93(OR INCEPT) TO '94 ROR N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'93 TO '94 ERV LESS ADMIN CHG N/A N/A N/A N/A
'94(OR INCEPT) TO '95 ROR N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'94 TO '95 ERV LESS ADMIN CHG N/A N/A N/A N/A
'95(OR INCEPT) TO '96 ROR N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'95 TO '96 ERV LESS ADMIN CHG N/A N/A N/A N/A
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A W/OUT 24.73%
CHARGE FREE AMOUNT N/A N/A N/A N/A
AMT SUBJ TO LOAD N/A N/A N/A N/A
10TH (OR INCEPTION) SALE CHARGE N/A N/A N/A N/A
AMT OF LOAD N/A N/A N/A N/A
ERV LESS LOAD N/A N/A N/A N/A
ANN.10YR RET W/LOAD AND ADM CHG N/A N/A N/A N/A WITH 24.73%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN Date: 22-Apr-97
Filename: C:\POSTDATA\1996YE\DSASAI.WK4
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN MMKT BOND STOCK HIDIV HIYLD
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 13.58 13.57 13.57 8.87 9.85
INCEPT. TO '83 ROR 4.13% 1.84% -2.18% N/A N/A
INCEPT. TO 'ERV 1041.27 1018.39 978.18 N/A N/A
ANNUAL ADMIN CHARGE 0.44 0.42 0.43 N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG 1040.84 1017.96 977.76 N/A N/A
83 TO '84 ROR 8.65% 11.64% 6.24% N/A N/A
INCEPT. TO '84 ERV 1130.91 1136.48 1038.72 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG 1130.16 1135.73 1037.97 N/A N/A
'84 TO '85 ROR 6.42% 16.98% 31.03% N/A N/A
'84 TO '85 ERV 1202.72 1328.63 1360.08 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'84 TO '85 ERV LESS ADMIN CHG 1201.97 1327.88 1359.33 N/A N/A
'85 TO '86 ROR 5.07% 12.88% 13.51% N/A N/A
'85 TO '86 ERV 1262.94 1498.88 1542.99 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A N/A
'85 TO '86 ERV LESS ADMIN CHG 1262.19 1498.13 1542.24 N/A N/A
'86 TO '87 ROR 5.06% -1.09% 0.26% N/A -6.03%
'86 TO '87 ERV 1326.02 1481.84 1546.24 N/A 939.66
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A 0.64
'86 TO '87 ERV LESS ADMIN CHG 1325.27 1481.09 1545.49 N/A 939.02
'87(OR INCEPT) TO '88 ROR 5.90% 6.70% 15.44% 9.98% 11.61%
'87 TO '88 ERV 1403.40 1580.35 1784.12 1099.77 1048.05
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.65 0.75
'87 TO '88 ERV LESS ADMIN CHG 1402.65 1579.60 1783.37 1099.12 1047.30
'88(OR INCEPT) TO '89 ROR 7.74% 11.92% 27.94% 20.97% -3.40%
'88 TO '89 ERV 1511.25 1767.96 2281.61 1329.60 1011.70
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'88 TO '89 ERV LESS ADMIN CHG 1510.50 1767.21 2280.86 1328.85 1010.95
'89(OR INCEPT) TO 90 ROR 6.65% 6.81% -6.54% -5.06% -13.08%
'89 TO '90 ERV 1610.99 1887.58 2131.78 1261.60 878.71
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'89 TO '90 ERV LESS ADMIN CHG 1,610.24 1,886.83 2,131.03 1,260.85 877.96
'90(OR INCEPT) TO '91 ROR 4.70% 14.83% 24.27% 25.74% 37.24%
'90 TO '91 ERV 1,685.85 2,166.68 2,648.25 1,585.35 1,204.96
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'90 TO '91 ERV LESS ADMIN CHG 1,685.10 2,165.93 2,647.50 1,584.60 1,204.21
'91(OR INCEPT) TO '92 ROR 2.34% 5.69% 12.58% 8.60% 15.90%
'91 TO '92 ERV 1,724.49 2,289.20 2,980.64 1,720.92 1,395.72
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'91 TO '92 ERV LESS ADMIN CHG 1,723.74 2,288.45 2,979.89 1,720.17 1,394.97
'92(OR INCEPT) TO '93 ROR 1.54% 8.62% 20.19% 20.59% 17.62%
'92 TO '93 ERV 1,750.21 2,485.64 3,581.53 2,074.41 1,640.83
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'92 TO '93 ERV LESS ADMIN CHG 1,749.46 2,484.89 3,580.78 2,073.66 1,640.08
'93(OR INCEPT) TO '94 ROR 2.60% -4.57% 1.36% 0.04% -4.06%
'93 TO '94 ERV 1,795.01 2,371.28 3,629.38 2,074.41 1,573.43
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'93 TO '94 ERV LESS ADMIN CHG 1,794.26 2,370.53 3,628.63 2,073.66 1,572.68
'94(OR INCEPT) TO '95 ROR 4.33% 19.07% 29.48% 20.03% 15.94%
'94 TO '95 ERV 1,871.99 2,822.52 4,698.38 2,489.00 1,823.38
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG 1,871.24 2,821.77 4,697.63 2,488.25 1,822.63
'95(OR INCEPT) TO '96 ROR 3.77% 2.95% 16.88% 20.05% 9.85%
'95 TO '96 ERV 1,941.88 2,905.04 5,490.36 2,987.13 2,002.12
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 1,941.13 2,904.29 5,489.61 2,986.38 2,001.37
ANNUALIZED ROR BEFORE LOAD 5.00% 8.18% 13.37% 13.13% 7.30%
CHARGE FREE AMOUNT 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
AMT SUBJ TO LOAD 0.00 0.00 0.00 0.00 0.00
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% 0.00%
AMT OF LOAD 0.00 0.00 0.00 0.00 0.00
ERV LESS LOAD 1,941.13 2,904.29 5,489.61 2,986.38 2,001.37
ANN. RET W/LOAD AND ADM CHG 5.00% 8.18% 13.37% 13.13% 7.30%
<CAPTION>
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN GLEQ GROWTH STIX TRINST TREQST
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 8.28 1.67 9.20 2.75 2.75
INCEPT. TO '83 ROR N/A N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
83 TO '84 ROR N/A N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'84 TO '85 ROR N/A N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'85 TO '86 ROR N/A N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'86 TO '87 ROR N/A N/A 7.06% N/A N/A
'86 TO '87 ERV N/A N/A 1070.56 N/A N/A
ANNUAL ADMIN CHARGE N/A N/A 0.15 N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A 1070.41 N/A N/A
'87(OR INCEPT) TO '88 ROR 8.15% N/A 13.86% N/A N/A
'87 TO '88 ERV 1081.47 N/A 1218.82 N/A N/A
ANNUAL ADMIN CHARGE 0.21 N/A 0.75 N/A N/A
'87 TO '88 ERV LESS ADMIN CHG 1081.26 N/A 1218.07 N/A N/A
'88(OR INCEPT) TO '89 ROR 17.19% N/A 29.13% N/A N/A
'88 TO '89 ERV 1267.09 N/A 1572.89 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1266.34 N/A 1572.14 N/A N/A
'89(OR INCEPT) TO 90 ROR -14.12% N/A -4.98% N/A N/A
'89 TO '90 ERV 1087.49 N/A 1493.88 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 1,086.74 N/A 1,493.13 N/A N/A
'90(OR INCEPT) TO '91 ROR 9.84% N/A 27.93% N/A N/A
'90 TO '91 ERV 1,193.71 N/A 1,910.22 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,192.96 N/A 1,909.47 N/A N/A
'91(OR INCEPT) TO '92 ROR -4.77% N/A 5.64% N/A N/A
'91 TO '92 ERV 1,136.08 N/A 2,017.11 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1,135.33 N/A 2,016.36 N/A N/A
'92(OR INCEPT) TO '93 ROR 41.17% N/A 8.16% N/A N/A
'92 TO '93 ERV 1,602.76 N/A 2,180.84 N/A N/A
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1,602.01 N/A 2,180.09 N/A N/A
'93(OR INCEPT) TO '94 ROR -6.20% N/A -0.39% 0.74% 6.04%
'93 TO '94 ERV 1,502.75 N/A 2,171.64 1,007.43 1,060.38
ANNUAL ADMIN CHARGE 0.75 N/A 0.75 0.56 0.56
'93 TO '94 ERV LESS ADMIN CHG 1,502.00 N/A 2,170.89 1,006.87 1,059.82
'94(OR INCEPT) TO '95 ROR 14.28% 23.26% 35.18% 9.64% 32.86%
'94 TO '95 ERV 1,716.52 1,232.60 2,934.52 1,103.92 1,408.06
ANNUAL ADMIN CHARGE 0.75 0.50 0.75 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG 1,715.77 1,232.09 2,933.77 1,103.17 1,407.31
'95(OR INCEPT) TO '96 ROR 18.04% 12.83% 20.87% 13.12% 17.91%
'95 TO '96 ERV 2,025.24 1,390.15 3,545.95 1,247.87 1,659.35
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 2,024.49 1,389.40 3,545.20 1,247.12 1,658.60
ANNUALIZED ROR BEFORE LOAD 8.89% 21.76% 14.74% 8.35% 20.17%
CHARGE FREE AMOUNT 1,000.00 200.00 1,000.00 300.00 300.00
AMT SUBJ TO LOAD 0.00 800.00 0.00 700.00 700.00
10TH (OR INCEPTION) SALE CHARGE 0.00% 6.00% 0.00% 5.00% 5.00%
AMT OF LOAD 0.00 48.00 0.00 35.00 35.00
ERV LESS LOAD 2,024.49 1,341.40 3,545.20 1,212.12 1,623.60
ANN. RET W/LOAD AND ADM CHG 8.89% 19.23% 14.74% 7.23% 19.24%
<CAPTION>
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN JANINT JANGRW MFSEMG MFSRSR AIMGRI
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 2.67 3.30 1.44 1.44 2.67
INCEPT. TO '83 ROR N/A N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
83 TO '84 ROR N/A N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'84 TO '85 ROR N/A N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'85 TO '86 ROR N/A N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'86 TO '87 ROR N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'87(OR INCEPT) TO '88 ROR N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'88(OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'89(OR INCEPT) TO 90 ROR N/A N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'90(OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'91(OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 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
'92(OR INCEPT) TO '93 ROR N/A 3.06% N/A N/A N/A
'92 TO '93 ERV N/A 1,030.64 N/A N/A N/A
ANNUAL ADMIN CHARGE N/A 0.22 N/A N/A N/A
'92 TO '93 ERV LESS ADMIN CHG N/A 1,030.42 N/A N/A N/A
'93(OR INCEPT) TO '94 ROR -3.71% 1.35% N/A N/A -0.90%
'93 TO '94 ERV 962.94 1,044.28 N/A N/A 991.05
ANNUAL ADMIN CHARGE 0.50 0.75 N/A N/A 0.50
'93 TO '94 ERV LESS ADMIN CHG 962.44 1,043.53 N/A N/A 990.55
'94(OR INCEPT) TO '95 ROR 21.45% 28.39% 16.78% 10.02% 32.05%
'94 TO '95 ERV 1,168.92 1,339.77 1,167.83 1,100.19 1,307.98
ANNUAL ADMIN CHARGE 0.75 0.75 0.33 0.33 0.75
'94 TO '95 ERV LESS ADMIN CHG 1,168.17 1,339.02 1,167.50 1,099.87 1,307.23
'95(OR INCEPT) TO '96 ROR 32.83% 16.81% 15.40% 20.64% 18.28%
'95 TO '96 ERV 1,551.66 1,564.10 1,347.33 1,326.88 1,546.15
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 1,550.91 1,563.35 1,346.58 1,326.13 1,545.40
ANNUALIZED ROR BEFORE LOAD 17.89% 14.50% 22.95% 21.65% 17.73%
CHARGE FREE AMOUNT 300.00 400.00 200.00 200.00 300.00
AMT SUBJ TO LOAD 700.00 600.00 800.00 800.00 700.00
10TH (OR INCEPTION) SALE CHARGE 5.00% 4.00% 6.00% 6.00% 5.00%
AMT OF LOAD 35.00 24.00 48.00 48.00 35.00
ERV LESS LOAD 1,515.91 1,539.35 1,298.58 1,278.13 1,510.40
ANN. RET W/LOAD AND ADM CHG 16.88% 13.97% 19.89% 18.58% 16.72%
<CAPTION>
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN AIMVAL OPPMAN OPPSMC WARVCP
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 3.58 8.42 8.42 0.25
INCEPT. TO '83 ROR N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG N/A N/A N/A N/A
83 TO '84 ROR N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG N/A N/A N/A N/A
'84 TO '85 ROR N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG N/A N/A N/A N/A
'85 TO '86 ROR N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A
'87(OR INCEPT) TO '88 ROR N/A 3.80% 1.31% N/A
'87 TO '88 ERV N/A 1037.97 1013.08 N/A
ANNUAL ADMIN CHARGE N/A 0.31 0.31 N/A
'87 TO '88 ERV LESS ADMIN CHG N/A 1037.66 1012.77 N/A
'88(OR INCEPT) TO '89 ROR N/A 30.72% 16.72% N/A
'88 TO '89 ERV N/A 1356.47 1182.12 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'88 TO '89 ERV LESS ADMIN CHG N/A 1355.72 1181.37 N/A
'89(OR INCEPT) TO 90 ROR N/A -4.76% -10.94% N/A
'89 TO '90 ERV N/A 1291.17 1052.12 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'89 TO '90 ERV LESS ADMIN CHG N/A 1,290.42 1,051.37 N/A
'90(OR INCEPT) TO '91 ROR N/A 44.02% 46.09% N/A
'90 TO '91 ERV N/A 1,858.46 1,535.99 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'90 TO '91 ERV LESS ADMIN CHG N/A 1,857.71 1,535.24 N/A
'91(OR INCEPT) TO '92 ROR N/A 17.06% 20.28% N/A
'91 TO '92 ERV N/A 2,174.55 1,846.59 N/A
ANNUAL ADMIN CHARGE N/A 0.75 0.75 N/A
'91 TO '92 ERV LESS ADMIN CHG N/A 2,173.80 1,845.84 N/A
'92(OR INCEPT) TO '93 ROR 11.00% 8.95% 18.09% N/A
'92 TO '93 ERV 1,109.97 2,368.43 2,179.83 N/A
ANNUAL ADMIN CHARGE 0.44 0.75 0.75 N/A
'92 TO '93 ERV LESS ADMIN CHG 1,109.53 2,367.68 2,179.08 N/A
'93(OR INCEPT) TO '94 ROR 2.61% 1.32% -2.78% N/A
'93 TO '94 ERV 1,138.45 2,399.04 2,118.56 N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A
'93 TO '94 ERV LESS ADMIN CHG 1,137.70 2,398.29 2,117.81 N/A
'94(OR INCEPT) TO '95 ROR 34.37% 43.55% 13.64% N/A
'94 TO '95 ERV 1,528.67 3,442.81 2,406.61 N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 N/A
'94 TO '95 ERV LESS ADMIN CHG 1,527.92 3,442.06 2,405.86 N/A
'95(OR INCEPT) TO '96 ROR 13.43% 21.12% 17.17% -1.59%
'95 TO '96 ERV 1,733.11 4,168.98 2,818.90 984.13
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.19
'95 TO '96 ERV LESS ADMIN CHG 1,732.36 4,168.23 2,818.15 983.94
ANNUALIZED ROR BEFORE LOAD 16.57% 18.48% 13.10% -6.23% 257.55%
CHARGE FREE AMOUNT 400.00 1,000.00 1,000.00 100.00
AMT SUBJ TO LOAD 600.00 0.00 0.00 883.94
10TH (OR INCEPTION) SALE CHARGE 4.00% 0.00% 0.00% 7.00%
AMT OF LOAD 24.00 0.00 0.00 61.88
ERV LESS LOAD 1,708.36 4,168.23 2,818.15 922.07
ANN. RET W/LOAD AND ADM CHG 16.12% 18.48% 13.10% -27.54% 222.52%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU Date: 22-Apr-97
DISCOVERY SELECT PRODUCTS Filename: C:\POSTDATA\1996YE\DSASAI.WK4
DISCOVERY SELECT MMKT BOND STOCK HIDIV HIYLD
INCEPTION DATE 02-Jun-83 08-Jun-83 06-Jun-83 19-Feb-88 23-Feb-87
<S> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 13.00 13.00 13.00 8.00 9.00
INCEPTION UNIT VALUE 1.00018 0.99691 1.00241 0.99730 0.99968
31-Dec-83 1.04146 1.01524 0.98054 N/A N/A
31-Dec-84 1.13159 1.13344 1.04168 N/A N/A
31-Dec-85 1.20424 1.32595 1.36494 N/A N/A
31-Dec-86 1.26532 1.49670 1.54936 N/A N/A
31-Dec-87 1.32931 1.48043 1.55338 N/A 0.93936
31-Dec-88 1.40768 1.57964 1.79322 1.09680 1.04843
31-Dec-89 1.51667 1.76801 2.29422 1.32679 1.01279
31-Dec-90 1.61757 1.88843 2.14426 1.25965 0.88031
31-Dec-91 1.69352 2.16852 2.66469 1.58384 1.20818
31-Dec-92 1.73311 2.29194 3.00000 1.72009 1.40033
31-Dec-93 1.75973 2.48943 3.60570 2.07432 1.64713
30-Dec-94 1.80554 2.37561 3.65464 2.07507 1.58019
31-Dec-95 1.88376 2.82857 4.73205 2.49069 1.83209
31-Dec-96 1.95487 2.91204 5.53059 2.99006 2.01251
<CAPTION>
DISCOVERY SELECT GLEQ GROWTH STIX TRINST TREQST
INCEPTION DATE 19-Sep-88 01-May-95 19-Oct-87 31-Mar-94 31-Mar-94
<S> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 8.00 1.00 9.00 2.00 2.00
INCEPTION UNIT VALUE 0.99848 1.00866 0.80241 0.99985 0.99985
31-Dec-83 N/A N/A N/A N/A N/A
31-Dec-84 N/A N/A N/A N/A N/A
31-Dec-85 N/A N/A N/A N/A N/A
31-Dec-86 N/A N/A N/A N/A N/A
31-Dec-87 N/A N/A 0.85903 N/A N/A
31-Dec-88 1.07983 N/A 0.97813 N/A N/A
31-Dec-89 1.26541 N/A 1.26306 N/A N/A
31-Dec-90 1.08669 N/A 1.20018 N/A N/A
31-Dec-91 1.19366 N/A 1.53544 N/A N/A
31-Dec-92 1.13674 N/A 1.62200 N/A N/A
31-Dec-93 1.60476 N/A 1.75431 N/A N/A
30-Dec-94 1.50533 N/A 1.74751 1.00728 1.06022
31-Dec-95 1.72032 1.24327 2.36221 1.10437 1.40860
31-Dec-96 2.03061 1.40276 2.85512 1.24923 1.66087
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI
<S> <C> <C> <C> <C> <C>
INCEPTION DATE 02-May-94 13-Sep-93 24-Jul-95 24-Jul-95 02-May-94
WHOLE YEARS SINCE
INCEPTION 2.00 3.00 1.00 1.00 2.00
INCEPTION UNIT VALUE 0.99996 0.99996 0.99996 0.99996 0.99996
31-Dec-83 N/A N/A N/A N/A N/A
31-Dec-84 N/A N/A N/A N/A N/A
31-Dec-85 N/A N/A N/A N/A N/A
31-Dec-86 N/A N/A N/A N/A N/A
31-Dec-87 N/A N/A N/A N/A N/A
31-Dec-88 N/A N/A N/A N/A N/A
31-Dec-89 N/A N/A N/A N/A N/A
31-Dec-90 N/A N/A N/A N/A N/A
31-Dec-91 N/A N/A N/A N/A N/A
31-Dec-92 N/A N/A N/A N/A N/A
31-Dec-93 N/A 1.03060 N/A N/A N/A
30-Dec-94 0.96290 1.04447 N/A N/A 0.99101
31-Dec-95 1.16948 1.34097 1.16778 1.10015 1.30858
31-Dec-96 1.55340 1.56638 1.34766 1.32722 1.54775
<CAPTION>
DISCOVERY SELECT AIMVAL OPPMAN OPPSMC WARVCP
INCEPTION DATE 01-Jun-93 01-Aug-88 01-Aug-88 30-Sep-96
<S> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 3.00 8.00 8.00 0.00
INCEPTION UNIT VALUE 1.00881 0.99989 0.99989 1.00000
31-Dec-83 N/A N/A N/A N/A
31-Dec-84 N/A N/A N/A N/A
31-Dec-85 N/A N/A N/A N/A
31-Dec-86 N/A N/A N/A N/A
31-Dec-87 N/A N/A N/A N/A
31-Dec-88 N/A 1.03786 1.01297 N/A
31-Dec-89 N/A 1.35673 1.18235 N/A
31-Dec-90 N/A 1.29213 1.05300 N/A
31-Dec-91 N/A 1.86092 1.53837 N/A
31-Dec-92 N/A 2.17831 1.85035 N/A
31-Dec-93 1.11975 2.37335 2.18516 N/A
30-Dec-94 1.14893 2.40478 2.12447 N/A
31-Dec-95 1.54376 3.45213 2.41418 N/A
31-Dec-96 1.75108 4.18117 2.82864 0.98413
</TABLE>
Must input current PREPARED BY:
REVIEWED BY:
APPROVED BY:
<PAGE>
<TABLE>
<CAPTION>
Date: 28-Apr-97
Filename: C:\POSTDATA\1996YT\DSASAI.WK4
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU DISCO SELECT PRODUCTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISCOVERY SELECT MMKT BOND STOCK HIDIV HIYLD GLEQ GROWTH STIX
----------------
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
WHOLE YEARS SINCE
INCEPTION 13.00 13.00 13.00 8.00 9.00 8.00 1.00 9.00
INCEPTION UNIT VALUE 1.00018 0.99691 1.00241 0.99730 0.99968 0.99848 1.00866 0.80241
30-Jun-83 1.00515 1.00263 1.02682 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
31-Dec-83 1.04146 1.01524 0.98054 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
30-Jun-84 1.08271 1.01481 0.93882 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
31-Dec-84 1.13159 1.13344 1.04168 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
30-Jun-85 1.16867 1.22545 1.20733 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
31-Dec-85 1.20424 1.32595 1.36494 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
30-Jun-86 1.23756 1.41615 1.60984 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
31-Dec-86 1.26532 1.49670 1.54936 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
30-Jun-87 1.29454 1.47264 1.93737 N/A 1.00140 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
31-Dec-87 1.32931 1.48043 1.55338 N/A 0.93936 N/A N/A 0.85903
1988 31-Mar-88 1.34683 1.53083 1.70198 1.00261 1.00061 N/A N/A 0.89961
30-Jun-88 1.36427 1.54510 1.81001 1.06050 1.01172 N/A N/A 0.95207
30-Sep-88 1.38485 1.57378 1.74932 1.07351 1.02977 1.00586 N/A 0.95209
31-Dec-88 1.40768 1.57964 1.79322 1.09680 1.04843 1.07983 N/A 0.97813
1989 31-Mar-89 1.43381 1.58916 1.89404 1.15356 1.06436 1.12695 N/A 1.04210
30-Jun-89 1.46273 1.70938 2.05552 1.24706 1.08803 1.12363 N/A 1.12827
30-Sep-89 1.48969 1.71664 2.24492 1.32515 1.06159 1.23424 N/A 1.24262
31-Dec-89 1.51667 1.76801 2.29422 1.32679 1.01279 1.26541 N/A 1.26306
1990 31-Mar-90 1.54121 1.74036 2.23465 1.27222 0.96666 1.15976 N/A 1.21953
30-Jun-90 1.56660 1.79428 2.28791 1.30917 1.01715 1.21030 N/A 1.28772
30-Sep-90 1.59159 1.80617 1.92449 1.16547 0.91553 1.05289 N/A 1.10713
31-Dec-90 1.61757 1.88843 2.14426 1.25965 0.88031 1.08669 N/A 1.20018
1991 31-Mar-91 1.64007 1.93178 2.54576 1.39732 1.01671 1.13425 N/A 1.36794
30-Jun-91 1.65943 1.95982 2.56794 1.42269 1.09665 1.12538 N/A 1.35821
30-Sep-91 1.67708 2.06514 2.56190 1.49197 1.15554 1.18030 N/A 1.42369
31-Dec-91 1.69352 2.16852 2.66469 1.58384 1.20818 1.19366 N/A 1.53544
1992 31-Mar-92 1.70647 2.13280 2.80723 1.56248 1.28975 1.13553 N/A 1.49022
30-Jun-92 1.71673 2.21191 2.82123 1.59376 1.32878 1.18434 N/A 1.51129
30-Sep-92 1.72539 2.29772 2.84544 1.65912 1.37870 1.12607 N/A 1.55168
31-Dec-92 1.73311 2.29194 3.00000 1.72009 1.40033 1.13674 N/A 1.62200
1993 31-Mar-93 1.74004 2.38331 3.26582 1.90917 1.48145 1.23501 N/A 1.68565
30-Jun-93 1.74636 2.44112 3.35740 1.97475 1.54887 1.28352 N/A 1.68585
30-Sep-93 1.75291 2.50972 3.47422 2.03732 1.56716 1.44096 N/A 1.72162
31-Dec-93 1.75973 2.48943 3.60570 2.07432 1.64713 1.60476 N/A 1.75431
1994 31-Mar-94 1.76667 2.41065 3.50101 2.03262 1.63845 1.53641 N/A 1.68051
30-Jun-94 1.77613 2.37820 3.51214 2.03906 1.61797 1.53198 N/A 1.68075
30-Sep-94 1.78921 2.38221 3.69964 2.15338 1.61477 1.59646 N/A 1.75506
30-Dec-94 1.80554 2.37561 3.65464 2.07507 1.58019 1.50533 N/A 1.74751
1995 31-Mar-95 1.82495 2.47253 3.96491 2.19764 1.65780 1.49401 N/A 1.90917
30-Jun-95 1.84509 2.64432 4.23150 2.35171 1.71894 1.63630 1.12463 2.08204
30-Sep-95 1.86443 2.69911 4.59104 2.47267 1.76307 1.75970 1.22724 2.23815
31-Dec-95 1.88376 2.82857 4.73205 2.49069 1.83209 1.72032 1.24327 2.36221
1996 31-Mar-96 1.90143 2.76354 4.96716 2.63240 1.88681 1.82365 1.28380 2.47973
30-Jun-96 1.91871 2.76596 5.04308 2.64792 1.90659 1.88361 1.32734 2.57933
30-Sep-96 1.93636 2.81876 5.10366 2.71157 1.98705 1.92369 1.35265 2.64723
31-Dec-96 1.95487 2.91204 5.53059 2.99006 2.01251 2.03061 1.40276 2.85512
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISCOVERY SELECT TRINST TREQST JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL
----------------
INCEPTION DATE 31-Mar-94 31-Mar-94 02-May-94 13-Sep-93 24-Jul-95 24-Jul-95 02-May-94 01-Jun-93
WHOLE YEARS SINCE
INCEPTION 2.00 2.00 2.00 3.00 1.00 1.00 2.00 3.00
INCEPTION UNIT VALUE 0.99985 0.99985 0.99996 0.99996 0.99996 0.99996 0.99996 1.00881
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
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 N/A N/A
31-Dec-88 N/A N/A N/A N/A N/A N/A N/A N/A
1989 31-Mar-89 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 N/A N/A
30-Sep-89 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-89 N/A N/A N/A N/A N/A N/A N/A N/A
1990 31-Mar-90 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-90 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-90 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-90 N/A N/A N/A N/A N/A N/A N/A N/A
1991 31-Mar-91 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-91 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-91 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-91 N/A N/A N/A N/A N/A N/A N/A N/A
1992 31-Mar-92 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-92 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-92 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-92 N/A N/A N/A N/A N/A N/A N/A N/A
1993 31-Mar-93 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-93 N/A N/A N/A N/A N/A N/A N/A 1.04992
30-Sep-93 N/A N/A N/A 1.01928 N/A N/A N/A 1.09909
31-Dec-93 N/A N/A N/A 1.03060 N/A N/A N/A 1.11975
1994 31-Mar-94 0.99985 0.99985 N/A 1.03899 N/A N/A N/A 1.14703
30-Jun-94 1.00648 1.01342 0.96178 1.02019 N/A N/A 0.97476 1.09567
30-Sep-94 1.04459 1.06188 0.98120 1.04618 N/A N/A 1.01372 1.16241
30-Dec-94 1.00728 1.06022 0.96290 1.04447 N/A N/A 0.99101 1.14893
1995 31-Mar-95 1.00104 1.14384 0.92301 1.11969 N/A N/A 1.07328 1.25820
30-Jun-95 1.03905 1.21932 1.01429 1.18159 N/A N/A 1.18230 1.41395
30-Sep-95 1.07973 1.30867 1.11179 1.28258 1.08409 1.03722 1.30451 1.57246
31-Dec-95 1.10437 1.40860 1.16948 1.34097 1.16778 1.10015 1.30858 1.54376
1996 31-Mar-96 1.15567 1.46762 1.27761 1.44865 1.24335 1.15983 1.36888 1.54899
30-Jun-96 1.19593 1.50526 1.41050 1.47543 1.33460 1.22504 1.42154 1.61976
30-Sep-96 1.19763 1.55152 1.45403 1.53372 1.37550 1.26774 1.46656 1.63779
31-Dec-96 1.24923 1.66087 1.55340 1.56638 1.34766 1.32722 1.54775 1.75108
</TABLE>
DISCOVERY SELECT OPPMAN OPPSMC WARVCP
----------------
INCEPTION DATE 01-Aug-88 01-Aug-88 30-Sep-96
WHOLE YEARS SINCE
INCEPTION 8.00 8.00 0.00
INCEPTION UNIT VALUE 0.99989 0.99989 1.00000 18.81412
30-Jun-83 N/A N/A N/A 3.03460
30-Sep-83 N/A N/A N/A 3.01970
31-Dec-83 N/A N/A N/A 3.03724
1984 31-Mar-84 N/A N/A N/A 3.02479
30-Jun-84 N/A N/A N/A 3.03634
30-Sep-84 N/A N/A N/A 3.20338
31-Dec-84 N/A N/A N/A 3.30671
1985 31-Mar-85 N/A N/A N/A 3.43077
30-Jun-85 N/A N/A N/A 3.60145
30-Sep-85 N/A N/A N/A 3.57794
31-Dec-85 N/A N/A N/A 3.89513
1986 31-Mar-86 N/A N/A N/A 4.18363
30-Jun-86 N/A N/A N/A 4.26355
30-Sep-86 N/A N/A N/A 4.18629
31-Dec-86 N/A N/A N/A 4.31138
1987 31-Mar-87 N/A N/A N/A 5.68079
30-Jun-87 N/A N/A N/A 5.70595
30-Sep-87 N/A N/A N/A 5.73342
31-Dec-87 N/A N/A N/A 6.16151
1988 31-Mar-88 N/A N/A N/A 7.48247
30-Jun-88 N/A N/A N/A 7.74367
30-Sep-88 1.00056 0.99757 N/A 10.76731
31-Dec-88 1.03786 1.01297 N/A 11.03456
1989 31-Mar-89 1.14942 1.09464 N/A 11.54804
30-Jun-89 1.20189 1.11059 N/A 12.12710
30-Sep-89 1.29635 1.19138 N/A 12.80258
31-Dec-89 1.35673 1.18235 N/A 12.98603
1990 31-Mar-90 1.30368 1.13117 N/A 12.56924
30-Jun-90 1.39023 1.18407 N/A 13.04743
30-Sep-90 1.20701 1.01227 N/A 11.78255
31-Dec-90 1.29213 1.05300 N/A 12.42222
1991 31-Mar-91 1.55612 1.25113 N/A 13.84108
30-Jun-91 1.62229 1.33498 N/A 14.14739
30-Sep-91 1.71975 1.45902 N/A 14.73439
31-Dec-91 1.86092 1.53837 N/A 15.44714
1992 31-Mar-92 1.95413 1.70897 N/A 15.78758
30-Jun-92 1.95175 1.64842 N/A 15.96821
30-Sep-92 2.05793 1.64933 N/A 16.29138
31-Dec-92 2.17831 1.85035 N/A 16.93287
1993 31-Mar-93 2.25024 1.99725 N/A 17.94794
30-Jun-93 2.30742 2.03405 N/A 19.42926
30-Sep-93 2.37853 2.11644 N/A 21.11725
31-Dec-93 2.37335 2.18516 N/A 21.64424
1994 31-Mar-94 2.34605 2.09741 N/A 23.19550
30-Jun-94 2.40329 2.00545 N/A 25.01727
30-Sep-94 2.45725 2.13931 N/A 25.89727
30-Dec-94 2.40478 2.12447 N/A 25.48795
1995 31-Mar-95 2.70937 2.06215 N/A 26.81159
30-Jun-95 3.09791 2.23452 N/A 30.01746
30-Sep-95 3.31366 2.38130 N/A 34.09142
31-Dec-95 3.45213 2.41418 N/A 35.10296
1996 31-Mar-96 3.68746 2.50577 N/A 36.60235
30-Jun-96 3.73399 2.60294 N/A 37.59753
30-Sep-96 3.90401 2.66541 N/A 38.53488
31-Dec-96 4.18117 2.82864 0.98413 41.68609
