AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1999
1933 ACT REGISTRATION NO. _________
1940 ACT REGISTRATION NO. 811-07325
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. ___ |_|
POST-EFFECTIVE AMENDMENT NO. ___ |_|
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
POST-EFFECTIVE AMENDMENT NO. 7 |X|
(Check appropriate box or boxes)
PRUCO LIFE FLEXIBLE PREMIUM
VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(888) PRU-2888
(Address and telephone number of depositor's principal executive offices)
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
Copies to:
CHRISTOPHER E. PALMER LEE D. AUGSBURGER
SHEA & GARDNER ASSISTANT GENERAL COUNSEL
1800 MASSACHUSETTS AVENUE, N.W. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
WASHINGTON, D.C. 20036 751 BROAD STREET
(202) 828-2093 NEWARK, NEW JERSEY 07201
(973) 367-1388
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective of this Registration.
It is proposed that this filing will become effective (check appropriate space):
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|_| on __________ pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on __________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
|_| on __________ pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Interests in Individual Variable Annuity
Contracts
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission may determine.
<PAGE>
DISCOVERY CHOICE JUNE __, 1999
VARIABLE ANNUITY
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY
PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE). PRUCO LIFE IS A WHOLLY OWNED
SUBSIDIARY OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
Discovery Choice offers a wide variety of investment choices, including 24
variable investment options that invest in mutual funds managed by these leading
asset managers.
PRUDENTIAL INVESTMENTS JANUS CAPITAL
AIM ADVISORS MFS
AMERICAN CENTURY OPPENHEIMER CAPITAL
FRANKLIN ADVISERS T. ROWE PRICE
WARBURG PINCUS
Please read this prospectus before purchasing a Discovery Choice variable
annuity contract and keep it for future reference. Current prospectuses for each
of the underlying mutual funds accompany this prospectus. These prospectuses
contain important information about the mutual funds. Please read these
prospectuses and keep them for reference.
To learn more about the Discovery Choice variable annuity, you can request a
copy of the Statement of Additional Information (SAI) dated June __, 1999. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of this prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the Discovery Choice SAI, material
incorporated by reference, and other information regarding registrants that file
electronically with the SEC. The Table of Contents of the SAI is on Page ___ of
this prospectus. For a free copy of the SAI, call us at: (888) PRU-2888 or write
to us at:
Pruco Life Insurance Company Prudential Annuity Service Center
213 Washington Street P.O. Box 14215
Newark, New Jersey 07102-2992 New Brunswick, New Jersey 08906
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE.
INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISK, INCLUDING THE
POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT IN DISCOVERY CHOICE IS NOT A BANK
DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
TABLE OF CONTENTS
GLOSSARY .................................................................... ii
SUMMARY ..................................................................... 1
SUMMARY OF CONTRACT EXPENSES ................................................ 3
EXPENSE EXAMPLES ............................................................ 5
1. WHAT IS THE DISCOVERY CHOICE VARIABLE ANNUITY?
Short-Term Cancellation Right or "Free Look" ........................... 7
2. WHAT INVESTMENT OPTIONS CAN I CHOOSE?
Variable Investment Options ............................................ 8
Transfers Among Options ................................................ 9
Dollar Cost Averaging .................................................. 10
Asset Allocation Program ............................................... 10
Auto-Rebalancing ....................................................... 10
Voting Rights .......................................................... 11
Substitution ........................................................... 11
3. WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
Payment Provisions ..................................................... 11
Option 1: Annuity Payments for a Fixed Period .......................... 11
Option 2: Life Annuity with 120 Payments (10 Years) Certain ............ 11
Option 3: Interest Payment Option ...................................... 12
Option 4: Other Annuity Options ........................................ 12
4. WHAT IS THE DEATH BENEFIT?
Beneficiary ............................................................ 12
Calculation of the Death Benefit ....................................... 12
5. HOW CAN I PURCHASE A DISCOVERY CHOICE CONTRACT?
Purchase Payments ...................................................... 13
Allocation of Purchase Payments ........................................ 13
Calculating Contract Value ............................................. 13
6. WHAT ARE THE EXPENSES ASSOCIATED WITH THE DISCOVERY SELECT CONTRACT?
Insurance Charges ...................................................... 14
Annual Contract Fee .................................................... 14
Premium Taxes .......................................................... 15
Transfer Fee ........................................................... 15
Company Taxes .......................................................... 15
7. HOW CAN I ACCESS MY MONEY? ............................................. 15
Automated Withdrawals .................................................. 15
Suspension of Payments or Transfers .................................... 16
8. WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE DISCOVERY CHOICE
CONTRACT? .............................................................. 16
Taxes Payable by You ................................................... 16
Taxes on Withdrawals and Surrender ..................................... 16
Taxes on Annuity Payments .............................................. 16
Penalty Taxes on Withdrawals and Annuity Payments ...................... 17
Taxes Payable by Beneficiaries ......................................... 17
Withholding of Tax from Distributions .................................. 17
Annuity Qualification .................................................. 17
Diversification and Investor Control ................................... 17
Required Distributions Upon Your Death ................................. 17
Changes in the Contract ................................................ 18
Additional Information ................................................. 18
Contracts Held by Tax Favored Plans .................................... 18
9. OTHER INFORMATION ...................................................... 22
Pruco Life Insurance Company ........................................... 22
The Separate Account ................................................... 22
Experts ................................................................ 22
Sale and Distribution of the Contract .................................. 23
Assignment ............................................................. 23
Financial Statements ................................................... 23
Year 2000 Compliance ................................................... 23
Statement of Additional Information .................................... 25
Accumulation Unit Values ............................................... 26
i
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
GLOSSARY
We have tried to make this prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms. The period that begins with the contract date (see below definition)
and ends when you start receiving income payments or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
- --------------------------------------------------------------------------------
ACCUMULATION PHASE: The period that begins with the contract date (see
definition below) and ends when you start receiving income payments, or earlier
if the contract is terminated through a full withdrawal or payment of a death
benefit.
ANNUITANT: The person whose life determines the amount of income payments that
will be paid.
ANNUITY DATE: The date when income payments are scheduled to begin.
BENEFICIARY: The person(s) or entity you have chosen to receive a death benefit.
CONTRACT DATE: The date we receive your initial purchase payment and all
necessary paperwork in good order at the Prudential Annuity Service Center.
Contract anniversaries are measured from the contract date. A contract year
starts on the contract date or on a contract anniversary.
CONTRACTOWNER, OWNER OR YOU: The person entitled to the ownership rights under
the contract.
CONTRACT VALUE: This is the total value of your contract minus any charges that
might apply.
DEATH BENEFIT: If the sole or last surviving owner dies, the designated
person(s) or the beneficiary, will receive, at a minimum, the total amount
invested or a potentially greater amount related to market appreciation. See
"What is the Death Benefit?" on page ___.
INCOME OPTIONS: Options under the contract that define the frequency and
duration of income payments. In your contract, these are referred to as payout
or annuity options.
PRUDENTIAL ANNUITY SERVICE CENTER: P.O. Box 14215, New Brunswick, New Jersey,
08906. The phone number is 1-888-PRU-2888.
PURCHASE PAYMENTS: The amount of money you pay us to purchase the contract.
Generally, you can make additional purchase payments at any time during the
accumulation phase.
SEPARATE ACCOUNT: Purchase payments allocated to the variable investment options
are held by us in a separate account called the Pruco Life Flexible Premium
Variable Annuity Account. The separate account is set apart from all of the
general assets of Pruco Life.
TAX DEFERRAL: This is a way to increase your assets without currently being
taxed. You do not pay taxes on your contract earnings until you take money out
of your contract.
VARIABLE INVESTMENT OPTION: When you choose a variable investment option, we
purchase shares of the mutual fund which are held as an investment for that
option. We hold these shares in the separate account. The division of the
separate account of Pruco Life that invests in a particular mutual fund is
referred to in your contract as a subaccount.
ii
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
SUMMARY: FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE
CORRESPONDING SECTION IN THE PROSPECTUS.
1. WHAT IS THE DISCOVERY CHOICE VARIABLE ANNUITY?
This variable annuity contract, offered by Pruco Life, is a contract
between you, as the owner, and us. The contract allows you to invest on a
tax-deferred basis in one or more of 24 variable investment options. The
contract is intended for retirement savings or other long-term investment
purposes and provides for a death benefit.
The variable investment options are designed to offer the opportunity for a
favorable return. However, this is NOT guaranteed. It is possible, due to market
changes, that your investments may decrease in value.
You can invest your money in any or all of the variable investment options.
You are allowed 12 tax free transfers each contract year among the variable
investment options, without a charge.
The contract, like all deferred annuity contracts, has two phases; the
accumulation phase and the income phase. During the accumulation phase, earnings
grow on a tax-deferred basis and are taxed as income when you make a withdrawal.
The income phase starts when you begin receiving regular payments from your
contract. The amount of money you are able to accumulate in your contract during
the accumulation phase will help determine the amount of payments you will
receive during the income phase. Other factors will affect the amount of your
payments such as, age, gender and payout option you selected.
FREE LOOK. If you change your mind about owning Discovery Choice, YOU MAY
CANCEL YOUR CONTRACT WITHIN 10 DAYS AFTER RECEIVING IT (or whatever time period
is required in the state where you receive the contract).
2. WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any or all of the variable investment options
that use the mutual funds described in the fund prospectuses provided with this
prospectus:
THE PRUDENTIAL SERIES FUND
Diversified Bond Portfolio
Diversified Conservative Growth Portfolio
Equity Income Portfolio
Equity Portfolio
Global Portfolio
Money Market Portfolio
High Yield Bond Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
20/20 Focus Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
American Century VP Value
JANUS ASPEN SERIES
Growth Portfolio
International Growth Portfolio
MFS VARIABLE INSURANCE TRUST
Emerging Growth Series
Research Series
OCC ACCUMULATION TRUST
Managed Portfolio
Small Cap Portfolio
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
Franklin Small Cap Investments Fund - Class 2
T. ROWE PRICE
Equity Series - Equity Income Portfolio
International Series - International Stock Portfolio
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio
Depending upon market conditions, you may earn or lose money in any of
these options. The value of your contract will fluctuate depending upon the
investment performance of the mutual funds used by the variable investment
options that you choose. Performance information
1
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
for the variable investment options is provided in the Statement of Additional
Information (SAI). Past performance is not a guarantee of future results.
3. WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one
of several options, including guaranteed payments for the annuitant's lifetime.
Once you begin receiving regular payments, you cannot change your payment plan.
4. WHAT IS THE DEATH BENEFIT?
If the sole or last surviving owner or joint owner dies before the income
phase of the contract begins, the person(s) or entity that you have chosen as
your beneficiary will receive at a minimum, the total amount invested or a
potentially greater amount relating to market appreciation depending on the
death benefit option you choose.
5. HOW CAN I PURCHASE A DISCOVERY CHOICE ANNUITY CONTRACT?
You can purchase this contract, under most circumstances, with a minimum
initial purchase payment of $10,000. Generally, you can add $1,000 or more at
any time during the accumulation phase of the contract. Your representative can
help you fill out the proper forms.
6. WHAT ARE THE EXPENSES ASSOCIATED WITH THE DISCOVERY CHOICE CONTRACT?
The contract has insurance features and investment features, and there are
costs related to each. Each year we deduct a contract maintenance charge if your
contract value is less than $50,000. This charge is equal to the lesser of $30
or 2% of your contract value. For insurance and administrative costs, we also
deduct an annual charge of 1.35% or 1.65% of the average daily value of all
assets allocated to the variable investment options, depending on the death
benefit option that you have chosen.
There are a few states/jurisdictions that assess a premium tax when you
begin receiving regular income payments from your annuity. In those states, we
will assess the required premium tax charge which can range up to 5%.
There are also charges made by the mutual funds which are invested in by
the variable investment options. These annual charges currently range from 0.37%
to 1.40% of a fund's average daily assets.
7. HOW CAN I ACCESS MY MONEY?
You may take money out at any time during the accumulation phase. You may,
however, be subject to income tax and a tax penalty if you make a withdrawal
prior to age 59 1/2.
8. WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE DISCOVERY CHOICE
CONTRACT?
Your earnings are not taxed until withdrawn. If you take money out during
the accumulation phase, earnings are withdrawn first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings in addition to ordinary
taxation. A portion of the payments you receive during the income phase is
considered partly a return of your original investment. As a result, that
portion of each payment is not taxable as income. Generally, all amounts
withdrawn from IRA contracts are taxable and subject to the 10% penalty if
withdrawn prior to age 59 1/2.
9. OTHER INFORMATION
This contract is issued by Pruco Life, a subsidiary of The Prudential
Insurance Company of America, and sold by registered representatives.
2
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
The purpose of this summary is to help you to understand the costs you will pay
for Discovery Choice. This summary includes the expenses of the mutual funds
used by the variable investment options but does not include any premium taxes
that might be applicable in your state.
FOR MORE DETAILED INFORMATION:
More detailed information can be found on page ___ under the section called,
"What Are The Expenses Associated With The Discovery Choice Variable Annuity?"
For more detailed expense information about the mutual funds, please refer to
the individual fund prospectuses which you will find at the back of this
prospectus.
TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
TRANSFER FEE (SEE NOTE 1 BELOW)
- --------------------------------------------------------------------------------
First 12 transfers per year $ 0.00
Each transfer after 12 $25.00
ANNUAL CONTRACT FEE
AND FULL WITHDRAWAL FEE (SEE NOTE 2 BELOW)
- --------------------------------------------------------------------------------
$30.00
ANNUAL ACCOUNT EXPENSES
- --------------------------------------------------------------------------------
AS A PERCENTAGE OF YOUR AVERAGE ACCOUNT VALUE.
BASIC DEATH BENEFIT OPTION
- --------------------------------------------------------------------------------
Insurance Charge: 1.35%
ENHANCED DEATH BENEFIT OPTION
- --------------------------------------------------------------------------------
Insurance Charge: 1.65%
NOTE 1: YOU WILL NOT BE CHARGED FOR TRANSFERS MADE IN CONNECTION WITH DOLLAR
COST AVERAGING AND AUTO-REBALANCING.
NOTE 2: THERE IS NO FULL WITHDRAWAL FEE IF THE VALUE OF YOUR CONTRACT FEE IS
OVER $50,000.
NOTES FOR ANNUAL MUTUAL FUND EXPENSES (APPEARING ON PAGE ___):
- --------------------------------------------------------------------------------
THESE EXPENSES ARE BASED ON THE HISTORICAL FUND EXPENSES FOR THE YEAR ENDED
DECEMBER 31, 1998, EXCEPT AS INDICATED. FUND EXPENSES ARE NOT FIXED OR
GUARANTEED BY THE DISCOVERY SELECT CONTRACT AND MAY VARY FROM YEAR TO YEAR.
(1) THE PRUDENTIAL SERIES FUND: BECAUSE THIS IS THE FIRST YEAR OF OPERATION OF
THE DIVERSIFIED CONSERVATIVE GROWTH PORTFOLIO AND THE 20/20 FOCUS PORTFOLIO,
OTHER EXPENSES ARE ESTIMATED BASED ON MANAGEMENT'S PROJECTION OF NON-MANAGEMENT
FEE EXPENSES.
(2) AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. AND T. ROWE PRICE FUNDS:
MANAGEMENT FEES INCLUDE ORDINARY EXPENSES OF OPERATING THE FUNDS.
(3) JANUS ASPEN SERIES: FEE REDUCTIONS REDUCE MANAGEMENT FEES TO THE LEVEL OF
THE CORRESPONDING JANUS RETAIL FUND. JANUS HAS AGREED TO CONTINUE THE APPLICABLE
WAIVERS AND FEE REDUCTIONS UNTIL AT LEAST THE NEXT ANNUAL RENEWAL OF THE
ADVISORY AGREEMENT.
(4) TEMPLETON VARIABLE PRODUCTS SERIES FUND. FIGURES REFLECT EXPENSES FROM THE
FUND'S INCEPTION ON MAY 1, 1998 AND ARE ANNUALIZED. THE INVESTMENT MANAGER
AGREED IN ADVANCE TO LIMIT MANAGEMENT FEES AND MAKE CERTAIN PAYMENTS TO REDUCE
THE FUND'S EXPENSES AS NECESSARY SO THAT TOTAL ACTUAL EXPENSES DID NOT EXCEED
1.25% OF THE FUND'S CLASS 2 NET ASSETS IN 1998. THE INVESTMENT MANAGER HAS
AGREED TO CONTINUE THIS ARRANGEMENT IN 1998. THE FUND MAINTAINS A DISTRIBUTION
OR "12B-1" PLAN FOR CLASS 2 WHICH IS INCLUDED IN OTHER EXPENSES AND IS DESCRIBED
IN ITS PROSPECTUS.
(5) WARBURG PINCUS TRUST. ACTUAL FEES AND EXPENSES FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 WERE 1.08% AND 0.32% FOR MANAGEMENT FEES AND OTHER EXPENSES,
RESPECTIVELY. FEE WAIVERS AND EXPENSE REIMBURSEMENT OR CREDITS REDUCED FEES AND
EXPENSES DURING 1998 BUT MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
ANNUAL MUTUAL FUND EXPENSES (after reimbursement, if any)
- ---------------------------------------------------------------------------------------------------------------
As a percentage of each Fund's average daily net assets:
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT OTHER TOTAL TOTAL
MANAGEMENT EXPENSES CONTRACTUAL ACTUAL
THE PRUDENTIAL SERIES FUND (1) FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Bond Portfolio 0.40% 0.02% 0.42% 0.42%
Diversified Conservative Growth Portfolio 0.75% 0.20% 0.95% 0.95%
Equity Income Portfolio 0.40% 0.02% 0.42% 0.42%
Equity Portfolio 0.45% 0.02% 0.47% 0.47%
Global Portfolio 0.75% 0.11% 0.86% 0.86%
High Yield Bond Portfolio 0.55% 0.03% 0.58% 0.58%
Money Market Portfolio 0.40% 0.01% 0.41% 0.41%
Prudential Jennison Portfolio 0.60% 0.03% 0.63% 0.63%
Small Capitalization Stock Portfolio 0.40% 0.07% 0.47% 0.47%
Stock Index Portfolio 0.35% 0.02% 0.37% 0.37%
20/20 Focus Portfolio 0.75% 0.20% 0.95% 0.95%
AIM VARIABLE INSURANCE FUNDS, INC
- ---------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.61% 0.04% 0.65% 0.65%
AIM V.I. Value Fund 0.61% 0.05% 0.66% 0.66%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (2)
- ---------------------------------------------------------------------------------------------------------------
American Century VP Value 1.00% 0.0% 1.00% 1.00%
JANUS ASPEN SERIES (3)
- ---------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.72% 0.03% 0.75% 0.68%
International Growth Portfolio 0.75% 0.20% 0.95% 0.86%
MFS VARIABLE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------
Emerging Growth Series 0.75% 0.10% 0.85% 0.85%
Research Series 0.75% 0.11% 0.86% 0.86%
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------
Managed Portfolio 0.78% 0.04% 0.82% 0.82%
Small Cap Portfolio 0.80% 0.08% 0.88% 0.88%
TEMPLETON VARIABLE PRODUCTS SERIES FUND (4)
- ---------------------------------------------------------------------------------------------------------------
Franklin Small Cap Investments Fund - Class 2 0.75% 1.25% 2.00% 1.25%
T. ROWE PRICE (2)
- ---------------------------------------------------------------------------------------------------------------
Equity Series - Equity Income Portfolio 0.85% 0.00% 0.85% 0.85%
International Series - International Stock
Portfolio 1.05% 0.00% 1.05% 1.05%
WARBURG PINCUS TRUST (5)
- ---------------------------------------------------------------------------------------------------------------
Post-Venture Capital Portfolio 1.25% 0.45% 1.70% 1.40%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* REFLECTS FEE WAIVERS AND REIMBURSEMENT OF EXPENSES, IF ANY. SEE NOTES ON
PAGE ___.
THE "EXPENSE EXAMPLES" ON THE FOLLOWING PAGES ARE CALCULATED USING THE TOTAL
ACTUAL EXPENSES.
4
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
THESE EXAMPLES WILL HELP YOU COMPARE THE FEES AND EXPENSES OF THE DIFFERENT
VARIABLE INVESTMENT OPTIONS OFFERED BY DISCOVERY CHOICE. YOU CAN ALSO USE THE
EXAMPLE TO COMPARE THE COST OF DISCOVERY CHOICE WITH OTHER VARIABLE ANNUITY
CONTRACTS.
EXAMPLE 1: BASIC DEATH BENEFIT OPTION
This example assumes that you:
o Invest $10,000 in Discovery Choice;
o Elect the BASIC Death Benefit Option;
o Allocate all of your assets to only one of the variable investment options;
o That investment has a 5% return each year; and
o The mutual fund's operating expenses remain the same each year.
EXAMPLE 2: ENHANCED DEATH BENEFIT OPTION
This example assumes that you:
o Invest $10,000 in Discovery Choice;
o Elect the ENHANCED Death Benefit Option;
o Allocate all of your assets to only one of the variable investment options;
o That investment has a 5% return each year; and
o The mutual fund's operating expenses remain the same each year.
Because this contract has no withdrawal charges, your costs are not impacted by
whether or not you choose to make withdrawals. Your actual costs may be higher
or lower, but on the following page are examples of what your costs would be
based on these assumptions.
NOTES FOR EXPENSE EXAMPLES:
- --------------------------------------------------------------------------------
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
IF YOUR CONTRACT VALUE IS LESS THAN $50,000, ON YOUR CONTRACT ANNIVERSARY (AND
UPON A FULL WITHDRAWAL), WE DEDUCT A $30 FEE. THE EXAMPLES USE AN AVERAGE NUMBER
AS THE AMOUNT OF THE ANNUAL CONTRACT FEE. THIS AMOUNT WAS CALCULATED BY
ESTIMATING THE CONTRACT FEES THAT WILL BE COLLECTED IN THE INITIAL YEARS OF THIS
CONTRACT AND THEN DIVIDING THAT NUMBER BY THE TOTAL ASSETS ESTIMATED TO BE
ALLOCATED TO THE VARIABLE INVESTMENT OPTIONS DURING THE SAME TIME PERIOD. BASED
ON THESE ESTIMATES, THE ANNUAL CONTRACT FEE IS INCLUDED AS AN ANNUAL CHARGE OF
0.10% OF CONTRACT VALUE. YOUR ACTUAL FEES WILL VARY BASED ON THE AMOUNT OF YOUR
CONTRACT AND YOUR SPECIFIC ALLOCATION(S).
A TABLE OF ACCUMULATION UNIT VALUES FOR EACH VARIABLE INVESTMENT OPTION APPEARS
ON PAGE __.
PREMIUM TAXES ARE NOT REFLECTED IN THE EXAMPLES. PREMIUM TAXES MAY APPLY
DEPENDING ON THE STATE WHERE YOU LIVE.
5
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
<TABLE>
<CAPTION>
EXPENSE EXAMPLES 1 AND 2
- ---------------------------------------------------------------------------------------------------------------------
EXAMPLE 1: EXAMPLE 2:
WITH THE BASIC DEATH BENEFIT WITH THE ENHANCED DEATH BENEFIT
-----------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified Bond Portfolio $193 $597 $1027 $2224 $223 $698 $1181 $2538
Diversified Conservative Growth Portfolio $246 $758 $1297 $2771 $276 $848 $1446 $3066
Equity Income Portfolio $193 $597 $1027 $2224 $223 $689 $1181 $2538
Equity Portfolio $198 $612 $1052 $2277 $228 $704 $1206 $2589
Global Portfolio $237 $731 $1252 $2681 $267 $821 $1402 $2979
High Yield Bond Portfolio $209 $646 $1109 $2393 $239 $737 $1262 $2701
Money Market Portfolio $192 $594 $1021 $2213 $222 $686 $1176 $2528
Prudential Jennison Portfolio $214 $661 $1135 $2445 $244 $752 $1287 $2751
Small Capitalization Stock Portfolio $198 $612 $1052 $2277 $228 $704 $1206 $2589
Stock Index Portfolio $188 $581 $1001 $2171 $218 $673 $1155 $2487
20/20 Focus Portfolio $246 $758 $1297 $2771 $276 $848 $1446 $3066
AIM VARIABLE INSURANCE FUNDS INC.
- ---------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund $216 $667 $1145 $2466 $246 $758 $1297 $2771
AIM V.I. Value Fund $217 $670 $1150 $2476 $247 $761 $1302 $2781
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
- ---------------------------------------------------------------------------------------------------------------------
American Century VP Value $251 $773 $1322 $2821 $281 $863 $1471 $3114
JANUS ASPEN SERIES
- ---------------------------------------------------------------------------------------------------------------------
Growth Portfolio $219 $676 $1160 $2497 $249 $767 $1312 $2801
International Growth Portfolio $237 $731 $1252 $2681 $267 $821 $1402 $2979
MFS VARIABLE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Emerging Growth Series $236 $728 $1247 $2671 $266 $818 $1397 $2969
Research Series $237 $731 $1252 $2681 $267 $821 $1402 $2979
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed Portfolio $233 $719 $1231 $2640 $263 $809 $1382 $2940
Small Cap Portfolio $239 $737 $1262 $2701 $269 $827 $1412 $2998
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ---------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Investments Fund
- Class 2 $276 $848 $1446 $3066 $306 $936 $1592 $3351
T. ROWE PRICE
- ---------------------------------------------------------------------------------------------------------------------
Equity Series - Equity Income Portfolio $236 $728 $1247 $2671 $266 $818 $1397 $2969
International Series - Int'l Stock
Portfolio $256 $788 $1347 $2871 $286 $878 $1495 $3162
WARBURG PINCUS TRUST
- ---------------------------------------------------------------------------------------------------------------------
Post-Venture Capital Portfolio $291 $892 $1520 $3210 $321 $980 $1665 $3489
</TABLE>
THESE EXAMPLES DO NOT SHOW PAST OR FUTURE EXPENSES. ACTUAL EXPENSES FOR A
PARTICULAR YEAR MAY BE MORE OR LESS THAN THOSE SHOWN IN THE EXAMPLES.
6
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DISCOVERY CHOICE VARIABLE ANNUITY
1. WHAT IS THE DISCOVERY CHOICE VARIABLE ANNUITY?
The Discovery Choice Variable Annuity is a contract between you, the owner,
and us, the insurance company, Pruco Life Insurance Company (Pruco Life, We or
Us).
Under our contract or agreement, in exchange for your payment to us, we
promise to pay you a guaranteed income stream that can begin any time after the
second contract anniversary. Your annuity is in the accumulation phase until you
decide to begin receiving annuity payments. The date you begin receiving annuity
payments is the annuity date. On the annuity date, your contract switches to the
income phase.
This annuity contract benefits from tax deferral. Tax deferral means that
you are not taxed on earnings or appreciation on the assets in your contract
until you withdraw money from your contract.
Discovery Choice is a variable annuity contract. This means that during the
accumulation phase, you can allocate your assets among 24 variable investment
options. The amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the investment performance of the mutual
fund associated with that variable investment option. Because the mutual funds'
portfolios fluctuate in value depending upon market conditions, your contract
value can either increase or decrease. This is important, since the amount of
the annuity payments you receive during the income phase depends upon the value
of your contract at the time you begin receiving payments.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person who receives the annuity payments when the
income phase begins. The annuitant is also the person whose life is used to
determine how much and how long these payments will continue. On and after the
annuity date, the annuitant is the owner and may not be changed. The beneficiary
becomes the owner when a death benefit is payable.
The beneficiary is the person(s) or entity designated to receive any death
benefit if the owner(s) dies during the accumulation phase. You may change the
beneficiary any time prior to the annuity date by making a written request to
us. Your request becomes effective when we approve it.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Discovery Choice, you may cancel your
contract within 10 days after receiving it (or whatever period is required by
applicable law). You can request a refund by returning the contract either to
the representative who sold it to you, or to the Prudential Annuity Service
Center at the address shown on the first page of this prospectus. You will
receive, depending on applicable law:
o Your full purchase payment; or
o The amount your contract is worth as of the day we receive your request.
This amount may be more or less than your original payment.
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DISCOVERY CHOICE VARIABLE ANNUITY
2. WHAT INVESTMENT OPTIONS CAN I CHOOSE?
The contract gives you the choice of allocating your purchase payments to
any one or more of 24 variable investment options. The 24 variable investment
options invest in mutual funds managed by leading investment advisors. Each of
these mutual funds has a separate prospectus that is provided with this
prospectus. YOU SHOULD READ THE MUTUAL FUND PROSPECTUS BEFORE YOU DECIDE TO
ALLOCATE YOUR ASSETS TO THE VARIABLE INVESTMENT OPTION USING THAT FUND.
Variable Investment Options
Listed below are the mutual funds in which the variable investment options
invest. Each variable investment option has a different investment objective.
THE PRUDENTIAL SERIES FUND, INC.
o Diversified Bond Portfolio
o Diversified Conservative Growth Portfolio
o Equity Income Portfolio
o Equity Portfolio
o Global Portfolio
o High Yield Bond Portfolio
o Money Market Portfolio
o Prudential Jennison Portfolio (domestic equity)
o Small Capitalization Stock Portfolio
o Stock Index Portfolio
o 20/20 Focus Portfolio
The Prudential Series Fund, Inc. is managed by Prudential through another
company it owns called The Prudential Investment Corporation. The Prudential
Investment Corporation manages each of the portfolios of the Prudential Series
Fund except the Prudential Jennison Portfolio and the Diversified Conservative
Growth Portfolio. For the Jennison Portfolio, Prudential Investment Corporation
oversees another company owned by Prudential called Jennison Associates Capital
Corp. that provides the day to day investment advisory services. For the
Diversified Conservative Growth Portfolio, Prudential Investment Corporation
oversees The Dreyfus Corporation and Pacific Investment Management Company,
which provide the day to day investment advisory services.
AIM VARIABLE INSURANCE FUNDS, INC.
o AIM V.I. Growth and Income Fund
o AIM V.I. Value Fund
AIM Advisors, Inc. serves as investment adviser to both of these funds.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
o American Century VP Value
American Century Investment Management, Inc. is the investment adviser for
American Century VP Value.
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DISCOVERY CHOICE VARIABLE ANNUITY
JANUS ASPEN SERIES
o Growth Portfolio
o International Growth Portfolio
Janus Capital Corporation serves as investment adviser to the Growth
Portfolio and the International Growth Portfolio.
MFS VARIABLE INSURANCE TRUST
o Emerging Growth Series
o Research Series (long-term growth and future income)
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to the Emerging Growth Series and the Research Series.
OCC ACCUMULATION TRUST
o Managed Portfolio (equity)
o Small Cap Portfolio
OpCap Advisors is the investment adviser to the Managed Portfolio and the
Small Cap Portfolio.
T. ROWE PRICE
o T. Rowe Price Equity Series, Inc., Equity Income Portfolio
o T. Rowe Price International Series, Inc., International Stock
Portfolio
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.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
o Franklin Small Cap Investments Fund--Class 2
Franklin Advisers, Inc. is the investment manager for this portfolio of the
Templeton Variable Products Series Fund.
WARBURG PINCUS TRUST
o Post-Venture Capital Portfolio
Warburg Pincus Counselors, Inc. serves as investment adviser and Abbott
Capital Management, L.P. serves as sub-investment adviser for that portion of
the Post-Venture Capital Portfolio allocated to private limited partnerships or
other investment funds.
Except for the Prudential Series Fund Inc., we are paid by each fund or an
affiliate of each fund for administrative and other services that we provide.
The amount we receive is based on an annual percentage of the average assets of
Discovery Choice invested in that fund.
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options. Your transfer
request may be made by telephone or in writing to the Prudential Annuity Service
Center. Only two transfers per month may be made by telephone. After that, all
transfer requests must be in writing with an original signature. We have
procedures in place to confirm that instructions received by telephone are
genuine.
We will not be liable for following telephone instructions that we
9
<PAGE>
reasonably believe to be genuine. Your transfer request will take effect at the
end of the business day on which it was received. Our business day closes,
usually at 4:15 p.m. Eastern time.
During the contract accumulation phase, you can make 12 transfers each contract
year, among the investment options, without charge. If you make more than 12
transfers in one contract year, you may be charged up to $25 for each additional
transfer. Currently we charge only $10 for additional transfers. (Dollar Cost
Averaging and Auto-Rebalancing transfers do not count toward the 12 free
transfers per year.)
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature allows you to systematically transfer
either a fixed dollar amount or a percentage out of any variable investment
option and into any other variable investment option(s). You can transfer money
to more than one variable investment option. The investment option used for the
transfers is designated as the DCA account. You can have these automatic
transfers made from the DCA account monthly, quarterly, semiannually or
annually. By allocating amounts on a regular schedule instead of allocating the
total amount at one particular time, you may be less susceptible to the impact
of market fluctuations.
Each transfer from your DCA account must be at least $100. Transfers will be
made automatically on the schedule you elect until the entire amount in your DCA
account has been transferred or until you tell us to discontinue the transfers.
If your DCA account balance drops below $100, the entire remaining balance of
the account will be transferred on the next transfer date. You can allocate
subsequent purchase payments to re-open the DCA account at any time.
Your transfers will be made on the last calendar day of each transfer period you
have selected, provided that the New York Stock Exchange is open on that date.
If the New York Stock Exchange is not open on a particular transfer date, the
transfer will take effect on the next business day.
Any transfers you make because of Dollar Cost Averaging are not counted toward
the 12 free transfers you are allowed each contract year. This feature is
available only during the contract accumulation phase.
ASSET ALLOCATION PROGRAM
We recognize the value of having advice when deciding on the allocation of your
money. If you choose to participate in the Asset Allocation Program, your
representative will give you a questionnaire to complete that will help
determine a program that is appropriate for you. Your asset allocation will be
prepared based on your answers to the questionnaire. You will not be charged for
this service and you are not obligated to participate or to invest according to
program recommendations.
AUTO-REBALANCING
Once your money has been allocated among the variable investment options, the
actual performance of the investment options may cause your allocation to shift.
For example, an investment option that initially holds only a small percentage
of your assets could perform much better than another investment option. Over
time, this option could increase to a larger percentage of your assets than you
desire. You can direct us to automatically rebalance your
10
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
assets to return to your original allocation or to change allocations by
selecting the Auto-Rebalancing feature. The DCA account cannot participate in
this feature.
Your rebalancing will be done monthly, quarterly, semiannually or annually based
on your choice. The rebalancing will be done on the last calendar day of the
period you have chosen, provided that the New York Stock Exchange is open on
that date. If the New York Stock Exchange is not open on that date, the
rebalancing will take effect on the next business day.
Any transfers you make because of Auto-Rebalancing are not counted toward the 12
free transfers you are allowed per year. This feature is available only during
the contract accumulation phase.
VOTING RIGHTS
We are the legal owner of the shares in the mutual funds available as variable
investment options. However, we vote the shares of the mutual funds according to
voting instructions we receive from contract-owners. We will mail you a proxy
which is a form you need to complete and return to us to tell us how you wish us
to vote. When we receive those instructions, we will vote all of the shares we
own on your behalf in accordance with those instructions. Fund shares for which
we do not receive instructions or that we own on our own behalf are voted in the
same proportion as shares for which instructions are received from
contract-owners. We may change the way your voting instructions are calculated
if it is required by federal regulation.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable
investment options. We may also cease to allow investments in existing funds. We
would do this only if events such as investment policy changes or tax law
changes make the mutual fund unsuitable. We would not do this without the
approval of the Securities and Exchange Commission and necessary state insurance
department approvals. You will be given specific notice in advance of any
substitution we intend to make.
3. WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
PAYMENT PROVISIONS
The annuitant can begin receiving annuity payments any time after the first
contract anniversary. Annuity payments must begin no later than the contract
anniversary that coincides with or follows the annuitant's 90th birthday (unless
we agree to another date).
You may choose among the income plans described below at any time before the
annuity date. These plans are called annuity options or settlement options.
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If you have not selected an annuity
option by the annuity date, the Life Income Annuity Option (Option 2, described
below) will automatically be selected unless prohibited by applicable law. ONCE
THE ANNUITY PAYMENTS BEGIN, YOU CANNOT CHANGE THE ANNUITY OPTION.
11
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
OPTION 1. ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for a period you choose, up to 25
years. The annuity payments may be made monthly, quarterly, semiannually, or
annually for as long as the annuitant is alive. If the annuitant dies during the
income phase, a lump sum payment will be made to the beneficiary. The amount of
the lump sum payment is determined by calculating the present value of the
unpaid future payments. This is done by using the interest rate used to compute
the actual payments. The interest rate used will always be at least 3% a
year.
OPTION 2. LIFE INCOME ANNUITY OPTION
Under this option, we will make annuity payments to the annuitant monthly,
quarterly, semiannually, or annually as long as the annuitant is alive. If the
annuitant dies before we have made 10 years worth of payments, we will pay the
beneficiary the present value of the remaining annuity payments in one lump sum
unless the annuitant has specifically instructed that the remaining monthly
annuity payments continue to be paid to the beneficiary. The present value of
the remaining annuity payments is calculated by using the interest rate used to
compute the amount of the original 120 payments. The interest rate used will
always be at least 3% a year. No withdrawal charge is applicable under this
option.
If you have not selected an annuity option by the annuity date, this is the
option we will automatically select for you, unless prohibited by applicable
law.
OPTION 3. INTEREST PAYMENT OPTION
Under this option, you can choose to have us hold all or a portion of your
Contract Value in order to accumulate interest. You can receive interest
payments on a monthly, quarterly, semiannual, or annual basis or you can allow
the interest to accrue on your contract assets. Under this option, we will pay
you interest at an effective rate of at least 3% a year.
This option is not available if your contract is held in an Individual
Retirement Account.
OPTION 4. OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options not described above. At
the time you choose to receive your annuity payments, we may make available to
you any of the fixed annuity options that are offered at your annuity date.
4. WHAT IS THE DEATH BENEFIT?
The death benefit feature protects the value of the contract for the
beneficiary.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner or last survivor of joint owners dies.
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DISCOVERY CHOICE VARIABLE ANNUITY
CALCULATION OF THE DEATH BENEFIT
The death benefit to which your beneficiary is entitled depends on whether you
elected the basic death benefit or the enhanced death benefit.
BASIC DEATH BENEFIT:
If the sole or last survivor of the owner or joint owner dies during the
accumulation period, after we receive the appropriate proof of death and any
other needed documentation, your beneficiary will receive the greater of the
following:
1. the current contract value. or
2. the total of all purchase payments made, proportionally reduced by the
effect of withdrawals.
ENHANCED DEATH BENEFIT:
If the sole or last survivor of the owner or joint owner dies during the
accumulation period and prior to age 80, your beneficiary will receive the
greater of the following:
1. the contract value as of the date we receive due proof of death and any
other documentation we need; or
2. the guaranteed minimum death benefit (GMDB). The GMDB is calculated daily
and is equal to the greater of:
(a) the total purchase payments compounded daily at an effective annual
interest rate of 5%, subject to a 200% cap. This is called the roll-up
value. Both the roll-up value and the cap are proportionally reduced
by the effect of withdrawals. Once the cap is reached, the roll-up
value will be increased by subsequent purchase payments and
proportionally reduced by the effect of withdrawals; and
(b) the highest value of the contract on any contract anniversary. This is
called the step-up value. Before the first contract anniversary, the
step-up value is the initial purchase payment increased by subsequent
purchase payments and proportionally reduced by the effect of
withdrawals. Between anniversaries, the step-up is increased only by
purchase payments and proportionally reduced by the effect of
withdrawals.
After the contract anniversary on or next following the 80th birthday of the
sole or older of the owner or joint owner, the beneficiary will receive a death
benefit equal to the greater of:
(a) the contract value as of the date we receive due proof of death and
any other documentation we need; or
(b) the GMDB as of the contract anniversary on or next following the sole
or older of the owner or joint owner's 80th birthday increased by
subsequent purchase payments since such contract anniversary and
proportionally reduced by the effect of withdrawals since such
contract anniversary.
Here is an example of a proportional reduction:
If an owner withdrew 50% of a contract valued at $100,000 and if the step-up
value at that time was $80,000, the new step-up value following the withdrawal
would be $40,000, or 50% of what it had been prior to the withdrawal.
13
<PAGE>
DISCOVERY CHOICE VARIABLE ANNUITY
5. HOW CAN I PURCHASE A DISCOVERY CHOICE CONTRACT?
PURCHASE PAYMENTS
A purchase payment is the amount of money you give us to purchase the contract.
The minimum purchase payment is $10,000. You can make additional purchase
payments of at least $1,000 or more at any time during the accumulation phase.
However, no purchase payments may be made on or after the 85th birthday of:
o the owner;
o if joint owners, the older owner; or
o the annuitant
We have established an aggregate maximum purchase payment limit of $10 million,
and we limit the maximum total purchase payments per contract in any contract
year, other than the first, to $2 million.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options based on the percentages you choose. The percentage
of your allocation to a specific investment option can range in whole
percentages from 1% to 100%. If you make additional purchase payments, they will
be allocated in the same way as your most recent purchase payment, unless you
tell us otherwise. We will credit these purchase payments to your contract as of
the end of the business day on which the payment is received. Our business day
closes when the New York Stock Exchange does, usually at 4:15 p.m. Eastern time.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment option(s) you choose.
To determine the value of your contract, we use a unit of measure called an
accumulation unit. An accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1. Adding up the total amount of money allocated to a specific investment
option;
2. Subtracting from that amount insurance charges and any other charges such
as for taxes; and
3. Dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units of the subaccount or subaccounts selected. The number of accumulation
units credited to your contract is determined by dividing the amount of the
purchase payment allocated to an investment option by the unit price of the
accumulation unit for that investment option. We calculate the unit price for
each investment option after the New York Stock Exchange closes each day and
then credit your contract. The value of the accumulation units can increase,
decrease, or remain the same from day to day. The Accumulation Unit Values Chart
on page ____ of this prospectus gives you more detailed information about the
accumulation units of the variable investment options. We cannot guarantee that
your contract value will increase or that it will not fall below the amount of
your total purchase payments.
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DISCOVERY CHOICE VARIABLE ANNUITY
6. WHAT ARE THE EXPENSES ASSOCIATED WITH THE DISCOVERY CHOICE CONTRACT?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we make a deduction for the insurance charge. The insurance charge
covers our expenses for mortality and expense risk, administration, marketing
and distribution. The mortality risk portion of the charge is for assuming the
risk that the annuitant(s) will live longer than expected based on our life
expectancy tables. When this happens, we pay a greater number of annuity
payments. The expense risk portion of the charge is for assuming that the
current charges will be insufficient in the future to cover the cost of
administering the contract. The administrative expense portion of the charge is
for the expenses associated with the administration of the contract. This would
include preparing and issuing the contract; establishing and maintaining
contract records; preparation of confirmations and annual reports; personnel
costs; legal and accounting fees; filing fees and systems costs.
The insurance charge is equal, on an annual basis, to 1.35% (Basic Death
Benefit) or 1.65% (Enhanced Death Benefit) of the daily value of the contract
invested in the variable investment options, after expenses have been deducted.
If the charges under the contract are not sufficient, then we will bear the
loss. We do, however, expect to profit from this charge. The insurance risk
charge for your contract cannot be increased. Any profits made from this charge
may be used by us to pay for the costs of distributing the contracts.
ANNUAL CONTRACT FEE
Each contract year during the accumulation phase, if your contract value is less
than $50,000, for administrative expenses we will deduct $30 or 2% of your
contract value, if less. (This fee may differ in certain states). While this is
what we currently charge, we may increase this charge up to a maximum of $60.
Also, we may raise the level of the contract value at which we waive this fee.
The charge will be deducted proportionately from each of the contract's variable
investment options. This charge will also be deducted when you surrender your
contract if your contract value is less than $50,000.
PREMIUM TAXES
Some states and/or municipalities charge premium taxes or similar taxes. We are
responsible for the payment of these taxes and will make a deduction from the
value of the contract to pay them. Some of these taxes are due when the contract
is issued, others are due when annuity payments begin. It is our current
practice not to deduct these taxes until annuity payments begin. In the few
states that impose a tax, the current rates range up to 5%. If, in the future,
we are charged for additional taxes that are based on purchase payments, that
charge may be passed on to contract owners.
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DISCOVERY CHOICE VARIABLE ANNUITY
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $[10] for each additional
transfer. The transfer fee will be deducted proportionately from all the
affected investment options.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We are not
currently charging the separate account for taxes. We will periodically review
the issue of charging the separate account for these taxes and may impose a
charge in the future.
7. HOW CAN I ACCESS MY MONEY?
You can access your money by:
o Making a withdrawal (either partial or complete); or
o Electing to receive annuity payments during the income phase.
YOU CAN MAKE WITHDRAWALS ONLY DURING THE ACCUMULATION PHASE.
When you make a complete withdrawal, you will receive the value of your contract
on the day you made the withdrawal. We will calculate the value of your contract
and charges, if any, as of the date we receive your request in good order at the
Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal will be made
proportionately from all of the affected variable investment options you have
selected. The minimum amount which may be withdrawn is $250. If, after a
withdrawal, your contract value is less than $2,000, we have the right to choose
to end your contract.
We will generally pay the withdrawal amount, less any required tax withholding,
within seven days after we receive a properly completed withdrawal request. We
will deduct applicable charges, if any, from the assets in your contract.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS.
AUTOMATED WITHDRAWALS
We offer an Automated Withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options. The minimum automated withdrawal amount you can
make is $100.
Income taxes and 10% penalty tax on earnings may apply to Automated Withdrawals
as well as any other withdrawals made from your contract.
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DISCOVERY CHOICE VARIABLE ANNUITY
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments made in connection with
withdrawals or transfers for any period when:
o The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o Trading on the New York Stock Exchange is restricted;
o An emergency exists during which sales and redemptions of shares of the
mutual funds are not reasonable or we cannot reasonably value the
accumulation units; or
o The Securities and Exchange Commission, by order, so permits suspension or
postponement of payments for the protection of owners.
8. WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE DISCOVERY CHOICE
CONTRACT?
The tax considerations associated with the Discovery Choice contract vary
depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan, or (ii) held under a tax-favored
retirement plan. We discuss the tax considerations for these categories of
contracts below. The discussion is general in nature and describes only federal
income tax law (not state or other tax laws). It is based on current law and
interpretations, which may change. It is not intended as tax advice. A qualified
tax adviser should be consulted for complete information and advice.
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you should not pay any tax until you receive money under the
contract.
CONTRACTS OWNED BY INDIVIDUALS
(NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS)
TAXES PAYABLE BY YOU
Generally, annuity contracts issued by the same company (and affiliates) to you
during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn.
If you assign all or part of your contract as collateral for a loan, the part
assigned will be treated as a withdrawal. Also, if you elect the interest
payment option, you will be treated, for tax purposes, as surrendering your
contract.
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DISCOVERY CHOICE VARIABLE ANNUITY
If you transfer your contract for less than full consideration, such as by gift,
you will trigger tax on the gain in the contract. This rule does not apply if
you transfer the contract to your spouse or incident to divorce.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction is allowed for the unrecovered
amount.
PENALTY TAXES ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10 %
penalty tax. Amounts are not subject to this penalty tax if:
o the amount is paid on or after you reach age 59 1/2 or die;
o the amount received is attributable to your becoming disabled;
o the amount paid or received is in the form of level annuity payments not
less frequently than annually under a lifetime annuity; and
o the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase); or
o If you modify the lifetime annuity payment stream (other than as a result
of death or disability) before you reach age 59 1/2 (or before the end of
the five year period beginning with the first payment and ending after you
reach age 59 1/2, your tax for the year of modification will be increased
by the penalty tax that would have been imposed without the exception, plus
interest for the deferral.
TAXES PAYABLE BY BENEFICIARIES
Generally, the same tax rules apply to amounts received by your beneficiary as
those set forth above with respect to you. The election of an annuity payment
option instead of a lump sum death benefit may defer taxes. Certain minimum
distribution requirements apply upon your death, as discussed further below.
WITHHOLDING OF TAX FROM DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to tax
withholding. You may generally elect not to have tax withheld from your
payments. These elections must be made on the appropriate Pruco Life forms.
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ANNUITY QUALIFICATION
DIVERSIFICATION AND INVESTOR CONTROL
In order to qualify for the tax rules applicable to annuity contracts described
above, the contract must be an annuity contract for tax purposes. This means
that the assets underlying the annuity contract must be diversified, according
to certain rules. It also means that Pruco Life, and not you as the
contractowner, must have sufficient control over the underlying assets to be
treated as the owner of the underlying assets for tax purposes. We believe these
rules, which are further discussed in the Statement of Additional Information,
will be met.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH
Upon your death (or the death of a joint owner, if earlier), certain
distributions must be made under the contract. The required distributions depend
on whether you die on or before you start taking annuity payments under the
contract or after you start taking annuity payments under the contract.
If you die 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 you die 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 your designated beneficiary and if annuity
payments begin within 1 year of your death, the value of the contract may be
distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to whom
ownership of the contract passes by reason of death, and must be a natural
person.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, such portion of the contract may be continued with your spouse
as the owner.
CHANGES IN THE CONTRACT
We reserve the right to make any changes we deem necessary to assure that the
contract qualifies as an annuity contract for tax purposes. Any such changes
will apply to all contractowners and you will be given notice to the extent
feasible under the circumstances.
CONTRACTS HELD BY TAX FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with individual
retirement accounts and annuities ("IRAs") which are subject to Sections 408(a),
408(b) and 408A of the Code. At some future time we may allow the contract to be
purchased in connection with other retirement arrangements which are also
entitled to favorable federal income tax treatment ("tax favored plans"). These
other tax favored plans include:
Simplified employee pension plans ("SEPs") under Section 408(k) of the Code;
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Saving incentive match plans for employees-IRAs ("SIMPLE-IRAs") under Section
408(p) of the Code; and Tax-deferred annuities ("TDAs") under Section 403(b) of
the Code. This description assumes that (i) we will be offering this to both IRA
and non-IRA tax favored plans, and (ii) you have satisfied the requirements for
eligibility for these products.
Types of Tax Favored Plans
IRAS
If you buy a contract for use as an IRA, we will provide you a copy of the
prospectus, contract and a brochure containing information about eligibility,
contribution limits, tax particulars and other IRA information. In addition to
this information (some of which is summarized below), the IRS requires that you
have a "free look" after making an initial contribution to the contract. During
this time, you can cancel the contract by notifying us in writing, and we will
refund all of the purchase payments under the contract (or, if greater, the
amount credited under the contract, calculated as of the valuation period that
we receive this cancellation notice).
Contributions Limits/Rollovers: Because of the way the contract is designed, you
may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan. You must make a minimum initial
payment of $10,000 to purchase a contract. This minimum is greater than the
maximum amount of any annual contribution you may make to an IRA (which is
generally $2,000/year). The "rollover" rules under the Code are fairly
technical; however, an individual (or his or her surviving spouse) may generally
"roll over" certain distributions from tax favored retirement plans (either
directly or within 60 days from the date of these distributions) if he or she
meets the requirements for distribution. Once you buy the contract, you can make
regular IRA contributions under the contract (to the extent permitted by law).
However, if you make such regular IRA contributions, you should note that you
will not be able to treat the contract as a "conduit IRA," which means that you
will not be able subsequently to "roll over" the contract funds into another
Section 401(a) plan or TDA (although you may be able to transfer the funds to
another IRA).
Required Provisions: Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
o You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
o Your rights as owner are non-forfeitable;
o You cannot sell, assign or pledge the contract, other than to Pruco Life;
o The annual premium you pay cannot be greater than $2,000 (which does not
include any rollover amounts); o The date on which annuity payments must
begin cannot be later than the April 1st of the calendar year after the
calendar year you turn age 70 1/2; and
o Death and annuity payments must meet "minimum distribution requirements"
(described below).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to
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the general tax withholding rules described earlier. In addition to this normal
tax liability, you may also be liable for the following, depending on your
actions:
o A 10% "early distribution penalty" (described below);
o Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
o Failure to take a minimum distribution (also generally described below).
SEPS
SEPs are a variation on a standard IRA, and contracts issued to a SEP must
satisfy the same general requirements described under IRAs (above). There are,
however, some differences:
o If you participate in a SEP, you generally does not include into income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $30,000 or (b) 15% of the employee's earned income (not including the
employer contribution amount as "earned income" for these purposes;
o SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
o Some SEPs for small employers permit salary deferrals (up to $10,000 in )
with the employer making these contributions to the SEP. However, no new
"salary reduction" or "SAR-SEPs" can be established after 1996.
You will also be provided the same information, and have the same "free look"
period, as you would have if you were purchasing the contract for a standard
IRA.
SIMPLE-IRAS
SIMPLE-IRAs are another variation on the standard IRA, available to small
employers (under 100 employees, on a "controlled group" basis) that do not offer
other tax favored plans. SIMPLE-IRAs are also subject to the same basic IRA
requirements with the following exceptions:
o Participants in a SIMPLE-IRA may contribute up to $6,000 (in 1999,
indexed), as opposed to the usual $2,000 limit, and employer contributions
may also be provided as either a match (up to 3% of your compensation; and
o SIMPLE -IRAs are not subject to the SEP nondiscrimination rules.
ROTH IRAS
Congress amended the Code in 1997 to add a new Section 408A, creating the "Roth
IRA" as a new type of individual retirement plan. Like standard IRAs, income
within a Roth IRA accumulates tax-free, and contributions are subject to
specific limits. Roth IRAs have, however, the following differences:
o Contributions to a Roth IRA cannot be deducted from your gross income;
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o "Qualified distributions" (generally, held for 5 years and payable on
account of death, disability, attainment of age 59 1/2, or first
time-homebuyer) from Roth IRAs are excludable from your gross income; and
o If eligible, you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Because the contract's minimum initial payment of $10,000 is greater than the
maximum annual contribution permitted to be made to a Roth IRA (generally,
$2,000 less any contributions to a traditional IRA), you may purchase a contract
as a Roth IRA only in connection with a "rollover" or "conversion" of the
proceeds of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA, or Roth IRA.
The Code permits persons who meet certain income limitations (generally,
adjusted gross income under $100,000), and who receive certain qualifying
distributions from such non-Roth IRAs, to directly rollover or make, within 60
days, a "rollover" of all or any part of the amount of such distribution to a
Roth IRA which they establish. This conversion triggers current taxation (but is
not subject to a 10% early distribution penalty). Once the contract has been
purchased, regular Roth IRA contributions will be accepted to the extent
permitted by law.
TDAS
You may own a TDAs generally if you are either an employer or employee of a
tax-exempt organization (as defined under Code Section 501(c)(3)) or a public
educational organization, you may make contributions to a TDA so long as the
employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and
any earnings, are not taxable until distribution. You may also make
contributions to a TDA under a salary reduction agreement, generally up to a
maximum of $10,000 (1999, indexed). Further, you may roll over TDA amounts to
another TDA or an IRA.
A contract may only qualify as a TDA if distributions (other than
"grandfathered" amounts held as of December 31, 1988) may be made only on
account of:
o Your attainment of age 59 1/2;
o Your severance of employment;
o Your death;
o Your total and permanent disability; or
o Hardship (under limited circumstances, and only related to salary deferrals
and any earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by April 1st
of the calendar year after the calendar year you turn age 70 1/2 or retire,
whichever is later.
These distribution limits do not apply either to transfers or exchanges of
investments under the contract, or to any "direct transfer" of your interest in
the contract to another TDA or to a mutual fund "custodial account" described
under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
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ADDITIONAL TAX FEATURES FOR TAX FAVORED PLANS
MINIMUM DISTRIBUTION OPTION
If you hold the contract under an IRA or other tax favored plan, you can satisfy
the IRS minimum distribution requirements described above (generally,
distribution after age 70 1/2) under the contract without either annuitizing or
"cash surrendering" a portion of the contract. You, as owner of the contract,
can select either a "calculation" or "recalculation" method to determine the
minimum distribution. We will send you a check for the minimum distribution
amount, less any other partial withdrawals that you made during the year. More
information on the mechanics of this calculation is available on request.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% penalty tax to the taxable part of distributions received from
an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or qualified
retirement plan before you attain age 59 1/2. There are only limited exceptions
to this tax, and you should consult your tax adviser for further details.
WITHHOLDING
The Code requires a mandatory 20% federal income tax withholding for certain
distributions from a TDA or qualified retirement plan, unless the distribution
is an eligible rollover contribution that is "directly" rolled into another
qualified plan, IRA (including the IRA variations described above) or TDA. For
all other distributions, unless you elect otherwise, we will withhold federal
income tax from the taxable portion of such distribution at an appropriate
percentage. The rate of withholding on annuity payments where no mandatory
withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
o For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions; and
o For all other distributions, you will be withheld at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if you
fail to pay such taxes.
ERISA DISCLOSURE/REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of the
contract Administrative exemptions under ERISA generally permit the sale of
insurance/annuity products to plans, provided that certain information is
disclosed to the person purchasing the contract. This information has to do
primarily with the fees, charges, discounts and other costs related to the
contract, as well as any commissions paid to any agent selling the contract.
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Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What Are the Expenses Associated with the
Discovery Choice Contract" starting on page ___.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale and Distribution of the Contract on page ___.
In addition, other relevant information required by the exemptions is contained
in the contract and accompanying documentation. Please consult your tax advisor
if you have any additional questions.
9. OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company 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 and therefore is subject to the insurance laws and regulations
of all the jurisdictions where it is licensed to do business. Pruco Life is a
wholly-owned subsidiary of The Prudential Life Insurance Company of America
(Prudential), a mutual insurance company founded in 1875 under the laws of the
State of New Jersey.
Prudential is currently considering reorganizing itself into a stock company.
This form of reorganization, known as demutualization, is a complex process that
may take two years to complete. No plan of demutualization has been adopted yet
by Prudential's Board of Directors. Any plan of reorganization adopted by the
Board of Directors would have to be approved by qualified policyholders and
appropriate state insurance regulators. Throughout the process, there will be
continuing evaluation by the Board of Directors and management of Prudential as
to the desirability of demutualization. The Board of directors, in its
discretion, may choose not to demutualize or to delay demutualization for a
time.
Should Prudential convert to a stock company, the allocation of stock, cash or
other benefits to policyholders and contractowners would be made in accordance
with procedures set forth in the plan of demutualization. In recent
demutualizations, policyholders and contractowners of the converting mutual
insurer have been eligible to receive consideration while policyholders and
contractowners of the insurer's stock subsidiaries have not. It has not yet been
determined whether any exceptions to that general approach will be made with
respect to policyholders and contractowners of Prudential's subsidiaries,
including Pruco Life insurance companies.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life Flexible Premium Variable
Annuity Account (separate account), to hold the assets that are associated with
the contracts. The separate account was established under Arizona law on June
16, 1995, and is registered with the U.S. Securities and Exchange Commission
under the Investment Company Act of 1940, as a unit investment trust, which is a
type of investment company. The assets of the separate account are held in the
name of Pruco Life and legally belong to us. These assets are kept separate from
all of our other assets and may not be charged with liabilities arising out of
any other business we
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DISCOVERY CHOICE VARIABLE ANNUITY
may conduct. More detailed information about Pruco Life, including its audited
financial statements, are provided in the Statement of Additional Information.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 751 Broad Street,
Newark, New Jersey 07102-3777, acts as the distributor of the contracts. PIMS is
a wholly-owned subsidiary of Prudential and is a limited liability corporation
organized under Delaware law in 1996. It is a registered broker-dealer under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. Commissions for the sales of contracts are paid to
Prudential representatives and to other independent broker-dealers who sell the
contracts. Registered representatives of independent broker-dealers may be paid
on a different basis than those affiliated with PIMS. 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 be more
than [3.0]% of the purchase payment.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice. We will not be liable
for any payment or other action we take in accordance with the contract if that
action occurs before we receive notice of the assignment. AN ASSIGNMENT, LIKE
ANY OTHER CHANGE IN OWNERSHIP, MAY TRIGGER A TAXABLE EVENT.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
YEAR 2000 COMPLIANCE
THE YEAR 2000 ISSUE
The services provided to you as a purchaser of Discovery Choice depend on the
smooth functioning of numerous computer systems. Many computer systems in use
today are programmed to recognize only the last two digits of a date as the
year. As a result, any systems using this kind of programming can not
distinguish a date using "00" and may treat it as "1900" instead of "2000." This
problem may impact computer systems that store business information, but it
could also affect other equipment used in our business like telephone, fax
machines and elevators. If this problem is not corrected, the "Year 2000" issue
could affect the accuracy and integrity of business records. Prudential's
regular business operations could be interrupted as well as those of other
companies that deal with us.
In addition, the operations of the mutual funds associated with the Discovery
Choice contract could experience problems resulting from the Year 2000 issue.
Please refer to the mutual fund prospectus for information regarding their
approach to Year 2000 concerns. The following describes Prudential's effort to
address Year 2000 concerns.
To address this potential problem Prudential, as the parent company of Pruco
Life, organized its Year 2000 efforts around the following three areas:
o Business Systems - Computer programs directly used to support our business;
o Infrastructure - Computers and other business equipment like telephones and
fax machines; and
o Business Partners - Year 2000 readiness of essential business partners.
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Business Systems. The business systems component includes a wide range of
computer programs that directly support Prudential's business operations
including systems for: insurance product processing, securities trading,
personnel record keeping and general accounting systems. All business systems
were analyzed to determine whether each computer program with a Year 2000
problem should be retired, replaced or renovated. The majority of this work has
been completed. A few remaining programs are currently being tested and
completion of this process is expected by June, 1999.
Infrastructure. As with business applications, we established a specific
methodology and process for addressing infrastructure issues. The infrastructure
effort includes mainframe computer system hardware and operating system
software, mid-range systems and servers, telecommunications equipment and
systems, buildings and facilities systems, personal computers, and vendor
hardware and software. Other than desktop systems, substantially all other
infrastructure systems have been tested. Presently, a small number of mid-range
computers and building and facility systems are still in the testing phase. We
expect to have the infrastructure process completed by June, 1999.
Business Partners. Prudential recognizes the importance of determining the Year
2000 readiness of external business relationships especially those that involve
electronic data transfer products and services, and products that impact our
essential business processes. Prudential first classified each business partner
as "highly critical" or "less critical" to our business, and then began to
develop risk assessment and contingency plans to address the potential that a
business partner could experience a Year 2000 failure. All highly critical
business partner relationships have been assessed and contingency planning is
completed. Risk assessment and contingency planning continues for less critical
business partners, and the target completion date for these relationships is
June, 1999.
Prudential believes that the Business Application, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule. A
small number of the projects may not meet their targeted completion date.
However, Prudential expects that these projects will be completed by September,
1999. If there are any delays, they should not have a significant impact on the
timing of the project as a whole.
THE COST OF YEAR 2000 READINESS
Prudential is funding the Year 2000 program from internal operating budgets, and
estimates that its total costs to address the Year 2000 issue will total
approximately $220 million. Because these expenses were part of the operating
budget, they did not impact the management of Discovery Choice. During the
course of the Year 2000 program, some optional computer projects have been
delayed, but these delays have not had any material effect on Discovery Choice.
YEAR 2000 RISKS AND CONTINGENCY PLANNING
Prudential believes that it is well positioned to lessen the impact of the Year
2000 problem. However, given the nature of this issue, we can not be 100%
certain that we are completely prepared, particularly because we cannot be
certain of Year 2000 readiness of third parties. As a result, we are unable to
determine at this time whether the consequences of Year 2000 failures may have a
material adverse effect on the results of Prudential's operations, liquidity or
financial condition. In the worst case, it is possible that a Year 2000
technology failure, whether internal or external, could have a material impact
on Prudential's results of operations, liquidity, or
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DISCOVERY CHOICE VARIABLE ANNUITY
financial position. If Prudential is unable to address the Year 2000 problem, we
may have difficulty in responding to your incoming phone calls, calculating your
unit values or processing withdrawals and purchase payments. It is also possible
that the mutual funds associated with Discovery Choice will be unable to value
the securities, in turn creating difficulties in purchasing or selling shares of
the mutual fund and calculating corresponding unit asset values. The objective
of Prudential's Year 2000 program has been to reduce these risks as much as
possible.
Most of the operations of Discovery Choice involve such a large number of
individual transactions that they can only be handled with the help of
computers. As a result, our current contingency plans include responses to the
failure of specific business programs or infrastructure components. However, our
contingency responses are now being reviewed and we expect to finalize them by
June, 1999 to ensure that they are workable under the special conditions of a
Year 2000 failure. Prudential believes that with the completion of its Year 2000
program, as scheduled, the possibility of significant interruptions of normal
operations will be reduced.
FINANCIAL STATEMENTS
The financial statements of the separate account associated with Discovery
Choice are included in the Statement of Additional Information.
EXPERTS
The consolidated financial statements of Pruco Life for the years ended December
31, 1998, December 31, 1997 and December 31, 1996 have been audited by
PricewaterhouseCoopers LLP, independent accountants ("PwC"). The report
certifying this audit is included in this prospectus. Pruco Life has relied upon
this report based on PwC's authority as experts in accounting and auditing.
PwC's principal business address is 1777 Avenue of the Americas, New York, New
York 10036.
STATEMENT OF ADDITIONAL INFORMATION
CONTENTS:
- ---------
Company
Experts
Litigation
Legal Opinions
Principal Underwriter
Determination of Accumulation Unit Values
Performance Information
Comparative Performance Information
Financial Information
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DISCOVERY CHOICE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
JUNE____, 1999
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
VARIABLE ANNUITY CONTRACTS
The Discovery Choice 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 Discovery Choice prospectus, dated June ____, 1999. To
obtain a copy of the prospectus, without charge, you can write to the Prudential
Annuity Service Center, P.O. Box 14215, New Brunswick, New Jersey 08906, or by
telephoning (888) PRU-2888.
TABLE OF CONTENTS
PAGE
COMPANY..................................................................... 2
EXPERTS..................................................................... 2
LITIGATION.................................................................. 2
LEGAL OPINIONS.............................................................. 2
PRINCIPAL UNDERWRITER....................................................... 2
DETERMINATION OF SUBACCOUNT UNIT VALUES..................................... 2
PERFORMANCE INFORMATION..................................................... 3
COMPARATIVE PERFORMANCE INFORMATION......................................... 5
FINANCIAL INFORMATION....................................................... A 1
PRUCO LIFE INSURANCE COMPANY PRUDENTIAL ANNUITY SERVICE CENTER
213 WASHINGTON STREET P.O. BOX 14215
NEWARK, NEW JERSEY 07102-2992 NEW BRUNSWICK, NEW JERSEY 08906
TELEPHONE: (888) PRU-2888
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DISCOVERY CHOICE VARIABLE ANNUITY
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 all
states except New York.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of
America ("Prudential"), a mutual life insurance company founded in 1875 under
the laws of the State of New Jersey.
EXPERTS
The financial statements of the Pruco Life Flexible Premium Variable Annuity
Account for the years ended December 31, 1998 and December 31, 1997 have been
audited by PricewaterhouseCoopers LLP, independent accountants ("PwC"). The
report certifying this audit is included in this statement of additional
information. Pruco Life has relied upon this report based on PwC's authority as
experts in accounting and auditing. PwC's principal business address is 1777
Avenue of the Americas, New York, New York, 10036.
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.
LEGAL OPINIONS
Shea & Gardner of Washington, D.C., has provided advice on certain matters
relating to the federal securities laws in connection with the contracts.
PRINCIPAL UNDERWRITER
Prudential Investment Management Services LLC ("PIMS"), a subsidiary of
Prudential offers the contracts on a continuous basis through Corporate Office
and regional home office employees in those states in which contracts may be
lawfully sold. It may also offer the contract through licensed insurance brokers
and agents, or through appropriately registered direct or indirect
subsidiary(ies) of Prudential, provided clearances to do so are obtained in any
jurisdiction where such clearances may be necessary.
Prudential may pay trail commissions to registered representatives who maintain
an ongoing relationship with a contractholder. Typically, a trail commission is
a compensation that is paid periodically to a representative, the amount of
which is linked to the value of the contract and the amount of time that the
contract has been in effect.
DETERMINATION OF ACCUMULATION UNIT VALUES
The value for each accumulation unit is computed as of the end of each
"valuation period" as defined in the prospectus (also referred to in this
section as "business day"). On any given business day the value of a Unit in
each subaccount will be determined by multiplying the value of a Unit of that
subaccount for the preceding business day by the net investment factor for that
subaccount for the current business day. The net investment factor for any
business day is determined by dividing the value of the assets of the subaccount
for that day by the value of the assets of the subaccount for the preceding
business day (ignoring, for this purpose, changes resulting from new purchase
payments and withdrawals), and subtracting from the result the daily equivalent
of the 1.4% annual charge for administrative expenses and mortality and expense
risks. (See WHAT ARE THE EXPENSES ASSOCIATED WITH THE DISCOVERY CHOICE VARIABLE
ANNUITY and CALCULATING CONTRACT VALUE 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.
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PERFORMANCE INFORMATION
The tables that follow provide performance information for each subaccount
through December 31, 1998. The performance information is based on historical
experience and does not indicate or represent future performance.
AVERAGE ANNUAL TOTAL RETURN
The DISCOVERY CHOICE 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 CHOICE 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, 1998 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.
TABLE 1
AVERAGE ANNUAL TOTAL RETURN
[PERFORMANCE INFORMATION TO BE PROVIDED BY AMENDMENT]
Note 1: 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 2: All tables assume a $30.00 annual charge for contracts under $50,000.
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)(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.
SAI-3
<PAGE>
TABLE 2
CUMULATIVE TOTAL RETURN
[PERFORMANCE INFORMATION TO BE PROVIDED BY AMENDMENT]
Note 1: 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 2: All tables assume a $30.00 annual charge for contracts under $50,000.
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 Prudential Series Fund. All fees, expenses and charges
associated with the DISCOVERY CHOICE 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, 1998 were 3.30% and 3.35%, 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 [1.35%] charge for insurance
risks.
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.
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.
FINANCIAL STATEMENTS OF SEPARATE ACCOUNT AND DEPOSITOR - [TO BE FILED BY
AMENDMENT]
SAI-4
<PAGE>
PART C - OTHER INFORMATION
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, 1998; the Statements of Operations for the period ended
December 31, 1998; the Statements of Changes in Net Assets for the periods
ended December 31, 1998 and December 31, 1997; and the Notes relating
thereto will appear in the statement of additional information. (Part B of
the Registration Statement) (Note 1)
(2) Consolidated Statements of Pruco Life Insurance Company (Depositor) and
subsidiaries consisting of the Consolidated Statements of Financial
Position as of December 31, 1998 and 1997; and the related Consolidated
Statements of Operations of Stockholder's Equity and Cash Flows for the
years ended December 31, 1998, 1997 and 1996; and the Notes to the
Consolidated Financial Statements will appear in the statement of
additional information (Part B of the Registration Statement) (Note 1).
(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) Form of Distribution Agreement between Prudential Investment Management
Services, Inc. "PIMS" (Underwriter) and Pruco Life Insurance Company
(Depositor) (Note 3)
(b) Form of Selected Broker Agreement used by PIMS (Note 3)
(4) (a) The Discovery Choice Contract VFLX-99 C-ROP (Note 4)
(b) The Discovery Choice Contract VFLX-99 C-GMDB (Note 4)
(5) (a) Application form for the Contract. (Note 4)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company, as amended
through October 19, 1993. (Note 5)
(b) By-laws of Pruco Life Insurance Company, as amended through May 6, 1997.
(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 7)
(9) Opinion of Counsel as to legality of the securities being registered.
(Note 1)
(10) Written consent of PricewaterhouseCoopers LLP independent accountants.
(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, Esther H. Milnes and I. Edward
Price (Note 8)
(b) Dennis G. Sullivan (Note 9)
(c) Kiyofumi Sakaguchi (Note 10)
(d) James J. Avery, Jr. (Note 11)
C-1
<PAGE>
(Note 1) To be filed by pre-effective amendment
(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 Post-Effective Amendment No. 6 to Form
N-4, Registration No.333-06701, filed April 15, 1999 on behalf of the
Pruco Life Flexible Premium Variable Annuity Account.
(Note 4) Filed herewith.
(Note 5) Incorporated by reference to the initial registration on 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 Form 10-Q as filed August 15, 1997, on
behalf of the Pruco Life Insurance Company.
(Note 7) 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 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) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-1, Registration No. 33-86780, filed April , 1999 on behalf of the
Pruco Life Variable Contract Real Property Account.
(Note 10) Incorporated by reference to Post Effective Amendment No.8 to Form
S-6, Registration No.33-49994, filed April 28, 1999, on behalf of the
Pruco Life Variable Appreciable Account.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the
Pruco Life Variable Appreciable Account.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
See Part A: Directors and Officers.
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
C-2
<PAGE>
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
Not Applicable.
ITEM 28. INDEMNIFICATION
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
Arizona, being the state of organization of Pruco Life Insurance Company
("Pruco"), permits entities organized under its jurisdiction to indemnify
directors and officers with certain limitations. The relevant provisions of
Arizona law permitting indemnification can be found in Section 10-850 et. seq.
of the Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII,
which relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its form 10-Q filed August 15, 1997.
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) Prudential Investment Management Services LLC (PIMS)
PIMS is distributor for Cash Accumulation Trust, Command Money Fund,
Command Government Fund, Command Tax-Free Fund, The Global Total Return Fund,
Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund), Prudential Balanced Fund, Prudential
California Municipal Fund, Prudential Distressed Securities Fund, Inc.,
Prudential Diversified Bond Fund, Inc., Prudential Emerging Growth Fund, Inc.,
Prudential Equity Fund, Inc., Prudential Equity Income Fund, Prudential Europe
Growth Fund, Inc., Prudential Global Genesis Fund, Inc., Prudential Global
Limited Maturity Fund, Inc., Prudential Government Income Fund, Inc., Prudential
Government Securities Trust, Prudential High Yield Fund, Inc., Prudential High
Yield Total Return Fund, Inc., Prudential Index Series Fund, Prudential
Institutional Liquidity Portfolio, Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential International Bond Fund, Inc., The Prudential Investment
Portfolios, Inc., Prudential Mid-Cap Value Fund, Prudential MoneyMart Assets,
Inc., Prudential Mortgage Income Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential National Municipals Fund, Inc.,
Prudential Natural Resources Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Real Estate Securities Fund, Prudential Small-Cap Quantum Fund, Inc.,
Prudential Small Company Value Fund, Inc., Prudential Special Money Market Fund,
Inc., Prudential Structured Maturity Fund, Inc., Prudential Tax-Free Money Fund,
Inc., Prudential 20/20 Focus Fund, Prudential Utility Fund, Inc., Prudential
World Fund, Inc. and The Target Portfolio Trust.
C-3
<PAGE>
(b) Information concerning the officers and directors of PIMS is set forth
below.
NAME (1) POSITIONS AND OFFICES POSITIONS AND
WITH UNDERWRITER OFFICES WITH
- -------- REGISTRANT
--------------------- -------------
Robert F. Gunia ............. President None
Jean D. Hamilton ........... Executive Vice President None
John R. Strangfeld .......... Executive Vice President None
Anne E. Bossi ............... Senior Vice President None
Kevin B. Frawley ............ Senior Vice President and Chief None
Compliance Officer
Brian Henderson ............. Senior Vice President and Chief None
Operating Officer
William V. Healey ........... Senior Vice President, Secretary None
and Chief Legal Officer
Margaret M. Deverell ........ Vice President, Comptroller and None
Chief Financial Officer
C. Edward Chaplin............ Treasurer None
- ------------------------
(1) The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102 unless otherwise noted.
(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, 751 Broad
Street, Newark, New Jersey 07102-3777.
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
has caused this Registration Statement; and pursuant to the requirements of the
Investment Company Act of 1940, the Registrant has caused this post-effective
amendment no. 7 to its 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 24th
day of May, 1999.
THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
(Registrant)
BY: PRUCO LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/ CLIFFORD E. KIRSCH /s/ ESTHER H. MILNES
- -------------------------------------------- -----------------------------
CLIFFORD E. KIRSCH ESTHER H. MILNES
CHIEF LEGAL OFFICE AND SECRETARY PRESIDENT
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the date
indicated:
SIGNATURE AND TITLE
-------------------
*
- ---------------------------------------------
ESTHER MILNES Date: May 24, 1999
PRESIDENT AND DIRECTOR
*
- ---------------------------------------------
JAMES J. AVERY JR.
CHAIRMAN OF THE BOARD AND DIRECTOR
* *By: CLIFFORD E. KIRSCH
- --------------------------------------------- ------------------------------
DENNIS G. SULLIVAN CLIFFORD E. KIRSCH
VICE PRESIDENT AND COMPTROLLER (ATTORNEY-IN-FACT)
*
- ---------------------------------------------
WILLIAM M. BETHKE
DIRECTOR
*
- ---------------------------------------------
IRA J. KLEINMAN
DIRECTOR
*
- ---------------------------------------------
I. EDWARD PRICE
DIRECTOR
*
- ---------------------------------------------
KIYOFUMI SAKAGUCHI
DIRECTOR
C-5
[logo] PRUDENTIAL XXXXXXXX VARIABLE ANNUITY APPLICATION
PRUDENTIAL ANNUITY SERVICE CENTER
PO Box 14200
New Brunswick NJ 08906-4200
Application for a Flexible Payment Variable Deferred
Annuity Contract to the Pruco Life Insurance Company,
213 Washington Street, Newark, NJ 07102,
a stock company subsidiary of
The Prudential Insurance Company of America
PLEASE PRINT USING BLUE OR BLACK INK
================================================================================
[1]OWNER [ ]Individual [ ]Corporation [ ]Trust [ ]Other
INFORMATION ---------------
First Name/Trustee(s) MI. Last Name
--------------------- ---- -----------------------------
Name of Trust/Corporation/Other (if applicable)
--------------------------------------------------------------
Street
--------------------------------------------------------------
City State Zip Code
--------------------------------------- ---- ----- - ----
SS#/TIN(Tax Iden- Date of Birth Area Code Telephone Number
tification No.) (mo., day, year)
--------------- ---------------- ------ -------------------
U.S. Resident Non-Resident Country
Male Female Citizen Alien Alien
Check all that
apply: [ ] [ ] [ ] [ ] [ ] -----------------
================================================================================
[2]JOINT OWNER First Name/Trustee(s) MI. Last Name
(if any)
Not applicable --------------------- ---- -----------------------------
to IRAs. Street
Joint Owner can
only be the --------------------------------------------------------------
Owner's spouse. City State Zip Code
If Joint Owner
is elected, he/ --------------------------------------- ---- ----- - ----
she must be SS#/TIN(Tax Iden- Date of Birth
listed as the tification No.) (mo., day, year) Area Code Telephone Number
Primary Bene-
ficiary. See --------------- ---------------- ------ -------------------
Section 5a. U.S. Resident Non-Resident Country
Check all that Male Female Citizen Alien Alien
apply: [ ] [ ] [ ] [ ] [ ] -----------------
================================================================================
[3]ANNUITANT First Name/Trustee(s) MI. Last Name
Complete this
section if the --------------------- ---- -----------------------------
Annuitant is Street
not the owner,
or there is a --------------------------------------------------------------
non-natural City State Zip Code
owner (e.g.,
trust or --------------------------------------- ---- ----- - ----
corporation.) SS#/TIN(Tax Iden- Date of Birth Area Code Telephone Number
tification No.) (mo., day, year)
--------------- ---------------- ------ -------------------
U.S. Resident Non-Resident Country
Male Female Citizen Alien Alien
Check all that
apply: [ ] [ ] [ ] [ ] [ ] -----------------
================================================================================
ORD 98476 98 ED 1/1999
<PAGE>
[4]CO-ANNUITANT First Name MI. Last Name
(if any)
Do not complete --------------------- ---- -----------------------------
this section if Street
opening an IRA.
--------------------------------------------------------------
City State Zip Code
--------------------------------------- ---- ----- - ----
SS#TIN(Tax Iden- Date of Birth Area Code Telephone Number
tification No.) (mo., day, year)
--------------- ---------------- ------ -------------------
U.S. Resident Non-Resident Country
Male Female Citizen Alien Alien
Check all that
apply: [ ] [ ] [ ] [ ] [ ] -----------------
================================================================================
[5a]BENEFICIARY First Name MI. Last Name
If jointly owned,
the Joint Owner --------------------- ---- -----------------------------
is always the Relationship To Owner SS#TIN (Tax Identifi- PRIMARY CLASs
sole primary cation No.) [X]
beneficiary. ---------------------
---------------------
If you need more First Name MI. Last Name
space, please
enter the --------------------- ---- -----------------------------
additional Relationship To Owner SS#TIN (Tax Choose one: PRIMARY
name(s) and Identifica- CLASS [ ]
relationship(s) --------------------- tion No.) SECONDARY
in the "Client's CLASS [ ]
Additional ---------------------
Remarks". See First Name MI. Last Name
Section 10.
--------------------- ---- -----------------------------
Relationship To Owner SS#TIN (Tax Choose one: PRIMARY
Identifica- CLASS [ ]
--------------------- tion No.) SECONDARY
CLASS [ ]
---------------------
================================================================================
[5b]DEATH
BENEFIT [ ]Basic Death Benefit [ ]Enhanced Death Benefit
(Choose one)
================================================================================
[6]TYPE OF PLAN Please choose one: [ ]Non-Qualified [ ]Traditional IRA
[ ]Roth IRA/Custodial [ ]Roth IRA [ ]Custodial Acct
================================================================================
[7]SOURCE OF Amount
FUNDS
Minimum of Non-Qualified: [ ]1035 Exchange $---------.--
$10,000. [ ]Check - payable to PRUDENTIAL
IRA: [ ]IRA Rollover [ ]Direct Rollover
[ ]IRA Transfer
[ ]Roth Conversion IRA (Establishment
Date* )
*This is the date you originally converted
from a traditional IRA to a Roth Conversion
IRA (if omitted, the current tax year will
be used). Required for IRA 5 - year holding
period requirement.
Estimated Amount
$----------.--
[ ]IRA Regular Contribution**
[ ]Roth IRA Regular Contribution**
**If making a contribution, please choose ONLY
one:
If making regular contributions for current and/
or previous year(s):
$--------.-- Yr.---- $--------.-- Yr.----
I UNDERSTAND THAT A CONVERSION FROM A TRADITIONAL IRA TO A
ROTH CONVERSION IRA WILL RESULT IN A TAXABLE EVENT WHICH WILL
BE REPORTED TO THE IRS.
IF YOU ARE TURNING 70 1/2 THIS CALENDAR YEAR, PLEASE ENCLOSE
THE MINIMUM DISTRIBUTION OPTION FORM (ORD78296).
================================================================================
<PAGE>
[8]PURCHASE INTEREST RATE OPTIONS
PAYMENT
ALLOCATION Fixed Rate Option (1YRFXD) ------%
Please write in
what % of your DCA Fixed Rate Account (DCAFXD) ------%
payment you
want to allocate MONEY MARKET PORTFOLIO
to the following
options. The Prudential Money Market Portfolio (MMKT) ------%
total must equal
100%. You must BOND PORTFOLIOS
initial any
changes. Prudential Diversified Bond Portfolio (BOND) ------%
Prudential High Yield Bond Portfolio (HYLD) ------%
BALANCED PORTFOLIO
OpCap Advisors OCC Accumulation Trust ------%
Managed Portfolio (OPPMAN)
GROWTH & INCOME PORTFOLIOS
Prudential Stock Index Portfolio (STIX) ------%
Prudential Equity Income Portfolio (HIDV) ------%
AIM V.I. Growth & Income Fund (AIMGRI) ------%
T. Rowe Price Equity Income Portfolio ------%
(TREQST)
GROWTH PORTFOLIOS
Prudential Equity Portfolio (STOCK) ------%
Prudential Jennison Portfolio (GROWTH) ------%
AIM V.I. Value Fund (AIMVAL) ------%
Janus Aspen Series Growth Portfolio ------%
(JANGRW)
MFS Research Series (MFSRSR) ------%
AGGRESSIVE GROWTH PORTFOLIOS
Prudential Small Capitalization Stock ------%
Portfolio (SCAP)
American Century VP Value (AMCVAL) ------%
Franklin Small Cap Investments Fund - ------%
Class 2 (FTSMCP)
MFS Emerging Growth Series (MFSEMG) ------%
OpCap Advisors OCC Accumulation Trust ------%
Warburg Pincus Post-Venture Capital ------%
Portfolio (WARVCP)
INTERNATIONAL STOCK PORTFOLIOS
Prudential Global Portfolio (GLEQ) ------%
Janus Aspen Series International Growth ------%
Portfolio (JANINT)
T. Rowe Price International Stock Portfolio ------%
(TRINST)
TOTAL 100%
================================================================================
[9]REPLACEMENT Will the proposed contract replace any existing insurance or
AND annuity contract(s)? [ ]Yes [ ]No
AGGREGATION
This section must If yes, provide the following information for each contract(s)
be completed. and enclose all applicable Prudential disclosure and state
if you need more replacement forms:
space, please
enter the Company Name Policy/Contract Number
additional
information in ------------------------------------ ----------------------
the "Client's Year of Issue Plan
Additional
Remarks." See ------------- -----------------
Section 10.
Did you purchase a non-qualified annuity from Prudential or an
affiliated company this calendar year? If yes, list contract
number and plan: [ ]Yes [ ]No
Company Name Policy/Contract Number
------------------------------------ ----------------------
Year of Issue Plan
------------- -----------------
================================================================================
<PAGE>
ANY PERSON WHO KNOWINGLY GIVES FALSE OR DECEPTIVE INFORMATION WHEN COMPLETING
THIS FORM FOR THE PURPOSE OF DEFRAUDING THE COMPANY MAY BE GUILTY OF INSURANCE
FRAUD.
================================================================================
[10]SIGNATURES If applying for an IRA or Roth IRA, the Owner acknowledges
receiving a "Questions and Answers on Individual Retirement
Annuities (IRAs)" booklet and understands that he or she will
be given a financial disclosure statement with the contract.
No representative can make or change a contract or waive any
of the company's rights or requirements.
The Owner(s) believes this contract meets his/her needs and
financial objectives. The Owner(s) further (1) understands
that any amount of purchase payments allocated to a variable
investment option will reflect the investment experience of
that option and, therefore, annuity payments and surrender
values may vary and are not guaranteed as to a fixed dollar
amount; (2) acknowledges receipt of the current prospectus for
the contract applied for and the variable investment options.
[ ]If this contract has a Joint Owner, please check this box
to authorize Prudential to act on the instruction(s) of either
the Owner or Joint Owner with regard to transactions under the
contract.
If the Owner is a Trust, please complete the Trustee Statement
and Agreement Form (ORD78272).
Client's Additional Remarks
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
Signed at
--------------------------- ------------------
City, State Date
X X
--------------------------- ------------------
Owner's Signature (Individual, Joint Owner's Signa-
Corporation, Trust) ture (if applicable)
X X
--------------------------- ------------------
Annuitant's Signature Co-Annuitant's Sig-
nature (if applicable)
================================================================================
[11]REPRE- [ ]1 [ ]2 [ ]3 [ ]4 (PSI use only)
SENTATIVE'S
SIGNATURE Do you have, from any source, facts that any person named as
Owner or Joint Owner above is replacing or changing any
current insurance or annuity in any company? If Yes, provide
details below. [ ]No [ ]Yes
This application is submitted in the belief that the purchase
of this contract is appropriate for the applicant based on the
information furnished and as reviewed with the applicant.
The representative hereby certifies that all information
contained in this application is true to the best of his/her
knowledge.
Representative
----------------------------- Contract Number ---------------
Name (Print)
X Financial
----------------------------- Adviser Number ---------------
Signature
----------------------------- ---------------- --------------
Branch/Field Office Name Branch/Field Telephone No.
Office Code
2nd Representative/FA
----------------------------- Contract Number
--------------
Second Representative/FA Name
(if any) (Print) Pre-assigned Contract
X Number (If any.)
----------------------------- --------------
Second Representative/FA Signature
Representative's Additional Remarks
--------------------------------------------------------------
================================================================================
MAIL TO: PRUDENTIAL ANNUITY SERVICE CENTER
PO BOX 14200
NEW BRUNSWICK, NJ 08906-4200
OVERNIGHT: PRUDENTIAL ANNUITY SERVICE CENTER
30 COLUMBUS CIRCLE
EDISON, NJ 08837
QUESTIONS? CLIENTS CALL (888) 778-2888 (TOLL FREE)
AGENTS & FINANCIAL ADVISORS CALL (800) 843-4124
================================================================================
PRUCO LIFE INSURANCE COMPANY
Phoenix, Arizona 85014
A STOCK COMPANY SUBSIDIARY OF
The Prudential Insurance Company of
America
- --------------------------------------------------------------------------------
This is an annuity contract. Subject to the provisions of the Contract, and in
consideration of any Purchase Payments you make and we accept, we will make
Annuity Payments starting on the Annuity Date shown on the Contract Data pages.
Please read the Contract carefully; it is a legal contract between you and Pruco
Life Insurance Company. Expense charges applicable to the Contract are shown on
the Contract Data pages. If you have a question about the Contract, or a claim,
see one of our representatives or contact the Annuity Service Center.
10 DAY RIGHT TO CANCEL CONTRACT
This Contract may be returned within 10 days after you receive it. It can be
mailed or delivered to either us, at the Annuity Service Center, or the
representative who sold it to you. Return of this Contract by mail is effective
on being postmarked, properly addressed and postage prepaid. The returned
Contract will be canceled upon our receipt, and we will return your money in
accordance with applicable law. Under certain circumstances, we have the right
to allocate Purchase Payment(s) to the Money Market Subaccount until the
expiration of the Right to Cancel period. If we so allocate Purchase Payment(s),
we will refund the Purchase Payment(s), less any withdrawals, in the event of
cancellation under the terms of this paragraph.
READ YOUR CONTRACT CAREFULLY
SECRETARY PRESIDENT
INDIVIDUAL DEFERRED VARIABLE
ANNUITY CONTRACT
Nonparticipating
ANNUITY PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
VFLX-99 C-ROP
<PAGE>
TABLE OF CONTENTS
CONTRACT DATA PAGES......................................................... 3
DEFINITIONS................................................................. 4
PURCHASE PAYMENTS........................................................... 7
CONTRACT VALUE.............................................................. 8
VARIABLE SEPARATE ACCOUNT................................................... 9
CONTRACT MAINTENANCE CHARGE................................................. 9
TRANSFERS................................................................... 10
WITHDRAWALS................................................................. 11
DEATH BENEFIT............................................................... 12
ANNUITY AND SETTLEMENT OPTIONS.............................................. 15
BENEFICIARY................................................................. 17
SUSPENSION OR DEFERRAL OF PAYMENTS OR TRANSFERS
FROM THE SEPARATE ACCOUNT................................................. 18
GENERAL PROVISIONS.......................................................... 19
VALUES AND BENEFITS......................................................... 20
ANNUITY OPTION PAYMENT TABLES............................................... 21
2
<PAGE>
CONTRACT DATA
OWNER: [John Doe] SEX: [M] AGE AT ISSUE: [52]
JOINT OWNER: [Mary Doe] SEX: [F] AGE AT ISSUE: [50]
ANNUITANT: [John Doe] SEX: [M] AGE AT ISSUE: [52]
CO-ANNUITANT: [Mary Doe] SEX: [F] AGE AT ISSUE: [50]
CONTRACT NUMBER: [12345] CONTRACT DATE:
[May 1, 1999]
PLAN TYPE: [Non-qualified] ANNUITY DATE:
[May 1, 2037]
PURCHASE PAYMENTS:
INITIAL PURCHASE PAYMENT: [$10,000]
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $1,000. For IRA contracts, the
Minimum Subsequent Purchase Payment is $1,000. We may allow a lower
Minimum Subsequent Purchase Payment for payroll deduction plans or other
automatic purchase plans.
ANNUAL PURCHASE PAYMENT LIMITS: The total of all Purchase Payments made
into this Contract in the first Contract Year may not exceed
$10,000,000. The total of all Purchase Payments made into this Contract
in any Contract Year after the first Contract Year may not exceed
$2,000,000. Purchase Payments of greater value may be allowed with our
prior approval.
AGGREGATE PURCHASE PAYMENT LIMIT: The total of all Purchase Payments
made into this Contract may not exceed $10,000,000. Purchase Payments of
greater value may be allowed with our prior approval.
BENEFICIARY:
As designated by Owner at Contract Date unless changed in accordance
with the Contract provisions.
A
<PAGE>
CONTRACT MAINTENANCE CHARGE:
If your Contract Value is less than $50,000, we will charge a Contract
Maintenance Charge of the lesser of 2% of the Contract Value or $30.
This charge is deducted on the Contract Anniversary and when a surrender
of the Contract occurs, if the Contract Value at the time is then less
than $50,000. The Contract Maintenance Charge will be deducted on a
pro-rata basis from all Allocation Options to which your Contract Value
is allocated. During the Annuity Period, we reserve the right to assess
an annual Contract Maintenance Charge of $30. The decision to assess
this charge may depend on the Annuity or Settlement Option selected. We
reserve the right to increase the Contract Maintenance Charge, but it
will not exceed $60 per Contract Year, and to raise the Contract Value
amount over which we will waive the Contract Maintenance Charge.
INSURANCE CHARGE:
This charge is deducted daily from the assets in each of the
Subaccounts. The maximum daily charge is .00367395%, which is equivalent
to an annual rate of 1.35%.
ALLOCATION OPTIONS:
VARIABLE INVESTMENT OPTIONS:
The following variable investment options are available through
allocation to subaccounts of the Pruco Life Flexible Premium Variable
Annuity Account. We reserve the right to limit the availability of the
below options, if necessary, in order to comply with federal, state or
local law.
THE PRUDENTIAL SERIES FUND, INC.
Diversified Bond Portfolio
Equity Income Portfolio
Equity Portfolio
Global Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Value Portfolio
B
<PAGE>
JANUS ASPEN SERIES
Growth Portfolio
International Growth Portfolio
MFS VARIABLE INSURANCE TRUST
Emerging Growth Series
Research Series
OCC ACCUMULATION TRUST
Managed Portfolio
Small Cap Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Franklin Small Cap Investments Portfolio
-Class 2
T.ROWE PRICE EQUITY SERIES, INC.
Equity Income Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
International Stock Portfolio
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio
INTEREST RATE OPTIONS:
The following interest rate options are currently available. We may add
other options in the future.
NONE
ALLOCATION GUIDELINES: Currently, you may select any Allocation Option which is
available at the time the Purchase Payment or transfer is made. However, an
amount of at least 1% of the Invested Purchase Payment must be allocated to any
Allocation Option. Allocations made pursuant to automatic rebalancing or dollar
cost-averaging are not subject to these limitations.
C
<PAGE>
TRANSFERS:
NUMBER OF TRANSFERS PERMITTED: Currently, there are no limits on the
number of transfers that can be made among Subaccounts. We reserve the
right to change this, but the Owner will always be allowed at least 12
transfers among Subaccounts in a Contract Year.
TRANSFER CHARGE: The Transfer Charge for each transfer after the first
12 in a Contract Year is $10. The charge is taken pro-rata from the
Allocation Options from which the transfer is made. Transfers made due
to automatic rebalancing or dollar cost-averaging will not be counted
for purposes of the transfer charge. We reserve the right to increase
this charge, but it will not exceed $30.
MINIMUM AMOUNT TO BE TRANSFERRED: Subject to the restrictions contained
in the Contract on transfers, the minimum transfer amount is $250 or
your entire interest in any Allocation Option, if less. This requirement
is waived if the transfer is pursuant to automatic rebalancing or dollar
cost-averaging.
WITHDRAWALS:
MINIMUM AMOUNT WHICH MAY BE WITHDRAWN: The minimum amount which may be
withdrawn is $250. The minimum amount which may be withdrawn under a
systematic withdrawal plan is $100.
MINIMUM CONTRACT VALUE WHICH MUST REMAIN IN THE CONTRACT AFTER A
WITHDRAWAL: The minimum Contract Value which must remain in the Contract
in order to keep the Contract inforce after a withdrawal is $2,000.
ENDORSEMENTS:
Individual Retirement Annuity Endorsement
ANNUITY SERVICE CENTER:
PRUDENTIAL
P.O. Box 1234
Any Town, PA
D
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD: The period from, and including, the Contract Date to, but
excluding, the Annuity Date.
ADJUSTED CONTRACT VALUE: The Contract Value as of the Annuity Date less any
applicable Premium Tax Charge. The applicable Annuity Option Payment Table is
applied to this amount to determine the initial Annuity Payment.
ALLOCATION OPTIONS: Those allocation choices available under the Contract as of
any given time, including the Variable Investment Options to which Contract
Value may be allocated. Allocation Options as of the Contract Date are shown on
the Contract Data pages.
ANNUITANT: The person named on the Contract Data pages upon whose continuation
of life any Annuity Payment involving life contingencies depends. If the
Annuitant dies before the Annuity Date, the Co-Annuitant, if applicable, becomes
the Annuitant. If there is no surviving Co-Annuitant, and the Annuitant was not
the Owner, the Owner becomes the Annuitant. You then have 60 days from the date
we receive due proof of death of the Annuitant or Co-Annuitant to name a new
Annuitant. If no new Annuitant is named during that 60 day period, the Owner
will remain the Annuitant.
ANNUITY DATE: The date the first Annuity or Settlement Payment to the Payee is
due. The Annuity Date is shown on the original Contract Data pages. You may
change the Annuity Date; however, any such changed Annuity Date must be earlier
than the date shown on the Contract Data pages, cannot precede the second
Contract Anniversary and must be consistent with applicable law at the time. If
there is a new Annuitant due to the death of the Annuitant or the assignment of
the Contract, and the new Annuitant is older than the prior Annuitant, the
Annuity Date will be based on the age of the new Annuitant; however any such
changed Annuity Date must be earlier than the date shown on the Contract Data
pages, cannot be later than the Contract Anniversary next following the new
Annuitant's 90th birthday and must be consistent with applicable law at the
time.
ANNUITY OR SETTLEMENT PAYMENTS: The series of payments made to you or any named
payee after the Annuity Date as described under the annuity or settlement option
selected.
ANNUITY PERIOD: The period of time, beginning on the Annuity Date, during which
Annuity or Settlement Payments are made.
ANNUITY SERVICE CENTER: The office indicated on the Contract Data pages to which
notices, requests and Purchase Payments must be sent. All sums payable to us
under the Contract must be sent to the Annuity Service Center. The Annuity
Service Center address may be changed at any time. You will be notified in
advance and in writing of any change in address.
4
<PAGE>
BENEFICIARY: The person(s) or entity(ies) who has the right to receive the death
benefit when payable. The Owner must be the primary Beneficiary of the Joint
Owner, and the Joint Owner must be the primary Beneficiary of the Owner.
BUSINESS DAY: Any day the New York Stock Exchange and the Company are open for
business.
CO-ANNUITANT: The person shown on the Contract Data pages who becomes the
Annuitant upon the death of the Annuitant before the Annuity Date. No
Co-Annuitant may be designated if the Owner is a non-natural person.
COMPANY: Pruco Life Insurance Company, an Arizona corporation.
CONTRACT ANNIVERSARY: The same day and month as the Contract Date in each later
year.
CONTRACT DATE: The date shown on the Contract Data pages on which the first
Contract Year begins.
CONTRACT SURRENDER VALUE: The Contract Value less any applicable Premium Tax
Charge or Contract Maintenance Charge.
CONTRACT VALUE: The dollar value as of any Business Day prior to the Annuity
Date of all amounts accumulated under this Contract.
CONTRACT YEAR: A year which starts on the Contract Date or on a Contract
Anniversary.
EARNINGS: The excess of the Contract Value over the sum of all Purchase Payments
made and not yet withdrawn.
GENERAL ACCOUNT: Our general investment account which contains all of our assets
with the exception of the Variable Separate Account and other segregated asset
accounts.
GOOD ORDER: An instruction received at the Annuity Service Center, utilizing
such forms, signatures and datings as we require, that is sufficiently complete
and clear that we do not need to exercise any discretion to follow such
instructions. We will notify you if an instruction is not in Good Order.
INTEREST RATE OPTION(S): Those interest rate option(s) available under the
Contract as of any given time. Interest Rate Option(s) as of the Contract Date
are shown on the Contract Data pages.
INVESTED PURCHASE PAYMENTS: The balance of each Purchase Payment after we make
any applicable deduction for: (1) Premium Tax Charge; and (2) charge for any
other type of tax (or component thereof) measured by or based upon the amount of
the Purchase Payment we receive.
5
<PAGE>
JOINT OWNER: The spouse of the Owner, if named on the Contract Data pages as the
Joint Owner, who shares ownership rights with the Owner as defined under this
Contract. You may add, change or remove a Joint Owner, subject to our
underwriting rules. The Contract may never have more than one Joint Owner. No
Joint Owner is permitted for IRA's or other qualified contracts.
OWNER: The person or entity named on the Contract Data pages who has ownership
rights as defined under the Contract provided that, if a Joint Owner is named,
the Owner shares ownership rights with the Joint Owner. You may change the Owner
subject to our underwriting rules. Any change of an Owner will be effective when
we process the request.
PAYEE: The person who has a right to receive Annuity or Settlement Payments
under the Annuity and Settlement Options provision of this Contract. The Payee
can be designated as revocable or irrevocable at your discretion. If you do not
designate a Payee at least 5 Business Days before the Annuity Date, the Owner
will become the Payee.
PREMIUM TAX CHARGE: A charge which may be deducted from Purchase Payments or
Contract Value for premium taxes owed by us to any governmental entity.
PURCHASE PAYMENT: A payment you make to this Contract.
SUBACCOUNT: Variable Separate Account assets are divided into Subaccounts.
Assets of each Subaccount will be invested in shares of a Variable Investment
Option.
VARIABLE INVESTMENT OPTION: Those investment options available under the
Contract through the Subaccounts as of any given time. Variable Investment
Options as of the Contract Date are shown on the Contract Data pages.
VARIABLE SEPARATE ACCOUNT: A segregated asset account maintained by us to
support this and certain other contracts. The segregated asset account(s)
available as of the Contract Date is shown on the Contract Data pages.
WE, OUR AND US: Pruco Life Insurance Company.
YOU AND YOUR: The Owner of the Contract if there is no Joint Owner; if there is
a Joint Owner, the Owner and Joint Owner acting jointly. If we receive written
authorization from both the Owner and Joint Owner in Good Order, then, upon our
consent, we will allow either to represent the entire ownership interest in the
Contract, until that authorization has been revoked by either party. This
Contract will treat the Owner as having contributed 100% of the Purchase
Payments. Therefore, we will treat the Owner as the taxpayer with respect to all
distributions made under the Contract while he or she is the Owner, whether or
not a Joint Owner is also named.
6
<PAGE>
PURCHASE PAYMENTS
PURCHASE PAYMENTS: The initial Purchase Payment must be paid on the Contract
Date. In general, subsequent Purchase Payments may be made at any time before
the Annuity Date. However, no Purchase Payments may be made on or after the sole
or older of the Owner's or Joint Owner's, or Annuitant's, 85th birthday, and we
reserve the right to decline any Purchase Payment. The Minimum Subsequent
Purchase Payment, Annual Purchase Payment Limits and Aggregate Purchase Payment
Limit are shown on the Contract Data pages.
ALLOCATION OF PURCHASE PAYMENTS: Invested Purchase Payments are allocated to one
or more of the Allocation Options in accordance with your selection. The
allocation of the initial Invested Purchase Payment is made in accordance with
your selection made on the Contract Date. Unless you inform us otherwise,
subsequent Invested Purchase Payments will be allocated in the same manner,
subject to availability, as the initial Invested Purchase Payment. Assuming that
all other requirements are received in Good Order, we reserve the right to
allocate your initial Invested Purchase Payment to the Money Market Subaccount
until we receive your allocation selection. In addition, the Company has
reserved the right to allocate the initial Invested Purchase Payment to the
Money Market Subaccount under the 10 Day Right to Cancel Contract provision set
forth on the face page of this Contract. All allocations of Invested Purchase
Payments are subject to the Allocation Guidelines shown on the Contract Data
pages.
Currently, you may select as many of the available Allocation Options as you
wish. However, we reserve the right to limit this in the future. If the Purchase
Payment and forms required to issue a Contract are in Good Order, the initial
Invested Purchase Payment will be credited to your Contract within two (2)
business days after receipt at the Annuity Service Center. Additional Invested
Purchase Payments will be credited to your Contract as of the Business Day they
are received.
7
<PAGE>
CONTRACT VALUE
Your Contract Value is the total of all amounts credited to your Contract as of
any Business Day as a result of your initial Invested Purchase Payment and the
increases and decreases described below.
On the Contract Date, the Contract Value is equal to the initial Invested
Purchase Payment. After that, the Contract Value as of any Business Day is
determined by starting with the Contract Value at the end of the previous day
and adjusting it for items that increase it or decrease it.
Items that increase the Contract Value are: Invested Purchase Payments; and
positive investment performance in a Subaccount.
Items that decrease the Contract Value are: withdrawals; negative investment
performance in a Subaccount; Insurance Charge; Contract Maintenance Charge, if
applicable; Transfer Charge; and any Premium Tax Charge or other tax charge.
Investment results are credited daily and the Insurance Charge is deducted
daily. The Contract Maintenance Charge is deducted annually as of the Contract
Anniversary and upon a total withdrawal. Other charges are assessed only if the
appropriate event occurs.
8
<PAGE>
VARIABLE SEPARATE ACCOUNT
THE VARIABLE SEPARATE ACCOUNT: The Variable Separate Account is designated on
the Contract Data pages. It consists of assets we have set aside and have kept
separate from the rest of our assets and those of our other separate accounts.
The assets of the Variable Separate Account, equal to reserves and other
liabilities of your Contract and those of other owners, will not be charged with
liabilities arising out of any other business we may conduct.
The Variable Separate Account assets are divided into Subaccounts. The assets of
the Subaccount are allocated to the Variable Investment Option(s) shown on the
Contract Data pages. We may restructure, eliminate or combine Subaccounts or add
to or eliminate Variable Investment Option(s) from those shown. You may be
permitted to transfer your Contract Value or allocate Invested Purchase Payments
to the additional Subaccount(s). However, the right to make such transfers or
allocations will be limited by any terms and conditions we may impose.
Should the shares of any Variable Investment Option(s) become unavailable for
investment by the Variable Separate Account, we deem further investment in the
shares inappropriate, or if required for tax reasons, we may limit further
purchase of such shares or substitute shares of another Variable Investment
Option for shares already purchased.
VALUATION OF ASSETS: The value of the shares held by the Subaccounts in the
Variable Investment Options will be based on the net asset value of the
Investment Option on each Business Day.
INSURANCE CHARGE: Each Business Day, we deduct an Insurance Charge from the
Subaccounts of the Variable Separate Account which is equivalent, on an annual
basis, to the amount shown on the Contract Data pages.
CONTRACT MAINTENANCE CHARGE
We deduct an annual Contract Maintenance Charge shown on the Contract Data
pages. We determine your Contract Value as of your Contract Anniversary and make
any deductions required on a pro-rata basis from all Allocation Options to which
your Contract Value is allocated. If a total withdrawal is made on other than a
Contract Anniversary, we will determine your Contract Value and make a deduction
for the Contract Maintenance Charge the same as we would if it were a Contract
Anniversary.
9
<PAGE>
TRANSFERS
TRANSFERS DURING THE ACCUMULATION PERIOD: A transfer is subject to the
following:
1. the maximum number of transfers which may be made, the maximum number
of transfers which are not subject to a Transfer Charge and the
minimum amount which may be transferred are shown on the Contract
Data pages;
2. a Transfer Charge is deducted if a transfer exceeds the maximum
number of free transfers. The Transfer Charge is shown on the
Contract Data pages. The Transfer Charge is deducted from the amount
which is transferred;
3. a transfer will be effected as of the end of the Business Day when we
receive a request in Good Order;
4. we are not responsible for the consequences resulting from a transfer
made in accordance with your instructions;
5. your right to make transfers is subject to modification if we
determine, in our sole opinion, that the exercise of the right by one
or more Owners is, or would be, to the disadvantage of other Owners
or if required to do so by applicable laws or regulations.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by us to be
to the disadvantage of other Owners or to ensure compliance with such
laws or regulations. A modification could be applied to transfers to
or from one or more of the Subaccounts and could include, but not be
limited to:
a. the requirement of a minimum time period between each
transfer;
b. not accepting a transfer request of an agent acting under a
power of attorney on behalf of more than one Owner;
c. limiting the dollar amount that may be transferred among the
Subaccounts by an Owner at any one time; or
d. restricting the number of transfers per year.
No transfers are permitted after the Annuity Date.
10
<PAGE>
WITHDRAWALS
WITHDRAWALS: During the Accumulation Period, you may, upon a request in Good
Order, make a total or partial withdrawal of the Contract Surrender Value. You
may specify the Allocation Option(s) from which a withdrawal will be taken. If
you do not so specify, we will take the withdrawal on a pro-rata basis from all
Allocation Option(s) to which your Contract Value is allocated.
We will pay the amount of any withdrawal within seven (7) days of receipt of a
request in Good Order unless the "Suspension or Deferral of Payments Provision"
is in effect.
Each partial withdrawal must be for an amount which is not less than the amount
shown on the Contract Data pages. The minimum Contract Value which must remain
in the Contract after a partial withdrawal in order to keep the Contract inforce
is shown on the Contract Data pages. If the amount of the withdrawal requested
would reduce the Contract Value below this minimum, we will give you the maximum
amount available that would not reduce the Contract Value below such minimum.
Special rules may apply for IRA's.
11
<PAGE>
DEATH BENEFIT
DEATH OF LAST SURVIVOR OF OWNER OR JOINT OWNER DURING THE ACCUMULATION PERIOD:
If the sole or last survivor of the Owner or Joint Owner dies during the
Accumulation Period, the death benefit will be as described below.
Upon receipt of due proof of death and any other documentation we
request in Good Order, the Beneficiary is entitled to receive a death
benefit equal to the greater of:
1. the Contract Value as of the date we receive due proof of death and
any other documentation we need; or
2. the total Invested Purchase Payments made proportionally reduced by
the effect of withdrawals.
Where the words "proportionally reduced by the effect of withdrawals" are used
in this Contract, the withdrawal reduces those values in the same proportion as
it reduces the Contract Value. We calculate the proportion by dividing the
Contract Value after the withdrawal by the Contract Value immediately prior to
the withdrawal. The resulting percentage is multiplied by the applicable values
(before the withdrawal) in determining the death benefit.
If the ownership of the Contract changes as a result of an assignment, the value
of the death benefit will be reset to the Contract Value as of the date of the
assignment. Such value will be treated as a Purchase Payment made on that date
for purposes of computing the death benefit.
The Beneficiary may, within 60 days of providing proof of death, elect to take
the death benefit under one of the death benefit payout options listed below,
provided that any payout option shall not include a period certain that exceeds
the life expectancy of the Beneficiary. The Beneficiary will be the sole
measuring life in determining the amount of any such payout option. If no payout
option is selected within the 60 days, the death benefit will be payable as a
lump sum.
12
<PAGE>
If the primary Beneficiary of the Owner is the spouse of the Owner at the time
of the Owner's death, the Contract will continue and the spouse will become the
Owner. If the primary Beneficiary of the Joint Owner is the spouse of the Joint
Owner at the time of the Joint Owner's death, the Contract will continue. In
either case, the spouse may, within 60 calendar days of providing proof of
death, elect to take the death benefit under any of the payout options available
under this Contract. If the spouse is the surviving Owner or Joint Owner under
the Contract, the death benefit will equal the Contract Value.
If the Owner and Joint Owner are not spouses at the time of the Owner or Joint
Owner's death, the Contract will not continue, the death benefit will equal the
Contract Value, and the Beneficiary will be required to choose one of the death
benefit payout options described below. In that event, the payout described in
Choice 2 and the beginning of the distribution described in Choice 3 will be
based on the date of death of the first to die of the Owner or Joint Owner.
The death benefit payout options are:
CHOICE 1 - lump sum payment of the death benefit; or
CHOICE 2 - the payment of the entire death benefit within 5 years of the
date of death of the last to survive of the Owner or Joint Owner; or
CHOICE 3 - payment of the death benefit under an Annuity or Settlement
Option over the lifetime of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary with
distribution beginning within one year of the date of death of the last
to survive of the Owner or Joint Owner.
Any portion of the death benefit not applied under Choice 3 within one year of
the date of the last to survive of the Owner's or Joint Owner's death, must be
distributed within five years of the date of death.
Once a death benefit becomes payable, the Payee's interest in any Annuity
Benefit under the Contract will cease.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election, unless the Suspension or
Deferral of Payments Provision is in effect.
13
<PAGE>
DEATH OF ANNUITANT DURING THE ACCUMULATION PERIOD: If the Annuitant dies before
the Annuity Date, the Co-Annuitant, if applicable, becomes the Annuitant. If
there is no surviving Co-Annuitant, and the Annuitant was not the Owner, the
Owner becomes the Annuitant. You have the right to name a new Annuitant within
60 days. If the Owner is a non-natural person, the death of the Annuitant will
be treated as the death of the Owner, a new Annuitant may not be designated, and
the Annuitant will be deemed to be the Owner for purposes of determining the
death benefit.
DEATH OF ANNUITANT DURING THE ANNUITY PERIOD: If the Annuitant dies on or after
the Annuity Date, the Settlement Option then in effect will govern whether or
not we will continue to make any payments. The death of a non-Annuitant Owner or
Joint Owner has no effect on the payout during the Annuity Period.
PAYMENT OF DEATH BENEFIT: We will require due proof of death and any other
documentation we request in Good Order before any death benefit is paid. All
death benefits will be paid in accordance with applicable law or regulations
governing death benefit payments.
SPECIAL TAX CONSIDERATIONS: There are special tax rules that apply to IRA and
other qualified contracts during both the Accumulation Period and Annuity Period
governing distributions upon the death of the Owner. These rules are contained
in provisions in the attached endorsements and supersede any other distribution
rules contained in the Contract.
The preceding provisions regarding the death of the Owner are intended to
satisfy the distribution at death requirements of section 72(s) of the Internal
Revenue Code of 1986, as amended. We reserve the right to amend this Contract by
subsequent endorsement as necessary to comply with applicable tax requirements,
if any, which are subject to change from time to time. Such additional
endorsements, if necessary to comply with amended tax requirements, will be
mailed to you and become effective within 30 days of mailing, unless you notify
us in writing, within that time frame, that you reject the endorsement.
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ANNUITY AND SETTLEMENT OPTIONS
GENERAL: On the Annuity Date, the Adjusted Contract Value will be applied under
the Annuity or Settlement Option you have selected. If the payment under any
option selected would be less than $20 per month, we reserve the right to pay
out the Adjusted Contract Value in a lump sum.
SELECTION OF AN ANNUITY OR SETTLEMENT OPTION: You may select an Annuity or
Settlement Option by notifying us of the selected option in Good Order. If no
Annuity or Settlement Option is selected, or if the chosen Option is not
received in Good Order, Option 2, Life Income Annuity Option, will automatically
be applied. You may, at any time prior to the Annuity Date, by a request in Good
Order 30 days in advance, select and/or change the Annuity or Settlement Option.
ANNUITY AND SETTLEMENT OPTIONS: This Contract provides for payments under one of
the Annuity or Settlement Options described below. Any other Annuity or
Settlement Option acceptable to us may be selected.
OPTION 1 - FIXED PERIOD ANNUITY OPTION. We will make equal payments for a period
you choose up to 25 years. At your choice, we will make such payments annually,
semi-annually, quarterly or monthly. The Option 1 Table shows the minimum
amounts we will pay.
OPTION 2 - LIFE INCOME ANNUITY OPTION. We will make payments for as long as the
Annuitant lives, with payments certain for 120 months. At your choice, we will
make such payments annually, semi-annually, quarterly or monthly. The Option 2
Table shows the minimum amounts we will pay.
OPTION 3- INTEREST PAYMENT SETTLEMENT OPTION. We will credit interest on the
Adjusted Contract Value at the rate of at least 3% until you request payment of
all or part of the Adjusted Contract Value. At your choice, we will pay interest
on the Adjusted Contract Value not yet withdrawn annually, semi-annually,
quarterly or monthly. You may request full or partial payment of the Adjusted
Contract Value provided, however, that if a partial payment is requested, the
amount of any Adjusted Contract Value remaining after such requested amount is
paid must be at least $1,000. This option is not available for qualified
contracts.
15
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OTHER ANNUITY OR SETTLEMENT OPTIONS: We may offer or consent to other settlement
options, including life income annuity options with payments certain for a
period of other than 120 months. Contact the representative who sold you the
Contract or call the toll-free number listed on your quarterly statement for
information.
ANNUITY: Unless you designate another Payee, you will be the Payee of the
Annuity Payments. The Adjusted Contract Value will be applied to the applicable
Annuity Table contained in this Contract based upon the Annuity Option you have
selected. The amount of the first payment for each $1,000 of Adjusted Contract
Value is shown in the Annuity Tables. If when Annuity Payments begin we are
using tables of annuity rates for these Contracts which result in larger Annuity
Payments, we will use those tables instead. Annuity Payments will depend on the
age and sex of the Annuitant, where permitted.
16
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BENEFICIARY
BENEFICIARY: The Beneficiary designation in effect on the Contract Date will
remain in effect until changed. The Beneficiary is entitled to receive the
benefits to be paid at the death of the last to die of the Owner or Joint Owner
(or the first to die of the Owner or Joint Owner if the Owner and Joint Owner
are not spouses at the time of the Owner's or Joint Owner's death) during the
Accumulation Period. The Owner must be the primary Beneficiary of the Joint
Owner, and the Joint Owner must be the primary Beneficiary of the Owner. Other
than primary Beneficiaries, Beneficiaries must be the same for both the Owner
and Joint Owner.
When a Beneficiary is designated, any relationship shown is to the Owner unless
otherwise specified.
To show priority among Beneficiaries, we will label the classes, so that the
class with first priority is called the primary class, the class with next
priority is called the secondary class, and so on. The following statements
apply to Beneficiaries unless the Contract Data pages, Contract endorsement or
any change request that we have processed specifies otherwise:
One who survives the last to die of the Owner and Joint Owner will have
the right to be paid only if no one in a prior class survives the last
to die of the Owner and Joint Owner.
One who has the right to be paid will be the only one paid if no one
else in the same class survives the last to die of the Owner and Joint
Owner.
Two or more in the same class who have the right to be paid will be paid
in equal shares.
If no one survives the sole Owner, we will pay in one sum to the Owner's
estate.
When there is insufficient evidence to determine the order of death
then, unless state law prohibits, we will deem the Owner to be the last
survivor and make payment to the Owner's Beneficiary.
Before we make a payment, we have the right to decide what proof we need
of the identity, age or any other facts about any persons designated as
Beneficiaries. If Beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s)
again.
CHANGE OF BENEFICIARY: To initiate a change of Beneficiary, call the toll-free
number listed on your statement or contact the representative who sold you the
Contract. We may also ask you to send us the Contract. The change will take
effect only when we process the request. Then, any previous Beneficiary's
interest will end as of the date we receive the request in Good Order, even if
the Owner or Joint Owner is not living when we process the request. We will not
be liable for any payment made or action taken before we record the change.
17
<PAGE>
SUSPENSION OR DEFERRAL OF PAYMENTS OR TRANSFERS
FROM THE SEPARATE ACCOUNT
We reserve the right to suspend or postpone payments from the Separate Account
for a withdrawal or transfer for any period when:
1. the New York Stock Exchange is closed (other than customary
weekend and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of
the Investment Options held in the Separate Account is not
reasonably practicable or it is not reasonably practicable to
determine the value of such shares; or
4. during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners;
provided that applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2) and (3)
exist.
18
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GENERAL PROVISIONS
THE CONTRACT: The entire Contract consists of this Contract, and any attached
endorsements or riders. This Contract may be changed or altered only by our
President or Secretary. Any change, modification or waiver must be made in
writing. This Contract may not be modified by us without your consent except as
may be required by applicable law or as set forth in this Contract.
ASSIGNMENT OF A CONTRACT: A request in Good Order specifying the terms of an
assignment of a Contract must be provided to the Annuity Service Center. We are
under no obligation to verify the assignment's validity or sufficiency. We will
not be liable for any payment made or action taken before we record the
assignment. If any Owner is living on the Annuity Date and an assignment is in
effect on that date, we have the right to pay the Contract Surrender Value in
one lump sum to the assignee where notice in Good Order is received. Partial
assignments, collateral or otherwise, are not allowed without our approval. We
reserve the right to restrict or refuse any assignment.
An assignment which results in a change of ownership will affect the value of
the death benefit. Please see the section of the Contract entitled, "Death of
Last Survivor of Owner or Joint Owner During the Accumulation Period", for more
information.
We will not be responsible for the validity or tax consequences of any
assignment. Any assignment made after the death benefit has become payable will
be valid only with our consent.
If the Contract is assigned, your rights may only be exercised with the consent
of the assignee of record.
NON-PARTICIPATING IN SURPLUS: This Contract does not share in any distribution
of our profits or surplus.
INCONTESTABILITY: We will not contest this Contract. We consider all statements
made in the application for this Contract to be representations, not warranties.
MISSTATEMENT OF AGE OR SEX: We may require proof of age of the Annuitant before
making any life contingent Annuity Payment provided for by this Contract. If the
age or sex of the Annuitant has been misstated, the amount payable will be the
amount that the Contract Value would have provided at the true age or sex.
Once Annuity Payments have begun, any underpayments, with interest at 5%, will
be made up in one sum with the next Annuity Payment, and overpayments, with
interest at 5%, will be deducted from the future Annuity Payments until the
total is repaid.
CONTRACT SETTLEMENT: This Contract must be returned to us upon any settlement.
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REPORTS: We will send you a report four times each calendar year until the
Annuity Date showing your Contract Value and other relevant information about
your Contract. You may ask for a report like this at any time. But, except for
the four reports we send you during the year, we have the right to charge a fee
for each report. We will also furnish an annual report of the Separate Account.
These reports will be sent to your last known address.
TAXES: Any taxes, including any Premium Taxes and any other type of tax (or
component thereof) measured by or based upon any portion of the Purchase Payment
we receive, paid to any governmental entity will be charged against the Contract
Value. We will, in our sole discretion, determine when taxes have resulted from:
the investment experience of the Separate Account; receipt by us of the Purchase
Payment(s); or commencement of Annuity Payments. We may, at our discretion, pay
taxes when due and deduct that amount from the Contract Value at a later date.
Payment at an earlier date does not waive any right we may have to deduct
amounts at a later date. We reserve the right to establish a provision for
federal income taxes if we determine, in our sole discretion, that we will incur
a tax as a result of the operation of the Separate Account. We will deduct for
any income taxes incurred by it as a result of the operation of the Separate
Account whether or not there was a provision for taxes and whether or not it was
sufficient. We will deduct any withholding taxes required by applicable law.
EVIDENCE OF SURVIVAL: Before we make a payment, we have the right to require
proof of continued life and any other documentation we need to make the payment.
We can require this proof for any person whose life or death determines whether
or to whom we must make the payment.
PROTECTION OF PROCEEDS: No Beneficiary may commute, encumber, alienate or assign
any payments under this Contract before they are due. To the extent permitted by
law, no payments will be subject to the debts, contracts or engagements of any
Beneficiary or to any judicial process to levy upon or attach the same for
payment thereof.
VALUES AND BENEFITS
Any values and death benefits that may be available under this Contract are not
less than the minimum benefits required by the law of any state in which this
Contract is delivered.
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ANNUITY OPTION PAYMENT TABLES
AMOUNTS PAYABLE: For Options 1 and 2, we will use the tables below to compute
the minimum amount of the Annuity Option Payment.
If the Annuity Date is not a Contract Anniversary, we will adjust the amounts
accordingly.
When we computed the amounts we show in the Option 2 Table, we adjusted the 2000
Individual Annuity Mortality Table to an age last birthday basis, less three
years, and we used an interest rate of X% per year. If the age is over 80, the
rate for age 80 will be used.
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INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT. ANNUITY PAYMENTS AND VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
22
PRUCO LIFE INSURANCE COMPANY
Phoenix, Arizona 85014
A STOCK COMPANY SUBSIDIARY OF
The Prudential Insurance Company of
America
- --------------------------------------------------------------------------------
This is an annuity contract. Subject to the provisions of the Contract, and in
consideration of any Purchase Payments you make and we accept, we will make
Annuity Payments starting on the Annuity Date shown on the Contract Data pages.
Please read the Contract carefully; it is a legal contract between you and Pruco
Life Insurance Company. Expense charges applicable to the Contract are shown on
the Contract Data pages. If you have a question about the Contract, or a claim,
see one of our representatives or contact the Annuity Service Center.
10 DAY RIGHT TO CANCEL CONTRACT
This Contract may be returned within 10 days after you receive it. It can be
mailed or delivered to either us, at the Annuity Service Center, or the
representative who sold it to you. Return of this Contract by mail is effective
on being postmarked, properly addressed and postage prepaid. The returned
Contract will be canceled upon our receipt, and we will return your money in
accordance with applicable law. Under certain circumstances, we have the right
to allocate Purchase Payment(s) to the Money Market Subaccount until the
expiration of the Right to Cancel period. If we so allocate Purchase Payment(s),
we will refund the Purchase Payment(s), less any withdrawals, in the event of
cancellation under the terms of this paragraph.
READ YOUR CONTRACT CAREFULLY
SECRETARY PRESIDENT
INDIVIDUAL DEFERRED VARIABLE
ANNUITY CONTRACT
Nonparticipating
ANNUITY PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
VFLX-99 C-GMDB
<PAGE>
TABLE OF CONTENTS
CONTRACT DATA PAGES......................................................... 3
DEFINITIONS................................................................. 4
PURCHASE PAYMENTS........................................................... 7
CONTRACT VALUE.............................................................. 8
VARIABLE SEPARATE ACCOUNT................................................... 9
CONTRACT MAINTENANCE CHARGE................................................. 9
TRANSFERS................................................................... 10
WITHDRAWALS................................................................. 11
DEATH BENEFIT............................................................... 12
ANNUITY AND SETTLEMENT OPTIONS.............................................. 16
BENEFICIARY................................................................. 18
SUSPENSION OR DEFERRAL OF PAYMENTS OR TRANSFERS
FROM THE SEPARATE ACCOUNT................................................. 19
GENERAL PROVISIONS.......................................................... 20
VALUES AND BENEFITS......................................................... 21
ANNUITY OPTION PAYMENT TABLES............................................... 22
2
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CONTRACT DATA
OWNER: [John Doe] SEX: [M] AGE AT ISSUE: [52]
JOINT OWNER: [Mary Doe] SEX: [F] AGE AT ISSUE: [50]
ANNUITANT: [John Doe] SEX: [M] AGE AT ISSUE: [52]
CO-ANNUITANT: [Mary Doe] SEX: [F] AGE AT ISSUE: [50]
CONTRACT NUMBER: [12345] CONTRACT DATE:
[May 1,1999]
PLAN TYPE: [Non-qualified] ANNUITY DATE:
[May 1, 2037]
PURCHASE PAYMENTS:
INITIAL PURCHASE PAYMENT: [$10,000]
MINIMUM SUBSEQUENT PURCHASE PAYMENT: $1,000. For IRA contracts, the
Minimum Subsequent Purchase Payment is $1,000. We may allow a lower
Minimum Subsequent Purchase Payment for payroll deduction plans or other
automatic purchase plans.
ANNUAL PURCHASE PAYMENT LIMITS: The total of all Purchase Payments made
into this Contract in the first Contract Year may not exceed
$10,000,000. The total of all Purchase Payments made into this Contract
in any Contract Year after the first Contract Year may not exceed
$2,000,000. Purchase Payments of greater value may be allowed with our
prior approval.
AGGREGATE PURCHASE PAYMENT LIMIT: The total of all Purchase Payments
made into this Contract may not exceed $10,000,000. Purchase Payments of
greater value may be allowed with our prior approval.
BENEFICIARY:
As designated by Owner at Contract Date unless changed in accordance
with the Contract provisions.
A
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CONTRACT MAINTENANCE CHARGE:
If your Contract Value is less than $50,000, we will charge a Contract
Maintenance Charge of the lesser of 2% of the Contract Value or $30.
This charge is deducted on the Contract Anniversary and when a surrender
of the Contract occurs, if the Contract Value at the time is then less
than $50,000. The Contract Maintenance Charge will be deducted on a
pro-rata basis from all Allocation Options to which your Contract Value
is allocated. During the Annuity Period, we reserve the right to assess
an annual Contract Maintenance Charge of $30. The decision to assess
this charge may depend on the Annuity or Settlement Option selected. We
reserve the right to increase the Contract Maintenance Charge, but it
will not exceed $60 per Contract Year, and to raise the Contract Value
amount over which we will waive the Contract Maintenance Charge.
INSURANCE CHARGE:
This charge is deducted daily from the assets in each of the
Subaccounts. The maximum daily charge is .00448376%, which is equivalent
to an annual rate of 1.65%.
ALLOCATION OPTIONS:
VARIABLE INVESTMENT OPTIONS:
The following variable investment options are available through
allocation to subaccounts of the Pruco Life Flexible Premium Variable
Annuity Account. We reserve the right to limit the availability of the
below options, if necessary, in order to comply with federal, state or
local law.
THE PRUDENTIAL SERIES FUND, INC.
Diversified Bond Portfolio
Equity Income Portfolio
Equity Portfolio
Global Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Value Portfolio
B
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JANUS ASPEN SERIES
Growth Portfolio
International Growth Portfolio
MFS VARIABLE INSURANCE TRUST
Emerging Growth Series
Research Series
OCC ACCUMULATION TRUST
Managed Portfolio
Small Cap Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Franklin Small Cap Investments Portfolio
-Class 2
T.ROWE PRICE EQUITY SERIES, INC.
Equity Income Portfolio
T.ROWE PRICE INTERNATIONAL SERIES, INC.
International Stock Portfolio
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio
INTEREST RATE OPTIONS:
The following interest rate options are currently available. We may add
other options in the future.
NONE
ALLOCATION GUIDELINES: Currently, you may select any Allocation Option which is
available at the time the Purchase Payment or transfer is made. However, an
amount of at least 1% of the Invested Purchase Payment must be allocated to any
Allocation Option. Allocations made pursuant to automatic rebalancing or dollar
cost- averaging are not subject to these limitations.
C
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TRANSFERS:
NUMBER OF TRANSFERS PERMITTED: Currently, there are no limits on the
number of transfers that can be made among Subaccounts. We reserve the
right to change this, but the Owner will always be allowed at least 12
transfers among Subaccounts in a Contract Year.
TRANSFER CHARGE: The Transfer Charge for each transfer after the first
12 in a Contract Year is $10. The charge is taken pro-rata from the
Allocation Options from which the transfer is made. Transfers made due
to automatic rebalancing or dollar cost-averaging will not be counted
for purposes of the transfer charge. We reserve the right to increase
this charge, but it will not exceed $30.
MINIMUM AMOUNT TO BE TRANSFERRED: Subject to the restrictions contained
in the Contract on transfers, the minimum transfer amount is $250 or
your entire interest in any Allocation Option, if less. This requirement
is waived if the transfer is pursuant to automatic rebalancing or dollar
cost-averaging.
WITHDRAWALS:
MINIMUM AMOUNT WHICH MAY BE WITHDRAWN: The minimum amount which may be
withdrawn is $250. The minimum amount which may be withdrawn under a
systematic withdrawal plan is $100.
MINIMUM CONTRACT VALUE WHICH MUST REMAIN IN THE CONTRACT AFTER A
WITHDRAWAL: The minimum Contract Value which must remain in the Contract
in order to keep the Contract inforce after a withdrawal is $2,000.
ENDORSEMENTS:
Individual Retirement Annuity Endorsement
ANNUITY SERVICE CENTER:
PRUDENTIAL
P.O. Box 1234
Any Town, PA
D
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DEFINITIONS
ACCUMULATION PERIOD: The period from, and including, the Contract Date to, but
excluding, the Annuity Date.
ADJUSTED CONTRACT VALUE: The Contract Value as of the Annuity Date less any
applicable Premium Tax Charge. The applicable Annuity Option Payment Table is
applied to this amount to determine the initial Annuity Payment.
ALLOCATION OPTIONS: Those allocation choices available under the Contract as of
any given time, including the Variable Investment Options, to which Contract
Value may be allocated. Allocation Options as of the Contract Date are shown on
the Contract Data pages.
ANNUITANT: The person named on the Contract Data pages upon whose continuation
of life any Annuity Payment involving life contingencies depends. If the
Annuitant dies before the Annuity Date, the Co-Annuitant, if applicable, becomes
the Annuitant. If there is no surviving Co-Annuitant, and the Annuitant was not
the Owner, the Owner becomes the Annuitant. You then have 60 days from the date
we receive due proof of death of the Annuitant or Co-Annuitant to name a new
Annuitant. If no new Annuitant is named during that 60 day period, the Owner
will remain the Annuitant.
ANNUITY DATE: The date the first Annuity or Settlement Payment to the Payee is
due. The Annuity Date is shown on the original Contract Data pages. You may
change the Annuity Date; however, any such changed Annuity Date must be earlier
than the date shown on the Contract Data pages, cannot precede the second
Contract Anniversary and must be consistent with applicable law at the time. If
there is a new Annuitant due to the death of the Annuitant or the assignment of
the Contract, and the new Annuitant is older than the prior Annuitant, the
Annuity Date will be based on the age of the new Annuitant; however any such
changed Annuity Date must be earlier than the date shown on the Contract Data
pages, cannot be later than the Contract Anniversary next following the new
Annuitant's 90th birthday and must be consistent with applicable law at the
time.
ANNUITY OR SETTLEMENT PAYMENTS: The series of payments made to you or any named
payee after the Annuity Date as described under the annuity or settlement option
selected.
ANNUITY PERIOD: The period of time, beginning on the Annuity Date, during which
Annuity or Settlement Payments are made.
ANNUITY SERVICE CENTER: The office indicated on the Contract Data pages to which
notices, requests and Purchase Payments must be sent. All sums payable to us
under the Contract must be sent to the Annuity Service Center. The Annuity
Service Center address may be changed at any time. You will be notified in
advance and in writing of any change in address.
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BENEFICIARY: The person(s) or entity(ies) who has the right to receive the death
benefit when payable. The Owner must be the primary Beneficiary of the Joint
Owner, and the Joint Owner must be the primary Beneficiary of the Owner.
BUSINESS DAY: Any day the New York Stock Exchange and the Company are open for
business.
CO-ANNUITANT: The person shown on the Contract Data pages who becomes the
Annuitant upon the death of the Annuitant before the Annuity Date. No
Co-Annuitant may be designated if the Owner is a non-natural person.
COMPANY: Pruco Life Insurance Company, an Arizona corporation.
CONTRACT ANNIVERSARY: The same day and month as the Contract Date in each later
year.
CONTRACT DATE: The date shown on the Contract Data pages on which the first
Contract Year begins.
CONTRACT SURRENDER VALUE: The Contract Value less any applicable Premium Tax
Charge or Contract Maintenance Charge.
CONTRACT VALUE: The dollar value as of any Business Day prior to the Annuity
Date of all amounts accumulated under this Contract.
CONTRACT YEAR: A year which starts on the Contract Date or on a Contract
Anniversary.
EARNINGS: The excess of the Contract Value over the sum of all Purchase Payments
made and not yet withdrawn.
GENERAL ACCOUNT: Our general investment account which contains all of our assets
with the exception of the Variable Separate Account and other segregated asset
accounts.
GOOD ORDER: An instruction received at the Annuity Service Center, utilizing
such forms, signatures and datings as we require, that is sufficiently complete
and clear that we do not need to exercise any discretion to follow such
instructions. We will notify you if an instruction is not in Good Order.
INTEREST RATE OPTION(S): Those interest rate option(s) available under the
Contract as of any given time. Interest Rate Option(s) as of the Contract Date
are shown on the Contract Data pages.
INVESTED PURCHASE PAYMENTS: The balance of each Purchase Payment after we make
any applicable deduction for: (1) Premium Tax Charge; and (2) charge for any
other type of tax (or component thereof) measured by or based upon the amount of
the Purchase Payment we receive.
5
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JOINT OWNER: The spouse of the Owner, if named on the Contract Data pages as the
Joint Owner, who shares ownership rights with the Owner as defined under this
Contract. You may add, change or remove a Joint Owner, subject to our
underwriting rules. The Contract may never have more than one Joint Owner. No
Joint Owner is permitted for IRA's or other qualified contracts.
OWNER: The person or entity named on the Contract Data pages who has ownership
rights as defined under the Contract provided that, if a Joint Owner is named,
the Owner shares ownership rights with the Joint Owner. You may change the Owner
subject to our underwriting rules. Any change of an Owner will be effective when
we process the request.
PAYEE: The person who has a right to receive Annuity or Settlement Payments
under the Annuity and Settlement Options provision of this Contract. The Payee
can be designated as revocable or irrevocable at your discretion. If you do not
designate a Payee at least 5 Business Days before the Annuity Date, the Owner
will become the Payee.
PREMIUM TAX CHARGE: A charge which may be deducted from Purchase Payments or
Contract Value for premium taxes owed by us to any governmental entity.
PURCHASE PAYMENT: A payment you make to this Contract.
SUBACCOUNT: Variable Separate Account assets are divided into Subaccounts.
Assets of each Subaccount will be invested in shares of a Variable Investment
Option.
VARIABLE INVESTMENT OPTION: Those investment options available under the
Contract through the Subaccounts as of any given time. Variable Investment
Options as of the Contract Date are shown on the Contract Data pages.
VARIABLE SEPARATE ACCOUNT: A segregated asset account maintained by us to
support this and certain other contracts. The segregated asset account(s)
available as of the Contract Date is shown on the Contract Data pages.
WE, OUR AND US: Pruco Life Insurance Company.
YOU AND YOUR: The Owner of the Contract if there is no Joint Owner; if there is
a Joint Owner, the Owner and Joint Owner acting jointly. If we receive written
authorization from both the Owner and Joint Owner in Good Order, then, upon our
consent, we will allow either to represent the entire ownership interest in the
Contract, until that authorization has been revoked by either party. This
Contract will treat the Owner as having contributed 100% of the Purchase
Payments. Therefore, we will treat the Owner as the taxpayer with respect to all
distributions made under the Contract while he or she is the Owner, whether or
not a Joint Owner is also named.
6
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PURCHASE PAYMENTS
PURCHASE PAYMENTS: The initial Purchase Payment must be paid on the Contract
Date. In general, subsequent Purchase Payments may be made at any time before
the Annuity Date. However, no Purchase Payments may be made on or after the sole
or older of the Owner's or Joint Owner's, or Annuitant's, 85th birthday, and we
reserve the right to decline any Purchase Payment. The Minimum Subsequent
Purchase Payment, Annual Purchase Payment Limits and Aggregate Purchase Payment
Limit are shown on the Contract Data pages.
ALLOCATION OF PURCHASE PAYMENTS: Invested Purchase Payments are allocated to one
or more of the Allocation Options in accordance with your selection. The
allocation of the initial Invested Purchase Payment is made in accordance with
your selection made on the Contract Date. Unless you inform us otherwise,
subsequent Invested Purchase Payments will be allocated in the same manner,
subject to availability, as the initial Invested Purchase Payment. Assuming that
all other requirements are received in Good Order, we reserve the right to
allocate your initial Invested Purchase Payment to the Money Market Subaccount
until we receive your allocation selection. In addition, the Company has
reserved the right to allocate the initial Invested Purchase Payment to the
Money Market Subaccount under the 10 Day Right to Cancel Contract provision set
forth on the face page of this Contract. All allocations of Invested Purchase
Payments are subject to the Allocation Guidelines shown on the Contract Data
pages.
Currently, you may select as many of the available Allocation Options as you
wish. However, we reserve the right to limit this in the future. If the Purchase
Payment and forms required to issue a Contract are in Good Order, the initial
Invested Purchase Payment will be credited to your Contract within two (2)
business days after receipt at the Annuity Service Center. Additional Invested
Purchase Payments will be credited to your Contract as of the Business Day they
are received.
7
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CONTRACT VALUE
Your Contract Value is the total of all amounts credited to your Contract as of
any Business Day as a result of your initial Invested Purchase Payment and the
increases and decreases described below.
On the Contract Date, the Contract Value is equal to the initial Invested
Purchase Payment. After that, the Contract Value as of any Business Day is
determined by starting with the Contract Value at the end of the previous day
and adjusting it for items that increase it or decrease it.
Items that increase the Contract Value are: Invested Purchase Payments; and
positive investment performance in a Subaccount.
Items that decrease the Contract Value are: withdrawals; negative investment
performance in a Subaccount; Insurance Charge; Contract Maintenance Charge, if
applicable; Transfer Charge; and any Premium Tax Charge or other tax charge.
Investment results are credited daily and the Insurance Charge is deducted
daily. The Contract Maintenance Charge is deducted annually as of the Contract
Anniversary and upon a total withdrawal. Other charges are assessed only if the
appropriate event occurs.
8
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VARIABLE SEPARATE ACCOUNT
THE VARIABLE SEPARATE ACCOUNT: The Variable Separate Account is designated on
the Contract Data pages. It consists of assets we have set aside and have kept
separate from the rest of our assets and those of our other separate accounts.
The assets of the Variable Separate Account, equal to reserves and other
liabilities of your Contract and those of other owners, will not be charged with
liabilities arising out of any other business we may conduct.
The Variable Separate Account assets are divided into Subaccounts. The assets of
the Subaccount are allocated to the Variable Investment Option(s) shown on the
Contract Data pages. We may restructure, eliminate or combine Subaccounts or add
to or eliminate Variable Investment Option(s) from those shown. You may be
permitted to transfer your Contract Value or allocate Invested Purchase Payments
to the additional Subaccount(s). However, the right to make such transfers or
allocations will be limited by any terms and conditions we may impose.
Should the shares of any Variable Investment Option(s) become unavailable for
investment by the Variable Separate Account, we deem further investment in the
shares inappropriate, or if required for tax reasons, we may limit further
purchase of such shares or substitute shares of another Variable Investment
Option for shares already purchased.
VALUATION OF ASSETS: The value of the shares held by the Subaccounts in the
Variable Investment Options will be based on the net asset value of the
Investment Option on each Business Day.
INSURANCE CHARGE: Each Business Day, we deduct an Insurance Charge from the
Subaccounts of the Variable Separate Account which is equivalent, on an annual
basis, to the amount shown on the Contract Data pages.
CONTRACT MAINTENANCE CHARGE
We deduct an annual Contract Maintenance Charge shown on the Contract Data
pages. We determine your Contract Value as of your Contract Anniversary and make
any deductions required on a pro-rata basis from all Allocation Options to which
your Contract Value is allocated. If a total withdrawal is made on other than a
Contract Anniversary, we will determine your Contract Value and make a deduction
for the Contract Maintenance Charge the same as we would if it were a Contract
Anniversary.
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TRANSFERS
TRANSFERS DURING THE ACCUMULATION PERIOD: A transfer is subject to the
following:
1. the maximum number of transfers which may be made, the maximum number
of transfers which are not subject to a Transfer Charge and the
minimum amount which may be transferred are shown on the Contract
Data pages;
2. a Transfer Charge is deducted if a transfer exceeds the maximum
number of free transfers. The Transfer Charge is shown on the
Contract Data pages. The Transfer Charge is deducted from the amount
which is transferred;
3. a transfer will be effected as of the end of the Business Day when we
receive a request in Good Order;
4. we are not responsible for the consequences resulting from a transfer
made in accordance with your instructions;
5. your right to make transfers is subject to modification if we
determine, in our sole opinion, that the exercise of the right by one
or more Owners is, or would be, to the disadvantage of other Owners
or if required to do so by applicable laws or regulations.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by us to be
to the disadvantage of other Owners or to ensure compliance with such
laws or regulations. A modification could be applied to transfers to
or from one or more of the Subaccounts and could include, but not be
limited to:
a. the requirement of a minimum time period between each
transfer;
b. not accepting a transfer request of an agent acting under a
power of attorney on behalf of more than one Owner;
c. limiting the dollar amount that may be transferred among the
Subaccounts by an Owner at any one time; or
d. restricting the number of transfers per year.
No transfers are permitted after the Annuity Date.
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WITHDRAWALS
WITHDRAWALS: During the Accumulation Period, you may, upon a request in Good
Order, make a total or partial withdrawal of the Contract Surrender Value. You
may specify the Allocation Option(s) from which a withdrawal will be taken. If
you do not so specify, we will take the withdrawal on a pro-rata basis from all
Allocation Option(s) to which your Contract Value is allocated.
We will pay the amount of any withdrawal within seven (7) days of receipt of a
request in Good Order unless the "Suspension or Deferral of Payments Provision"
is in effect.
Each partial withdrawal must be for an amount which is not less than the amount
shown on the Contract Data pages. The minimum Contract Value which must remain
in the Contract after a partial withdrawal in order to keep the Contract inforce
is shown on the Contract Data pages. If the amount of the withdrawal requested
would reduce the Contract Value below this minimum, we will give you the maximum
amount available that would not reduce the Contract Value below such minimum.
Special rules may apply for IRA's.
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DEATH BENEFIT
DEATH OF LAST SURVIVOR OF OWNER OR JOINT OWNER DURING THE ACCUMULATION PERIOD:
If the sole or last survivor of the Owner or Joint Owner dies during the
Accumulation Period, the death benefit will be as described below.
On or prior to the Contract Anniversary coinciding with or next
following the 80th birthday of the sole or older of the Owner or Joint
Owner, upon receipt of due proof of death and any other documentation we
request in Good Order, the Beneficiary is entitled to receive a death
benefit equal to the greater of:
1. the Contract Value as of the date we receive due proof of death and
any other documentation we need; or
2. the Guaranteed Minimum Death Benefit ("GMDB") as of the date we
receive due proof of death and any other documentation we need. The
GMDB is calculated daily and is equal to the greater of (a) or (b),
where:
(a) is the "Roll-Up". The Roll-Up is equal to the total Invested
Purchase Payments made increased daily at an effective annual
interest rate of 5% starting on the date that each Invested
Purchase Payment is made, until the cap is reached ("Roll-Up
Cap"), and is proportionally reduced by the effect of
withdrawals. The Roll-Up Cap is equal to the sum of two times
each Invested Purchase Payment and is proportionally reduced
by the effect of withdrawals. Once the Roll-Up Cap is reached,
the Roll-Up will be increased by subsequent Invested Purchase
Payments and proportionally reduced by the effect of
withdrawals; and
(b) is the "Step-Up". Before the first Contract Anniversary, the
Step-Up is the initial Invested Purchase Payment increased by
subsequent Invested Purchase Payments and proportionally
reduced by the effect of withdrawals. The Step-Up for each
subsequent annual Contract Anniversary will be reset to the
greater of the previous Step- Up and the Contract Value as of
such Contract Anniversary. Between such Contract
Anniversaries, the Step-Up will be increased by Invested
Purchase Payments and proportionally reduced by the effect of
withdrawals.
After the Contract Anniversary coinciding with or next following the
80th birthday of the sole or older of the Owner or Joint Owner, upon
receipt of due proof of death and any other documentation we request in
Good Order, the Beneficiary is entitled to receive a death benefit equal
to the greater of:
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1. the Contract Value as of the date we receive due proof of death and
any other documentation we need; or
2. the GMDB as of the Contract Anniversary coinciding with or next
following the sole or older of the Owner or Joint Owner's 80th
birthday increased by subsequent Invested Purchase Payments since
such Contract Anniversary and proportionally reduced by the effect of
withdrawals since such Contract Anniversary.
Where the words "proportionally reduced by the effect of withdrawals" are used
in this Contract, the withdrawal reduces those values in the same proportion as
it reduces the Contract Value. We calculate the proportion by dividing the
Contract Value after the withdrawal by the Contract Value immediately prior to
the withdrawal. The resulting percentage is multiplied by the applicable values
(before the withdrawal) in determining the death benefit.
If the ownership of the Contract changes as a result of an assignment, the value
of the death benefit will be reset to the Contract Value as of the date of the
assignment. Such value will be treated as a Purchase Payment made on that date
for purposes of computing the death benefit.
The Beneficiary may, within 60 days of providing proof of death, elect to take
the death benefit under one of the death benefit payout options listed below,
provided that any payout option shall not include a period certain that exceeds
the life expectancy of the Beneficiary. The Beneficiary will be the sole
measuring life in determining the amount of any such payout option. If no payout
option is selected within the 60 days, the death benefit will be payable as a
lump sum.
If the primary Beneficiary of the Owner is the spouse of the Owner at the time
of the Owner's death, the Contract will continue and the spouse will become the
Owner. If the primary Beneficiary of the Joint Owner is the spouse of the Joint
Owner at the time of the Joint Owner's death, the Contract will continue. In
either case, the spouse may, within 60 calendar days of providing proof of
death, elect to take the death benefit under any of the payout options available
under this Contract. If the spouse is the surviving Owner or Joint Owner under
the Contract, the death benefit will equal the Contract Value.
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If the Owner and Joint Owner are not spouses at the time of the Owner or Joint
Owner's death, the Contract will not continue, the death benefit will equal the
Contract Value, and the Beneficiary will be required to choose one of the death
benefit payout options described below. In that event, the payout described in
Choice 2 and the beginning of the distribution described in Choice 3 will be
based on the date of death of the first to die of the Owner or Joint Owner.
The death benefit payout options are:
CHOICE 1 - lump sum payment of the death benefit; or
CHOICE 2 - the payment of the entire death benefit within 5 years of the
date of death of the last to survive of the Owner or Joint Owner; or
CHOICE 3 - payment of the death benefit under an Annuity or Settlement
Option over the lifetime of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary with
distribution beginning within one year of the date of death of the last
to survive of the Owner or Joint Owner.
Any portion of the death benefit not applied under Choice 3 within one year of
the date of the last to survive of the Owner's or Joint Owner's death, must be
distributed within five years of the date of death.
Once a death benefit becomes payable, the Payee's interest in any Annuity
Benefit under the Contract will cease.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election, unless the Suspension or
Deferral of Payments Provision is in effect.
DEATH OF ANNUITANT DURING THE ACCUMULATION PERIOD: If the Annuitant dies before
the Annuity Date, the Co-Annuitant, if applicable, becomes the Annuitant. If
there is no surviving Co-Annuitant, and the Annuitant was not the Owner, the
Owner becomes the Annuitant. You have the right to name a new Annuitant within
60 days. If the Owner is a non-natural person, the death of the Annuitant will
be treated as the death of the Owner, a new Annuitant may not be designated, and
the Annuitant will be deemed to be the Owner for purposes of determining the
death benefit.
DEATH OF ANNUITANT DURING THE ANNUITY PERIOD: If the Annuitant dies on or after
the Annuity Date, the Settlement Option then in effect will govern whether or
not we will continue to make any payments. The death of a non-Annuitant Owner or
Joint Owner has no effect on the payout during the Annuity Period.
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PAYMENT OF DEATH BENEFIT: We will require due proof of death and any other
documentation we request in Good Order before any death benefit is paid. All
death benefits will be paid in accordance with applicable law or regulations
governing death benefit payments.
SPECIAL TAX CONSIDERATIONS: There are special tax rules that apply to IRA and
other qualified contracts during both the Accumulation Period and Annuity Period
governing distributions upon the death of the Owner. These rules are contained
in provisions in the attached endorsements and supersede any other distribution
rules contained in the Contract.
The preceding provisions regarding the death of the Owner are intended to
satisfy the distribution at death requirements of section 72(s) of the Internal
Revenue Code of 1986, as amended. We reserve the right to amend this Contract by
subsequent endorsement as necessary to comply with applicable tax requirements,
if any, which are subject to change from time to time. Such additional
endorsements, if necessary to comply with amended tax requirements, will be
mailed to you and become effective within 30 days of mailing, unless you notify
us in writing, within that time frame, that you reject the endorsement.
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ANNUITY AND SETTLEMENT OPTIONS
GENERAL: On the Annuity Date, the Adjusted Contract Value will be applied under
the Annuity or Settlement Option you have selected. If the payment under any
option selected would be less than $20 per month, we reserve the right to pay
out the Adjusted Contract Value in a lump sum.
SELECTION OF AN ANNUITY OR SETTLEMENT OPTION: You may select an Annuity or
Settlement Option by notifying us of the selected option in Good Order. If no
Annuity or Settlement Option is selected, or if the chosen Option is not
received in Good Order, Option 2, Life Income Annuity Option, will automatically
be applied. You may, at any time prior to the Annuity Date, by a request in Good
Order 30 days in advance, select and/or change the Annuity or Settlement Option.
ANNUITY AND SETTLEMENT OPTIONS: This Contract provides for payments under one of
the Annuity or Settlement Options described below. Any other Annuity or
Settlement Option acceptable to us may be selected.
OPTION 1 - FIXED PERIOD ANNUITY OPTION. We will make equal payments for a period
you choose up to 25 years. At your choice, we will make such payments annually,
semi-annually, quarterly or monthly. The Option 1 Table shows the minimum
amounts we will pay.
OPTION 2 - LIFE INCOME ANNUITY OPTION. We will make payments for as long as the
Annuitant lives, with payments certain for 120 months. At your choice, we will
make such payments annually, semi-annually, quarterly or monthly. The Option 2
Table shows the minimum amounts we will pay.
OPTION 3- INTEREST PAYMENT SETTLEMENT OPTION. We will credit interest on the
Adjusted Contract Value at the rate of at least 3% until you request payment of
all or part of the Adjusted Contract Value. At your choice, we will pay interest
on the Adjusted Contract Value not yet withdrawn annually, semi-annually,
quarterly or monthly. You may request full or partial payment of the Adjusted
Contract Value provided, however, that if a partial payment is requested, the
amount of any Adjusted Contract Value remaining after such requested amount is
paid must be at least $1,000. This option is not available for qualified
contracts.
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OTHER ANNUITY OR SETTLEMENT OPTIONS: We may offer or consent to other settlement
options, including life income annuity options with payments certain for a
period of other than 120 months. Contact the representative who sold you the
Contract or call the toll-free number listed on your quarterly statement for
information.
ANNUITY: Unless you designate another Payee, you will be the Payee of the
Annuity Payments. The Adjusted Contract Value will be applied to the applicable
Annuity Table contained in this Contract based upon the Annuity Option you have
selected. The amount of the first payment for each $1,000 of Adjusted Contract
Value is shown in the Annuity Tables. If when Annuity Payments begin we are
using tables of annuity rates for these Contracts which result in larger Annuity
Payments, we will use those tables instead. Annuity Payments will depend on the
age and sex of the Annuitant, where permitted.
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BENEFICIARY
BENEFICIARY: The Beneficiary designation in effect on the Contract Date will
remain in effect until changed. The Beneficiary is entitled to receive the
benefits to be paid at the death of the last to die of the Owner or Joint Owner
(or the first to die of the Owner or Joint Owner if the Owner and Joint Owner
are not spouses at the time of the Owner's or Joint Owner's death) during the
Accumulation Period. The Owner must be the primary Beneficiary of the Joint
Owner, and the Joint Owner must be the primary Beneficiary of the Owner. Other
than primary Beneficiaries, Beneficiaries must be the same for both the Owner
and Joint Owner.
When a Beneficiary is designated, any relationship shown is to the Owner unless
otherwise specified.
To show priority among Beneficiaries, we will label the classes, so that the
class with first priority is called the primary class, the class with next
priority is called the secondary class, and so on. The following statements
apply to Beneficiaries unless the Contract Data pages, Contract endorsement or
any change request that we have processed specifies otherwise:
One who survives the last to die of the Owner and Joint Owner will have
the right to be paid only if no one in a prior class survives the last
to die of the Owner and Joint Owner.
One who has the right to be paid will be the only one paid if no one
else in the same class survives the last to die of the Owner and Joint
Owner.
Two or more in the same class who have the right to be paid will be paid
in equal shares.
If no one survives the sole Owner, we will pay in one sum to the Owner's
estate.
When there is insufficient evidence to determine the order of death
then, unless state law prohibits, we will deem the Owner to be the last
survivor and make payment to the Owner's Beneficiary.
Before we make a payment, we have the right to decide what proof we need
of the identity, age or any other facts about any persons designated as
Beneficiaries. If Beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s)
again.
CHANGE OF BENEFICIARY: To initiate a change of Beneficiary, call the toll-free
number listed on your statement or contact the representative who sold you the
Contract. We may also ask you to send us the Contract. The change will take
effect only when we process the request. Then, any previous Beneficiary's
interest will end as of the date we receive the request in Good Order, even if
the Owner or Joint Owner is not living when we process the request. We will not
be liable for any payment made or action taken before we record the change.
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SUSPENSION OR DEFERRAL OF PAYMENTS OR TRANSFERS
FROM THE SEPARATE ACCOUNT
We reserve the right to suspend or postpone payments from the Separate Account
for a withdrawal or transfer for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
Investment Options held in the Separate Account is not reasonably
practicable or it is not reasonably practicable to determine the
value of such shares; or
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Owners;
provided that applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2) and (3)
exist.
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GENERAL PROVISIONS
THE CONTRACT: The entire Contract consists of this Contract, and any attached
endorsements or riders. This Contract may be changed or altered only by our
President or Secretary. Any change, modification or waiver must be made in
writing. This Contract may not be modified by us without your consent except as
may be required by applicable law or as set forth in this Contract.
ASSIGNMENT OF A CONTRACT: A request in Good Order specifying the terms of an
assignment of a Contract must be provided to the Annuity Service Center. We are
under no obligation to verify the assignment's validity or sufficiency. We will
not be liable for any payment made or action taken before we record the
assignment. If any Owner is living on the Annuity Date and an assignment is in
effect on that date, we have the right to pay the Contract Surrender Value in
one lump sum to the assignee where notice in Good Order is received. Partial
assignments, collateral or otherwise, are not allowed without our approval. We
reserve the right to restrict or refuse any assignment.
An assignment which results in a change of ownership will affect the value of
the death benefit. Please see the section of the Contract entitled, "Death of
Last Survivor of Owner or Joint Owner During the Accumulation Period", for more
information.
We will not be responsible for the validity or tax consequences of any
assignment. Any assignment made after the death benefit has become payable will
be valid only with our consent.
If the Contract is assigned, your rights may only be exercised with the consent
of the assignee of record.
NON-PARTICIPATING IN SURPLUS: This Contract does not share in any distribution
of our profits or surplus.
INCONTESTABILITY: We will not contest this Contract. We consider all statements
made in the application for this Contract to be representations, not warranties.
MISSTATEMENT OF AGE OR SEX: We may require proof of age of the Annuitant before
making any life contingent Annuity Payment provided for by this Contract. If the
age or sex of the Annuitant has been misstated, the amount payable will be the
amount that the Contract Value would have provided at the true age or sex.
Once Annuity Payments have begun, any underpayments, with interest at 5%, will
be made up in one sum with the next Annuity Payment, and overpayments, with
interest at 5%, will be deducted from the future Annuity Payments until the
total is repaid.
CONTRACT SETTLEMENT: This Contract must be returned to us upon any settlement.
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REPORTS: We will send you a report four times each calendar year until the
Annuity Date showing your Contract Value and other relevant information about
your Contract. You may ask for a report like this at any time. But, except for
the four reports we send you during the year, we have the right to charge a fee
for each report. We will also furnish an annual report of the Separate Account.
These reports will be sent to your last known address.
TAXES: Any taxes, including any Premium Taxes and any other type of tax (or
component thereof) measured by or based upon any portion of the Purchase Payment
we receive, paid to any governmental entity will be charged against the Contract
Value. We will, in our sole discretion, determine when taxes have resulted from:
the investment experience of the Separate Account; receipt by us of the Purchase
Payment(s); or commencement of Annuity Payments. We may, at our discretion, pay
taxes when due and deduct that amount from the Contract Value at a later date.
Payment at an earlier date does not waive any right we may have to deduct
amounts at a later date. We reserve the right to establish a provision for
federal income taxes if we determine, in our sole discretion, that we will incur
a tax as a result of the operation of the Separate Account. We will deduct for
any income taxes incurred by it as a result of the operation of the Separate
Account whether or not there was a provision for taxes and whether or not it was
sufficient. We will deduct any withholding taxes required by applicable law.
EVIDENCE OF SURVIVAL: Before we make a payment, we have the right to require
proof of continued life and any other documentation we need to make the payment.
We can require this proof for any person whose life or death determines whether
or to whom we must make the payment.
PROTECTION OF PROCEEDS: No Beneficiary may commute, encumber, alienate or assign
any payments under this Contract before they are due. To the extent permitted by
law, no payments will be subject to the debts, contracts or engagements of any
Beneficiary or to any judicial process to levy upon or attach the same for
payment thereof.
VALUES AND BENEFITS
Any values and death benefits that may be available under this Contract are not
less than the minimum benefits required by the law of any state in which this
Contract is delivered.
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ANNUITY OPTION PAYMENT TABLES
AMOUNTS PAYABLE: For Options 1 and 2, we will use the tables below to compute
the minimum amount of the Annuity Option Payment.
If the Annuity Date is not a Contract Anniversary, we will adjust the amounts
accordingly.
When we computed the amounts we show in the Option 2 Table, we adjusted the 2000
Individual Annuity Mortality Table to an age last birthday basis, less three
years, and we used an interest rate of X% per year. If the age is over 80, the
rate for age 80 will be used.
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INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT. ANNUITY PAYMENTS AND VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
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