AS FILED WITH THE SEC ON APRIL 11, 2003
REGISTRATION NO. 33-61143
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 8 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ARIZONA
(State or other jurisdiction of incorporation or organization)
22-194455
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
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(Name, address, and telephone number of agent for service)
Copies to:
JOHN M. EWING
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
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Approximate date of commencement of proposed sale to the public--Immediately
upon effectiveness
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box ........................[x]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH AMOUNT PROPOSED PROPOSED AMOUNT OF
CLASS OF SECURITIES TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED* PRICE PER UNIT* OFFERING PRICE FEE**
--------------------- ------------- ------------------ ------------------- ---------------
Market-value adjustment
annuity contracts
(or modified
guaranteed
annuity contracts) $500,000,000 $500,000,000 -0-
- ----------
* Securities are not issued in predetermined units
** Registration fee for those securities was paid at the time they were
originally registered on Form S-1 as filed by Pruco Life Insurance Company
on July 19, 1995. The current amount of registered, but unsold, securities
is reported quarterly by the Registrant on Form 10-Q and annually on Form
10-K.
STRATEGIC PARTNERS(SM)
SELECT
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VARIABLE ANNUITY
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PROSPECTUS: MAY 1, 2003
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.
THE FUNDS
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Strategic Partners Select offers a wide variety of investment choices, including
27 variable investment options that invest in mutual funds managed by these
leading asset managers:
PRUDENTIAL INVESTMENTS LLC
JENNISON ASSOCIATES LLC
A I M CAPITAL MANAGEMENT, INC.
ALLIANCE CAPITAL MANAGEMENT, L.P.
CALAMOS ASSET MANAGEMENT, INC.
DAVIS ADVISORS
DEUTSCHE ASSET MANAGEMENT INVESTMENT SERVICES LIMITED
FIDELITY MANAGEMENT & RESEARCH COMPANY
GE ASSET MANAGEMENT, INCORPORATED
INVESCO FUNDS GROUP, INC.
JANUS CAPITAL MANAGEMENT LLC
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT
PLEASE READ THIS PROSPECTUS
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Please read this prospectus before purchasing a Strategic Partners Select
variable annuity contract and keep it for future reference. The Risk Factors
section relating to the market value adjustment option appears on page 10 of
this prospectus. 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 STRATEGIC PARTNERS SELECT
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To learn more about the Strategic Partners Select variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2003. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life also files other reports
with the SEC. All of these filings can be reviewed and copied at the SEC's
offices, and can also be obtained from the SEC's Public Reference Section, 450
5th Street N.W., Washington, D.C. 20549-0102. You may obtain information on the
operation of the Public Reference Room by calling the SEC at (202) 942-8090. The
SEC also maintains a Web site (http://www.sec.gov) that contains the Strategic
Partners Select 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 39 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
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(888) PRU-2888 or write to us at:
Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
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 STRATEGIC
PARTNERS SELECT IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ORD01009
CONTENTS
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<Table>
PART I: STRATEGIC PARTNERS SELECT PROSPECTUS
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SUMMARY
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Glossary........................................... 6
Summary............................................ 8
Risk Factors....................................... 10
Summary of Contract Expenses....................... 11
Expense Examples................................... 13
PART II: STRATEGIC PARTNERS SELECT PROSPECTUS
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SECTIONS 1-9
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Section 1: What is the Strategic Partners Select
Variable Annuity?..................................... 16
Short Term Cancellation Right or "Free Look"....... 16
Section 2: What Investment Options Can I Choose?........ 18
Variable Investment Options........................ 18
Interest-Rate Options.............................. 19
Transfers Among Options............................ 20
Market Timing...................................... 20
Dollar Cost-Averaging.............................. 20
Asset Allocation Program........................... 21
Auto-Rebalancing................................... 21
Voting Rights...................................... 21
Substitution....................................... 21
Section 3: What Kind of Payments Will I Receive During
the Income Phase? (Annuitization).......... .......... 22
Payment Provisions................................. 22
Option 1: Annuity Payments for a Fixed
Period...................................... 22
Option 2: Life Annuity with 120 Payments (10
Years) Certain.............................. 22
Option 3: Interest Payment Option.............. 22
Option 4: Other Annuity Options................ 22
Tax Considerations................................. 23
Section 4: What is the Death Benefit?................... 24
Beneficiary........................................ 24
Calculation of the Death Benefit................... 24
Death of Owner or Joint Owner...................... 24
Section 5: How Can I Purchase a Strategic Partners
Select Contract?...................................... 26
Purchase Payments.................................. 26
Allocation of Purchase Payments.................... 26
Calculating Contract Value......................... 26
Section 6: What are the Expenses Associated with the
Strategic Partners Select Contract?................... 27
Insurance Charges.................................. 27
Annual Contract Fee................................ 27
Withdrawal Charge.................................. 27
Waiver of Charge for Critical Care................. 28
Taxes Attributable to Premium...................... 28
Transfer Fee....................................... 28
Company Taxes...................................... 28
Underlying Mutual Fund Fees........................ 29
</Table>
2
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<Table>
Section 7: How Can I Access My Money?................... 30
Withdrawals During the Accumulation Phase.......... 30
Automated Withdrawals.............................. 30
Suspension of Payments or Transfers................ 30
Section 8: What are the Tax Considerations Associated
with the Strategic Partners Select Contract?.......... 31
Contracts Owned by Individuals (Not Associated with
Tax Favored Retirement Plans).................... 31
Contracts Held by Tax Favored Plans................ 33
Section 9: Other Information............................ 38
Pruco Life Insurance Company....................... 38
The Separate Account............................... 38
Sale and Distribution of the Contract.............. 38
Litigation......................................... 39
Assignment......................................... 39
Financial Statements............................... 39
Statement of Additional Information................ 39
Householding....................................... 39
Market Value Adjustment Formula.................... 40
IRA Disclosure Statement........................... 44
Appendix................................................ 48
Accumulation Unit Values........................... 49
PART III: PROSPECTUSES
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VARIABLE INVESTMENT OPTIONS
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THE PRUDENTIAL SERIES FUND
JANUS ASPEN SERIES
</Table>
3
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4
PART I SUMMARY
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STRATEGIC PARTNERS SELECT PROSPECTUS
5
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
GLOSSARY
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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.
ACCUMULATION PHASE
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.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted by
any market value adjustment and minus any charge we impose for premium taxes.
ANNUITANT
The person whose life determines how long the contract lasts and 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 when the sole
or last surviving annuitant dies.
CASH VALUE
This is the total value of your contract adjusted by any market value
adjustment, minus any withdrawal charge(s) or administrative charge.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant upon the
death of the annuitant. No co-annuitant may be designated if the owner is a non-
natural person.
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.
CONTRACT OWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
The total value of the amounts in a contract allocated to the variable
investment options and the interest-rate options as of a particular date.
DEATH BENEFIT
If the sole or last surviving annuitant dies, the designated person(s) or the
beneficiary will receive, at a minimum, the total invested purchase payments
proportionately reduced for withdrawals. See "What is the Death Benefit?" on
page 24.
DOLLAR COST AVERAGING FIXED RATE OPTION (DCA FIXED RATE OPTION)
An investment option that offers a fixed rate of interest for a selected period
during which periodic transfers are automatically made to selected variable
investment options. We guarantee your money will earn at least 3% while it is
allocated to this option. Payments you allocate to the DCA Fixed Rate Option
become part of Pruco Life's general assets until they are transferred.
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.
INTEREST CELL
The segment of the interest-rate option that is established whenever you
allocate or transfer money into an interest-rate option.
INTEREST-RATE OPTION
An investment option that offers a fixed-rate of interest for a one-year period
(fixed-rate option) or a seven-year period (market value adjustment option).
6
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PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
INVESTED PURCHASE PAYMENTS
Your total purchase payments (which we define below) less any deduction we make
for any premium or other tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract.
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA, 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The phone number is (888)
PRU-2888. Prudential's Web site is www.prudential.com.
PURCHASE PAYMENTS
The amount of money you pay us to purchase the contract. Generally, with some
restrictions, 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.
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners Select variable annuity. We have filed the Statement of Additional
Information with the Securities and Exchange Commission and it is legally a part
of this prospectus. To learn how to obtain a copy of the Statement of Additional
Information, see the front cover of this prospectus.
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.
You should be aware that tax favored plans (such as IRAs) already provide tax
deferral regardless of whether they invest in annuity contracts. See "What are
the Tax Considerations Associated with the Strategic Partners Select Contract,"
on page 31.
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.
7
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
Summary of Sections 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS SELECT 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 27 variable investment options. There are also two
interest-rate options which are available in most states, the fixed-rate option
and the market value adjustment option. The contract is intended for retirement
savings or other long-term investment purposes and provides a death benefit and
guaranteed income options.
The variable investment options are designed to offer the opportunity over
the long term for a better return than the fixed interest-rate options. However,
this is NOT guaranteed. It is possible, due to market changes, that your
investments may decrease in value.
The interest-rate options offer an interest rate that is guaranteed. While
your money is in the fixed-rate option or if your money remains in the market
value adjustment option for a full seven-year period, your principal amount is
guaranteed and the interest amount that your money will earn is guaranteed by us
to always be at least 3%. Payments allocated to the fixed-rate option become
part of Pruco Life's general assets. Payments allocated to the market value
adjustment option are held as a separate pool of assets, but the income, gains
or losses resulting from these assets are not credited or charged against the
contracts. As a result, the strength of our guarantees under these interest-rate
options are based on the overall financial strength of Pruco Life.
You can invest your money in any or all of the variable investment options
and the interest-rate options. You are allowed 12 transfers each contract year
among the variable investment options, without a charge. There are certain
restrictions on transfers involving the interest-rate options.
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 the payments you will
receive during the income phase. Other factors will affect the amount of your
payments such as age, gender and the payout option you selected.
FREE LOOK. If you change your mind about owning Strategic Partners Select,
you may cancel your contract within 10 days after receiving it (or whatever time
period is required by applicable law).
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can generally invest your money in any of the variable investment options
that invest in the mutual
8
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PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
funds described in the fund prospectuses provided with this prospectus:
THE PRUDENTIAL SERIES FUND, INC.
Jennison Portfolio (domestic equity)
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio (domestic equity)
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio)
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small/Mid Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
JANUS ASPEN SERIES
Growth Portfolio -- Service Shares
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 you
choose. Performance information for the variable investment options is provided
in the Statement of Additional Information (SAI). Past performance is not a
guarantee of future results.
You can also put your money into one or both of the interest-rate options.
SECTION 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.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
SECTION 4
WHAT IS THE DEATH BENEFIT?
If the sole or last surviving annuitant dies during the accumulation phase, the
designated person(s) or the beneficiary will receive at a minimum, the total
invested purchase payments proportionately reduced for withdrawals.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS SELECT CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000. You can add $500 or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT CONTRACT?
The contract has insurance features and investment features, and there are costs
related to each.
Each year we deduct a $30 contract maintenance charge if your contract value
is less than $50,000. For insurance and administrative costs, we also deduct an
annual charge of 1.52% of the average daily value of all assets allocated to the
variable investment options. This charge is not assessed against amounts
allocated to the interest-rate investment options.
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
impose a required premium tax charge which can range up to 3.5%.
There are also expenses associated with the mutual funds. For 2002, the fees
of these funds ranged on an annual basis from 0.37% to 3.00% of fund assets,
9
Summary of Sections 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
which are reduced by expense reimbursements or waivers to 0.37% to 1.30%. These
reimbursements or waivers may be terminated at any time.
During the accumulation phase, if you withdraw money less than seven years
after the contract date, you may have to pay a withdrawal charge on all or part
of the withdrawal. This charge ranges from 1-7%.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may take money out at any time during the accumulation phase. If you do so,
however, you may be subject to income tax and, if you make a withdrawal prior to
age 59 1/2, an additional tax penalty as well. Each year, you may withdraw up to
10% of your total purchase payments without charge. Withdrawals greater than 10%
of your purchase payments will be subject to a withdrawal charge. This charge
decreases 1% each year. After the 7th year, there is no charge for a withdrawal.
A market value adjustment may also apply.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT
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 ordinary
income. If you are younger than age 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 a partial 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 (excluding Roth IRAs) are fully taxable and subject
to the 10% penalty if withdrawn prior to age 59 1/2.
SECTION 9
OTHER INFORMATION
This contract is issued by Pruco Life Insurance Company (Pruco Life), a
subsidiary of The Prudential Insurance Company of America and sold by registered
representatives.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option annuity that we summarize below.
ISSUER RISK. Your market value adjustment option is issued by Pruco Life, and
thus is backed by the financial strength of that company. If Pruco Life were to
experience significant financial adversity, it is possible that Pruco Life's
ability to pay interest and principal under the market value adjustment option
could be impaired.
RISKS RELATED TO CHANGING INTEREST RATES. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
holds to support the market value adjustment option. Nonetheless, the market
value adjustment formula (which is detailed in the appendix to this prospectus)
reflects the effect that prevailing interest rates have on those bonds and other
instruments. If you need to withdraw your money during a period in which
prevailing interest rates have risen above their level when you made your
purchase, you will experience a "negative" market value adjustment. When we
impose this market value adjustment, it could result in the loss of both the
interest you have earned and a portion of your purchase payments. Thus, before
you commit to a particular guarantee period, you should consider carefully
whether you have the ability to remain invested throughout the guarantee period.
In addition, we cannot, of course, assure you that the market value adjustment
option will perform better than another investment that you might have made.
RISKS RELATED TO THE WITHDRAWAL CHARGE. We impose withdrawal charges under
the variable annuities that offer the market value adjustment option as a
companion option. If you anticipate needing to withdraw your money prior to the
end of a guarantee period, you should be prepared to pay the withdrawal charge
that we will impose.
10
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
Summary of Contract Expenses
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THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS SELECT. THE FOLLOWING TABLES DESCRIBE THE FEES AND
EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT.
THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME
THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE
BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Select Contract?" on page 27. For more detailed expense information
about the underlying mutual funds, please refer to the individual fund
prospectuses which you will find at the back of this prospectus.
CONTRACTOWNER TRANSACTION EXPENSES
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WITHDRAWAL CHARGE(1)
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During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
<Table>
MAXIMUM TRANSFER FEE(2)
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each transfer after 12 $25.00
MAXIMUM ANNUAL CONTRACT FEE(3)
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$30.00
ANNUAL ACCOUNT EXPENSES
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AS A PERCENTAGE OF THE AVERAGE ACCOUNT VALUE
Mortality and Expense Risk: 1.37%
Administrative Fee: 0.15%
Total: 1.52%
</Table>
1: AS OF THE BEGINNING OF THE CONTRACT YEAR, YOU MAY WITHDRAW UP TO 10% OF THE
TOTAL PURCHASE PAYMENTS PLUS ANY CHARGE-FREE AMOUNT CARRIED OVER FROM THE
PREVIOUS CONTRACT YEAR WITHOUT CHARGE. THERE IS NO WITHDRAWAL CHARGE ON ANY
WITHDRAWALS MADE UNDER THE CRITICAL CARE OPTION (SEE PAGE 28) OR ON ANY AMOUNT
USED TO PROVIDE INCOME UNDER THE LIFE ANNUITY WITH 120 PAYMENTS (10 YEARS)
CERTAIN OPTION. (SEE PAGE 22). SURRENDER CHARGES ARE WAIVED WHEN A DEATH BENEFIT
IS PAID DUE TO THE DEATH OF AN ANNUITANT.
2: YOU WILL NOT BE CHARGED FOR TRANSFERS MADE IN CONNECTION WITH DOLLAR COST
AVERAGING AND AUTO-REBALANCING.
3: THIS FEE IS NOT CHARGED IF THE VALUE OF YOUR CONTRACT IS $50,000 OR MORE, OR
IF THE WITHDRAWALS ARE MADE UNDER THE CRITICAL CARE ACCESS OPTION. THIS IS A
SINGLE FEE THAT WE ASSESS (A) ANNUALLY OR (B) UPON A FULL WITHDRAWAL MODE ON A
DATE OTHER THAN A CONTRACT ANNIVERSARY.
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11
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
The next item shows the minimum and maximum total operating expenses charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's fees
and expenses is contained in the prospectus for each underlying mutual fund. The
minimum and maximum total operating expenses depicted below are based on
historical fund expenses for the year ended December 31, 2002. Fund expenses are
not fixed or guaranteed by the Strategic Partners Select contract, and may vary
from year to year.
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES (expenses that are deducted from
underlying mutual fund assets, including management fees, distribution and/or
service (12b-1) fees, and other expenses)
<Table>
<Caption>
MINIMUM MAXIMUM
TOTAL ANNUAL UNDERLYING MUTUAL FUND OPERATING EXPENSES* 0.37% 3.00%
</Table>
* Actual expenses for the mutual funds are lower due to any expense
reimbursements or waivers. Expense reimbursements or waivers are voluntary and
may be terminated at any time. The minimum and maximum expenses, with expense
reimbursements, are 0.37% and 1.30%, respectively.
12
PART I
STRATEGIC PARTNERS SELECT PROSPECTUS SUMMARY
Expense Examples
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THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS, WHICH
DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE AS
INDICATED IN THE TABLES THAT FOLLOW.
Example 1: If You Withdraw Your Assets
Example 1 assumes that:
- - you invest $10,000 in Strategic Partners Select;
- - you allocate all of your assets to the variable investment options having the
maximum total operating expenses;
- - you withdraw all your assets at the end of the time period indicated;
- - your investment has a 5% return each year; and
- - the mutual fund's total operating expenses remain the same each year.
Your actual costs may be higher or lower.
Example 2: If You Do Not Withdraw Your Assets
Example 2 assumes that:
- - you invest $10,000 in Strategic Partners Select;
- - you allocate all of your assets to the variable investment options having the
maximum total operating expenses;
- - you DO NOT WITHDRAW any of your assets at the end of the time period
indicated;
- - your investment has a 5% return each year; and
- - the mutual fund's total operating expenses remain the same each year.
Your actual costs may be higher or lower.
On the following page are examples of what your costs would be using these
assumptions.
NOTES FOR ANNUAL MUTUAL FUND
EXPENSES:
- -----------------------------------
THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The values shown in the 10 year
column are the same for Example 1
and Example 2. This is because
after 10 years, we would no longer
deduct withdrawal charges when you
make a withdrawal or when you begin
the income phase of your contract.
If your contract value is less than
$50,000, on your contract
anniversary (and upon a surrender),
we deduct a $30 fee. The examples
use an average annual contract fee,
which we calculated based on our
estimate of the total contract fees
we expect to collect in 2003. Based
on these estimates, the annual
contract fee is included as an
annual charge of 0.029% of contract
value. Your actual fees will vary
based on the amount of your
contract and your specific
allocation(s).
Premium taxes are not reflected in
the examples. A charge for premium
taxes may apply depending on the
state where you live.
<Table>
EXAMPLE 1: EXAMPLE 2:
IF YOU WITHDRAW YOUR ASSETS IF YOU DO NOT WITHDRAW YOUR
ASSETS
1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS
$918 $1,333 $1,773 $3,175 $288 $883 $1,503 $3,175
</Table>
- --------------------------------------------------------------------------------
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14
PART II SECTIONS 1-9
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STRATEGIC PARTNERS SELECT PROSPECTUS
15
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS SELECT
VARIABLE ANNUITY?
THE STRATEGIC PARTNERS SELECT 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 first
contract anniversary. (Maryland residents must wait until the end of the seventh
contract year.) 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.
Strategic Partners Select is a variable annuity contract. This means that
during the accumulation phase, you can allocate your assets among 27 variable
investment options as well as 2 guaranteed interest-rate options. (If you live
in Maryland, Oregon or Washington, the market value adjustment option is not
available to you.) If you select a variable investment option, the amount of
money you are able to accumulate in your contract during the accumulation phase
depends upon the investment performance of the underlying 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 mentioned above, Strategic Partners Select also offers two guaranteed
interest-rate options: a fixed-rate option and a market value adjustment option.
The fixed-rate option offers an interest rate that is guaranteed by us for one
year and will always be at least 3% per year. The market value adjustment option
guarantees a stated interest rate, generally higher than the fixed-rate option.
However, in order to get the full benefit of the stated interest rate, assets in
this option must be held for a seven-year period. (The market value adjustment
option is not available to residents of Maryland, Oregon or Washington.)
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(s) is the person upon whose death during the accumulation
phase, the death benefit is payable. 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 the amount of these payments and often
how long the payments will continue. On and after the annuity date, the
annuitant may not be changed.
The beneficiary is the person(s) or entity designated to receive any death
benefit if the annuitant(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. If the annuitant and
owner are not the same and the owner dies during the accumulation phase, the
subsequent owner (typically the owner's estate unless a joint or contingent
owner is named) receives the contract benefit, subject to tax requirements
concerning distributions. See "What are the Tax Considerations Associated with
the Strategic Partners Select Contract?" section beginning on page 31.
SHORT TERM CANCELLATION RIGHT
OR "FREE LOOK"
If you change your mind about owning Strategic Partners Select, you may cancel
your contract within 10 days after receiving it (or whatever period is required
16
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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 state law:
- - Your full purchase payment, less any applicable federal and state income tax
withholding; or
- - 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, less any applicable
federal and state income tax withholding.
To the extent dictated by state law, we will include in your refund the
amount of any fees and charges that we deducted.
17
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
- --------------------------------------------------------------------------------
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
ONE OR MORE OF 27 VARIABLE INVESTMENT OPTIONS, AS WELL AS TWO INTEREST-RATE
OPTIONS.
The 27 variable investment options invest in underlying 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 underlying mutual funds in which the variable investment
options invest. Each variable investment option has a different investment
objective.
THE PRUDENTIAL SERIES FUND, INC.
- - Jennison Portfolio (domestic equity)
- - Prudential Equity Portfolio
- - Prudential Global Portfolio
- - Prudential Money Market Portfolio
- - Prudential Stock Index Portfolio
- - Prudential Value Portfolio (domestic equity)
- - SP Aggressive Growth Asset Allocation Portfolio
- - SP AIM Aggressive Growth Portfolio
- - SP AIM Core Equity Portfolio
- - SP Alliance Large Cap Growth Portfolio
- - SP Alliance Technology Portfolio
- - SP Balanced Asset Allocation Portfolio
- - SP Conservative Asset Allocation Portfolio
- - SP Davis Value Portfolio
- - SP Deutsche International Equity Portfolio
- - SP Growth Asset Allocation Portfolio
- - SP INVESCO Small Company Growth Portfolio
- - SP Jennison International Growth Portfolio
- - SP Large Cap Value Portfolio
- - SP MFS Capital Opportunities Portfolio (domestic and foreign equity)
- - SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio)
- - SP PIMCO High Yield Portfolio
- - SP PIMCO Total Return Portfolio
- - SP Prudential U.S. Emerging Growth Portfolio
- - SP Small/Mid Cap Value Portfolio
- - SP Strategic Partners Focused Growth Portfolio
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index Portfolio,
Prudential Value Portfolio and each "SP" Portfolio of The Prudential Series
Fund, Inc., are managed by an indirect wholly-owned subsidiary of Prudential
Financial, Inc. called Prudential Investments LLC (PI). Under the
manager-of-managers approach, PI has the ability to assign subadvisers to manage
specific portions of a portfolio, and the portion managed by a subadviser may
vary from 0% to 100% of the portfolio's assets. The subadvisers that managed
some or all of a Prudential Series Fund portfolio as of December 31, 2002 are
listed below.
Jennison Portfolio, Prudential Global Portfolio,
Prudential Value Portfolio, SP Jennison International Growth Portfolio,
and SP Prudential U.S. Emerging Growth Portfolio: Jennison Associates
LLC
Prudential Equity Portfolio: GE Asset Management, Incorporated, Jennison
Associates LLC, and Salomon Brothers Asset Management Inc.
Prudential Money Market Portfolio and Prudential Stock Index Portfolio:
Prudential Investment Management, Inc.
SP Strategic Partners Focused Growth Portfolio: Jennison Associates LLC
and Alliance Capital Management L.P.
SP AIM Aggressive Growth Portfolio and SP AIM Core Equity Portfolio: A I
M Capital Management, Inc.
SP Alliance Large Cap Growth Portfolio and SP Alliance Technology
Portfolio: Alliance Capital Management L.P.
SP Davis Value Portfolio: Davis Advisors
SP Deutsche International Equity Portfolio: Deutsche Asset Management
Investment Services Limited, a wholly-owned subsidiary of Deutsche Bank
AG
SP INVESCO Small Company Growth Portfolio: INVESCO Funds Group, Inc.
SP Large Cap Value Portfolio and SP Small/Mid Cap Value Portfolio:
Fidelity Management and Research Company
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
SP MFS Capital Opportunities Portfolio: Massachusetts Financial Services
Company
SP Mid Cap Growth Portfolio (formerly SP MFS Mid-Cap Growth Portfolio):
Calamos Asset Management, Inc.
SP PIMCO High Yield Portfolio and SP PIMCO Total Return Portfolio:
Pacific Investment Management Company LLC
JANUS ASPEN SERIES
- - Growth Portfolio--Service Shares
Janus Capital Management LLC serves as investment adviser to the Growth
Portfolio--Service Shares of Janus Aspen Series.
A fund or portfolio may have a similar name or an investment objective and
investment policies resembling those of a mutual fund managed by the same
investment adviser that is sold directly to the public. Despite such
similarities, there can be no assurance that the investment performance of any
such fund or portfolio will resemble that of the publicly available mutual fund.
An affiliate of each of the funds may compensate Pruco Life based upon an
annual percentage of the average assets held in the fund by Pruco Life under the
contracts. These percentages may vary by fund and/or portfolio, and reflect
administrative and other services we provide.
INTEREST-RATE OPTIONS
We offer two interest-rate options: a one-year fixed-rate option and a market
value adjustment option (not available in Maryland, Oregon or Washington). We
set a one year guaranteed annual interest rate for the one-year fixed-rate
option. For the market value adjustment option, we set a seven-year guaranteed
interest rate.
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. An interest cell with
a new interest rate period is established every time you allocate or transfer
money into a interest-rate option. You may have money allocated in more than one
interest rate period at the same time. This could result in your money earning
interest at different rates and each interest rate period maturing at a
different time. While these interest rates may change from time to time, the
minimum rate set will never be less than 3%.
At the maturity of an interest cell for a fixed-rate or market value
adjustment option, you may elect to transfer the amount in the cell to any other
investment option available on that date. If you do not make a transfer election
during the 30-day period following the interest cell's maturity date, then we
will transfer the amount in the cell to a new interest cell with the same time
to maturity as the old cell.
Payments that you apply to the interest-rate option become part of Pruco
Life's general assets. Payments that you apply to the market value adjustment
option are held as a separate pool of assets, but the income, gains or losses
resulting from these assets are not credited or charged against the contracts.
As a result, the strength of the interest-rate option guarantees is based on the
overall financial strength of Pruco Life. If Pruco Life suffered a material
financial set back, the ability of Pruco Life to meet its financial obligations
could be affected.
MARKET VALUE ADJUSTMENT
If you transfer or withdraw assets or annuitize from the market value adjustment
option before an interest rate period is over, the assets will be subject to a
market value adjustment. The market value adjustment may increase or decrease
the amount being withdrawn or transferred and may be substantial. The
adjustment, whether up or down will never be greater than 40%. The amount of the
market value adjustment is based on the difference between the:
1) Guaranteed interest rate for the amount you are withdrawing or transferring;
and
2) Interest rate that is in effect on the date of the withdrawal or transfer.
The amount of time left in the interest rate period is also a factor. You
will find a detailed description of how the market value adjustment is
calculated on page 40 of this prospectus. (For contracts issued in Pennsylvania,
the description is on page 42.)
19
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options and the
interest-rate options. Your transfer request may be made by telephone,
electronically, or otherwise in paper form to the Prudential Annuity Service
Center. Only two transfers per month may be made by telephone or electronically.
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
or electronically are genuine. We will not be liable for following telephone or
electronic instructions that we 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 usually closes at 4:00 p.m. Eastern time.
YOU GENERALLY CAN MAKE TRANSFERS OUT OF THE ONE-YEAR FIXED-RATE OPTION ONLY
DURING THE 30-DAY PERIOD FOLLOWING THE END OF AN INTEREST RATE PERIOD. ANY
AMOUNT TRANSFERRED FROM A MARKET VALUE ADJUSTMENT OPTION IS SUBJECT TO A MARKET
VALUE ADJUSTMENT, UNLESS THE TRANSFER IS MADE DURING THE 30-DAY PERIOD FOLLOWING
THE MATURITY OF THE INTEREST CELL.
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 will be charged $25 for each
additional transfer. (Dollar Cost Averaging and Auto-Rebalancing transfers do
not count toward the 12 free transfers per year.)
MARKET TIMING
THE CONTRACT WAS NOT DESIGNED FOR MARKET TIMING OR FOR PERSONS THAT MAKE
PROGRAMMED, LARGE, OR FREQUENT TRANSFERS. BECAUSE MARKET TIMING AND SIMILAR
TRADING PRACTICES GENERALLY ARE DISRUPTIVE TO THE SEPARATE ACCOUNT AND THE
UNDERLYING MUTUAL FUNDS, WE MONITOR CONTRACT TRANSACTIONS IN AN EFFORT TO
IDENTIFY SUCH TRADING PRACTICES. IF WE DETECT THOSE PRACTICES, WE RESERVE THE
RIGHT TO REJECT A PROPOSED TRANSACTION AND TO MODIFY THE CONTRACT'S TRANSFER
PROCEDURES. FOR EXAMPLE, WE MAY DECIDE NOT TO ACCEPT THE TRANSFER REQUESTS OF AN
AGENT ACTING UNDER A POWER OF ATTORNEY ON BEHALF OF MORE THAN ONE
CONTRACTHOLDER.
TO DETER MARKET TIMING TRANSACTIONS, PRUCO LIFE RESERVES THE RIGHT TO EFFECT
EXCHANGES ON A DELAYED BASIS FOR ALL CONTRACTS. THAT IS, PRUCO LIFE MAY PRICE AN
EXCHANGE INVOLVING THE VARIABLE SUBACCOUNTS ON THE BUSINESS DAY SUBSEQUENT TO
THE BUSINESS DAY ON WHICH THE EXCHANGE REQUEST WAS RECEIVED. BEFORE IMPLEMENTING
SUCH A PRACTICE, PRUCO LIFE WILL ISSUE A SEPARATE WRITTEN NOTICE TO CONTRACT
OWNERS THAT EXPLAINS THE PRACTICE IN DETAIL.
DOLLAR COST AVERAGING FEATURE
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 or the one-year fixed-rate option and into any 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. Of course, there is no
guarantee that dollar cost averaging will ensure a profit or protect against a
loss in declining markets.
Transfers must be at least $100 from your DCA account. After that, transfers
will continue automatically 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
20
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
you are allowed per year. This feature is available only during the contract
accumulation phase, and is offered without charge.
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
financial professional 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 assets to return to
your original allocation percentages or to subsequent allocation percentages you
select. We will rebalance only the variable investment options that you have
designated. The interest-rate options and 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, and is offered without charge. If you
choose auto-rebalancing and dollar cost averaging, auto-rebalancing will take
place after the transfers from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares of the mutual funds that underly variable
investment options. However, we vote the shares of the mutual funds according to
voting instructions we receive from contractowners. 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. We will vote the
shares for which we do not receive instructions, and any other shares that we
own in our own right, in the same proportion as the shares for which
instructions are received. We may change the way your voting instructions are
calculated if it is required by federal or state 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 variable
investment options and their underlying funds. We would not do this without the
approval of the SEC and any necessary state insurance departments. You will be
given specific notice in advance of any substitution we intend to make.
21
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
- --------------------------------------------------------------------------------
PAYMENT PROVISIONS
We can begin making annuity payments any time after the first contract
anniversary. (Maryland residents must wait until after the seventh anniversary.)
Annuity payments must begin no later than the annuitant's 90th birthday.
We make the income plans described below available at any time before the
annuity date. These plans are called annuity 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 an annuity option is not selected by the annuity date, the
Interest Payment Option (Option 3, described below) will automatically be
selected. However, if your contract is held as an IRA and an annuity option is
not selected by the annuity date or prior to the annuitant's 90th birthday, a
lump sum payment of the contract value will be made to you on the annuitant's
90th birthday. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION
CANNOT BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
Depending upon the annuity option you choose, you may incur a withdrawal
charge when the income phase begins. Currently, if permitted by state law, we
deduct any applicable withdrawal charge if you choose Option 1, Option 3, or
certain other annuity options that we may make available. We do not deduct a
withdrawal charge if you choose Option 2. For information about Withdrawal
Charges, see "What are the Expenses Associated with Strategic Partners Select
Contract?" page 27.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, 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 ANNUITY WITH 120 PAYMENTS (10 YEARS) CERTAIN
Under this option, we will make annuity payments 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 we
were 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.
OPTION 3
INTEREST PAYMENT OPTION
Under this option, we will credit interest on the adjusted contract value until
you request payment of all or part of the adjusted contract value. We can make
interest payments on a monthly, quarterly, semiannual, or annual basis or allow
the interest to accrue on your contract assets. If an annuity option is not
selected by the annuity date, this is the option we will automatically select
for you, unless prohibited by applicable law. 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 IRA. Under this option, all gain in the
annuity will be taxable as of the annuity date. Under this option, you can
withdraw part or all of the contract value that we are holding at any time.
OPTION 4
OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options not described above. At
the time annuity payments are chosen, we may make available to you any of the
fixed annuity options that are offered at your annuity date.
22
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 33, you
would consider the minimum distribution requirements mentioned on page 36 when
selecting your annuity option.
For certain contracts held in connection with "qualified" retirement plans
(such as a Section 401(k) plan), please note that if you are married at the time
your payments commence, you may be required by federal law to choose an income
option that provides at least a 50 percent joint and survivor annuity to your
spouse, unless your spouse waives that right. Similarly, if you are married at
the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. For more information, consult the terms of your retirement
arrangement.
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STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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, you
can change the beneficiary at any time before the annuitant or last surviving
annuitant dies.
CALCULATION OF THE DEATH BENEFIT
If the annuitant (or the last surviving annuitant, if there are co-annuitants)
dies during the accumulation phase, we will, upon receiving appropriate proof of
death and any other needed documentation ("due proof of death"), pay a death
benefit to the beneficiary designated by the contract owner. We require proof of
death to be submitted promptly.
If the annuitant (older co-annuitant) is under age 80 on the contract date
and prior to his or her 80th birthday, the annuitant (last surviving annuitant)
dies, the beneficiary will receive the greater of the following (as of the time
we receive due proof of death):
- - Current value of your contract; or
- - Guaranteed Minimum Death Benefit--The Guaranteed Minimum Death Benefit (GMDB)
is the greater of:
1) The step-up value which equals the highest value of the contract on any
contract anniversary date--that is, on each contract anniversary, the new
step-up value becomes the higher of the previous step-up value and the
current contract value. Between anniversary dates, the step-up value is only
increased by additional invested purchase payments and reduced proportionally
by withdrawals; or
2) The "roll-up value" which is the total of all invested purchase payments
compounded daily at an effective annual rate of 5%, subject to a cap of 200%
of all invested purchase payments. Both the roll-up and the cap are reduced
proportionally by withdrawals.
On or after the annuitant's (older co-annuitant's) 80th birthday, if the
annuitant (last surviving annuitant) dies, the beneficiary will receive the
greater of: 1) the current contract value as of the date that due proof of death
is received, and 2) the Guaranteed Minimum Death Benefit as of age 80, increased
by additional invested purchase payments, and reduced proportionally by
withdrawals. For this purpose, an annuitant is deemed to reach age 80 on the
contract anniversary on or following the annuitant's actual 80th birthday.
If the annuitant (older co-annuitant) is age 80 or older on the contract
date, upon the annuitant's (last surviving annuitant's) death, the beneficiary
will receive as of the date that due proof of death is received, the greater of:
1) current contract value as of the date that due proof of death is received;
and 2) the total invested purchase payments reduced proportionally by
withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and step-up value is $80,000. The
owner makes a withdrawal that reduces the contract value by 50% (including the
effect of any withdrawal charges). The new step-up value is $40,000, or 50% of
what it was before the withdrawal.
This death benefit is payable only in the event of the death of the sole or
last surviving annuitant and will not be paid upon the death of an owner who is
not the annuitant.
Certain terms of this death benefit are limited in Oregon.
DEATH OF OWNER OR JOINT OWNER
If the owner and the annuitant are not the same person and the owner dies during
the accumulation phase, the subsequent owner generally receives the cash value
subject to tax requirements concerning distributions.
If the contract has an owner and joint owner who are spouses at the time of
the owner's or joint owner's death during the accumulation phase, the contract
will continue and the surviving spouse will become the sole owner of the
contract, entitled to any rights and privileges granted by us under the
contract. However, the surviving spouse may, within 60 days of providing proof
of death take the cash value under one of the payout options listed below.
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
If the contract has an owner and joint owner who are not spouses at the time
of the owner's or joint owner's death during the accumulation phase, the
surviving owner will be required to take the cash value under one of the payout
options listed below.
The payout options are:
Choice 1. Lump sum.
Choice 2. Payment of the entire contract within 5 years of the date of death.
Choice 3. Payment under an annuity or settlement option over the lifetime of
the survivor or over a period not extending beyond the life
expectancy of the surviving owner with distribution beginning
within one year of the date of death.
This contract is subject to special tax rules that govern the required
distributions upon the death of the owner or joint owner. See "What are the Tax
Considerations Associated with the Strategic Partners Select Contract?" section
beginning on page 31.
25
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
SELECT CONTRACT?
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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 by means other than electronic fund transfer of no less than $500 at
any time during the accumulation phase. However, we impose a minimum of $100
with respect to additional purchase payments made through electronic fund
transfers. You must get our prior approval for any purchase payments over $5
million.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options and the interest-rate options based on the
percentages you choose. The percentage of your allocation to a specific
investment option can range in whole percentages from 0% to 100%. If, after the
initial invested purchase payment, we receive a purchase payment without
allocation instructions, we will allocate the corresponding invested purchase
payment in the same proportion as your most recent purchase payment (unless you
directed us to allocate that purchase payment on a one-time-only basis). You may
submit an allocation change request at any time. Contact the Prudential Annuity
Service Center for details.
We generally will credit the initial purchase payment to your contract within
two business days from the day on which the payment is received at the
Prudential Annuity Service Center, if we receive the application in good order.
If the initial purchase payment and application are not received in good order,
we will take up to five business days to try to complete the application. If the
application cannot be completed within that five business day period, we will
return your payment to you (unless you consent to our retention of it). We will
generally credit each subsequent purchase payment as of the business day we
receive it in good order at the Prudential Annuity Service Center. Our business
day generally closes at 4:00 p.m. Eastern time. We will generally credit
subsequent purchase payments received in good order after the close of a
business day on the following business day.
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 allocated to the variable investment
options, 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 applicable
charges; 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 relating to the variable investment options you have chosen. 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.
We cannot guarantee that the value of your contract will increase or that it
will not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of 3% a year on that portion of the contract
value allocated to the fixed-rate option or to the market value adjustment
option if held for the full seven-year period.
26
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT?
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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 insurance charges. The insurance charges have
two parts:
1) Mortality and expense risk charge
2) Administrative expense charge
1) MORTALITY AND EXPENSE RISK CHARGE
The mortality risk 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 charge is
for assuming that the current charges will be insufficient in the future to
cover the cost of administering the contract.
The mortality and expense risk charge is equal, on an annual basis, to 1.37%
of the daily value of the contract invested in the variable investment options,
after expenses have been deducted. This charge is not assessed against amounts
allocated to the interest-rate options.
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 mortality and
expense risk charge cannot be increased. Any profits made from this charge may
be used by us to pay for the costs of distributing the contracts.
2) ADMINISTRATIVE EXPENSE CHARGE
This charge is for the expenses associated with the administration of the
contract. The administration of the contract includes preparing and issuing the
contract, establishing and maintaining contract records, issuing confirmations
and annual reports, personnel costs, legal and accounting fees, filing fees, and
systems costs.
This charge is equal, on an annual basis, to 0.15% of the daily value of the
contract invested in the variable investment options, after expenses have been
deducted. This charge is not assessed against amounts allocated to the
interest-rate options.
ANNUAL CONTRACT FEE
During the accumulation phase, if your contract value is less than $50,000, we
will deduct $30 per contract year (this fee may differ in certain states). This
annual contract fee is used for administrative expenses and cannot be increased.
The $30 charge will be deducted proportionately from each of the contract's
investment options. This same charge will also be deducted when you surrender
your contract if your contract value is less than $50,000.
WITHDRAWAL CHARGE
During the accumulation phase, you can make withdrawals from your contract. When
you make a withdrawal, money will be taken first from your purchase payments for
purposes of determining withdrawal charges. When your purchase payments have
been used up, then we will take the money from your earnings. You will not have
to pay any withdrawal charge when you withdraw your earnings.
The withdrawal charge is for the payment of the expenses involved in selling
and distributing the contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature and other
promotional activities. If the contract is sold under circumstances that reduce
the sales expenses, we may reduce or eliminate the withdrawal charge. For
example, a large group of individuals purchasing contracts or an individual who
already has a relationship with us may receive such a reduction.
You can withdraw up to 10% of your total purchase payments each contract year
without paying a withdrawal charge. This amount is referred to as the
"charge-free amount." If any of the charge-free amount is not used during a
contract year, it will be carried over to the next contract year. During the
first seven contract years, if your withdrawal of purchase payments is more than
the charge-free amount, a withdrawal charge will be applied proportionately to
all
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6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT CONTRACT?
CONTINUED
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
of the variable investment options as well as the interest-rate options. This
charge is based on your contract date.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
PERCENTAGE OF APPLICABLE WITHDRAWAL CHARGES
- ------------------------------------------------------------
<Table>
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
After that 0%
</Table>
Note: As of the beginning of the contract year, you may withdraw up to 10% of
the total purchase payments plus any charge-free amount carried over from the
previous contract year without charge. There is no withdrawal charge on any
withdrawals made under the Critical Care Access Option or on any amount used to
provide income under the Life Annuity with 120 payments (10 years) Certain
Option. There will be a reduction in the withdrawal charge for contracts issued
to contractowners whose age at issue is 84 and older.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
We will allow you to withdraw money from the contract and waive any withdrawal
charges, if the annuitant or the last surviving co-annuitant (if applicable)
becomes confined to an eligible nursing home or hospital for a period of at
least three consecutive months. You would need to provide us with proof of the
confinement. If a physician has certified that the annuitant or last surviving
co-annuitant is terminally ill (has six months or less to live) there will be no
charge imposed for withdrawals. Critical Care Access is not available in all
states. We will also waive the contract maintenance charge if you surrender your
contract in accordance with the above noted conditions. This option is not
available to the contractowner if he or she is not the annuitant.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may make
a deduction from the value of the contract to pay some or all of these taxes.
Some of these taxes are due when the contract is issued, others are due when the
annuity payments begin. It is our current practice not to deduct a charge for
state premium taxes until annuity payments begin. In the states that impose a
premium tax, the current rates range up to 3.5%. It is also our current practice
not to deduct a charge for the federal tax associated with deferred acquisition
costs paid by us that are based on premium received. However, we reserve the
right to charge the contract owner in the future for any such tax associated
with deferred acquisition costs and any federal, state or local income, excise,
business or any other type of tax measured by the amount of premium received by
us.
TRANSFER FEE
You can make 12 free transfers every contract year. 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 $25 for each additional transfer.
We will deduct the transfer fee pro-rata from the investment options from which
the transfer is made. The transfer fee is deducted before the market value
adjustment, if any, is calculated.
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 such
a charge in the future.
28
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
UNDERLYING MUTUAL FUND FEES
When you allocate a purchase payment or a transfer to the variable investment
options, we in turn invest in shares of a corresponding mutual fund. Those funds
charge fees that are in addition to the contract-related fees described in this
section. For 2002, the fees of these funds ranged on an annual basis from 0.37%
to 1.30% of fund assets (these fees reflect the effect of expense reimbursements
or waivers, which may terminate at any time). For additional information about
these fund fees, please consult the prospectuses for the funds, which are
attached to this prospectus.
29
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
7:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR COMPLETE); OR
- - 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, less any applicable charges. 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 investment options and interest-rate
options you have selected. You will need our consent to make a partial
withdrawal if the requested withdrawal is less than $250.
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, and apply a market value adjustment,
if any, from the assets in your contract.
INCOME TAXES, TAX PENALTIES, AND CERTAIN RESTRICTIONS ALSO 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. Market value adjustments may apply.
Withdrawal charges may be deducted if the withdrawals in any contract year are
more than the charge-free amount. The minimum automated withdrawal amount you
can make is $100.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, A MARKET VALUE ADJUSTMENT
AND CERTAIN RESTRICTIONS MAY APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE
EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS AND THE TAX DISCUSSION IN THE
STATEMENT OF ADDITIONAL INFORMATION.
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:
- - The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
- - Trading on the New York Stock Exchange is restricted;
- - An emergency exists, as determined by the SEC, during which sales of shares
of the mutual funds are not feasible or we cannot reasonably value the
accumulation units; or
- - The SEC, by order, permits suspension or postponement of payments for the
protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the
interest-rate options promptly upon request.
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS SELECT CONTRACT?
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The tax considerations associated with the Strategic Partners Select 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.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX FAVORED RETIREMENT
PLANS)
TAXES PAYABLE BY YOU
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.
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.
Although, we believe that the basic death benefit and the GMDB features are
an investment protection feature that should have no adverse tax consequences,
it is possible that the Internal Revenue Service would assert that some or all
of the charges for the basic death benefit and GMDB features should be treated
for federal income tax purposes as a partial withdrawal from the contract. If
this were the case, the charge for these benefits could be deemed a withdrawal
and treated as taxable to the extent there are earnings in the contract.
Additionally, for owners under age 59 1/2, the taxable income attributable to
the charge for the benefit could be subject to a tax penalty.
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. You will
generally be taxed on any withdrawal from a contract while you are alive even if
the withdrawal is paid to someone else.
If you assign or pledge 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.
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 under most circumstances if you
transfer the contract 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 may be allowed for the unrecovered
amount.
TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
- - the amount is paid on or after you reach age 59 1/2 or die;
- - the amount received is attributable to your becoming disabled;
- - the amount paid or received is in the form of level annuity payments not less
frequently than annually under a lifetime annuity; and
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PART II
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- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
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
All the death benefit options are subject to income tax to the extent the
distribution exceeds the adjusted basis in the contract and the full value of
the death benefit is included in the owner's estate.
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.
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment, we
will withhold as if you are a married individual with 3 exemptions unless you
designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country.
Regardless of the amount withheld by us, you are liable for payment of
federal and state income tax on the taxable portion of annuity distributions.
You should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
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 we,
and not you as the contract owner, 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
benefit rights under the contract pass by reason of death, and must be a natural
person in order to elect an annuity payment
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
option based on life expectancy or a period exceeding five years.
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.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
- - The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
- - Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
- - You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
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 Internal Revenue Code of 1986, as
amended (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;
- - 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.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS OF WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
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 and the contract. The "IRA Disclosure Statement" on page 44
contains 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 provided by applicable state law, the amount
credited under the contract, calculated as of the valuation period that we
receive this cancellation notice, if greater), less any applicable federal and
state income tax withholding.
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 or transfer from another IRA. 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 allowed by law
that you may make to an IRA. For 2003 and 2004, the contribution limit is
$3,000; increasing for 2005 to 2007, to $4,000; and for 2008, $5,000. After 2008
the contribution amount will be indexed for inflation. The tax law also provides
for a catch-up provision for individuals who are age 50 and above. These
taxpayers will be permitted to
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PART II
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contribute an additional $500 in years 2003 to 2005 and an additional $1,000 in
2006 and years thereafter). 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 retain possible favorable tax treatment if you subsequently "roll over"
the contract funds originally derived from a qualified retirement plan or TDA
into another Section 401(a) plan or TDA.
Required Provisions: Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
- - 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);
- - Your rights as owner are non-forfeitable;
- - You cannot sell, assign or pledge the contract, other than to Pruco Life;
- - The annual premium you pay cannot be greater than the maximum amount allowed
by law, including catch-up contributions if applicable (which does not
include any rollover amounts);
- - 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
- - Death and annuity payments must meet "minimum distribution requirements"
(described on page 36).
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 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:
- - A 10% "early distribution penalty" (described below);
- - Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
- - 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:
- - If you participate in a SEP, you generally do not include into income any
employer contributions made to the SEP on your behalf up to the lesser of (a)
$40,000 in 2003 or (b) 25% of the employee's earned income (not including the
employer contribution amount as "earned income" for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2003, this limit is $200,000.
- - SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
- - Some SEPs for small employers permit salary deferrals up to $12,000 in 2003
with the employer making these contributions to the SEP. However, no new
"salary reduction" or "SAR-SEPs" can be established after 1996. Individuals
participating in a SARSEP who are age 50 or above by the end of the year will
be permitted to contribute an additional $2,000 in 2003, increasing in $1,000
increments per year until reaching $5,000 in 2006. Thereafter the amount is
indexed for inflation.
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
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PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
subject to the same basic IRA requirements with the following exceptions:
- - Participants in a SIMPLE-IRA may contribute up to $8,000 in 2003, as opposed
to the usual IRA contribution limit, and employer contributions may also be
provided as a match (up to 3% of your compensation);
- - Individuals age 50 or above by the end of the year will be permitted to
contribute an additional $1,000 in 2003, increasing in $500 increments per
year until reaching $2,500 in 2006. Thereafter the amount is indexed for
inflation; and
- - SIMPLE-IRAs are not subject to the SEP nondiscrimination rules.
ROTH IRAS Like standard IRAs, income within a Roth IRA accumulates
tax-deferred, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "Qualified distributions" (generally, held for 5 tax 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
- - 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, the
annual contribution allowed by law less any contributions to a traditional IRA.
The annual contribution allowed by law for Roth IRAs increases in the same
manner as the increases for traditional IRAs as described on page 33), 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 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 $12,000 in 2003. Individuals participating in a TDA who are age 50 or
above by the end of the year will be permitted to contribute an additional
$2,000 in 2003, increasing in $1,000 increments per year until reaching $5,000
in 2006. Thereafter the amount is indexed for inflation. Further, you may roll
over TDA amounts to another TDA or an IRA. You may also rollover TDA amounts to
a qualified retirement plan, a SEP and a 457 government plan.
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:
- - Your attainment of age 59 1/2;
- - Your severance of employment;
- - Your death;
- - Your total and permanent disability; or
- - 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
35
8:
TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS SELECT CONTRACT
CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
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.
MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that payments must start
by April 1 of the year after the year you reach age 70 1/2 and must be made for
each year thereafter. The amount of the payment must at least equal the minimum
required under the IRS rules. Several choices are available for calculating the
minimum amount, including a new method under IRS regulations released in April
2002. More information on the mechanics of this calculation is available on
request. Please contact us a reasonable time before the IRS deadline so that a
timely distribution is made. Please note that there is a 50% IRS penalty tax on
the amount of any minimum distribution not made in a timely manner.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will send you a check for this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on 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
Unless a distribution is an eligible rollover distribution that is "directly"
rolled over into another qualified plan, IRA (including the IRA variations
described above) SEP, 457 government plan, or TDA, we will withhold at the rate
of 20%. This 20% withholding does not apply to distributions from IRAs and Roth
IRAs. 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:
- - 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
- - For all other distributions, we will withhold 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.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under
36
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
"What Are the Expenses Associated with the Strategic Partners Select Contract"
starting on page 27.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale and Distribution of the Contract" on page 38.
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.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS--QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income to
your spouse, unless your spouse waives that right. Similarly, if you are married
at the time of your death, federal law may require all or a portion of the death
benefit to be paid to your spouse, even if you designated someone else as your
beneficiary. A brief explanation of the applicable rules follows. For more
information, consult the terms of your retirement arrangement.
Defined Benefit Plans, Money Purchase Pension Plans, and ERISA 403(b)
Annuities. If you are married at the time your payments commence, federal law
requires that benefits be paid to you in the form of a "qualified joint and
survivor annuity" ("QJSA"), unless you and your spouse waive that right, in
writing. Generally, this means that you will receive a reduced payment during
your life and, upon your death, your spouse will receive at least one-half of
what you were receiving for life. You may elect to receive another income option
if your spouse consents to the election and waives his or her right to receive
the QJSA. If your spouse consents to the alternative form of payment, your
spouse may not receive any benefits from the plan upon your death. Federal law
also requires that the plan pay a death benefit to your spouse if you are
married and die before you begin receiving your benefit. This benefit must be
available in the form of an annuity for your spouse's lifetime and is called a
"qualified pre-retirement survivor annuity" ("QPSA"). If the plan pays death
benefits to other beneficiaries, you may elect to have a beneficiary other than
your spouse receive the death benefit, but only if your spouse consents to the
election and waives his or her right to receive the QPSA. If your spouse
consents to the alternate beneficiary, your spouse will receive no benefits from
the plan upon your death. Any QPSA waiver prior to your attaining age 35 will
become null and void on the first day of the calendar year in which you attain
age 35, if still employed.
Defined Contribution Plans (including 401(k) Plans). Spousal consent to a
distribution is generally not required. Upon your death, your spouse will
receive the entire death benefit, even if you designated someone else as your
beneficiary, unless your spouse consents in writing to waive this right. Also,
if you are married and elect an annuity as a periodic income option, federal law
requires that you receive a QJSA (as described above), unless you and your
spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution is not required. Upon your death, any death benefit will be paid to
your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about the requirements of federal tax law applicable
to tax favored plans, see the "IRA Disclosure Statement" on page 44.
37
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
9:
OTHER
INFORMATION
- --------------------------------------------------------------------------------
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company ("Pruco Life") is a stock life insurance company,
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam, and in all
states except New York.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company
of America ("Prudential"), a New Jersey stock life insurance company that has
been doing business since 1875. Prudential is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. ("Prudential Financial"), a New Jersey
insurance holding company. As Pruco Life's ultimate parent, Prudential Financial
exercises significant influence over the operations and capital structure of
Pruco Life and Prudential. However, neither Prudential Financial, Prudential,
nor any other related company has any legal responsibility to pay amounts that
Pruco Life may owe under the contract.
Pruco Life publishes annual and quarterly reports that are filed with the
SEC. These reports contain financial information about Pruco Life that is
annually audited by independent accountants. Pruco Life's annual report for the
year ended December 31, 2002, together with subsequent periodic reports that
Pruco Life files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Pruco Life annual report that is not ordinarily
mailed to contractholders, the more current reports and any subsequently filed
documents at no cost by contacting us at the address or telephone number listed
on the cover. The SEC file number for Pruco Life is 33-37587. You may read and
copy any filings made by Pruco Life with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, Washington, D.C. 20549. You can obtain information on
the operation of the Public Reference Room by calling (202) 942-8090. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life Flexible Premium Variable
Annuity 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 SEC 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 may conduct. More
detailed information about Pruco Life, including its audited consolidated
financial statements, is provided in the Statement of Additional Information.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 100 Mulberry Street,
Newark, New Jersey 07102-4077, acts as the distributor of the contracts under a
"best efforts" underwriting agreement with Pruco Life under which PIMS is
reimbursed for its costs and expenses. PIMS is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. 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.
We pay the broker-dealer whose registered representatives sell the contract
either:
- - a commission of up to 7% of your purchase payments; or
- - a combination of a commission on purchase payments and a "trail"
commission -- which is a commission determined as a percentage of your
contract value that is paid periodically over the life of your contract.
The commission amount quoted above is the maximum amount which is paid. In
most circumstances, the registered representative who sold the contract will
receive significantly less.
From time to time, Prudential or its affiliates may offer and pay non-cash
compensation to registered
38
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
representatives who sell the contract. For example, Prudential or an affiliate
may pay for a training and education meeting that is attended by registered
representatives of both Prudential-affiliated broker-dealers and independent
broker-dealers. Prudential and its affiliates retain discretion as to which
broker-dealers to offer non-cash (and cash) compensation arrangements, and will
comply with NASD rules and other pertinent laws in making such offers and
payments. Our payment of cash or non-cash compensation in connection with sales
of the contract does not result directly in any additional charge to you.
LITIGATION
We are subject to legal and regulatory actions in the ordinary course of our
business, including class action lawsuits. Pending legal and regulatory actions
include proceedings that are specific to us and proceedings generally applicable
to the businesses in which we operate. We are also subject to litigation arising
out of our general business activities, such as our investments and third party
contracts. In certain of these matters, the plaintiffs are seeking large and/or
indeterminate amounts, including punitive or exemplary damages.
We have been subject to substantial regulatory actions and civil litigation,
including class actions, involving individual life insurance sales practices
from 1982 through 1995. As of January 31, 2003, Pruco Life has resolved those
regulatory actions, its sales practices class action litigation and all of the
individual sales practices actions filed by policyholders who "opted out" of the
sales practices class action. Prudential has indemnified Pruco Life for any
liabilities incurred in connection with sales practices litigation covering
policyholders of individual permanent life insurance policies issued in the
United States from 1982 to 1995.
Pruco Life's litigation is subject to many uncertainties, and given the
complexity and scope, the outcomes cannot be predicted. It is possible that the
results of operations or the cash flow of Pruco Life in a particular quarterly
or annual period could be materially affected by an ultimate unfavorable
resolution of pending litigation and regulatory matters. Management believes,
however, that the ultimate outcome of all pending litigation and regulatory
matters should not have a material adverse effect on Pruco Life's financial
position.
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 financial professional.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life, the co-issuer
of the Strategic Partners Select contract, are included in the Statement of
Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
- - Company
- - Experts
- - Principal Underwriter
- - Allocation of Initial Purchase Payment
- - Determination of Accumulation Unit Values
- - Performance Information
- - Comparative Performance Information
- - Further Information about the Death Benefit
- - Federal Tax Status
- - Financial Statements
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and shareholder
reports to each consenting household, in lieu of sending a copy to each
contractholder that resides in the household. If you are a member of such a
household, you should be aware that you can revoke your consent to householding
at any time, and begin to receive your own copy of prospectuses and shareholder
reports, by calling 1-877-778-5008.
39
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
MARKET VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENT FORMULA
With respect to residents of states, other than Pennsylvania, in which Strategic
Partners Select is being offered. With respect to contracts issued in
Pennsylvania, see page 42.
THE ADJUSTMENT INVOLVES THREE AMOUNTS
The Market Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1) The number of whole months remaining in the existing interest rate period.
2) The guaranteed interest rate.
3) The interest rate that Pruco Life declares for a duration of one year longer
than the number of whole years remaining on the existing cell being withdrawn
from.
STATED AS A FORMULA, THE MARKET VALUE IS EQUAL TO:
(M/12) X (R-C)
not to exceed +0.40 or be less than -0.40; where,
<Table>
- -----------------------------------------------------
M = the number of whole months (not to be less
than one) remaining in the interest-rate
period.
R = the Contract's guaranteed interest-rate
expressed as a decimal. Thus 6.2% is
converted to 0.062.
C = the interest-rate, expressed as a decimal,
that Pruco Life declares for a duration
equal to the number of whole years
remaining in the present interest-rate
period, plus 1 year as of the date the
request for a withdrawal or transaction is
received.
- -----------------------------------------------------
</Table>
The Market Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market Value Adjustment.
STEP BY STEP
The steps below explain how a market value adjustment is calculated.
STEP 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
STEP 2: Determine the interest rate Pruco Life declares on the date the request
for withdrawal or transfer is received for a duration of years equal to the
whole number of years determined in Step 1, plus 1 additional year. Subtract
this interest rate from the guaranteed interest rate. The result could be
negative.
STEP 3: Multiply the results of Step 1 and Step 2. Again, the result could be
negative. If the result is less than -0.4, use the value -0.4. If the result is
in between -0.4 and 0.4, use the actual value. If the result is more than 0.4,
use the value 0.4.
STEP 4: Multiply the result of Step 3 (which is the Market Value Factor) by the
value of the amount subject to a Market Value Adjustment. The result is the
Market Value Adjustment.
STEP 5: The result of Step 4 is added to the interest cell. If the Market Value
Adjustment is positive, the interest cell will go up in value. If the Market
Value Adjustment is negative, the interest cell will go down in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a market value
adjustment and the determination of the withdrawal charge:
Suppose a contractowner made two invested purchase payments, the first in the
amount of $10,000 on December 1, 1995, all of which was allocated to the Equity
Subaccount, and the second in the amount of $5,000 on October 1, 1997, all of
which was allocated to the MVA Option with a guaranteed interest rate of 8%
(0.08) for 7 years. A request for withdrawal of $8,500 is made on February 1,
2000 (the contract owner does not provide any withdrawal instructions). On that
date the amount in the Equity Subaccount is equal to $12,000 and the amount in
the interest cell with a maturity date of September 30, 2004 is $5,985.23, so
40
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
that the contract fund on that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life for the
duration of 5 years (4 whole years remaining until September 30, 2004, plus 1
year) is 11%.
The following computations would be made:
1) Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2) Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
<Table>
<Caption>
DATE PAYMENT FREE
-------------------------
12/1/95 $10,000 $1,000
12/1/96 $2,000
10/1/97 $5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
</Table>
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the
fourth Contract year) for a total of $7,000.
3) Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not
charge-free.
<Table>
--------------------------------------------
$8,500.00 requested withdrawal amount
-$7,000.00 charge-free
--------------------------------------------
$1,500.00 additional amount needed to
complete withdrawal
</Table>
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount
requested. Therefore, in order to produce the amount needed to complete the
withdrawal request ($1,500), we must "gross-up" that amount, before applying
the withdrawal charge rate. This is done by dividing by 1 minus the
withdrawal charge rate.
-----------------------------------------------------------
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces it
to $1,500, the balance needed to complete the request.
<Table>
--------------------------------------------
$1,546.39 grossed-up amount
X .03 withdrawal charge rate
--------------------------------------------
$46.39 withdrawal charge
</Table>
4) The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interest-rate that would be offered for
an interest cell with a duration of the remaining whole years plus 1), which
is -0.03, multiplied by 4.58333 (55 months remaining until September 30,
2004, divided by 12) or -0.13750. Thus, there will be a negative Market Value
Adjustment of approximately 14% of the amount in the interest cell that is
subject to the adjustment.
<Table>
--------------------------------------------
-0.13750 X $5,985.23 =
-822.97 negative MVA
$5,985.23 unadjusted value
--------------------------------------------
$5,162.26 adjusted value
$12,000.00 equity value
--------------------------------------------
$17,162.26 adjusted contract fund
</Table>
5) The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over
all accounts making up the Contract Fund following the Market Value
Adjustments, if any, associated with the MVA option.
<Table>
------------------------------------------------
Equity
($12,000/$17,162.26) X $8,546.39 = $5,975.71
------------------------------------------------
7-Yr MVA
($5,162.26/$17,162.26) X $8,546.39 = $2,570.68
---------
$8,546.39
</Table>
6) The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal
of $2,570.68 leaves $2,591.58. This amount must be "unadjusted" by dividing
it by 0.86250 (1 plus the Market Value Adjustment of -0.13750) to determine
the amount remaining in the interest cell to which the guaranteed
interest-rate of 8% will continue to be credited until September 30, 2004 or
a subsequent withdrawal. That amount is $3,004.73.
41
MARKET VALUE ADJUSTMENT FORMULA CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
MARKET VALUE ADJUSTMENT FORMULA WITH RESPECT TO CONTRACTS ISSUED IN PENNSYLVANIA
ONLY
THE ADJUSTMENT INVOLVES THREE AMOUNTS
The Market Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1) The number of whole months remaining in the existing interest rate period.
2) The guaranteed interest rate.
3) The interpolated value of the interest rates that Pruco Life declares for the
number of whole years remaining and the duration 1 year longer than the
number of whole years remaining in the existing interest rate period.
STATED AS A FORMULA, THE MARKET VALUE IS EQUAL TO:
(M/12) X (R-C)
not to exceed +0.40 or be less than -0.40; where,
<Table>
- -----------------------------------------------------
M = the number of whole months (not to be less
than one) remaining in the interest-rate
period.
R = the Contract's guaranteed interest-rate
expressed as a decimal. Thus 6.2% is
converted to 0.062.
C = the interpolated value of the interest
rates, expressed as a decimal, that Pruco
Life declares for the number of whole years
remaining and the duration 1 year longer
than the number of whole years remaining as
of the date the request for a withdrawal or
transfer is received or m/365 x (n+1) year
rate + (365-m)/365 x n year rate, where "n"
equals years and "m" equals days remaining
in year "n" of the existing interest rate
period.
- -----------------------------------------------------
</Table>
The Market Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market Value Adjustment.
STEP BY STEP
The steps below explain how a market value adjustment is calculated.
STEP 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
STEP 2: Interpolate the interest rates Pruco Life declares on the date the
request for withdrawal or transfer is received for the duration of years equal
to the whole number of years determined in Step 1, plus the whole number of
years plus 1 additional year.
STEP 3: Subtract this interpolated interest rate from the guaranteed interest
rate. The result could be negative.
STEP 4: Multiply the results of Step 1 and Step 2. Again, the result could be
negative. If the result is less than -0.4, use the value -0.4. If the result is
in between -0.4 and 0.4, use the actual value. If the result is more than 0.4,
use the value 0.4.
STEP 5: Multiply the result of Step 3 (which is the Market Value Factor) by the
value of the amount subject to a Market Value Adjustment. The result is the
Market Value Adjustment.
STEP 6: The result of Step 4 is added to the interest cell. If the Market Value
Adjustment is positive, the interest cell will go up in value. If the Market
Value Adjustment is negative, the interest cell will go down in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a market value
adjustment and the determination of the withdrawal charge:
Suppose a contractowner made two invested purchase payments, the first in the
amount of $10,000 on December 1, 1995, all of which was allocated to the Equity
Subaccount, and the second in the amount of $5,000 on October 1, 1997, all of
which was allocated to the MVA option with a guaranteed interest rate of 8%
(0.08) for 7 years. A request for withdrawal of $8,500 is made on February 1,
2000 (the contract owner does not provide any withdrawal instructions). On that
date the amount in the Equity Subaccount is equal to $12,000 and the amount in
the interest cell with a maturity date of September 30, 2004 is $5,985.23, so
that the contract fund on that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life for the
duration's 4 and 5 years (4 whole
42
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
years remaining until September 30, 2004, plus 1 year) are 10.8% and 11.4%,
respectively.
The following computations would be made:
1) Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2) Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
<Table>
<Caption>
DATE PAYMENT FREE
-------------------------
12/1/95 $10,000 $1,000
12/1/96 $2,000
10/1/97 $5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
</Table>
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the
fourth Contract year) for a total of $7,000.
3) Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not
charge-free.
<Table>
--------------------------------------------
$8,500.00 requested withdrawal amount
-$7,000.00 charge-free
--------------------------------------------
$1,500.00 additional amount needed to
complete withdrawal
</Table>
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount
requested. Therefore, in order to produce the amount needed to complete the
withdrawal request ($1,500), we must "gross-up" that amount, before applying
the withdrawal charge rate. This is done by dividing by 1 minus the
withdrawal charge rate.
-----------------------------------------------------------
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces it
to $1,500, the balance needed to complete the request.
<Table>
--------------------------------------------
$1,546.39 grossed-up amount
X .03 withdrawal charge rate
--------------------------------------------
$46.39 withdrawal charge
</Table>
4) The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interpolated value for the interest
rates that would be offered for interest cells with durations of whole years
remaining and whole year plus 1 remaining in the existing interest rate
period), which is -0.03, multiplied by 4.58333 (55 months remaining until
September 30, 2004, divided by 12) or -0.13750. Thus, there will be a
negative Market Value Adjustment of approximately 14% of the amount in the
interest cell that is subject to the adjustment.
<Table>
--------------------------------------------
-0.13750 X $5,985.23 =
-822.97 negative MVA
$5,985.23 unadjusted value
--------------------------------------------
$5,162.26 adjusted value
$12,000.00 equity value
--------------------------------------------
$17,162.26 adjusted contract fund
</Table>
5) The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over
all accounts making up the Contract Fund following the Market Value
Adjustments, if any, associated with the MVA option.
<Table>
------------------------------------------------
Equity
($12,000/$17,162.26) X $8,546.39 = $5,975.71
------------------------------------------------
7-Yr MVA
($5,162.26/$17,162.26) X $8,546.39 = $2,570.68
---------
$8,546.39
</Table>
6) The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal
of $2,570.68 leaves $2,591.58. This amount must be "unadjusted" by dividing
it by 0.86250 (1 plus the Market Value Adjustment of -0.13750) to determine
the amount remaining in the interest cell to which the guaranteed
interest-rate of 8% will continue to be credited until September 30, 2004 or
a subsequent withdrawal. That amount is $3,004.73.
43
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEP) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a refund (less any applicable federal and state income
tax withholding) within 10 days (or whatever period is required by applicable
state law) after it is delivered. The amount of the refund is dictated by state
law. This is a more liberal provision than is required in connection with IRAs.
To exercise this "free-look" provision, return the contract 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.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA (or SEP) contributions must be made by
no later than the due date for filing your income tax return for that year,
excluding extensions (generally by April 15th). For a single taxpayer, the
applicable dollar limitation is $40,000 in 2003, with the amount of IRA
contribution which may be deducted reduced proportionately for Adjusted Gross
Income between $40,000 -- $50,000. For married couples filing jointly, the
applicable dollar limitation is $60,000, with the amount of IRA contribution
which may be deducted reduced proportionately for Adjusted Gross Income between
$60,000-$70,000. There is no deduction allowed for IRA contributions when
Adjusted Gross Income reaches $50,000 for individuals and $70,000 for married
couples filing jointly. These amounts are for 2003. Income limits are scheduled
to increase until 2006 for single taxpayers and 2007 for married taxpayers.
Contributions made by your employer to your SEP are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEP will be entitled to
elect to have their employer make contributions to their SEP on their behalf or
to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEP are limited to $12,000 in 2003 with a permitted catch-up contribution of
$2,000 for individuals age 50 and above. Contribution and catch-up contribution
limits are scheduled to increase through 2006 and are indexed for inflation
thereafter. Salary-reduction SEPs (also called "SARSEPs") are available only if
at least 50% of the employees elect to have amounts contributed to the SARSEP
and if the employer has 25 or fewer employees at all times during the preceding
year. New SARSEPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) the maximum amount allowed by law, including catch-up
contributions if applicable, or (2) 100% of your earned compensation.
Contributions in excess of these limits may be subject to penalty. See below.
Under a SEP agreement, the maximum annual contribution which your employer
may make on your behalf to a SEP contract that is excludable from your income is
the lesser of 25% of your salary or $40,000 in
44
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
2003. An employee who is a participant in a SEP agreement may make after-tax
contributions to the SEP contract, subject to the contribution limits applicable
to IRAs in general. Those employee contributions will be deductible subject to
the deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) the maximum amount allowed
by law, including catch-up contributions if applicable or (2) 100% of taxable
alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEP, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess contribution from your
IRA or SEP before your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See PREMATURE DISTRIBUTIONS below for penalties imposed on
withdrawal when the contribution exceeds the maximum amount allowed by law,
including catch-up contributions if applicable.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to the maximum amount allowed by
law, including catch-up contributions if applicable may be made to your IRA and
the spousal IRA if the combined compensation of you and your spouse is at least
equal to the amount contributed. If requirements for deductibility (including
income levels) are met, you will be able to deduct an amount equal to the least
of (i) the amount contributed to the IRAs; (ii) twice the maximum amount allowed
by law, including catch-up contributions if applicable; or (iii) 100% of your
combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See "Contributions and Deductions" on page 44. If you contribute more than the
allowable amount, the excess portion will be considered an excess contribution.
The rules for correcting it are the same as discussed above for regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made
from other IRAs and contributed to this contract. This transfer of funds from
one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. You may later roll over such a
contribution to another qualified retirement plan. As long as you have not mixed
it with IRA (or SEP) contributions, you can retain favorable tax treatment
permitted you on distributions from a qualified retirement plan, if you later
rollover to a qualified retirement plan. (You may roll less than all of a
qualified distribution into an IRA, but any part of it not rolled over will be
currently includable in your income without any capital gains treatment.)
Funds can also be rolled over from an IRA or SEP to another IRA or SEP or to
another qualified retirement plan or 457 government plan.
45
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
DISTRIBUTIONS
(A) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEP be forfeited. To insure that
your contributions will be used for retirement, the federal tax law does not
permit you to use your IRA or SEP as security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your IRA or SEP to
anyone. Use of an IRA (or SEP) as security or assignment of it to another will
invalidate the entire annuity. It then will be includable in your income in the
year it is invalidated and will be subject to a 10% tax penalty if you are not
at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or
SEP without penalty to your former spouse in accordance with the terms of a
divorce decree.)
You may surrender any portion of the value of your IRA (or SEP). In the case
of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59 1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% penalty tax does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(B) DISTRIBUTION AFTER AGE 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEP) regardless of when you
actually retire. In addition, you must commence distributions from your IRA by
April 1 following the year you attain age 70 1/2. You may elect to receive the
distribution under any one of the periodic payment options available under the
contract. The distributions from your IRA under any one of the periodic payment
options, or in one sum, will be treated as ordinary income as you receive them,
to the degree that you have made deductible contributions. If you have made both
deductible and nondeductible contributions, the portion of the distribution
attributable to the nondeductible contribution will be tax-free.
(C) INADEQUATE DISTRIBUTIONS--50% TAX
Your IRA or SEP is intended to provide retirement benefits over your lifetime.
Thus, federal tax law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse/beneficiary.) The calculation method is
revised under the IRS regulations issued in April 2002 for distributions
beginning in 2003. If the payments are not sufficient to meet these
requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
(D) DEATH BENEFITS
If you, (or your surviving spouse) die before receiving the entire value of your
IRA (or SEP), the remaining interest must be distributed to your beneficiary (or
your surviving spouse's beneficiary) in one lump-sum by December 31st of the
fifth year after your (or your surviving spouse's death, or applied to purchase
an immediate annuity for the beneficiary. This annuity must be payable over the
life expectancy of the beneficiary beginning by December 31 of the year
following the year after your or your spouse's death. If your spouse is the
designated beneficiary, he or she is treated as the owner of the IRA. If minimum
required distributions have begun and no designated beneficiary is identified by
December 31 of the year following the year of death, the entire amount must be
distributed based on the life expectancy of the owner using the owner's age
prior to death. A distribution of the balance of your IRA upon your death will
not be considered a
46
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
gift for federal tax purposes, but will be included in your gross estate for
purposes of federal estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $110,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any taxable year to all Roth IRAs
maintained by an individual is generally the lesser of the maximum amount
allowed by law and 100% of compensation for that year (the maximum amount
allowed by law is phased out for incomes between $150,000 and $160,000 for
married and between $95,000 and $110,000 for singles). The contribution limit is
reduced by the amount of any contributions made to a non-Roth IRA. Contributions
to a Roth IRA are not deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a non-Roth IRA may be converted, transferred or rolled over to a Roth
IRA. Some or all of the IRA value will typically be includable in the taxpayer's
gross income. Provided a rollover contribution meets the requirements of IRAs
under Section 408(d)(3) of the Code, a rollover may be made from a Roth IRA to
another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A NON-ROTH IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five tax years after the first year for which a contribution was
made to any Roth IRA established for the owner or five years after a rollover,
transfer, or conversion was made from a non-Roth IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will be
treated as made first from contributions and then from earnings, and taxed
generally in the same manner as distributions from a non-Roth IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed under the same rules
applied to traditional IRAs where death occurs before the required beginning
date.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate. Beginning in January 2004, if you were
at least 70 1/2 at the end of the prior year, we will indicate to you and to the
IRS, on Form 5498, that your account is subject to minimum required
distributions.
47
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
APPENDIX
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
48
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES:
AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
- -------------------------------------------------------
<Table>
<Caption>
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
JENNISON PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99429 $0.86910 8,717,408
1/1/2002 to 12/31/2002 $0.86910 $0.59107 15,222,304
PRUDENTIAL EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
2/4/2002* to 12/31/2002 $0.97749 $0.78083 1,279,634
PRUDENTIAL GLOBAL PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99996 $0.83930 1,866,907
1/1/2002 to 12/31/2002 $0.83930 $0.61886 3,064,422
PRUDENTIAL MONEY MARKET PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $1.00008 $1.01177 13,343,454
1/1/2002 to 12/31/2002 $1.01177 $1.01170 14,548,905
PRUDENTIAL STOCK INDEX PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99726 $0.90422 7,466,612
1/1/2002 to 12/31/2002 $0.90422 $0.69297 12,343,903
PRUDENTIAL VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
2/4/2002* to 12/31/2002 $0.97745 $0.79269 1,769,021
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99880 $0.87039 888,327
1/1/2002 to 12/31/2002 $0.87039 $0.66733 2,227,131
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99724 $0.87438 808,820
1/1/2002 to 12/31/2002 $0.87438 $0.68075 1,752,360
SP AIM CORE EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99083 $0.84034 1,681,815
1/1/2002 to 12/31/2002 $0.84034 $0.70189 2,615,923
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99509 $0.88165 3,051,950
1/1/2002 to 12/31/2002 $0.88165 $0.59753 5,098,338
SP ALLIANCE TECHNOLOGY PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.98559 $0.81232 656,964
1/1/2002 to 12/31/2002 $0.81232 $0.46943 1,104,394
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99891 $0.94878 13,046,073
1/1/2002 to 12/31/2002 $0.94878 $0.82546 23,741,587
</Table>
<Table>
THIS CHART CONTINUES ON THE NEXT PAGE
* COMMENCEMENT OF BUSINESS
</Table>
49
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES (CONTINUED):
AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
- -------------------------------------------------------
<Table>
<Caption>
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99796 $0.98385 8,874,996
1/1/2002 to 12/31/2002 $0.98385 $0.91217 16,967,796
SP DAVIS VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99791 $0.91944 10,293,226
1/1/2002 to 12/31/2002 $0.91944 $0.76351 16,643,331
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $1.00228 $0.84670 2,495,330
1/1/2002 to 12/31/2002 $0.84670 $0.69085 4,657,121
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99886 $0.90902 5,263,885
1/1/2002 to 12/31/2002 $0.90902 $0.74090 11,721,213
SP INVESCO SMALL COMPANY GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99726 $0.92608 1,290,543
1/1/2002 to 12/31/2002 $0.92608 $0.63614 2,322,396
SP JENNISON INTERNATIONAL GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $1.00272 $0.74738 2,151,275
1/1/2002 to 12/31/2002 $0.74738 $0.57004 3,358,884
SP LARGE CAP VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99702 $0.92319 5,170,387
1/1/2002 to 12/31/2002 $0.92319 $0.76054 8,625,236
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99530 $0.80999 978,680
1/1/2002 to 12/31/2002 $0.80999 $0.56912 1,527,407
SP MID CAP GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99348 $0.81479 2,095,863
1/1/2002 to 12/31/2002 $0.81479 $0.43076 4,325,750
SP PIMCO HIGH YIELD PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99996 $1.01328 6,416,368
1/1/2002 to 12/31/2002 $1.01328 $0.99971 9,793,607
SP PIMCO TOTAL RETURN PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99996 $1.04036 18,964,185
1/1/2002 to 12/31/2002 $1.04036 $1.12110 36,854,342
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99484 $0.87347 3,829,252
1/1/2002 to 12/31/2002 $0.87347 $0.58438 7,011,525
</Table>
<Table>
THIS CHART CONTINUES ON THE NEXT PAGE
* COMMENCEMENT OF BUSINESS
</Table>
50
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS SELECT PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES (CONTINUED):
AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
- -------------------------------------------------------
<Table>
<Caption>
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP SMALL/MID CAP VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $1.00084 $1.00204 5,541,640
1/1/2002 to 12/31/2002 $1.00204 $0.84509 10,143,232
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99482 $0.85645 861,855
1/1/2002 to 12/31/2002 $0.85645 $0.63048 2,001,670
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
5/7/2001* to 12/31/2001 $0.99357 $0.78312 2,205,333
1/1/2002 to 12/31/2002 $0.78312 $0.56521 3,372,526
</Table>
* COMMENCEMENT OF BUSINESS
51
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PART III PROSPECTUSES
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Incorporated by reference to Part II, Item 2 or Part II, Item 5 of the
Registrants most recently filed report on Form 10-Q or 10-K, respectively.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in connection with certain affiliates, maintains various
insurance coverages under which the underwriter and certain affiliated persons
may be insured against liability which may be incurred in such capacity, subject
to the terms, conditions and exclusions of the insurance policies.
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 16. EXHIBITS
(a) EXHIBITS
(1) Form of a Distribution Agreement between Prudential Investment Management
Services, Inc., "PIMS" (Principal Underwriter) and Pruco Life Insurance
Company (Depositor). (Note 2)
(4) (a) Discovery Select Variable Annuity Contract (Note 3)
(b) Strategic Partners Select Variable Annuity Contract (Note 6)
(5) Opinion of Counsel as to the legality of the securities being registered.
(Note 1)
(23) Written Consent of PricewaterhouseCoopers LLP (Note 1)
(24) Powers of Attorney:
(a) Vivian L. Banta, Richard J. Carbone and Helen M. Galt (Note 4)
(b) Ronald P. Joelson (Note 6)
(c) James J. Avery, Jr. (Note 5)
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(d) David R. Odenath, Jr. (Note 6)
(e) William J. Eckert, IV (Note 6)
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(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 on
Form S-1, Registration No. 33-61143, filed April 15, 1999,
on behalf the Pruco Life Insurance Company.
(Note 3) Incorporated by reference to Registrant's Form S-1, filed July 19,
1995.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 5 to
Form S-6, Registration No. 333-85115, filed on or about June 28, 2001
on behalf of the Pruco Life Variable Universal Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 2 to
Form S-6, Registration No. 333-07451, filed June 25, 1997
on behalf of the Pruco Life Variable Appreciable Account.
(Note 6) Incorporated by reference to initial Registration on Form N-4,
Registration No. 333-52754, filed December 26, 2000 on
behalf of the Pruco Life Flexible Premium Variable Annuity Account.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, State of New Jersey, on this 11th day of
April 2003.
PRUCO LIFE INSURANCE COMPANY
(Registrant)
BY: /s/ ANDREW J. MAKO
-----------------------------------
ANDREW J. MAKO
PRESIDENT
Pursuant to the requirements of 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
/s/* April 11, 2003
-------------------------------------
VIVIAN L. BANTA
CHAIRMAN AND DIRECTOR
/s/* *BY: /s/ CLIFFORD E. KIRSCH
------------------------------------- ------------------------------
JAMES J. AVERY, JR. CLIFFORD E. KIRSCH
VICE CHAIRMAN AND DIRECTOR (ATTORNEY-IN-FACT)
-------------------------------------
ANDREW J. MAKO
PRESIDENT AND DIRECTOR
/s/*
-------------------------------------
WILLIAM J. ECKERT, IV
VICE PRESIDENT AND CHIEF
ACCOUNTING OFFICER, (PRINCIPAL
FINANCIAL OFFICER AND CHIEF
ACCOUNTING OFFICER)
/s/*
-------------------------------------
RONALD P. JOELSON
DIRECTOR
/s/*
-------------------------------------
RICHARD J. CARBONE
DIRECTOR
/s/*
-------------------------------------
HELEN M. GALT
DIRECTOR
/s/*
-------------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
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EXHIBIT INDEX
(5) Opinion of Counsel
(23) Written Consent of PricewaterhouseCoopers LLP