AS FILED WITH THE SEC ON APRIL 12, 2004
REGISTRATION NO. 333-103474
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
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PRUCO LIFE INSURANCE COMPANY
--------------------------------------------------------------
(Exact Name of Registrant)
ARIZONA
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(State or other jurisdiction of incorporation or organization)
22-194455
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(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
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(Address and telephone number of principal executive offices)
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4708
--------------------------------------------------------------
(Name, address, and telephone number of agent for service)
Copies to:
C. CHRISTOPHER SPRAGUE
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-6997
================================================================================
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]
<Table>
<Caption>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED* PER UNIT* OFFERING PRICE FEE**
- --------------------------- ------------ ---------------- ---------------- ------------
Market-value adjustment
annuity contracts (or
modified guaranteed
annuity contracts)........ $200,000,000 $200,000,000 $-0-
</Table>
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* Securities are not issued in predetermined units.
** Registration fee for these securities, in the amount of $200 million, was
paid at the time the securities were originally registered on Form S-3 as
filed by Pruco Life Insurance Company on February 27, 2003. 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)
ANNUITY ONE 3
VARIABLE ANNUITY
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PROSPECTUS: MAY 1, 2004
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
- ------------------------------------------------------------
Strategic Partners Annuity One 3 offers a wide variety of investment choices,
including variable investment options that invest in underlying 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
THE DREYFUS CORPORATION
GE ASSET MANAGEMENT, INCORPORATED
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
HOTCHKIS AND WILEY CAPITAL MANAGEMENT LLC
JANUS CAPITAL MANAGEMENT LLC
J.P. MORGAN INVESTMENT MANAGEMENT INC.
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
STATE STREET RESEARCH AND MANAGEMENT COMPANY
WILLIAM BLAIR & COMPANY, LLC
You may choose between two basic versions of Strategic Partners Annuity One 3.
One version, the Contract With Credit, provides for a bonus credit that we add
to each purchase payment you make. If you choose this version of Strategic
Partners Annuity One 3, some charges and expenses may be higher than if you
choose the version without the credit. Those higher charges could exceed the
amount of the credit under some circumstances, particularly if you withdraw
purchase payments within a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners Annuity One 3
variable annuity contract, and keep it for future reference. The current
prospectuses for the underlying mutual funds contain important information about
the mutual funds. When you invest in a variable investment option that is funded
by a mutual fund, you should read the mutual fund prospectus and keep it for
future reference. The Risk Factors section relating to the market value
adjustment option appears on page 14 of this prospectus.
TO LEARN MORE ABOUT STRATEGIC PARTNERS ANNUITY ONE 3
- ------------------------------------------------------------
To learn more about the Strategic Partners Annuity One 3 variable annuity, you
can request a copy of the Statement of Additional Information (SAI) dated May 1,
2004. 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 maintains a Web site (http://www.sec.gov) that contains the Strategic
Partners Annuity One 3 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 75 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
- ------------------------------------------------------------
- - (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 ANNUITY ONE 3 IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
STRATEGIC PARTNERS(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ORD01142
CONTENTS
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<Table>
PART I: STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
-------------------------------------------------
SUMMARY
-------
Glossary........................................... 6
Summary............................................ 10
Risk Factors....................................... 14
Summary Of Contract Expenses....................... 15
Expense Examples................................... 19
PART II: STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
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SECTIONS 1-9
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Section 1: What Is The Strategic Partners Annuity One 3
Variable Annuity?..................................... 26
Short Term Cancellation Right Or "Free Look"....... 27
Section 2: What Investment Options Can I Choose?........ 28
Variable Investment Options........................ 28
Fixed Interest Rate Options........................ 36
Market Value Adjustment Option..................... 37
Transfers Among Options............................ 38
Additional Transfer Restrictions................... 39
Dollar Cost Averaging.............................. 40
Asset Allocation Program........................... 41
Auto-Rebalancing................................... 41
Voting Rights...................................... 41
Substitution....................................... 41
Section 3: What Kind Of Payments Will I Receive During
The Income Phase? (Annuitization)..................... 42
Payment Provisions................................. 42
Payment Provisions Without The Guaranteed Minimum
Income Benefit................................... 42
Option 1: Annuity Payments For A Fixed
Period....................................... 42
Option 2: Life Income Annuity Option........... 42
Option 3: Interest Payment Option.............. 42
Other Annuity Options.......................... 43
Tax Considerations................................. 43
Guaranteed Minimum Income Benefit.................. 43
GMIB Roll-up................................... 44
GMIB Option 1 -- Single Life Payout Option..... 46
GMIB Option 2 -- Joint Life Payout Option...... 46
Income Appreciator Benefit......................... 46
How We Determine Annuity Payments.................. 48
Section 4: What Is The Death Benefit?................... 50
Beneficiary........................................ 50
Calculation Of The Death Benefit................... 50
Guaranteed Minimum Death Benefit................... 50
GMDB Roll-up................................... 50
GMDB Step-up................................... 51
Special Rules If Joint Owners...................... 51
Payout Options..................................... 52
Earnings Appreciator Benefit....................... 52
Spousal Continuance Benefit........................ 53
Section 5: How Can I Purchase A Strategic Partners
Annuity One 3 Contract? .............................. 56
Purchase Payments.................................. 56
Allocation Of Purchase Payments.................... 56
Credits............................................ 56
Calculating Contract Value......................... 57
</Table>
2
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<Table>
<Caption>
Section 6: What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract?............ 58
Insurance And Administrative Charge................ 58
Withdrawal Charge.................................. 59
Waiver Of Withdrawal Charges For Critical Care..... 59
Contract Maintenance Charge........................ 60
Guaranteed Minimum Income Benefit Charge........... 60
Income Appreciator Benefit Charge.................. 60
Earnings Appreciator Benefit Charge................ 61
Taxes Attributable To Premium...................... 62
Transfer Fee....................................... 62
Company Taxes...................................... 62
Underlying Mutual Fund Fees........................ 62
Section 7: How Can I Access My Money?................... 63
Withdrawals During The Accumulation Phase.......... 63
Automated Withdrawals.............................. 63
Income Appreciator Benefit Options During The
Accumulation Phase............................... 63
Suspension Of Payments Or Transfers................ 65
Section 8: What Are The Tax Considerations Associated
With The Strategic Partners Annuity One 3 Contract?... 66
Contracts Owned By Individuals (Not Associated With
Tax-Favored Retirement Plans).................... 66
Contracts Held By Tax-Favored Plans................ 69
Section 9: Other Information............................ 73
Pruco Life Insurance Company....................... 73
The Separate Account............................... 73
Sale And Distribution Of The Contract.............. 73
Litigation......................................... 74
Assignment......................................... 74
Financial Statements............................... 75
Statement Of Additional Information................ 75
Householding....................................... 75
Market-Value Adjustment Formula.................... 76
IRA Disclosure Statement........................... 79
Appendix A.............................................. 83
Accumulation Unit Values........................... 83
Appendix B.............................................. 88
Hypothetical Illustrations......................... 88
</Table>
<Table>
PART III: PROSPECTUSES
----------------------
VARIABLE INVESTMENT OPTIONS
---------------------------
THE PRUDENTIAL SERIES FUND, INC.
JANUS ASPEN SERIES
</Table>
3
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4
PART I SUMMARY
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STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
5
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 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 (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes and
withdrawal charges.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the Earnings
Appreciator Benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which both the New York Stock Exchange and Pruco Life are open for
business. Our business day generally ends at 4:00 p.m. Eastern time.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirements for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept 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
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs than the Contract Without Credit.
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract With
Credit.
6
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive, at a
minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation. The
Guaranteed Minimum Death Benefit is available for an additional charge. See
"What is the Death Benefit?" on page 50.
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 or to the one-year fixed interest rate option.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We may offer one or more
guarantee periods.
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge that guarantees that the
death benefit that the beneficiary receives will be no less than a certain GMDB
protected value.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which may
equal the GMDB roll-up value, the GMDB step-up value, or the greater of the two.
The GMDB protected value will be subject to certain age restrictions and time
durations, however, it will still increase by subsequent invested purchase
payments and reduce proportionally by withdrawals.
GMDB ROLL-UP
We use the GMDB roll-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. The GMDB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate starting
on the date that each invested purchase payment is made, subject to a cap, and
reduced proportionally by withdrawals.
GMDB STEP-UP
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon death,
even if the contract value has declined. For example, if the GMDB step-up were
set at $100,000 on a contract anniversary, and the contract value subsequently
declined to $80,000 on the date of death, the GMDB step-up value would
nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
7
GLOSSARY CONTINUED
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB PROTECTED VALUE
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit.
The value is calculated daily and is equal to the GMIB roll-up, until the
GMIB roll-up either reaches its cap or if we stop applying the annual interest
rate based on the age of the annuitant, number of contract anniversaries or
number of years since last GMIB reset. At such point, the GMIB protected value
will be increased by any subsequent invested purchase payments. Any withdrawals
in subsequent contract years will proportionally reduce the GMIB protected
value. The GMIB protected value is not available as a cash surrender benefit or
a death benefit, nor is it used to calculate the cash surrender value or death
benefit.
GMIB RESET
You may elect to "step-up" or "reset" your GMIB protected value if your contract
value is greater than the current GMIB protected value. Upon exercise of the
reset provision, your GMIB protected value will be reset to equal your current
contract value. You are limited to two resets over the life of your contract,
provided that certain annuitant age requirements are met.
GMIB ROLL-UP
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the contract value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date each
invested purchase payment is made, subject to a cap, and reduced proportionally
by withdrawals.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the Income
Appreciator Benefit during the accumulation phase.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period during which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. The joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT
An adjustment to your contract value or withdrawal proceeds that is based on the
relationship between interest you are currently earning within the market value
adjustment option and prevailing interest rates. This adjustment may be positive
or negative.
8
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
MARKET VALUE ADJUSTMENT OPTION
This investment option may offer various guarantee periods and pays a fixed rate
of interest with respect to each guarantee period. We impose a market value
adjustment on withdrawals or transfers that you make from this option prior to
the end of its guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
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 telephone 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, 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 Annuity One 3 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. Generally,
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 Annuity
One 3 Contract," on page 66.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that 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.
9
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY?
The Strategic Partners Annuity One 3 variable annuity is a contract between you,
the owner, and us, the insurance company, Pruco Life Insurance Company (Pruco
Life, we or us). The contract allows you to invest on a tax-deferred basis in
variable investment options, fixed interest rate options, and the market value
adjustment option. The contract is intended for retirement savings or other
long-term investment purposes and provides for a death benefit.
There are two basic versions of the Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed interest rate options and the
market value adjustment option than the Contract Without Credit, and
- - may provide fewer available market value adjustment guarantee periods than
the Contract Without Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide higher interest rates for fixed interest rate options and the
market value adjustment option than the Contract With Credit, and
- - may provide more available market value adjustment guarantee periods than the
Contract With Credit.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in the Prudential Money Market Portfolio variable
investment option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to be at least
3%.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only 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 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 select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see your contract for further information on these and
other variations.
10
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or not
to make such contract amendments available to contracts that already have been
issued.
If you change your mind about owning Strategic Partners Annuity One 3, you
may cancel your contract within 10 days after receiving it (or whatever period
is required under applicable law). This time period is referred to as the "Free
Look" period.
Pruco Life offers several different annuities which your representative may
be authorized to offer to you. Each annuity has different features and benefits
that may be appropriate for you based on your financial situation, your age and
how you intend to use the annuity. The different features and benefits include
variations in death benefit protection, and the ability to access your annuity's
contract value. The fees and charges under the annuity contract and the
compensation paid to your representative may also be different between each
annuity. If you are purchasing the contract as a replacement for existing
variable annuity or variable life coverage, you should consider, among other
things, any surrender or penalty charges you may incur when replacing your
existing coverage.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any of the following variable investment options:
The Prudential Series Fund, Inc.
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SPGoldman Sachs Small Cap Value Portfolio (formerly SP Small/Mid Cap Value
Portfolio)
SP Growth Asset Allocation Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SPState Street Research Small Cap Growth Portfolio
(formerly SP INVESCO Small Company Growth Portfolio)
SP Strategic Partners Focused Growth Portfolio
SPTechnology Portfolio (formerly SP Alliance Technology Portfolio)
SPWilliam Blair International Growth Portfolio (formerly SP Jennison
International 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
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
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.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB) and the Income
Appreciator Benefit. The Guaranteed Minimum Income Benefit
11
SUMMARY FOR SECTIONS 1-9 CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
provides that once the income period begins, your income payments will be no
less than a value that is based on a certain "GMIB protected value" applied to
the GMIB guaranteed annuity purchase rates. The Income Appreciator Benefit may
provide an additional income amount during the accumulation phase or upon
annuitization. See "What Kind Of Payments Will I Receive During The Income
Phase" on page 42.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first-to-die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum Death
Benefit (GMDB). The base death benefit equals the total invested purchase
payments reduced proportionally by withdrawals. The Guaranteed Minimum Death
Benefit is equal to a "GMDB protected value" that depends upon which of the
following Guaranteed Minimum Death Benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value;"
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value;" or
- - the greater of the GMDB step-up value and GMDB roll-up value.
On the date we receive proof of death in good order, in lieu of paying a
death benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Benefit, if the conditions that we describe
on page 53 are met.
For an additional fee, you may also choose, if it is available in your
contract, the Earnings Appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000, but not greater than $1,000,000 absent our prior
approval. Generally, you can make additional purchase payments of $500 ($100 if
made through electronic funds transfer) or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms. The Contract With Credit provides for the allocation of a
credit with each purchase payment.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year (or upon full surrender) we deduct a contract maintenance charge if
your contract value is less than $75,000. This charge is currently equal to
the lesser of $35 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $75,000 or more. We may impose
lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge as follows:
-- 1.4% if you choose the base death benefit,
-- 1.65% if you choose the roll-up or step-up Guaranteed Minimum Death
Benefit option, or
-- 1.75% if you choose the greater of the roll-up and step-up Guaranteed
Minimum Death Benefit option.
12
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
We impose an additional insurance and administrative charge of 0.10%
annually for the Contract With Credit.
- - We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value. (In some states this fee may be lower.)
- - We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your contract value.
- - We will deduct an additional charge if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge from your contract value on
the contract anniversary and upon certain other events. The charge for this
benefit is based on an annual rate of 0.30% of your contract value.
- - There are a few states/jurisdictions that assess a premium tax on us when you
begin receiving regular income payments from your annuity. In those states,
we deduct a charge designed to approximate this tax, which can range from
0-3.5% of your contract value.
- - There are also expenses associated with the mutual funds. For 2003, the fees
of these funds ranged on an annual basis from 0.37% to 2.56% of fund assets,
which are reduced by expense reimbursements or waivers to 0.37% to 1.30%.
These reimbursements or waivers may be terminated at any time.
- - If you withdraw money (or you begin the income phase) less than seven
contract anniversaries after making a purchase payment, then you may have to
pay a withdrawal charge on all or part of the withdrawal. This charge ranges
from 1-7% for the Contract Without Credit and 5-8% for the Contract With
Credit. (In certain states reduced withdrawal charges may apply for certain
ages. Your contract contains the applicable charges.)
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" on page 15 and "What Are The
Expenses Associated With The Strategic Partners Annuity One 3 Contract?" on page
58.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. For the Contract Without Credit, if
you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging from 1-7%. For the
Contract With Credit, we may impose a withdrawal charge ranging from 5-8%. (In
certain states reduced withdrawal charges may apply for certain ages. Your
contract contains the applicable charges.)
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY
ONE 3 CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal as a withdrawal
of earnings, which 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 and therefore will not be taxable as income. Generally, all amounts
withdrawn from an Individual Retirement Annuity (IRA) contract (excluding Roth
IRAs) are
13
SUMMARY FOR SECTIONS 1-9 CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
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 of affiliated and unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option that we summarize below.
ISSUER RISK. The market value adjustment option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life, and thus 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 and fixed interest rate options and to fulfill its insurance
guarantees 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 prior to the end of a guarantee
period and 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 may impose withdrawal charges on
amounts withdrawn from the market value adjustment 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.
14
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS ANNUITY ONE 3. 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.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Annuity One 3 Contract?" on page 58. The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
CONTRACT OWNER TRANSACTION EXPENSES
<Table>
<Caption>
WITHDRAWAL CHARGE(1)
- -----------------------------------------
CONTRACT CONTRACT CONTRACT
ANNIVERSARIES SINCE WITH WITHOUT
PURCHASE PAYMENT CREDIT CREDIT
- ------------------- -------- --------
0 8% 7%
1 8% 6%
2 8% 5%
3 8% 4%
4 7% 3%
5 6% 2%
6 5% 1%
7 0% 0%
</Table>
<Table>
<Caption>
MAXIMUM TRANSFER FEE
- --------------------------------------------------------------
Each transfer after 12(2) $30.00
CHARGE FOR PREMIUM TAX IMPOSED ON US BY CERTAIN
STATES/JURISDICTIONS
- --------------------------------------------------------------
Up to 3.5% of contract value
</Table>
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal charge
if we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 59. In certain states reduced withdrawal charges may apply under
the Contract with Credit. Your contract contains the applicable charges.
2: Currently, we charge $25 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of $30,
but have no current intention to do so. We will not charge you for transfers
made in connection with Dollar Cost Averaging and Auto-Rebalancing or transfers
from the market value adjustment option at the end of a guarantee period, and do
not count them toward the limit of 12 free transfers per year.
15
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
The next table describes the fees and expenses you will pay periodically during
the time that you own the contract, not including underlying mutual fund fees
and expenses.
ANNUAL ACCOUNT EXPENSES
<Table>
MAXIMUM CONTRACT MAINTENANCE CHARGE AND CONTRACT CHARGE
UPON FULL WITHDRAWAL(3)
- ---------------------------------------------------------------------
$60.00
ANNUAL INSURANCE AND ADMINISTRATIVE EXPENSES
- ---------------------------------------------------------------------
AS A PERCENTAGE OF ACCOUNT VALUE IN VARIABLE
INVESTMENT OPTIONS
Base Death Benefit: 1.40%
Guaranteed Minimum Death Benefit Option--Roll-Up or
Step-Up: 1.65%
Guaranteed Minimum Death Benefit Option--Greater of
Roll-Up and Step-Up: 1.75%
Additional Charge for Contract With Credit(4) 0.10%
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(5) (for contracts sold on or
after January 20, 2004, or upon subsequent state approval)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.50%
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(5) (FOR ALL OTHER CONTRACTS)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.45%
ANNUAL INCOME APPRECIATOR BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(6)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.25%
ANNUAL EARNINGS APPRECIATOR BENEFIT CHARGE AND CHARGE
UPON CERTAIN TRANSACTIONS(7)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.30%
</Table>
3: Currently, we waive this fee if your contract value is greater than or equal
to $75,000. If your contract value is less than $75,000, we currently charge the
lesser of $35 or 2% of your contract value. This is a single fee that we assess
(a) annually or (b) upon full withdrawal made on a date other than a contract
anniversary. As shown in the table, we can increase this fee in the future up to
a maximum of $60, but we have no current intention to do so. This charge may be
lower in certain states.
4: We impose this additional charge of 0.10% annually on the Contract With
Credit, irrespective of which death benefit option you choose.
5: We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after January
20, 2004, or upon subsequent state approval (0.45% for all other contracts) of
the average GMIB protected value, which is calculated daily and generally is
equal to the GMIB roll-up value. In some states this charge is 0.30%, see your
contract for details. Subject to certain age or duration restrictions, the
roll-up value is the total of all invested purchase payments (after a reset, the
contract value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. The reduction is
equal to the amount of the withdrawal for the first 5% of the roll-up value,
calculated as of the latest contract anniversary (or contract date). The amount
of the withdrawal in excess of 5% of the roll-up value further reduces the
roll-up value and 200% cap proportionally to the additional reduction in
contract value after the first 5% withdrawal occurs. We assess this fee each
contract anniversary and when you begin the income phase of your contract. We
also assess this fee if you make a full withdrawal, but prorate the fee based on
the portion of the contract year that has elapsed since the full annual fee was
most recently deducted. If you make a partial withdrawal, we will assess the
prorated fee if the remaining contract value after the withdrawal would be less
than the amount of the prorated fee; otherwise we will not assess the fee at
that time.
6: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last deducted.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable charge. With
respect to full and partial withdrawals, we prorate the fee based on the portion
of the contract year that has elapsed since the full annual fee was most
recently deducted. We reserve the right to calculate and deduct the fee more
frequently than annually, such as quarterly.
7: We impose this charge only if you choose the Earnings Appreciator Benefit.
The charge for this benefit is based on an annual rate of 0.30% of your contract
value. Although the charge may be calculated more often, it is deducted only: on
each contract anniversary, on the annuity date, upon the death of the sole owner
or first to die of the owner or joint owner prior to the annuity date, upon a
full withdrawal, and upon a partial withdrawal if the contract value remaining
after such partial withdrawal is not enough to cover the then-applicable
earnings appreciator charge. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
16
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PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other 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 below and 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, 2003. Fund expenses
are not fixed or guaranteed by the Strategic Partners Annuity One 3 contract,
and may vary from year to year.
<Table>
<Caption>
MINIMUM MAXIMUM
------- -------
Total Annual Underlying Mutual Fund Operating Expenses 0.37% 2.56%
* Actual expenses for the mutual funds are lower due to certain 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.
</Table>
17
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
<Table>
<Caption>
ANNUAL MUTUAL FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------------
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OTHER
ADVISORY FEES EXPENSES TOTAL EXPENSES(1)
THE PRUDENTIAL SERIES FUND, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
Jennison Portfolio 0.60% 0.04% 0.64%
Prudential Equity Portfolio 0.45% 0.04% 0.49%
Prudential Global Portfolio 0.75% 0.12% 0.87%
Prudential Money Market Portfolio 0.40% 0.04% 0.44%
Prudential Stock Index Portfolio 0.35% 0.02% 0.37%
Prudential Value Portfolio 0.40% 0.04% 0.44%
SP Aggressive Growth Asset Allocation Portfolio(2,
3) 0.85% 0.30% 1.15%
SP AIM Aggressive Growth Portfolio(2) 0.95% 1.07% 2.02%
SP AIM Core Equity Portfolio(2) 0.85% 0.87% 1.72%
SP Alliance Large Cap Growth Portfolio 0.90% 0.16% 1.06%
SP Balanced Asset Allocation Portfolio(2, 3) 0.77% 0.21% 0.98%
SP Conservative Asset Allocation Portfolio(2, 3) 0.72% 0.16% 0.88%
SP Davis Value Portfolio 0.75% 0.07% 0.82%
SP Deutsche International Equity Portfolio(2) 0.90% 0.40% 1.30%
SP Goldman Sachs Small Cap Value Portfolio
(formerly SP Small/Mid Cap Value Portfolio) 0.90% 0.14% 1.04%
SP Growth Asset Allocation Portfolio(2, 3) 0.81% 0.26% 1.07%
SP Large Cap Value Portfolio(2) 0.80% 0.31% 1.11%
SP MFS Capital Opportunities Portfolio(2) 0.75% 1.27% 2.02%
SP Mid-Cap Growth Portfolio(2) 0.80% 0.54% 1.34%
SP PIMCO High Yield Portfolio 0.60% 0.12% 0.72%
SP PIMCO Total Return Portfolio 0.60% 0.05% 0.65%
SP Prudential U.S. Emerging Growth Portfolio 0.60% 0.20% 0.80%
SP State Street Research Small Cap Growth
Portfolio(2)
(formerly SP INVESCO Small Company Growth
Portfolio) 0.95% 0.83% 1.78%
SP Strategic Partners Focused Growth Portfolio(2) 0.90% 0.75% 1.65%
SP Technology Portfolio(2)
(formerly SP Alliance Technology Portfolio) 1.15% 1.41% 2.56%
SP William Blair International Growth Portfolio
(formerly SP Jennison International Growth
Portfolio) 0.85% 0.30% 1.15%
</Table>
<Table>
<Caption>
INVESTMENT 12B-1 OTHER TOTAL
ADVISORY FEES FEE EXPENSES EXPENSES
JANUS ASPEN SERIES(4)
- --------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio -- Service Shares 0.65% 0.25% 0.02% 0.92%
</Table>
1. The Total Expenses do not reflect fee waivers, reimbursement of expenses, or
expense offset arrangements for the fiscal year ended December 31, 2003.
2. The portfolios' total actual annual operating expenses for the year ended
December 31, 2003 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
expense reimbursements are voluntary and may be terminated by Prudential
Investments LLC at any time. After accounting for the expense reimbursements,
the portfolios' actual annual operating expenses were:
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Aggressive Growth Asset
Allocation Portfolio 0.97%
SP AIM Aggressive Growth Portfolio 1.07%
SP AIM Core Equity Portfolio 1.00%
SP Balanced Asset Allocation
Portfolio 0.87%
SP Conservative Asset Allocation
Portfolio 0.81%
SP Deutsche International Equity
Portfolio 1.10%
SP Growth Asset Allocation
Portfolio 0.92%
</Table>
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Large Cap Value Portfolio 0.90%
SP MFS Capital Opportunities
Portfolio 1.00%
SP Mid Cap Growth Portfolio 1.00%
SP State Street Research Small Cap
Growth Portfolio 1.15%
SP Strategic Partners Focused
Growth Portfolio 1.01%
SP Technology Portfolio 1.30%
</Table>
3. Each asset allocation portfolio invests in a combination of underlying
portfolios of The Prudential Series Fund, Inc. The Total Expenses for each asset
allocation portfolio are calculated as a blend of the fees of the underlying
portfolios, plus a 0.05% advisory fee payable to the investment adviser,
Prudential Investments LLC. The 0.05% advisory fee is included in the amount of
each investment advisory fee set forth in the table above.
4. Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc.
18
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
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 1A: Contract With Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit;
- - You choose a Guaranteed Minimum Death Benefit that provides the greater of
the step-up and roll-up death benefit;
- - You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after January 20, 2004, or upon subsequent state approval);
- - You choose the Earnings Appreciator Benefit;
- - You choose the Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
19
EXPENSE EXAMPLES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
EXAMPLE 1b: Contract With Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 2a: Contract Without Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 2b: Contract Without Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3a: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit;
- - You do not choose a Guaranteed Minimum Death Benefit, Earnings Appreciator
Benefit, Guaranteed Minimum Income Benefit, or Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 3b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
20
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
EXAMPLE 4a: Contract Without Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4b: Contract Without Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 4a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Note that withdrawal charges (which
are reflected in Examples 1a, 2a,
3a and 4a) are assessed in
connection with some annuity
options, but not others.
The values shown in the 10 year
column are the same for Example 4a
and 4b, the same for Example 3a and
3b, the same for Example 2a and 2b,
and the same for Example 1a and 1b.
This is because if 10 years have
elapsed since your last purchase
payment, we would no longer deduct
withdrawal charges when you make a
withdrawal. The indicated examples
reflect the maximum withdrawal
charges, but in certain states
reduced withdrawal charges may
apply for certain ages.
The examples use an average
contract maintenance charge, which
we calculated based on our estimate
of the total contract fees we
expect to collect in 2004. Based on
these estimates, the contract
maintenance charge is included as
an annual charge of 0.062% of
contract value. Your actual fees
will vary based on the amount of
your contract and your specific
allocation among the investment
options.
Premium taxes are not reflected in
the examples. We deduct a charge to
approximate premium taxes that may
be imposed on us in your state.
This charge is generally deducted
from the amount applied to an
annuity payout option.
A table of accumulation unit values
appears in the Appendix to this
prospectus.
21
EXPENSE EXAMPLES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY
<Table>
<Caption>
CONTRACT WITH CREDIT: GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM
DEATH BENEFIT OPTION; GUARANTEED MINIMUM INCOME BENEFIT; EARNINGS
APPRECIATOR BENEFIT; INCOME APPRECIATOR BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 1a: EXAMPLE 1b:
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
$1,325 $2,461 $3,492 $5,595 $573 $1,709 $2,834 $5,595
</Table>
<Table>
<Caption>
CONTRACT WITHOUT CREDIT: GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM
DEATH BENEFIT OPTION; GUARANTEED MINIMUM INCOME BENEFIT; EARNINGS
APPRECIATOR BENEFIT; INCOME APPRECIATOR BENEFIT
- --------------------------------------------------------------------------------
EXAMPLE 2a: EXAMPLE 2b:
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
$1,171 $2,066 $2,953 $5,309 $541 $1,616 $2,683 $5,309
</Table>
<Table>
<Caption>
CONTRACT WITH CREDIT: BASE DEATH BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 3a: EXAMPLE 3b:
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
$1,183 $2,055 $2,849 $4,480 $431 $1,303 $2,191 $4,480
</Table>
<Table>
<Caption>
CONTRACT WITHOUT CREDIT: BASE DEATH BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 4a: EXAMPLE 4b:
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
$1,034 $1,674 $2,331 $4,224 $404 $1,224 $2,061 $4,224
</Table>
22
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23
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24
PART II SECTIONS 1-9
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
25
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU,
THE OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the third contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract in
a tax-favored plan such as an IRA, that plan generally provides tax deferral
even without investing in an annuity contract. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
There are two basic versions of Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for fixed interest rate options and the
market value adjustment option than the Contract Without Credit, and
- - may provide fewer available market value adjustment guarantee periods than
the Contract Without Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for fixed interest rate options and the
market value adjustment option than the Contract With Credit, and
- - may provide more market value adjustment guarantee periods than the Contract
With Credit.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Annuity One 3 if you anticipate having to withdraw a
significant amount of your purchase payments within a few years of making those
purchase payments.
Strategic Partners Annuity One 3 is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options and a market value adjustment
option. If you select variable investment options, the amount of money you are
able to accumulate in your contract during the accumulation phase depends upon
the investment performance of the underlying mutual fund(s) associated with that
variable investment option.
Because the underlying 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.
26
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Annuity One 3, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the contract
either to the representative who sold it to you, or to the Prudential Annuity
Service Center at the address shown on the first page of this prospectus. You
will receive, depending on applicable state law:
- - Your full purchase payment, less any applicable federal and state income tax;
or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. We impose neither a withdrawal
charge nor any market value adjustment if you cancel your contract under this
provision.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your contract value. To the extent dictated by state law, we will
include in your refund the amount of any fees and charges that we deducted.
27
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
- --------------------------------------------------------------------------------
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY OF
THE VARIABLE INVESTMENT OPTIONS, FIXED INTEREST RATE OPTIONS, AND A MARKET VALUE
ADJUSTMENT OPTION.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their shares
to both variable annuity and variable life separate accounts of different
insurance companies, which could create the kinds of risks that are described in
more detail in the current prospectus for the underlying mutual fund. The
current prospectuses for the underlying mutual funds also contain other
important information about the mutual funds. When you invest in a variable
investment option that is funded by a mutual fund, you should read the mutual
fund prospectus and keep it for future reference.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment of
their investment style (as of the date of this prospectus). The chart also
provides a description of each portfolio's investment objective (in italics) and
a short, summary description of their key policies to assist you in determining
which portfolios may be of interest to you. There is no guarantee that any
portfolio will meet its investment objective. The name of the adviser/subadviser
for each portfolio appears next to the description.
All the portfolios on the following chart, except for the Janus Aspen
Series -- Growth Portfolio, are Prudential Series Fund portfolios. The Jennison
Portfolio, Prudential Equity Portfolio, Prudential Global Portfolio, Prudential
Money Market Portfolio, Prudential Stock Index Portfolio and Prudential Value
Portfolio, and each "SP" Portfolio of the Prudential Series Fund, are managed by
an indirect wholly-owned subsidiary of Prudential Financial, Inc. called
Prudential Investments LLC (PI) under a "manager-of-managers" approach. The SP
Aggressive Growth Asset Allocation Portfolio, SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio invest in other Prudential Series Fund Portfolios, and are
managed by 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 manage some or all of a Prudential Series Fund portfolio are
listed on the following chart.
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. With regard to its variable
annuity contracts generally, Pruco Life receives fees that range from 0.05% to
0.40% annually for providing such services.
As detailed in the Prudential Series Fund prospectus, although the Prudential
Money Market Portfolio is designed to be a stable investment option, it is
possible to lose money in that portfolio. For example, when prevailing
short-term interest rates are very low, the yield on the Prudential Money Market
Portfolio may be so low that, when separate account and contract charges are
deducted, you experience a negative return.
28
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JENNISON PORTFOLIO: seeks long-term growth of capital. The Jennison Associates
Portfolio invests primarily in equity securities of major, LLC
established corporations that the subadviser believes offer
above-average growth prospects. The Portfolio may invest up
to 30% of its total assets in foreign securities. Stocks are
selected on a company-by-company basis using fundamental
analysis. Normally 65% of the Portfolio's total assets are
invested in common stocks and preferred stocks of companies
with capitalization in excess of $1 billion.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE PRUDENTIAL EQUITY PORTFOLIO: seeks long-term growth of GE Asset Management,
capital. The Portfolio invests at least 80% of its Incorporated;
investable assets in common stocks of major established Jennison Associates
corporations as well as smaller companies that the LLC; Salomon Brothers
subadvisers believe offer attractive prospects of Asset Management Inc.
appreciation. The Portfolio may invest up to 30% of its
total assets in foreign securities. The Portfolio may also
invest 20% of its investable assets in short, intermediate
or long-term debt obligations, convertible and
nonconvertible preferred stock and other equity-related
securities. Up to 5% of these investable assets may be rated
below investment grade. Debt securities rated below
investment grade are considered speculative and are
sometimes referred to as "junk bonds."
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PRUDENTIAL GLOBAL PORTFOLIO: seeks long-term growth of Jennison Associates
capital. The Portfolio invests primarily in common stocks LLC
(and their equivalents) of foreign and U.S. companies. When
selecting stocks, the subadviser uses a growth approach
which means that it looks for companies that have
above-average growth prospects. Generally, the Portfolio
invests in at least three countries, including the U.S., but
may invest up to 35% of the Portfolio's assets in companies
located in any one country other than the U.S.
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET PRUDENTIAL MONEY MARKET PORTFOLIO: seeks maximum current Prudential Investment
income consistent with the stability of capital and the Management, Inc.
maintenance of liquidity. The Portfolio invests in
high-quality short-term money market instruments issued by
the U.S. Government or its agencies, as well as by
corporations and banks, both domestic and foreign. The
Portfolio will invest only in instruments that mature in
thirteen months or less, and which are denominated in U.S.
dollars.
- -----------------------------------------------------------------------------------------------------------------------
MANAGED INDEX PRUDENTIAL STOCK INDEX PORTFOLIO: seeks investment results Prudential Investment
that generally correspond to the performance of Management, Inc.
publicly-traded common stocks. With the price and yield
performance of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) as the benchmark, the Portfolio
normally invests at least 80% of investable assets in S&P
500 stocks. The S&P 500 represents more than 70% of the
total market value of all publicly-traded common stocks and
is widely viewed as representative of publicly-traded common
stocks as a whole. The Portfolio is not "managed" in the
traditional sense of using market and economic analyses to
select stocks. Rather, the portfolio manager purchases
stocks in proportion to their weighting in the S&P 500.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
29
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE PRUDENTIAL VALUE PORTFOLIO: seeks capital appreciation. The Jennison Associates
Portfolio invests primarily in common stocks that the LLC
subadviser believes are undervalued -- those stocks that are
trading below their underlying asset value, cash generating
ability and overall earnings and earnings growth. There is a
risk that "value" stocks can perform differently from the
market as a whole and other types of stocks and can continue
to be undervalued by the markets for long periods of time.
Normally at least 65% of the Portfolio's total assets is
invested in the common stock and convertible securities of
companies that the subadviser believes will provide
investment returns above those of the S&P 500 or the New
York Stock Exchange (NYSE) Composite Index. Most of the
investments will be securities of large capitalization
companies. The Portfolio may invest up to 25% of its total
assets in real estate investment trusts (REITs) and up to
30% of its total assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO: seeks to Prudential
obtain the highest potential total return consistent with Investments LLC
the specified level of risk tolerance. The Portfolio seeks
to achieve this investment objective by investing in several
other Series Fund Portfolios ("Underlying Portfolios"),
which currently consist of domestic equity Portfolios and
international equity Portfolios. The domestic equity
component is approximately 78% of the Portfolio and the
international equity component is approximately 22% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP AIM AGGRESSIVE GROWTH PORTFOLIO: seeks long-term growth A I M Capital
of capital. The Portfolio invests primarily in the common Management, Inc.
stocks of companies whose earnings the subadviser expects to
grow more than 15% per year. Growth stocks may involve a
higher level of risk than value stocks, because growth
stocks tend to attract more attention and more speculative
investments than value stocks. On behalf of the Portfolio,
the subadviser invests in securities of small and medium
sized growth companies, may invest up to 25% of the
Portfolio's total assets in foreign securities and may
invest up to 15% of the Portfolio's total assets in real
estate investment trusts (REITs).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP AIM CORE EQUITY PORTFOLIO: seeks growth of capital. The A I M Capital
Portfolio normally invests at least 80% of investable assets Management, Inc.
in equity securities, including convertible securities of
established companies that have long-term above-average
growth in earnings and growth companies that the subadviser
believes have the potential for above-average growth in
earnings. The Portfolio may invest up to 20% of its total
assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP ALLIANCE LARGE CAP GROWTH PORTFOLIO: seeks growth of Alliance Capital
capital by pursuing aggressive investment policies. The Management, L.P.
Portfolio normally invests at least 80% of its investable
assets in stocks of companies considered to have large
capitalizations (i.e., similar to companies included in the
S&P 500 Index). Unlike most equity funds, the Portfolio
focuses on a relatively small number of intensively
researched companies. The Portfolio usually invests in about
40-60 companies, with the 25 most highly regarded of these
companies generally constituting approximately 70% of the
Portfolio's investable assets. Up to 15% of the Portfolio's
total assets may be invested in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
30
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP BALANCED ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide a
balance between current income and growth of capital by
investing in several other Series Fund Portfolios
("Underlying Portfolios"), which currently consist of fixed
income Portfolios, domestic equity Portfolios, and
international equity Portfolios. The fixed income component
is approximately 37% of the Portfolio, the domestic equity
component is approximately 49% of the Portfolio, and the
international equity component is approximately 14% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO: seeks to obtain Prudential
the highest potential total return consistent with the Investments LLC
specified level of risk tolerance. The Portfolio seeks to
provide current income with low to moderate capital
appreciation by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of fixed income Portfolios, domestic equity
Portfolios, and international equity Portfolios. The fixed
income component is approximately 57% of the Portfolio, the
domestic equity component is approximately 33% of the
Portfolio, and the international equity component is
approximately 10% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP DAVIS VALUE PORTFOLIO: seeks growth of capital. The Davis Advisors
Portfolio invests primarily in common stocks of U.S.
companies with market capitalizations of at least $5
billion. It may also invest in stocks of foreign companies
and U.S. companies with smaller capitalizations. The
subadviser selects common stocks of quality, overlooked
growth companies at value prices and holds them for the
long-term. It looks for companies with sustainable growth
rates selling at modest price-earnings multiples that it
hopes will expand as other investors recognize the company's
true worth. There is a risk that "value" stocks can perform
differently from the market as a whole and other types of
stocks and can continue to be undervalued by the markets for
long periods of time.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO: seeks long-term Deutsche Asset
capital appreciation. The Portfolio invests primarily in the Management Investment
stocks of companies located in developed foreign countries Services Limited
that make up the MSCI EAFE Index, plus Canada. The Portfolio
also may invest in emerging markets securities. The
Portfolio normally invests at least 80% of its investable
assets in the stocks and other securities with equity
characteristics of companies in developed countries outside
the U.S.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP GROWTH ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide
long-term growth of capital with consideration also given to
current income by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of domestic equity Portfolios, fixed income
Portfolios, and international equity Portfolios. The
domestic equity component is approximately 64% of the
Portfolio, the fixed income component is approximately 18%
of the Portfolio, and the international equity component is
approximately 18% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
31
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO (FORMERLY SP Goldman Sachs Asset
SMALL/MID CAP VALUE PORTFOLIO): seeks long-term capital Management, L.P.
growth. The Portfolio normally invests at least 80% of
investable assets in small capitalization companies that are
generally believed to be undervalued in the marketplace. The
80% requirement applies at the time the Portfolio invests
its assets. The Portfolio generally defines small
capitalization stocks as stocks of companies with a
capitalization of $4 billion or less.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP LARGE CAP VALUE PORTFOLIO: seeks long-term growth of Hotchkis and Wiley
capital. The Portfolio normally invests at least 80% of Capital Management
investable assets in common stocks and securities LLC; J.P. Morgan
convertible into common stock of companies that are believed Investment Management
to be undervalued and have an above-average potential to Inc.
increase in price, given the company's sales, earnings, book
value, cash flow and recent performance. The Portfolio seeks
to achieve its objective through investments primarily in
equity securities of large capitalization companies. The
Portfolio generally defines large capitalization companies
as those with a total market capitalization of $5 billion or
more (measured at the time of purchase).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP MFS CAPITAL OPPORTUNITIES PORTFOLIO: seeks capital Massachusetts
appreciation. The Portfolio normally invests at least 65% of Financial Services
net assets in common stocks and related securities, such as Company (MFS)
preferred stocks, convertible securities and depositary
receipts for those securities. The Portfolio focuses on
companies that the subadviser believes have favorable growth
prospects and attractive valuations based on current and
expected earnings or cash flow. The Portfolio's investments
may include securities listed on a securities exchange or
traded in the over-the-counter markets. The subadviser uses
a bottom-up, as opposed to a top-down, investment style in
managing the Portfolio. This means that securities are
selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and
management's abilities). The Portfolio may invest in foreign
securities (including emerging market securities), through
which it may have exposure to foreign currencies.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP MID CAP GROWTH PORTFOLIO: seeks long-term growth of Calamos Asset
capital. The Portfolio normally invests at least 80% of Management, Inc.
investable assets in common stocks and related securities,
such as preferred stocks, convertible securities and
depositary receipts for those securities. These securities
typically are of medium market capitalizations, which the
subadviser believes have above-average growth potential.
Medium market capitalization companies are defined by the
Portfolio as companies with market capitalizations equaling
or exceeding $250 million but not exceeding the top of the
Russell Midcap(TM) Growth Index range at the time of the
Portfolio's investment. The Portfolio's investments may
include securities listed on a securities exchange or traded
in the over-the-counter markets. The subadviser uses a
bottom-up and top-down analysis in managing the Portfolio.
This means that securities are selected based upon
fundamental analysis, as well as a top-down approach to
diversification by industry and company, and by paying
attention to macro-level investment themes. The Portfolio
may invest in foreign securities (including emerging markets
securities).
- -----------------------------------------------------------------------------------------------------------------------
</Table>
32
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND SP PIMCO HIGH YIELD PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio normally invests at LLC (PIMCO)
least 80% of investable assets in a diversified portfolio of
high yield/high risk securities rated below investment grade
but rated at least B by Moody's Investor Service, Inc.
(Moody's) or Standard & Poor's Ratings Group (S&P), or, if
unrated, determined by the subadviser to be of comparable
quality. The remainder of the Portfolio's assets may be
invested in investment grade fixed income instruments. The
duration of the Portfolio normally varies within a two to
six year time frame based on the subadviser's forecast for
interest rates. The Portfolio may invest without limit in
U.S. dollar-denominated securities of foreign issuers. The
Portfolio may invest up to 15% of its assets in
euro-denominated securities.
- -----------------------------------------------------------------------------------------------------------------------
BOND SP PIMCO TOTAL RETURN PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio invests primarily in LLC (PIMCO)
investment grade debt securities. The Portfolio normally
invests at least 65% of its assets in a diversified
portfolio of fixed income instruments of varying maturities.
It may also invest up to 10% of its assets in high
yield/high risk securities (also known as "junk bonds")
rated B or higher by Moody's or S&P or, if unrated,
determined by the subadviser to be of comparable quality.
The portfolio duration of this Portfolio normally varies
within a three to six year time frame based on the
subadviser's forecast for interest rates.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO: seeks Jennison Associates
long-term capital appreciation. The Portfolio normally LLC
invests at least 80% of investable assets in equity
securities of small and medium sized U.S. companies that the
subadviser believes have the potential for above-average
growth. The Portfolio considers small and medium-sized
companies to be those with market capitalizations that are
less than the largest capitalization of the Standard and
Poor's Mid Cap 400 Stock Index as of the end of a calendar
quarter. As of December 31, 2003, this number was $11.8
billion. The Portfolio can invest up to 20% of investable
assets in equity securities of companies with larger or
smaller market capitalizations than previously noted. The
Portfolio can invest up to 35% of total assets in foreign
securities. The Portfolio also may use derivatives for
hedging or to improve the Portfolio's returns.
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO State Street Research
(FORMERLY SP INVESCO SMALL COMPANY GROWTH PORTFOLIO): seeks and Management
long-term capital growth. The Portfolio normally invests at Company
least 80% of investable assets in common stocks of small-
capitalization companies -- those which are included in the
Russell 2000 Growth Index at the time of purchase, or if not
included in that index, have market capitalizations of $2.5
billion or below at the time of purchase. Investments in
small, developing companies carry greater risk than
investments in larger, more established companies.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
33
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<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO: seeks Alliance Capital
long-term growth of capital. The Portfolio normally invests Management, L.P.;
at least 65% of total assets in equity-related securities of Jennison Associates
U.S. companies that the subadvisers believe to have strong LLC
capital appreciation potential. The Portfolio's strategy is
to combine the efforts of two subadvisers and to invest in
the favorite stock selection ideas of three portfolio
managers (two of whom invest as a team). Each subadviser to
the Portfolio utilizes a growth style to select
approximately 20 securities. The portfolio managers build a
portfolio with stocks in which they have the highest
confidence and may invest more than 5% of the Portfolio's
assets in any one issuer. The Portfolio is nondiversified,
meaning it can invest a relatively high percentage of its
assets in a small number of issuers. Investing in a
nondiversified portfolio, particularly a portfolio investing
in approximately 40 equity-related securities, involves
greater risk than investing in a diversified portfolio
because a loss resulting from the decline in the value of
one security may represent a greater portion of the total
assets of a nondiversified portfolio.
- -----------------------------------------------------------------------------------------------------------------------
SECTOR SP TECHNOLOGY PORTFOLIO (FORMERLY SP ALLIANCE TECHNOLOGY The Dreyfus
PORTFOLIO): seeks growth of capital. The Portfolio normally Corporation
invests at least 80% of investable assets in securities of
companies that use technology extensively in the development
of new or improved products or processes. The Portfolio also
may invest up to 25% of its total assets in foreign
securities. The Portfolio's investments in stocks may
include common stocks, preferred stocks and convertible
securities, including those purchased in initial public
offerings (IPOs). Technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile
than the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO (FORMERLY SP William Blair &
JENNISON INTERNATIONAL GROWTH PORTFOLIO): seeks long-term Company, LLC
growth of capital. The Portfolio invests primarily in
equity-related securities of foreign issuers that the
subadviser thinks will increase in value over a period of
years. The Portfolio invests primarily in the common stock
of large and medium-sized foreign companies. Under normal
circumstances, the Portfolio invests at least 65% of its
total assets in common stock of foreign companies operating
or based in at least five different countries. The Portfolio
looks primarily for stocks of companies whose earnings are
growing at a faster rate than other companies and that have
above average growth in earnings and cash flow, improving
profitability, strong balance sheets, management strength
and strong market share for its products. The Portfolio also
tries to buy such stocks at attractive prices in relation to
their growth prospects.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JANUS ASPEN SERIES: GROWTH PORTFOLIO -- SERVICE SHARES: Janus Capital
seeks long-term growth of capital in a manner consistent Management LLC
with the preservation of capital. The Portfolio invests
primarily in domestic and foreign equity securities, which
may include preferred stocks, common stocks and securities
convertible into common or preferred stocks. To a lesser
degree, the Portfolio may invest in other types of domestic
and foreign securities and use other investment strategies.
The Portfolio invests primarily in common stocks selected
for their growth potential. Although the Portfolio can
invest in companies of any size, it generally invests in
larger, more established companies. Janus Capital generally
takes a "bottom up' approach to selecting companies. This
means that it seeks to identify individual companies with
earnings growth potential that may not be recognized by the
market at large. The Portfolio will limit its investment in
high-yield/high-risk bonds to less than 35% of its net
assets.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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PART II
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FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed 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 they
will not be less than the minimum interest rate indicated in your contract which
can range from 1% to 3%. We may offer lower interest rates for Contracts With
Credit than for Contracts Without Credit.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year.
DOLLAR COST AVERAGING FIXED RATE OPTION
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred to
the selected variable investment options, or to the one-year fixed interest rate
option in either six or twelve monthly installments, and you may not change that
number of monthly installments after you have chosen the DCA Fixed Rate Option.
You may allocate to both the six-month and twelve-month options. (In the future,
we may make available other numbers of transfers and other transfer
schedules--for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6th of the amount you allocated to the DCA Fixed Rate Option, and if you
choose a twelve-payment transfer schedule, each transfer generally will equal
1/12th of the amount you allocated to the DCA Fixed Rate Option. In either case,
the final transfer amount generally will also include the credited interest. You
may change at any time the investment options into which the DCA Fixed Rate
Option assets are transferred. You may make a one time transfer of the remaining
value out of your DCA Fixed Rate Option, if you so choose. Transfers from the
DCA Fixed Rate Option do not count toward the maximum number of free transfers
allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer
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the remaining balance in the DCA Fixed Rate Option on the next scheduled
transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will be
no less than 3% interest annually with respect to any guarantee period. We may
offer fewer available guarantee periods in Contracts With Credit than in
Contracts Without Credit. This option is not available for contracts issued in
some states. Please see your contract. The market value adjustment option is
registered separately from the variable investment options, and the amount of
market value adjustment option securities registered is stated in that
registration statement.
IF AMOUNTS ARE WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE
30-DAY PERIOD IMMEDIATELY FOLLOWING THE END OF THE GUARANTEE PERIOD, THEY WILL
BE SUBJECT TO A MARKET VALUE ADJUSTMENT EVEN IF THEY ARE NOT SUBJECT TO A
WITHDRAWAL CHARGE.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at least
$1,000 if you choose this option. We may offer lower interest rates for
Contracts With Credit than for Contracts Without Credit.
We refer to interest rates as annual rates, although we credit interest
within each guarantee period on a daily basis. The daily interest that we credit
is equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center until
the earliest to occur of any of the following events: (a) full surrender of the
contract, (b) commencement of annuity payments or settlement, (c) end of the
guarantee period, (d) transfer of the value in the guarantee period, (e) payment
of a death benefit, or (f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdraw or transfer the value in the guarantee period,
(b) allocate the value to another available guarantee period or other investment
option (provided that the new guarantee period ends prior to the annuity
date). You will receive the interest rate applicable on the date we receive
your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the amount in
the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) listed immediately above, you
will receive the current interest rate applicable to the guarantee period having
the same duration as the guarantee period that just matured, which is offered on
the day immediately following the end of the matured guarantee period. However,
if at that time we do not offer a guarantee period with the same duration as
that which matured, you will then receive the current interest rate applicable
to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least 3%.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life.
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PART II
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MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. For example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by changes
in interest rates, among other factors. The market value adjustment that we
assess against your contract value if you withdraw or transfer outside the
30-day period discussed above involves our attributing to you a portion of our
investment experience on these bonds and other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in a
reduction of the withdrawal proceeds that you receive). For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining contract value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD UNDER YOUR CONTRACT DOES NOT
DEPEND ON THE INVESTMENT PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE
HOLD WITH RESPECT TO YOUR GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET
VALUE ADJUSTMENT, WE DO NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS
AND OTHER INSTRUMENTS THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
contract value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option, or
into the one-year fixed interest rate option, although a market value adjustment
will apply to any transfer you make outside the 30-day period discussed above.
You may transfer contract value into the market value adjustment option at any
time, provided it is at least $1,000.
In general, you may make your transfer request by telephone, electronically,
or otherwise in paper form to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following unauthorized
telephone or electronic instructions that we reasonably believed to be genuine.
Your transfer request will take effect at the end of the business day on which
it was received. Our business day generally closes at 4:00 p.m. Eastern time.
Transfer requests received after 4:00 p.m. Eastern time will take effect at the
end of the next business day.
With regard to the market value adjustment option, you can specify the
guarantee period from which you
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wish to transfer. If you request a transfer from the market value adjustment
option, but you do not specify the guarantee period from which funds are to be
taken, then we will transfer funds from the guarantee period that has the least
time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE
DCA FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE
ONE YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$25 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and Auto-
Rebalancing transfers do not count toward the 12 free transfers per year.)
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and otherwise is in good order. For purposes of this transfer
restriction, we (i) do not view a facsimile transmission as a "writing", (ii)
will treat multiple transfer requests submitted on the same business day as a
single transfer, and (iii) do not count transfers that involve one of our
systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to
short-term fluctuations in markets, sometimes called "market timing," can make
it very difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction costs,
or affect performance. For those reasons, the contract was not designed for
persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in any
contract year for all existing or new contract owners, and to take the other
actions discussed below. We also reserve the right to limit the number of
transfers in any contract year or to refuse any transfer request for an owner or
certain owners if: (a) we believe that excessive transfer activity (as we define
it) or a specific transfer request or group of transfer requests may have a
detrimental effect on accumulation unit values or the share prices of the
underlying mutual funds; or (b) we are informed by a fund (e.g., by the fund's
portfolio manager) that the purchase or redemption of fund shares must be
restricted because the fund believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected fund. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate amount
of a trade or trades represented a relatively large proportion of the total
assets of a particular underlying mutual fund. In furtherance of our general
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
- - With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such amount
into a particular variable investment option, and within 30 calendar days
thereafter transfer (the "Transfer Out") all or a portion of that amount into
another variable investment option, then upon the Transfer Out, the former
variable investment option becomes restricted (the "Restricted Option").
Specifically, we will not permit subsequent transfers into the Restricted
Option for 90 calendar days after the Transfer Out if the Restricted Option
invests in a non-international fund, or 180 calendar days after
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the Transfer Out if the Restricted Option invests in an international fund.
For purposes of this rule, we do not (i) count transfers made in connection
with one of our systematic programs, such as asset allocation and automated
withdrawals and (ii) categorize as a transfer the first transfer that you
make after the contract date, if you make that transfer within 30 calendar
days after the contract date. Even if an amount becomes restricted under the
foregoing rules, you are still free to redeem the amount from your contract
at any time.
- - We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable investment
option on the business day subsequent to the business day on which the
exchange request was received. Before implementing such a practice, we would
issue a separate written notice to contract owners that explains the practice
in detail. In addition, if we do implement a delayed exchange policy, we will
apply the policy on a uniform basis to all contracts in the relevant class.
- - If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
- - We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such limited transfer restrictions, and contract owners
who own variable life insurance or variable annuity contracts (regardless of
jurisdiction) that do not impose the above-referenced transfer restrictions,
might make more numerous and frequent transfers than contract owners who are
subject to such limitations. Because contract owners who are not subject to
the same transfer restrictions may have the same underlying mutual fund
portfolios available to them, unfavorable consequences associated with such
frequent trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may affect
all contract owners. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly,
and will not waive a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option into any other variable
investment options or the one-year fixed interest rate option. You can have
these automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in declining markets.
Each dollar cost averaging transfer must be at least $100. Transfers will be
made automatically on the schedule you choose until the entire amount you chose
to have transferred has been transferred or until you tell us to discontinue the
transfers. If the remaining amount to be transferred drops below $100, the
entire remaining balance will be transferred on the next transfer date. You can
allocate subsequent purchase payments to be transferred under this option at any
time.
Your transfers will occur 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 dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase and is offered without
charge.
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ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you a
questionnaire to complete that will help determine a program that is appropriate
for you. Your asset allocation will be prepared based on your answers to the
questionnaire. You will not be charged for this service and you are not
obligated to participate or to invest according to program recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns over
the long term. However, asset allocation does not guarantee a profit or protect
against a loss. You are not obligated to participate or to invest according to
the program recommendations. We do not intend to provide any personalized
investment advice in connection with these programs and you should not rely on
these programs as providing individualized investment recommendations to you.
The asset allocation programs do not guarantee better investment results. We
reserve the right to terminate or change the asset allocation programs at any
time. You should consult your representative before electing any asset
allocation program.
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 percentage or to a subsequent allocation percentage you
select. We will rebalance only the variable investment options that you have
designated. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur 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 underlying mutual funds used by the
variable investment options. However, we vote the shares of the mutual funds
according to voting instructions we receive from contract owners. When a vote is
required, we will mail you a proxy which is a form that 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 fund shares for which we do not receive
instructions, and any other shares that we own in our own right, in the same
proportion as shares for which we receive instructions from contract owners. We
may change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in existing
funds. We would not do this without the approval of the Securities and Exchange
Commission (SEC) and any necessary state insurance departments. You will be
given specific notice in advance of any substitution we intend to make.
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3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE
INCOME PHASE? (ANNUITIZATION)
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PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the third contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95th birthday (unless we agree to another date).
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners Annuity One 3 variable annuity contract offers an
optional Guaranteed Minimum Income Benefit, which we describe below. Your
annuity options vary depending upon whether you choose this benefit.
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 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about withdrawal
charges, see "What are the Expenses Associated With The Strategic Partners
Annuity One 3 Contract," page 58.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If an annuity option is not
selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by applicable
law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT BE
CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. 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 will be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
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
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such remaining 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 will be at least 3% a year.
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. If
the life income annuity option is prohibited by applicable law, then we will pay
you a lump sum in lieu of this option.
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
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contract assets. Under this option, we will pay you interest at an effective
rate of at least 3% a year. This option is not available if you hold your
contract in an IRA.
Under this option, all gain in the annuity will be taxable as of the annuity
date, however, you can withdraw part or all of the contract value that we are
holding at any time.
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.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 69, you
should consider the minimum distribution requirements mentioned on page 71 when
selecting your annuity option.
If a contract is 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.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB) is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. This feature may not be
available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described below.
At this point, the GMIB protected value will be increased by any subsequent
invested purchase payments and reduced by the effect of withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
- - The annuitant must be 75 or younger in order for you to elect the Guaranteed
Minimum Income Benefit.
- - If you choose the Guaranteed Minimum Income Benefit, we will impose an annual
charge equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value described below. In some states this fee may be
lower.
- - Under the contract terms governing the GMIB, we can require GMIB participants
to invest only in designated underlying mutual funds or can require GMIB
participants to invest according to an asset allocation model.
- - TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING PERIOD
IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7TH CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET (AS
DESCRIBED BELOW), THE WAITING PERIOD IS THE 7 YEAR PERIOD BEGINNING WITH THE
DATE OF THE MOST RECENT RESET.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
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GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments (after a reset, the
contract value at the time of the reset), increased daily at an effective annual
interest rate of 5% starting on the date each invested purchase payment is made,
until the cap is reached (GMIB roll-up cap). We will reduce this amount by the
effect of withdrawals. The GMIB roll-up cap is equal to two times each invested
purchase payment (for a reset, two times the sum of (1) the contract value at
the time of the reset, and (2) any invested purchase payments made subsequent to
the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- - the contract anniversary coinciding with or next following the annuitant's
80th birthday,
- - the 7th contract anniversary, or
- - 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced proportionally by withdrawals.
EFFECT OF WITHDRAWALS.
In any contract year when the GMIB protected value is increasing at the rate of
5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). The GMIB roll-up cap is
also reduced by withdrawals in the same manner. Any withdrawals made after the
dollar-for-dollar limit has been reached will proportionally reduce the GMIB
protected value. We calculate the proportional reduction by dividing the
contract value after the withdrawal by the contract value immediately following
the withdrawal of any available dollar-for-dollar amount. The resulting
percentage is multiplied by both the GMIB protected value and GMIB roll-up cap
after subtracting from each the amount of the withdrawal that does not exceed
5%. In each contract year during which the GMIB protected value has stopped
increasing at the 5% rate, withdrawals will reduce the GMIB protected value
proportionally.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are January 1,
2004; 2.) an initial purchase payment of $250,000; 3.) an initial GMIB protected
value of $250,000; 4.) an initial 200% cap of $500,000; and 5.) an initial
dollar-for-dollar limit of $12,500 (5% of $250,000):
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on February 1, 2004 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,035.26 (the initial value accumulated for 31 days
at an annual effective rate of 5%). As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,035.26 to $241,035.26).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$500,000 to $490,000).
- - The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first contract year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on March 1, 2004 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,968.88. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
- - The GMIB protected value is first reduced by the Remaining Limit (from
$241,968.88 to $239,468.88).
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- - The result is then further reduced by the ratio of A to B, where:
- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
- B is the contract value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,468.88 X (1 -
($7,500/$217,500)), or $231,211.33.
- The GMIB 200% cap is first reduced by the Remaining Limit, (from $490,000
to $487,500).
- The GMIB 200% cap is then further reduced by the ratio of A to B above
($487,500 x (1-($7,500/$217,500)), or $470,689.66.
- - The Remaining Limit is set to zero (0) for the balance of the first contract
year.
EXAMPLE 3. DOLLAR-FOR-DOLLAR LIMIT IN SECOND CONTRACT YEAR
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2005 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.86. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.89. As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $240,837.86 to $230,837.86).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$470,689.66 to $460,689.66).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.89 to $2,041.89).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the GMIB
roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based on
the number of years since the most recent reset. These purchase rates may be
less advantageous than the rates that would have applied absent a reset.
PAYOUT AMOUNT
The Guaranteed Minimum Income Benefit payout amount is based on the age and sex
(where applicable) of the annuitant (and, if there is one, the co-annuitant).
After we first deduct a charge for any applicable premium taxes that we are
required to pay, the payout amount will equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates (which are generally
less favorable than the annuity purchase rates for annuity payments not
involving GMIB) and based on the annuity payout option as described below, or
2) the adjusted contract value -- that is, the value of the contract adjusted
for any market value adjustment minus any charge we impose for premium taxes
and withdrawal charges -- as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two Guaranteed Minimum Income Benefit annuity payout options.
Each option involves payment for at least a period certain of ten years. In
calculating the amount of the payments under the GMIB, we apply certain assumed
interest rates, equal to 2% annually for a waiting period of 7-9 years, and 2.5%
annually for a waiting period of 10 years or longer for contracts sold on or
after January 20, 2004, or upon subsequent state approval (and 2.5% annually for
a waiting period of 7-9 years, 3% annually for a waiting period of 10-14 years,
and 3.5% annually for waiting periods of 15 years or longer for all other
contracts).
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GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments, your GMIB protected value is increasing in ways we did
not intend. In determining whether to limit purchase payments, we will look at
purchase payments which are disproportionately larger than your initial purchase
payment and other actions that may artificially increase the GMIB protected
value. Certain state laws may prevent us from limiting your subsequent purchase
payments. You must exercise one of the GMIB payout options described above no
later than 30 days after the contract anniversary coinciding with or next
following the annuitant's attainment of age 95 (age 92 for contracts used as a
funding vehicle for IRAs).
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your contract value declines
significantly due to negative investment performance. If your contract value is
not significantly affected by negative investment performance, it is unlikely
that the purchase of GMIB will result in your receiving larger annuity payments
than if you had not purchased GMIB. This is because the assumptions that we use
in computing the GMIB, such as the annuity purchase rates, (which include
assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing non-GMIB annuity
payout options. Therefore, you may generate higher income payments if you were
to annuitize a lower contract value at the current annuity purchase rates, than
if you were to annuitize under the GMIB with a higher GMIB protected value than
your contract value but at the annuity purchase rates guaranteed under the GMIB.
TERMINATING THE GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is fully
surrendered, on the date the death benefit is payable to your beneficiary
(unless your surviving spouse elects to continue the contract), or on the date
that your contract value is transferred to begin making annuity payments. The
GMIB may also be terminated if you designate a new annuitant who would not be
eligible to elect the GMIB based on his or her age at the time of the change.
Upon termination of the GMIB, we will deduct the charge from your contract
value for the portion of the contract year since the prior contract anniversary
(or the contract date if in the first contract year).
INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (IAB) is an optional, supplemental income benefit
that provides an additional income amount during the accumulation period or upon
annuitization. The Income Appreciator Benefit is designed to provide you with
additional funds that
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can be used to help defray the impact taxes may have on distributions from your
contract. IAB may be suitable for you in other circumstances as well, which you
can discuss with your registered representative. Because individual
circumstances vary, you should consult with a qualified tax advisor to determine
whether it would be appropriate for you to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
- - If you choose the Income Appreciator Benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are The Expenses Associated
With The Strategic Partners Annuity One 3 Contract?" on page 58.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN IN
FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must send
us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
- - IAB OPTION 1 - at annuitization as part of an annuity payment;
- - IAB OPTION 2 - during the accumulation phase through the IAB automatic
withdrawal payment program; or
- - IAB OPTION 3 - during the accumulation phase as an Income Appreciator Benefit
credit to your contract over a 10-year period.
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 63.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What Are The Tax Considerations Associated
With The Strategic Partners Annuity One 3 Contract?" on page 66.
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income Appreciator Benefit has been in force. For purposes of calculating
the Income Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the Spousal Continuance Benefit (explained on page 53), or (2) if
we were to permit you to elect the Income Appreciator Benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has been
in force.
<Table>
<Caption>
NUMBER OF YEARS INCOME
INCOME APPRECIATOR APPRECIATOR
BENEFIT BENEFIT
HAS BEEN IN FORCE PERCENTAGE
------------------ -----------
0-6 0%
7-9 15%
10-14 20%
15+ 25%
</Table>
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted contract value for
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purposes of determining the amount available for annuitization. You may apply
this amount to any annuity or settlement option over the lifetime of the
annuitant, joint annuitants, or a period certain of at least 15 years (but not
to exceed life expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown in
the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate
the Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit;
- - the date the Income Appreciator Benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our distributing
to you in increments the value that you have accumulated. We make these
incremental payments either over a specified time period (e.g., 15 years) (fixed
period annuities) or for the duration of the life of the annuitant (and possibly
co-annuitant) (life annuities). There are certain assumptions that are common to
both fixed period annuities and life annuities. In each type of annuity, we
assume that the value you apply at the outset toward your annuity payments earns
interest throughout the payout period. For annuity options within the GMIB, this
interest rate ranges from 2% to 2.5% for contracts sold on or after January 20,
2004, or upon subsequent state approval (and 2.5% to 3.5% for all other
contracts). For non-GMIB annuity options, the guaranteed minimum rate is 3%. The
GMIB guaranteed annuity purchase rates in your contract depict the minimum
amounts we will pay (per $1000 of adjusted contract value). If our current
annuity purchase rates on the annuity date are more favorable to you than the
guaranteed rates, we will make payments based on those more favorable rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
FIXED PERIOD ANNUITIES
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted contract value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
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LIFE ANNUITIES
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or co-
annuitant's life expectancy, including the following:
- - The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
GUARANTEED AND GMIB ANNUITY PAYMENTS
- - Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
future improvements. We do this largely by making a hypothetical reduction in
the age of the annuitant (or co-annuitant), in lieu of using the annuitant's
(or co-annuitant's) actual age, in calculating the payment amounts. By using
such a reduced age, we base our calculations on a younger person, who
generally would live longer and therefore draw life annuity payments over a
longer time period. Given the longer pay-out period, the payments made to the
younger person would be less than those made to an older person. We make two
such age adjustments:
1. First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after January 20, 2004, or upon subsequent state approval or (b) two years,
with respect to guaranteed payments under life annuities not involving GMIB,
as well as GMIB payments under contracts not described in (a) immediately
above. For the reasons explained above in this section, the four year age
reduction causes a greater reduction in the amount of the annuity payments
than does the two-year age reduction.
2. Second, for life annuities under both versions of GMIB as well as guaranteed
payments under life annuities not involving GMIB, we make a further age
reduction according to the table in your contract entitled "Translation of
Adjusted Age." As indicated in the table, the further into the future the
first annuity payment is, the longer we expect the person receiving those
payments to live, and the more we reduce the annuitant's (or co-annuitant's)
age.
CURRENT ANNUITY PAYMENTS
Immediately above, we have discussed how we determine annuity payments under the
GMIB annuity options and under non-GMIB annuity payout options that are based on
"guaranteed" annuity purchase rates. By "guaranteed" annuity purchase rates, we
mean the minimum annuity purchase rates that are set forth in your annuity
contract and thus contractually guaranteed by us. "Current" annuity purchase
rates, in contrast, refer to the annuity purchase rates that we are applying to
contracts that are entering the annuity phase at a given point in time. These
current annuity purchase rates vary from period to period, depending on changes
in interest rates and other factors. We do not guarantee any particular level of
current annuity purchase rates. When calculating current annuity purchase rates,
we use the actual age of the annuitant (or co-annuitant), rather than any
reduced age.
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WHAT IS THE
DEATH BENEFIT?
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THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner dies. However, if the contract is jointly owned, the owner must name
the joint owner and the joint owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is only
one beneficiary designated who is the owner's spouse on the date of death, then
the surviving spouse may continue the contract under the Spousal Continuance
Benefit. If there are an owner and joint owner of the contract, and the owner's
spouse is both the joint owner and the beneficiary on the date of death, then,
at the death of the first to die, the death benefit will be paid to the
surviving owner or the surviving owner may continue the contract under the
Spousal Continuance Benefit. See "Spousal Continuance Benefit" on page 53.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current contract value (as of the time we receive proof of death in good
order). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a Guaranteed Minimum Death Benefit, the GMDB protected value.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit (GMDB) provides for the option to receive
an enhanced death benefit upon the death of the sole owner or the first to die
of the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option.
The GMDB protected value option can be equal to the:
- - GMDB roll-up,
- - GMDB step-up, or
- - Greater of the GMDB roll-up and the GMDB step-up.
The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. The GMDB roll-up will
increase by subsequent invested purchase payments and reduce proportionally by
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
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IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% starting on
the date that each invested purchase payment is made. We will increase the GMDB
roll-up by subsequent invested purchase payments and reduce it by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and the protected value is $80,000.
The owner makes a withdrawal that reduces the contract value by 25% (including
the effect of any withdrawal charges). The new protected value is $60,000, or
75% of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner, and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
- - The spouse can receive the death benefit. A surviving spouse who is eligible
for the Spousal Continuance Benefit must choose between that benefit and
receiving the death benefit during the first 60 days following our receipt of
proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
Depending on applicable state law, some death benefit options may not be
available or may be subject to certain restrictions under your contract.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies the Spousal Continuance Benefit may apply. See "Spousal Continu-
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PART II
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ance Benefit" page 53. If the contract has an owner and a joint owner and they
are not spouses at the time one dies, we will pay the death benefit and the
contract will end. Joint ownership may not be allowed in your state.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
CHOICE 1. LUMP SUM PAYMENT OF THE DEATH BENEFIT. IF THE BENEFICIARY DOES NOT
CHOOSE A PAYOUT OPTION WITHIN SIXTY DAYS, THE BENEFICIARY WILL RECEIVE THIS
PAYOUT OPTION.
CHOICE 2. THE PAYMENT OF THE ENTIRE DEATH BENEFIT WITHIN A PERIOD OF 5 YEARS
FROM THE DATE OF DEATH.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or fixed interest rate options; name a beneficiary
to receive any remaining death benefit in the event of the beneficiary's
death; and make withdrawals from the contract value, in which case, any such
withdrawals will not be subject to any withdrawal charges. However, the
beneficiary may not make any purchase payments to the contract.
CHOICE 3. PAYMENT OF THE DEATH BENEFIT UNDER AN ANNUITY OR ANNUITY SETTLEMENT
OPTION OVER THE LIFETIME OF THE BENEFICIARY OR OVER A PERIOD NOT EXTENDING
BEYOND THE LIFE EXPECTANCY OF THE BENEFICIARY WITH DISTRIBUTION BEGINNING
WITHIN ONE YEAR OF THE DATE OF DEATH OF THE LAST TO SURVIVE OF THE OWNER OR
JOINT OWNER.
If the owner and joint owner are not spouses, any portion of the death
benefit not applied under Choice 3 within one year of the date of death of the
first to die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What Are The Tax Considerations Associated With The
Strategic Partners Annuity One 3 Contract?" on page 66.
EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit (EAB) is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
Earnings Appreciator Benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The Earnings Appreciator Benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax advisor to determine whether it would be
appropriate for you to elect the Earnings Appreciator Benefit.
If you want the Earnings Appreciator Benefit, you generally must elect it at
the time you apply for the contract. If you elect the Earnings Appreciator
Benefit, you may not later revoke it.
Upon our receipt of proof of death in good order, we will determine an
Earnings Appreciator Benefit by multiplying the Earnings Appreciator Benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
For purposes of computing earnings and purchase payments under the Earnings
Appreciator Benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
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EAB percentage:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
- - 15% if the owner is between ages 76 and 79 on the date the application is
signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
Spousal Continuance Benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the Earnings Appreciator Benefit, we will use the age of the
surviving spouse at the time that the Spousal Continuance Benefit is
activated to determine the applicable EAB percentage.
- - We will not allow the surviving spouse to continue the Earnings Appreciator
Benefit (or bear the charge associated with this benefit) if he or she is age
80 or older on the date that the Spousal Continuance Benefit is activated.
- - If the Earnings Appreciator Benefit is continued, we will calculate any
applicable Earnings Appreciator Benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
Spousal Continuance Benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive proof of the owner's death
in good order, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In no event, however, can the annuitant be older
than the maximum age for annuitization on the date of the owner's death, nor can
the surviving spouse be older than 95 on the date of the owner's death. Assuming
the above conditions are present, the surviving spouse can elect the Spousal
Continuance Benefit, but must do so no later than 60 days after furnishing proof
of the owner's death in good order.
Upon activation of the Spousal Continuance Benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate or market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable Earnings Appreciator Benefit.
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IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB
STEP-UP, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding discussion in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the Guaranteed Minimum Death Benefit provisions of the contract.
The contract may not be continued upon the death of a spouse who had assumed
ownership of the contract through the exercise of the Spousal Continuance
Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued
for the surviving spousal owner. All provisions of the Guaranteed Minimum Income
Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
on the date of the owner's death. If the GMIB reset feature was never exercised,
the surviving spousal owner can exercise the GMIB reset feature twice. If the
original owner had previously exercised the GMIB reset feature once, the
surviving spousal owner can exercise the GMIB reset once. However the surviving
spouse (or new annuitant designated by the surviving spouse) must be under 76
years of age at the time of reset. If the original owner had previously
exercised the GMIB reset feature twice, the surviving spousal owner may not
exercise the GMIB reset at all. If the attained age of the surviving spouse at
activation of the Spousal Continuance Benefit, when added to the remainder of
the GMIB waiting period to be satisfied, would preclude the surviving spouse
from utilizing the Guaranteed Minimum Income Benefit, we will revoke the
Guaranteed Minimum Income Benefit under the contract at that time and we will no
longer charge for that benefit.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death, the
Income Appreciator Benefit will end unless the contract is continued by the
owner's surviving spouse under the Spousal Continuance Benefit. If the contract
is continued by the surviving spouse, we will continue to pay the balance of any
Income Appreciator Benefit payments until the earliest to occur of the
following: (a) the date on which 10 years' worth of IAB automatic withdrawal
payments or IAB credits, as applicable, have been paid, (b) the latest date on
which annuity payments would have had to have commenced had the owner not died
(i.e., the contract anniversary coinciding with or next following the
annuitant's 95th birthday), or (c) the contract anniversary coinciding with or
next following the annuitants' surviving spouse's 95th birthday.
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the Spousal Continuance Benefit, when added to the remainder of the IAB waiting
period to be satisfied, would preclude the surviving spouse from utilizing the
Income Appreciator Benefit, we will revoke the Income Appreciator Benefit under
the contract at that time and we will no longer
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charge for that benefit. If the Income Appreciator Benefit has been in force for
7 contract years or more, but the benefit has not been activated, the surviving
spouse may activate the benefit at any time after the contract has been
continued. If the Income Appreciator Benefit is activated after the contract is
continued by the surviving spouse, the Income Appreciator Benefit calculation
will exclude any amount added to the contract at the time of spousal continuance
resulting from any death benefit value exceeding the contract value.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT?
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase the
contract. The minimum initial purchase payment is $10,000, and may not exceed
$1,000,000 absent our prior approval. With some restrictions, 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 may not make additional purchase payments if you
purchase a contract issued in Massachusetts, or if you purchase a Contract With
Credit issued in Pennsylvania.)
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the 86th
birthday of:
- - the owner,
- - the joint owner,
- - the annuitant, or
- - the co-annuitant.
Currently, the maximum aggregate purchase payments you may make is $20
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million absent our prior approval. Depending on applicable
state law, other limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate options, or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a particular investment option can range in whole percentages from
0% to 100%.
When you make an additional purchase payment, it will be allocated in the
same way as your most recent purchase payment, unless you tell us otherwise.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 and,
allocations to the market value adjustment option must be no less than $1,000.
You may change your allocation of future invested purchase payments 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 we receive your payment in good order at
the Prudential Annuity Service Center. If, however, your first payment is made
without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. 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.
Subsequent purchase payments received in good order after 4:00 p.m., Eastern
time will be credited on the following business day.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than $250,000 but less than $1 million; or 6% if the
purchase payment is $1 million or greater; and
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- - if the elder owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death benefit
under the contract, we have a contractual right to take back any credit we
applied within one year of the date of death.
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 options 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 such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment, plus
(if you have purchased the Contract With Credit) any applicable credit,
allocated to a variable 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 your contract value will increase or that it will
not fall below the amount of your total purchase payments.
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6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE 3 CONTRACT?
- --------------------------------------------------------------------------------
THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. WE DESCRIBE THESE CHARGES AND EXPENSES BELOW.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits under
the contracts. They are also designed, in the aggregate, to compensate us for
the risks of loss we assume pursuant to the contracts. If, as we expect, the
charges that we collect from the contracts exceed our total costs in connection
with the contracts, we will earn a profit. Otherwise, we will incur a loss. The
rates of certain of our charges have been set with reference to estimates of the
amount of specific types of expenses or risks that we will incur. In most cases,
this prospectus identifies such expenses or risks in the name of the charge;
however, the fact that any charge bears the name of, or is designed primarily to
defray a particular expense or risk does not mean that the amount we collect
from that charge will never be more than the amount of such expense or risk. Nor
does it mean that we may not also be compensated for such expense or risk out of
any other charges we are permitted to deduct by the terms of the contract.
INSURANCE AND ADMINISTRATIVE CHARGE
Each day we make a deduction for the insurance and administrative charge. This
charge covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option, the insurance and administrative cost also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the charge
is for assuming the risk that the annuitant(s) will live longer than expected
based on our life expectancy tables. When this happens, we pay a greater number
of annuity payments. We also incur the risk that the death benefit amount
exceeds the contract value. The expense risk portion of the charge is for
assuming the risk that the current charges will be insufficient in the future to
cover the cost of administering the contract. The administrative expense portion
of the charge compensates us for the expenses associated with the administration
of the contract. This includes preparing and issuing the contract; establishing
and maintaining contract records; preparation of confirmations and annual
reports; personnel costs; legal and accounting fees; filing fees; and systems
costs. The Guaranteed Minimum Death Benefit risk portion of the charge, if
applicable, covers our assumption of the risk that the protected value of the
contract will be larger than the base death benefit if the contract owner dies
during the accumulation phase.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit option that you
choose. The charge is equal to:
- 1.4% on an annual basis if you choose the base death benefit,
- 1.65% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option, and
- 1.75% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option.
We impose an additional insurance and administrative charge of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract With Credit.
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from this charge.
The insurance risk charge for your contract cannot be
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increased. Any profits made from this charge may be used by us to pay for the
costs of distributing the contracts. If you choose the Contract With Credit, we
will also use any profits from this charge to recoup our costs of providing the
credit.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration of
the withdrawal charge depends on whether you choose the Contract With Credit or
the Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment being
withdrawn was made. Specifically, we maintain an "age" for each purchase payment
you have made by keeping track of how many contract anniversaries have passed
since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
<Table>
<Caption>
NUMBER OF CONTRACT
ANNIVERSARIES SINCE CONTRACT WITH CONTRACT WITHOUT
THE DATE OF EACH CREDIT WITHDRAWAL CREDIT WITHDRAWAL
PURCHASE PAYMENT CHARGE CHARGE
- ------------------- ----------------- -----------------
0 8% 7%
1 8% 6%
2 8% 5%
3 8% 4%
4 7% 3%
5 6% 2%
6 5% 1%
7 0% 0%
</Table>
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary will
apply.
If you request a withdrawal, we will deduct an amount from the contract value
that is sufficient to pay the withdrawal charge, and provide you with the amount
requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We make this "charge-free amount"
available to you subject to approval of this feature in your state. We determine
the charge-free amount available to you in a given contract year on the contract
anniversary that begins that year. In calculating the charge-free amount, we
divide purchase payments into two categories -- payments that are subject to a
withdrawal charge and those that are not. We determine the charge-free amount
based only on purchase payments that are subject to a withdrawal charge. The
charge-free amount in a given contract year is equal to 10% of the sum of all
the purchase payments subject to the withdrawal charge that you have made as of
the applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
When you make a withdrawal, we will deduct the amount of the withdrawal first
from the available charge-free amount. Any excess amount will then be deducted
from purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose withdrawal
charges on earnings.
If a withdrawal or transfer is taken from a market value adjustment guarantee
period prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount, including the withdrawal
charge.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the
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PARTNERS ANNUITY ONE 3 CONTRACT? CONTINUED
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owner has assigned ownership of the contract to someone else.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an IRS mandatory distribution
requirement only with respect to that contract's account balance, we will waive
withdrawal charges. See "What Are The Tax Considerations Associated With The
Strategic Partners Annuity One 3 Contract?" on page 66.
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $75,000, we will deduct the lesser of $35 or 2% of your
contract value, for administrative expenses (this fee may differ in certain
states). While this is what we currently charge, we may increase this charge up
to a maximum of $60. Also, we may raise the level of the contract value at which
we waive this fee. The charge will be deducted proportionately from each of the
contract's investment options. This same charge will also be deducted when you
surrender your contract if your contract value is less than $75,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum Income
Benefit. FOR CONTRACTS SOLD ON OR AFTER JANUARY 20, 2004, OR UPON SUBSEQUENT
STATE APPROVAL, we will deduct a charge equal to 0.50% per year of the average
GMIB protected value for the period the charge applies. FOR ALL OTHER CONTRACTS,
this is an annual charge equal to 0.45% of the average GMIB protected value for
the period the charge applies. We deduct the charge from your contract value on
each of the following events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable Guaranteed Minimum Income Benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value,
it does not increase or decrease based on changes to the annuity's contract
value due to market performance. If the GMIB protected value increases, the
dollar amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the contract value
allocated to the variable investment options, the fixed interest rate options,
and the market value adjustment option. In some states, we may deduct the charge
for the Guaranteed Minimum Income Benefit in a different manner. No market value
adjustment will apply to the portion of the charge deducted from the market
value adjustment option. If you surrender your contract, begin receiving annuity
payments under the GMIB or any other annuity payout option we make available
during a contract year, or the GMIB terminates, we will deduct the charge for
the portion of the contract year since the prior contract anniversary (or the
contract date if in the first contract year). Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
applicable Guaranteed Minimum Income Benefit charge, we will deduct the charge
from the amount we pay you.
THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES
NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge
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equal to 0.25% of your contract value. The Income Appreciator Benefit charge is
calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. No market value adjustment will apply to the
portion of the charge deducted from the market value adjustment. Upon a full
withdrawal, or if the contract value remaining after a partial withdrawal is not
enough to cover the then-applicable Income Appreciator Benefit charge, the
charge is deducted from the amount paid. The payment of the Income Appreciator
Benefit charge will be deemed to be made from earnings for purposes of
calculating other charges. THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR
PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME
OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB charge
during the 10-year payment period contemplated by IAB Options 2 and 3. Moreover,
you should realize that amounts credited to your contract value under IAB Option
3 increase the contract value, and because the IAB fee is a percentage of your
contract value, the IAB fee may increase as a consequence of those additions.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Earnings Appreciator
Benefit. The charge for this benefit is based on an annual rate of 0.30% of your
contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
Earnings Appreciator Benefit charge was last calculated.
Although the Earnings Appreciator Benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or the first to die of the owner or joint
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
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PARTNERS ANNUITY ONE 3 CONTRACT? CONTINUED
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option bears to the total contract value. Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
then-applicable Earnings Appreciator Benefit charge, we will deduct the charge
from the amount we pay you. We will deem the payment of the Earnings Appreciator
Benefit charge as made from earnings for purposes of calculating other charges.
TAXES ATTRIBUTABLE TO PREMIUM
There may be 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 charge against the value of the contract to pay some or all of these taxes. 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 on us, 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. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer fee
pro-rata from the investment options from which the transfer is made.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
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 underlying mutual fund.
Those funds charge fees that are in addition to the contract-related fees
described in this section. For 2003, 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.
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7:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. 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 and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum contract value that must remain in order to keep the
contract in force after a withdrawal is $2,000. If you request a withdrawal
amount that would reduce the contract value below this minimum, we will withdraw
the maximum amount available that, with the withdrawal charge, would not reduce
the contract value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order. We will deduct applicable charges,
if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
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 (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is generally $100.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND CERTAIN RESTRICTIONS MAY
APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8
OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The Income Appreciator Benefit (IAB) is discussed on page 46. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good
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order. Under IAB Options 2 and 3, you can choose to have the Income Appreciator
Benefit amounts paid or credited monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay you
the Income Appreciator Benefit amount in equal installments over a 10 year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this Income Appreciator Benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not to amounts attributable to the Income Appreciator Benefit.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the Income Appreciator Benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any Income
Appreciator Benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
investment options, fixed interest rate options, or the market value adjustment
option in the same proportions as your most recent purchase payment allocation
percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
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direct us otherwise. We will waive the $1,000 minimum requirement for the market
value adjustment option. We will calculate the Income Appreciator Benefit amount
on the date we receive your written request in good order. Once we have
calculated the Income Appreciator Benefit, the Income Appreciator Benefit credit
will not be affected by changes in contract value due to the investment
performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the contract
value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the Income
Appreciator Benefit was activated plus (2) earnings since the Income Appreciator
Benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply a
new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated
that have not been previously withdrawn do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year is
less than the excess withdrawal threshold, the difference between the amount
withdrawn and the threshold can be carried over to subsequent years on a
cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us 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 and
redemptions of shares of the underlying 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 process any transfer made
from the fixed interest rate options promptly upon request.
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8:
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS ANNUITY ONE 3 CONTRACT?
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The tax considerations associated with the Strategic Partners Annuity One 3
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan (including contracts held
by a non-natural person, such as a trust, acting as an agent for a natural
person), 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. The
discussion includes a description of certain spousal rights under the contract
and under tax-qualified plans. Our administration of such spousal rights and
related tax reporting accords with our understanding of the Defense of Marriage
Act (which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). The information provided is not
intended as tax advice. You should consult with a qualified tax advisor for
complete information and advice. References to purchase payments below relate to
your cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
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.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, 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.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
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 withdrawals from the 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 generally will be treated as a withdrawal. Also, if you
elect the interest
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payment option that we may offer, that election 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 any 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 substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty); or
- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to August
14, 1982, then any purchase payments made to the original contract prior to
August 14, 1982 will be treated as made to the new contract prior to that date.
(See "Federal Tax Status" in the Statement of Additional Information).
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as ineligible
for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example we do not know how the IRS
may view early withdrawals or annuitizations after a partial exchange. In
addition, it is unclear how the IRS will treat a partial exchange from a life
insurance, endowment, or annuity contract into an immediate annuity. As of the
date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting and
withholding agent, believe that we would be expected to deem the transaction to
be abusive. However, some insurance companies may not recognize these partial
surrenders as tax-free exchanges and may report them as taxable distributions to
the extent of any gain distributed as well as subjecting the taxable portion of
the distribution to the 10% tax penalty. We strongly urge you to discuss any
transaction
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PARTNERS ANNUITY ONE 3 CONTRACT CONTINUED
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of this type with your tax advisor before proceeding with the transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
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 three 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. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section below for a discussion regarding withholding rules
for tax favored plans (for example, an IRA).
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 assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is 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. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
Required Distributions Upon Your Death. Upon your death, certain
distributions must be made under the
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contract. The required distributions depend on whether you die 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 a periodic
payment option is selected by your designated beneficiary and if such 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 a periodic payment option based on life expectancy or a period
exceeding five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that 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 contract owners 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 Code. This description assumes that 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 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 contract. The "IRA Disclosure Statement" on page 79 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 your contract
is worth, 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 you
may make to an IRA. For 2004 the limit is $3,000; increasing in 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
contribute an additional $500 in
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years 2004 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 into another Section 401(a)
plan.
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 contribution 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 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 71).
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 on page 71);
- - 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 on page 71).
Roth IRAs. Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "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 traditional 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
traditional IRA; and
- - If eligible (including meeting income limitations and earnings requirements),
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, you may only
purchase a contract for a Roth IRA in connection with a "rollover" or
"conversion" of
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amounts of another traditional IRA, conduit IRA, or Roth IRA. This minimum is
greater than the maximum amount of any annual contribution allowed by law you
may make to a 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.
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 generally 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. 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% tax penalty 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 distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you. If
you own more than one IRA, you can choose to satisfy your minimum distribution
requirement for each of your IRAs by withdrawing that amount from any of your
IRAs.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA or Roth IRA before you attain age 59 1/2.
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; or
- - the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
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 three
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
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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
prevent 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 "What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract" starting on page 58.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" on page 73.
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.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 79.
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OTHER
INFORMATION
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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's Life annual report for the
year ended December 31, 2003, 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 contract owners, 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. 20549-0102. 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 (separate account), to hold the assets that are associated with
the variable annuity 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. (NASD).
Compensation is paid to broker/dealer firms whose registered representatives
sell the contract according to one or more schedules. The individual registered
representatives will receive a portion of the compensation, depending on the
practice of the firm. Commissions are generally based on a percentage of
purchase payments made, up to a maximum of 8%. Alternative compensation
schedules are available that provide a lower initial commission plus ongoing
annual compensation based on all or a portion of contract value (a "trail
commission"). We may also provide compensation for providing ongoing service to
you in relation to the contract.
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In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco Life and/or the contract on a preferred or
recommended company or product list and/or access to the firm's registered
representatives), we or PIMS may enter into compensation arrangements with
certain broker/dealer firms or branches of such firms with respect to certain or
all registered representatives of such firms under which such firms may receive
separate compensation or reimbursement for, among other things, training of
sales personnel and/or marketing and/or administrative and/or other services
they provide to us or our affiliates. To the extent permitted by NASD rules and
other applicable laws and regulations, PIMS may pay or allow other promotional
incentives or payments in the form of cash or non-cash compensation. These
arrangements may not be offered to all firms, and the terms of such arrangements
may differ between firms. You should note that firms and individual registered
representatives and branch managers within some firms participating in one of
these compensation arrangements might receive greater compensation for selling
the contract than for selling a different annuity that is not eligible for these
compensation arrangements. While compensation is generally taken into account as
an expense in considering the charges applicable to an annuity product, any such
compensation will be paid by us or PIMS, and will not result in any additional
charge to you. Your registered representative can provide you with more
information about the compensation arrangements that apply upon the sale of the
contract.
LITIGATION
We are subject to legal and regulatory actions in the ordinary course of our
business, including class actions. Pending legal and regulatory actions include
proceedings relating to aspects of the businesses and operations that are
specific to Pruco Life and that are typical of the businesses in which Pruco
Life operates. Class action and individual lawsuits involve a variety of issues
and/or allegations, which include sales practices, underwriting practices,
claims payment and procedures, premium charges, policy servicing and breach of
fiduciary duties to customers. 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.
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.
In January 2004, the NASD fined Prudential Equity Group, Inc. (formerly known
as Prudential Securities Incorporated) and PIMS $2 million, and ordered the
firms to pay customers $9.5 million for sales of fixed and variable annuities
that violated a New York State Insurance Department regulation concerning
replacement sales and NASD rules. We brought this matter to the New York
Insurance Department and the NASD's attention in response to an internal
investigation, and in consultation with both New York and the NASD, we have
initiated a remediation program for all affected customers which has already
provided $8 million in remediation.
ASSIGNMENT
You can assign the contract at any time during your lifetime. If you do so, we
will reset the death benefit to equal the contract value on the date the
assignment occurs. For details, see "What is the Death Benefit," on page 50. 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.
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For further information please speak to your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life, the co-issuer
of the Strategic Partners Annuity One 3 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
- - Federal Tax Status
- - State Specific Variations
- - Directors and Officers
- - 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 contract
owner 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 (877) 778-5008.
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MARKET-VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any withdrawal charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------) to the N/12 power] -1
1 + J + .0025
<Table>
where: I = the guaranteed credited interest rate
(annual effective) for the given
contract at the time of withdrawal or
annuitization or settlement.
J = the current credited interest rate
offered on new money at the time of
withdrawal or annuitization or
settlement for a guarantee period of
equal length to the number of whole
years remaining in the Contract's
current guarantee period plus one
year.
N = equals the remaining number of months
in the contract's current guarantee
period (rounded up) at the time of
withdrawal or annuitization or
settlement.
</Table>
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------) to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the (38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.05] + [((365-61)/365) X 0.04] =
0.0417
</Table>
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power -1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.08] + [((365 - 61)/365) X 0.07] =
0.0717
</Table>
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power -1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power -1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07)] to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
78
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 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,
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 after it is delivered, or applicable state
required period, if longer. 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 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 contributions must be made by no later
than the due date for filing your income tax return for that year. For a single
taxpayer, the applicable dollar limitation is $45,000 in 2004, with the amount
of IRA contribution which may be deducted reduced proportionately for Adjusted
Gross Income between $45,000 -- $55,000. For married couples filing jointly, the
applicable dollar limitation is $65,000, with the amount of IRA contribution
which may be deducted reduced proportionately between $65,000-$75,000. There is
no deduction allowed for IRA contributions when Adjusted Gross Income reaches
$55,000 for individuals and $75,000 for married couples filing jointly. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
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 should contribute more than the maximum contribution amount to your
IRA, the excess amount will be considered an "excess contribution." You are
permitted to withdraw an excess contribution from your IRA 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" on page 80).
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
79
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
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 79. 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 and reinvest it in another IRA. 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. (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 Simplified Employee Pension IRA to
an IRA or to another qualified retirement plan or 457 government plan.
DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA be forfeited. To insure that your
contributions will be used for retirement, the federal tax law does not permit
you to use your IRA as security for a loan. Furthermore, as a general rule, you
may not sell or assign your interest in your IRA to anyone. Use of an IRA 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 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. 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% tax penalty 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 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. If you own more than one IRA, you can
choose to satisfy your minimum distribution requirement for each of your IRAs by
withdrawing that amount from any of your IRAs. You may elect to receive the
distribution under
80
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
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 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
defined under IRS regulations. 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, 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, or as a program of minimum distributions.
This annuity or minimum distribution program must be payable over the life
expectancy of the beneficiary beginning by December 31st 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 31st 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 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 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 traditional 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 traditional 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 TRADITIONAL 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
81
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
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 traditional
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
traditional 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. 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.
82
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
APPENDIX A
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
As we have indicated throughout this prospectus, the Strategic Partners Annuity
One 3 Variable Annuity is a contract that allows you to select or decline any of
several features that carries with it a specific asset-based charge. We maintain
a unique unit value corresponding to each combination of such contract features.
Here we depict the historical unit values corresponding to the contract features
bearing the highest and lowest combinations of asset-based charges during the
period January 6, 2003 to December 31, 2003. The remaining unit values appear in
the Statement of Additional Information, which you may obtain free of charge, by
calling (888) PRU-2888 or by writing to us at the Prudential Annuity Service
Center, P.O. Box 7960, Philadelphia, PA 19101.
83
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<Table>
<Caption>
ACCUMULATION UNIT VALUES: (BASE DEATH BENEFIT 1.40)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01724 $1.24006 2,381,401
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01834 $1.25778 1,368,678
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00588 $1.28481 805,296
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 0.9997 $0.99449 2,049,651
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02199 $1.22414 3,356,056
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02526 $1.22392 900,360
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01313 $1.27916 1,545,924
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01134 $1.22149 436,202
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01232 $1.19626 301,134
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01908 $1.17938 1,236,101
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00979 $1.19393 12,267,993
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00745 $1.13654 7,810,706
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00887 $1.24835 3,564,458
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01281 $1.23393 1,148,393
SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01511 $1.29026 2,793,324
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01135 $1.23975 7,383,151
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02725 $1.21457 1,098,747
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
</Table>
84
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(BASE DEATH BENEFIT 1.40)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02112 $1.20717 455,643
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00463 $1.33928 846,352
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00530 $1.19841 3,514,084
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00076 $1.04684 9,081,987
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01864 $1.36653 1,350,535
SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01406 $1.30191 453,998
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01518 $1.19388 620,221
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.03407 $1.34037 281,067
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01151 $1.35112 959,373
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02245 $1.24622 208,132
</Table>
<Table>
* COMMENCEMENT OF BUSINESS
</Table>
85
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PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES:
(GREATER OF ROLL-UP AND STEP-UP GMDB AND CONTRACT WITH CREDIT 1.85)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01721 $ 1.23477 7,912,908
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01830 $ 1.25211 3,449,281
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00585 $ 1.27928 1,880,748
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 0.99993 $ 0.99008 4,740,923
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.02196 $ 1.21877 15,302,286
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.02522 $ 1.21867 3,460,913
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01309 $ 1.27356 6,167,864
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01130 $ 1.21618 1,561,412
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01228 $ 1.19096 790,191
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01904 $ 1.17423 3,090,700
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00975 $ 1.18869 47,305,493
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00741 $ 1.13146 22,991,929
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00884 $ 1.24312 9,765,567
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01277 $ 1.22851 3,172,821
SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01508 $ 1.28460 8,900,299
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01131 $ 1.23434 39,541,643
* COMMENCEMENT OF BUSINESS
</Table>
86
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PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(GREATER OF ROLL-UP AND STEP-UP GMDB AND CONTRACT WITH CREDIT 1.85)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.02721 $ 1.20922 3,158,789
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.02108 $ 1.20192 1,080,405
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00459 $ 1.33337 3,770,679
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00526 $ 1.19293 9,624,581
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.00073 $ 1.04222 17,952,432
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01860 $ 1.36051 4,878,831
SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01402 $ 1.29612 1,566,777
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01515 $ 1.18852 855,905
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.03404 $ 1.33452 1,534,324
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.01148 $ 1.34511 2,468,449
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $ 1.02241 $ 1.24068 998,406
</Table>
<Table>
* COMMENCEMENT OF BUSINESS
</Table>
87
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
APPENDIX B
HYPOTHETICAL ILLUSTRATIONS
- --------------------------------------------------------------------------------
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table), the arithmetic average
fund fees were equal to 1.09% annually. If we did take expense reimbursements
and waivers into account here, that would have lowered the arithmetic average,
and thereby increased the illustrated values. The hypothetical gross rates of
return are next reduced by the insurance and administrative charge associated
with the selected death benefit option. Finally, the contract value is reduced
by the annual charges for the optional benefits that are illustrated as well as
by the contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -2.78%, 3.05%
and 6.94%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised
in that year.
A '0' in these columns indicates that the contract has terminated due to
insufficient account value and, consequently, the guaranteed benefit has no
value.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for
a description of how the various illustrated features operate.
88
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
STRATEGIC PARTNERS ANNUITY ONE 3
$100,000 SINGLE CONTRIBUTION AND NO WITHDRAWALS
MALE, ISSUE AGE 60
BENEFITS:
GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM DEATH BENEFIT
EARNINGS APPRECIATOR BENEFIT
GUARANTEED MINIMUM INCOME BENEFIT
INCOME APPRECIATOR BENEFIT
CONTRACT WITHOUT CREDIT
10% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 105,842 100,442 105,842 2,337 108,178 N/A N/A 105,000
2 62 112,029 107,529 112,029 4,812 116,840 N/A N/A 110,250
3 63 118,582 114,982 118,582 7,433 126,015 N/A N/A 115,763
4 64 125,524 122,824 125,524 10,210 135,733 N/A N/A 121,551
5 65 132,877 131,077 132,877 13,151 146,028 N/A N/A 127,628
6 66 140,666 139,766 140,666 16,266 156,932 N/A N/A 134,010
7 67 148,917 148,917 148,917 19,567 168,484 7,338 156,255 140,710
8 68 157,658 157,658 157,658 23,063 180,722 8,649 166,307 147,746
9 69 166,919 166,919 166,919 26,768 193,687 13,384 180,303 155,133
10 70 176,730 176,730 176,730 30,692 207,422 15,346 192,076 162,889
15 75 235,296 235,296 235,296 54,118 289,414 33,824 269,120 200,000
20 80 314,497 314,497 314,497 85,799 400,295 53,624 368,121 200,000
25 85 422,268 422,268 422,268 120,000 542,268 80,567 502,835 200,000
30 90 568,915 568,915 568,915 120,000 688,915 117,229 686,144 200,000
35 95 768,463 768,463 768,463 120,000 888,463 167,116 935,578 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,704 9,547
8 8,358 10,413
9 9,070 11,359
10 10,607 12,646
15 15,937 20,190
20 19,313 30,646
25 24,359 47,105
30 30,105 69,306
35 37,787 100,835
- -------------------------------------------------------------
</Table>
6% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 101,974 96,574 105,000 790 105,790 N/A N/A 105,000
2 62 103,972 99,472 110,250 1,589 111,839 N/A N/A 110,250
3 63 105,992 102,392 115,763 2,397 118,159 N/A N/A 115,763
4 64 108,035 105,335 121,551 3,214 124,765 N/A N/A 121,551
5 65 110,098 108,298 127,628 4,039 131,667 N/A N/A 127,628
6 66 112,182 111,282 134,010 4,873 138,882 N/A N/A 134,010
7 67 114,285 114,285 140,710 5,714 146,424 2,143 116,428 140,710
8 68 116,406 116,406 147,746 6,562 154,308 2,461 118,867 147,746
9 69 118,543 118,543 155,133 7,417 162,550 3,709 122,252 155,133
10 70 120,696 120,696 162,889 8,278 171,168 4,139 124,835 162,889
15 75 131,651 131,651 207,893 12,660 220,553 7,913 139,564 200,000
20 80 143,600 143,600 265,330 17,440 282,770 10,900 154,500 200,000
25 85 157,110 157,110 265,330 22,844 288,174 14,277 171,387 200,000
30 90 172,385 172,385 265,330 28,954 294,284 18,096 190,481 200,000
35 95 189,656 189,656 265,330 35,863 301,192 22,414 212,070 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,434 7,114
8 8,027 7,442
9 8,671 7,788
10 9,940 8,219
15 14,171 10,470
20 16,060 12,862
25 18,604 16,055
30 20,697 19,240
35 22,893 22,856
- ---------------------------------------------------------------------------------
</Table>
89
PART II
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-9
0% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 96,173 90,773 105,000 0 105,000 N/A N/A 105,000
2 62 92,447 87,947 110,250 0 110,250 N/A N/A 110,250
3 63 88,818 85,218 115,763 0 115,763 N/A N/A 115,763
4 64 85,281 82,581 121,551 0 121,551 N/A N/A 121,551
5 65 81,832 80,032 127,628 0 127,628 N/A N/A 127,628
6 66 78,465 77,565 134,010 0 134,010 N/A N/A 134,010
7 67 75,178 75,178 140,710 0 140,710 0 75,178 140,710
8 68 71,930 71,930 147,746 0 147,746 0 71,930 147,746
9 69 68,754 68,754 155,133 0 155,133 0 68,754 155,133
10 70 65,645 65,645 162,889 0 162,889 0 65,645 162,889
15 75 50,988 50,988 207,893 0 207,893 0 50,988 200,000
20 80 38,237 38,237 265,330 0 265,330 0 38,237 200,000
25 85 27,464 27,464 265,330 0 265,330 0 27,464 200,000
30 90 18,361 18,361 265,330 0 265,330 0 18,361 200,000
35 95 10,670 10,670 265,330 0 265,330 0 10,670 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,323 4,593
8 7,896 4,504
9 8,518 4,413
10 9,694 4,322
15 13,632 3,825
20 15,230 3,183
25 17,364 2,573
30 18,980 1,855
35 20,586 1,150
- -------------------------------------------------------------
</Table>
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
EXPLANATION OF HEADINGS
CONTRACT VALUE -- The projected total value of the annuity at the beginning of
the period indicated, after all fees other than withdrawal charges have been
deducted.
SURRENDER VALUE -- The projected cash value of the annuity after any applicable
fees and withdrawal charges payable on surrender.
DEATH BENEFIT VALUE -- Greater of the contract value or purchase payments
(adjusted for withdrawals) compounded at 5% annually up to the later of age 80
or 5 years from issue (for age 80-85 at issue, 3% annual roll-up for 5 years) or
the highest contract value (the "step-up") on any contract anniversary up to the
later of age 80 or the fifth contract anniversary adjusted for withdrawals (age
80-84 at issue will have only one step-up on the third contract anniversary) is
payable to the beneficiary(s) on death of owner and/or joint owner. See the
prospectus for more complete information.
EARNINGS APPRECIATOR BENEFIT (EAB) -- A supplemental death benefit based on 40%
of earnings if issue age is 0-70; 25% for age 71-75; 15% for age 76-79, subject
to a cap equal to 300% of purchase payments multiplied by the applicable benefit
percentage. See prospectus for more complete information.
IAB VALUE -- Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
AMOUNT AVAILABLE TO ANNUITIZE -- The contract value plus the IAB value. See
prospectus for more complete information.
GMIB PROTECTED VALUE -- Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB GUARANTEED ANNUAL PAYOUT FOR SINGLE LIFE WITH 10-YEAR PERIOD CERTAIN -- The
payout determined by applying the GMIB protected value (and IAB value if IAB is
elected) to the GMIB guaranteed annuity purchase rates contained in the
contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See the
prospectus for more detail.
PROJECTED CONTRACT ANNUAL ANNUITY PAYOUT FOR SINGLE LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN -- The hypothetical annuity payout based on the projected
contract value (and IAB value if IAB is elected) calculated using the minimum
payout rates guaranteed under the contract ("Guaranteed Minimum Payout Rates").
See prospectus for more complete information.
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization:
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated based
on the actual contract value at annuitization and the better of the
Guaranteed Minimum Annuity Payout Rates or the Current Annuity Payout
Rates in effect at the time of annuitization. To show how the GMIB rider
works relative to the annuity payout available under the contract we
included the Projected Contract Annuity Payout column which shows
hypothetical annuity payouts based on the projected contract values and
the Guaranteed Minimum Payout Rates. We did not illustrate any
hypothetical annuity payouts based on Current Annuity Payout Rates
because these rates are subject to change at any time; however,
historically the annuity payout provided under such Current Annuity
Payout Rates have been significantly higher than the annuity payout that
would be provided under Guaranteed Minimum Annuity Payout Rates.
90
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PART III PROSPECTUSES
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
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ORD01142
STRATEGIC PARTNERS(SM)
PLUS 3
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
PROSPECTUS: MAY 1, 2004
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
- ------------------------------------------------------------
Strategic Partners Plus 3 offers a wide variety of investment choices, including
variable investment options that invest in underlying 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
EVERGREEN INVESTMENT MANAGEMENT COMPANY
THE DREYFUS CORPORATION
GE ASSET MANAGEMENT, INCORPORATED
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
HOTCHKIS AND WILEY CAPITAL MANAGEMENT LLC
JANUS CAPITAL MANAGEMENT LLC
J.P. MORGAN INVESTMENT MANAGEMENT INC.
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
STATE STREET RESEARCH AND MANAGEMENT COMPANY
WILLIAM BLAIR & COMPANY, LLC
You may choose between two basic versions of Strategic Partners Plus 3. One
version, the Contract With Credit, provides for a bonus credit that we add to
each purchase payment you make. If you choose this version of Strategic Partners
Plus 3, some charges and expenses may be higher than if you choose the version
without the credit. Those higher charges could exceed the amount of the credit
under some circumstances, particularly if you withdraw purchase payments within
a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners Plus 3
variable annuity contract, and keep it for future reference. The current
prospectuses for the underlying mutual funds contain important information about
the mutual funds. When you invest in a variable investment option that is funded
by a mutual fund, you should read the mutual fund prospectus and keep it for
future reference. The Risk Factors section relating to the market value
adjustment option appears on page 14 of this prospectus.
TO LEARN MORE ABOUT STRATEGIC PARTNERS PLUS 3
- ------------------------------------------------------------
To learn more about the Strategic Partners Plus 3 variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2004. 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 maintains a Web site (http://www.sec.gov) that contains the Strategic
Partners Plus 3 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 76 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
- ------------------------------------------------------------
- - (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 PLUS 3 IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
STRATEGIC PARTNERS(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA P2360
CONTENTS
- --------------------------------------------------------------------------------
<Table>
PART I: STRATEGIC PARTNERS PLUS 3 PROSPECTUS
-------------------------------------------------
SUMMARY
-------
Glossary........................................... 6
Summary............................................ 10
Risk Factors....................................... 14
Summary Of Contract Expenses....................... 15
Expense Examples................................... 20
PART II: STRATEGIC PARTNERS PLUS 3 PROSPECTUS
------------------------------------------------------------
SECTIONS 1-9
------------------------------------------------------------
Section 1: What Is The Strategic Partners Plus 3
Variable Annuity?..................................... 26
Short Term Cancellation Right Or "Free Look"....... 27
Section 2: What Investment Options Can I Choose?........ 28
Variable Investment Options........................ 28
Fixed Interest Rate Options........................ 37
Market Value Adjustment Option..................... 38
Transfers Among Options............................ 39
Additional Transfer Restrictions................... 40
Dollar Cost Averaging.............................. 41
Asset Allocation Program........................... 42
Auto-Rebalancing................................... 42
Voting Rights...................................... 42
Substitution....................................... 42
Section 3: What Kind Of Payments Will I Receive During
The Income Phase? (Annuitization)..................... 43
Payment Provisions................................. 43
Payment Provisions Without The Guaranteed Minimum
Income Benefit................................... 43
Option 1: Annuity Payments For A Fixed
Period....................................... 43
Option 2: Life Income Annuity Option........... 43
Option 3: Interest Payment Option.............. 43
Other Annuity Options.......................... 44
Tax Considerations................................. 44
Guaranteed Minimum Income Benefit.................. 44
GMIB Roll-up................................... 45
GMIB Option 1 -- Single Life Payout Option..... 47
GMIB Option 2 -- Joint Life Payout Option...... 47
Income Appreciator Benefit......................... 47
How We Determine Annuity Payments.................. 49
Section 4: What Is The Death Benefit?................... 51
Beneficiary........................................ 51
Calculation Of The Death Benefit................... 51
Guaranteed Minimum Death Benefit................... 51
GMDB Roll-up................................... 51
GMDB Step-up................................... 52
Special Rules If Joint Owners...................... 52
Payout Options..................................... 53
Earnings Appreciator Benefit....................... 53
Spousal Continuance Benefit........................ 54
Section 5: How Can I Purchase A Strategic Partners Plus
3 Contract?........................................... 57
Purchase Payments.................................. 57
Allocation Of Purchase Payments.................... 57
Credits............................................ 57
Calculating Contract Value......................... 58
</Table>
2
- --------------------------------------------------------------------------------
<Table>
<Caption>
Section 6: What Are The Expenses Associated With The
Strategic Partners Plus 3 Contract?................... 59
Insurance And Administrative Charge................ 59
Withdrawal Charge.................................. 60
Waiver Of Withdrawal Charges For Critical Care..... 60
Contract Maintenance Charge........................ 61
Guaranteed Minimum Income Benefit Charge........... 61
Income Appreciator Benefit Charge.................. 61
Earnings Appreciator Benefit Charge................ 62
Taxes Attributable To Premium...................... 63
Transfer Fee....................................... 63
Company Taxes...................................... 63
Underlying Mutual Fund Fees........................ 63
Section 7: How Can I Access My Money?................... 64
Withdrawals During The Accumulation Phase.......... 64
Automated Withdrawals.............................. 64
Income Appreciator Benefit Options During The
Accumulation Phase............................... 64
Suspension Of Payments Or Transfers................ 66
Section 8: What Are The Tax Considerations Associated
With The Strategic Partners Plus 3 Contract?.......... 67
Contracts Owned By Individuals (Not Associated With
Tax-Favored Retirement Plans).................... 67
Contracts Held By Tax-Favored Plans................ 70
Section 9: Other Information............................ 74
Pruco Life Insurance Company....................... 74
The Separate Account............................... 74
Sale And Distribution Of The Contract.............. 74
Litigation......................................... 75
Assignment......................................... 75
Financial Statements............................... 76
Statement Of Additional Information................ 76
Householding....................................... 76
Market-Value Adjustment Formula.................... 77
IRA Disclosure Statement........................... 80
Appendix A.............................................. 84
Accumulation Unit Values........................... 84
Appendix B.............................................. 91
Hypothetical Illustrations......................... 91
</Table>
<Table>
PART III: PROSPECTUSES
----------------------
VARIABLE INVESTMENT OPTIONS
---------------------------
THE PRUDENTIAL SERIES FUND, INC.
EVERGREEN VARIABLE ANNUITY TRUST
JANUS ASPEN SERIES
</Table>
3
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4
PART I SUMMARY
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS PLUS 3 PROSPECTUS
5
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
GLOSSARY
- --------------------------------------------------------------------------------
WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes and
withdrawal charges.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the Earnings
Appreciator Benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which both the New York Stock Exchange and Pruco Life are open for
business. Our business day generally ends at 4:00 p.m. Eastern time.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirements for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept 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
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CONTRACT WITH CREDIT
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs than the Contract Without Credit.
6
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
CONTRACT WITHOUT CREDIT
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract With
Credit.
CREDIT
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally are
not recaptured once the free look period expires. Our reference in the preceding
sentence to "generally are not recaptured" refers to the fact that we have the
contractual right to deduct, from the death benefit we pay, the amount of any
credit corresponding to a purchase payment made within one year of death.
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive, at a
minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation. The
Guaranteed Minimum Death Benefit is available for an additional charge. See
"What is the Death Benefit?" on page 51.
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 or to the one-year fixed interest rate option.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We may offer one or more
guarantee periods.
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge that guarantees that the
death benefit that the beneficiary receives will be no less than a certain GMDB
protected value.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which may
equal the GMDB roll-up value, the GMDB step-up value, or the greater of the two.
The GMDB protected value will be subject to certain age restrictions and time
durations, however, it will still increase by subsequent invested purchase
payments and reduce proportionally by withdrawals.
GMDB ROLL-UP
We use the GMDB roll-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. The GMDB roll-up is equal to the invested
purchase payments compounded daily at an effective annual interest rate starting
on the date that each invested purchase payment is made, subject to a cap, and
reduced proportionally by withdrawals.
GMDB STEP-UP
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon death,
even if the contract value has declined. For example, if the GMDB step-up were
set at $100,000 on a contract anniversary, and the contract value subsequently
7
GLOSSARY CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
declined to $80,000 on the date of death, the GMDB step-up value would
nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB PROTECTED VALUE
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit.
The value is calculated daily and is equal to the GMIB roll-up, until the
GMIB roll-up either reaches its cap or if we stop applying the annual interest
rate based on the age of the annuitant, number of contract anniversaries or
number of years since last GMIB reset. At such point, the GMIB protected value
will be increased by any subsequent invested purchase payments. Any withdrawals
in subsequent contract years will proportionally reduce the GMIB protected
value. The GMIB protected value is not available as a cash surrender benefit or
a death benefit, nor is it used to calculate the cash surrender value or death
benefit.
GMIB RESET
You may elect to "step-up" or "reset" your GMIB protected value if your contract
value is greater than the current GMIB protected value. Upon exercise of the
reset provision, your GMIB protected value will be reset to equal your current
contract value. You are limited to two resets over the life of your contract,
provided that certain annuitant age requirements are met.
GMIB ROLL-UP
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the contract value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date each
invested purchase payment is made, subject to a cap, and reduced proportionally
by withdrawals.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the Income
Appreciator Benefit during the accumulation phase.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period during which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. The joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT
An adjustment to your contract value or withdrawal proceeds that is based on the
relationship between interest you are currently earning within the market value
8
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
adjustment option and prevailing interest rates. This adjustment may be positive
or negative.
MARKET VALUE ADJUSTMENT OPTION
This investment option may offer various guarantee periods and pays a fixed rate
of interest with respect to each guarantee period. We impose a market value
adjustment on withdrawals or transfers that you make from this option prior to
the end of its guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
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 telephone 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, 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 Plus 3 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. Generally,
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 Plus 3
Contract," on page 67.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that 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.
9
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9
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FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY?
The Strategic Partners Plus 3 variable annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company (Pruco Life,
we or us). The contract allows you to invest on a tax-deferred basis in variable
investment options, fixed interest rate options, and the market value adjustment
option. The contract is intended for retirement savings or other long-term
investment purposes and provides for a death benefit.
There are two basic versions of the Strategic Partners Plus 3 variable
annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide lower interest rates for fixed interest rate options and the
market value adjustment option than the Contract Without Credit, and
- - may provide fewer available market value adjustment guarantee periods than
the Contract Without Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide higher interest rates for fixed interest rate options and the
market value adjustment option than the Contract With Credit, and
- - may provide more available market value adjustment guarantee periods than the
Contract With Credit.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in the Prudential Money Market Portfolio variable
investment option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to be at least
3%.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only 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 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 select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see your contract for further information on these and
other variations.
10
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or not
to make such contract amendments available to contracts that already have been
issued.
If you change your mind about owning Strategic Partners Plus 3, you may
cancel your contract within 10 days after receiving it (or whatever period is
required under applicable law). This time period is referred to as the "Free
Look" period.
Pruco Life offers several different annuities which your representative may
be authorized to offer to you. Each annuity has different features and benefits
that may be appropriate for you based on your financial situation, your age and
how you intend to use the annuity. The different features and benefits include
variations in death benefit protection, and the ability to access your annuity's
contract value. The fees and charges under the annuity contract and the
compensation paid to your representative may also be different between each
annuity. If you are purchasing the contract as a replacement for existing
variable annuity or variable life coverage, you should consider, among other
things, any surrender or penalty charges you may incur when replacing your
existing coverage.
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any of the following variable investment options:
The Prudential Series Fund, Inc.
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SPGoldman Sachs Small Cap Value Portfolio (formerly SP Small/Mid Cap Value
Portfolio)
SP Growth Asset Allocation Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SPState Street Research Small Cap Growth Portfolio
(formerly SP INVESCO Small Company Growth Portfolio)
SP Strategic Partners Focused Growth Portfolio
SPTechnology Portfolio (formerly SP Alliance Technology Portfolio)
SPWilliam Blair International Growth Portfolio (formerly SP Jennison
International Growth Portfolio)
Evergreen Variable Annuity Trust
- - Evergreen VA Foundation Fund
- - Evergreen VA Fund*
- - Evergreen VA Growth and Income Fund**
- - Evergreen VA Growth Fund
- - Evergreen VA International Equity Fund***
- - Evergreen VA Omega Fund
- - Evergreen VA Special Values Fund
(formerly Evergreen VA Small Cap Value Fund)
* Effective December 5, 2003, the Evergreen VA Blue Chip Fund and the
Evergreen VA Masters Fund were each merged into the Evergreen VA Fund.
** Effective December 5, 2003, the Evergreen VA Capital Growth Fund was
merged into the Evergreen VA Growth and Income Fund.
*** Effective December 5, 2003, the Evergreen VA Global Leaders Fund was
merged into the Evergreen VA International Equity Fund.
11
SUMMARY FOR SECTIONS 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
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
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
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.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB) and the Income
Appreciator Benefit. The Guaranteed Minimum Income Benefit provides that once
the income period begins, your income payments will be no less than a value that
is based on a certain "GMIB protected value" applied to the GMIB guaranteed
annuity purchase rates. The Income Appreciator Benefit may provide an additional
income amount during the accumulation phase or upon annuitization. See "What
Kind Of Payments Will I Receive During The Income Phase" on page 43.
SECTION 4
WHAT IS THE DEATH BENEFIT?
In general, if the sole owner or first-to-die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive, at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum Death
Benefit (GMDB). The base death benefit equals the total invested purchase
payments reduced proportionally by withdrawals. The Guaranteed Minimum Death
Benefit is equal to a "GMDB protected value" that depends upon which of the
following Guaranteed Minimum Death Benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value;"
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value;" or
- - the greater of the GMDB step-up value and GMDB roll-up value.
On the date we receive proof of death in good order, in lieu of paying a
death benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Benefit, if the conditions that we describe
on page 54 are met.
For an additional fee, you may also choose, if it is available in your
contract, the Earnings Appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS PLUS 3 CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000, but not greater than $1,000,000 absent our prior
approval. Generally, you can make additional purchase payments of $500 ($100 if
made through electronic funds transfer) or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms. The Contract With Credit provides for the allocation of a
credit with each purchase payment.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
12
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3 CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year (or upon full surrender) we deduct a contract maintenance charge if
your contract value is less than $75,000. This charge is currently equal to
the lesser of $35 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $75,000 or more. We may impose
lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge as follows:
-- 1.4% if you choose the base death benefit,
-- 1.65% if you choose the roll-up or step-up Guaranteed Minimum Death
Benefit option, or
-- 1.75% if you choose the greater of the roll-up and step-up Guaranteed
Minimum Death Benefit option.
We impose an additional insurance and administrative charge of 0.10%
annually for the Contract With Credit.
- - We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value. (In some states this fee may be lower.)
- - We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your contract value.
- - We will deduct an additional charge if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge from your contract value on
the contract anniversary and upon certain other events. The charge for this
benefit is based on an annual rate of 0.30% of your contract value.
- - There are a few states/jurisdictions that assess a premium tax on us when you
begin receiving regular income payments from your annuity. In those states,
we deduct a charge designed to approximate this tax, which can range from
0-3.5% of your contract value.
- - There are also expenses associated with the mutual funds. For 2003, the fees
of these funds ranged on an annual basis from 0.37% to 2.56% of fund assets,
which are reduced by expense reimbursements or waivers to 0.37% to 1.30%.
These reimbursements or waivers may be terminated at any time.
- - If you withdraw money (or you begin the income phase) less than seven
contract anniversaries after making a purchase payment, then you may have to
pay a withdrawal charge on all or part of the withdrawal. This charge ranges
from 1-7% for the Contract Without Credit and 5-8% for the Contract With
Credit. (In certain states reduced withdrawal charges may apply for certain
ages. Your contract contains the applicable charges.)
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" on page 15 and "What Are The
Expenses Associated With The Strategic Partners Plus 3 Contract?" on page 59.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. For the Contract Without Credit, if
you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging
13
SUMMARY FOR SECTIONS 1-9 CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
from 1-7%. For the Contract With Credit, we may impose a withdrawal charge
ranging from 5-8%. (In certain states reduced withdrawal charges may apply for
certain ages. Your contract contains the applicable charges.)
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3
CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal as a withdrawal
of earnings, which 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 and therefore will not be taxable as income. Generally, all amounts
withdrawn from an Individual Retirement Annuity (IRA) contract (excluding Roth
IRAs) are 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 of affiliated and unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option that we summarize below.
ISSUER RISK. The market value adjustment option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life, and thus 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 and fixed interest rate options and to fulfill its insurance
guarantees 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 prior to the end of a guarantee
period and 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 may impose withdrawal charges on
amounts withdrawn from the market value adjustment 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.
14
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS PLUS 3. 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.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners Plus 3 Contract?" on page 59. The individual fund prospectuses contain
detailed expense information about the underlying mutual funds.
CONTRACT OWNER TRANSACTION EXPENSES
<Table>
<Caption>
WITHDRAWAL CHARGE(1)
- -----------------------------------------
CONTRACT CONTRACT CONTRACT
ANNIVERSARIES SINCE WITH WITHOUT
PURCHASE PAYMENT CREDIT CREDIT
- ------------------- -------- --------
0 8% 7%
1 8% 6%
2 8% 5%
3 8% 4%
4 7% 3%
5 6% 2%
6 5% 1%
7 0% 0%
</Table>
<Table>
<Caption>
MAXIMUM TRANSFER FEE
- --------------------------------------------------------------
Each transfer after 12(2) $30.00
CHARGE FOR PREMIUM TAX IMPOSED ON US BY CERTAIN
STATES/JURISDICTIONS
- --------------------------------------------------------------
Up to 3.5% of contract value
</Table>
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal charge
if we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 60. In certain states reduced withdrawal charges may apply under
the Contract with Credit. Your contract contains the applicable charges.
2: Currently, we charge $25 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of $30,
but have no current intention to do so. We will not charge you for transfers
made in connection with Dollar Cost Averaging and Auto-Rebalancing or transfers
from the market value adjustment option at the end of a guarantee period, and do
not count them toward the limit of 12 free transfers per year.
15
SUMMARY OF CONTRACT EXPENSES CONTINUED
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PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
The next table describes the fees and expenses you will pay periodically during
the time that you own the contract, not including underlying mutual fund fees
and expenses.
ANNUAL ACCOUNT EXPENSES
<Table>
MAXIMUM CONTRACT MAINTENANCE CHARGE AND CONTRACT CHARGE
UPON FULL WITHDRAWAL(3)
- ---------------------------------------------------------------------
$60.00
ANNUAL INSURANCE AND ADMINISTRATIVE EXPENSES
- ---------------------------------------------------------------------
AS A PERCENTAGE OF ACCOUNT VALUE IN VARIABLE
INVESTMENT OPTIONS
Base Death Benefit: 1.40%
Guaranteed Minimum Death Benefit Option--Roll-Up or
Step-Up: 1.65%
Guaranteed Minimum Death Benefit Option--Greater of
Roll-Up and Step-Up: 1.75%
Additional Charge for Contract With Credit(4) 0.10%
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(5) (for contracts sold on or
after January 20, 2004, or upon subsequent state approval)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.50%
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(5) (FOR ALL OTHER CONTRACTS)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.45%
ANNUAL INCOME APPRECIATOR BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS(6)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.25%
ANNUAL EARNINGS APPRECIATOR BENEFIT CHARGE AND CHARGE
UPON CERTAIN TRANSACTIONS(7)
- ---------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.30%
</Table>
3: Currently, we waive this fee if your contract value is greater than or equal
to $75,000. If your contract value is less than $75,000, we currently charge the
lesser of $35 or 2% of your contract value. This is a single fee that we assess
(a) annually or (b) upon full withdrawal made on a date other than a contract
anniversary. As shown in the table, we can increase this fee in the future up to
a maximum of $60, but we have no current intention to do so. This charge may be
lower in certain states.
4: We impose this additional charge of 0.10% annually on the Contract With
Credit, irrespective of which death benefit option you choose.
5: We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after January
20, 2004, or upon subsequent state approval (0.45% for all other contracts) of
the average GMIB protected value, which is calculated daily and generally is
equal to the GMIB roll-up value. In some states this charge is 0.30%, see your
contract for details. Subject to certain age or duration restrictions, the
roll-up value is the total of all invested purchase payments (after a reset, the
contract value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. The reduction is
equal to the amount of the withdrawal for the first 5% of the roll-up value,
calculated as of the latest contract anniversary (or contract date). The amount
of the withdrawal in excess of 5% of the roll-up value further reduces the
roll-up value and 200% cap proportionally to the additional reduction in
contract value after the first 5% withdrawal occurs. We assess this fee each
contract anniversary and when you begin the income phase of your contract. We
also assess this fee if you make a full withdrawal, but prorate the fee based on
the portion of the contract year that has elapsed since the full annual fee was
most recently deducted. If you make a partial withdrawal, we will assess the
prorated fee if the remaining contract value after the withdrawal would be less
than the amount of the prorated fee; otherwise we will not assess the fee at
that time.
6: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full or
partial withdrawal, and upon a subsequent purchase payment. The fee is based on
the contract value at the time of the calculation, and is prorated based on the
portion of the contract year since the date that the charge was last deducted.
Although it may be calculated more often, it is deducted only: on each contract
anniversary, on the annuity date, upon the death of the sole owner or first to
die of the owner or joint owner prior to the annuity date, upon a full
withdrawal, and upon a partial withdrawal if the contract value remaining after
such partial withdrawal is not enough to cover the then-applicable charge. With
respect to full and partial withdrawals, we prorate the fee based on the portion
of the contract year that has elapsed since the full annual fee was most
recently deducted. We reserve the right to calculate and deduct the fee more
frequently than annually, such as quarterly.
7: We impose this charge only if you choose the Earnings Appreciator Benefit.
The charge for this benefit is based on an annual rate of 0.30% of your contract
value. Although the charge may be calculated more often, it is deducted only: on
each contract anniversary, on the annuity date, upon the death of the sole owner
or first to die of the owner or joint owner prior to the annuity date, upon a
full withdrawal, and upon a partial withdrawal if the contract value remaining
after such partial withdrawal is not enough to cover the then-applicable
earnings appreciator charge. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
16
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other 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 below and 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, 2003. Fund expenses
are not fixed or guaranteed by the Strategic Partners Plus 3 contract, and may
vary from year to year.
<Table>
<Caption>
MINIMUM MAXIMUM
------- -------
Total Annual Underlying Mutual Fund Operating Expenses 0.37% 2.56%
* Actual expenses for the mutual funds are lower due to certain 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.
</Table>
17
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
<Table>
<Caption>
ANNUAL MUTUAL FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------------
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OTHER TOTAL
ADVISORY FEES EXPENSES EXPENSES(1)
THE PRUDENTIAL SERIES FUND, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
Jennison Portfolio 0.60% 0.04% 0.64%
Prudential Equity Portfolio 0.45% 0.04% 0.49%
Prudential Global Portfolio 0.75% 0.12% 0.87%
Prudential Money Market Portfolio 0.40% 0.04% 0.44%
Prudential Stock Index Portfolio 0.35% 0.02% 0.37%
Prudential Value Portfolio 0.40% 0.04% 0.44%
SP Aggressive Growth Asset Allocation
Portfolio(2,3) 0.85% 0.30% 1.15%
SP AIM Aggressive Growth Portfolio(2) 0.95% 1.07% 2.02%
SP AIM Core Equity Portfolio(2) 0.85% 0.87% 1.72%
SP Alliance Large Cap Growth Portfolio 0.90% 0.16% 1.06%
SP Balanced Asset Allocation Portfolio(2,3) 0.77% 0.21% 0.98%
SP Conservative Asset Allocation Portfolio(2,3) 0.72% 0.16% 0.88%
SP Davis Value Portfolio 0.75% 0.07% 0.82%
SP Deutsche International Equity Portfolio(2) 0.90% 0.40% 1.30%
SP Goldman Sachs Small Cap Value Portfolio
(formerly SP Small/Mid-Cap Value Portfolio) 0.90% 0.14% 1.04%
SP Growth Asset Allocation Portfolio(2,3) 0.81% 0.26% 1.07%
SP Large Cap Value Portfolio(2) 0.80% 0.31% 1.11%
SP MFS Capital Opportunities Portfolio(2) 0.75% 1.27% 2.02%
SP Mid Cap Growth Portfolio(2) 0.80% 0.54% 1.34%
SP PIMCO High Yield Portfolio 0.60% 0.12% 0.72%
SP PIMCO Total Return Portfolio 0.60% 0.05% 0.65%
SP Prudential U.S. Emerging Growth Portfolio 0.60% 0.20% 0.80%
SP State Street Research Small Cap Growth
Portfolio(2)
(formerly SP INVESCO Small Company Growth
Portfolio) 0.95% 0.83% 1.78%
SP Strategic Partners Focused Growth
Portfolio(2) 0.90% 0.75% 1.65%
SP Technology Portfolio(2)
(formerly SP Alliance Technology Portfolio) 1.15% 1.41% 2.56%
SP William Blair International Growth Portfolio
(formerly SP Jennison International Growth
Portfolio) 0.85% 0.30% 1.15%
EVERGREEN VARIABLE ANNUITY TRUST
- ---------------------------------------------------------------------------------------------------------------------------------
Evergreen VA Foundation Fund 0.75% 0.18% 0.93%
Evergreen VA Fund(4) 0.75% 0.27% 1.02%
Evergreen VA Growth and Income Fund 0.75% 0.24% 0.99%
Evergreen VA Growth Fund(4) 0.70% 0.38% 1.08%
Evergreen VA International Equity Fund(4) 0.66% 0.46% 1.12%
Evergreen VA Omega Fund 0.52% 0.20% 0.72%
Evergreen VA Special Values Fund(4)
(formerly Evergreen VA Small Cap Value Fund) 0.87% 0.27% 1.14%
</Table>
18
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
<Table>
<Caption>
INVESTMENT 12B-1 OTHER TOTAL
ADVISORY FEES FEE EXPENSES EXPENSES
Janus Aspen Series(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio -- Service Shares 0.65% 0.25% 0.02% 0.92%
</Table>
1. The Total Expenses do not reflect fee waivers, reimbursement of expenses, or
expense offset arrangements for the fiscal year ended December 31, 2003.
2. The portfolios' total actual annual operating expenses for the year ended
December 31, 2003 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
expense reimbursements are voluntary and may be terminated by Prudential
Investments LLC at any time. After accounting for the expense reimbursements,
the portfolios' actual annual operating expenses were:
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Aggressive Growth Asset
Allocation Portfolio 0.97%
SP AIM Aggressive Growth Portfolio 1.07%
SP AIM Core Equity Portfolio 1.00%
SP Balanced Asset Allocation
Portfolio 0.87%
SP Conservative Asset Allocation
Portfolio 0.81%
SP Deutsche International Equity
Portfolio 1.10%
SP Growth Asset Allocation
Portfolio 0.92%
</Table>
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Large Cap Value Portfolio 0.90%
SP MFS Capital Opportunities
Portfolio 1.00%
SP Mid Cap Growth Portfolio 1.00%
SP State Street Research Small Cap
Growth Portfolio 1.15%
SP Strategic Partners Focused
Growth Portfolio 1.01%
SP Technology Portfolio 1.30%
</Table>
3. Each asset allocation portfolio invests in a combination of underlying
portfolios of The Prudential Series Fund, Inc. The Total Expenses for each asset
allocation portfolio are calculated as a blend of the fees of the underlying
portfolios, plus a 0.05% advisory fee payable to the investment adviser,
Prudential Investments LLC. The 0.05% advisory fee is included in the amount of
each investment advisory fee set forth in the table above.
4. The Fund's investment adviser may voluntarily waive its fees and/or reimburse
the Fund for certain of its expenses in order to reduce expense ratios. Amounts
waived and/or reimbursed may be recouped up to a period of three years following
the end of the fiscal year in which the fee waivers and/or expense
reimbursements were made. The Fund's investment adviser may cease these
voluntary waivers and/or reimbursements at any time. Including current voluntary
fee waivers, Net Operation Expenses were 1.00% for the VA Fund; 1.00% for the VA
Growth Fund; 1.00% for the VA Special Values Fund; and 1.07% for the VA
International Equity Fund.
5. Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc.
19
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- --------------------------------------------------------------------------------
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 1A: Contract With Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit; Guaranteed Minimum Income Benefit; Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit;
- - You choose a Guaranteed Minimum Death Benefit that provides the greater of
the step-up and roll-up death benefit;
- - You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after January 20, 2004, or upon subsequent state approval);
- - You choose the Earnings Appreciator Benefit;
- - You choose the Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
20
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
EXAMPLE 1b: Contract With Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 2a: Contract Without Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit, and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 2b: Contract Without Credit: Greater of Roll-up and Step-up Guaranteed
Minimum Death Benefit, Guaranteed Minimum Income Benefit, Earnings Appreciator
Benefit, Income Appreciator Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 3a: Contract With Credit: Base Death Benefit, and You Withdraw All Your
Assets
This example assumes that:
- - You invest $10,000 in the Contract With Credit;
- - You do not choose a Guaranteed Minimum Death Benefit, Earnings Appreciator
Benefit, Guaranteed Minimum Income Benefit, or Income Appreciator Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 3b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
21
EXPENSE EXAMPLES CONTINUED
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
EXAMPLE 4a: Contract Without Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you invest in the Contract Without Credit.
EXAMPLE 4b: Contract Without Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 4a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Note that withdrawal charges (which
are reflected in Examples 1a, 2a,
3a and 4a) are assessed in
connection with some annuity
options, but not others.
The values shown in the 10 year
column are the same for Example 4a
and 4b, the same for Example 3a and
3b, the same for Example 2a and 2b,
and the same for Example 1a and 1b.
This is because if 10 years have
elapsed since your last purchase
payment, we would no longer deduct
withdrawal charges when you make a
withdrawal. The indicated examples
reflect the maximum withdrawal
charges, but in certain states
reduced withdrawal charges may
apply for certain ages.
The examples use an average
contract maintenance charge, which
we calculated based on our estimate
of the total contract fees we
expect to collect in 2004. Based on
these estimates, the contract
maintenance charge is included as
an annual charge of 0.062% of
contract value. Your actual fees
will vary based on the amount of
your contract and your specific
allocation among the investment
options.
Premium taxes are not reflected in
the examples. We deduct a charge to
approximate premium taxes that may
be imposed on us in your state.
This charge is generally deducted
from the amount applied to an
annuity payout option.
A table of accumulation unit values
appears in the Appendix to this
prospectus.
22
- --------------------------------------------------------------------------------
PART I
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
<Table>
<Caption>
CONTRACT WITH CREDIT: GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM
DEATH BENEFIT OPTION; GUARANTEED MINIMUM INCOME BENEFIT; EARNINGS
APPRECIATOR BENEFIT; INCOME APPRECIATOR BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 1a: EXAMPLE 1b:
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
$1,325 $2,461 $3,492 $5,595 $573 $1,709 $2,834 $5,595
</Table>
<Table>
<Caption>
CONTRACT WITHOUT CREDIT: GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM
DEATH BENEFIT OPTION; GUARANTEED MINIMUM INCOME BENEFIT; EARNINGS
APPRECIATOR BENEFIT; INCOME APPRECIATOR BENEFIT
- --------------------------------------------------------------------------------
EXAMPLE 2a: EXAMPLE 2b:
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
$1,171 $2,066 $2,953 $5,309 $541 $1,616 $2,683 $5,309
</Table>
<Table>
<Caption>
CONTRACT WITH CREDIT: BASE DEATH BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 3a: EXAMPLE 3b:
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
$1,183 $2,055 $2,849 $4,480 $431 $1,303 $2,191 $4,480
</Table>
<Table>
<Caption>
CONTRACT WITHOUT CREDIT: BASE DEATH BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 4a: EXAMPLE 4b:
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
$1,034 $1,674 $2,331 $4,224 $404 $1,224 $2,061 $4,224
</Table>
23
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24
PART II SECTIONS 1-9
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS PLUS 3 PROSPECTUS
25
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
1:
WHAT IS THE STRATEGIC PARTNERS PLUS 3
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time on or after the third contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract in
a tax-favored plan such as an IRA, that plan generally provides tax deferral
even without investing in an annuity contract. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
There are two basic versions of Strategic Partners Plus 3 variable annuity.
Contract With Credit.
- - provides for a bonus credit that we add to each purchase payment that you
make,
- - has higher withdrawal charges and insurance and administrative costs than the
Contract Without Credit,
- - may provide a lower interest rate for fixed interest rate options and the
market value adjustment option than the Contract Without Credit, and
- - may provide fewer available market value adjustment guarantee periods than
the Contract Without Credit.
Contract Without Credit.
- - does not provide a credit,
- - has lower withdrawal charges and insurance and administrative costs than the
Contract With Credit,
- - may provide a higher interest rate for fixed interest rate options and the
market value adjustment option than the Contract With Credit, and
- - may provide more market value adjustment guarantee periods than the Contract
With Credit.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Plus 3 if you anticipate having to withdraw a significant
amount of your purchase payments within a few years of making those purchase
payments.
Strategic Partners Plus 3 is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options and a market value adjustment
option. If you select variable investment options, the amount of money you are
able to accumulate in your contract during the accumulation phase depends upon
the investment performance of the underlying mutual fund(s) associated with that
variable investment option.
Because the underlying 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.
26
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Plus 3, you may cancel
your contract within 10 days after receiving it (or whatever period is required
by applicable law). You can request a refund by returning the contract either to
the representative who sold it to you, or to the Prudential Annuity Service
Center at the address shown on the first page of this prospectus. You will
receive, depending on applicable state law:
- - Your full purchase payment, less any applicable federal and state income tax;
or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. We impose neither a withdrawal
charge nor any market value adjustment if you cancel your contract under this
provision.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your contract value. To the extent dictated by state law, we will
include in your refund the amount of any fees and charges that we deducted.
27
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
- --------------------------------------------------------------------------------
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY OF
THE VARIABLE INVESTMENT OPTIONS, FIXED INTEREST RATE OPTIONS, AND A MARKET VALUE
ADJUSTMENT OPTION.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their shares
to both variable annuity and variable life separate accounts of different
insurance companies, which could create the kinds of risks that are described in
more detail in the current prospectus for the underlying mutual fund. The
current prospectuses for the underlying mutual funds also contain other
important information about the mutual funds. When you invest in a variable
investment option that is funded by a mutual fund, you should read the mutual
fund prospectus and keep it for future reference.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment of
their investment style (as of the date of this prospectus). The chart also
provides a description of each portfolio's investment objective (in italics) and
a short, summary description of their key policies to assist you in determining
which portfolios may be of interest to you. There is no guarantee that any
portfolio will meet its investment objective. The name of the adviser/subadviser
for each portfolio appears next to the description.
All the portfolios on the following chart, except for the Janus Aspen
Series -- Growth Portfolio, and the seven Evergreen Funds, are Prudential Series
Fund portfolios. The Jennison Portfolio, Prudential Equity Portfolio, Prudential
Global Portfolio, Prudential Money Market Portfolio, Prudential Stock Index
Portfolio and Prudential Value Portfolio, and each "SP" Portfolio of the
Prudential Series Fund, are managed by an indirect wholly-owned subsidiary of
Prudential Financial, Inc. called Prudential Investments LLC (PI) under a
"manager-of-managers" approach. The SP Aggressive Growth Asset Allocation
Portfolio, SP Balanced Asset Allocation Portfolio, SP Conservative Asset
Allocation Portfolio, and SP Growth Asset Allocation Portfolio invest in other
Prudential Series Fund Portfolios, and are managed by 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 manage some or all of a Prudential Series Fund portfolio are
listed on the following chart.
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. With regard to its variable
annuity contracts generally, Pruco Life receives fees that range from 0.05% to
0.40% annually for providing such services.
As detailed in the Prudential Series Fund prospectus, although the Prudential
Money Market Portfolio is designed to be a stable investment option, it is
possible to lose money in that portfolio. For example, when prevailing
short-term interest rates are very low, the yield on the Prudential Money Market
Portfolio may be so low that, when separate account and contract charges are
deducted, you experience a negative return.
28
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JENNISON PORTFOLIO: seeks long-term growth of capital. The Jennison Associates
Portfolio invests primarily in equity securities of major, LLC
established corporations that the subadviser believes offer
above-average growth prospects. The Portfolio may invest up
to 30% of its total assets in foreign securities. Stocks are
selected on a company-by-company basis using fundamental
analysis. Normally 65% of the Portfolio's total assets are
invested in common stocks and preferred stocks of companies
with capitalization in excess of $1 billion.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE PRUDENTIAL EQUITY PORTFOLIO: seeks long-term growth of GE Asset Management,
capital. The Portfolio invests at least 80% of its Incorporated;
investable assets in common stocks of major established Jennison Associates
corporations as well as smaller companies that the LLC; Salomon Brothers
subadvisers believe offer attractive prospects of Asset Management Inc.
appreciation. The Portfolio may invest up to 30% of its
total assets in foreign securities. The Portfolio may also
invest 20% of its investable assets in short, intermediate
or long-term debt obligations, convertible and
nonconvertible preferred stock and other equity-related
securities. Up to 5% of these investable assets may be rated
below investment grade. Debt securities rated below
investment grade are considered speculative and are
sometimes referred to as "junk bonds."
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PRUDENTIAL GLOBAL PORTFOLIO: seeks long-term growth of Jennison Associates
capital. The Portfolio invests primarily in common stocks LLC
(and their equivalents) of foreign and U.S. companies. When
selecting stocks, the subadviser uses a growth approach
which means that it looks for companies that have
above-average growth prospects. Generally, the Portfolio
invests in at least three countries, including the U.S., but
may invest up to 35% of the Portfolio's assets in companies
located in any one country other than the U.S.
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET PRUDENTIAL MONEY MARKET PORTFOLIO: seeks maximum current Prudential Investment
income consistent with the stability of capital and the Management, Inc.
maintenance of liquidity. The Portfolio invests in
high-quality short-term money market instruments issued by
the U.S. Government or its agencies, as well as by
corporations and banks, both domestic and foreign. The
Portfolio will invest only in instruments that mature in
thirteen months or less, and which are denominated in U.S.
dollars.
- -----------------------------------------------------------------------------------------------------------------------
MANAGED INDEX PRUDENTIAL STOCK INDEX PORTFOLIO: seeks investment results Prudential Investment
that generally correspond to the performance of Management, Inc.
publicly-traded common stocks. With the price and yield
performance of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) as the benchmark, the Portfolio
normally invests at least 80% of investable assets in S&P
500 stocks. The S&P 500 represents more than 70% of the
total market value of all publicly-traded common stocks and
is widely viewed as representative of publicly-traded common
stocks as a whole. The Portfolio is not "managed" in the
traditional sense of using market and economic analyses to
select stocks. Rather, the portfolio manager purchases
stocks in proportion to their weighting in the S&P 500.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE PRUDENTIAL VALUE PORTFOLIO: seeks capital appreciation. The Jennison Associates
Portfolio invests primarily in common stocks that the LLC
subadviser believes are undervalued -- those stocks that are
trading below their underlying asset value, cash generating
ability and overall earnings and earnings growth. There is a
risk that "value" stocks can perform differently from the
market as a whole and other types of stocks and can continue
to be undervalued by the markets for long periods of time.
Normally at least 65% of the Portfolio's total assets is
invested in the common stock and convertible securities of
companies that the subadviser believes will provide
investment returns above those of the S&P 500 or the New
York Stock Exchange (NYSE) Composite Index. Most of the
investments will be securities of large capitalization
companies. The Portfolio may invest up to 25% of its total
assets in real estate investment trusts (REITs) and up to
30% of its total assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO: seeks to Prudential
obtain the highest potential total return consistent with Investments LLC
the specified level of risk tolerance. The Portfolio seeks
to achieve this investment objective by investing in several
other Series Fund Portfolios ("Underlying Portfolios"),
which currently consist of domestic equity Portfolios and
international equity Portfolios. The domestic equity
component is approximately 78% of the Portfolio and the
international equity component is approximately 22% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP AIM AGGRESSIVE GROWTH PORTFOLIO: seeks long-term growth A I M Capital
of capital. The Portfolio invests primarily in the common Management, Inc.
stocks of companies whose earnings the subadviser expects to
grow more than 15% per year. Growth stocks may involve a
higher level of risk than value stocks, because growth
stocks tend to attract more attention and more speculative
investments than value stocks. On behalf of the Portfolio,
the subadviser invests in securities of small and medium
sized growth companies, may invest up to 25% of the
Portfolio's total assets in foreign securities and may
invest up to 15% of the Portfolio's total assets in real
estate investment trusts (REITs).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP AIM CORE EQUITY PORTFOLIO: seeks growth of capital. The A I M Capital
Portfolio normally invests at least 80% of investable assets Management, Inc.
in equity securities, including convertible securities of
established companies that have long-term above-average
growth in earnings and growth companies that the subadviser
believes have the potential for above-average growth in
earnings. The Portfolio may invest up to 20% of its total
assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP ALLIANCE LARGE CAP GROWTH PORTFOLIO: seeks growth of Alliance Capital
capital by pursuing aggressive investment policies. The Management, L.P.
Portfolio normally invests at least 80% of its investable
assets in stocks of companies considered to have large
capitalizations (i.e., similar to companies included in the
S&P 500 Index). Unlike most equity funds, the Portfolio
focuses on a relatively small number of intensively
researched companies. The Portfolio usually invests in about
40-60 companies, with the 25 most highly regarded of these
companies generally constituting approximately 70% of the
Portfolio's investable assets. Up to 15% of the Portfolio's
total assets may be invested in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
30
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP BALANCED ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide a
balance between current income and growth of capital by
investing in several other Series Fund Portfolios
("Underlying Portfolios"), which currently consist of fixed
income Portfolios, domestic equity Portfolios, and
international equity Portfolios. The fixed income component
is approximately 37% of the Portfolio, the domestic equity
component is approximately 49% of the Portfolio, and the
international equity component is approximately 14% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO: seeks to obtain Prudential
the highest potential total return consistent with the Investments LLC
specified level of risk tolerance. The Portfolio seeks to
provide current income with low to moderate capital
appreciation by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of fixed income Portfolios, domestic equity
Portfolios, and international equity Portfolios. The fixed
income component is approximately 57% of the Portfolio, the
domestic equity component is approximately 33% of the
Portfolio, and the international equity component is
approximately 10% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP DAVIS VALUE PORTFOLIO: seeks growth of capital. The Davis Advisors
Portfolio invests primarily in common stocks of U.S.
companies with market capitalizations of at least $5
billion. It may also invest in stocks of foreign companies
and U.S. companies with smaller capitalizations. The
subadviser selects common stocks of quality, overlooked
growth companies at value prices and holds them for the
long-term. It looks for companies with sustainable growth
rates selling at modest price-earnings multiples that it
hopes will expand as other investors recognize the company's
true worth. There is a risk that "value" stocks can perform
differently from the market as a whole and other types of
stocks and can continue to be undervalued by the markets for
long periods of time.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO: seeks long-term Deutsche Asset
capital appreciation. The Portfolio invests primarily in the Management Investment
stocks of companies located in developed foreign countries Services Limited
that make up the MSCI EAFE Index, plus Canada. The Portfolio
also may invest in emerging markets securities. The
Portfolio normally invests at least 80% of its investable
assets in the stocks and other securities with equity
characteristics of companies in developed countries outside
the U.S.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP GROWTH ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide
long-term growth of capital with consideration also given to
current income by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of domestic equity Portfolios, fixed income
Portfolios, and international equity Portfolios. The
domestic equity component is approximately 64% of the
Portfolio, the fixed income component is approximately 18%
of the Portfolio, and the international equity component is
approximately 18% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO (FORMERLY SP Goldman Sachs Asset
SMALL/MID CAP VALUE PORTFOLIO): seeks long-term capital Management, L.P.
growth. The Portfolio normally invests at least 80% of
investable assets in small capitalization companies that are
generally believed to be undervalued in the marketplace. The
80% requirement applies at the time the Portfolio invests
its assets. The Portfolio generally defines small
capitalization stocks as stocks of companies with a
capitalization of $4 billion or less.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP LARGE CAP VALUE PORTFOLIO: seeks long-term growth of Hotchkis and Wiley
capital. The Portfolio normally invests at least 80% of Capital Management
investable assets in common stocks and securities LLC; J.P. Morgan
convertible into common stock of companies that are believed Investment Management
to be undervalued and have an above-average potential to Inc.
increase in price, given the company's sales, earnings, book
value, cash flow and recent performance. The Portfolio seeks
to achieve its objective through investments primarily in
equity securities of large capitalization companies. The
Portfolio generally defines large capitalization companies
as those with a total market capitalization of $5 billion or
more (measured at the time of purchase).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP MFS CAPITAL OPPORTUNITIES PORTFOLIO: seeks capital Massachusetts
appreciation. The Portfolio normally invests at least 65% of Financial Services
net assets in common stocks and related securities, such as Company (MFS)
preferred stocks, convertible securities and depositary
receipts for those securities. The Portfolio focuses on
companies that the subadviser believes have favorable growth
prospects and attractive valuations based on current and
expected earnings or cash flow. The Portfolio's investments
may include securities listed on a securities exchange or
traded in the over-the-counter markets. The subadviser uses
a bottom-up, as opposed to a top-down, investment style in
managing the Portfolio. This means that securities are
selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and
management's abilities). The Portfolio may invest in foreign
securities (including emerging market securities), through
which it may have exposure to foreign currencies.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP MID CAP GROWTH PORTFOLIO: seeks long-term growth of Calamos Asset
capital. The Portfolio normally invests at least 80% of Management, Inc.
investable assets in common stocks and related securities,
such as preferred stocks, convertible securities and
depositary receipts for those securities. These securities
typically are of medium market capitalizations, which the
subadviser believes have above-average growth potential.
Medium market capitalization companies are defined by the
Portfolio as companies with market capitalizations equaling
or exceeding $250 million but not exceeding the top of the
Russell Midcap(TM) Growth Index range at the time of the
Portfolio's investment. The Portfolio's investments may
include securities listed on a securities exchange or traded
in the over-the-counter markets. The subadviser uses a
bottom-up and top-down analysis in managing the Portfolio.
This means that securities are selected based upon
fundamental analysis, as well as a top-down approach to
diversification by industry and company, and by paying
attention to macro-level investment themes. The Portfolio
may invest in foreign securities (including emerging markets
securities).
- -----------------------------------------------------------------------------------------------------------------------
</Table>
32
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND SP PIMCO HIGH YIELD PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio normally invests at LLC (PIMCO)
least 80% of investable assets in a diversified portfolio of
high yield/high risk securities rated below investment grade
but rated at least B by Moody's Investor Service, Inc.
(Moody's) or Standard & Poor's Ratings Group (S&P), or, if
unrated, determined by the subadviser to be of comparable
quality. The remainder of the Portfolio's assets may be
invested in investment grade fixed income instruments. The
duration of the Portfolio normally varies within a two to
six year time frame based on the subadviser's forecast for
interest rates. The Portfolio may invest without limit in
U.S. dollar-denominated securities of foreign issuers. The
Portfolio may invest up to 15% of its assets in
euro-denominated securities.
- -----------------------------------------------------------------------------------------------------------------------
BOND SP PIMCO TOTAL RETURN PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio invests primarily in LLC (PIMCO)
investment grade debt securities. The Portfolio normally
invests at least 65% of its assets in a diversified
portfolio of fixed income instruments of varying maturities.
It may also invest up to 10% of its assets in high
yield/high risk securities (also known as "junk bonds")
rated B or higher by Moody's or S&P or, if unrated,
determined by the subadviser to be of comparable quality.
The portfolio duration of this Portfolio normally varies
within a three to six year time frame based on the
subadviser's forecast for interest rates.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO: seeks Jennison Associates
long-term capital appreciation. The Portfolio normally LLC
invests at least 80% of investable assets in equity
securities of small and medium sized U.S. companies that the
subadviser believes have the potential for above-average
growth. The Portfolio considers small and medium-sized
companies to be those with market capitalizations that are
less than the largest capitalization of the Standard and
Poor's Mid Cap 400 Stock Index as of the end of a calendar
quarter. As of December 31, 2003, this number was $11.8
billion. The Portfolio can invest up to 20% of investable
assets in equity securities of companies with larger or
smaller market capitalizations than previously noted. The
Portfolio can invest up to 35% of total assets in foreign
securities. The Portfolio also may use derivatives for
hedging or to improve the Portfolio's returns.
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO State Street Research
(FORMERLY SP INVESCO SMALL COMPANY GROWTH PORTFOLIO): seeks and Management
long-term capital growth. The Portfolio normally invests at Company
least 80% of investable assets in common stocks of small-
capitalization companies -- those which are included in the
Russell 2000 Growth Index at the time of purchase, or if not
included in that index, have market capitalizations of $2.5
billion or below at the time of purchase. Investments in
small, developing companies carry greater risk than
investments in larger, more established companies.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO: seeks Alliance Capital
long-term growth of capital. The Portfolio normally invests Management, L.P.;
at least 65% of total assets in equity-related securities of Jennison Associates
U.S. companies that the subadvisers believe to have strong LLC
capital appreciation potential. The Portfolio's strategy is
to combine the efforts of two subadvisers and to invest in
the favorite stock selection ideas of three portfolio
managers (two of whom invest as a team). Each subadviser to
the Portfolio utilizes a growth style to select
approximately 20 securities. The portfolio managers build a
portfolio with stocks in which they have the highest
confidence and may invest more than 5% of the Portfolio's
assets in any one issuer. The Portfolio is nondiversified,
meaning it can invest a relatively high percentage of its
assets in a small number of issuers. Investing in a
nondiversified portfolio, particularly a portfolio investing
in approximately 40 equity-related securities, involves
greater risk than investing in a diversified portfolio
because a loss resulting from the decline in the value of
one security may represent a greater portion of the total
assets of a nondiversified portfolio.
- -----------------------------------------------------------------------------------------------------------------------
SECTOR SP TECHNOLOGY PORTFOLIO (FORMERLY SP ALLIANCE TECHNOLOGY The Dreyfus
PORTFOLIO): seeks growth of capital. The Portfolio normally Corporation
invests at least 80% of investable assets in securities of
companies that use technology extensively in the development
of new or improved products or processes. The Portfolio also
may invest up to 25% of its total assets in foreign
securities. The Portfolio's investments in stocks may
include common stocks, preferred stocks and convertible
securities, including those purchased in initial public
offerings (IPOs). Technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile
than the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO (FORMERLY SP William Blair &
JENNISON INTERNATIONAL GROWTH PORTFOLIO): seeks long-term Company, LLC
growth of capital. The Portfolio invests primarily in
equity-related securities of foreign issuers that the
subadviser thinks will increase in value over a period of
years. The Portfolio invests primarily in the common stock
of large and medium-sized foreign companies. Under normal
circumstances, the Portfolio invests at least 65% of its
total assets in common stock of foreign companies operating
or based in at least five different countries. The Portfolio
looks primarily for stocks of companies whose earnings are
growing at a faster rate than other companies and that have
above average growth in earnings and cash flow, improving
profitability, strong balance sheets, management strength
and strong market share for its products. The Portfolio also
tries to buy such stocks at attractive prices in relation to
their growth prospects.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
34
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JANUS ASPEN SERIES: GROWTH PORTFOLIO -- SERVICE SHARES: Janus Capital
seeks long-term growth of capital in a manner consistent Management LLC
with the preservation of capital. The Portfolio invests
primarily in domestic and foreign equity securities, which
may include preferred stocks, common stocks and securities
convertible into common or preferred stocks. To a lesser
degree, the Portfolio may invest in other types of domestic
and foreign securities and use other investment strategies.
The Portfolio invests primarily in common stocks selected
for their growth potential. Although the Portfolio can
invest in companies of any size, it generally invests in
larger, more established companies. Janus Capital generally
takes a "bottom up' approach to selecting companies. This
means that it seeks to identify individual companies with
earnings growth potential that may not be recognized by the
market at large. The Portfolio will limit its investment in
high-yield/high-risk bonds to less than 35% of its net
assets.
- -----------------------------------------------------------------------------------------------------------------------
BALANCED EVERGREEN VA FOUNDATION FUND: seeks capital growth and Evergreen Investment
current income. The Fund invests in a combination of equity Management Company,
and debt securities. Under normal conditions, the Fund will LLC
invest at least 25% of its assets in debt securities and the
remainder in equity securities. The equity securities that
the Fund invests in will primarily consist of the common
stocks, preferred stocks and securities convertible or
exchangeable for common stocks of large U.S. companies
(i.e., companies whose market capitalization falls within
the range tracked by the Russell 1000(R) Index, at the time
of purchase). In addition, the equity portion of the Fund
will seek to maintain a weighted average market
capitalization that falls within the range of the Russell
1000(R) Index. The Fund's adviser uses a diversified equity
style of management, best defined as a blend between growth
and value stocks.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE/BLEND EVERGREEN VA FUND*: seeks long-term capital growth. The Fund Evergreen Investment
invests primarily in the common stocks of large U.S. Management Company,
companies (i.e., companies whose market capitalizations fall LLC
within the range tracked by the Russell 1000(R) Index, at
the time of purchase). In addition, the Fund will seek to
maintain a weighted average market capitalization that falls
within the range of the Russell 1000(R) Index. The Fund's
adviser uses a diversified equity style of management, best
defined as a blend between growth and value stocks.
- -----------------------------------------------------------------------------------------------------------------------
MID/LARGE BLEND EVERGREEN VA GROWTH AND INCOME FUND**: seeks capital growth Evergreen Investment
in the value of its shares and current income. The Fund Management Company,
invests primarily in the common stocks of medium and LLC
large-sized U.S. companies, (i.e., companies whose market
capitalization falls within the range tracked by the Russell
1000(R) Index, at the time of purchase). In addition, the
Fund will seek to maintain a weighted average market
capitalization that falls within the range of the Russell
1000(R) Index. The Fund's stock selection is based on a
diversified style of equity management that allows it to
invest in both value and growth-oriented equity securities.
- -----------------------------------------------------------------------------------------------------------------------
* EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA BLUE CHIP FUND AND THE EVERGREEN VA MASTERS FUND WERE EACH MERGED INTO
THE EVERGREEN VA FUND.
** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA CAPITAL GROWTH FUND WAS MERGED INTO THE EVERGREEN VA GROWTH AND INCOME
FUND.
</Table>
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH EVERGREEN VA GROWTH FUND: seeks long-term capital growth. Evergreen Investment
The Fund seeks to achieve its goal by investing at least 75% Management Company,
of its assets in common stocks of small and medium-sized LLC
companies (i.e., companies whose market capitalization falls
within the range tracked by the Russell 2000(R) Growth
Index, at the time of purchase). The remaining portion of
the Fund's assets may be invested in companies of any size.
In addition, the Fund will seek to maintain a weighted
average market capitalization that falls within the range of
the Russell 2000(R) Growth Index. The Fund's adviser employs
a growth-style of equity management and will purchase stocks
of companies which have demonstrated earnings, asset values,
or growth potential which they believe are not yet reflected
in the stock's market price.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY EVERGREEN VA INTERNATIONAL EQUITY FUND***: seeks long-term Evergreen Investment
capital growth and secondarily, modest income. The Fund Management Company,
invests primarily in equity securities issued by LLC
established, quality non-U.S. companies located in countries
with developed markets and may purchase securities across
all market capitalizations. The Fund may also invest in
emerging markets. The Fund normally invests at least 65% of
its assets in the securities of companies in at least three
different countries (other than the U.S.) The Fund's adviser
seeks both growth and value opportunities.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH EVERGREEN VA OMEGA FUND: seeks long-term capital growth. The Evergreen Investment
Fund invests primarily in common stocks and securities Management Company,
convertible into common stocks of U.S. companies across all LLC
market capitalizations. The Fund's adviser employs a growth
style of equity management.
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE EVERGREEN VA SPECIAL VALUES FUND (FORMERLY EVERGREEN VA Evergreen Investment
SMALL CAP VALUE FUND): seeks capital growth. The Fund Management Company,
normally invests at least 80% of its assets in common stocks LLC
of small U.S. companies (i.e., companies whose market
capitalizations fall within the range tracked by the Russell
2000(R) Index, at the time of purchase). In addition, the
Fund will seek to maintain a weighted average market
capitalization that falls within the range of the Russell
2000(R) Index. The remaining 20% of the Fund's assets may be
represented by cash or invested in various cash equivalents
or common stocks of any market capitalization.
- -----------------------------------------------------------------------------------------------------------------------
*** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA GLOBAL LEADERS FUND WAS MERGED INTO THE EVERGREEN VA INTERNATIONAL
EQUITY FUND.
</Table>
36
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed 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 they
will not be less than the minimum interest rate indicated in your contract which
can range from 1% to 3%. We may offer lower interest rates for Contracts With
Credit than for Contracts Without Credit.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year.
DOLLAR COST AVERAGING FIXED RATE OPTION
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred to
the selected variable investment options, or to the one-year fixed interest rate
option in either six or twelve monthly installments, and you may not change that
number of monthly installments after you have chosen the DCA Fixed Rate Option.
You may allocate to both the six-month and twelve-month options. (In the future,
we may make available other numbers of transfers and other transfer
schedules--for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6th of the amount you allocated to the DCA Fixed Rate Option, and if you
choose a twelve-payment transfer schedule, each transfer generally will equal
1/12th of the amount you allocated to the DCA Fixed Rate Option. In either case,
the final transfer amount generally will also include the credited interest. You
may change at any time the investment options into which the DCA Fixed Rate
Option assets are transferred. You may make a one time transfer of the remaining
value out of your DCA Fixed Rate Option, if you so choose. Transfers from the
DCA Fixed Rate Option do not count toward the maximum number of free transfers
allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer
37
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
the remaining balance in the DCA Fixed Rate Option on the next scheduled
transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the market value adjustment option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will be
no less than 3% interest annually with respect to any guarantee period. We may
offer fewer available guarantee periods in Contracts With Credit than in
Contracts Without Credit. This option is not available for contracts issued in
some states. Please see your contract. The market value adjustment option is
registered separately from the variable investment options, and the amount of
market value adjustment option securities registered is stated in that
registration statement.
IF AMOUNTS ARE WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE
30-DAY PERIOD IMMEDIATELY FOLLOWING THE END OF THE GUARANTEE PERIOD, THEY WILL
BE SUBJECT TO A MARKET VALUE ADJUSTMENT EVEN IF THEY ARE NOT SUBJECT TO A
WITHDRAWAL CHARGE.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at least
$1,000 if you choose this option. We may offer lower interest rates for
Contracts With Credit than for Contracts Without Credit.
We refer to interest rates as annual rates, although we credit interest
within each guarantee period on a daily basis. The daily interest that we credit
is equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center until
the earliest to occur of any of the following events: (a) full surrender of the
contract, (b) commencement of annuity payments or settlement, (c) end of the
guarantee period, (d) transfer of the value in the guarantee period, (e) payment
of a death benefit, or (f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdraw or transfer the value in the guarantee period,
(b) allocate the value to another available guarantee period or other investment
option (provided that the new guarantee period ends prior to the annuity
date). You will receive the interest rate applicable on the date we receive
your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the amount in
the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) listed immediately above, you
will receive the current interest rate applicable to the guarantee period having
the same duration as the guarantee period that just matured, which is offered on
the day immediately following the end of the matured guarantee period. However,
if at that time we do not offer a guarantee period with the same duration as
that which matured, you will then receive the current interest rate applicable
to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least 3%.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life.
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MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. For example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by changes
in interest rates, among other factors. The market value adjustment that we
assess against your contract value if you withdraw or transfer outside the
30-day period discussed above involves our attributing to you a portion of our
investment experience on these bonds and other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in a
reduction of the withdrawal proceeds that you receive). For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining contract value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD UNDER YOUR CONTRACT DOES NOT
DEPEND ON THE INVESTMENT PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE
HOLD WITH RESPECT TO YOUR GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET
VALUE ADJUSTMENT, WE DO NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS
AND OTHER INSTRUMENTS THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
contract value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option, or
into the one-year fixed interest rate option, although a market value adjustment
will apply to any transfer you make outside the 30-day period discussed above.
You may transfer contract value into the market value adjustment option at any
time, provided it is at least $1,000.
In general, you may make your transfer request by telephone, electronically,
or otherwise in paper form to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following unauthorized
telephone or electronic instructions that we reasonably believed to be genuine.
Your transfer request will take effect at the end of the business day on which
it was received. Our business day generally closes at 4:00 p.m. Eastern time.
Transfer requests received after 4:00 p.m. Eastern time will take effect at the
end of the next business day.
With regard to the market value adjustment option, you can specify the
guarantee period from which you
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wish to transfer. If you request a transfer from the market value adjustment
option, but you do not specify the guarantee period from which funds are to be
taken, then we will transfer funds from the guarantee period that has the least
time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE
DCA FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE
ONE YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$25 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and Auto-
Rebalancing transfers do not count toward the 12 free transfers per year.)
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and otherwise is in good order. For purposes of this transfer
restriction, we (i) do not view a facsimile transmission as a "writing", (ii)
will treat multiple transfer requests submitted on the same business day as a
single transfer, and (iii) do not count transfers that involve one of our
systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to
short-term fluctuations in markets, sometimes called "market timing," can make
it very difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction costs,
or affect performance. For those reasons, the contract was not designed for
persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in any
contract year for all existing or new contract owners, and to take the other
actions discussed below. We also reserve the right to limit the number of
transfers in any contract year or to refuse any transfer request for an owner or
certain owners if: (a) we believe that excessive transfer activity (as we define
it) or a specific transfer request or group of transfer requests may have a
detrimental effect on accumulation unit values or the share prices of the
underlying mutual funds; or (b) we are informed by a fund (e.g., by the fund's
portfolio manager) that the purchase or redemption of fund shares must be
restricted because the fund believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected fund. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate amount
of a trade or trades represented a relatively large proportion of the total
assets of a particular underlying mutual fund. In furtherance of our general
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
- - With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such amount
into a particular variable investment option, and within 30 calendar days
thereafter transfer (the "Transfer Out") all or a portion of that amount into
another variable investment option, then upon the Transfer Out, the former
variable investment option becomes restricted (the "Restricted Option").
Specifically, we will not permit subsequent transfers into the Restricted
Option for 90 calendar days after the Transfer Out if the Restricted Option
invests in a non-international fund, or 180 calendar days after
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the Transfer Out if the Restricted Option invests in an international fund.
For purposes of this rule, we do not (i) count transfers made in connection
with one of our systematic programs, such as asset allocation and automated
withdrawals and (ii) categorize as a transfer the first transfer that you
make after the contract date, if you make that transfer within 30 calendar
days after the contract date. Even if an amount becomes restricted under the
foregoing rules, you are still free to redeem the amount from your contract
at any time.
- - We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable investment
option on the business day subsequent to the business day on which the
exchange request was received. Before implementing such a practice, we would
issue a separate written notice to contract owners that explains the practice
in detail. In addition, if we do implement a delayed exchange policy, we will
apply the policy on a uniform basis to all contracts in the relevant class.
- - If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
- - We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such limited transfer restrictions, and contract owners
who own variable life insurance or variable annuity contracts (regardless of
jurisdiction) that do not impose the above-referenced transfer restrictions,
might make more numerous and frequent transfers than contract owners who are
subject to such limitations. Because contract owners who are not subject to
the same transfer restrictions may have the same underlying mutual fund
portfolios available to them, unfavorable consequences associated with such
frequent trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may affect
all contract owners. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly,
and will not waive a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option into any other variable
investment options or the one-year fixed interest rate option. You can have
these automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against loss in declining markets.
Each dollar cost averaging transfer must be at least $100. Transfers will be
made automatically on the schedule you choose until the entire amount you chose
to have transferred has been transferred or until you tell us to discontinue the
transfers. If the remaining amount to be transferred drops below $100, the
entire remaining balance will be transferred on the next transfer date. You can
allocate subsequent purchase payments to be transferred under this option at any
time.
Your transfers will occur 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 dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase and is offered without
charge.
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ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you a
questionnaire to complete that will help determine a program that is appropriate
for you. Your asset allocation will be prepared based on your answers to the
questionnaire. You will not be charged for this service and you are not
obligated to participate or to invest according to program recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns over
the long term. However, asset allocation does not guarantee a profit or protect
against a loss. You are not obligated to participate or to invest according to
the program recommendations. We do not intend to provide any personalized
investment advice in connection with these programs and you should not rely on
these programs as providing individualized investment recommendations to you.
The asset allocation programs do not guarantee better investment results. We
reserve the right to terminate or change the asset allocation programs at any
time. You should consult your representative before electing any asset
allocation program.
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 percentage or to a subsequent allocation percentage you
select. We will rebalance only the variable investment options that you have
designated. If you also participate in the DCA feature, then the variable
investment option from which you make the DCA transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur 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 underlying mutual funds used by the
variable investment options. However, we vote the shares of the mutual funds
according to voting instructions we receive from contract owners. When a vote is
required, we will mail you a proxy which is a form that 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 fund shares for which we do not receive
instructions, and any other shares that we own in our own right, in the same
proportion as shares for which we receive instructions from contract owners. We
may change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in existing
funds. We would not do this without the approval of the Securities and Exchange
Commission (SEC) and any necessary state insurance departments. You will be
given specific notice in advance of any substitution we intend to make.
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PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the third contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95th birthday (unless we agree to another date).
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners Plus 3 variable annuity contract offers an optional
Guaranteed Minimum Income Benefit, which we describe below. Your annuity options
vary depending upon whether you choose this benefit.
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 for a period
shorter than five years, Option 3, or certain other annuity options that we may
make available. We do not deduct a withdrawal charge if you choose Option 1 for
a period of five years or longer or Option 2. For information about withdrawal
charges, see "What are the Expenses Associated With The Strategic Partners Plus
3 Contract," page 59.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If an annuity option is not
selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by applicable
law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT BE
CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. 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 will be at least 3% a year.
OPTION 2
LIFE INCOME ANNUITY OPTION
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
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such remaining 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 will be at least 3% a year.
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. If
the life income annuity option is prohibited by applicable law, then we will pay
you a lump sum in lieu of this option.
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
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contract assets. Under this option, we will pay you interest at an effective
rate of at least 3% a year. This option is not available if you hold your
contract in an IRA.
Under this option, all gain in the annuity will be taxable as of the annuity
date, however, you can withdraw part or all of the contract value that we are
holding at any time.
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.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 70, you
should consider the minimum distribution requirements mentioned on page 72 when
selecting your annuity option.
If a contract is 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.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB) is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. This feature may not be
available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described below.
At this point, the GMIB protected value will be increased by any subsequent
invested purchase payments and reduced by the effect of withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
- - The annuitant must be 75 or younger in order for you to elect the Guaranteed
Minimum Income Benefit.
- - If you choose the Guaranteed Minimum Income Benefit, we will impose an annual
charge equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value described below. In some states this fee may be
lower.
- - Under the contract terms governing the GMIB, we can require GMIB participants
to invest only in designated underlying mutual funds or can require GMIB
participants to invest according to an asset allocation model.
- - TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING PERIOD
IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7TH CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET (AS
DESCRIBED BELOW), THE WAITING PERIOD IS THE 7 YEAR PERIOD BEGINNING WITH THE
DATE OF THE MOST RECENT RESET.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
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GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments (after a reset, the
contract value at the time of the reset), increased daily at an effective annual
interest rate of 5% starting on the date each invested purchase payment is made,
until the cap is reached (GMIB roll-up cap). We will reduce this amount by the
effect of withdrawals. The GMIB roll-up cap is equal to two times each invested
purchase payment (for a reset, two times the sum of (1) the contract value at
the time of the reset, and (2) any invested purchase payments made subsequent to
the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- - the contract anniversary coinciding with or next following the annuitant's
80th birthday,
- - the 7th contract anniversary, or
- - 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced proportionally by withdrawals.
EFFECT OF WITHDRAWALS.
In any contract year when the GMIB protected value is increasing at the rate of
5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). The GMIB roll-up cap is
also reduced by withdrawals in the same manner. Any withdrawals made after the
dollar-for-dollar limit has been reached will proportionally reduce the GMIB
protected value. We calculate the proportional reduction by dividing the
contract value after the withdrawal by the contract value immediately following
the withdrawal of any available dollar-for-dollar amount. The resulting
percentage is multiplied by both the GMIB protected value and GMIB roll-up cap
after subtracting from each the amount of the withdrawal that does not exceed
5%. In each contract year during which the GMIB protected value has stopped
increasing at the 5% rate, withdrawals will reduce the GMIB protected value
proportionally.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are January 1,
2004; 2.) an initial purchase payment of $250,000; 3.) an initial GMIB protected
value of $250,000; 4.) an initial 200% cap of $500,000; and 5.) an initial
dollar-for-dollar limit of $12,500 (5% of $250,000):
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on February 1, 2004 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,035.26 (the initial value accumulated for 31 days
at an annual effective rate of 5%). As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,035.26 to $241,035.26).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$500,000 to $490,000).
- - The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first contract year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on March 1, 2004 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,968.88. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
- - The GMIB protected value is first reduced by the Remaining Limit (from
$241,968.88 to $239,468.88).
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- - The result is then further reduced by the ratio of A to B, where:
- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
- B is the contract value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,468.88 X (1 -
($7,500/$217,500)), or $231,211.33.
- The GMIB 200% cap is first reduced by the Remaining Limit, (from $490,000
to $487,500).
- The GMIB 200% cap is then further reduced by the ratio of A to B above
($487,500 x (1-($7,500/$217,500)), or $470,689.66.
- - The Remaining Limit is set to zero (0) for the balance of the first contract
year.
EXAMPLE 3. DOLLAR-FOR-DOLLAR LIMIT IN SECOND CONTRACT YEAR
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2005 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.86. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.89. As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $240,837.86 to $230,837.86).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$470,689.66 to $460,689.66).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.89 to $2,041.89).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the GMIB
roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based on
the number of years since the most recent reset. These purchase rates may be
less advantageous than the rates that would have applied absent a reset.
PAYOUT AMOUNT
The Guaranteed Minimum Income Benefit payout amount is based on the age and sex
(where applicable) of the annuitant (and, if there is one, the co-annuitant).
After we first deduct a charge for any applicable premium taxes that we are
required to pay, the payout amount will equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates (which are generally
less favorable than the annuity purchase rates for annuity payments not
involving GMIB) and based on the annuity payout option as described below, or
2) the adjusted contract value -- that is, the value of the contract adjusted
for any market value adjustment minus any charge we impose for premium taxes
and withdrawal charges -- as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two Guaranteed Minimum Income Benefit annuity payout options.
Each option involves payment for at least a period certain of ten years. In
calculating the amount of the payments under the GMIB, we apply certain assumed
interest rates, equal to 2% annually for a waiting period of 7-9 years, and 2.5%
annually for a waiting period of 10 years or longer for contracts sold on or
after January 20, 2004, or upon subsequent state approval (and 2.5% annually for
a waiting period of 7-9 years, 3% annually for a waiting period of 10-14 years,
and 3.5% annually for waiting periods of 15 years or longer for all other
contracts).
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GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments, your GMIB protected value is increasing in ways we did
not intend. In determining whether to limit purchase payments, we will look at
purchase payments which are disproportionately larger than your initial purchase
payment and other actions that may artificially increase the GMIB protected
value. Certain state laws may prevent us from limiting your subsequent purchase
payments. You must exercise one of the GMIB payout options described above no
later than 30 days after the contract anniversary coinciding with or next
following the annuitant's attainment of age 95 (age 92 for contracts used as a
funding vehicle for IRAs).
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your contract value declines
significantly due to negative investment performance. If your contract value is
not significantly affected by negative investment performance, it is unlikely
that the purchase of GMIB will result in your receiving larger annuity payments
than if you had not purchased GMIB. This is because the assumptions that we use
in computing the GMIB, such as the annuity purchase rates, (which include
assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing non-GMIB annuity
payout options. Therefore, you may generate higher income payments if you were
to annuitize a lower contract value at the current annuity purchase rates, than
if you were to annuitize under the GMIB with a higher GMIB protected value than
your contract value but at the annuity purchase rates guaranteed under the GMIB.
TERMINATING THE GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is fully
surrendered, on the date the death benefit is payable to your beneficiary
(unless your surviving spouse elects to continue the contract), or on the date
that your contract value is transferred to begin making annuity payments. The
GMIB may also be terminated if you designate a new annuitant who would not be
eligible to elect the GMIB based on his or her age at the time of the change.
Upon termination of the GMIB, we will deduct the charge from your contract
value for the portion of the contract year since the prior contract anniversary
(or the contract date if in the first contract year).
INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (IAB) is an optional, supplemental income benefit
that provides an additional income amount during the accumulation period or upon
annuitization. The Income Appreciator Benefit is designed to provide you with
additional funds that
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can be used to help defray the impact taxes may have on distributions from your
contract. IAB may be suitable for you in other circumstances as well, which you
can discuss with your registered representative. Because individual
circumstances vary, you should consult with a qualified tax advisor to determine
whether it would be appropriate for you to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
- - If you choose the Income Appreciator Benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are The Expenses Associated
With The Strategic Partners Plus 3 Contract?" on page 59.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN IN
FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must send
us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
- - IAB OPTION 1 - at annuitization as part of an annuity payment;
- - IAB OPTION 2 - during the accumulation phase through the IAB automatic
withdrawal payment program; or
- - IAB OPTION 3 - during the accumulation phase as an Income Appreciator Benefit
credit to your contract over a 10-year period.
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 64.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What Are The Tax Considerations Associated
With The Strategic Partners Plus 3 Contract?" on page 67.
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income Appreciator Benefit has been in force. For purposes of calculating
the Income Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the Spousal Continuance Benefit (explained on page 54), or (2) if
we were to permit you to elect the Income Appreciator Benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has been
in force.
<Table>
<Caption>
NUMBER OF YEARS INCOME
INCOME APPRECIATOR APPRECIATOR
BENEFIT BENEFIT
HAS BEEN IN FORCE PERCENTAGE
------------------ -----------
0-6 0%
7-9 15%
10-14 20%
15+ 25%
</Table>
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted contract value for
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purposes of determining the amount available for annuitization. You may apply
this amount to any annuity or settlement option over the lifetime of the
annuitant, joint annuitants, or a period certain of at least 15 years (but not
to exceed life expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown in
the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate
the Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit;
- - the date the Income Appreciator Benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our distributing
to you in increments the value that you have accumulated. We make these
incremental payments either over a specified time period (e.g., 15 years) (fixed
period annuities) or for the duration of the life of the annuitant (and possibly
co-annuitant) (life annuities). There are certain assumptions that are common to
both fixed period annuities and life annuities. In each type of annuity, we
assume that the value you apply at the outset toward your annuity payments earns
interest throughout the payout period. For annuity options within the GMIB, this
interest rate ranges from 2% to 2.5% for contracts sold on or after January 20,
2004, or upon subsequent state approval (and 2.5% to 3.5% for all other
contracts). For non-GMIB annuity options, the guaranteed minimum rate is 3%. The
GMIB guaranteed annuity purchase rates in your contract depict the minimum
amounts we will pay (per $1000 of adjusted contract value). If our current
annuity purchase rates on the annuity date are more favorable to you than the
guaranteed rates, we will make payments based on those more favorable rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
FIXED PERIOD ANNUITIES
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted contract value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
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LIFE ANNUITIES
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or co-
annuitant's life expectancy, including the following:
- - The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
GUARANTEED AND GMIB ANNUITY PAYMENTS
- - Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
future improvements. We do this largely by making a hypothetical reduction in
the age of the annuitant (or co-annuitant), in lieu of using the annuitant's
(or co-annuitant's) actual age, in calculating the payment amounts. By using
such a reduced age, we base our calculations on a younger person, who
generally would live longer and therefore draw life annuity payments over a
longer time period. Given the longer pay-out period, the payments made to the
younger person would be less than those made to an older person. We make two
such age adjustments:
1. First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after January 20, 2004, or upon subsequent state approval or (b) two years,
with respect to guaranteed payments under life annuities not involving GMIB,
as well as GMIB payments under contracts not described in (a) immediately
above. For the reasons explained above in this section, the four year age
reduction causes a greater reduction in the amount of the annuity payments
than does the two-year age reduction.
2. Second, for life annuities under both versions of GMIB as well as guaranteed
payments under life annuities not involving GMIB, we make a further age
reduction according to the table in your contract entitled "Translation of
Adjusted Age." As indicated in the table, the further into the future the
first annuity payment is, the longer we expect the person receiving those
payments to live, and the more we reduce the annuitant's (or co-annuitant's)
age.
CURRENT ANNUITY PAYMENTS
Immediately above, we have discussed how we determine annuity payments under the
GMIB annuity options and under non-GMIB annuity payout options that are based on
"guaranteed" annuity purchase rates. By "guaranteed" annuity purchase rates, we
mean the minimum annuity purchase rates that are set forth in your annuity
contract and thus contractually guaranteed by us. "Current" annuity purchase
rates, in contrast, refer to the annuity purchase rates that we are applying to
contracts that are entering the annuity phase at a given point in time. These
current annuity purchase rates vary from period to period, depending on changes
in interest rates and other factors. We do not guarantee any particular level of
current annuity purchase rates. When calculating current annuity purchase rates,
we use the actual age of the annuitant (or co-annuitant), rather than any
reduced age.
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WHAT IS THE
DEATH BENEFIT?
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THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner dies. However, if the contract is jointly owned, the owner must name
the joint owner and the joint owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is only
one beneficiary designated who is the owner's spouse on the date of death, then
the surviving spouse may continue the contract under the Spousal Continuance
Benefit. If there are an owner and joint owner of the contract, and the owner's
spouse is both the joint owner and the beneficiary on the date of death, then,
at the death of the first to die, the death benefit will be paid to the
surviving owner or the surviving owner may continue the contract under the
Spousal Continuance Benefit. See "Spousal Continuance Benefit" on page 54.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current contract value (as of the time we receive proof of death in good
order). If you have purchased the Contract With Credit, we will first deduct
any credit corresponding to a purchase payment made within one year of death.
We impose no market value adjustment on contract value held within the market
value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a Guaranteed Minimum Death Benefit, the GMDB protected value.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit (GMDB) provides for the option to receive
an enhanced death benefit upon the death of the sole owner or the first to die
of the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option.
The GMDB protected value option can be equal to the:
- - GMDB roll-up,
- - GMDB step-up, or
- - Greater of the GMDB roll-up and the GMDB step-up.
The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. The GMDB roll-up will
increase by subsequent invested purchase payments and reduce proportionally by
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary.
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
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IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% starting on
the date that each invested purchase payment is made. We will increase the GMDB
roll-up by subsequent invested purchase payments and reduce it by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and the protected value is $80,000.
The owner makes a withdrawal that reduces the contract value by 25% (including
the effect of any withdrawal charges). The new protected value is $60,000, or
75% of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
Special rules apply if the beneficiary is the spouse of the owner, and the
contract does not have a joint owner. In that case, upon the death of the owner,
the spouse will have the choice of the following:
- - If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Benefit are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
- - The spouse can receive the death benefit. A surviving spouse who is eligible
for the Spousal Continuance Benefit must choose between that benefit and
receiving the death benefit during the first 60 days following our receipt of
proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the contract
value on the date the change of ownership occurs, and for purposes of computing
the future death benefit, we will treat that contract value as a purchase
payment occurring on that date.
Depending on applicable state law, some death benefit options may not be
available or may be subject to certain restrictions under your contract.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the time
that one dies the Spousal Continuance Benefit may apply. See "Spousal Continu-
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ance Benefit" page 54. If the contract has an owner and a joint owner and they
are not spouses at the time one dies, we will pay the death benefit and the
contract will end. Joint ownership may not be allowed in your state.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
CHOICE 1. LUMP SUM PAYMENT OF THE DEATH BENEFIT. IF THE BENEFICIARY DOES NOT
CHOOSE A PAYOUT OPTION WITHIN SIXTY DAYS, THE BENEFICIARY WILL RECEIVE THIS
PAYOUT OPTION.
CHOICE 2. THE PAYMENT OF THE ENTIRE DEATH BENEFIT WITHIN A PERIOD OF 5 YEARS
FROM THE DATE OF DEATH.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable or fixed interest rate options; name a beneficiary
to receive any remaining death benefit in the event of the beneficiary's
death; and make withdrawals from the contract value, in which case, any such
withdrawals will not be subject to any withdrawal charges. However, the
beneficiary may not make any purchase payments to the contract.
CHOICE 3. PAYMENT OF THE DEATH BENEFIT UNDER AN ANNUITY OR ANNUITY SETTLEMENT
OPTION OVER THE LIFETIME OF THE BENEFICIARY OR OVER A PERIOD NOT EXTENDING
BEYOND THE LIFE EXPECTANCY OF THE BENEFICIARY WITH DISTRIBUTION BEGINNING
WITHIN ONE YEAR OF THE DATE OF DEATH OF THE LAST TO SURVIVE OF THE OWNER OR
JOINT OWNER.
If the owner and joint owner are not spouses, any portion of the death
benefit not applied under Choice 3 within one year of the date of death of the
first to die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What Are The Tax Considerations Associated With The
Strategic Partners Plus 3 Contract?" on page 67.
EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit (EAB) is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
Earnings Appreciator Benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The Earnings Appreciator Benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax advisor to determine whether it would be
appropriate for you to elect the Earnings Appreciator Benefit.
If you want the Earnings Appreciator Benefit, you generally must elect it at
the time you apply for the contract. If you elect the Earnings Appreciator
Benefit, you may not later revoke it.
Upon our receipt of proof of death in good order, we will determine an
Earnings Appreciator Benefit by multiplying the Earnings Appreciator Benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to 3 times the sum of all purchase
payments previously made under the contract.
For purposes of computing earnings and purchase payments under the Earnings
Appreciator Benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
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EAB percentage:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
- - 15% if the owner is between ages 76 and 79 on the date the application is
signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
Spousal Continuance Benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the Earnings Appreciator Benefit, we will use the age of the
surviving spouse at the time that the Spousal Continuance Benefit is
activated to determine the applicable EAB percentage.
- - We will not allow the surviving spouse to continue the Earnings Appreciator
Benefit (or bear the charge associated with this benefit) if he or she is age
80 or older on the date that the Spousal Continuance Benefit is activated.
- - If the Earnings Appreciator Benefit is continued, we will calculate any
applicable Earnings Appreciator Benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
Spousal Continuance Benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive proof of the owner's death
in good order, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In no event, however, can the annuitant be older
than the maximum age for annuitization on the date of the owner's death, nor can
the surviving spouse be older than 95 on the date of the owner's death. Assuming
the above conditions are present, the surviving spouse can elect the Spousal
Continuance Benefit, but must do so no later than 60 days after furnishing proof
of the owner's death in good order.
Upon activation of the Spousal Continuance Benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate or market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. However, we will continue to impose withdrawal charges on
purchase payments made after activation of this benefit. In addition, contract
value allocated to the market value adjustment option will remain subject to a
potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable Earnings Appreciator Benefit.
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IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB
STEP-UP, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding discussion in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the Guaranteed Minimum Death Benefit provisions of the contract.
The contract may not be continued upon the death of a spouse who had assumed
ownership of the contract through the exercise of the Spousal Continuance
Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued
for the surviving spousal owner. All provisions of the Guaranteed Minimum Income
Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
on the date of the owner's death. If the GMIB reset feature was never exercised,
the surviving spousal owner can exercise the GMIB reset feature twice. If the
original owner had previously exercised the GMIB reset feature once, the
surviving spousal owner can exercise the GMIB reset once. However the surviving
spouse (or new annuitant designated by the surviving spouse) must be under 76
years of age at the time of reset. If the original owner had previously
exercised the GMIB reset feature twice, the surviving spousal owner may not
exercise the GMIB reset at all. If the attained age of the surviving spouse at
activation of the Spousal Continuance Benefit, when added to the remainder of
the GMIB waiting period to be satisfied, would preclude the surviving spouse
from utilizing the Guaranteed Minimum Income Benefit, we will revoke the
Guaranteed Minimum Income Benefit under the contract at that time and we will no
longer charge for that benefit.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death, the
Income Appreciator Benefit will end unless the contract is continued by the
owner's surviving spouse under the Spousal Continuance Benefit. If the contract
is continued by the surviving spouse, we will continue to pay the balance of any
Income Appreciator Benefit payments until the earliest to occur of the
following: (a) the date on which 10 years' worth of IAB automatic withdrawal
payments or IAB credits, as applicable, have been paid, (b) the latest date on
which annuity payments would have had to have commenced had the owner not died
(i.e., the contract anniversary coinciding with or next following the
annuitant's 95th birthday), or (c) the contract anniversary coinciding with or
next following the annuitants' surviving spouse's 95th birthday.
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the Spousal Continuance Benefit, when added to the remainder of the IAB waiting
period to be satisfied, would preclude the surviving spouse from utilizing the
Income Appreciator Benefit, we will revoke the Income Appreciator Benefit under
the contract at that time and we will no longer
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PART II
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charge for that benefit. If the Income Appreciator Benefit has been in force for
7 contract years or more, but the benefit has not been activated, the surviving
spouse may activate the benefit at any time after the contract has been
continued. If the Income Appreciator Benefit is activated after the contract is
continued by the surviving spouse, the Income Appreciator Benefit calculation
will exclude any amount added to the contract at the time of spousal continuance
resulting from any death benefit value exceeding the contract value.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
PLUS 3 CONTRACT?
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PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase the
contract. The minimum initial purchase payment is $10,000, and may not exceed
$1,000,000 absent our prior approval. With some restrictions, 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 may not make additional purchase payments if you
purchase a contract issued in Massachusetts, or if you purchase a Contract With
Credit issued in Pennsylvania.)
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the 86th
birthday of:
- - the owner,
- - the joint owner,
- - the annuitant, or
- - the co-annuitant.
Currently, the maximum aggregate purchase payments you may make is $20
million. We limit the maximum total purchase payments in any contract year other
than the first to $2 million absent our prior approval. Depending on applicable
state law, other limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate options, or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a particular investment option can range in whole percentages from
0% to 100%.
When you make an additional purchase payment, it will be allocated in the
same way as your most recent purchase payment, unless you tell us otherwise.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 and,
allocations to the market value adjustment option must be no less than $1,000.
You may change your allocation of future invested purchase payments 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 we receive your payment in good order at
the Prudential Annuity Service Center. If, however, your first payment is made
without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. 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.
Subsequent purchase payments received in good order after 4:00 p.m., Eastern
time will be credited on the following business day.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
contract value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
- - if the elder owner is 80 or younger on the date that the purchase payment is
made, then we will add a bonus credit to the purchase payment equal to 4% if
the purchase payment is less than $250,000; 5% if the purchase payment is
equal to or greater than $250,000 but less than $1 million; or 6% if the
purchase payment is $1 million or greater; and
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PART II
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- - if the elder owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death benefit
under the contract, we have a contractual right to take back any credit we
applied within one year of the date of death.
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 options 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 such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment, plus
(if you have purchased the Contract With Credit) any applicable credit,
allocated to a variable 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 your contract value will increase or that it will
not fall below the amount of your total purchase payments.
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6:
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS 3 CONTRACT?
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THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. WE DESCRIBE THESE CHARGES AND EXPENSES BELOW.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits under
the contracts. They are also designed, in the aggregate, to compensate us for
the risks of loss we assume pursuant to the contracts. If, as we expect, the
charges that we collect from the contracts exceed our total costs in connection
with the contracts, we will earn a profit. Otherwise, we will incur a loss. The
rates of certain of our charges have been set with reference to estimates of the
amount of specific types of expenses or risks that we will incur. In most cases,
this prospectus identifies such expenses or risks in the name of the charge;
however, the fact that any charge bears the name of, or is designed primarily to
defray a particular expense or risk does not mean that the amount we collect
from that charge will never be more than the amount of such expense or risk. Nor
does it mean that we may not also be compensated for such expense or risk out of
any other charges we are permitted to deduct by the terms of the contract.
INSURANCE AND ADMINISTRATIVE CHARGE
Each day we make a deduction for the insurance and administrative charge. This
charge covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option, the insurance and administrative cost also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the charge
is for assuming the risk that the annuitant(s) will live longer than expected
based on our life expectancy tables. When this happens, we pay a greater number
of annuity payments. We also incur the risk that the death benefit amount
exceeds the contract value. The expense risk portion of the charge is for
assuming the risk that the current charges will be insufficient in the future to
cover the cost of administering the contract. The administrative expense portion
of the charge compensates us for the expenses associated with the administration
of the contract. This includes preparing and issuing the contract; establishing
and maintaining contract records; preparation of confirmations and annual
reports; personnel costs; legal and accounting fees; filing fees; and systems
costs. The Guaranteed Minimum Death Benefit risk portion of the charge, if
applicable, covers our assumption of the risk that the protected value of the
contract will be larger than the base death benefit if the contract owner dies
during the accumulation phase.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit option that you
choose. The charge is equal to:
- 1.4% on an annual basis if you choose the base death benefit,
- 1.65% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option, and
- 1.75% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option.
We impose an additional insurance and administrative charge of 0.10% annually
(of account value attributable to the variable investment options) for the
Contract With Credit.
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from this charge.
The insurance risk charge for your contract cannot be increased. Any profits
made from this charge may be used by us to pay for the costs of distributing the
contracts. If you choose the Contract With Credit, we will also use any profits
from this charge to recoup our costs of providing the credit.
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WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration of
the withdrawal charge depends on whether you choose the Contract With Credit or
the Contract Without Credit. The withdrawal charge varies with the number of
contract anniversaries that have elapsed since each purchase payment being
withdrawn was made. Specifically, we maintain an "age" for each purchase payment
you have made by keeping track of how many contract anniversaries have passed
since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn.
<Table>
<Caption>
NUMBER OF CONTRACT
ANNIVERSARIES SINCE CONTRACT WITH CONTRACT WITHOUT
THE DATE OF EACH CREDIT WITHDRAWAL CREDIT WITHDRAWAL
PURCHASE PAYMENT CHARGE CHARGE
- ------------------- ----------------- -----------------
0 8% 7%
1 8% 6%
2 8% 5%
3 8% 4%
4 7% 3%
5 6% 2%
6 5% 1%
7 0% 0%
</Table>
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary will
apply.
If you request a withdrawal, we will deduct an amount from the contract value
that is sufficient to pay the withdrawal charge, and provide you with the amount
requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We make this "charge-free amount"
available to you subject to approval of this feature in your state. We determine
the charge-free amount available to you in a given contract year on the contract
anniversary that begins that year. In calculating the charge-free amount, we
divide purchase payments into two categories -- payments that are subject to a
withdrawal charge and those that are not. We determine the charge-free amount
based only on purchase payments that are subject to a withdrawal charge. The
charge-free amount in a given contract year is equal to 10% of the sum of all
the purchase payments subject to the withdrawal charge that you have made as of
the applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
When you make a withdrawal, we will deduct the amount of the withdrawal first
from the available charge-free amount. Any excess amount will then be deducted
from purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose withdrawal
charges on earnings.
If a withdrawal or transfer is taken from a market value adjustment guarantee
period prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount, including the withdrawal
charge.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup our
costs of providing the credit.
Withdrawal charges will never be greater than permitted by applicable law.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the owner has assigned ownership of the contract to
someone else.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an IRS mandatory distribution
requirement only
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with respect to that contract's account balance, we will waive withdrawal
charges. See "What Are The Tax Considerations Associated With The Strategic
Partners Plus 3 Contract?" on page 67.
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $75,000, we will deduct the lesser of $35 or 2% of your
contract value, for administrative expenses (this fee may differ in certain
states). While this is what we currently charge, we may increase this charge up
to a maximum of $60. Also, we may raise the level of the contract value at which
we waive this fee. The charge will be deducted proportionately from each of the
contract's investment options. This same charge will also be deducted when you
surrender your contract if your contract value is less than $75,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum Income
Benefit. FOR CONTRACTS SOLD ON OR AFTER JANUARY 20, 2004, OR UPON SUBSEQUENT
STATE APPROVAL, we will deduct a charge equal to 0.50% per year of the average
GMIB protected value for the period the charge applies. FOR ALL OTHER CONTRACTS,
this is an annual charge equal to 0.45% of the average GMIB protected value for
the period the charge applies. We deduct the charge from your contract value on
each of the following events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable Guaranteed Minimum Income Benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value,
it does not increase or decrease based on changes to the annuity's contract
value due to market performance. If the GMIB protected value increases, the
dollar amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the contract value
allocated to the variable investment options, the fixed interest rate options,
and the market value adjustment option. In some states, we may deduct the charge
for the Guaranteed Minimum Income Benefit in a different manner. No market value
adjustment will apply to the portion of the charge deducted from the market
value adjustment option. If you surrender your contract, begin receiving annuity
payments under the GMIB or any other annuity payout option we make available
during a contract year, or the GMIB terminates, we will deduct the charge for
the portion of the contract year since the prior contract anniversary (or the
contract date if in the first contract year). Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
applicable Guaranteed Minimum Income Benefit charge, we will deduct the charge
from the amount we pay you.
THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES
NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge equal to 0.25% of your contract value. The
Income Appreciator Benefit charge is calculated:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
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PART II
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The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. No market value adjustment will apply to the
portion of the charge deducted from the market value adjustment. Upon a full
withdrawal, or if the contract value remaining after a partial withdrawal is not
enough to cover the then-applicable Income Appreciator Benefit charge, the
charge is deducted from the amount paid. The payment of the Income Appreciator
Benefit charge will be deemed to be made from earnings for purposes of
calculating other charges. THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR
PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME
OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB charge
during the 10-year payment period contemplated by IAB Options 2 and 3. Moreover,
you should realize that amounts credited to your contract value under IAB Option
3 increase the contract value, and because the IAB fee is a percentage of your
contract value, the IAB fee may increase as a consequence of those additions.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Earnings Appreciator
Benefit. The charge for this benefit is based on an annual rate of 0.30% of your
contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
Earnings Appreciator Benefit charge was last calculated.
Although the Earnings Appreciator Benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or the first to die of the owner or joint
owner prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
option bears to the total contract value. Upon a full withdrawal or if the
contract value remaining after a partial withdrawal is not enough to cover the
then-applicable Earnings Appreciator Benefit charge, we will deduct the charge
from the amount we pay you. We will deem the payment of the Earnings Appreciator
Benefit charge as made from earnings for purposes of calculating other charges.
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TAXES ATTRIBUTABLE TO PREMIUM
There may be 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 charge against the value of the contract to pay some or all of these taxes. 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 on us, 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. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer fee
pro-rata from the investment options from which the transfer is made.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
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 underlying mutual fund.
Those funds charge fees that are in addition to the contract-related fees
described in this section. For 2003, 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.
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7:
HOW CAN I
ACCESS MY MONEY?
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YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. 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 and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum contract value that must remain in order to keep the
contract in force after a withdrawal is $2,000. If you request a withdrawal
amount that would reduce the contract value below this minimum, we will withdraw
the maximum amount available that, with the withdrawal charge, would not reduce
the contract value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order. We will deduct applicable charges,
if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
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 (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is generally $100.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND CERTAIN RESTRICTIONS MAY
APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8
OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The Income Appreciator Benefit (IAB) is discussed on page 47. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good
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order. Under IAB Options 2 and 3, you can choose to have the Income Appreciator
Benefit amounts paid or credited monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay you
the Income Appreciator Benefit amount in equal installments over a 10 year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this Income Appreciator Benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not to amounts attributable to the Income Appreciator Benefit.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the Income Appreciator Benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any Income
Appreciator Benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
investment options, fixed interest rate options, or the market value adjustment
option in the same proportions as your most recent purchase payment allocation
percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
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direct us otherwise. We will waive the $1,000 minimum requirement for the market
value adjustment option. We will calculate the Income Appreciator Benefit amount
on the date we receive your written request in good order. Once we have
calculated the Income Appreciator Benefit, the Income Appreciator Benefit credit
will not be affected by changes in contract value due to the investment
performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the contract
value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the Income
Appreciator Benefit was activated plus (2) earnings since the Income Appreciator
Benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply a
new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated
that have not been previously withdrawn do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year is
less than the excess withdrawal threshold, the difference between the amount
withdrawn and the threshold can be carried over to subsequent years on a
cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us 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 and
redemptions of shares of the underlying 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 process any transfer made
from the fixed interest rate options promptly upon request.
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WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS PLUS 3 CONTRACT?
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The tax considerations associated with the Strategic Partners Plus 3 contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan (including contracts held by a
non-natural person, such as a trust, acting as an agent for a natural person),
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. The
discussion includes a description of certain spousal rights under the contract
and under tax-qualified plans. Our administration of such spousal rights and
related tax reporting accords with our understanding of the Defense of Marriage
Act (which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). The information provided is not
intended as tax advice. You should consult with a qualified tax advisor for
complete information and advice. References to purchase payments below relate to
your cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
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.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, 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.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
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 withdrawals from the 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 generally will be treated as a withdrawal. Also, if you
elect the interest payment option that we may offer, that election 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 any 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.
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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 substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty); or
- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to August
14, 1982, then any purchase payments made to the original contract prior to
August 14, 1982 will be treated as made to the new contract prior to that date.
(See "Federal Tax Status" in the Statement of Additional Information).
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as ineligible
for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example we do not know how the IRS
may view early withdrawals or annuitizations after a partial exchange. In
addition, it is unclear how the IRS will treat a partial exchange from a life
insurance, endowment, or annuity contract into an immediate annuity. As of the
date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting and
withholding agent, believe that we would be expected to deem the transaction to
be abusive. However, some insurance companies may not recognize these partial
surrenders as tax-free exchanges and may report them as taxable distributions to
the extent of any gain distributed as well as subjecting the taxable portion of
the distribution to the 10% tax penalty. We strongly urge you to discuss any
transaction of this type with your tax advisor before proceeding with the
transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary.
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Choosing any option other than a lump sum death benefit may defer taxes. Certain
minimum distribution requirements apply upon your death, as discussed further
below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
- - Choice 1: The beneficiary is taxed on earnings in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
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 three 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. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section below for a discussion regarding withholding rules
for tax favored plans (for example, an IRA).
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 assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is 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. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
Required Distributions Upon Your Death. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die 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.
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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 a periodic
payment option is selected by your designated beneficiary and if such 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 a periodic payment option based on life expectancy or a period
exceeding five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that 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 contract owners 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 Code. This description assumes that 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 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 contract. The "IRA Disclosure Statement" on page 80 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 your contract
is worth, 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 you
may make to an IRA. For 2004 the limit is $3,000; increasing in 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
contribute an additional $500 in years 2004 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
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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 into another Section 401(a) plan.
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 contribution 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 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 72).
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 on page 72);
- - 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 on page 72).
Roth IRAs. Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "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 traditional 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
traditional IRA; and
- - If eligible (including meeting income limitations and earnings requirements),
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, you may only
purchase a contract for a Roth IRA in connection with a "rollover" or
"conversion" of amounts of another traditional IRA, conduit IRA, or Roth IRA.
This minimum is greater than the maximum amount of any annual contribution
allowed by law you may make to a 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
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"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.
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 generally 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. 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% tax penalty 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 distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you. If
you own more than one IRA, you can choose to satisfy your minimum distribution
requirement for each of your IRAs by withdrawing that amount from any of your
IRAs.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA or Roth IRA before you attain age 59 1/2.
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; or
- - the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
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 three
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
prevent 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
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
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 "What Are The Expenses Associated With The
Strategic Partners Plus 3 Contract" starting on page 59.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" on page 74.
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.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 80.
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STRATEGIC PARTNERS PLUS 3 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's Life annual report for the
year ended December 31, 2003, 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 contract owners, 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. 20549-0102. 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 (separate account), to hold the assets that are associated with
the variable annuity 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. (NASD).
Compensation is paid to broker/dealer firms whose registered representatives
sell the contract according to one or more schedules. The individual registered
representatives will receive a portion of the compensation, depending on the
practice of the firm. Commissions are generally based on a percentage of
purchase payments made, up to a maximum of 8%. Alternative compensation
schedules are available that provide a lower initial commission plus ongoing
annual compensation based on all or a portion of contract value (a "trail
commission"). We may also provide compensation for providing ongoing service to
you in relation to the contract.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
Life and/or the contract on a preferred or recommended company or product list
and/or access to the firm's registered representatives), we or PIMS may enter
into compensation arrangements with certain broker/dealer firms or branches of
such firms with respect to certain or all registered representatives of such
firms under which such firms may receive separate compensation or reimbursement
for, among other things, training of sales personnel and/or marketing and/or
administrative and/or other services they provide to us or our affiliates. To
the extent permitted by NASD rules and other applicable laws and regulations,
PIMS may pay or allow other promotional incentives or payments in the form of
cash or non-cash compensation. These arrangements may not be offered to all
firms, and the terms of such arrangements may differ between firms. You should
note that firms and individual registered representatives and branch managers
within some firms participating in one of these compensation arrangements might
receive greater compensation for selling the contract than for selling a
different annuity that is not eligible for these compensation arrangements.
While compensation is generally taken into account as an expense in considering
the charges applicable to an annuity product, any such compensation will be paid
by us or PIMS, and will not result in any additional charge to you. Your
registered representative can provide you with more information about the
compensation arrangements that apply upon the sale of the contract.
LITIGATION
We are subject to legal and regulatory actions in the ordinary course of our
business, including class actions. Pending legal and regulatory actions include
proceedings relating to aspects of the businesses and operations that are
specific to Pruco Life and that are typical of the businesses in which Pruco
Life operates. Class action and individual lawsuits involve a variety of issues
and/or allegations, which include sales practices, underwriting practices,
claims payment and procedures, premium charges, policy servicing and breach of
fiduciary duties to customers. 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.
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.
In January 2004, the NASD fined Prudential Equity Group, Inc. (formerly known
as Prudential Securities Incorporated) and PIMS $2 million, and ordered the
firms to pay customers $9.5 million for sales of fixed and variable annuities
that violated a New York State Insurance Department regulation concerning
replacement sales and NASD rules. We brought this matter to the New York
Insurance Department and the NASD's attention in response to an internal
investigation, and in consultation with both New York and the NASD, we have
initiated a remediation program for all affected customers which has already
provided $8 million in remediation.
ASSIGNMENT
You can assign the contract at any time during your lifetime. If you do so, we
will reset the death benefit to equal the contract value on the date the
assignment occurs. For details, see "What is the Death Benefit," on page 51. We
will not be bound by the assignment until we receive written notice. We will not
be liable for any payment or other action we take in accordance with the
contract if that action occurs before we receive notice of the assignment. An
assignment, like any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
75
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OTHER INFORMATION CONTINUED
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life, the co-issuer
of the Strategic Partners Plus 3 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
- - Federal Tax Status
- - State Specific Variations
- - Directors and Officers
- - 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 contract
owner 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 (877) 778-5008.
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
MARKET-VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any withdrawal charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------) to the N/12 power] -1
1 + J + .0025
<Table>
where: I = the guaranteed credited interest rate
(annual effective) for the given
contract at the time of withdrawal or
annuitization or settlement.
J = the current credited interest rate
offered on new money at the time of
withdrawal or annuitization or
settlement for a guarantee period of
equal length to the number of whole
years remaining in the Contract's
current guarantee period plus one
year.
N = equals the remaining number of months
in the contract's current guarantee
period (rounded up) at the time of
withdrawal or annuitization or
settlement.
</Table>
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------) to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
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MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the (38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.05] + [((365-61)/365) X 0.04] =
0.0417
</Table>
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power -1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.08] + [((365 - 61)/365) X 0.07] =
0.0717
</Table>
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power -1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power -1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07)] to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
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STRATEGIC PARTNERS PLUS 3 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,
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 after it is delivered, or applicable state
required period, if longer. 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 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 contributions must be made by no later
than the due date for filing your income tax return for that year. For a single
taxpayer, the applicable dollar limitation is $45,000 in 2004, with the amount
of IRA contribution which may be deducted reduced proportionately for Adjusted
Gross Income between $45,000 -- $55,000. For married couples filing jointly, the
applicable dollar limitation is $65,000, with the amount of IRA contribution
which may be deducted reduced proportionately between $65,000-$75,000. There is
no deduction allowed for IRA contributions when Adjusted Gross Income reaches
$55,000 for individuals and $75,000 for married couples filing jointly. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
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 should contribute more than the maximum contribution amount to your
IRA, the excess amount will be considered an "excess contribution." You are
permitted to withdraw an excess contribution from your IRA 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" on page 81).
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
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
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 80. 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 and reinvest it in another IRA. 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. (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 Simplified Employee Pension IRA to
an IRA or to another qualified retirement plan or 457 government plan.
DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA be forfeited. To insure that your
contributions will be used for retirement, the federal tax law does not permit
you to use your IRA as security for a loan. Furthermore, as a general rule, you
may not sell or assign your interest in your IRA to anyone. Use of an IRA 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 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. 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% tax penalty 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 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. If you own more than one IRA, you can
choose to satisfy your minimum distribution requirement for each of your IRAs by
withdrawing that amount from any of your IRAs. You may elect to receive the
distribution under
81
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
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 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
defined under IRS regulations. 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, 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, or as a program of minimum distributions.
This annuity or minimum distribution program must be payable over the life
expectancy of the beneficiary beginning by December 31st 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 31st 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 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 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 traditional 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 traditional 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 TRADITIONAL 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
82
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
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 traditional
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
traditional 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. 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.
83
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
APPENDIX A
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
As we have indicated throughout this prospectus, the Strategic Partners Plus 3
Variable Annuity is a contract that allows you to select or decline any of
several features that carries with it a specific asset-based charge. We maintain
a unique unit value corresponding to each combination of such contract features.
Here we depict the historical unit values corresponding to the contract features
bearing the highest and lowest combinations of asset-based charges during the
period January 6, 2003 to December 31, 2003. The remaining unit values appear in
the Statement of Additional Information, which you may obtain free of charge, by
calling (888) PRU-2888 or by writing to us at the Prudential Annuity Service
Center, P.O. Box 7960, Philadelphia, PA 19101.
84
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<Table>
<Caption>
ACCUMULATION UNIT VALUES: (BASE DEATH BENEFIT 1.40)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01724 $ 1.24006 14,202
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01834 $ 1.25778 34,149
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00588 $ 1.28481 0
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $0.99997 $ 0.99449 0
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02199 $ 1.22414 0
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02526 $ 1.22392 0
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01313 $ 1.27916 173,799
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01134 $ 1.22149 37,878
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01232 $ 1.19626 0
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01908 $ 1.17938 35,521
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00979 $ 1.19393 42,219
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00745 $ 1.13654 0
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00887 $ 1.24835 139,416
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01281 $ 1.23393 60,946
SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01511 $ 1.29026 61,963
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01135 $ 1.23975 587,421
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02725 $ 1.21457 0
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
</Table>
85
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(BASE DEATH BENEFIT 1.40)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02112 $ 1.20717 6,786
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00463 $ 1.33928 20,736
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00530 $ 1.19841 57,933
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00076 $ 1.04684 40,502
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01864 $ 1.36653 8,122
SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01406 $ 1.30191 0
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01518 $ 1.19388 83,241
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.03407 $ 1.34037 0
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01151 $ 1.35112 12,286
EVERGREEN VA BLUE CHIP FUND**
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.01837 $ 1.14078 0
EVERGREEN VA CAPITAL GROWTH FUND***
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.02779 $ 1.09104 0
EVERGREEN VA FOUNDATION FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00931 $ 1.12625 0
EVERGREEN VA FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.92203 $10.34285 0
EVERGREEN VA GLOBAL LEADERS FUND****
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.00985 $ 1.13581 0
EVERGREEN VA GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.91859 $10.39784 0
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA BLUE CHIP FUND AND THE EVERGREEN VA MASTERS FUND WERE EACH MERGED INTO THE
EVERGREEN VA FUND.
*** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA CAPITAL GROWTH FUND WAS MERGED INTO THE EVERGREEN VA GROWTH AND INCOME FUND.
**** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA GLOBAL LEADERS FUND WAS MERGED INTO THE EVERGREEN VA INTERNATIONAL EQUITY
FUND.
</Table>
86
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(BASE DEATH BENEFIT 1.40)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
EVERGREEN VA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01232 $ 1.35076 1,339
EVERGREEN VA INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.98995 $10.44289 1,603
EVERGREEN VA MASTERS FUND**
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.01698 $ 1.24212 0
EVERGREEN VA OMEGA FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00975 $ 1.33662 30,970
EVERGREEN VA SPECIAL VALUES FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01278 $ 1.25261 8,951
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02245 $ 1.24622 0
</Table>
<Table>
* COMMENCEMENT OF BUSINESS
** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA BLUE CHIP FUND AND THE EVERGREEN VA MASTERS FUND WERE EACH MERGED INTO THE
EVERGREEN VA FUND.
</Table>
87
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
<Caption>
ACCUMULATION UNIT VALUES:
(GREATER OF ROLL-UP AND STEP-UP GMDB AND CONTRACT WITH CREDIT 1.85)
- ------------------------------------------------------------------------------------------------------------------------------
JENNISON PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01721 $ 1.23477 532,897
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01830 $ 1.25211 94,856
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00585 $ 1.27928 474,299
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $0.99993 $ 0.99008 970,655
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02196 $ 1.21877 284,569
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02522 $ 1.21867 208,185
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01309 $ 1.27356 1,215,654
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01130 $ 1.21618 151,052
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01228 $ 1.19096 304,703
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01904 $ 1.17423 650,570
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00975 $ 1.18869 8,880,292
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00741 $ 1.13146 5,442,444
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00884 $ 1.24312 3,823,070
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01277 $ 1.22851 460,907
SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01508 $ 1.28460 639,413
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01131 $ 1.23434 6,833,723
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02721 $ 1.20922 308,543
</Table>
88
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PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(GREATER OF ROLL-UP AND STEP-UP GMDB AND CONTRACT WITH CREDIT 1.85)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02108 $ 1.20192 412,528
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00459 $ 1.33337 601,516
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00526 $ 1.19293 1,208,281
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00073 $ 1.04222 2,602,548
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01860 $ 1.36051 239,886
SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01402 $ 1.29612 223,415
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01515 $ 1.18852 19,181
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.03404 $ 1.33452 48,598
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01148 $ 1.34511 486,216
EVERGREEN VA BLUE CHIP FUND**
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.01834 $ 1.13611 0
EVERGREEN VA CAPITAL GROWTH FUND***
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.02775 $ 1.08671 0
EVERGREEN VA FOUNDATION FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00928 $ 1.12127 485,711
EVERGREEN VA FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.92191 $10.33946 30,021
EVERGREEN VA GLOBAL LEADERS FUND****
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.00981 $ 1.13116 0
EVERGREEN VA GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.91847 $10.39444 9,761
</Table>
<Table>
* COMMENCEMENT OF BUSINESS
** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA BLUE CHIP FUND AND THE EVERGREEN VA MASTERS FUND WERE EACH MERGED INTO THE
EVERGREEN VA FUND.
*** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA CAPITAL GROWTH FUND WAS MERGED INTO THE EVERGREEN VA GROWTH AND INCOME FUND.
**** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA GLOBAL LEADERS FUND WAS MERGED INTO THE EVERGREEN VA INTERNATIONAL EQUITY
FUND.
</Table>
89
- --------------------------------------------------------------------------------
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(GREATER OF ROLL-UP AND STEP-UP GMDB AND CONTRACT WITH CREDIT 1.85)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
EVERGREEN VA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01228 $ 1.34494 270,183
EVERGREEN VA INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------
12/5/2003* to 12/31/2003 $9.98983 $10.43946 11,898
EVERGREEN VA MASTERS FUND**
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/4/2003 $1.01694 $ 1.23705 0
EVERGREEN VA OMEGA FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.00971 $ 1.33072 718,960
EVERGREEN VA SPECIAL VALUES FUND
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.01274 $ 1.24731 535,501
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
1/6/2003* to 12/31/2003 $1.02241 $ 1.24068 223,309
</Table>
* COMMENCEMENT OF BUSINESS
** EFFECTIVE DECEMBER 5, 2003, THE EVERGREEN VA BLUE CHIP FUND AND THE
EVERGREEN VA MASTERS FUND WERE EACH MERGED INTO THE EVERGREEN VA FUND.
90
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
APPENDIX B
HYPOTHETICAL ILLUSTRATIONS
- --------------------------------------------------------------------------------
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table), the arithmetic average
fund fees were equal to 1.09% annually. If we did take expense reimbursements
and waivers into account here, that would have lowered the arithmetic average,
and thereby increased the illustrated values. The hypothetical gross rates of
return are next reduced by the insurance and administrative charge associated
with the selected death benefit option. Finally, the contract value is reduced
by the annual charges for the optional benefits that are illustrated as well as
by the contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -2.78%, 3.05%
and 6.94%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised
in that year.
A '0' in these columns indicates that the contract has terminated due to
insufficient account value and, consequently, the guaranteed benefit has no
value.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for
a description of how the various illustrated features operate.
91
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
STRATEGIC PARTNERS PLUS 3
$100,000 SINGLE CONTRIBUTION AND NO WITHDRAWALS
MALE, ISSUE AGE 60
BENEFITS:
GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM DEATH BENEFIT
EARNINGS APPRECIATOR BENEFIT
GUARANTEED MINIMUM INCOME BENEFIT
INCOME APPRECIATOR BENEFIT
CONTRACT WITHOUT CREDIT
10% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 105,842 100,442 105,842 2,337 108,178 N/A N/A 105,000
2 62 112,029 107,529 112,029 4,812 116,840 N/A N/A 110,250
3 63 118,582 114,982 118,582 7,433 126,015 N/A N/A 115,763
4 64 125,524 122,824 125,524 10,210 135,733 N/A N/A 121,551
5 65 132,877 131,077 132,877 13,151 146,028 N/A N/A 127,628
6 66 140,666 139,766 140,666 16,266 156,932 N/A N/A 134,010
7 67 148,917 148,917 148,917 19,567 168,484 7,338 156,255 140,710
8 68 157,658 157,658 157,658 23,063 180,722 8,649 166,307 147,746
9 69 166,919 166,919 166,919 26,768 193,687 13,384 180,303 155,133
10 70 176,730 176,730 176,730 30,692 207,422 15,346 192,076 162,889
15 75 235,296 235,296 235,296 54,118 289,414 33,824 269,120 200,000
20 80 314,497 314,497 314,497 85,799 400,295 53,624 368,121 200,000
25 85 422,268 422,268 422,268 120,000 542,268 80,567 502,835 200,000
30 90 568,915 568,915 568,915 120,000 688,915 117,229 686,144 200,000
35 95 768,463 768,463 768,463 120,000 888,463 167,116 935,578 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,704 9,547
8 8,358 10,413
9 9,070 11,359
10 10,607 12,646
15 15,937 20,190
20 19,313 30,646
25 24,359 47,105
30 30,105 69,306
35 37,787 100,835
- -------------------------------------------------------------
</Table>
6% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 101,974 96,574 105,000 790 105,790 N/A N/A 105,000
2 62 103,972 99,472 110,250 1,589 111,839 N/A N/A 110,250
3 63 105,992 102,392 115,763 2,397 118,159 N/A N/A 115,763
4 64 108,035 105,335 121,551 3,214 124,765 N/A N/A 121,551
5 65 110,098 108,298 127,628 4,039 131,667 N/A N/A 127,628
6 66 112,182 111,282 134,010 4,873 138,882 N/A N/A 134,010
7 67 114,285 114,285 140,710 5,714 146,424 2,143 116,428 140,710
8 68 116,406 116,406 147,746 6,562 154,308 2,461 118,867 147,746
9 69 118,543 118,543 155,133 7,417 162,550 3,709 122,252 155,133
10 70 120,696 120,696 162,889 8,278 171,168 4,139 124,835 162,889
15 75 131,651 131,651 207,893 12,660 220,553 7,913 139,564 200,000
20 80 143,600 143,600 265,330 17,440 282,770 10,900 154,500 200,000
25 85 157,110 157,110 265,330 22,844 288,174 14,277 171,387 200,000
30 90 172,385 172,385 265,330 28,954 294,284 18,096 190,481 200,000
35 95 189,656 189,656 265,330 35,863 301,192 22,414 212,070 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,434 7,114
8 8,027 7,442
9 8,671 7,788
10 9,940 8,219
15 14,171 10,470
20 16,060 12,862
25 18,604 16,055
30 20,697 19,240
35 22,893 22,856
- ---------------------------------------------------------------------------------
</Table>
92
PART II
STRATEGIC PARTNERS PLUS 3 PROSPECTUS SECTIONS 1-9
0% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 96,173 90,773 105,000 0 105,000 N/A N/A 105,000
2 62 92,447 87,947 110,250 0 110,250 N/A N/A 110,250
3 63 88,818 85,218 115,763 0 115,763 N/A N/A 115,763
4 64 85,281 82,581 121,551 0 121,551 N/A N/A 121,551
5 65 81,832 80,032 127,628 0 127,628 N/A N/A 127,628
6 66 78,465 77,565 134,010 0 134,010 N/A N/A 134,010
7 67 75,178 75,178 140,710 0 140,710 0 75,178 140,710
8 68 71,930 71,930 147,746 0 147,746 0 71,930 147,746
9 69 68,754 68,754 155,133 0 155,133 0 68,754 155,133
10 70 65,645 65,645 162,889 0 162,889 0 65,645 162,889
15 75 50,988 50,988 207,893 0 207,893 0 50,988 200,000
20 80 38,237 38,237 265,330 0 265,330 0 38,237 200,000
25 85 27,464 27,464 265,330 0 265,330 0 27,464 200,000
30 90 18,361 18,361 265,330 0 265,330 0 18,361 200,000
35 95 10,670 10,670 265,330 0 265,330 0 10,670 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,323 4,593
8 7,896 4,504
9 8,518 4,413
10 9,694 4,322
15 13,632 3,825
20 15,230 3,183
25 17,364 2,573
30 18,980 1,855
35 20,586 1,150
- -------------------------------------------------------------
</Table>
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
EXPLANATION OF HEADINGS
CONTRACT VALUE -- The projected total value of the annuity at the beginning of
the period indicated, after all fees other than withdrawal charges have been
deducted.
SURRENDER VALUE -- The projected cash value of the annuity after any applicable
fees and withdrawal charges payable on surrender.
DEATH BENEFIT VALUE -- Greater of the contract value or purchase payments
(adjusted for withdrawals) compounded at 5% annually up to the later of age 80
or 5 years from issue (for age 80-85 at issue, 3% annual roll-up for 5 years) or
the highest contract value (the "step-up") on any contract anniversary up to the
later of age 80 or the fifth contract anniversary adjusted for withdrawals (age
80-84 at issue will have only one step-up on the third contract anniversary) is
payable to the beneficiary(s) on death of owner and/or joint owner. See the
prospectus for more complete information.
EARNINGS APPRECIATOR BENEFIT (EAB) -- A supplemental death benefit based on 40%
of earnings if issue age is 0-70; 25% for age 71-75; 15% for age 76-79, subject
to a cap equal to 300% of purchase payments multiplied by the applicable benefit
percentage. See prospectus for more complete information.
IAB VALUE -- Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
AMOUNT AVAILABLE TO ANNUITIZE -- The contract value plus the IAB value. See
prospectus for more complete information.
GMIB PROTECTED VALUE -- Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB GUARANTEED ANNUAL PAYOUT FOR SINGLE LIFE WITH 10-YEAR PERIOD CERTAIN -- The
payout determined by applying the GMIB protected value (and IAB value if IAB is
elected) to the GMIB guaranteed annuity purchase rates contained in the
contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See the
prospectus for more detail.
PROJECTED CONTRACT ANNUAL ANNUITY PAYOUT FOR SINGLE LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN -- The hypothetical annuity payout based on the projected
contract value (and IAB value if IAB is elected) calculated using the minimum
payout rates guaranteed under the contract ("Guaranteed Minimum Payout Rates").
See prospectus for more complete information.
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization:
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated based
on the actual contract value at annuitization and the better of the
Guaranteed Minimum Annuity Payout Rates or the Current Annuity Payout
Rates in effect at the time of annuitization. To show how the GMIB rider
works relative to the annuity payout available under the contract we
included the Projected Contract Annuity Payout column which shows
hypothetical annuity payouts based on the projected contract values and
the Guaranteed Minimum Payout Rates. We did not illustrate any
hypothetical annuity payouts based on Current Annuity Payout Rates
because these rates are subject to change at any time; however,
historically the annuity payout provided under such Current Annuity
Payout Rates have been significantly higher than the annuity payout that
would be provided under Guaranteed Minimum Annuity Payout Rates.
93
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PART III PROSPECTUSES
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
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P2360
STRATEGIC PARTNERS(SM)
FLEXELITE
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
PROSPECTUS: MAY 1, 2004
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
- ------------------------------------------------------------
Strategic Partners FlexElite offers a wide variety of investment choices,
including variable investment options that invest in underlying 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
THE DREYFUS CORPORATION
GE ASSET MANAGEMENT, INCORPORATED
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
HOTCHKIS AND WILEY CAPITAL MANAGEMENT LLC
JANUS CAPITAL MANAGEMENT LLC
J.P. MORGAN INVESTMENT MANAGEMENT INC.
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS)
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (PIMCO)
SALOMON BROTHERS ASSET MANAGEMENT INC.
STATE STREET RESEARCH AND MANAGEMENT COMPANY
WILLIAM BLAIR & COMPANY, LLC
PLEASE READ THIS PROSPECTUS
- ------------------------------------------------------------
Please read this prospectus before purchasing a Strategic Partners FlexElite
variable annuity contract and keep it for future reference. The current
prospectuses for the underlying mutual funds contain important information about
the mutual funds. When you invest in a variable investment option that is funded
by a mutual fund, you should read the mutual fund prospectus and keep it for
future reference. The Risk Factors section relating to the market value
adjustment option appears on page 13 of this prospectus.
TO LEARN MORE ABOUT STRATEGIC PARTNERS FLEXELITE
- ------------------------------------------------------------
To learn more about the Strategic Partners FlexElite variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2004. 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 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 FlexElite 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 74 of this prospectus.
FOR A FREE COPY OF THE SAI CALL US AT:
- ------------------------------------------------------------
[ARROW GRAPHIC] (888) PRU-2888 or write to us at:
[ARROW GRAPHIC] Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19101
YOU MAY ELECT BEFORE YOUR 3RD AND 6TH CONTRACT ANNIVERSARIES TO HAVE A CREDIT
ADDED TO YOUR CONTRACT VALUE. IF YOU MAKE A CREDIT ELECTION, YOUR CHARGES MAY BE
HIGHER THAN IF YOU HAD NOT MADE THE ELECTION AND THEY COULD EXCEED YOUR CREDIT
AMOUNT IF YOU MAKE A WITHDRAWAL WITHIN 3 YEARS OF YOUR ELECTION.
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 FLEXELITE IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
STRATEGIC PARTNERS(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ORD01091
CONTENTS
- --------------------------------------------------------------------------------
<Table>
PART I: STRATEGIC PARTNERS FLEXELITE PROSPECTUS
-----------------------------------------------------------------
SUMMARY
-----------------------------------------------------------------
Glossary................................................ 6
Summary................................................. 10
Risk Factors............................................ 13
Summary Of Contract Expenses............................ 15
Expense Examples........................................ 19
PART II: STRATEGIC PARTNERS FLEXELITE PROSPECTUS
-----------------------------------------------------------------
SECTIONS 1-9
-----------------------------------------------------------------
Section 1: What Is The Strategic Partners FlexElite Variable
Annuity?................................................... 24
Short Term Cancellation Right Or "Free Look"............ 24
Section 2: What Investment Options Can I Choose?............. 25
Variable Investment Options............................. 25
Fixed Interest Rate Options............................. 33
Market Value Adjustment Option.......................... 34
Transfers Among Options................................. 35
Additional Transfer Restrictions........................ 36
Dollar Cost Averaging................................... 38
Asset Allocation Program................................ 38
Auto-Rebalancing........................................ 38
Voting Rights........................................... 39
Substitution............................................ 39
Section 3: What Kind Of Payments Will I Receive During The
Income Phase? (Annuitization).............................. 40
Payment Provisions...................................... 40
Payment Provisions Without The Guaranteed Minimum Income
Benefit............................................... 40
Option 1: Annuity Payments For A Fixed Period....... 40
Option 2: Life Income Annuity Option................ 40
Option 3: Interest Payment Option................... 41
Other Annuity Options............................... 41
Tax Considerations...................................... 41
Guaranteed Minimum Income Benefit....................... 41
GMIB Roll-Up........................................ 42
GMIB Option 1 -- Single Life Payout Option.......... 44
GMIB Option 2 -- Joint Life Payout Option........... 44
Income Appreciator Benefit.............................. 45
How We Determine Annuity Payments....................... 46
Section 4: What Is The Death Benefit?........................ 49
Beneficiary............................................. 49
Calculation Of The Death Benefit........................ 49
Guaranteed Minimum Death Benefit........................ 49
GMDB Roll-Up........................................ 49
GMDB Step-Up........................................ 50
Payout Options.......................................... 51
Earnings Appreciator Benefit............................ 51
Spousal Continuance Benefit............................. 52
Section 5: How Can I Purchase A Strategic Partners FlexElite
Contract? ................................................. 55
Purchase Payments....................................... 55
Allocation Of Purchase Payments......................... 55
Credit Election......................................... 55
Calculating Contract Value.............................. 56
</Table>
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
<Table>
Section 6: What Are The Expenses Associated With The
Strategic Partners FlexElite Contract?..................... 57
Insurance And Administrative Charge..................... 57
Withdrawal Charge....................................... 58
Waiver Of Withdrawal Charge For Critical Care........... 58
Minimum Distribution Requirements....................... 59
Contract Maintenance Charge............................. 59
Guaranteed Minimum Income Benefit Charge................ 59
Income Appreciator Benefit Charge....................... 59
Earnings Appreciator Benefit Charge..................... 60
Taxes Attributable To Premium........................... 61
Transfer Fee............................................ 61
Company Taxes........................................... 61
Underlying Mutual Fund Fees............................. 61
Section 7: How Can I Access My Money?........................ 62
Withdrawals During The Accumulation Phase............... 62
Automated Withdrawals................................... 62
Income Appreciator Benefit Options During The
Accumulation Phase.................................... 62
Suspension of Payments Or Transfers..................... 64
Section 8: What Are The Tax Considerations Associated With
The Strategic Partners FlexElite Contract?................. 65
Contracts Owned By Individuals (Not Associated With
Tax-Favored Retirement Plans)......................... 65
Contracts Held By Tax Favored Plans..................... 68
Section 9: Other Information................................. 72
Pruco Life Insurance Company............................ 72
The Separate Account.................................... 72
Sale And Distribution Of The Contract................... 72
Litigation.............................................. 73
Assignment.............................................. 73
Financial Statements.................................... 73
Statement Of Additional Information..................... 74
Householding............................................ 74
Market-Value Adjustment Formula......................... 75
IRA Disclosure Statement................................ 78
Appendix A................................................... 82
Accumulation Unit Values................................ 82
Appendix B................................................... 88
Hypothetical Illustrations.............................. 88
PART III: PROSPECTUSES
-----------------------------------------------------------------
VARIABLE INVESTMENT OPTIONS
-----------------------------------------------------------------
THE PRUDENTIAL SERIES FUND, INC.
JANUS ASPEN SERIES
</Table>
- --------------------------------------------------------------------------------
3
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- --------------------------------------------------------------------------------
4
PART I SUMMARY
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS FLEXELITE PROSPECTUS
- --------------------------------------------------------------------------------
5
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY
- --------------------------------------------------------------------------------
WE HAVE TRIED TO MAKE THIS PROSPECTUS AS EASY TO READ AND UNDERSTAND AS
POSSIBLE. BY THE NATURE OF THE CONTRACT, HOWEVER, CERTAIN TECHNICAL WORDS OR
TERMS ARE UNAVOIDABLE. WE HAVE IDENTIFIED THE FOLLOWING AS SOME OF THESE WORDS
OR TERMS.
ACCUMULATION PHASE
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
ADJUSTED CONTRACT VALUE
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes,
withdrawal charge and credit election withdrawal charge.
ADJUSTED PURCHASE PAYMENT
Your invested purchase payment is adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the Earnings
Appreciator Benefit.
ANNUITANT
The person whose life determines the amount of income payments that we will pay.
If the annuitant dies before the annuity date, the co-annuitant (if any) becomes
the annuitant if the contract's requirements for changing the annuity date are
met. If, upon the death of the annuitant, there is no surviving eligible
co-annuitant, and the owner is not the annuitant, then the owner becomes the
annuitant.
ANNUITY DATE
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the annuitant
due to the death of the annuitant, and the co-annuitant is older than the
annuitant, then the annuity date will be based on the age of the co-annuitant,
provided that the contract's requirements for changing the annuity date are met
(e.g., the co-annuitant cannot be older than a specified age). If the
co-annuitant is younger than the annuitant, then the annuity date will remain
unchanged.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
BUSINESS DAY
A day on which both the New York Stock Exchange and Pruco Life are open for
business. Our business day generally ends at 4:00 p.m. Eastern time.
CO-ANNUITANT
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirement for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
CONTRACT DATE
The date we accept 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
This is the total value of your contract, equal to the sum of the values of your
investment in each investment option you have chosen. Your contract value will
go up or down based on the performance of the investment options you choose.
CREDIT
The amount we add to your contract value if you make a credit election.
CREDIT ELECTION
Your election to have a credit added to your contract value. At least 30
calendar days prior to your 3rd and 6th contract anniversaries, we will notify
you of your option to make a credit election. We will give you notice only if
the credit election is available under your contract and you have not previously
declined to receive a credit. We must receive the credit election in good order
no later than the applicable contract anniversary.
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
DEATH BENEFIT
If a death benefit is payable, the beneficiary you designate will receive, at a
minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation. The
Guaranteed Minimum Death Benefit is available for an additional charge. See
"What Is The Death Benefit?" on page 49.
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 or to the one-year fixed interest rate option.
EARNINGS APPRECIATOR BENEFIT (EAB)
An optional feature available for an additional charge that may provide a
supplemental death benefit based on earnings under the contract.
FIXED INTEREST RATE OPTIONS
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic transfers
are made to selected variable investment options or to the one-year fixed rate
option.
GOOD ORDER
An instruction received at the Prudential Annuity Service Center, utilizing such
forms, signatures and dating as we require, which is sufficiently clear that we
do not need to exercise any discretion to follow such instructions.
GUARANTEE PERIOD
A period of time during which your invested purchase payment in the market value
adjustment option earns interest at the declared rate. We may offer one or more
guarantee periods.
GUARANTEED MINIMUM DEATH BENEFIT (GMDB)
An optional feature available for an additional charge that guarantees that the
death benefit that the beneficiary receives will be no less than a certain GMDB
protected value.
GMDB PROTECTED VALUE
The amount guaranteed under the Guaranteed Minimum Death Benefit, which may
equal the GMDB roll-up value, the GMDB step-up value, or the greater of the two.
The GMDB protected value will be subject to certain age restrictions and time
durations, however, it will still increase by subsequent invested purchase
payments and reduce proportionally by withdrawals.
GMDB ROLL-UP
We use the GMDB roll-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. The GMDB roll-up is equal to the invested
purchase
payments compounded daily at an effective annual interest rate starting on the
date that each invested purchase payment is made, subject to a cap, and reduced
proportionally by withdrawals.
GMDB STEP-UP
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon death,
even if the contract value has declined. For example, if the GMDB step-up were
set at $100,000 on a contract anniversary, and the contract value subsequently
declined to $80,000 on the date of death, the GMDB step-up value would
nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
An optional feature available for an additional charge that guarantees that the
income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB PROTECTED VALUE
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit.
The value is calculated daily and is equal to the GMIB roll-up, until the
GMIB roll-up either reaches its cap or if we stop applying the annual interest
rate based on the age of the annuitant, number of contract anniversaries or
number of years since last GMIB reset. At such point, the GMIB protected value
will be increased by any subsequent invested purchase payments. Any withdrawals
in subsequent contract years will proportionally reduce the GMIB protected
value. The GMIB protected value is not available as a cash surrender benefit or
a death benefit, nor is it
- --------------------------------------------------------------------------------
7
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
GLOSSARY CONTINUED
- --------------------------------------------------------------------------------
used to calculate the cash surrender value or death benefit.
GMIB RESET
You may elect to "step-up" or "reset" your GMIB protected value if your contract
value is greater than the current GMIB protected value. Upon exercise of the
reset provision, your GMIB protected value will be reset to equal your current
contract value. You are limited to two resets over the life of your contract,
provided that certain annuitant age requirements are met.
GMIB ROLL-UP
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the contract value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date each
invested purchase payment is made, subject to a cap, and reduced proportionally
by withdrawals.
INCOME APPRECIATOR BENEFIT (IAB)
An optional feature that may be available for an additional charge that may
provide a supplemental income benefit based on earnings under the contract.
IAB AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
A series of payments consisting of a portion of your contract value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB CREDIT
An amount we add to your contract value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the Income
Appreciator Benefit during the accumulation phase.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity options.
INCOME PHASE
The period during which you receive income payments under the contract.
INVESTED PURCHASE PAYMENTS
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
JOINT OWNER
The person named as the joint owner, who shares ownership rights with the owner
as defined in the contract. The joint owner may be the owner's spouse, but need
not be.
MARKET VALUE ADJUSTMENT
An adjustment to your contract value or withdrawal proceeds that is based on the
relationship between interest you are currently earning within the market value
adjustment option and prevailing interest rates. This adjustment may be positive
or negative.
MARKET VALUE ADJUSTMENT OPTION
An investment option for contracts sold on or after May 1, 2003, or upon
subsequent state approval. This investment option may offer various guarantee
periods and pays a fixed rate of interest with respect to each guarantee period.
We impose a market value adjustment on withdrawals that you make from this
option prior to the end of its guarantee period.
NET PURCHASE PAYMENTS
Your total purchase payments less any withdrawals you have made.
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, 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.
- --------------------------------------------------------------------------------
8
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
STATEMENT OF ADDITIONAL INFORMATION
A document containing certain additional information about the Strategic
Partners FlexElite 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. Generally,
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
FlexElite Contract," on page 65.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that 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.
- --------------------------------------------------------------------------------
9
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9
- --------------------------------------------------------------------------------
FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN PART II OF THE PROSPECTUS.
SECTION 1
WHAT IS THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY?
The Strategic Partners FlexElite Variable Annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company (Pruco Life,
we or us). The contract allows you to invest on a tax-deferred basis in variable
investment options, fixed interest rate options and the market value adjustment
option. The contract is intended for retirement savings or other long-term
investment purposes and provides for a death benefit.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in Prudential Money Market Portfolio variable investment
option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum interest
rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to be at least
3%.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
- - During the accumulation phase, any earnings grow on a tax-deferred basis and
are generally only 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 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 select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
There are certain state variations to this contract that are referred to in
this prospectus. Please see your contract for further information on these and
other variations.
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or not
to make such contract amendments available to contracts that already have been
issued.
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever time period
is required under applicable law). This time period is referred to as the "Free
Look" period.
Pruco Life offers several different annuities which your representative may
be authorized to offer to you. Each annuity has different features and benefits
that may be appropriate for you based on your financial situation, your age and
how you intend to use the annuity. The different features and benefits include
variations in death benefit protection and the ability to access your annuity's
contract value. The fees and charges under the annuity contract and compensation
paid to your representative may also be different between each annuity. If you
are purchasing the contract as a replacement for existing variable annuity or
variable life coverage, you should consider, among other things, any surrender
or penalty charges you may incur when replacing your existing coverage.
- --------------------------------------------------------------------------------
10
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SECTION 2
WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any of the following variable investment options:
The Prudential Series Fund, Inc.
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP AIM Aggressive Growth Portfolio
SP AIM Core Equity Portfolio
SP Alliance Large Cap Growth Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Davis Value Portfolio
SP Deutsche International Equity Portfolio
SP Goldman Sachs Small Cap Value Portfolio
(formerly SP Small/Mid Cap Value Portfolio)
SP Growth Asset Allocation Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP State Street Research Small Cap Growth Portfolio
(formerly SP INVESCO Small Company Growth
Portfolio)
SP Strategic Partners Focused Growth Portfolio
SP Technology Portfolio
(formerly SP Alliance Technology Portfolio)
SP William Blair International Growth Portfolio
(formerly SP Jennison International 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
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
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.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB) and the Income
Appreciator Benefit. The Guaranteed Minimum Income Benefit provides that once
the income period begins, your income payments will be no less than a value that
is based on a certain "GMIB protected value" applied to the GMIB guaranteed
annuity purchase rates. The Income Appreciator Benefit provides an additional
income amount during the accumulation phase or upon annuitization. See "What
Kind Of Payments Will I Receive During The Income Phase" on page 40.
SECTION 4
WHAT IS THE DEATH BENEFIT?
For contracts sold on or after May 1, 2003, or upon subsequent state approval,
in general, if the sole owner or first to die of the owner and joint owner dies
before the income phase of the contract begins, the person(s) or entity that you
have chosen as your beneficiary will receive at a minimum, the greater of (i)
the contract value, (ii) either the base death benefit or, for a higher
insurance charge, a potentially larger Guaranteed Minimum Death Benefit (GMDB).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal to
a "GMDB protected value" that depends upon which of the following
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11
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9 CONTINUED
- --------------------------------------------------------------------------------
Guaranteed Minimum Death Benefit options you choose:
- - the highest value of the contract on any contract anniversary, which we call
the "GMDB step-up value";
- - the total amount you invest increased by a guaranteed rate of return, which
we call the "GMDB roll-up value"; or
- - the greater of the GMDB step-up value and GMDB roll-up value.
FOR ALL OTHER CONTRACTS, THE DEATH BENEFIT DESCRIBED ABOVE WILL BE PAID UPON
THE DEATH OF THE SOLE OWNER OR IF SPOUSAL JOINT OWNERS, THE LAST SURVIVING
OWNER.
On the date we receive proof of death in good order, in lieu of paying a
death benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Benefit, if the conditions, that we describe
on page 52 are met.
For an additional fee, you may also choose, if it is available under your
contract, the Earnings Appreciator supplemental death benefit, which provides a
benefit payment upon the death of the sole owner or first to die of the owner or
joint owner during the accumulation period.
SECTION 5
HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT?
You can purchase this contract, under most circumstances, with a minimum initial
purchase payment of $10,000, but not greater than $1,000,000 absent our prior
approval. Generally, you can make additional purchase payments of $500 ($100 if
made through electronic funds transfer) or more at any time during the
accumulation phase of the contract. Your representative can help you fill out
the proper forms.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
SECTION 6
WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE CONTRACT?
The contract has insurance features and investment features, both of which have
related costs and charges.
- - Each year (or upon full surrender) we deduct a contract maintenance charge if
your contract value is less than $100,000. This charge is currently equal to
the lesser of $50 or 2% of your contract value. We do not impose the contract
maintenance charge if your contract value is $50,000 or more. We may impose
lesser charges in certain states.
- - For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable investment
options, depending on the death benefit option that you choose. The daily
cost is equivalent to an annual charge as follows:
- 1.65% if you choose the base death benefit,
- 1.9% if you choose either the roll-up or the step-up Guaranteed Minimum
Death Benefit option, or
- 2% if you choose the greater of the roll-up and step-up Guaranteed Minimum
Death Benefit option.
The 1.65%, 1.9%, and 2% charges referenced immediately above apply to any
Strategic Partners FlexElite contract sold on or after May 1, 2003, or
upon subsequent state approval. Otherwise, those charges are 1.6%, 1.8%,
and 1.9%, respectively.
- - We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your contract value on the
contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts), of the
average GMIB protected value.
- - We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your contract value on the contract
anniversary and upon certain other events. The
- --------------------------------------------------------------------------------
12
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
charge for this benefit is based on an annual rate of 0.25% of your contract
value.
- - We will deduct an additional charge if you choose the Earnings Appreciator
supplemental death benefit. We deduct this charge from your contract value on
the contract anniversary and upon certain other events. The charge for this
benefit is based on an annual rate of 0.30% of your contract value.
- - There are a few states/jurisdictions that assess a premium tax on us when you
begin receiving regular income payments from your annuity. In those states,
we deduct a charge designed to approximate this tax, which can range from
0-3.5% of your contract value.
- - There are also expenses associated with the mutual funds. For 2003, the fees
of these funds ranged on an annual basis from 0.37% to 2.56% of fund assets,
which are reduced by expense reimbursements or waivers to 0.37% to 1.30%.
These reimbursements or waivers may be terminated at any time.
- - If you withdraw money within three years of the contract date or a credit
election, you may have to pay a withdrawal charge up to 7% on all or part of
the withdrawal.
For more information, including details about other possible charges under
the contract, see "Summary Of Contract Expenses" on page 15 and "What Are The
Expenses Associated With The Strategic Partners FlexElite Contract" on page 57.
SECTION 7
HOW CAN I ACCESS MY MONEY?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. If you withdraw money within three
years of the contract date or a credit election, we may impose a withdrawal
charge.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal prior to the end of a guarantee
period.
SECTION 8
WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawals as a
withdrawal of earnings, which 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 and therefore will not be taxable as income. Generally,
all amounts withdrawn from an Individual Retirement Annuity (IRA) contract
(excluding Roth IRAs) are 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 of affiliated and unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the market value
adjustment option annuity that we summarize below.
ISSUER RISK. The market value adjustment option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life, and thus 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 and fixed interest rate options and to fulfill its insurance
guarantees 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
- --------------------------------------------------------------------------------
13
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY FOR SECTIONS 1-9 CONTINUED
- --------------------------------------------------------------------------------
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 prior to the end of a guarantee period and 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 may impose withdrawal charges on
amounts withdrawn from the market value adjustment 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.
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14
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES
- --------------------------------------------------------------------------------
THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL PAY
FOR STRATEGIC PARTNERS FLEXELITE. 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.
For more detailed information, including additional information about current
and maximum charges, see "What Are The Expenses Associated With The Strategic
Partners FlexElite Contract?" on page 57. The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
CONTRACT OWNER TRANSACTION EXPENSES
<Table>
WITHDRAWAL CHARGE(1)
- ---------------------------------------------------------------------------
FULL CONTRACT YEARS
- ---------------------------------------------------------------------------
0 7%
1 7%
2 7%
3 0%
</Table>
<Table>
<Caption>
CREDIT ELECTION WITHDRAWAL CHARGE(2)
- ---------------------------------------------------------------------------
FULL CONTRACT YEARS
- ---------------------------------------------------------------------------
3 7%
4 7%
5 7%
6 7%
7 7%
8 7%
9 0%
</Table>
<Table>
MAXIMUM TRANSFER FEE
- --------------------------------------------------------------------
Each transfer after 12(3) $ 30.00
CHARGE FOR PREMIUM TAX IMPOSED ON US BY CERTAIN STATES/JURISDICTIONS
- --------------------------------------------------------------------
Up to 3.5% of contract value
</Table>
1: Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We will waive the withdrawal charge
if we pay a death benefit or under certain other circumstances. See "Withdrawal
Charge" on page 58. In certain states reduced withdrawal charges may apply. Your
contract contains the applicable charges.
2: We impose these withdrawal charges only if you elect to have the credit added
to your contract value prior to your 3rd and 6th contract anniversaries. These
charges may be lower in certain states.
3: Currently, we charge $10 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of $30,
but we have no current intention to do so. We will not charge you for transfers
made in connection with Dollar Cost Averaging and Auto-Rebalancing or transfers
from the market value adjustment option at the end of a guarantee period, and do
not count them toward the limit of 12 free transfers per year.
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15
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including underlying mutual fund
fees and expenses.
ANNUAL ACCOUNT EXPENSES
<Table>
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE AND CONTRACT
CHARGE UPON FULL WITHDRAWAL(4)
- --------------------------------------------------------------------
$ 60.00
ANNUAL INSURANCE AND ADMINISTRATIVE EXPENSES(5)
------------------------------------------------------------------
AS A PERCENTAGE OF ACCOUNT VALUE IN VARIABLE
INVESTMENT OPTIONS:
Base Death Benefit 1.65%
Guaranteed Minimum Death Benefit-
Roll-Up or Step-Up 1.90%
Greater of Roll-Up and Step-Up 2.00%
Possible Additional Charge if 76 or older 0.10%
</Table>
<Table>
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
- ------------------------------------------------------------------
UPON CERTAIN WITHDRAWALS(6) (for contracts sold on or after
January 20, 2004, or upon subsequent state approval)
- ------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.50%
ANNUAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE AND CHARGE
- ------------------------------------------------------------------
UPON CERTAIN WITHDRAWALS(6) (for all other contracts)
- ------------------------------------------------------------------
AS A PERCENTAGE OF AVERAGE GMIB PROTECTED VALUE 0.45%
ANNUAL INCOME APPRECIATOR BENEFIT CHARGE AND CHARGE
UPON CERTAIN WITHDRAWALS/ANNUITIZATIONS(7)
- ------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.25%
</Table>
<Table>
ANNUAL EARNINGS APPRECIATOR CHARGE AND CHARGE
UPON CERTAIN TRANSACTIONS(8)
- --------------------------------------------------------------------------------------
AS A PERCENTAGE OF CONTRACT VALUE 0.30%
Possible Additional Charge if 66 or older 0.10%
</Table>
4: Currently, we waive this fee if your contract value is greater than or equal
to $100,000. If your contract value is less than $100,000, we currently charge
the lesser of $50 or 2% of your contract value. This is a single fee that we
assess (a) annually or (b) upon a full withdrawal made on a date other than a
contract anniversary. As shown in the table, we can increase this fee in the
future up to a maximum of $60, but we have no current intention to do so.
5: The 1.65%, 1.90%, and 2.00% charges listed here apply to any Strategic
Partners FlexElite contract sold on or after May 1, 2003 or upon subsequent
state approval. For all other contracts, these charges are 1.60%, 1.80%, and
1.90%, respectively, and we reserve the right to impose an additional insurance
charge of 0.10% annually of average account value for contracts issued to those
aged 76 or older, under which the Guaranteed Minimum Death Benefit has been
selected.
6: We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after January
20, 2004, or upon subsequent state approval (0.45% for all other contracts) of
the average GMIB protected value, which is calculated daily and generally is
equal to the GMIB roll-up value. Subject to certain age restrictions, the
roll-up value is the total of all invested purchase payments (after a reset, the
contract value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. The reduction is
equal to the amount of the withdrawal for the first 5% of the roll-up value,
calculated as of the latest contract anniversary (or contract date). The amount
of the withdrawal in excess of 5% of the roll-up value further reduces the
roll-up value and 200% cap proportionally to the additional reduction in
contract value after the first 5% withdrawal occurs. We assess this fee each
contract anniversary and when you begin the income phase of your contract. We
also assess this fee if you make a full withdrawal, but prorate the fee based on
the portion of the contract year that has elapsed since the full annual fee was
most recently deducted. If you make a partial withdrawal, we will assess the
prorated fee if the remaining contract value after the withdrawal would be less
than the amount of the prorated fee; otherwise we will not assess the fee at
that time.
7: We impose this charge only if you choose the Income Appreciator Benefit. The
charge for this benefit is based on an annual rate of 0.25% of your contract
value. The Income Appreciator Benefit charge is calculated: on each contract
anniversary, on the annuity date, if a death benefit is payable, upon the death
of the sole owner or first to die of the owner or joint owner prior to the
annuity date, upon a full or partial withdrawal, and upon a subsequent purchase
payment. The fee is based on the contract value at the time of the calculation,
and is prorated based on the portion of the contract year since the date that
the charge was last deducted. Although it may be calculated more often, it is
deducted only: on each contract
- --------------------------------------------------------------------------------
16
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PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
anniversary, on the annuity date, if a death benefit is payable, upon the death
of the sole owner or first to die of the owner or joint owners prior to the
annuity date, upon a full withdrawal, and upon a partial withdrawal if the
contract value remaining after such partial withdrawal is not enough to cover
the then-applicable charge. With respect to full and partial withdrawals, we
prorate the fee based on the portion of the contract year that has elapsed since
the full annual fee was most recently deducted. We reserve the right to
calculate and deduct the fee more frequently than annually, such as quarterly.
8: We impose this charge only if you choose the Earnings Appreciator Benefit. We
deduct this charge annually. We also deduct this charge if you make a full
withdrawal or enter the income phase of your contract, or if a death benefit is
payable, but prorate the fee to reflect a partial rather than full year. If you
make a partial withdrawal, we will deduct the prorated fee if the remaining
contract value after the withdrawal would be less than the amount of the
prorated fee; otherwise we will not deduct the fee at that time. The fee is also
calculated when you make any purchase payment or withdrawal but we do not deduct
it until the next deduction date. For contracts sold prior to May 1, 2003, or
upon subsequent state approval, we reserve the right to impose an additional
charge of 0.10% annually of account value for contracts issued to those aged 66
or older, under which the Earnings Appreciator Benefit has been selected.
TOTAL ANNUAL MUTUAL FUND OPERATING EXPENSES
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management fees,
distribution and/or service (12b-1) fees, and other 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 below and 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, 2003. Fund expenses
are not fixed or guaranteed by the Strategic Partners FlexElite contract, and
may vary from year to year.
<Table>
<Caption>
Minimum Maximum
------- -------
Total Annual Underlying Mutual Fund Operating Expenses* 0.37% 2.56%
</Table>
* Actual expenses for the mutual funds are lower due to certain 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.
- --------------------------------------------------------------------------------
17
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
SUMMARY OF CONTRACT EXPENSES CONTINUED
- --------------------------------------------------------------------------------
<Table>
<Caption>
ANNUAL MUTUAL FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------------
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
INVESTMENT OTHER
- ---------------------------------------------------------------------------------------------------------------------------------
ADVISORY FEES EXPENSES TOTAL EXPENSES(1)
THE PRUDENTIAL SERIES FUND, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
Jennison Portfolio 0.60% 0.04% 0.64%
Prudential Equity Portfolio 0.45% 0.04% 0.49%
Prudential Global Portfolio 0.75% 0.12% 0.87%
Prudential Money Market Portfolio 0.40% 0.04% 0.44%
Prudential Stock Index Portfolio 0.35% 0.02% 0.37%
Prudential Value Portfolio 0.40% 0.04% 0.44%
SP Aggressive Growth Asset Allocation
Portfolio(2,3) 0.85% 0.30% 1.15%
SP AIM Aggressive Growth Portfolio(2) 0.95% 1.07% 2.02%
SP AIM Core Equity Portfolio(2) 0.85% 0.87% 1.72%
SP Alliance Large Cap Growth Portfolio 0.90% 0.16% 1.06%
SP Balanced Asset Allocation Portfolio(2,3) 0.77% 0.21% 0.98%
SP Conservative Asset Allocation
Portfolio(2,3) 0.72% 0.16% 0.88%
SP Davis Value Portfolio 0.75% 0.07% 0.82%
SP Deutsche International Equity Portfolio(2) 0.90% 0.40% 1.30%
SP Goldman Sachs Small Cap Value Portfolio
(formerly SP Small/Mid-Cap Value Portfolio) 0.90% 0.14% 1.04%
SP Growth Asset Allocation Portfolio(2,3) 0.81% 0.26% 1.07%
SP Large Cap Value Portfolio(2) 0.80% 0.31% 1.11%
SP MFS Capital Opportunities Portfolio(2) 0.75% 1.27% 2.02%
SP Mid Cap Growth Portfolio(2) 0.80% 0.54% 1.34%
SP PIMCO High Yield Portfolio 0.60% 0.12% 0.72%
SP PIMCO Total Return Portfolio 0.60% 0.05% 0.65%
SP Prudential U.S. Emerging Growth Portfolio 0.60% 0.20% 0.80%
SP State Street Research Small Cap Growth
Portfolio(2)
(formerly SP INVESCO Small Company Growth
Portfolio) 0.95% 0.83% 1.78%
SP Strategic Partners Focused Growth
Portfolio(2) 0.90% 0.75% 1.65%
SP Technology Portfolio(2)
(formerly SP Alliance Technology Portfolio) 1.15% 1.41% 2.56%
SP William Blair International Growth
Portfolio
(formerly SP Jennison International Growth
Portfolio) 0.85% 0.30% 1.15%
</Table>
<Table>
<Caption>
INVESTMENT 12B-1 OTHER TOTAL
ADVISORY FEES FEE EXPENSES EXPENSES
Janus Aspen Series(4)
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio -- Service Shares 0.65% 0.25% 0.02% 0.92%
</Table>
1. The Total Expenses do not reflect fee waivers, reimbursement of expenses, or
expense offset arrangements for the fiscal year ended December 31, 2003.
2. The portfolios' total actual annual operating expenses for the year ended
December 31, 2003 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
expense reimbursements are voluntary and may be terminated by Prudential
Investments LLC at any time. After accounting for the expense reimbursements,
the portfolios' actual annual operating expenses were:
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Aggressive Growth Asset
Allocation Portfolio 0.97%
SP AIM Aggressive Growth Portfolio 1.07%
SP AIM Core Equity Portfolio 1.00%
SP Balanced Asset Allocation
Portfolio 0.87%
SP Conservative Asset Allocation
Portfolio 0.81%
SP Deutsche International Equity
Portfolio 1.10%
SP Growth Asset Allocation
Portfolio 0.92%
</Table>
<Table>
<Caption>
TOTAL ACTUAL ANNUAL
PORTFOLIO OPERATING EXPENSES
PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT
SP Large Cap Value Portfolio 0.90%
SP MFS Capital Opportunities
Portfolio 1.00%
SP Mid Cap Growth Portfolio 1.00%
SP State Street Research Small Cap
Growth Portfolio 1.15%
SP Strategic Partners Focused
Growth Portfolio 1.01%
SP Technology Portfolio 1.30%
</Table>
3. Each asset allocation portfolio invests in a combination of underlying
portfolios of The Prudential Series Fund, Inc. The Total Expenses for each asset
allocation portfolio are calculated as a blend of the fees of the underlying
portfolios, plus a 0.05% advisory fee payable to the investment adviser,
Prudential Investments LLC. The 0.05% advisory fee is included in the amount of
each investment advisory fee set forth in the table above.
4. Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc.
- --------------------------------------------------------------------------------
18
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXPENSE EXAMPLES
- ---------------------------------------------------
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 1A: Greater of Roll-up and Step-up
Guaranteed Minimum Death Benefit; Guaranteed
Minimum Income Benefit; Earnings Appreciator
Benefit; Income Appreciator Benefit; Credit
Elections; and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Strategic Partners
FlexElite Contract;
- - You choose the Greater of Roll-Up and Step-Up
Guaranteed Minimum Death Benefit;
- - You choose the Guaranteed Minimum Income Benefit
(your contract is purchased on or after January
20, 2004);
- - You choose the Earnings Appreciator Benefit;
- - You choose the Income Appreciator Benefit;
- - You make credit elections prior to your 3(rd)
and 6(th) contract anniversaries;
- - You allocate all your assets to the variable
investment option having the maximum total
operating expenses;
- - Your investment has a 5% return each year;
- - The mutual fund's total operating expenses
remain the same each year; and
- - You withdraw all your assets at the end of the
indicated period.
- --------------------------------------------------------------------------------
19
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
EXPENSE EXAMPLES CONTINUED
- --------------------------------------------------------------------------------
EXAMPLE 1B: Greater of Roll-up and Step-up Guaranteed Minimum Death Benefit;
Guaranteed Minimum Income Benefit; Earnings Appreciator Benefit; Income
Appreciator Benefit; Credit Elections; and You Do Not Withdraw Your Assets
This example makes the same assumptions as Example 1a except that it assumes
that you do not withdraw any of your assets at the end of the indicated period.
EXAMPLE 2A: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Strategic Partners FlexElite Contract;
- - You choose a Guaranteed Minimum Death Benefit;
- - You allocate all your assets to the variable investment option having the
maximum total operating expenses;
- - Your investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2B: Base Death Benefit and You Do Not Withdraw All Your Assets
This example makes the same assumptions as Example 2a except that it assumes
that you do not withdraw any of your assets at the end of the indicated period.
In these expense examples, we set out projected expenses that are based on
versions of the contract that carry the highest and lowest overall charges. We
do not depict projected expenses for every possible combination of contract
charges. The actual expenses under the contract with the insurance features and
underlying funds that you have selected, and the purchase payments that you have
made, may vary from the figures we depict here.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Note that withdrawal charges (which are reflected in Example 1a and 2a) are
assessed in connection with some annuity options, but not others.
The values shown in the 10 year column are the same for Example 1a and 1b and
the same in the 5 year and 10 year columns for Example 2a and 2b. This is
because if you decline the credit and 3 or more years have elapsed since your
contract date, we would no longer deduct withdrawal charges when you make a
withdrawal or begin the income phase of your contract. Similarly, if 3 or more
years have elapsed since your last credit election before your 6th contract
anniversary, no withdrawal charges apply.
The examples use an average contract maintenance charge, which we calculated
based on our estimate of the total contract fees we expect to collect in 2004.
Based on these estimates, the contract maintenance charge is included as an
annual charge of 0.034% of contract value. Your actual fees will vary based on
the amount of your contract and your specific allocation among the investment
options.
Premium taxes are not reflected in the examples. We deduct a charge to
approximate premium taxes that may be imposed on us in your state. This charge
is generally deducted from the amount applied to an annuity payout option.
The table of accumulation unit values appears in the Appendix to this
prospectus.
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
PART I STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY
<Table>
<Caption>
GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM DEATH
BENEFIT; GUARANTEED MINIMUM INCOME BENEFIT; EARNINGS APPRECIATOR BENEFIT;
INCOME APPRECIATOR BENEFIT; CREDIT ELECTIONS
- --------------------------------------------------------------------------------
EXAMPLE 1A: EXAMPLE 1B:
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
- --------------------------------------------------------------------------------
$1,193 $2,307 $3,415 $5,520 $563 $1,677 $2,785 $5,520
</Table>
<Table>
<Caption>
BASE DEATH BENEFIT
- ---------------------------------------------------------------------------
EXAMPLE 2A: EXAMPLE 2B:
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
- ---------------------------------------------------------------------------
$1,056 $1,918 $2,169 $4,453 $426 $1,288 $2,169 $4,453
</Table>
- --------------------------------------------------------------------------------
21
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- --------------------------------------------------------------------------------
22
PART II SECTIONS 1-9
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS FLEXELITE PROSPECTUS
23
1:
WHAT IS THE STRATEGIC PARTNERS FLEXELITE
VARIABLE ANNUITY?
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY (PRUCO LIFE, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you a
guaranteed income stream that can begin any time after the second contract
anniversary. Your annuity is in the accumulation phase until you decide to begin
receiving annuity payments. The date you begin receiving annuity payments is the
annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you
are not taxed on earnings or appreciation on the assets in your contract until
you withdraw money from your contract. (If you purchase the annuity contract in
a tax-favored plan such as an IRA, that plan generally provides tax deferral
even without investing in an annuity contract. Therefore, before purchasing an
annuity in a tax-favored plan, you should consider whether its features and
benefits beyond tax deferral meet your needs and goals. You may also want to
consider the relative features, benefits and costs of these annuities compared
with any other investment that you may use in connection with your retirement
plan or arrangement.)
Strategic Partners FlexElite is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options, and a market value adjustment
option. If you select variable investment options, the amount of money you are
able to accumulate in your contract during the accumulation phase depends upon
the investment performance of the underlying mutual fund(s) associated with that
variable investment option.
Because the underlying mutual funds' portfolios fluctuate in value depending
upon market conditions, your contract value can either increase or decrease.
This is important, since the amount of the annuity payments you receive during
the income phase depends upon the value of your contract at the time you begin
receiving payments.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the income
phase begins. On or after the annuity date, the annuitant may not be changed.
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners FlexElite, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the contract
either to the representative who sold it to you, or to the Prudential Annuity
Service Center at the address shown on the first page of this prospectus. You
will receive, depending on applicable state law:
- - Your full purchase payment less any applicable federal and state income tax;
or
- - The amount your contract is worth as of the day we receive your request, less
any applicable federal and state income tax withholding. This amount may be
more or less than your original payment. We impose neither a withdrawal
charge nor any market value adjustment if you cancel your contract under this
provision.
To the extent dictated by state law, we will include in your refund the
amount of any fees and charges that we deducted.
- --------------------------------------------------------------------------------
24
2:
WHAT INVESTMENT OPTIONS
CAN I CHOOSE?
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY OF
THE VARIABLE INVESTMENT OPTIONS, FIXED INTEREST RATE OPTIONS, AND A MARKET VALUE
ADJUSTMENT OPTION.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their shares
to both variable annuity and variable life separate accounts of different
insurance companies, which could create the kinds of risks that are described in
more detail in the current prospectus for the underlying mutual fund. The
current prospectuses for the underlying mutual funds also contain other
important information about the mutual funds. When you invest in a variable
investment option that is funded by a mutual fund, you should read the mutual
fund prospectus and keep it for future reference.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment of
their investment style (as of the date of this prospectus). The chart also
provides a description of each portfolio's investment objective (in italics) and
a short, summary description of their key policies to assist you in determining
which portfolios may be of interest to you. There is no guarantee that any
portfolio will meet its investment objective. The name of the adviser/subadviser
for each portfolio appears next to the description.
All the portfolios on the following chart, except for the Janus Aspen
Series--Growth Portfolio, are Prudential Series Fund portfolios. The Jennison
Portfolio, Prudential Equity Portfolio, Prudential Global Portfolio, Prudential
Money Market Portfolio, Prudential Stock Index Portfolio and Prudential Value
Portfolio, and each "SP" Portfolio of the Prudential Series Fund, are managed by
an indirect wholly-owned subsidiary of Prudential Financial, Inc. called
Prudential Investments LLC (PI) under a "manager-of-managers" approach. The SP
Aggressive Growth Asset Allocation Portfolio, SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio invest in other Prudential Series Fund Portfolios, and are
managed by 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 manage some or all of a Prudential Series Fund portfolio are
listed on the following chart.
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. With regard to its variable
annuity contracts generally, Pruco Life receives fees that range from 0.05% to
0.40% annually for providing such services.
As detailed in the Prudential Series Fund prospectus, although the Prudential
Money Market Portfolio is designed to be a stable investment option, it is
possible to lose money in that portfolio. For example, when prevailing
short-term interest rates are very low, the yield on the Prudential Money Market
Portfolio may be so low that, when separate account and contract charges are
deducted, you experience a negative return.
- --------------------------------------------------------------------------------
25
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JENNISON PORTFOLIO: seeks long-term growth of capital. The Jennison Associates
Portfolio invests primarily in equity securities of major, LLC
established corporations that the subadviser believes offer
above-average growth prospects. The Portfolio may invest up
to 30% of its total assets in foreign securities. Stocks are
selected on a company-by-company basis using fundamental
analysis. Normally 65% of the Portfolio's total assets are
invested in common stocks and preferred stocks of companies
with capitalization in excess of $1 billion.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE PRUDENTIAL EQUITY PORTFOLIO: seeks long-term growth of GE Asset Management,
capital. The Portfolio invests at least 80% of its Incorporated;
investable assets in common stocks of major established Jennison Associates
corporations as well as smaller companies that the LLC; Salomon Brothers
subadvisers believe offer attractive prospects of Asset Management Inc.
appreciation. The Portfolio may invest up to 30% of its
total assets in foreign securities. The Portfolio may also
invest 20% of its investable assets in short, intermediate
or long-term debt obligations, convertible and
nonconvertible preferred stock and other equity-related
securities. Up to 5% of these investable assets may be rated
below investment grade. Debt securities rated below
investment grade are considered speculative and are
sometimes referred to as "junk bonds."
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PRUDENTIAL GLOBAL PORTFOLIO: seeks long-term growth of Jennison Associates
capital. The Portfolio invests primarily in common stocks LLC
(and their equivalents) of foreign and U.S. companies. When
selecting stocks, the subadviser uses a growth approach
which means that it looks for companies that have
above-average growth prospects. Generally, the Portfolio
invests in at least three countries, including the U.S., but
may invest up to 35% of the Portfolio's assets in companies
located in any one country other than the U.S.
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET PRUDENTIAL MONEY MARKET PORTFOLIO: seeks maximum current Prudential Investment
income consistent with the stability of capital and the Management, Inc.
maintenance of liquidity. The Portfolio invests in
high-quality short-term money market instruments issued by
the U.S. Government or its agencies, as well as by
corporations and banks, both domestic and foreign. The
Portfolio will invest only in instruments that mature in
thirteen months or less, and which are denominated in U.S.
dollars.
- -----------------------------------------------------------------------------------------------------------------------
MANAGED INDEX PRUDENTIAL STOCK INDEX PORTFOLIO: seeks investment results Prudential Investment
that generally correspond to the performance of Management, Inc.
publicly-traded common stocks. With the price and yield
performance of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) as the benchmark, the Portfolio
normally invests at least 80% of investable assets in S&P
500 stocks. The S&P 500 represents more than 70% of the
total market value of all publicly-traded common stocks and
is widely viewed as representative of publicly-traded common
stocks as a whole. The Portfolio is not "managed" in the
traditional sense of using market and economic analyses to
select stocks. Rather, the portfolio manager purchases
stocks in proportion to their weighting in the S&P 500.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE PRUDENTIAL VALUE PORTFOLIO: seeks capital appreciation. The Jennison Associates
Portfolio invests primarily in common stocks that the LLC
subadviser believes are undervalued--those stocks that are
trading below their underlying asset value, cash generating
ability and overall earnings and earnings growth. There is a
risk that "value" stocks can perform differently from the
market as a whole and other types of stocks and can continue
to be undervalued by the markets for long periods of time.
Normally at least 65% of the Portfolio's total assets is
invested in the common stock and convertible securities of
companies that the subadviser believes will provide
investment returns above those of the S&P 500 or the New
York Stock Exchange (NYSE) Composite Index. Most of the
investments will be securities of large capitalization
companies. The Portfolio may invest up to 25% of its total
assets in real estate investment trusts (REITs) and up to
30% of its total assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO: seeks to Prudential
obtain the highest potential total return consistent with Investments LLC
the specified level of risk tolerance. The Portfolio seeks
to achieve this investment objective by investing in several
other Series Fund Portfolios ("Underlying Portfolios"),
which currently consist of domestic equity Portfolios and
international equity Portfolios. The domestic equity
component is approximately 78% of the Portfolio and the
international equity component is approximately 22% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP AIM AGGRESSIVE GROWTH PORTFOLIO: seeks long-term growth A I M Capital
of capital. The Portfolio invests primarily in the common Management, Inc.
stocks of companies whose earnings the subadviser expects to
grow more than 15% per year. Growth stocks may involve a
higher level of risk than value stocks, because growth
stocks tend to attract more attention and more speculative
investments than value stocks. On behalf of the Portfolio,
the subadviser invests in securities of small and medium
sized growth companies, may invest up to 25% of the
Portfolio's total assets in foreign securities and may
invest up to 15% of the Portfolio's total assets in real
estate investment trusts (REITs).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP AIM CORE EQUITY PORTFOLIO: seeks growth of capital. The A I M Capital
Portfolio normally invests at least 80% of investable assets Management, Inc.
in equity securities, including convertible securities of
established companies that have long-term above-average
growth in earnings and growth companies that the subadviser
believes have the potential for above-average growth in
earnings. The Portfolio may invest up to 20% of its total
assets in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP ALLIANCE LARGE CAP GROWTH PORTFOLIO: seeks growth of Alliance Capital
capital by pursuing aggressive investment policies. The Management, L.P.
Portfolio normally invests at least 80% of its investable
assets in stocks of companies considered to have large
capitalizations (i.e., similar to companies included in the
S&P 500 Index). Unlike most equity funds, the Portfolio
focuses on a relatively small number of intensively
researched companies. The Portfolio usually invests in about
40-60 companies, with the 25 most highly regarded of these
companies generally constituting approximately 70% of the
Portfolio's investable assets. Up to 15% of the Portfolio's
total assets may be invested in foreign securities.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
27
2:
WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP BALANCED ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide a
balance between current income and growth of capital by
investing in several other Series Fund Portfolios
("Underlying Portfolios"), which currently consist of fixed
income Portfolios, domestic equity Portfolios, and
international equity Portfolios. The fixed income component
is approximately 37% of the Portfolio, the domestic equity
component is approximately 49% of the Portfolio, and the
international equity component is approximately 14% of the
Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO: seeks to obtain Prudential
the highest potential total return consistent with the Investments LLC
specified level of risk tolerance. The Portfolio seeks to
provide current income with low to moderate capital
appreciation by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of fixed income Portfolios, domestic equity
Portfolios, and international equity Portfolios. The fixed
income component is approximately 57% of the Portfolio, the
domestic equity component is approximately 33% of the
Portfolio, and the international equity component is
approximately 10% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP DAVIS VALUE PORTFOLIO: seeks growth of capital. The Davis Advisors
Portfolio invests primarily in common stocks of U.S.
companies with market capitalizations of at least $5
billion. It may also invest in stocks of foreign companies
and U.S. companies with smaller capitalizations. The
subadviser selects common stocks of quality, overlooked
growth companies at value prices and holds them for the
long-term. It looks for companies with sustainable growth
rates selling at modest price-earnings multiples that it
hopes will expand as other investors recognize the company's
true worth. There is a risk that "value" stocks can perform
differently from the market as a whole and other types of
stocks and can continue to be undervalued by the markets for
long periods of time.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO: seeks long-term Deutsche Asset
capital appreciation. The Portfolio invests primarily in the Management Investment
stocks of companies located in developed foreign countries Services Limited
that make up the MSCI EAFE Index, plus Canada. The Portfolio
also may invest in emerging markets securities. The
Portfolio normally invests at least 80% of its investable
assets in the stocks and other securities with equity
characteristics of companies in developed countries outside
the U.S.
- -----------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SP GROWTH ASSET ALLOCATION PORTFOLIO: seeks to obtain the Prudential
highest potential total return consistent with the specified Investments LLC
level of risk tolerance. The Portfolio seeks to provide
long-term growth of capital with consideration also given to
current income by investing in several other Series Fund
Portfolios ("Underlying Portfolios"), which currently
consist of domestic equity Portfolios, fixed income
Portfolios, and international equity Portfolios. The
domestic equity component is approximately 64% of the
Portfolio, the fixed income component is approximately 18%
of the Portfolio, and the international equity component is
approximately 18% of the Portfolio.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO (FORMERLY SP Goldman Sachs Asset
SMALL/MID CAP VALUE PORTFOLIO): seeks long-term capital Management, L.P.
growth. The Portfolio normally invests at least 80% of
investable assets in small capitalization companies that are
generally believed to be undervalued in the marketplace. The
80% requirement applies at the time the Portfolio invests
its assets. The Portfolio generally defines small
capitalization stocks as stocks of companies with a
capitalization of $4 billion or less.
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE SP LARGE CAP VALUE PORTFOLIO: seeks long-term growth of Hotchkis and Wiley
capital. The Portfolio normally invests at least 80% of Capital Management
investable assets in common stocks and securities LLC; J.P. Morgan
convertible into common stock of companies that are believed Investment Management
to be undervalued and have an above-average potential to Inc.
increase in price, given the company's sales, earnings, book
value, cash flow and recent performance. The Portfolio seeks
to achieve its objective through investments primarily in
equity securities of large capitalization companies. The
Portfolio generally defines large capitalization companies
as those with a total market capitalization of $5 billion or
more (measured at the time of purchase).
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP CORE SP MFS CAPITAL OPPORTUNITIES PORTFOLIO: seeks capital Massachusetts
appreciation. The Portfolio normally invests at least 65% of Financial Services
net assets in common stocks and related securities, such as Company (MFS)
preferred stocks, convertible securities and depositary
receipts for those securities. The Portfolio focuses on
companies that the subadviser believes have favorable growth
prospects and attractive valuations based on current and
expected earnings or cash flow. The Portfolio's investments
may include securities listed on a securities exchange or
traded in the over-the-counter markets. The subadviser uses
a bottom-up, as opposed to a top-down, investment style in
managing the Portfolio. This means that securities are
selected based upon fundamental analysis (such as an
analysis of earnings, cash flows, competitive position and
management's abilities). The Portfolio may invest in foreign
securities (including emerging market securities), through
which it may have exposure to foreign currencies.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP MID CAP GROWTH PORTFOLIO: seeks long-term growth of Calamos Asset
capital. The Portfolio normally invests at least 80% of Management, Inc.
investable assets in common stocks and related securities,
such as preferred stocks, convertible securities and
depositary receipts for those securities. These securities
typically are of medium market capitalizations, which the
subadviser believes have above-average growth potential.
Medium market capitalization companies are defined by the
Portfolio as companies with market capitalizations equaling
or exceeding $250 million but not exceeding the top of the
Russell Midcap(TM) Growth Index range at the time of the
Portfolio's investment. The Portfolio's investments may
include securities listed on a securities exchange or traded
in the over-the-counter markets. The subadviser uses a
bottom-up and top-down analysis in managing the Portfolio.
This means that securities are selected based upon
fundamental analysis, as well as a top-down approach to
diversification by industry and company, and by paying
attention to macro-level investment themes. The Portfolio
may invest in foreign securities (including emerging markets
securities).
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND SP PIMCO HIGH YIELD PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio normally invests at LLC (PIMCO)
least 80% of investable assets in a diversified portfolio of
high yield/high risk securities rated below investment grade
but rated at least B by Moody's Investor Service, Inc.
(Moody's) or Standard & Poor's Ratings Group (S&P), or, if
unrated, determined by the subadviser to be of comparable
quality. The remainder of the Portfolio's assets may be
invested in investment grade fixed income instruments. The
duration of the Portfolio normally varies within a two to
six year time frame based on the subadviser's forecast for
interest rates. The Portfolio may invest without limit in
U.S. dollar-denominated securities of foreign issuers. The
Portfolio may invest up to 15% of its assets in
euro-denominated securities.
- -----------------------------------------------------------------------------------------------------------------------
BOND SP PIMCO TOTAL RETURN PORTFOLIO: seeks maximum total return, Pacific Investment
consistent with preservation of capital and prudent Management Company
investment management. The Portfolio invests primarily in LLC (PIMCO)
investment grade debt securities. The Portfolio normally
invests at least 65% of its assets in a diversified
portfolio of fixed income instruments of varying maturities.
It may also invest up to 10% of its assets in high
yield/high risk securities (also known as "junk bonds")
rated B or higher by Moody's or S&P or, if unrated,
determined by the subadviser to be of comparable quality.
The portfolio duration of this Portfolio normally varies
within a three to six year time frame based on the
subadviser's forecast for interest rates.
- -----------------------------------------------------------------------------------------------------------------------
MID CAP GROWTH SP PRUDENTIAL U.S. EMERGING GROWTH PORTFOLIO: seeks Jennison Associates
long-term capital appreciation. The Portfolio normally LLC
invests at least 80% of investable assets in equity
securities of small and medium sized U.S. companies that the
subadviser believes have the potential for above-average
growth. The Portfolio considers small and medium-sized
companies to be those with market capitalizations that are
less than the largest capitalization of the Standard and
Poor's Mid Cap 400 Stock Index as of the end of a calendar
quarter. As of December 31, 2003, this number was $11.8
billion. The Portfolio can invest up to 20% of investable
assets in equity securities of companies with larger or
smaller market capitalizations than previously noted. The
Portfolio can invest up to 35% of total assets in foreign
securities. The Portfolio also may use derivatives for
hedging or to improve the Portfolio's returns.
- -----------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO State Street Research
(FORMERLY SP INVESCO SMALL COMPANY GROWTH PORTFOLIO): seeks and Management
long-term capital growth. The Portfolio normally invests at Company
least 80% of investable assets in common stocks of small-
capitalization companies -- those which are included in the
Russell 2000 Growth Index at the time of purchase, or if not
included in that index, have market capitalizations of $2.5
billion or below at the time of purchase. Investments in
small, developing companies carry greater risk than
investments in larger, more established companies.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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30
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO: seeks Alliance Capital
long-term growth of capital. The Portfolio normally invests Management, L.P.;
at least 65% of total assets in equity-related securities of Jennison Associates
U.S. companies that the subadvisers believe to have strong LLC
capital appreciation potential. The Portfolio's strategy is
to combine the efforts of two subadvisers and to invest in
the favorite stock selection ideas of three portfolio
managers (two of whom invest as a team). Each subadviser to
the Portfolio utilizes a growth style to select
approximately 20 securities. The portfolio managers build a
portfolio with stocks in which they have the highest
confidence and may invest more than 5% of the Portfolio's
assets in any one issuer. The Portfolio is nondiversified,
meaning it can invest a relatively high percentage of its
assets in a small number of issuers. Investing in a
nondiversified portfolio, particularly a portfolio investing
in approximately 40 equity-related securities, involves
greater risk than investing in a diversified portfolio
because a loss resulting from the decline in the value of
one security may represent a greater portion of the total
assets of a nondiversified portfolio.
- -----------------------------------------------------------------------------------------------------------------------
SECTOR SP TECHNOLOGY PORTFOLIO (FORMERLY SP ALLIANCE TECHNOLOGY The Dreyfus
PORTFOLIO): seeks growth of capital. The Portfolio normally Corporation
invests at least 80% of investable assets in securities of
companies that use technology extensively in the development
of new or improved products or processes. The Portfolio also
may invest up to 25% of its total assets in foreign
securities. The Portfolio's investments in stocks may
include common stocks, preferred stocks and convertible
securities, including those purchased in initial public
offerings (IPOs). Technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile
than the overall stock market.
- -----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO (FORMERLY SP William Blair &
JENNISON INTERNATIONAL GROWTH PORTFOLIO): seeks long-term Company, LLC
growth of capital. The Portfolio invests primarily in
equity-related securities of foreign issuers that the
subadviser thinks will increase in value over a period of
years. The Portfolio invests primarily in the common stock
of large and medium-sized foreign companies. Under normal
circumstances, the Portfolio invests at least 65% of its
total assets in common stock of foreign companies operating
or based in at least five different countries. The Portfolio
looks primarily for stocks of companies whose earnings are
growing at a faster rate than other companies and that have
above average growth in earnings and cash flow, improving
profitability, strong balance sheets, management strength
and strong market share for its products. The Portfolio also
tries to buy such stocks at attractive prices in relation to
their growth prospects.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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31
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
PORTFOLIO
STYLE/ ADVISER/
TYPE INVESTMENT OBJECTIVES/POLICIES SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH JANUS ASPEN SERIES: GROWTH PORTFOLIO -- SERVICE SHARES: Janus Capital
seeks long-term growth of capital in a manner consistent Management LLC
with the preservation of capital. The Portfolio invests
primarily in domestic and foreign equity securities, which
may include preferred stocks, common stocks and securities
convertible into common or preferred stocks. To a lesser
degree, the Portfolio may invest in other types of domestic
and foreign securities and use other investment strategies.
The Portfolio invests primarily in common stocks selected
for their growth potential. Although the Portfolio can
invest in companies of any size, it generally invests in
larger, more established companies. Janus Capital generally
takes a "bottom up" approach to selecting companies. This
means that it seeks to identify individual companies with
earnings growth potential that may not be recognized by the
market at large. The Portfolio will limit its investment in
high-yield/high-risk bonds to less than 35% of its net
assets.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
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32
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
- - a one-year fixed interest rate option, and
- - a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed 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 they
will not be less than the minimum interest rate indicated in your contract which
can range from 1% to 3%.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets.
ONE-YEAR FIXED INTEREST RATE OPTION
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment for contracts sold on or after May 1, 2003, or upon subsequent state
approval. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this option
for more than one year.
DOLLAR COST AVERAGING FIXED RATE OPTION
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
you may allocate all or part of your initial purchase payment to the DCA Fixed
Rate Option (for all other contracts you may allocate all or part of a purchase
payment to the DCA Fixed Rate Option). Under this option, you automatically
transfer amounts over a stated period (currently, six or twelve months) from the
DCA Fixed Rate Option to the variable investment options and/or to the one-year
fixed interest rate option, as you select. We will invest the assets you
allocate to the DCA Fixed Rate Option in our general account until they are
transferred. Transfers to the one-year fixed interest rate option will remain in
the general account.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, if you choose to allocate all or part of a purchase payment to the DCA
Fixed Rate Option, the minimum amount of the purchase payment you may allocate
is $2,000 (for all other contracts, the minimum amount is $5,000). The first
periodic transfer will occur on the date you allocate your purchase payment to
the DCA Fixed Rate Option. Subsequent transfers will occur on the monthly
anniversary of the first transfer. Currently, you may choose to have the
purchase payment amount allocated to the DCA Fixed Rate Option transferred to
the selected variable investment options or to the one-year fixed interest rate
option in either six or twelve monthly installments, and you may not change that
number of monthly installments after you have chosen the DCA Fixed Rate Option.
You may allocate to both the six-month and twelve-month options. FOR CONTRACTS
SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, you may
allocate to both the six-month and twelve-month options, but the minimum amount
of your initial purchase payment that may be allocated to one or the other is
$2,000. (In the future, we may make available other numbers of transfers and
other transfer schedules--for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6th of the amount you allocated to the DCA Fixed Rate Option, and if you
choose a twelve-payment transfer schedule, each transfer generally will equal
1/12th of the amount you allocated to the DCA Fixed Rate Option. In either case,
the final transfer amount generally will also include the credited interest. You
may change at any time the investment options into which the DCA Fixed Rate
Option assets are transferred. You may make a one time transfer of the remaining
value out of your DCA Fixed Rate Option, if you so choose. Transfers from the
DCA Fixed Rate Option do not count toward the
- --------------------------------------------------------------------------------
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WHAT INVESTMENT OPTIONS CAN I CHOOSE? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
maximum number of free transfers allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all
or part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we
will recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
THE MARKET VALUE ADJUSTMENT OPTION IS AVAILABLE TO STRATEGIC PARTNERS FLEXELITE
CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL. THIS
OPTION MAY NOT BE AVAILABLE IN YOUR STATE.
Under the market value adjustment option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will be
no less than 3% interest with respect to any guarantee period. This option is
not available for contracts issued in some states. Please see your contract. The
market value adjustment option is registered separately from the variable
investment options, and the amount of market value adjustment option securities
registered is stated in that registration statement.
IF AMOUNTS ARE WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE
30-DAY PERIOD IMMEDIATELY FOLLOWING THE END OF THE GUARANTEE PERIOD, THEY WILL
BE SUBJECT TO A MARKET VALUE ADJUSTMENT EVEN IF THEY ARE NOT SUBJECT TO A
WITHDRAWAL CHARGE.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at least
$1,000 if you choose this option.
We refer to interest rates as annual rates, although we credit interest
within each guarantee period on a daily basis. The daily interest that we credit
is equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center until
the earliest to occur of any of the following events: (a) full surrender of the
contract, (b) commencement of annuity payments or settlement, (c) end of the
guarantee period, (d) transfer of value in the guarantee period, (e) payment of
a death benefit, or (f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a) withdraw or transfer the value in the guarantee period,
(b) allocate the value to another available guarantee period or other investment
option (provided that the new guarantee period ends prior to the annuity
date). You will receive the interest rate applicable on the date we receive
your instruction, or
(c) apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
contract value in your maturing guarantee period, we will reinvest the amount in
the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) delineated immediately above,
you will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current interest
rate applicable to the shortest guarantee period then offered.
- --------------------------------------------------------------------------------
34
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least 3%.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life.
MARKET VALUE ADJUSTMENT
When you allocate a purchase payment or transfer contract value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally we buy bonds for this purpose.
The duration of the bonds and other instruments that we buy with respect to a
particular guarantee period is influenced significantly by the length of the
guarantee period. For example, we typically would acquire longer-duration bonds
with respect to the 10 year guarantee period than we do for the 3 year guarantee
period. The value of these bonds is affected by changes in interest rates, among
other factors. The market value adjustment that we assess against your contract
value if you withdraw or transfer outside the 30-day period discussed above
involves our attributing to you a portion of our investment experience on these
bonds and other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in a
reduction of the withdrawal proceeds that you receive.) For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining contract value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
- - We determine the market value adjustment according to a mathematical formula,
which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we also
provide hypothetical examples of how the formula works.
- - A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
- - In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the contract value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above. The laws of certain states may prohibit us from imposing a
market value adjustment on the annuity date.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFITS IN YOUR GUARANTEE PERIOD DOES NOT DEPEND ON THE INVESTMENT
PERFORMANCE OF THE BONDS AND OTHER INSTRUMENTS THAT WE HOLD WITH RESPECT TO YOUR
GUARANTEE PERIOD. APART FROM THE EFFECT OF ANY MARKET VALUE ADJUSTMENT, WE DO
NOT PASS THROUGH TO YOU THE GAINS OR LOSSES ON THE BONDS AND OTHER INSTRUMENTS
THAT WE HOLD IN CONNECTION WITH A GUARANTEE PERIOD.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
contract value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option, or
into the one-year fixed interest rate option, although a market value adjustment
will apply to any transfer you make outside the 30-day period discussed above.
You may transfer contract value into the market value adjustment option at any
time, provided it is at least $1,000.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
In general, you make your transfer request by telephone, electronically, or
otherwise in paper form to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following unauthorized
telephone or electronic instructions that we reasonably believed 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.
Transfer requests received after 4:00 p.m. Eastern time will take effect at the
end of the next business day.
With regard to the market value adjustment option, you can specify the
guarantee period from which you wish to transfer. If you request a transfer from
the market value adjustment option, but you do not specify the guarantee period
from which funds are to be taken, then we will transfer funds from the guarantee
period that has the least time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE
DCA FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE
ONE YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT. TRANSFERS FROM THE DCA FIXED
RATE OPTION CANNOT BE MADE INTO THE MARKET VALUE ADJUSTMENT OPTION BUT CAN BE
MADE INTO THE FIXED RATE OPTION, AT OUR DISCRETION. WE CURRENTLY ALLOW TRANSFERS
INTO THE FIXED RATE OPTION.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we charge
$10 for each transfer after the twelfth in a contract year, and we have the
right to increase this charge up to $30. (Dollar Cost Averaging and Auto-
Rebalancing transfers do not count toward the 12 free transfers per year. Nor do
transfers made during the 30-day period immediately following the end of a
guarantee period count against the 12 free transfers.) If a transfer that you
request out of the market value adjustment option will be subject to a transfer
charge, then:
- - We will deduct the transfer charge proportionally from the contract value in
each guarantee period, where you have directed us to transfer funds from
several guarantee periods; and
- - If you have directed us to transfer the full contract value out of a
guarantee period, then we will first deduct the transfer charge and
thereafter transfer the remaining amount; and
- - In any event, we will deduct the applicable transfer charge prior to
effecting the transfer.
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and otherwise is in good order. For purposes of this transfer
restriction, we (i) do not review facsimile transmission as a "writing", (ii)
will treat multiple transfer requests submitted on the same business day as a
single transfer, and (iii) do not count transfers that involve one of our
systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to
short-term fluctuations in markets, sometimes called "market timing," can make
it very difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction costs,
or affect performance. For those reasons, the contract was not designed for
persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in any
contract year for all existing or new contract owners, and to take the other
actions discussed below. We also reserve the right to limit the number of
transfers in any contract
- --------------------------------------------------------------------------------
36
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
year or to refuse any transfer request for an owner or certain owners if: (a) we
believe that excessive transfer activity (as we define it) or a specific
transfer request or group of transfer requests may have a detrimental effect on
accumulation unit values or the share prices of the underlying mutual funds; or
(b) we are informed by a fund (e.g., by the fund's portfolio manager) that the
purchase or redemption of fund shares must be restricted because the fund
believes the transfer activity to which such purchase and redemption relates
would have a detrimental effect on the share prices of the affected fund.
Without limiting the above, the most likely scenario where either of the above
could occur would be if the aggregate amount of a trade or trades represented a
relatively large proportion of the total assets of a particular underlying
mutual fund. In furtherance of our general authority to restrict transfers as
described above, and without limiting other actions we may take in the future,
we have adopted the following specific restrictions:
- - With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such amount
into a particular variable investment option, and within 30 calendar days
thereafter transfer (the "Transfer Out") all or a portion of that amount into
another variable investment option, then upon the Transfer Out, the former
variable investment option becomes restricted (the "Restricted Option").
Specifically, we will not permit subsequent transfers into the Restricted
Option for 90 calendar days after the Transfer Out if the Restricted Option
invests in a non-international fund, or 180 calendar days after the Transfer
Out if the Restricted Option invests in an international fund. For purposes
of this rule, we do not (i) count transfers made in connection with one of
our systematic programs, such as asset allocation and automated withdrawals
and (ii) categorize as a transfer the first transfer that you make after the
contract date, if you make that transfer within 30 calendar days after the
contract date. Even if an amount becomes restricted under the foregoing
rules, you are still free to redeem the amount from your contract at any
time.
- - We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable investment
option on the business day subsequent to the business day on which the
exchange request was received. Before implementing such a practice, we would
issue a separate written notice to contract owners that explains the practice
in detail. In addition, if we do implement a delayed exchange policy, we will
apply the policy on a uniform basis to all contracts in the relevant class.
- - If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
- - We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such limited transfer restrictions, and contract owners
who own variable life insurance or variable annuity contracts (regardless of
jurisdiction) that do not impose the above-referenced transfer restrictions,
might make more numerous and frequent transfers than contract owners who are
subject to such limitations. Because contract owners who are not subject to
the same transfer restrictions may have the same underlying mutual fund
portfolios available to them, unfavorable consequences associated with such
frequent trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may affect
all contract owners. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly,
and will not waive a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option into any other variable
investment options (or for contracts sold on or after May 1, 2003, or upon
subsequent state approval, the one-year fixed interest rate option). Under this
feature, you cannot make transfers into the market value adjustment option and
transfers into a fixed rate option are at our discretion. You can have these
automatic transfers occur monthly, quarterly, semiannually or annually. By
investing amounts on a regular basis instead of investing the total amount at
one time, dollar cost averaging may decrease the effect of market fluctuation on
the investment of your purchase payment. Of course, dollar cost averaging cannot
ensure a profit or protect against a loss in declining markets.
Each dollar cost averaging transfer must be at least $100. Transfers will be
made automatically on the schedule you choose until the entire amount you chose
to have transferred has been transferred or until you tell us to discontinue the
transfers. If the remaining account to be transferred drops below $100, the
entire remaining balance will be transferred on the next transfer date. You can
allocate subsequent purchase payments to be transferred under this option at any
time.
Your transfers will occur 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 dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging feature
is available only during the contract accumulation phase and is offered without
charge.
ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you a
questionnaire to complete that will help determine a program that is appropriate
for you. Your asset allocation will be prepared based on your answers to the
questionnaire. You will not be charged for this service, and you are not
obligated to participate or to invest according to program recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns over
the long term. However, asset allocation does not guarantee a profit or protect
against a loss. You are not obligated to participate or to invest according to
the program recommendations. We do not intend to provide any personalized
investment advice in connection with these programs and you should not rely on
these programs as providing individualized investment recommendations to you.
The asset allocation programs do not guarantee better investment results. We
reserve the right to terminate or change the asset allocation programs at any
time. You should consult your representative before electing any asset
allocation program.
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 percentage or to a subsequent allocation percentage you
select. We will rebalance only the variable investment options that you have
designated. The DCA account cannot participate in this feature.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually or annually. The rebalancing will occur on the last calendar day of
the period you have chosen, provided that the New York
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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 underlying mutual funds used by the
variable investment options. However, we vote the shares of the mutual funds
according to voting instructions we receive from contract owners. When a vote is
required, we will mail you a proxy which is a form that 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 fund shares for which we do not receive
instructions, and any other shares that we own in our own right, in the same
proportion as shares for which we receive instructions from contract owners. We
may change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in existing
funds. We would not do this without the approval of the Securities and Exchange
Commission (SEC) and any necessary state insurance departments. You will be
given specific notice in advance of any substitution we intend to make.
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PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the second contract
anniversary (or as required by state law if different). Annuity payments must
begin no later than the contract anniversary coinciding with or next following
the annuitant's 95th birthday (unless we agree to another date).
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners FlexElite variable annuity contract offers an optional
Guaranteed Minimum Income Benefit, which we describe below. Your annuity options
vary depending upon whether you choose this benefit.
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 for a period
shorter than five years (ten years for contracts sold on or after May 1, 2003,
or upon subsequent state approval), Option 3, or certain other annuity options
that we may make available. We do not deduct a withdrawal charge if you choose
Option 1 for a period of five years (ten years for contracts sold on or after
May 1, 2003, or upon subsequent state approval) or longer or Option 2. For
information about withdrawal charges, see "What Are The Expenses Associated With
The Strategic Partners FlexElite Contract," page 57.
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement options."
During the income phase, all of the annuity options under this contract are
fixed annuity options. This means that your participation in the variable
investment options ends on the annuity date. If an annuity option is not
selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by applicable
law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION CANNOT BE
CHANGED AND YOU CANNOT MAKE WITHDRAWALS.
OPTION 1
ANNUITY PAYMENTS FOR A FIXED PERIOD
Under this option, we will make equal payments for the period chosen, up to 25
years (but not to exceed life expectancy). The annuity payments may be made
monthly, quarterly, semiannually, or annually, as you choose, for the fixed
period. If the annuitant dies during the income phase, payments will continue to
the beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump sum payment. 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 will be at least 1.5% a year for contracts sold on
or after May 1, 2003, or upon subsequent state approval (and 3% a year for all
other contracts).
OPTION 2
LIFE INCOME ANNUITY OPTION
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
in one lump sum the present value of the annuity payments scheduled to have been
made over the remaining portion of that 10 year period, unless we were
specifically instructed that such remaining annuity
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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 will be at
least 3% a year.
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. If
the life income annuity option is prohibited by applicable law, then we will pay
you a lump sum in lieu of this option.
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. Under this option, we will pay
you interest at an effective rate of at least 1.5% a year for contracts sold on
or after May 1, 2003, or upon subsequent state approval (and 3% a year for all
other contracts). 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, however, you can withdraw part or all of the contract value that we are
holding at any time.
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.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, as discussed on page 68, you
should consider the minimum distribution requirements mentioned on page 70, when
selecting your annuity option.
If a contract is 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.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB), is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. This feature may not be
available in your state.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the annual
interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described below.
At this point, the GMIB protected value will be increased by any subsequent
invested purchase payments and reduced by the effect of withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
- - The annuitant must be 75 or younger in order for you to elect the Guaranteed
Minimum Income Benefit.
- - If you choose the Guaranteed Minimum Income Benefit, we will impose an annual
charge equal to 0.50% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (0.45% for all other contracts) of the average
GMIB protected value, described below.
- - Under the contract terms governing the GMIB, we can require GMIB participants
to invest only in designated underlying mutual funds or can require
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GMIB participants to invest according to an asset allocation model.
- - TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING PERIOD
IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7TH CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET (AS
DESCRIBED BELOW), THE WAITING PERIOD IS THE 7-YEAR PERIOD BEGINNING WITH THE
DATE OF THE MOST RECENT RESET.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
GMIB ROLL-UP
The GMIB roll-up is equal to the invested purchase payments (after a reset, the
contract value at the time of the reset), increased daily at an effective annual
interest rate of 5% starting on the date each invested purchase payment is made,
until the cap is reached (GMIB roll-up cap). We will reduce this amount by the
effect of withdrawals. The GMIB roll-up cap is equal to two times each invested
purchase payment (for a reset, two times the sum of (1) the contract value at
the time of the reset, and (2) any invested purchase payments made subsequent to
the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
- the contract anniversary coinciding with or next following the
annuitant's 80th birthday,
- the 7th contract anniversary, or
- 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced by the effect of withdrawals.
EFFECT OF WITHDRAWALS
In any contract year when the GMIB protected value is increasing at the rate of
5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value, calculated on the contract anniversary (or,
during the first contract year, on the contract date). The GMIB roll-up cap is
also reduced by withdrawals in the same manner. Any withdrawals made after the
dollar-for-dollar limit has been reached will proportionally reduce the GMIB
protected value. We calculate the proportional reduction by dividing the
contract value after the withdrawal by the contract value immediately following
the withdrawal of any available dollar-for-dollar amount. The resulting
percentage is multiplied by both the GMIB protected value and GMIB roll-up cap
after subtracting from each the amount of the withdrawal that does not exceed
5%. In each contract year during which the GMIB protected value has stopped
increasing at the 5% rate, withdrawals will reduce the GMIB protected value
proportionally.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are January 1,
2004; 2.) an initial purchase payment of $250,000; 3.) an initial GMIB protected
value of $250,000; 4.) an initial 200% cap of $500,000; and 5.) an initial
dollar-for-dollar limit of $12,500 (5% of $250,000):
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on February 1, 2004 (in the first contract year).
No prior withdrawals have been taken. Immediately prior to the withdrawal, the
GMIB protected value is $251,035.26 (the initial value accumulated for 31 days
at an annual effective rate of
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5%). As the amount withdrawn is less than the dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,035.26 to $241,035.26).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$500,000 to $490,000).
- - The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first contract year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on March 1, 2004 (still within the first
contract year). Immediately before the withdrawal, the contract value is
$220,000 and the GMIB protected value is $241,968.88. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
- - The GMIB protected value is first reduced by the Remaining Limit (from
$241,968.88 to $239,468.88).
- - The result is then further reduced by the ratio of A to B, where:
- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
- B is the contract value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,468.88 X (1 -
($7,500/$217,500)), or $231,211.33.
- The GMIB 200% cap is first reduced by the Remaining Limit, (from $490,000
to $487,500).
- The GMIB 200% cap is then further reduced by the ratio of A to B above
($487,500 x (1-($7,500/$217,500)), or $470,689.66.
- - The Remaining Limit is set to zero (0) for the balance of the first contract
year.
EXAMPLE 3. DOLLAR-FOR-DOLLAR LIMIT IN SECOND CONTRACT YEAR
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2005 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.86. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.89. As the amount withdrawn is less than the
dollar-for-dollar limit:
- - The GMIB protected value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $240,837.86 to $230,837.86).
- - The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000, from
$470,689.66 to $460,689.66).
- - The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.89 to $2,041.89).
GMIB RESET FEATURE
You may elect to "reset" your GMIB protected value to equal your current
contract value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76th birthday. If
you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the GMIB
roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based on
the number of years since the most recent reset. These purchase rates may be
less advantageous than the rates that would have applied absent a reset.
PAYOUT AMOUNT
The Guaranteed Minimum Income Benefit payout amount is based on the age and sex
(where applicable) of the annuitant (and, if there is one, the co-annuitant).
After we first deduct a charge for any applicable
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premium taxes that we are required to pay, the payout amount will equal the
greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout option,
applied to the GMIB guaranteed annuity purchase rates (which are generally
less favorable than the annuity purchase rates for annuity payments not
involving GMIB) and based on the annuity payout option as described below, or
2) the adjusted contract value--that is, the value of the contract adjusted for
any market value adjustment minus any charge we impose for premium taxes and
withdrawal charges--as of the date you exercise the GMIB payout option
applied to the current annuity purchase rates then in use.
GMIB ANNUITY PAYOUT OPTIONS
We currently offer two Guaranteed Minimum Income Benefit annuity payout options.
Each option involves lifetime payments with a period certain of ten years. In
calculating the amount of the payments under the GMIB, we apply certain assumed
interest rates, equal to 2% annually for a waiting period of 7-9 years and 2.5%
annually for waiting periods of 10 years or longer for contracts sold on or
after January 20, 2004, or upon subsequent state approval (and 2.5% annually for
a waiting period of 7-9 years, 3% annually for a waiting period of 10-14 years,
and 3.5% annually for waiting periods of 15 years or longer for all other
contracts).
GMIB OPTION 1
SINGLE LIFE PAYOUT OPTION
We will make monthly payments for as long as the annuitant lives, with payments
for a period certain. We will stop making payments after the later of the death
of the annuitant or the end of the period certain.
GMIB OPTION 2
JOINT LIFE PAYOUT OPTION
In the case of an annuitant and co-annuitant, we will make monthly payments for
the joint lifetime of the annuitant and co-annuitant, with payments for a period
certain. If the co-annuitant dies first, we will continue to make payments until
the later of the death of the annuitant and the end of the period certain. If
the annuitant dies first, we will continue to make payments until the later of
the death of the co-annuitant and the end of the period certain, but if the
period certain ends first, we will reduce the amount of each payment to 50% of
the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly, semi-annually
or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing of
your purchase payments, your GMIB protected value is increasing in ways we did
not intend. In determining whether to limit purchase payments, we will look at
purchase payments which are disproportionately larger than your initial purchase
payment and other actions that may artificially increase the GMIB protected
value. Certain state laws may prevent us from limiting your subsequent purchase
payments. You must exercise one of the GMIB payout options described above no
later than 30 days after the later of the contract anniversary coinciding with
or next following the annuitant's attainment of age 95 (age 92 for contracts
used as a funding vehicle for IRAs).
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your contract value declines
significantly due to negative investment performance. If your contract value is
not significantly affected by negative investment performance, it is unlikely
that the purchase of GMIB will result in your receiving larger annuity payments
than if you had not purchased GMIB. This is because the assumptions that we use
in computing the GMIB, such as the annuity purchase rates, (which include
assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing non-GMIB annuity
payout options. Therefore, you may generate higher income payments if you were
to annuitize a lower contract value at the
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current annuity purchase rates, than if you were to annuitize under the GMIB
with a higher GMIB protected value than your contract value but at the annuity
purchase rates guaranteed under the GMIB.
TERMINATING THE GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is fully
surrendered, on the date the death benefit is payable to your beneficiary
(unless your surviving spouse elects to continue the contract), or on the date
that your contract value is transferred to begin making annuity payments. The
GMIB may also be terminated if you designate a new annuitant who would not be
eligible to elect the GMIB based on his or her age at the time of the change.
Upon termination of the GMIB, we will deduct the charge from your contract
value for the portion of the contract year since the prior contract anniversary
(or the contract date if in the first contract year).
INCOME APPRECIATOR BENEFIT
THE INCOME APPRECIATOR BENEFIT (IAB) IS AVAILABLE TO STRATEGIC PARTNERS
FLEXELITE CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL. The IAB is an optional, supplemental income benefit that provides an
additional income amount during the accumulation period or upon annuitization.
The Income Appreciator Benefit is designed to provide you with additional funds
that can be used to help defray the impact taxes may have on distributions from
your contract. IAB may be suitable for you in other circumstances as well, which
you can discuss with your registered representative. Because individual
circumstances vary, you should consult with a qualified tax advisor to determine
whether it would be appropriate for you to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
- - The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
- - If you choose the Income Appreciator Benefit, we will impose an annual charge
equal to 0.25% of your contract value. See "What are the Expenses Associated
With The Strategic Partners FlexElite Contract?" on page 57.
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN IN
FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must send
us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
-- IAB OPTION 1 at annuitization as part of an annuity payment;
-- IAB OPTION 2 during the accumulation phase through the IAB automatic
withdrawal payment program; or
-- IAB OPTION 3 during the accumulation phase as an Income Appreciator
Benefit credit to your contract over a 10-year period.
More information about IAB Option 1 appears below. For information about IAB
Options 2 and 3, see "How Can I Access My Money?" on page 62.
Income Appreciator Benefit payments are treated as earnings and may be
subject to tax upon withdrawal. See "What Are The Tax Considerations Associated
With The Strategic Partners FlexElite Contract?" on page 65.
IF YOU DO NOT ACTIVATE THE BENEFIT PRIOR TO THE MAXIMUM ANNUITIZATION AGE YOU
MAY LOSE ALL OR PART OF THE IAB.
CALCULATION OF INCOME APPRECIATOR BENEFIT AMOUNT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the annuity
date). We do this by multiplying the current earnings in the contract by the
applicable Income Appreciator Benefit percentage based on the number of years
the Income
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Appreciator Benefit has been in force. For purposes of calculating the Income
Appreciator Benefit:
- - earnings are calculated as the difference between the contract value and the
sum of all purchase payments;
- - earnings do not include (1) any amount added to the contract value as a
result of the Spousal Continuance Benefit (explained on page 52), or (2) if
we were to permit you to elect the Income Appreciator Benefit after the
contract date, any earnings accrued under the contract prior to that
election;
- - withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
- - the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has been
in force.
<Table>
<Caption>
NUMBER OF YEARS INCOME
INCOME APPRECIATOR APPRECIATOR
BENEFIT BENEFIT
HAS BEEN IN FORCE PERCENTAGE
------------------ -----------
0-6 0%
7-9 15%
10-14 20%
15+ 25%
</Table>
IAB OPTION 1 -- INCOME APPRECIATOR BENEFIT AT ANNUITIZATION
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted contract value for purposes of
determining the amount available for annuitization. You may apply this amount to
any annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH INSTANCES,
WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
EFFECT OF INCOME APPRECIATOR BENEFIT ON GUARANTEED MINIMUM INCOME BENEFIT
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we use
to calculate the annuity payout amount will be the greater of:
1. the adjusted contract value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown in
the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate
the Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
TERMINATING THE INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract;
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit;
- - the date the Income Appreciator Benefit amount is reduced to zero (generally
ten years after activation) under IAB Options 2 and 3;
- - the date of annuitization; or
- - the date the contract terminates.
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our distributing
to you in increments the value that you have accumulated. We make these
incremental payments either over a specified time period (e.g., 15 years) (fixed
period annuities) or for the duration of the life of the annuitant (and possibly
co-annuitant) (life annuities). There are certain assumptions that are common to
both fixed period annuities and life annuities. In each type of annuity, we
assume that the
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
value you apply at the outset toward your annuity payments earns interest
throughout the payout period. For annuity options within the GMIB, this interest
rate ranges from 2% to 2.5% for contracts sold on or after January 20, 2004, or
upon subsequent state approval (and 2.5% to 3.5% for all other contracts). For
non-GMIB annuity options, the guaranteed minimum rate is 3% (or 1.5% depending
on the option elected and the version of the contract). The GMIB guaranteed
annuity purchase rates in your contract depict the minimum amounts we will pay
(per $1000 of adjusted contract value). If our current annuity purchase rates on
the annuity date are more favorable to you than the guaranteed rates, we will
make payments based on those more favorable rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
FIXED PERIOD ANNUITIES
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted contract value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
LIFE ANNUITIES
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or co-
annuitant's life expectancy, including the following:
- - The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
GUARANTEED AND GMIB ANNUITY PAYMENTS
- - Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
future improvements. We do this largely by making a hypothetical reduction in
the age of the annuitant (or co-annuitant), in lieu of using the annuitant's
(or co-annuitant's) actual age, in calculating the payment amounts. By using
such a reduced age, we base our calculations on a younger person, who
generally would live longer and therefore draw life annuity payments over a
longer time period. Given the longer pay-out period, the payments made to the
younger person would be less than those made to an older person. We make two
such age adjustments:
1. First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after January 20, 2004, or upon subsequent state approval or (b) two years,
with respect to guaranteed payments under life annuities not involving GMIB,
as well as GMIB payments under contracts not described in (a) immediately
above. For the reasons explained above in this section, the four year age
reduction causes a greater reduction in the amount of the annuity payments
than does the two-year age reduction.
2. Second, for life annuities under both versions of GMIB as well as guaranteed
payments under life annuities not involving GMIB, we make a further age
reduction according to the table in your contract entitled "Translation of
Adjusted Age." As indicated in the table, the further into the future the
first annuity payment is, the longer we expect the person receiving those
payments to live, and the more we reduce the annuitant's (or co-annuitant's)
age.
CURRENT ANNUITY PAYMENTS
Immediately above, we have discussed how we determine annuity payments under the
GMIB annuity options and under non-GMIB annuity payout options that are based on
"guaranteed" annuity purchase rates. By
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3:
WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
"guaranteed" annuity purchase rates, we mean the minimum annuity purchase rates
that are set forth in your annuity contract and thus contractually guaranteed by
us. "Current" annuity purchase rates, in contrast, refer to the annuity purchase
rates that we are applying to contracts that are entering the annuity phase at a
given point in time. These current annuity purchase rates vary from period to
period, depending on changes in interest rates and other factors. We do not
guarantee any particular level of current annuity purchase rates. When
calculating current annuity purchase rates, we use the actual age of the
annuitant (or co-annuitant), rather than any reduced age.
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4:
WHAT IS THE
DEATH BENEFIT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named,
during the accumulation period you can change the beneficiary at any time before
the owner or last survivor, if there are spousal joint owners, dies. However, if
the contract is jointly owned, the owner must name the joint owner and the joint
owner must name the owner as the beneficiary.
CALCULATION OF THE DEATH BENEFIT
If the sole owner dies during the accumulation phase, we will, upon receiving
appropriate proof of death and any other needed documentation in good order
(proof of death), pay a death benefit to the beneficiary designated by the
owner. If there is a sole owner and there is only one beneficiary who is the
owner's spouse, then the surviving spouse may continue the contract under the
Spousal Continuance Benefit. If there are an owner and joint owner of the
contract, and the owner's spouse is both the joint owner and the beneficiary at
the death of the first to die, the death benefit will be paid to the surviving
owner, or the surviving owner may continue the contract under the Spousal
Continuance Benefit (for contracts sold on or after May 1, 2003, or upon
subsequent state approval. For all other contracts, if the owner and joint owner
are spouses we will pay this death benefit upon the death of the last surviving
spouse who continues the contract as the sole owner.) If the contract has an
owner and a joint owner and they are not spouses at the time one dies, we will
pay the contract value and the contract will end. Joint ownership may not be
allowed in your state.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current contract value (as of the time we receive proof of death in good
order). We impose no market value adjustment on contract value held within
the market value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if you
have chosen a Guaranteed Minimum Death Benefit, the GMDB protected value.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003 OR UPON SUBSEQUENT STATE APPROVAL,
you may elect the base death benefit and the Guaranteed Minimum Death Benefit
(GMDB) if you are age 85 or younger when you purchase the contract.
FOR ALL OTHER CONTRACTS, you may elect the base death benefit if you are 85
or younger and you may elect a Guaranteed Minimum Death Benefit (GMDB) if you
are 79 or younger when you purchase the contract.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit (GMDB) provides for the option to receive
an enhanced death benefit upon the death of the sole owner or the first to die
of the owner or joint owner during the accumulation phase. If you elect the GMDB
feature, you must elect a GMDB protected value option.
The GMDB protected value option can be equal to the:
- GMDB roll-up,
- GMDB step-up, or
- Greater of the GMDB roll-up and the GMDB step-up.
The GMDB protected value is calculated daily.
GMDB ROLL-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 5% starting on
the date that each invested purchase payment is made. Both the GMDB roll-up and
the cap value will increase by subsequent invested purchase payments and reduce
proportionally by withdrawals.
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
We stop increasing the GMDB roll-up by the effective annual interest rate on
the later of:
- - the contract anniversary coinciding with or next following the sole owner's
or older owner's 80th birthday, or
- - the 5th contract anniversary (applicable only to contracts sold on or after
May 1, 2003, or upon subsequent state approval).
However, the GMDB protected value will still increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 5% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 5%.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB roll-up is equal to the invested purchase
payments, increased daily at an effective annual interest rate of 3% subject to
a 200% cap of all invested purchase payments, starting on the date that each
invested purchase payment is made. We will increase the GMDB roll-up by
subsequent invested purchase payments and reduce it by the effect of
withdrawals.
We stop increasing the GMDB roll-up by the effective annual interest rate on
the 5th contract anniversary. However we will continue to reduce the GMDB
protected value by the effect of withdrawals.
Withdrawals will first reduce the GMDB protected value on a dollar-for-dollar
basis up to the first 3% of GMDB protected value calculated on the contract
anniversary (on the contract date in the first contract year), then
proportionally by any amounts exceeding the 3%.
GMDB STEP-UP
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE 80
ON THE CONTRACT DATE, the GMDB step-up before the first contract anniversary is
the initial invested purchase payment increased by subsequent invested purchase
payments, and proportionally reduced by the effect of withdrawals. The GMDB
step-up on each contract anniversary will be the greater of the previous GMDB
step-up and the contract value as of such contract anniversary. Between contract
anniversaries, the GMDB step-up will increase by invested purchase payments and
reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the contract value
on the later of:
- - the contract anniversary coinciding with or next following the sole or older
owner's 80th birthday, or
- - the 5th contract anniversary (APPLICABLE ONLY TO CONTRACTS SOLD ON OR AFTER
MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL.)
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Here is an example of a proportional reduction:
The current contract value is $100,000 and the protected value is $80,000.
The owner makes a withdrawal that reduces the contract value by 25% (including
the effect of any withdrawal charges). The new protected value is $60,000, or
75% of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB step-up
to the greater of the then current GMDB step-up or the contract value as of that
contract anniversary. Thereafter, we will only increase the GMDB protected value
by subsequent invested purchase payments and proportionally reduce it by
withdrawals.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PART II
STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
GREATER OF STEP-UP AND ROLL-UP GUARANTEED MINIMUM DEATH BENEFIT
Under this option, the protected value is equal to the greater of the step-up
value and the roll-up value.
If you have chosen the base death benefit and death occurs after age 80, the
beneficiary will receive the base death benefit described above. If you have
chosen the Guaranteed Minimum Death Benefit option and death occurs on or after
age 80, 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 protected
value of the GMDB roll-up or the GMDB step-up reduced proportionally by any
subsequent withdrawals.
PAYOUT OPTIONS
The beneficiary may, within 60 days of providing proof of death, choose to take
the death benefit under one of several death benefit payout options listed
below.
The death benefit payout options are:
Choice 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death.
The entire death benefit will include any increases or losses resulting
from the performance of the variable or fixed interest rate options during
this period. During this period the beneficiary may: reallocate the contract
value among the variable, fixed interest rate, or the market value adjustment
options; name a beneficiary to receive any remaining death benefit in the
event of the beneficiary's death; and make withdrawals from the contract
value, in which case, any such withdrawals will not be subject to any
withdrawal charges. However, the beneficiary may not make any purchase
payments to the contract.
Choice 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the owner.
If the owner and joint owner are spouses, any portion of the death benefit
not applied under Choice 3 within one year of the date of death of the first to
die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See "What Are The Tax Considerations Associated With The
Strategic Partners FlexElite Contract?" on page 65.
EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit (EAB) is an optional, supplemental death
benefit that provides a benefit payment upon the death of the sole owner or
first to die of the owner or joint owner during the accumulation phase. Any
Earnings Appreciator Benefit payment we make will be in addition to any other
death benefit payment we make under the contract. This feature may not be
available in your state.
The Earnings Appreciator Benefit is designed to provide a beneficiary with
additional funds when we pay a death benefit in order to defray the impact taxes
may have on that payment. Because individual circumstances vary, you should
consult with a qualified tax advisor to determine whether it would be
appropriate for you to elect the Earnings Appreciator Benefit.
If you want the Earnings Appreciator Benefit, you generally must elect it at
the time you apply for the contract. If you elect the Earnings Appreciator
Benefit, you may not later revoke it.
Upon our receipt of proof of death in good order, we will determine an
Earnings Appreciator Benefit by multiplying the Earnings Appreciator Benefit
percentage below by the lesser of: (i) the then-existing amount of earnings
under the contract, or (ii) an amount equal to
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
3 times the sum of all purchase payments previously made under the contract.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003 OR UPON SUBSEQUENT STATE APPROVAL,
for purposes of computing earnings and purchase payments under the Earnings
Appreciator Benefit, we calculate earnings as the difference between the
contract value and the sum of all purchase payments. Withdrawals reduce earnings
first, then purchase payments, on a dollar-for-dollar basis.
FOR ALL OTHER CONTRACTS, for purposes of computing earnings and purchase
payments under the EAB, we increase the initial purchase payments by any
subsequent purchase payments and reduce it proportionally by any
withdrawals--the total contract value less that resultant sum being earnings.
When determining the amount of 3 times the sum of all purchase payments
mentioned in this section, we exclude purchase payments made both (i) after the
first contract anniversary and (ii) within 12 months of the date of death
(proportionally reduced for withdrawals).
The EAB percentages are as follows:
- - 40% if the owner is age 70 or younger on the date the application is signed.
- - 25% if the owner is between ages 71 and 75 on the date the application is
signed.
- - FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, 15% if the owner is between ages 76 and 79 on the date the
application is signed.
If the contract is owned jointly, the age of the older of the owner or joint
owner determines the EAB percentage.
If the surviving spouse is continuing the contract in accordance with the
Spousal Continuance Benefit (See "Spousal Continuance Benefit" below), the
following conditions apply:
- - In calculating the Earnings Appreciator Benefit, we will use the age of the
surviving spouse at the time that the Spousal Continuance Benefit is
activated to determine the applicable EAB percentage.
- - For the original version of the contract, we will not allow the surviving
spouse to continue the Earnings Appreciator Benefit (or bear the charge
associated with this benefit) if he or she is age 76 or older on the date
that the Spousal Continuance Benefit is activated. FOR CONTRACTS SOLD ON OR
AFTER MAY 1, 2003, OR UPON STATE APPROVAL, we will not allow the surviving
spouse to continue the Earnings Appreciation Benefit (or bear the charge
associated with this benefit) if he or she is age 80 or older on the date the
Spousal Continuance Benefit is activated.
- - If the Earnings Appreciator Benefit is continued, we will calculate any
applicable Earnings Appreciator Benefit payable upon the surviving spouse's
death by treating the contract value (as adjusted under the terms of the
Spousal Continuance Benefit) as the first purchase payment.
TERMINATING THE EARNINGS APPRECIATOR BENEFIT
The Earnings Appreciator Benefit will terminate on the earliest of:
- - the date you make a total withdrawal from the contract,
- - the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Benefit,
- - the date the contract terminates, or
- - the date you annuitize the contract.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive proof of the owner's death
good order, (1) there is only one owner of the contract and there is only one
beneficiary who is the owner's spouse; or (2) FOR CONTRACTS SOLD ON OR AFTER MAY
1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, there are an owner and joint owner
of the contract, and the joint owner is the owner's spouse and the owner's
beneficiary under the contract. In no event, however, can the annuitant be older
than the maximum age for annuitization on the date of the owner's death, nor can
the surviving spouse be older than 95 on the date of the owner's death. Assuming
the above conditions are present, the surviving spouse can elect the Spousal
Continuance Benefit, but must do so no later than 60 days after furnishing proof
of the owner's death in good order.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
Upon activation of the Spousal Continuance Benefit, the contract value is
adjusted to equal the amount of the death benefit to which the surviving spouse
would have been entitled. This contract value will serve as the basis for
calculating any death benefit payable upon the death of the surviving spouse. We
will allocate any increase in the adjusted contract value among the variable,
fixed interest rate and market value adjustment options in the same proportions
that existed immediately prior to the spousal continuance adjustment. We will
waive the $1,000 minimum requirement for the market value adjustment option.
Under the Spousal Continuance Benefit, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the Spousal
Continuance Benefit. In addition, the contract value allocated to the market
value adjustment option will remain subject to a potential market value
adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Benefit, we will adjust the contract value to equal the greater of:
- - the contract value, or
- - the sum of all invested purchase payments (adjusted for withdrawals),
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB ROLL-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB roll-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GMDB STEP-UP, we
will adjust the contract value to equal the greater of:
- - the contract value, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
IF YOU HAVE ELECTED THE GUARANTEED MINIMUM DEATH BENEFIT WITH THE GREATER OF
THE GMDB ROLL-UP AND GMDB STEP-UP, we will adjust the contract value to equal
the greatest of:
- - the contract value,
- - the GMDB roll-up, or
- - the GMDB step-up,
plus the amount of any applicable Earnings Appreciator Benefit.
After we have made the adjustment to contract value set out immediately
above, we will continue to compute the GMDB roll-up and the GMDB step-up under
the surviving spousal owner's contract, and will do so in accordance with the
preceding discussion in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death benefit
payable under the Guaranteed Minimum Death Benefit provisions of the contract.
The contract may not be continued upon the death of a spouse who had assumed
ownership of the contract through the exercise of the Spousal Continuance
Benefit.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be
continued for the surviving spousal owner. All provisions of the Guaranteed
Minimum Income Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will
remain the same as on the date of the owner's death. If the GMIB reset feature
was never exercised, the surviving spousal owner can exercise the GMIB reset
feature twice. If the original owner had previously exercised the GMIB reset
feature once, the surviving spousal owner can exercise the GMIB reset once.
However, the surviving spouse (or new annuitant designated by the surviving
spouse) must be under 76 years of age at the time of reset. If the original
owner had previously exercised the GMIB reset feature twice, the surviving
spousal owner may not exercise the GMIB reset at all. If the attained age of the
surviving spouse at activation of the Spousal Continuance Benefit, when added to
the remainder of the GMIB waiting period to be satisfied, would preclude the
surviving spouse from utilizing the Guaranteed Minimum Income Benefit, we will
revoke the Guaranteed
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4:
WHAT IS THE DEATH BENEFIT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
Minimum Income Benefit under the contract at that time and we will no longer
charge for that benefit.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death,
the Income Appreciator Benefit will end unless the contract is continued by the
owner's surviving spouse under the Spousal Continuance Benefit. If the contract
is continued by the surviving spouse, we will continue to pay the balance of any
Income Appreciator Benefit payments until the earliest to occur of the
following: (a) the date on which 10 years' worth of IAB automatic withdrawal
payments or IAB credits, as applicable, have been paid, (b) the latest date on
which annuity payments would have had to have commenced had the owner not died
(i.e., contract anniversary coinciding with or next following the annuitant's
95th birthday, or (c) the contract anniversary coinciding with or next following
the annuitants' surviving spouse's 95th birthday.
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force for
7 contract years. If the attained age of the surviving spouse at activation of
the Spousal Continuation Benefit, when added to the remainder of the Income
Appreciator Benefit waiting period to be satisfied, would preclude the surviving
spouse from utilizing the Income Appreciator Benefit, we will revoke the Income
Appreciator Benefit under the contract at that time and we will no longer charge
for that benefit. If the Income Appreciator Benefit has been in force for 7
contract years or more, but the benefit has not been activated, the surviving
spouse may activate the benefit at any time after the contract has been
continued. If the Income Appreciator Benefit is activated after the contract is
continued by the surviving spouse, the Income Appreciator Benefit calculation
will exclude any amount added to the contract at the time of spousal continuance
resulting from any death benefit value exceeding the contract value.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS
FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase the
contract. The minimum initial purchase payment is $10,000, and may not exceed
$1,000,000 absent our prior approval. With some restrictions, 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 may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the 86th
birthday of:
- - the owner;
- - the joint owner;
- - the annuitant; or
- - the co-annuitant
Currently, the maximum aggregate purchase payment you may make is $20
million. We limit the maximum total purchase payments in any contract year,
other than the first to $2 million absent our prior approval. Depending on the
applicable state law, other limits may apply.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options, fixed interest rate options, or the market value
adjustment option based on the percentages you choose. The percentage of your
allocation to a particular investment option can range in whole percentages from
0% to 100%.
When you make an additional purchase payment, it will be allocated in the
same way as your most recent purchase payment, unless you tell us otherwise.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 for
contracts sold on or after May 1, 2003, or upon subsequent state approval (for
all other contracts $5,000), and allocations to the market value adjustment
option must be no less than $1,000.
You may change your allocation of future invested purchase payment 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 we receive your payment in good order at
the Prudential Annuity Service Center. If, however, your first payment is made
without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. 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. Subsequent purchase payments
received in good order after 4:00 p.m., Eastern time will be credited on the
following business day.
CREDIT ELECTION
We will notify you of your option to make a credit election thirty days before
your 3rd and 6th contract anniversaries. If you make a credit election, we will
add to your contract value a credit amount of at least 0.5% of the contract
value as of the applicable contract anniversary. Currently, we will add a credit
amount of 1% of the contract value as of the applicable contract anniversary.
The credit will be allocated to the variable or fixed interest rate options or
the market value adjustment option in the same proportion as the contract value
on the contract anniversary. We must receive your credit election in good order
by your contract anniversary in order to add the credit to your contract value.
This option is not available if the annuitant or co-annuitant is 81 or older on
the contract date, the contract is continued under the Spousal Continuance
Benefit, or you previously elected not to take the credit.
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5:
HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
After you make a credit election, amounts you withdraw will be subject to a
credit election withdrawal charge of 7% for the first three contract years since
your credit election.
These charges may be lower in certain states.
The credit election withdrawal charges are determined and applied in the same
manner as the withdrawal charges described on page 58. Credits and related
earnings are treated as earnings under the contract.
We recoup the cost of the credit by assessing withdrawal charges for a longer
period of time. If you make a withdrawal during the credit election withdrawal
charge period you may be in a worse position than if you had declined the
credit. This credit option may not be available in your state.
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 such as for taxes; and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment
allocated to a variable investment option by the unit price of the accumulation
unit for that variable investment option. We calculate the unit price for each
variable 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 your contract value will increase or that it will
not fall below the amount of your total purchase payments.
We reserve the right to terminate the contract, and pay the contract value to
you, in either of the following scenarios: (i) if immediately prior to the
annuity date, the contract value is less than $2000, or if the contract would
provide annuity payments of less than $20 per month and (ii) if during the
accumulation period, no purchase payment has been received during the
immediately preceding two contract years and each of the following is less than
$2000: (a) the total purchase payments (less withdrawals) made prior to such
period, and (b) the current contract value.
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WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC
PARTNERS FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
THERE ARE CHARGES AND OTHER EXPENSES ASSOCIATED WITH THE CONTRACT THAT REDUCE
THE RETURN ON YOUR INVESTMENT. THESE CHARGES AND EXPENSES ARE DESCRIBED BELOW.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits under
the contracts. They are also designed, in the aggregate, to compensate us for
the risks of loss we assume pursuant to the contracts. If, as we expect, the
charges that we collect from the contracts exceed our total costs in connection
with the contracts, we will earn a profit. Otherwise, we will incur a loss. The
rates of certain of our charges have been set with reference to estimates of the
amount of specific types of expenses or risks that we will incur. In most cases,
this prospectus identifies such expenses or risks in the name of the charge;
however, the fact that any charge bears the name of, or is designed primarily to
defray a particular expense or risk does not mean that the amount we collect
from that charge will never be more than the amount of such expense or risk. Nor
does it mean that we may not also be compensated for such expense or risk out of
any other charges we are permitted to deduct by the terms of the contract.
INSURANCE AND ADMINISTRATIVE CHARGE
Each day we make a deduction for the insurance and administrative charge. This
charge covers our expenses for mortality and expense risk, administration,
marketing and distribution. If you choose a Guaranteed Minimum Death Benefit
option, the insurance and administrative charge also includes a charge to cover
our assumption of the associated risk. The mortality risk portion of the charge
is for assuming the risk that the annuitant(s) will live longer than expected
based on our life expectancy tables. When this happens, we pay a greater number
of annuity payments. We also incur the risk that the death benefit amount
exceeds the contract value. The expense risk portion of the charge is for
assuming the risk that the current charges will be insufficient in the future to
cover the cost of administering the contract. The administrative expense portion
of the charge is for the expenses associated with the administration of the
contract. This includes preparing and issuing the contract; establishing and
maintaining contract records; preparation of confirmations and annual reports;
personnel costs; legal and accounting fees; filing fees; and systems costs. The
Guaranteed Minimum Death Benefit risk portion of the charge, if applicable,
covers our assumption of the risk that the protected value of the contract will
be larger than the base death benefit if the contract owner dies during the
accumulation phase.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit option that you
choose.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE
APPROVAL, the charge is equal to:
- 1.65% on an annual basis if you choose the base benefit,
- 1.9% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option, and
- 2% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option.
FOR ALL OTHER CONTRACTS:
- 1.6% on an annual basis if you choose the base benefit, and
- 1.8% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option.
- 1.9% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option.
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CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from this charge.
The insurance risk charge for your contract cannot be increased. Any profits
made from this charge may be used by us to pay for the costs of distributing the
contracts.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. As described on page 55,
when you make a credit election, a 7% withdrawal charge will be applied to
amounts withdrawn for the three contract years following the credit election.
The withdrawal charge may also apply if you begin the income phase during these
periods, depending upon the annuity option you choose.
The withdrawal charge is the percentage, shown below, of the amount
withdrawn. Full contract years are measured from the contract date with respect
to the initial withdrawal charge and from the date you make a credit election
with respect to the credit election withdrawal charge.
<Table>
<Caption>
FULL CONTRACT YEARS
FROM THE CONTRACT
DATE AND FROM THE
DATE YOU MAKE A
CREDIT ELECTION WITHDRAWAL CHARGE
- --------------------------------------------
0 7%
1 7%
2 7%
3 0%
</Table>
In certain states reduced withdrawal charges may apply for certain ages if a
credit election is made.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary will
apply.
If you request a withdrawal, we will deduct an amount from the contract value
that is sufficient to pay the withdrawal charge, and provide you with the amount
requested.
If you request a full withdrawal, we will provide you with the full amount of
the contract value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your contract
value without incurring a withdrawal charge. We determine the "charge-free
amount" available to you in a given contract year on the contract anniversary
that begins that year. The charge-free amount in a given contract year is equal
to 10% of the sum of all purchase payments that you have made as of the
applicable contract anniversary. During the first contract year, the charge-free
amount is equal to 10% of the initial purchase payment.
When you make a withdrawal, we will deduct the amount of the withdrawal first
from the available charge-free amount. Any excess amount will then be deducted
from purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose withdrawal
charges on earnings.
If a withdrawal is taken from a market value adjustment guarantee period
prior to the expiration of the rate guarantee period, we will make a market
value adjustment to the withdrawal amount. We will then apply a withdrawal
charge to the adjusted amount. Withdrawal charges will never be greater than
permitted by applicable law.
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE
Except as restricted by applicable state law, we will waive all withdrawal
charges and any market value adjustment upon receipt of proof that the owner or
a joint owner is terminally ill, or has been confined to an eligible nursing
home or eligible hospital continuously for at least three months after the
contract date. We will also waive the contract maintenance charge if you
surrender your contract in accordance with the above noted conditions. This
waiver is not available if the owner has assigned ownership of the contract to
someone else.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
MINIMUM DISTRIBUTION REQUIREMENTS
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
if a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an IRS mandatory distribution
requirement only with respect to that contract's account balance, we will waive
withdrawal charges. See "What Are The Tax Considerations Associated With The
Strategic Partners Annuity One Contract?" on page 65.
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your contract
value is less than $100,000, we will deduct the lesser of $50 or 2% of your
contract value, for administrative expenses. (This fee may differ in certain
states). While this is what we currently charge, we may increase this charge up
to a maximum of $60. Also, we may raise the level of the contract value at which
we waive this fee. The charge will be deducted proportionately from each of the
contract's variable investment options, fixed interest rate options, and
guarantee periods within the market value adjustment option. This same charge
will also be deducted when you surrender your contract if your contract value is
less than $100,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum Income
Benefit. FOR CONTRACTS SOLD ON OR AFTER JANUARY 20, 2004, or upon subsequent
state approval, we will deduct a charge equal to 0.50% per year of the average
GMIB protected value for the period the charge applies. FOR ALL OTHER CONTRACTS,
this is an annual charge equal to 0.45% of the average GMIB protected value for
the period the charge applies. We deduct the charge from your contract value on
each of the following events:
- - each contract anniversary,
- - when you begin the income phase of the contract,
- - upon a full withdrawal, and
- - upon a partial withdrawal if the remaining contract value would not be enough
to cover the then applicable Guaranteed Minimum Income Benefit charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value,
it does not increase or decrease based on changes to the annuity's contract
value due to market performance. If the GMIB protected value increases, the
dollar amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the contract value
allocated to the variable investment options, the fixed interest rate options,
and the market value adjustment option. No market value adjustment will apply to
the portion of the charge deducted from the market value adjustment option. If
you surrender your contract, begin receiving annuity payments under the GMIB or
any other annuity payout option we make available during a contract year, or the
GMIB terminates, we will deduct the charge for the portion of the contract year
since the prior contract anniversary (or the contract date if in the first
contract year). Upon a full withdrawal or if the contract value remaining after
a partial withdrawal is not enough to cover the applicable Guaranteed Minimum
Income Benefit charge, we will deduct the charge from the amount we pay you.
THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES
NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge equal to 0.25% of your contract value. The
Income Appreciator Benefit charge is calculated:
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or the first to die of the owner or joint
owner prior to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon the death of the sole owner or first to die of the owner or joint
owners prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option bears
to the total contract value. No market value adjustment will apply to the
portion of the charge deducted from the market value adjustment option. Upon a
full withdrawal, or if the contract value remaining after a partial withdrawal
is not enough to cover the then-applicable Income Appreciator Benefit charge,
the charge is deducted from the amount paid. The payment of the Income
Appreciator Benefit charge will be deemed to be made from earnings for purposes
of calculating other charges. THE FACT THAT WE IMPOSE THE CHARGE UPON A FULL OR
PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME
OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB charge
during the 10-year payment period contemplated by IAB Options 2 and 3. Moreover,
you should realize that amounts credited to your contract value under IAB Option
3 increase the contract value, and because the IAB fee is a percentage of your
contract value, the IAB fee may increase as a consequence of those additions.
EARNINGS APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Earnings Appreciator
supplemental death benefit. The charge for this benefit is based on an annual
rate of 0.30% of your contract value.
We calculate the charge on each of the following events:
- each contract anniversary,
- on the annuity date,
- upon death of the sole or first to die of the owner or joint owner prior
to the annuity date,
- upon a full or partial withdrawal, and
- upon a subsequent purchase payment.
The fee is based on the contract value at time of calculation and is
pro-rated based on the portion of the contract year since the date that the
Earnings Appreciator Benefit charge was last calculated.
Although the Earnings Appreciator Benefit charge may be calculated more
often, it is deducted only:
- on each contract anniversary,
- on the annuity date,
- upon death of the sole owner or first to die of the owner or joint owner
prior to the annuity date,
- upon a full withdrawal, and
- upon a partial withdrawal if the contract value remaining after the
partial withdrawal is not enough to cover the then applicable charge.
We withdraw this charge from each investment option (including each guarantee
period) in the same proportion that the amount allocated to the investment
option bears to the total contract value. No market
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
value adjustment will apply to the portion of the charge deducted from the
market value adjustment option. Upon a full withdrawal or if the contract value
remaining after a partial withdrawal is not enough to cover the then-applicable
Earnings Appreciator Benefit charge, we will deduct the charge from the amount
we pay you. We will deem the payment of the Earnings Appreciator Benefit charge
as made from earnings for purposes of calculating other charges.
TAXES ATTRIBUTABLE TO PREMIUM
There may be 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 charge against the value of the contract to pay some or all of these taxes. 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 on us, 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. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $10 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer fee
pro-rata from the investment options from which the transfer is made.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We do not
currently charge you for these taxes. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
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 underlying mutual fund.
Those funds charge fees that are in addition to the contract-related fees
described in this section. For 2003, 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.
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HOW CAN I
ACCESS MY MONEY?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
YOU CAN ACCESS YOUR MONEY BY:
- - MAKING A WITHDRAWAL (EITHER PARTIAL OR COMPLETE); OR
- - CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. 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 and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum contract value that must remain in order to keep the
contract in force after a withdrawal is $2,000. If you request a withdrawal
amount that would reduce the contract value below this minimum, we will withdraw
the maximum amount available that, with the withdrawal charge, would not reduce
the contract value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after we
receive a withdrawal request in good order. We will deduct applicable charges,
if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you indicate
that the withdrawal is to originate from the market value adjustment option, but
you do not specify which guarantee period is to be involved, then we will take
the withdrawal from the guarantee period that has the least time remaining until
its maturity date. If you indicate that you wish to make a withdrawal, but do
not specify the investment options to be involved, then we will take the
withdrawal from your contract value on a pro rata basis from each investment
option that you have. In that situation, we will aggregate the contract value in
each of the guarantee periods that you have within the market value adjustment
option for purposes of making that pro rata calculation. The portion of the
withdrawal associated with the market value adjustment option then will be taken
from the guarantee periods with the least amount of time remaining until the
maturity date, irrespective of the original length of the guarantee period. You
should be aware that a withdrawal may avoid a withdrawal charge based on the
charge-free amount that we allow, yet still be subject to a market value
adjustment.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS ALSO MAY APPLY TO ANY
WITHDRAWAL. 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 (other than a guarantee period within the market
value adjustment option). The minimum automated withdrawal amount you can make
is generally $100.
INCOME TAXES, TAX PENALTIES, WITHDRAWAL CHARGES, AND CERTAIN RESTRICTIONS MAY
APPLY TO AUTOMATED WITHDRAWALS. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8
OF THIS PROSPECTUS.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
The Income Appreciator Benefit (or "IAB") is discussed on page 45. As mentioned
there, you may choose IAB Option 1 at annuitization, but you may instead choose
IAB Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
order. Under IAB Options 2 and 3, you can choose to have the Income Appreciator
Benefit amounts paid or credited monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY REMAINING
PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE WOULD NOT
REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 -- INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT PROGRAM
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay you
the Income Appreciator Benefit amount in equal installments over a 10-year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your contract value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from
your contract value under this Income Appreciator Benefit program in any
contract year during the 10-year period may not exceed 10% of the contract value
as of the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in contract value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal payment
amounts, but not to amounts attributable to the Income Appreciator Benefit.
After the ten-year payment period has ended, if the remaining contract value
is $2,000 or more, the contract will continue. If the remaining contract value
is less than $2,000 after the end of the 10-year payment period, we will pay you
the remaining contract value and the contract will terminate. If the contract
value falls below the minimum amount required to keep the contract in force due
solely to investment results before the end of the 10-year payment period, we
will continue to pay the Income Appreciator Benefit amount for the remainder of
the 10-year payment period.
DISCONTINUING THE INCOME APPRECIATOR BENEFIT AUTOMATIC WITHDRAWAL PAYMENT
PROGRAM UNDER IAB OPTION 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to the contract value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any Income
Appreciator Benefit amount added to the contract value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the variable
investment options, fixed interest rate options, or the market value adjustment
option in the same proportions as your most recent purchase payment allocation
percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for the
10-year payment period to the contract value in a lump sum before determining
the adjusted contract value. The adjusted contract value may be applied to any
annuity or settlement option that is paid over the lifetime of the annuitant,
joint annuitants, or a period certain of at least 15 years (but not to exceed
life expectancy).
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HOW CAN I ACCESS MY MONEY? CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
IAB OPTION 3 -- INCOME APPRECIATOR BENEFIT CREDIT TO CONTRACT VALUE
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your contract value over a 10-year payment period. We
will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option. We will waive the $1,000 minimum requirement for the market
value adjustment option. We will calculate the Income Appreciator Benefit amount
on the date we receive your written request in good order. Once we have
calculated the Income Appreciator Benefit, the Income Appreciator Benefit credit
will not be affected by changes in contract value due to the investment
performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your contract
value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the contract
value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment
period be applied to an annuity or settlement option that is paid over the
lifetime of the annuitants, joint annuitants, or a period certain of at least 15
years (but not to exceed life expectancy).
EXCESS WITHDRAWALS
During the 10-year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your contract value in a contract year
that exceeds the sum of (1) 10% of the contract value as of the date the Income
Appreciator Benefit was activated plus (2) earnings since the Income Appreciator
Benefit was activated, that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply a
new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the contract value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated,
that have not been previously withdrawn, do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year is
less than the excess withdrawal threshold, the difference between the amount
withdrawn and the threshold can be carried over to subsequent years on a
cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
EFFECT OF TOTAL WITHDRAWAL ON INCOME APPRECIATOR BENEFIT
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us to suspend or postpone payments made in connection with
withdrawals or transfers from a variable investment option 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 and
redemptions of shares of the underlying 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 process any transfer made
from the fixed interest rate options promptly upon request.
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WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC
PARTNERS FLEXELITE CONTRACT?
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
The tax considerations associated with the Strategic Partners FlexElite contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan (including contracts held by a
non-natural person, such as a trust, acting as an agent for a natural person),
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). The discussion includes a description of certain spousal rights under
the contract and under tax-qualified plans. Our administration of such spousal
rights and related tax reporting accords with our understanding of the Defense
of Marriage Act (which defines a "marriage" as a legal union between a man and a
woman and a "spouse" as a person of the opposite sex). The information provided
is not intended as tax advice. You should consult with a qualified tax advisor
for complete information and advice. References to purchase payments below
relate to your cost basis in your contract. Generally, your cost basis in a
contract not associated with a tax-favored retirement plan is the amount you pay
into your contract, or into annuities exchanged for your contract, on an
after-tax basis less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA or 403(b) account, which can hold other permissible assets other than the
annuity. The terms and administration of the trust or custodial account in
accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are
the responsibility of the applicable trustee or custodian.
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.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract, such as the
Guaranteed Minimum Death Benefit, 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 the owners
under age 59 1/2, the taxable income attributable to the charge for the benefit
could be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding these
benefits.
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 withdrawals from the 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 generally will be treated as a withdrawal. Also, if you
elect the interest payment option, that we may offer, that election 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 any 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.
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.); or
- - the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to August
14, 1982, then any purchase payments made to the original contract prior to
August 14, 1982 will be treated as made to the new contract prior to that date.
(See "Federal Tax Status" in the Statement of Additional Information.)
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS has
reserved the right to treat transactions it considers abusive as ineligible for
this favorable partial 1035 exchange treatment. We do not know what transactions
may be considered abusive. For example we do not know how the IRS may view early
withdrawals or annuitizations after a partial exchange. In addition, it is
unclear how the IRS will treat a partial exchange from a life insurance,
endowment, or annuity contract into an immediate annuity. As of the date of this
prospectus, we will accept a partial 1035 exchange from a non-qualified annuity
into an immediate annuity as a "tax-free" exchange for future tax reporting
purposes, except to the extent that we, as a reporting and withholding agent,
believe that we would be expected to deem the transaction to be abusive.
However, some insurance companies may not recognize these partial surrenders as
tax-free exchanges and may report them as taxable distributions to the extent of
any gain distributed as well as subjecting the taxable portion of the
distribution to the 10% tax penalty. We strongly urge you to discuss any
transaction of this type with your tax advisor before proceeding with the
transaction.
TAXES PAYABLE BY BENEFICIARIES
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
- - Choice 1: The beneficiary is taxed on earning in the contract.
- - Choice 2: The beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
- - Choice 3: The beneficiary is taxed on each payment (part will be treated as
earnings and part as return of premiums).
REPORTING AND WITHHOLDING 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 three 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. Please refer to the CONTRACTS HELD
BY TAX FAVORED PLANS section below for a discussion regarding withholding rules
for tax favored plans (for example, an IRA).
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 assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules. We believe these diversification rules will be met.
An additional requirement for qualification for the tax treatment described
above is 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. While we also believe these investor control rules will
be met, the Treasury Department may promulgate guidelines under which a variable
annuity will not be treated as an annuity for tax purposes if persons with
ownership rights have excessive control over the investments underlying such
variable annuity. It is unclear whether such guidelines, if in fact promulgated,
would have retroactive effect. It is also unclear what effect, if any, such
guidelines may have on transfers between the investment options offered pursuant
to this prospectus. We will take any action, including modifications to your
contract or the investment options, required to comply with such guidelines if
promulgated.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH. Upon your death, certain
distributions must be made under the contract. The required distributions depend
on whether you die 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
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
the date of death. However, if a periodic payment option is selected by your
designated beneficiary and if such 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 a periodic
payment option based on life expectancy or a period exceeding five years.
If the contract is payable to (or for the benefit of) your surviving spouse,
that 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 Code. This description assumes that 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 contract. The "IRA Disclosure Statement" on page 78 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 your contract
is worth, 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 2004 the limit is $3,000; increasing in 2005 to
2007 to $4,000; and for 2008 to $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
contribute an additional $500 in years 2004 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
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 into another Section 401(a) plan.
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 contribution 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 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 70).
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 on page 70);
- - 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 on page 70).
ROTH IRAS. Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
- - Contributions to a Roth IRA cannot be deducted from your gross income;
- - "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 traditional 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
traditional IRA; and
- - If eligible (including meeting income limitations and earnings requirements),
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, you may only
purchase a contract for a Roth IRA in connection with a "rollover" or
"conversion" of amounts of another traditional IRA, conduit IRA, or Roth IRA.
This minimum is greater than the maximum amount of any annual contribution
allowed by law you may make to a 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
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CONTINUED
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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.
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 generally 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. 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% tax penalty 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 distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during the
year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you. If
you own more than one IRA, you can choose to satisfy your minimum distribution
requirement for each of your IRAs by withdrawing that amount from any of your
IRAs.
PENALTY FOR EARLY WITHDRAWALS
You may owe a 10% tax penalty on the taxable part of distributions received from
an IRA or Roth IRA before you attain age 59 1/2.
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; or
- - the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
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 three
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
prevent 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 per-
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
mit 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 "What Are the Expenses Associated with the
Strategic Partners FlexElite Contract" starting on page 57.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" on page 72.
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.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to tax
favored plans, see the "IRA Disclosure Statement" on page 78.
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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, and therefore, is subject to the insurance laws and regulations
of all the jurisdictions where it is licensed to do business.
Pruco Life is a wholly-owned subsidiary of The Prudential 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, 2003, 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 contract owners, 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. 20549-0102. 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 (separate account), to hold the assets that are associated with
the variable annuity 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. (NASD).
Compensation is paid to broker/dealer firms whose registered representatives
sell the contract according to one or more schedules. The individual registered
representatives will receive a portion of the compensation, depending on the
practice of the firm. Commissions are generally based on a percentage of
purchase payments made, up to a maximum of 8%. Alternative compensation
schedules are available that provide a lower initial commission plus ongoing
annual compensation based on all or a portion of contract value (a "trail
commission"). We may also provide compensation for providing ongoing service to
you in relation to the contract.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
Life and/or the contract on a preferred or recommended company or product list
and/or access to the firm's registered representatives), we or PIMS may enter
into compensation arrangements with certain broker/dealer firms or branches of
such firms with respect to certain or all registered representatives of such
firms under which such firms may receive separate compensation or reimbursement
for, among other things, training of sales personnel and/or marketing and/or
administrative and/or other services they provide to us or our affiliates. To
the extent permitted by NASD rules and other applicable laws and regulations,
PIMS may pay or allow other promotional incentives or payments in the form of
cash or non-cash compensation. These arrangements may not be offered to all
firms, and the terms of such arrangements may differ between firms. You should
note that firms and individual registered representatives and branch managers
within some firms participating in one of these compensation arrangements might
receive greater compensation for selling the contract than for selling a
different annuity that is not eligible for these compensation arrangements.
While compensation is generally taken into account as an expense in considering
the charges applicable to an annuity product, any such compensation will be paid
by us or PIMS, and will not result in any additional charge to you. Your
registered representative can provide you with more information about the
compensation arrangements that apply upon the sale of the contract.
LITIGATION
We are subject to legal and regulatory actions in the ordinary course of our
business, including class actions. Pending legal and regulatory actions include
proceedings relating to aspects of the businesses and operations that are
specific to Pruco Life and that are typical of the businesses in which Pruco
Life operates. Class action and individual lawsuits involve a variety of issues
and/or allegations, which include sales practices, underwriting practices,
claims payment and procedures, premium charges, policy servicing and breach of
fiduciary duties to customers. 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.
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.
In January 2004, the NASD fined Prudential Equity Group, Inc. (formerly known
as Prudential Securities Incorporated) and PIMS $2 million, and ordered the
firms to pay customers $9.5 million for sales of fixed and variable annuities
that violated a New York State Insurance Department regulation concerning
replacement sales and NASD rules. We brought this matter to the New York
Insurance Department and the NASD's attention in response to an internal
investigation, and in consultation with both New York and the NASD, we have
initiated a remediation program for all affected customers which has already
provided $8 million in remediation.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice. We will not be liable
for any payment or other action we take in accordance with the contract if that
action occurs before we receive notice of the assignment. An assignment, like
any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life, the co-issuer
of the Strategic Partners
- --------------------------------------------------------------------------------
73
9:
OTHER INFORMATION CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
FlexElite 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
- - Federal Tax Status
- - State Specific Variations
- - Directors and Officers
- - 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 contract
owner 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 (877)-778-5008.
- --------------------------------------------------------------------------------
74
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
MARKET-VALUE
ADJUSTMENT FORMULA
- --------------------------------------------------------------------------------
MARKET-VALUE ADJUSTMENT FORMULA
GENERAL FORMULA
The formula under which Pruco Life calculates the market value adjustment
applicable to a full or partial surrender, annuitization, or settlement under
the market value adjustment option is set forth below. The market value
adjustment is expressed as a multiplier factor. That is, the Contract Value
after the market value adjustment ("MVA"), but before any withdrawal charge, is
as follows: Contract Value (after MVA) = Contract Value (before MVA) X (1 +
MVA). The MVA itself is calculated as follows:
1 + I
MVA = [(-------------)to the N/12 power] -1
1 + J + .0025
<Table>
where: I = the guaranteed credited interest rate
(annual effective) for the given
contract at the time of withdrawal or
annuitization or settlement.
J = the current credited interest rate
offered on new money at the time of
withdrawal or annuitization or
settlement for a guarantee period of
equal length to the number of whole
years remaining in the Contract's
current guarantee period plus one
year.
N = equals the remaining number of months
in the contract's current guarantee
period (rounded up) at the time of
withdrawal or annuitization or
settlement.
</Table>
PENNSYLVANIA FORMULA
We use the same MVA formula with respect to contracts issued in Pennsylvania as
the general formula, except that "J" in the formula above uses an interpolated
rate as the current credited interest rate. Specifically, "J" is the
interpolated current credited interest rate offered on new money at the time of
withdrawal, annuitization, or settlement. The interpolated value is calculated
using the following formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of the
current guarantee period.
INDIANA FORMULA
We use the following MVA formula for contracts issued in Indiana:
1 + I
MVA = [(-----------)to the N/12 power] -1
1 + J
The variables I, J and N retain the same definitions as the general formula.
MARKET VALUE ADJUSTMENT EXAMPLE
(ALL STATES EXCEPT INDIANA AND PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05 + 0.0025)]to the (38/12)
power -1 = 0.02274
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.02274 = $253.03
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $253.03 = $11,380.14
- --------------------------------------------------------------------------------
75
MARKET-VALUE ADJUSTMENT FORMULA CONTINUED
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07 + 0.0025)] to the(38/12)
power -1 = -0.03644
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.03644) = -$405.47
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$405.47) = $10,721.64
MARKET VALUE ADJUSTMENT EXAMPLE
(PENNSYLVANIA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 4%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.05] + [((365-61)/365) X 0.04] =
0.0417
</Table>
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power-1 = 0.04902
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04902 = $545.45
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $545.45 = $11,672.56
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 3 years (the number of whole years remaining) is 7%, and for a
guarantee period of 4 years (the number of whole years remaining plus 1) is
8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = [(61/365) X 0.08] + [((365 - 61)/365) X 0.07] =
0.0717
</Table>
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power-1 = -0.04098
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04098) = -$455.99
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
- --------------------------------------------------------------------------------
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$455.99) = $10,671.12
MARKET VALUE ADJUSTMENT EXAMPLE
(INDIANA)
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 5% (0.05)
</Table>
The MVA factor calculation would be: [(1.06)/(1.05)] to the (38/12) power-1 =
0.03047
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 x 0.03047 = $339.04
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $339.04 = $11,466.15
The MVA may not always be positive. Here is an example where it is negative.
- - Suppose a contract owner made an invested purchase payment of $10,000 on July
1, 2000 and received a guaranteed interest rate of 6% for 5 years. A request
to surrender the contract is made on May 1, 2002. At the time, the Contract
Value will have accumulated to $11,127.11. The number of whole years
remaining in the guarantee period is 3.
- - On May 1, 2002 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
<Table>
N = 38
I = 6% (0.06)
J = 7% (0.07)
</Table>
The MVA factor calculation would be: [(1.06)/(1.07)]to the (38/12) power -1
= -0.02930
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.02930) = -$326.02
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$326.02) = $10,801.09
- --------------------------------------------------------------------------------
77
IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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,
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 after it is delivered, or applicable state
required period, if longer. 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 contributions must be made by no later
than the due date for filing your income tax return for that year. For a single
taxpayer, the applicable dollar limitation is $45,000 in 2004, with the amount
of IRA contribution which may be deducted reduced proportionately for Adjusted
Gross Income between $45,000 -- $55,000. For married couples filing jointly, the
applicable dollar limitation is $65,000, with the amount of IRA contribution
which may be deducted reduced proportionately for Adjusted Gross Income between
$65,000 -- $75,000. There is no deduction allowed for IRA contributions when
Adjusted Gross Income reaches $55,000 for individuals and $75,000 for married
couples filing jointly. Income limits are scheduled to increase until 2006 for
single taxpayers and 2007 for married taxpayers.
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 should contribute more than the maximum contribution amount to your
IRA, the excess amount will be considered an "excess contribution." You are
permitted to withdraw an excess contribution from your IRA 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" on page 79).
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
- --------------------------------------------------------------------------------
78
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 78. 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 and reinvest it in another IRA. 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. (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 Simplified Employee Pension IRA to
an IRA or to another qualified retirement plan or 457 government plan.
DISTRIBUTIONS
(a) PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA be forfeited. To insure that your
contributions will be used for retirement, the federal tax law does not permit
you to use your IRA as security for a loan. Furthermore, as a general rule, you
may not sell or assign your interest in your IRA to anyone. Use of an IRA 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 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. 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% tax penalty 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 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. If you own more than one IRA, you can
choose to satisfy your minimum distribution requirement for each of your IRAs by
withdrawing that amount from any of your IRAs. You may elect to receive the
distribution under
- --------------------------------------------------------------------------------
79
IRA DISCLOSURE STATEMENT CONTINUED
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 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
defined under IRS regulations. 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, 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, or as a program of minimum distributions.
This annuity or minimum distribution program must be payable over the life
expectancy of the beneficiary beginning by December 31st 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 31st 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 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 IRAs maintained by
an individual is generally the lesser of the maximum amount allowed by law and
100% of compensation for that year (the lesser of 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 traditional 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 traditional 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 TRADITIONAL 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
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80
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
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 traditional 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 traditional 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. 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.
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81
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
APPENDIX A
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
As we have indicated throughout this prospectus, the Strategic Partners
FlexElite Variable Annuity is a contract that allows you to select or decline
any of several features that carries with it a specific asset-based charge. We
maintain a unique unit value corresponding to each combination of such contract
features. Here we depict the historical unit values corresponding to the
contract features bearing the highest and lowest combinations of asset-based
charges during the periods May 1, 2002 to December 31, 2002 and January 1, 2003
to December 31, 2003. From May 1, 2003 to December 31, 2003, the highest
combination of asset-based charges amounted to 2.00%, and the lowest combination
of asset-based charges amounted to 1.60%. The remaining unit values appear in
the Statement of Additional Information, which you may obtain free of charge by
calling (888) PRU-2888 or by writing to us at the Prudential Annuity Service
Center, P.O. Box 7960, Philadelphia, PA 19101.
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82
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PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES:
(BASE DEATH BENEFIT 1.60)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00649 $0.75325 93,203
1/1/2003 to 12/31/2003 $0.75325 $0.96574 650,728
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00967 $0.80433 19,194
1/1/2003 to 12/31/2003 $0.80433 $1.04229 135,937
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00696 $0.78574 122,789
1/1/2003 to 12/31/2003 $0.78574 $1.03683 199,985
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00000 $0.99920 423,551
1/1/2003 to 12/31/2003 $0.99920 $0.99175 2,261,832
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00875 $0.81778 59,882
1/1/2003 to 12/31/2003 $0.81778 $1.03180 1,305,656
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00860 $0.79642 40,410
1/1/2003 to 12/31/2003 $0.79642 $1.00386 239,625
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00677 $0.79525 312,154
1/1/2003 to 12/31/2003 $0.79525 $1.03928 757,989
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00304 $0.78203 96,866
1/1/2003 to 12/31/2003 $0.78203 $0.97382 262,005
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00936 $0.85600 37,745
1/1/2003 to 12/31/2003 $0.85600 $1.04209 156,248
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00779 $0.78002 83,646
1/1/2003 to 12/31/2003 $0.78002 $0.95090 1,707,961
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00335 $0.88984 2,338,741
1/1/2003 to 12/31/2003 $0.88984 $1.07623 5,502,079
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
</Table>
- --------------------------------------------------------------------------------
83
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(BASE DEATH BENEFIT 1.60)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00203 $0.93918 2,345,900
1/1/2003 to 12/31/2003 $0.93918 $1.07673 4,403,658
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00676 $0.85482 433,610
1/1/2003 to 12/31/2003 $0.85482 $1.08886 1,349,154
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00812 $0.81844 208,005
1/1/2003 to 12/31/2003 $0.81844 $1.02601 378,060
SP GOLDMAN SACHS SMALL CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00401 $0.77921 127,081
1/1/2003 to 12/31/2003 $0.77921 $1.02081 659,327
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00493 $0.84271 723,141
1/1/2003 to 12/31/2003 $0.84271 $1.06394 1,988,561
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00956 $0.83364 51,159
1/1/2003 to 12/31/2003 $0.83364 $1.04013 401,897
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00460 $0.76575 89,492
1/1/2003 to 12/31/2003 $0.76575 $0.95573 229,832
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $0.98986 $0.68122 64,598
1/1/2003 to 12/31/2003 $0.68122 $0.93944 718,763
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $0.99896 $0.97196 257,990
1/1/2003 to 12/31/2003 $0.97196 $1.17106 3,639,912
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $0.99996 $1.05757 946,026
1/1/2003 to 12/31/2003 $1.05757 $1.10183 4,014,394
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00813 $0.75658 77,973
1/1/2003 to 12/31/2003 $0.75658 $1.05808 234,827
SP STATE STREET RESEARCH SMALL CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $0.99996 $0.76251 66,083
1/1/2003 to 12/31/2003 $0.76251 $1.01108 571,775
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
</Table>
- --------------------------------------------------------------------------------
84
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(BASE DEATH BENEFIT 1.60)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00807 $0.80793 98,858
1/1/2003 to 12/31/2003 $0.80793 $1.00077 79,543
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00200 $0.68057 2,907
1/1/2003 to 12/31/2003 $0.68057 $0.95387 188,395
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00364 $0.76891 36,399
1/1/2003 to 12/31/2003 $0.76891 $1.05634 992,042
JANUS ASPEN SERIES--GROWTH PORTFOLIO SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2002* to 12/31/2002 $1.00860 $0.77398 8,577
1/1/2003 to 12/31/2003 $0.77398 $1.00180 86,824
</Table>
* COMMENCEMENT OF BUSINESS
- --------------------------------------------------------------------------------
85
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES:
(GREATER OF ROLL-UP AND STEP-UP GMDB 2.00)
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99921 $1.21145 779,617
PRUDENTIAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00117 $1.24857 193,463
PRUDENTIAL GLOBAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00326 $1.23779 155,832
PRUDENTIAL MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99997 $0.99224 212,815
PRUDENTIAL STOCK INDEX PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99953 $1.20803 423,123
PRUDENTIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99995 $1.25016 94,946
SP AGGRESSIVE GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00158 $1.26460 912,164
SP AIM AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99611 $1.22686 40,542
SP AIM CORE EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99816 $1.19826 316,000
SP ALLIANCE LARGE CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99809 $1.13844 383,589
SP BALANCED ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00116 $1.15404 2,516,911
SP CONSERVATIVE ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00100 $1.08861 562,468
SP DAVIS VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99995 $1.24302 1,399,288
SP DEUTSCHE INTERNATIONAL EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00500 $1.27708 460,314
SP GOLDMAN SACHS SMALL CAP PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99690 $1.29176 584,437
SP GROWTH ASSET ALLOCATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00135 $1.21051 3,262,410
</Table>
<Table>
* COMMENCEMENT OF BUSINESS THIS CHART CONTINUES ON THE NEXT PAGE
</Table>
- --------------------------------------------------------------------------------
86
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
<Table>
<Caption>
ACCUMULATION UNIT VALUES (CONTINUED):
(GREATER OF ROLL-UP AND STEP-UP GMDB 2.00)
- ------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
SP LARGE CAP VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99746 $1.21513 366,983
SP MFS CAPITAL OPPORTUNITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99995 $1.19662 139,899
SP MID CAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99765 $1.29694 542,782
SP PIMCO HIGH YIELD PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00293 $1.08266 481,047
SP PIMCO TOTAL RETURN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00170 $1.01274 880,192
SP PRUDENTIAL US EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00190 $1.28167 217,286
SP STATE STREET RESEARCH SMALLCAP GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00196 $1.29715 241,209
SP STRATEGIC PARTNERS FOCUSED GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99621 $1.16761 197,854
SP TECHNOLOGY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00272 $1.30756 229,497
SP WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $1.00451 $1.32707 180,985
JANUS ASPEN SERIES--GROWTH PORTFOLIO
SERVICE SHARES
- ------------------------------------------------------------------------------------------------------------------------------
5/1/2003* to 12/31/2003 $0.99867 $1.20059 61,017
</Table>
* COMMENCEMENT OF BUSINESS
- --------------------------------------------------------------------------------
87
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
APPENDIX B
HYPOTHETICAL ILLUSTRATIONS
- --------------------------------------------------------------------------------
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table), the arithmetic average
fund fees were equal to 1.09% annually. If we did take expense reimbursements
and waivers into account here, that would have lowered the arithmetic average,
and thereby increased the illustrated values. The hypothetical gross rates of
return are next reduced by the insurance and administrative charge associated
with the selected death benefit option. Finally, the contract value is reduced
by the annual charges for the optional benefits that are illustrated as well as
by the contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -3.02%, 2.80%
and 6.68%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised
in that year.
A '0' in these columns indicates that the contract has terminated due to
insufficient account value and, consequently, the guaranteed benefit has no
value.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for
a description of how the various illustrated features operate.
- --------------------------------------------------------------------------------
88
- --------------------------------------------------------------------------------
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
STRATEGIC PARTNERS FLEXELITE
$100,000 SINGLE CONTRIBUTION AND NO WITHDRAWALS
MALE, ISSUE AGE 60
BENEFITS:
GREATER OF ROLL-UP AND STEP-UP GUARANTEED MINIMUM DEATH BENEFIT
EARNINGS APPRECIATOR BENEFIT
GUARANTEED MINIMUM INCOME BENEFIT
INCOME APPRECIATOR BENEFIT
NO CREDIT ELECTION
10% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 105,581 99,281 105,581 2,232 107,813 N/A N/A 105,000
2 62 111,476 105,176 111,476 4,591 116,067 N/A N/A 110,250
3 63 117,704 117,704 117,704 7,082 124,786 N/A N/A 115,763
4 64 124,283 124,283 124,283 9,713 133,996 N/A N/A 121,551
5 65 131,233 131,233 131,233 12,493 143,726 N/A N/A 127,628
6 66 138,576 138,576 138,576 15,430 154,006 N/A N/A 134,010
7 67 146,333 146,333 146,333 18,533 164,866 6,950 153,283 140,710
8 68 154,528 154,528 154,528 21,811 176,340 8,179 162,708 147,746
9 69 163,187 163,187 163,187 25,275 188,462 12,637 175,825 155,133
10 70 172,336 172,336 172,336 28,934 201,270 14,467 186,803 162,889
15 75 226,482 226,482 226,482 50,593 277,075 31,620 258,102 200,000
20 80 298,774 298,774 298,774 79,510 378,284 49,694 348,468 200,000
25 85 395,945 395,945 395,945 118,378 514,323 73,986 469,931 200,000
30 90 526,555 526,555 526,555 120,000 646,555 106,639 633,194 200,000
35 95 702,113 702,113 702,113 120,000 822,113 150,528 852,642 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,684 9,366
8 8,333 10,187
9 9,039 11,084
10 10,554 12,299
15 15,787 19,363
20 19,014 29,010
25 23,787 44,023
30 29,100 63,958
35 36,080 91,896
- -------------------------------------------------------------
</Table>
6% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
SURRENDER DEATH EARNINGS TOTAL DEATH AMOUNT PROTECTED
ANNUITANT CONTRACT VALUE BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO VALUE
YEAR AGE VALUE --------- VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE ---------
- ----------------------------------------------------------------------------------------------------------------------
1 61 101,723 95,423 105,000 689 105,689 N/A N/A 105,000
2 62 103,459 97,159 110,250 1,384 111,634 N/A N/A 110,250
3 63 105,207 105,207 115,763 2,083 117,845 N/A N/A 115,763
4 64 106,965 106,965 121,551 2,786 124,337 N/A N/A 121,551
5 65 108,733 108,733 127,628 3,493 131,122 N/A N/A 127,628
6 66 110,510 110,510 134,010 4,204 138,214 N/A N/A 134,010
7 67 112,294 112,294 140,710 4,918 145,628 1,844 114,138 140,710
8 68 114,083 114,083 147,746 5,633 153,379 2,112 116,195 147,746
9 69 115,876 115,876 155,133 6,350 161,483 3,175 119,051 155,133
10 70 117,671 117,671 162,889 7,069 169,958 3,534 121,206 162,889
15 75 126,632 126,632 207,893 10,653 218,546 6,658 133,290 200,000
20 80 136,205 136,205 265,330 14,482 279,812 9,051 145,256 200,000
25 85 146,896 146,896 265,330 18,758 284,088 11,724 158,620 200,000
30 90 158,837 158,837 265,330 23,535 288,865 14,709 173,547 200,000
35 95 172,175 172,175 265,330 28,870 294,200 18,044 190,218 200,000
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,419 6,974
8 8,008 7,275
9 8,649 7,591
10 9,904 7,980
15 14,086 10,000
20 15,919 12,092
25 18,382 14,859
30 20,376 17,530
35 22,443 20,501
</Table>
- --------------------------------------------------------------------------------
89
PART II STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-9
0% ASSUMED RATE OF RETURN
- --------------------------------------------------------------------------------
<Table>
<Caption>
PROJECTED VALUE DEATH BENEFIT(S) LIVING BENEFIT(S)
- --------------------------------------- ------------------------------------- ------------------------------------
EAB IAB GMIB
--------------------------- ------------------------ ---------
DEATH EARNINGS TOTAL DEATH AMOUNT GMIB
ANNUITANT CONTRACT SURRENDER BENEFIT APPRECIATOR BENEFIT VALUE AVAILABLE TO PROTECTED
YEAR AGE VALUE VALUE VALUE BENEFIT AND EAB IAB VALUE ANNUITIZE VALUE
- ----------------------------------------------------------------------------------------------------------------------
1 61 95,886 89,586 105,000 0 105,000 N/A N/A 105,000
2 62 91,893 85,593 110,250 0 110,250 N/A N/A 110,250
3 63 88,014 88,014 115,763 0 115,763 N/A N/A 115,763
4 64 84,245 84,245 121,551 0 121,551 N/A N/A 121,551
5 65 80,580 80,580 127,628 0 127,628 N/A N/A 127,628
6 66 77,014 77,014 134,010 0 134,010 N/A N/A 134,010
7 67 73,542 73,542 140,710 0 140,710 0 73,542 140,710
8 68 70,160 70,160 147,746 0 147,746 0 70,160 147,746
9 69 66,861 66,861 155,133 0 155,133 0 66,861 155,133
10 70 63,641 63,641 162,889 0 162,889 0 63,641 162,889
15 75 48,590 48,590 207,893 0 207,893 0 48,590 200,000
20 80 35,663 35,663 265,330 0 265,330 0 35,663 200,000
25 85 24,874 24,874 265,330 0 265,330 0 24,874 200,000
30 90 15,870 15,870 265,330 0 265,330 0 15,870 200,000
35 95 8,355 8,355 265,330 0 265,330 0 8,355 200,000
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
LIVING BENEFIT(S)
- ---- ------------------------------------
GMIB
------------------------------------
GMIB PROJECTED CONTRACT
GUARANTEED ANNUAL ANNUITY
ANNUAL PAYOUT PAYOUT FOR SINGLE
FOR SINGLE LIFE LIFE ANNUITY
WITH 10 YEAR WITH 10 YEAR
YEAR PERIOD CERTAIN PERIOD CERTAIN
- ---- ------------------------------------
1 N/A N/A
2 N/A N/A
3 N/A N/A
4 N/A N/A
5 N/A N/A
6 N/A N/A
7 7,323 4,493
8 7,896 4,393
9 8,518 4,292
10 9,694 4,190
15 13,632 3,645
20 15,230 2,969
25 17,364 2,330
30 18,980 1,603
35 20,586 900
- ---------------------------------------------------------------------------------
</Table>
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
EXPLANATION OF HEADINGS
CONTRACT VALUE -- The projected total value of the annuity at the beginning of
the period indicated, after all fees other than withdrawal charges have been
deducted.
SURRENDER VALUE -- The projected cash value of the annuity after any applicable
fees and withdrawal charges payable on surrender.
DEATH BENEFIT VALUE -- Greater of the contract value or purchase payments
(adjusted for withdrawals) compounded at 5% annually up to the later of age 80
or 5 years from issue (for age 80-85 at issue, 3% annual roll-up for 5 years) or
the highest contract value (the "step-up") on any contract anniversary up to the
later of age 80 or the fifth contract anniversary adjusted for withdrawals (age
80-84 at issue will have only one step-up on the third contract anniversary) is
payable to the beneficiary(s) on death of owner and/or joint owner. See the
prospectus for more complete information.
EARNINGS APPRECIATOR BENEFIT (EAB) -- A supplemental death benefit based on 40%
of earnings if issue age is 0-70; 25% for age 71-75; 15% for age 76-79, subject
to a cap equal to 300% of purchase payments multiplied by the applicable benefit
percentage. See prospectus for more complete information.
IAB VALUE -- Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
AMOUNT AVAILABLE TO ANNUITIZE -- The contract value plus the IAB value. See
prospectus for more complete information.
GMIB PROTECTED VALUE -- Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB GUARANTEED ANNUAL PAYOUT FOR SINGLE LIFE WITH 10-YEAR PERIOD CERTAIN -- The
payout determined by applying the GMIB protected value (and IAB value if IAB is
elected) to the GMIB guaranteed annuity purchase rates contained in the
contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See prospectus
for more complete information.
PROJECTED CONTRACT ANNUAL ANNUITY PAYOUT FOR SINGLE LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN -- The hypothetical annuity payout based on the projected
contract value (and IAB value if IAB is elected) calculated using the minimum
payout rates guaranteed under the contract ("Guaranteed Minimum Payout Rates").
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization:
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated based
on the actual contract value at annuitization and the better of the
Guaranteed Minimum Annuity Payout Rates or the Current Annuity Payout
Rates in effect at the time of annuitization. To show how the GMIB rider
works relative to the annuity payout available under the contract we
included the Projected Contract Annuity Payout column which shows
hypothetical annuity payouts based on the projected contract values and
the Guaranteed Minimum Payout Rates. We did not illustrate any
hypothetical annuity payouts based on Current Annuity Payout Rates
because these rates are subject to change at any time; however,
historically the annuity payout provided under such Current Annuity
Payout Rates have been significantly higher than the annuity payout that
would be provided under Guaranteed Minimum Annuity Payout Rates.
- --------------------------------------------------------------------------------
90
This page intentionally left blank
ORD01091
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
Pruco Life registered $200 million of interests in the market value adjusted
annuity contracts described in this registration statement. Pruco Life has paid
$16,180 to the SEC for the registration fees required under the Securities Act
of 1933.
Federal Taxes
Pruco Life Insurance Company estimates the federal tax effect associated with
the deferred acquisition costs attributable to receipt of $30 million of
purchase payments over a two year period to be approximately $118,400.
State Taxes
Pruco Life estimates that approximately $6,400 in premium taxes will be owed
upon receipt of purchase payments under the contracts, and that additional
premium taxes in the approximate amount of $64,000 would be owed if the full
$32 million of purchase payments were applied to annuity options. The taxes set
forth here are an estimate, based on the amount of purchase payments we expect
to receive during the next two years.
Printing Costs
Pruco Life estimates that the cost of printing prospectuses for the amount of
securities registered herein will be approximately $172,755.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life.
Accounting Costs
PricewaterhouseCoopers LLP, the independent public accountant that audits Pruco
Life's financial statements, charges approximately $10,000 in connection with
each filing of this registration statement with the Commission.
Premium Paid to Indemnify Officers
Officers and Directors of Pruco Life Insurance Company are indemnified under a
policy that also covers officers and directors of other entities controlled by
Prudential Financial, Inc. A portion of the cost of that policy is attributed
to Pruco Life.
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
3
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)
(3) (i) Articles of Incorporation of Pruco Life Insurance Company, as amended
through October 19, 1993. (Note 9)
(ii) By-Laws of Pruco Life Insurance Company, as amended through May 6,
1997. (Note 10)
(4) (a) Strategic Partners Variable Annuity Contract VBON-2000. (Note 3)
(b) Strategic Partners Variable Annuity Contract VDCA-2000. (Note 3)
(c) Strategic Partners MVA Endorsement ORD 112805. (Note 8)
(d) Strategic Partners Application ORD 99730. (Note 8)
(e) Strategic Partners FlexElite Variable Annuity Contract VFLX-2003.
(Note 7)
(f) Strategic Partners FlexElite Application. (Note 11)
(g) Strategic Partners SPAO and FlexElite GMIB Endorsement ORD 112963.
(Note 12)
(h) Strategic Partners SPAO Application. (Note 1)
(i) Strategic Partners FlexElite Application. (Note 1)
(j) Strategic Partners SPAO and FlexElite GMIB Endorsement Supplement
ORD 112963. (Note 1)
(5) Opinion of Counsel. (Note 1)
(23) Written Consent of PricewaterhouseCoopers LLP independent accountants.
(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)
(d) David R. Odenath, Jr. (Note 6)
(e) William J. Eckert, IV (Note 6)
(f) Andrew J. Mako (Note 12)
- -------------------
(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 of the
Pruco Life Insurance Company.
(Note 3) Incorporated by reference to the initial registration on Form N-4,
Registration No. 333-37728, filed May 24, 2000 on behalf of the Pruco
Life Flexible Premium Variable Annuity Account.
4
(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.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4, Registration No. 333-75702, filed February 14, 2003 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 8) Incorporated by reference to initial Form S-3 Registration Statement
No. 333-103474 filed February 27, 2003 on behalf of Pruco Life
Insurance Company.
(Note 9) Incorporated by reference to the initial registration on Form S-6,
Registration No. 333-07451, filed July 2, 1999 on behalf of the Pruco
Life Variable Appreciable Account.
(Note 10) Incorporated by reference to Form 10-Q as filed August 15, 1997 on
behalf of Pruco Life insurance Company.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 2 to Form
N-4, Registration No. 333-75702, filed April 23, 2003 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 11 to Form
N-4, Registration No. 811-07325, filed November 14, 2003 on behalf of
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 1833;
(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.
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(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.
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 12th day of
April, 2004.
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
Registrant Statement has been signed by the following persons in the capacities
and on the date indicated.
<Table>
SIGNATURE AND TITLE
/s/ * April 12, 2004
-----------------------------------------
VIVIAN L. BANTA
CHAIRMAN AND DIRECTOR
/s/ *
-----------------------------------------
JAMES J. AVERY, JR.
VICE CHAIRMAN AND DIRECTOR
/s/ *
-----------------------------------------
ANDREW J. MAKO
PRESIDENT AND DIRECTOR
/s/ * *By: /s/ CLIFFORD E. KIRSCH
----------------------------------------- ----------------------------------
WILLIAM J. ECKERT, IV CLIFFORD E. KIRSCH
VICE PRESIDENT AND CHIEF (ATTORNEY-IN-FACT)
ACCOUNTING OFFICER
/s/ *
-----------------------------------------
RONALD P. JOELSON
DIRECTOR
/s/ *
-----------------------------------------
RICHARD J. CARBONE
DIRECTOR
/s/ *
-----------------------------------------
HELEN M. GALT
DIRECTOR
/s/ *
-----------------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
</Table>
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EXHIBIT INDEX
(4)(h) Strategic Partners SPAO Application.
(4)(i) Strategic Partners FlexElite Application.
(4)(j) Strategic Partners SPAO and FlexElite GMIB Endorsement
Supplement--ORD 112963.
(5) Opinion of Counsel.
(23) Written Counsel of PricewaterhouseCoopers LLP.
8