AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 2009
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
PRUCO LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ARIZONA
(State or other jurisdiction of incorporation or organization)
22-1944557
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-5740
(Address and telephone number of principal executive offices)
THOMAS C. CASTANO
SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4780
(Name, address and telephone number of agent for service)
Copies to:
CHRISTOPHER SPRAGUE
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NJ 07102-2992
(973) 802-6997
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box:. [_]
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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a registration statement pursuant to General Instruction I.D.
or a post-effective amendment thereto that shall become effective upon filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [_]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [_]
Indicate by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [X] Smaller reporting company [_]
Calculation of Registration fee
- ------------------------------------------------------------------------------------------
Proposed Proposed
Title of each class of Amount maximum maximum
securities to be to be offering price aggregate Amount of
registered registered* per unit* offering price registration fee**
- ------------------------------------------------------------------------------------------
Market-value adjustment
annuity contracts (or
modified guaranteed
annuity contracts) $40,000,000 $1,572
- --------------------------------------------------------------------------------------
* Securities are not issued in predetermined units
** In this filling, Pruco Life Insurance Company is registering $40,000,000 of
Securities and paying a fee of $1,572 therefor.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission may determine.
================================================================================
STRATEGIC PARTNERS/SM/ ANNUITY ONE 3 VARIABLE ANNUITY
PROSPECTUS: MAY 1, 2008
----------------------------------------------
This Prospectus describes an Individual Variable Annuity Contract offered by
Pruco Life Insurance Company (Pruco Life) and the Pruco Life Flexible Premium
Variable Annuity Account. 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. Please
note that selling broker-dealer firms through which the contract is sold may
decline to make available to their customers certain of the optional features
and investment options offered generally under the contract. Alternatively,
such firms may restrict the availability of the optional benefits that they do
make available to their customers (e.g., by imposing a lower maximum issue age
for certain optional benefits than what is prescribed generally under the
contract). Please speak to your registered representative for further details.
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 among each annuity. Differences in
compensation among different annuity products could influence a registered
representative's decision as to which annuity to recommend to you. 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. 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.
Currently, portfolios of the following underlying mutual funds are being
offered: The Prudential Series Fund, Advanced Series Trust, Nationwide
Variable Insurance Trust, and Janus Aspen Series. (see next page for list of
portfolios currently offered). 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 in the Summary.
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, 2008. 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 Public Reference Section, 100 F Street, N.E., Washington,
D.C. 20549 (See SEC file numbers 333-37728 and 333-103474), or obtained from
us, free of charge. 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 set forth in
Section 11 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 19176.
- --------------------------------------------------------------------------------
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
The Prudential Series Fund
Jennison Portfolio
Equity Portfolio
Global Portfolio
Money Market Portfolio
Stock Index Portfolio
Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Growth Asset Allocation Portfolio
SP Davis Value Portfolio
SP International Growth Portfolio
SP International Value Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
Advanced Series Trust
AST Advanced Strategies Portfolio
AST Aggressive Asset Allocation Portfolio
AST AllianceBernstein Core Value Portfolio
AST AllianceBernstein Growth & Income Portfolio
AST American Century Income & Growth Portfolio
AST American Century Strategic Allocation Portfolio
AST Balanced Asset Allocation Portfolio
AST Capital Growth Asset Allocation Portfolio
AST Cohen & Steers Realty Portfolio
AST Conservative Asset Allocation Portfolio
AST DeAM Large-Cap Value Portfolio
AST DeAM Small-Cap Value Portfolio
AST Federated Aggressive Growth Portfolio
AST First Trust Balanced Target Portfolio
AST First Trust Capital Appreciation Target Portfolio
AST Goldman Sachs Concentrated Growth Portfolio
AST Goldman Sachs Mid-Cap Growth Portfolio
AST High Yield Portfolio
AST Investment Grade Bond Portfolio
AST JPMorgan International Equity Portfolio
AST Large-Cap Value Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST Marsico Capital Growth Portfolio
AST MFS Global Equity Portfolio
AST MFS Growth Portfolio
AST Mid-Cap Value Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Neuberger Berman Small-Cap Growth Portfolio
AST PIMCO Limited Maturity Bond Portfolio
AST Preservation Asset Allocation Portfolio
AST QMA US Equity Alpha Portfolio
AST Small-Cap Growth Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Global Bond Portfolio
AST T. Rowe Price Natural Resources Portfolio
AST T. Rowe Price Large-Cap Growth Portfolio
AST UBS Dynamic Alpha Strategy Portfolio
AST Western Asset Core Plus Bond Portfolio
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets Fund
Janus Aspen Series
Large Cap Growth Portfolio -- Service Shares
CONTENTS
PART I: STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SUMMARY............................... 2
GLOSSARY................................................................................. 2
SUMMARY.................................................................................. 8
RISK FACTORS............................................................................. 12
SUMMARY OF CONTRACT EXPENSES............................................................. 13
EXPENSE EXAMPLES......................................................................... 18
PART II: STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS SECTIONS 1-11........................ 21
SECTION 1: WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY? ............... 22
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"........................................... 23
SECTION 2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? ........................................ 23
VARIABLE INVESTMENT OPTIONS ........................................................... 23
FIXED INTEREST RATE OPTIONS ........................................................... 35
MARKET VALUE ADJUSTMENT OPTION ........................................................ 35
ADDITIONAL TRANSFER RESTRICTIONS....................................................... 37
DOLLAR COST AVERAGING.................................................................. 38
ASSET ALLOCATION PROGRAM............................................................... 39
AUTO-REBALANCING ...................................................................... 39
SCHEDULED TRANSACTIONS ................................................................ 39
VOTING RIGHTS ......................................................................... 39
SUBSTITUTION........................................................................... 40
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......................................................................... 41
GMIB OPTION 1 - SINGLE LIFE PAYOUT OPTION ........................................... 43
GMIB OPTION 2 - JOINT LIFE PAYOUT OPTION............................................. 43
HOW WE DETERMINE ANNUITY PAYMENTS...................................................... 44
SECTION 4: WHAT IS THE DEATH BENEFIT?.................................................... 45
BENEFICIARY ........................................................................... 45
CALCULATION OF THE DEATH BENEFIT....................................................... 45
GUARANTEED MINIMUM DEATH BENEFIT....................................................... 45
GMDB ROLL-UP......................................................................... 45
GMDB STEP-UP......................................................................... 46
SPECIAL RULES IF JOINT OWNERS.......................................................... 46
HIGHEST DAILY VALUE DEATH BENEFIT...................................................... 47
CALCULATION OF THE HIGHEST DAILY VALUE DEATH BENEFIT .................................. 47
PAYOUT OPTIONS......................................................................... 48
BENEFICIARY CONTINUATION OPTION........................................................ 49
EARNINGS APPRECIATOR BENEFIT........................................................... 50
SPOUSAL CONTINUANCE OPTION............................................................. 51
SECTION 5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS?.................................... 53
LIFETIME FIVE INCOME BENEFIT........................................................... 53
SPOUSAL LIFETIME FIVE INCOME BENEFIT................................................... 59
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT............................................. 62
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (HIGHEST DAILY LIFETIME SEVEN)............. 69
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (SPOUSAL HIGHEST DAILY LIFETIME
SEVEN)............................................................................... 75
SECTION 6: WHAT IS THE INCOME APPRECIATOR BENEFIT? ...................................... 83
INCOME APPRECIATOR BENEFIT............................................................. 83
CALCULATION OF THE INCOME APPRECIATOR BENEFIT.......................................... 83
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE....................... 84
i
SECTION 7: HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT?................ 85
PURCHASE PAYMENTS....................................................................... 85
ALLOCATION OF PURCHASE PAYMENTS ........................................................ 86
CREDITS................................................................................. 86
CALCULATING CONTRACT VALUE.............................................................. 87
SECTION 8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT?............................................................................... 87
INSURANCE AND ADMINISTRATIVE CHARGES.................................................... 87
WITHDRAWAL CHARGE....................................................................... 88
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE........................................... 89
CONTRACT MAINTENANCE CHARGE ............................................................ 89
GUARANTEED MINIMUM INCOME BENEFIT CHARGE ............................................... 89
INCOME APPRECIATOR BENEFIT CHARGE....................................................... 90
EARNINGS APPRECIATOR BENEFIT CHARGE .................................................... 90
BENEFICIARY CONTINUATION OPTION CHARGES................................................. 91
TAXES ATTRIBUTABLE TO PREMIUM........................................................... 91
TRANSFER FEE............................................................................ 91
COMPANY TAXES .......................................................................... 91
UNDERLYING MUTUAL FUND FEES ............................................................ 92
SECTION 9: HOW CAN I ACCESS MY MONEY? .................................................... 92
WITHDRAWALS DURING THE ACCUMULATION PHASE............................................... 92
AUTOMATED WITHDRAWALS................................................................... 92
SUSPENSION OF PAYMENTS OR TRANSFERS .................................................... 93
SECTION 10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT?................................................................. 93
SECTION 11: OTHER INFORMATION ............................................................ 101
PRUCO LIFE INSURANCE COMPANY............................................................ 101
THE SEPARATE ACCOUNT.................................................................... 102
SALE AND DISTRIBUTION OF THE CONTRACT................................................... 102
LEGAL PROCEEDINGS ...................................................................... 103
ASSIGNMENT ............................................................................. 104
FINANCIAL STATEMENTS.................................................................... 104
STATEMENT OF ADDITIONAL INFORMATION .................................................... 104
HOUSEHOLDING............................................................................ 104
MARKET VALUE ADJUSTMENT FORMULA ........................................................ 105
APPENDIX A - ACCUMULATION UNIT VALUES...................................................... A-1
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU .......................... B-1
APPENDIX C - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT.............. C-1
APPENDIX D - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME SEVEN BENEFIT..................................................... D-1
ii
PART I SUMMARY
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
1
PART I: STRATEGIC PARTNERS ANNUITY ONE 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 is adjusted for any subsequent withdrawals. The
adjusted purchase payment is used only for calculations of the Earnings
Appreciator Benefit.
Annual Income Amount
Under the Lifetime Five Income Benefit and Highest Daily Lifetime Seven
Benefit, an amount that you can withdraw each year as long as the annuitant
lives. For the Highest Daily Lifetime Five Benefit only, we refer to an amount
that you can withdraw each year as long as the annuitant lives as the "Total
Annual Income Amount". Under the Spousal Lifetime Five Income Benefit and
Spousal Highest Daily Lifetime Seven Benefit, an annual income amount is paid
until the later death of two natural persons who are each other's spouses at
the time of election and at the first death of one of them.
Annual Withdrawal Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal remaining. The
Annual Withdrawal Amount is set initially to equal 7% of the initial Protected
Withdrawal Value, but will be adjusted to reflect subsequent purchase
payments, withdrawals, and any step-up.
Annuitant
The person whose life determines the amount of income payments that we will
make. Except as indicated below, 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.
Generally, if an annuity is owned by an entity and the entity has named a
co-annuitant, the co-annuitant will become the annuitant upon the death of the
annuitant, and no death benefit is payable. Unless we agree otherwise, the
contract is eligible to have a co-annuitant designation only if the entity
that owns the contract is (1) a plan described in Internal Revenue Code
Section 72(s)(5)(A)(i) (or any successor Code section thereto); (2) an entity
described in Code Section 72(u)(1) (or any successor Code section thereto); or
(3) a custodial account established pursuant to the provisions in Code
Section 408(a) (or any successor Code section thereto) ("Custodial Account").
Where the contract is held by a Custodial Account, the co-annuitant will not
automatically become the annuitant upon the death of the annuitant. Upon the
death of the annuitant, the Custodial Account will have the choice, subject to
our rules, to either elect to receive the death benefit or elect to continue
the contract. If the contract is continued, then the Contract Value as of the
date of due proof of death of the annuitant will reflect the amount that would
have been payable had a death benefit been paid.
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.
2
Benefit Fixed Rate Account
An investment option offered as part of this contract that is used only if you
have elected the optional Highest Daily Lifetime Five Benefit. Amounts
allocated to the Benefit Fixed Rate Account earn a fixed rate of interest, and
are held within our general account. You may not allocate purchase payments to
the Benefit Fixed Rate Account. Rather, Contract Value is transferred to the
Benefit Fixed Rate Account only under the asset transfer feature of the
Highest Daily Lifetime Five Benefit.
Business Day
A day on which the New York Stock Exchange is 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.
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.
Daily Value
For purposes of the Highest Daily Value Death Benefit, which we describe
below, the Contract Value as of the end of each business day. The Daily Value
on the contract date is equal to your purchase payment.
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, or Highest Daily Value Death Benefit, is
available for an additional charge. See Section 4, "What Is The Death Benefit?"
Death Benefit Target Date
With respect to the Highest Daily Value Death Benefit, the later of the
contract anniversary on or after the 80th birthday of the current contract
owner, the older of either joint owner or (if owned by an entity) the
annuitant, or five years after the contract date.
Designated Life
For purposes of the Spousal Lifetime Five Income Benefit and Spousal Highest
Daily Lifetime Seven Benefit, a Designated Life refers to each of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them.
3
GLOSSARY continued
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.
Enhanced Protected Withdrawal Value
Under the Highest Daily Lifetime Five Benefit only, a sum that we add to your
existing Protected Withdrawal Value, provided that you have not made any
withdrawal during the first ten years that your Highest Daily Lifetime Five
Benefit has been in effect and you otherwise meet the conditions set forth in
the rider and this prospectus.
Excess Income/Excess Withdrawal
Under the Lifetime Five Income Benefit, Spousal Lifetime Five Income Benefit,
Highest Daily Lifetime Five Income Benefit, Highest Daily Lifetime Seven
Benefit and Spousal Highest Daily Lifetime Seven Benefit, Excess Income refers
to cumulative withdrawals that exceed the Annual Income Amount (the Total
Annual Income Amount for Highest Daily Lifetime Five). Under the Lifetime Five
Income Benefit, Excess Withdrawal refers to cumulative withdrawals that exceed
the Annual Withdrawal Amount.
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. The GMDB is a different death benefit than the Highest
Daily Value Death Benefit, which we describe below.
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 by the effect of 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.
4
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, and any withdrawals
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.
Highest Daily Lifetime Five/SM/ Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of a principal value called
the Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Contract Value.
Highest Daily Lifetime Seven/SM/ Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of a principal value called
the Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Contract Value. Highest Daily
Lifetime Seven is the same class of optional benefit as our Highest Daily
Lifetime Five Income Benefit, but differs (among other things) with respect to
how the Protected Withdrawal Value is calculated and to how the lifetime
withdrawals are calculated.
Highest Daily Value Death Benefit
An optional death benefit available for an additional charge that can provide
a death benefit that exceeds the Contract Value on the date of death. The
amount of the death benefit is determined with reference to the Highest Daily
Value, as defined below.
Income Appreciator Benefit (IAB)
An optional feature that may be available for an additional charge that
provides a supplemental living 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. A joint owner must be a natural person.
5
GLOSSARY continued
Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amount of withdrawals. There are two options--one is designed to
provide an annual withdrawal amount for life and the other is designed to
provide a greater annual withdrawal amount (than the first option) as long as
there is Protected Withdrawal Value. We also offer a variant of the Lifetime
Five Income Benefit to certain spousal owners--see "Spousal Lifetime Five
Income Benefit."
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
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.
Proportional Withdrawals
A method that involves calculating the percentage of your Contract Value that
each prior withdrawal represented when withdrawn. In general, proportional
withdrawals result in a reduction to the applicable benefit value by reducing
such value in the same proportion as the Contract Value was reduced by the
withdrawal as of the date the withdrawal occurred.
Protected Withdrawal Value
Under the Lifetime Five Income Benefit, Spousal Lifetime Five Income Benefit,
Highest Daily Lifetime Seven Benefit and Spousal Highest Daily Lifetime
Benefit, an amount that we guarantee regardless of the investment performance
of your Contract Value. For the Highest Daily Lifetime Five Benefit only, we
refer to an amount that we guarantee regardless of the investment performance
of your Contract Value as the "Total Protected Withdrawal Value".
Prudential Annuity Service Center
For general correspondence: P.O. Box 7960, Philadelphia, PA 19176. 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.
Spousal Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees the
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on the Contract Value, subject to our rules regarding the
timing and amount of withdrawals. Under the Spousal Lifetime Five Income
Benefit, an annual income amount is paid until the later death of two natural
persons who are each other's spouses at the time of election and at the first
death of one of them.
Spousal Highest Daily Lifetime Seven/SM/ Income Benefit
The spousal version of the Highest Daily Lifetime Seven Income Benefit.
Spousal Highest Daily Lifetime Seven is the same class of optional Benefit as
our Spousal Lifetime Five Income Benefit, but differs (among other things)
with respect to how the Protected Withdrawal Value is calculated and to how
the lifetime withdrawals are calculated.
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.
6
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 Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners Annuity One 3 Contract?"
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.
7
SUMMARY FOR SECTIONS 1-11
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 we will pay at least the minimum interest rate dictated by applicable
state law, if any.
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.
8
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.
SECTION 2
What Investment Options Can I Choose?
You can invest your money in several variable investment options. The variable
investment options are classified according to their investment style, and a
brief description of each portfolio's investment objective and key policies is
set forth in Section 2, to assist you in determining which portfolios may be
of interest to you.
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). 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. See
Section 3, "What Kind Of Payments Will I Receive During The Income Phase?"
The Lifetime withdrawal benefits (each discussed in Section 5) and the Income
Appreciator Benefit (discussed in Section 6) each may provide an additional
amount upon which your annuity payments are based.
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), or Highest Daily Value Death Benefit.
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.
The Highest Daily Value Death Benefit provides a death benefit equal to the
greater of the base death benefit or the highest daily value less proportional
withdrawals.
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 Option, if the conditions that we describe,
in Section 4, 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 phase.
SECTION 5
What Are The Lifetime Withdrawal Benefits?
The Lifetime Five Income Benefit is an optional feature that guarantees your
ability to withdraw an amount equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amounts of withdrawals. There are two options--one is designed to
provide an annual withdrawal amount for life (the "Life Income Benefit"), and
the other is designed to provide a greater annual withdrawal amount (than the
first option), as long as there is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
9
SUMMARY FOR SECTIONS 1-11 continued
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the Contract Value allocated to the variable
investment options. This charge is in addition to the charge for the
applicable death benefit.
In addition to the Lifetime Five Income Benefit, we offer a benefit called the
Spousal Lifetime Five Income Benefit. The Spousal Lifetime Five Income benefit
is similar to the Lifetime Five Income Benefit, except that it is offered only
to those who are each other's spouses at the time the benefit is elected, and
the benefit offers only a Life Income Benefit (not the Withdrawal Benefit).
The charge for the Spousal Lifetime Five Income Benefit is a daily fee equal
on an annual basis to 0.75% of the Contract Value allocated to the variable
investment options. The charge is in addition to the charge for the applicable
death benefit.
Highest Daily Lifetime Five is similar to our Lifetime Five and Spousal
Lifetime Five benefits, in that under each such benefit, there is a "protected
withdrawal value" that serves as the basis for withdrawals you can make (which
we may refer to as "Total Protected Withdrawal Value", for Highest Daily
Lifetime Five only). As we discuss in more detail later, we guarantee this
protected withdrawal value, even if your Contract Value declines. Thus, as a
participant in one of these benefits, you are assured of a certain amount that
you can withdraw, even if there is a significant decline in the securities
markets. Highest Daily Lifetime Five Benefit differs from Lifetime Five and
Spousal Lifetime Five in that (a) the Protected Withdrawal Value is determined
based on the highest daily Contract Value and (b) we require you to
participate in an asset transfer program, under which your Contract Value may
be transferred periodically between the variable investment options and the
Benefit Fixed Rate Account (which is part of our general account). This
formula is described more fully in Appendix C. We operate the asset transfer
program under a formula, which is described in the portion of Section 5
concerning the Highest Daily Lifetime Five Benefit. As discussed in Section 5,
when you elect Highest Daily Lifetime Five, the asset transfer formula is made
a part of your annuity contract, and thus may not be altered thereafter.
However, we do reserve the right to amend the formula for new-issued annuity
contracts that elect Highest Daily Lifetime Five and for existing contracts
that elect the benefit in the future. As we discuss in more detail later in
this prospectus, this required asset transfer program helps us manage our
financial exposure under Highest Daily Lifetime Five, by moving assets out of
the variable investment options in the event of securities market declines. In
essence, we seek to preserve the value of these assets, by transferring them
to a more stable account. Of course, the formula also contemplates the
transfer of assets from the Benefit Fixed Rate Account to the variable
investment options in certain other scenarios.
Finally, we offer Highest Daily Lifetime Seven, an optional feature available
for an additional charge that guarantees your ability to withdraw amounts
equal to a percentage of a principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Contract Value. Highest Daily Lifetime Seven is the same
class of optional Benefit as our Lifetime Five Income Benefit, but differs
(among other things) with respect to how the Protected Withdrawal Value is
calculated and to how the lifetime withdrawals are calculated. Spousal Highest
Daily Lifetime Seven is the spousal version of Highest Daily Lifetime Seven,
and thus offers lifetime payments until the second-to-die of two spouses.
SECTION 6
What Is The Income Appreciator Benefit?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, 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. You can
activate this benefit in one of three ways, as described in Section 6. Note,
however, that the annuitization options within this benefit are limited.
SECTION 7
How Can I Purchase A Strategic Partners Annuity One 3 Contract?
You can purchase this contract, unless we agree otherwise and subject to our
rules, with a minimum initial purchase payment of $10,000. You must get our
prior approval for any initial and additional purchase payment of $1,000,000
or more, unless we are prohibited under applicable state law from insisting on
such 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.
10
SECTION 8
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 (or other) option that
you choose. The daily cost is equivalent to an annual charge as follows:
-- 1.40% if you choose the base death benefit,
-- 1.65% if you choose the roll-up or step-up Guaranteed Minimum Death
Benefit option (i.e., 0.25% in addition to the base death benefit
charge),
-- 1.75% if you choose the greater of the roll-up and step-up Guaranteed
Minimum Death Benefit option (i.e., 0.35% in addition to the base death
benefit charge),
-- 1.90% if you choose the Highest Daily Value Death Benefit (i.e., 0.50%
in addition to the base death benefit charge),
-- 0.60% if you choose the Lifetime Five Income Benefit (1.50% maximum
charge). This charge is in addition to the charge for the applicable
death benefit,
-- 0.75% if you choose the Spousal Lifetime Five Income Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit,
-- 0.60% if you choose the Highest Daily Lifetime Five Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit,
-- 0.60% of the Protected Withdrawal Value if you choose the Highest Daily
Lifetime Seven Benefit (1.50% maximum charge). This charge is in
addition to the charge for the applicable death benefit, or
-- 0.75% of the Protected Withdrawal Value if you choose the Spousal
Highest Daily Lifetime Seven Income Benefit (1.50% maximum charge). This
charge is in addition to the charge for the applicable death benefit.
.. 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 (1.00% maximum charge). (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. 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 2007, the
fees of these funds ranged from 0.37% to 1.65% annually. For certain funds,
expenses are reduced pursuant to expense waivers and comparable
arrangements. In general, these expense waivers and comparable arrangements
are not guaranteed, and 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" and Section 8, "What Are The
Expenses Associated With The Strategic Partners Annuity One 3 Contract?"
SECTION 9
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.
11
SUMMARY FOR SECTIONS 1-11 continued
We offer optional living benefits--the Lifetime Five Income Benefit, Spousal
Lifetime Five Income Benefit, Highest Daily Lifetime Five Benefit, Highest
Daily Lifetime Seven Income Benefit, and Spousal Highest Daily Lifetime Seven
Benefit under which we guarantee that certain amounts will be available to you
for withdrawal, regardless of market-related declines in your Contract Value.
You need not participate in any of these benefits in order to withdraw some or
all of your money. You also may access your Income Appreciator Benefit through
withdrawals.
SECTION 10
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 taxable and subject to the 10% penalty if
withdrawn prior to age 59 1/2.
SECTION 11
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 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.
12
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 Section 8, "What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract?" The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
-------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
-------------------------------------------------
WITHDRAWAL CHARGE /1/
-------------------------------------------------
NUMBER OF CONTRACT
ANNIVERSARIES SINCE CONTRACT CONTRACT
PURCHASE PAYMENT WITH CREDIT WITHOUT 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%
-------------------------------------------------
MAXIMUM TRANSFER FEE
-------------------------------------------------------------------------
Each transfer after 12 /2/ $30.00
-------------------------------------------------------------------------
Each transfer after 20 $10.00
(Beneficiary Continuation Option only)
-------------------------------------------------------------------------
Charge for premium Tax Imposed on us by certain States/Jurisdictions /3/
-------------------------------------------------------------------------
Up to 3.5% of Contract Value
-------------------------------------------------------------------------
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" in Section 8. 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.
3 We reserve the right to deduct the charge either at the time the tax is
imposed, upon a full surrender of the Annuity, or upon annuitization.
13
SUMMARY OF CONTRACT EXPENSES continued
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.
- ---------------------------------------------------------------------------------------------
PERIODIC ACCOUNT EXPENSES
- ---------------------------------------------------------------------------------------------
Maximum Contract Maintenance Charge and Contract $60.00
Charge Upon Full Withdrawal /4/
- ---------------------------------------------------------------------------------------------
Maximum Annual Contract Fee if Contract Value is less lesser of $30 or 2% of Contract Value
than $25,000
(Beneficiary Continuation option ONLY)
- ---------------------------------------------------------------------------------------------
INSURANCE AND ADMINISTRATIVE EXPENSES WITH THE INDICATED BENEFITS
As a Percentage of Contract Value in Variable Investment Options (except as indicated):
- ---------------------------------------------------------------------------------------------
CONTRACT CONTRACT
WITH WITHOUT
CREDIT CREDIT
----------------------------------------------------------
Maximum charge for Lifetime Five /5/ 1.50% 1.50%
----------------------------------------------------------
Maximum charge for Spousal Lifetime 1.50% 1.50%
Five /5/
----------------------------------------------------------
Maximum charge for Highest Daily 1.50% 1.50%
Lifetime Five /5/
----------------------------------------------------------
Maximum charge for Highest Daily 1.50% 1.50%
Lifetime Seven /5/
----------------------------------------------------------
Maximum charge for Spousal Highest 1.50% 1.50%
Daily Lifetime Seven /5/
----------------------------------------------------------
Lifetime Five Income Benefit 0.60% 0.60%
(current charge)
----------------------------------------------------------
Spousal Lifetime Five Income Benefit 0.75% 0.75%
(current charge)
----------------------------------------------------------
Highest Daily Lifetime Five Income 0.60% 0.60%
Benefit
(current charge)
----------------------------------------------------------
Highest Daily Lifetime Seven 0.60% 0.60%
(current charge): assessed against
Protected Withdrawal Value /6/
----------------------------------------------------------
Spousal Highest Daily Lifetime Seven 0.75% 0.75%
(current charge): assessed against
Protected Withdrawal Value /6/
----------------------------------------------------------
Base Death Benefit 1.50% 1.40%
----------------------------------------------------------
Guaranteed Minimum Death Benefit 1.75% 1.65%
Option - Roll-Up or Step-Up
----------------------------------------------------------
Guaranteed Minimum Death Benefit 1.85% 1.75%
Option - Greater of Roll-Up or Step-Up
----------------------------------------------------------
Highest Daily Value Death Benefit 2.00% 1.90%
----------------------------------------------------------
Maximum Annual Guaranteed Minimum 1.00% 1.00%
Income Benefit Charge and Charge Upon
Certain Withdrawals as a percentage
of average GMIB Protected Value /7/
----------------------------------------------------------
Annual Guaranteed Minimum Income 0.50% 0.50%
Benefit Charge and Charge Upon
Certain Withdrawals
(for contracts sold on or after
January 20, 2004 or upon subsequent
state approval) - as a percentage of
average GMIB Protected Value (current
charge)
----------------------------------------------------------
Annual Income Appreciator Benefit 0.25% 0.25%
Charge and Charge Upon Certain
Withdrawals /8/
----------------------------------------------------------
Annual Earnings Appreciator Benefit 0.30% 0.30%
Charge and Charge Upon Certain
Transactions /9/
----------------------------------------------------------
Settlement Service Charge 1.00% 1.00%
(if the Owner's beneficiary elects
the Beneficiary Continuation Option)
/10/
----------------------------------------------------------
4: Currently, we waive this fee if your Contract Value is greater than or
equal to $75,000 (waived if Contract Value is greater than or equal to
$25,000 for Beneficiary Continuation Option). 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.
5: We reserve the right to increase the charge to the maximum charge indicated
upon any step-up or reset under the benefit, or a new election of the
benefit. However, we have no present intention of doing so.
14
6: With respect to Highest Daily Lifetime Seven and Spousal Highest Daily
Lifetime Seven, the 0.60% charge and 0.75% charge, respectively, is
assessed against the Protected Withdrawal Value. With respect to each of
Highest Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven,
one-fourth of the annual charge is deducted at the end of each quarter,
where the quarters are part of years that have as their anniversary the
date that the benefit was elected. The fee is taken out of Contract Value
in the variable investment options. These optional benefits are not
available under the Beneficiary Continuation Option.
7: 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. The fee is withdrawn from
each variable investment option in the same proportion as the Contact Value
allocated to that variable investment option represents to the total
Contract Value in all variable investment options. 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. We reserve the right to increase this
charge up to the maximum indicated upon any reset of the benefit or new
election.
8: 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 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.
9: 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.
10:The other Insurance and Administrative Expense Charges do not apply if you
are a beneficiary under the Beneficiary Continuation Option. Instead, the
Settlement Service Charge set forth here applies, if your beneficiary
elects the Beneficiary Continuation Option. The 1.00% charge is an annual
charge that is assessed daily against the assets in the variable investment
options.
-----------------------------------
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, 2007.
Fund expenses are not fixed or guaranteed by the Strategic Partners Annuity
One 3 contract, and may vary from year to year.
------------------------------------------------------
MINIMUM MAXIMUM
------------------------------------------------------
Total Annual Underlying Mutual Fund 0.37% 1.65%
Operating Expenses*
------------------------------------------------------
* See "Summary of Contract Expenses" - Underlying Mutual Fund Portfolio
Annual Expenses for more detail on the expenses of the underlying mutual
funds.
- --------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
----------------------------------------------------------
UNDERLYING PORTFOLIO Management Other 12b-1 Fees Acquired Total Annual
Fee /4/ Expenses Portfolio Fees Portfolio
& Expenses /6/ Expenses
- --------------------------------------------------------------------------------------------------
Advanced Series Trust /1,3/
AST Advanced Strategies 0.85% 0.15% 0.00% 0.04% 1.04%
AST Aggressive Asset Allocation /2/ 0.15% 0.03% 0.00% 0.96% 1.14%
AST AllianceBernstein Core Value 0.75% 0.11% 0.00% 0.00% 0.86%
AST AllianceBernstein Growth & Income 0.75% 0.08% 0.00% 0.00% 0.83%
AST American Century Income & Growth 0.75% 0.11% 0.00% 0.00% 0.86%
15
SUMMARY OF CONTRACT EXPENSES continued
- ------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- ------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
----------------------------------------------------------
UNDERLYING PORTFOLIO Management Other 12b-1 Fees Acquired Total Annual
Fee /4/ Expenses Portfolio Fees Portfolio
& Expenses /6/ Expenses
- ------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation 0.85% 0.25% 0.00% 0.00% 1.10%
AST Balanced Asset Allocation /2/ 0.15% 0.01% 0.00% 0.90% 1.06%
AST Capital Growth Asset Allocation /2/ 0.15% 0.01% 0.00% 0.93% 1.09%
AST Cohen & Steers Realty Portfolio 1.00% 0.12% 0.00% 0.00% 1.12%
AST Conservative Asset Allocation /2/ 0.15% 0.02% 0.00% 0.87% 1.04%
AST DeAM Large-Cap Value 0.85% 0.11% 0.00% 0.00% 0.96%
AST DeAM Small-Cap Value 0.95% 0.18% 0.00% 0.00% 1.13%
AST Federated Aggressive Growth 0.95% 0.11% 0.00% 0.00% 1.06%
AST First Trust Balanced Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST First Trust Capital Appreciation Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST Goldman Sachs Concentrated Growth 0.90% 0.10% 0.00% 0.00% 1.00%
AST Goldman Sachs Mid-Cap Growth 1.00% 0.12% 0.00% 0.00% 1.12%
AST High Yield 0.75% 0.12% 0.00% 0.00% 0.87%
AST Investment Grade Bond /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST JPMorgan International Equity 0.87% 0.13% 0.00% 0.00% 1.00%
AST Large-Cap Value 0.75% 0.08% 0.00% 0.00% 0.83%
AST Lord Abbett Bond-Debenture 0.80% 0.11% 0.00% 0.00% 0.91%
AST Marsico Capital Growth 0.90% 0.08% 0.00% 0.00% 0.98%
AST MFS Global Equity 1.00% 0.21% 0.00% 0.00% 1.21%
AST MFS Growth 0.90% 0.12% 0.00% 0.00% 1.02%
AST Mid-Cap Value 0.95% 0.14% 0.00% 0.00% 1.09%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.10% 0.00% 0.00% 1.00%
AST Neuberger Berman Mid-Cap Value 0.89% 0.10% 0.00% 0.00% 0.99%
AST Neuberger Berman Small-Cap Growth 0.95% 0.12% 0.00% 0.00% 1.07%
AST PIMCO Limited Maturity Bond 0.65% 0.11% 0.00% 0.00% 0.76%
AST Preservation Asset Allocation /2/ 0.15% 0.03% 0.00% 0.82% 1.00%
AST QMA US Equity Alpha 1.00% 0.63% 0.00% 0.00% 1.63%
AST Small-Cap Growth 0.90% 0.15% 0.00% 0.00% 1.05%
AST Small-Cap Value 0.90% 0.10% 0.00% 0.00% 1.00%
AST T. Rowe Price Asset Allocation 0.85% 0.12% 0.00% 0.00% 0.97%
AST T. Rowe Price Global Bond 0.80% 0.13% 0.00% 0.00% 0.93%
AST T. Rowe Price Natural Resources 0.90% 0.10% 0.00% 0.00% 1.00%
AST T. Rowe Price Large-Cap Growth 0.88% 0.08% 0.00% 0.00% 0.96%
AST UBS Dynamic Alpha Strategy 1.00% 0.13% 0.00% 0.02% 1.15%
AST Western Asset Core Plus Bond /5/ 0.70% 0.10% 0.00% 0.02% 0.82%
The Prudential Series Fund /7,8,9/
Equity Portfolio 0.45% 0.02% 0.00% 0.00% 0.47%
Global Portfolio 0.75% 0.06% 0.00% 0.00% 0.81%
Jennison Portfolio 0.60% 0.02% 0.00% 0.00% 0.62%
Money Market Portfolio 0.40% 0.03% 0.00% 0.00% 0.43%
Stock Index Portfolio /10/ 0.35% 0.02% 0.00% 0.00% 0.37%
Value Portfolio 0.40% 0.03% 0.00% 0.00% 0.43%
SP Aggressive Growth Asset Allocation Portfolio 0.05% 0.06% 0.00% 0.85% 0.96%
SP Balanced Asset Allocation Portfolio 0.05% 0.01% 0.00% 0.79% 0.85%
SP Conservative Asset Allocation Portfolio 0.05% 0.02% 0.00% 0.75% 0.82%
SP Davis Value Portfolio 0.75% 0.05% 0.00% 0.00% 0.80%
SP Growth Asset Allocation Portfolio 0.05% 0.01% 0.00% 0.83% 0.89%
SP International Growth Portfolio 0.85% 0.09% 0.00% 0.00% 0.94%
SP International Value Portfolio 0.90% 0.09% 0.00% 0.00% 0.99%
SP Mid Cap Growth Portfolio 0.80% 0.07% 0.00% 0.00% 0.87%
16
- -----------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- -----------------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
----------------------------------------------------------
UNDERLYING PORTFOLIO Management Other 12b-1 Fees Acquired Total Annual
Fee /4/ Expenses Portfolio Fees Portfolio
& Expenses /6/ Expenses
- -----------------------------------------------------------------------------------------------------------
SP PIMCO High Yield Portfolio 0.60% 0.09% 0.00% 0.00% 0.69%
SP PIMCO Total Return Portfolio 0.60% 0.07% 0.00% 0.00% 0.67%
SP Prudential U.S. Emerging Growth Portfolio 0.60% 0.05% 0.00% 0.00% 0.65%
SP Small Cap Value Portfolio 0.90% 0.06% 0.00% 0.00% 0.96%
SP Strategic Partners Focused Growth Portfolio 0.90% 0.25% 0.00% 0.00% 1.15%
Janus Aspen Series
Large Cap Growth Portfolio--Service Shares 0.64% 0.02% 0.25% 0.01% 0.92%
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets 1.05% 0.35% 0.25% N/A 1.65%
1 The Fund has entered into arrangements with the issuers of the variable
insurance products offering the Portfolios under which the Fund compensates
the issuers 0.10% for providing ongoing services to Portfolio shareholders
in lieu of the Fund providing such services directly to
shareholders. Amounts paid under these arrangements are included in "Other
Expenses." Subject to the expense limitations set forth below, for each
Portfolio of the Fund other than the Dynamic Asset Allocation Portfolios,
0.03% of the 0.10% administrative services fee is voluntarily waived. The
Dynamic Asset Allocation Portfolios do not directly pay any portion of the
0.10% administrative service fee. The Acquired Portfolios in which the
Dynamic Asset Allocation Portfolios invest, however, are subject to the
administrative services fee. With respect to the AST QMA US Equity Alpha
Portfolio, "Other Expenses" includes dividend expenses on short sales and
interest expenses on short sales. Our reference above to the Dynamic Asset
Allocation Portfolios refers to these portfolios: AST Aggressive Asset
Allocation, AST Balanced Asset Allocation, AST Capital Growth Asset
Allocation, AST Conservative Asset Allocation, and AST Preservation Asset
Allocation.
2 Some of the Portfolios invest in other investment companies (the Acquired
Portfolios). For example, each Dynamic Asset Allocation Portfolio invests
primarily in shares of other Portfolios of Advanced Series Trust. Investors
in a Portfolio indirectly bear the fees and expenses of the Acquired
Portfolios. The expenses shown under "Acquired Portfolio Fees and Expenses"
represent a weighted average of the expense ratios of the Acquired
Portfolios in which each Portfolio invested during the year ended
December 31, 2007. The Dynamic Asset Allocation Portfolios do not pay any
transaction fees when purchasing or redeeming shares of the Acquired
Portfolios. Our reference above to the Dynamic Asset Allocation Portfolios
refers to these portfolios: AST Aggressive Asset Allocation, AST Balanced
Asset Allocation, AST Capital Growth Asset Allocation, AST Conservative
Asset Allocation, and AST Preservation Asset Allocation.
3 Prudential Investments LLC and AST Investment Services, Inc. have
voluntarily agreed to waive a portion of their management fee and/or limit
total expenses (expressed as an annual percentage of average daily
net assets) for certain Portfolios of the Fund. These arrangements, which
are set forth as follows, may be discontinued or otherwise modified at any
time. AST American Century Strategic Allocation: 1.25%; AST Cohen & Steers
Realty: 1.45%; AST DeAM Small-Cap Value: 1.14%; AST Goldman Sachs
Concentrated Growth: 0.86%; AST Goldman Sachs Mid-Cap Growth: 1.12%; AST
High Yield: 0.88%; AST JPMorgan International Equity: 1.01%; AST Large-Cap
Value: 1.20%; AST Lord Abbett Bond-Debenture: 0.88%; AST MFS Growth: 1.35%;
AST Marsico Capital Growth: 1.35%; AST Mid-Cap Value: 1.45%; AST Neuberger
Berman Mid-Cap Growth: 1.25%; AST Neuberger Berman Mid-Cap Value: 1.25%;
AST PIMCO Limited Maturity Bond: 1.05%; AST T. Rowe Price Asset
Allocation: 1.25%; AST T. Rowe Price Natural Resources: 1.35%.
4 The management fee rate shown in the "management fees" column represents
the actual fee rate paid by the indicated Portfolio for the fiscal year
ended December 31, 2007, except that the fee rate shown does not reflect
the impact of any voluntary management fee waivers that may be applicable
and which would result in a reduction in the fee rate paid by the
Portfolio. The management fee rate for certain Portfolios may include
"breakpoints" which are reduced fee rates that are applicable at specified
levels of Portfolio assets; the effective fee rates shown in the table
reflect and incorporate any fee "breakpoints" which may be applicable.
5 The Western Asset Core Plus Bond Portfolio is based on estimated expenses
for 2008 and current period average daily net assets. The AST Investment
Grade Bond Portfolio expenses are based on estimated expenses for 2008 at
an estimated asset level.
6 Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Total Annual Portfolio Operating Expenses listed above may
exceed the expense limit numbers. The impact of the acquired fund fees and
expenses are included in the total returns of the Fund.
7 Investors incur certain fees and expenses in connection with an investment
in the Fund's Portfolios. The following table shows the fees and expenses
that you may incur if you invest in Class 1 shares of the Portfolios
through a variable annuity contract. The fees and expenses shown below are
based the fees and expenses incurred in the year ended December 31, 2007
(except as explained in the footnotes) and are expressed as a percentage of
the average daily net assets of each Portfolio. The table does not include
annuity contract charges. Because annuity contract charges are not
included, the total fees and expenses that you will incur will be higher
than the fees and expenses set forth in the following table. See this
prospectus for the fees and expenses under the annuity contract.
8 Some of the Portfolios invest in other investment companies (the Acquired
Portfolios). For example, each SP Asset Allocation Portfolio invests in
shares of other Portfolios of the Fund, and some Portfolios invest in other
funds, including the Dryden Core Investment Fund. Investors in a Portfolio
indirectly bear the fees and expenses of the Acquired Portfolios. The
expenses shown in the column "Acquired Portfolio Fees and Expenses"
represent a weighted average of the expense ratios of the Acquired
Portfolios in which each Portfolio invested during the year ended
December 31, 2007. The SP Asset Allocation Portfolios do not pay any
transaction fees when purchasing or redeeming shares of the Acquired
Portfolios. Each of the Asset Allocation Portfolios is responsible for the
payment of its own "Other Expenses," including, without limitation,
custodian fees, legal fees, trustee fees and audit fee, in accordance with
the terms of the management agreement.
9 Prudential Investments LLC has voluntarily agreed to waive a portion of its
management fee and/or limit total expenses (expressed as an annual
percentage of average daily net assets) for certain Portfolios of the Fund.
These arrangements, which are set forth as follows for Class 1 shares, may
be discontinued or
17
SUMMARY OF CONTRACT EXPENSES continued
otherwise modified at any time. Stock Index Portfolio: 0.75%; Value
Portfolio: 0.75%; SP International Growth Portfolio: 1.24%; SP Mid Cap
Growth Portfolio: 1.00%; SP Small Cap Value Portfolio: 1.05%; SP Strategic
Partners Focused Growth Portfolio: 1.25%.
10 The Portfolio's contractual management fee rate is as follows: 0.35% for
average net assets up to $4 billion, and 0.30% for average net assets in
excess of $4 billion.
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: Highest Daily Value 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 the Highest Daily Value 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;
.. For each separate account charge, we deduct the maximum charge rather than
any current charge; and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 1b: Contract With Credit: Highest Daily Value 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: Highest Daily Value 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: Highest Daily Value 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 any optional insurance 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;
18
.. For each separate account charge, we deduct the maximum charge rather than
any current charge; 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.
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 general estimate of the total contract fees we expect to collect
in 2008. 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.
A table of accumulation unit values appears in Appendix A to this prospectus.
Contract with Credit: Highest Daily Value Death Benefit; Guaranteed Minimum
Income Benefit; Earnings Appreciator Benefit; Income Appreciator Benefit
Example 1a: If You Withdraw Your Assets Example 1b: If You Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$1,323 $2,455 $3,482 $5,579 $571 $1,703 $2,824 $5,579
----------------------------------------------------------------------------------------
Contract Without Credit: Highest Daily Value Death Benefit; Guaranteed Minimum
Income Benefit; Earnings Appreciator Benefit; Income Appreciator benefit
Example 2a: If You Withdraw Your Assets Example 2b: If You Do Not Withdraw Your Assets
------------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
------------------------------------------------------------------------------------------
$1,169 $2,060 $2,943 $5,293 $539 $1,610 $2,673 $5,293
------------------------------------------------------------------------------------------
19
EXPENSE EXAMPLES continued
Contract With Credit: Base Death Benefit
Example 3a: If You Withdraw Your Assets Example 3b: If you Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$1,114 $1,854 $2,523 $3,879 $362 $1,102 $1,865 $3,879
----------------------------------------------------------------------------------------
Contract Without Credit: Base Death Benefit
Example 4a: If You Withdraw Your assets Example 4b: If You Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$968 $1,480 $2,015 $3,640 $338 $1,030 $1,745 $3,640
----------------------------------------------------------------------------------------
20
PART II SECTIONS 1-11
- --------------------------------------------------------------------------------
21
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 when it is sold outside a
tax-favored plan (generally called a non-qualified annuity). 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. In other words, you need not purchase this contract to gain the
preferential tax treatment provided by your retirement plan. Therefore, before
purchasing an annuity in a tax-favored plan, you should consider whether its
features and benefits beyond tax deferral, including the death benefit and
income benefits, meet your needs and goals. You should consider the relative
features, benefits and costs of this annuity 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.
In replacing another annuity you may own, please consider all charges
associated with that annuity. Credits applicable to bonus products, such as
the Contract With Credit, should not be viewed as an offset of any surrender
charge that applies to another annuity contract you may currently own.
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.
22
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 withholding; 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.
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. The mutual fund
options that you select are your choice. We do not recommend or endorse any
particular underlying mutual fund.
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 and a short,
summary description of their key policies to assist you in determining which
portfolios may be of interest to you. What appears in the chart below is
merely a summary - please consult the portfolio's prospectus for a
comprehensive discussion of the portfolio's investment policies. 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.
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index
Portfolio, Prudential Value Portfolio, and each "SP" Portfolio of the
Prudential Series Fund, are managed by an indirect, wholly-owned subsidiary of
Prudential Financial, Inc. called Prudential Investments LLC (PI) under a
"manager-of-managers" approach. The portfolios of the Advanced Series Trust
are co-managed by PI and AST Investment Services, Inc., also under a
manager-of-managers approach. AST Investment Services, Inc. is an indirect,
wholly-owned subsidiary of Prudential Financial, Inc.
Under the manager-of-managers approach, PI and AST Investment Services, Inc.
have the ability to assign sub-advisers to manage specific portions of a
portfolio, and the portion managed by a sub-adviser may vary from 0% to 100%
of the portfolio's assets. The sub-advisers that manage some or all of a
portfolio are listed on the following chart.
Please note that we restrict the investment options in which you can
participate, if you elect certain optional benefits. Thus, your participation
in those benefits could result in your missing investment opportunities that
might arise in investment options from which you are excluded. (Of course,
potentially missing investment opportunities in investment options in which
you do not participate is an inherent consequence of any investment choice,
and generally speaking, it is your decision as to how to invest your purchase
payments).
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.
23
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
Pruco Life has entered into agreements with certain underlying portfolios
and/or the investment adviser or distributor of such portfolios. Pruco Life
may provide administrative and support services to such portfolios pursuant to
the terms of these agreements and under which it receives a fee of up to 0.55%
annually (as of May 1, 2008) of the average assets allocated to the portfolio
under the contract. These agreements, including the fees paid and services
provided, can vary for each underlying mutual fund whose portfolios are
offered as sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the contract. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributors, and the amounts of such payments may vary
between and among each adviser, sub-adviser, and distributor depending on
their respective participation. During 2007, with regard to amounts that were
paid under these kinds of arrangements, the amounts ranged from approximately
$750 to approximately $946,934. These amounts may have been paid to one or
more Prudential-affiliated insurers issuing individual variable annuities.
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.
Upon the introduction of the Advanced Series Trust Asset Allocation Portfolios
on December 5, 2005, we ceased offering the Prudential Series Fund Asset
Allocation Portfolios to new purchasers and to existing contract owners who
had not previously invested in those Portfolios. However, a contract owner who
had Contract Value allocated to a Prudential Series Fund Asset Allocation
Portfolio prior to December 5, 2005 may continue to allocate purchase payments
to that Portfolio after that date. In addition, after December 5, 2005, we
ceased offering the Prudential Series Fund SP Large Cap Value Portfolio to new
purchasers and to existing contract owners who had not previously invested in
that Portfolio. However, a contract owner who had Contract Value allocated to
the SP Large Cap Value Portfolio prior to December 5, 2005 may continue to
allocate purchase payments to that Portfolio after that date.
24
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
ADVANCED SERIES TRUST
-------------------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management, LLC;
of equity and fixed income Pacific Investment
securities across different Management
investment categories and investment Company LLC
managers. The Portfolio pursues a (PIMCO); T. Rowe
combination of traditional and Price Associates,
non-traditional investment Inc.; William Blair
strategies. & Company, LLC
-------------------------------------------------------------------------
ASSET AST Aggressive Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
100% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
92.5% to 100%) and the remainder of
its net assets to underlying
portfolios investing primarily in
debt securities and money market
instruments (with a range of 0% -
7.5%).
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The subadviser
expects that the majority of the
Portfolio's assets will be invested
in the common stocks of large
companies that appear to be
undervalued. Among other things, the
Portfolio seeks to identify
compelling buying opportunities
created when companies are
undervalued on the basis of investor
reactions to near-term problems or
circumstances even though their
long-term prospects remain sound.
The subadviser seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Growth & AllianceBernstein
CAP Income Portfolio: seeks long-term L.P.
VALUE growth of capital and income while
attempting to avoid excessive
fluctuations in market value. The
Portfolio normally will invest in
common stocks (and securities
convertible into common stocks). The
subadviser will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects.
-------------------------------------------------------------------------
LARGE AST American Century Income & Growth American Century
CAP Portfolio: seeks capital growth with Investment
VALUE current income as a secondary Management, Inc.
objective. The Portfolio invests
primarily in common stocks that
offer potential for capital growth,
and may, consistent with its
investment objective, invest in
stocks that offer potential for
current income. The subadviser
utilizes a quantitative management
technique with a goal of building an
equity portfolio that provides
better returns than the S&P 500
Index without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-------------------------------------------------------------------------
ASSET AST American Century Strategic American Century
ALLOCA Allocation Portfolio: seeks Investment
TION/ long-term capital growth with some Management, Inc.
BALANCED regular income. The Portfolio will
invest, under normal circumstances,
in any type of U.S. or foreign
equity security that meets certain
fundamental and technical standards.
The portfolio managers will draw on
growth, value and quantitative
investment techniques in managing
the equity portion of the Portfolio
and diversify the Portfolio's
investments among small, medium and
large companies.
-------------------------------------------------------------------------
ASSET AST Balanced Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
75% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
67.5% to 80%), and 25% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 20.0%
to 32.5%).
-------------------------------------------------------------------------
25
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
65% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
57.5% to 72.5%, and 35% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 27.5%
to 42.5%).
-------------------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues
its investment objective by
investing, under normal
circumstances, at least 80% of its
net assets in common stocks and
other equity securities issued by
real estate companies, such as real
estate investment trusts (REITs).
Under normal circumstances, the
Portfolio will invest substantially
all of its assets in the equity
securities of real estate companies,
i.e., a company that derives at
least 50% of its revenues from the
ownership, construction, financing,
management or sale of real estate or
that has at least 50% of its assets
in real estate. Real estate
companies may include real estate
investment trusts (REITs).
-------------------------------------------------------------------------
ASSET AST Conservative Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
55% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
47.5% to 62.5%), and 45% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 37.5%
to 52.5%.
-------------------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the
equity securities of large-sized
companies included in the Russell
1000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 1000(R)
Value Index, but which attempts to
outperform the Russell 1000(R) Value
Index through active stock selection.
-------------------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in Management
the value stocks of smaller Americas, Inc.
companies. The Portfolio pursues its
objective, under normal market
conditions, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 2000(R)
Value Index, but which attempts to
outperform the Russell 2000(R) Value
Index.
-------------------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management Corp.;
the over-the-counter-market. Small Federated MDTA
companies will be defined as LLC
companies with market
capitalizations similar to companies
in the Russell 2000 Growth Index.
-------------------------------------------------------------------------
26
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust Advisors
ALLOCA Portfolio: seeks long-term capital L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and
approximately 35% in fixed income
securities. The Portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - The Dow(R) Target
Dividend, the Value Line(R) Target
25, the Global Dividend Target 15,
the NYSE(R) International Target 25,
and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index.
--------------------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust Advisors
ALLOCA Target Portfolio: seeks long-term L.P.
TION/ capital growth. The Portfolio seeks
BALANCED to achieve its objective by
investing approximately 80% in
common stocks and 20% in fixed
income securities. The portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Value
Line(R) Target 25, the Global
Dividend Target 15, the Target Small
Cap, the Nasdaq(R) Target 15, and
the NYSE(R) International Target 25.
Each strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index.
--------------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Goldman Sachs
CAP Growth Portfolio: seeks long-term Asset Management,
GROWTH growth of capital. The Portfolio L.P.
will pursue its objective by
investing primarily in equity
securities of companies that the
subadviser believes have the
potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the subadviser to
be positioned for long-term growth.
--------------------------------------------------------------------------
MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset Management,
growth. The Portfolio pursues its L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the
time of investment) fall within the
range of companies in the Russell
Mid-cap Growth Index. The subadviser
seeks to identify individual
companies with earnings growth
potential that may not be recognized
by the market at large.
--------------------------------------------------------------------------
FIXED AST High Yield Portfolio: seeks Pacific Investment
INCOME maximum total return, consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio invests, under normal
circumstances, at least 80% of its
net assets plus any borrowings for
investment purposes (measured at
time of purchase) in high yield,
fixed-income securities that, at the
time of purchase, are non-investment
grade securities. Such securities
are commonly referred to as "junk
bonds".
--------------------------------------------------------------------------
FIXED AST Investment Grade Bond Portfolio: Prudential
INCOME seeks the highest potential total Investment
return consistent with its specified Management, Inc.
level of risk tolerance to meet the
parameters established to support
the Highest Daily Lifetime Seven
benefits and maintain liquidity to
support changes in market conditions
for a fixed duration (weighted
average maturity) of about 6 years.
Please note that you may not make
purchase payments to this Portfolio,
and that this Portfolio is available
only with certain living benefits.
--------------------------------------------------------------------------
INTER AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management, Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of
the world. The equity securities
will ordinarily be traded on a
recognized foreign securities
exchange or traded in a foreign
over-the-counter market in the
country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
--------------------------------------------------------------------------
27
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management LLC;
VALUE of income, as well as capital Hotchkis and Wiley
appreciation. The Portfolio invests, Capital
under normal circumstances, at least Management LLC;
80% of its net assets in common J.P. Morgan
stocks of large capitalization Investment
companies. Large capitalization Management, Inc.
companies are those companies with
market capitalizations within the
market capitalization range of the
Russell 1000 Value Index.
-------------------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett & Co.
INCOME Portfolio: seeks high current income LLC
and the opportunity for capital
appreciation to produce a high total
return. The Portfolio invests, under
normal circumstances, at least 80%
of the value of its assets in fixed
income securities. The Portfolio
allocates its assets principally
among fixed income securities in
four market sectors: U.S. investment
grade securities, U.S. high yield
securities, foreign securities
(including emerging market
securities) and convertible
securities. Under normal
circumstances, the Portfolio invests
in each of the four sectors
described above. However, the
Portfolio may invest substantially
all of its assets in any one sector
at any time, subject to the
limitation that at least 20% of the
Portfolio's net assets must be
invested in any combination of
investment grade debt securities,
U.S. Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in
equity securities.
-------------------------------------------------------------------------
LARGE AST Marsico Capital Growth Marsico Capital
CAP Portfolio: seeks capital growth. Management, LLC
GROWTH Income realization is not an
investment objective and any income
realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in common stocks of large companies
that are selected for their growth
potential. Large capitalization
companies are companies with market
capitalizations within the market
capitalization range of the Russell
1000 Growth Index. In selecting
investments for the Portfolio, the
subadviser uses an approach that
combines "top down" macroeconomic
analysis with "bottom up" stock
selection. The "top down" approach
identifies sectors, industries and
companies that may benefit from the
trends the subadviser has observed.
The subadviser then looks for
individual companies with earnings
growth potential that may not be
recognized by the market at large,
utilizing a "bottom up" stock
selection process. The Portfolio
will normally hold a core position
of between 35 and 50 common stocks.
The Portfolio may hold a limited
number of additional common stocks
at times when the Portfolio manager
is accumulating new positions,
phasing out existing or responding
to exceptional market conditions.
-------------------------------------------------------------------------
INTER AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities. The Portfolio will
invest in the securities of U.S. and
foreign issuers (including issuers
in emerging market countries). While
the portfolio may invest its assets
in companies of any size, the
Portfolio generally focuses on
companies with relatively large
market capitalizations relative to
the markets in which they are traded.
-------------------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future, Financial Services
GROWTH rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of
its net assets in common stocks and
related securities, such as
preferred stocks, convertible
securities and depositary receipts,
of companies that the subadviser
believes offer better than average
prospects for long-term growth. The
subadviser uses a "bottom up" as
opposed to a "top down" investment
style in managing the Portfolio.
-------------------------------------------------------------------------
28
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
MID CAP AST Mid Cap Value Portfolio: seeks EARNEST Partners
VALUE to provide capital growth by LLC; WEDGE
investing primarily in Capital
mid-capitalization stocks that Management, LLP
appear to be undervalued. The
Portfolio generally invests, under
normal circumstances, at least 80%
of the value of its net assets in
mid-capitalization companies.
Mid-capitalization companies are
generally those that have market
capitalizations, at the time of
purchase, within the market
capitalization range of companies
included in the Russell Midcap Value
Index during the previous 12-months
based on month-end data.
------------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger Berman
GROWTH Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of mid-capitalization companies.
Mid-capitalization companies are
those companies whose market
capitalization is within the range
of market capitalizations of
companies in the Russell Midcap(R)
Growth Index. Using fundamental
research and quantitative analysis,
the subadviser looks for
fast-growing companies that are in
new or rapidly evolving industries.
------------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman
VALUE Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of medium capitalization companies.
For purposes of the Portfolio,
companies with market
capitalizations that fall within the
range of the Russell Midcap(R) Index
at the time of investment are
considered medium capitalization
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
------------------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Neuberger Berman
CAP Growth Portfolio: seeks maximum Management Inc.
GROWTH growth of investors' capital from a
portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily
investing at least 80% of its total
assets in the equity securities of
small-sized companies included in
the Russell 2000 Growth(R) Index.
------------------------------------------------------------------------
ASSET AST Niemann Capital Growth Asset Neimann Capital
ALLOCA Allocation Portfolio: seeks the Management Inc.
TION/ highest potential total return
GROWTH consistent with its specified level
of risk tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a one- to
three-year time frame based on the
subadviser's forecast for interest
rates.
------------------------------------------------------------------------
ASSET AST Preservation Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
35% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
27.5% to 42.5%), and 65% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 57.5%
to 72.5%.
------------------------------------------------------------------------
29
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
LARGE AST QMA US Equity Portfolio Quantitative
CAP (formerly known as AST Management
BLEND AllianceBernstein Managed Index 500 Associates LLC
Portfolio): seeks to produce returns
that exceed those of the benchmark.
The portfolio utilizes a long/short
investment strategy and will
normally invest at least 80% of its
net assets plus borrowings in equity
and equity related securities of
issuers traded on a securities
exchange or market in the US. The
benchmark index is the Russell
1000(R) which is comprised of stocks
representing more than 90% of the
market cap of the US market and
includes the largest 1000 securities
in the Russell 3000(R) index.
-------------------------------------------------------------------------
SMALL AST Small-Cap Growth Portfolio: Eagle Asset
CAP seeks long-term capital growth. The Management;
GROWTH Portfolio pursues its objective by Neuberger Berman
investing, under normal Management Inc.
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000(R) Index at the time of
the Portfolio's investment.
-------------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC;
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC;
appear to be undervalued. The J.P. Morgan
Portfolio invests, under normal Investment
circumstances, at least 80% of the Management, Inc.;
value of its net assets in small Lee Munder
capitalization stocks. Small Investments, Ltd
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000(R) Value Index.
-------------------------------------------------------------------------
ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total
assets in equity securities and 40%
in fixed income securities. This mix
may vary depending on the
subadviser's outlook for the
markets. The subadviser concentrates
common stock investments in larger,
more established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
-------------------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign
and U.S. dollar-denominated bonds.
The Portfolio will invest at least
80% of its total assets in fixed
income securities. The Portfolio
invests in all types of bonds,
including those issued or guaranteed
by U.S. or foreign governments or
their agencies and by foreign
authorities, provinces and
municipalities as well as investment
grade corporate bonds, mortgage and
asset-backed securities, and
high-yield bonds of U.S. and foreign
issuers. The Portfolio generally
invests in countries where the
combination of fixed-income returns
and currency exchange rates appears
attractive, or, if the currency
trend is unfavorable, where the
subadviser believes that the
currency risk can be minimized
through hedging. The Portfolio may
also invest up to 20% of its assets
in the aggregate in below
investment-grade, high-risk bonds
("junk bonds"). In addition, the
Portfolio may invest up to 30% of
its assets in mortgage-related
(including mortgage dollar rolls and
derivatives, such as collateralized
mortgage obligations and stripped
mortgage securities) and
asset-backed securities.
-------------------------------------------------------------------------
LARGE AST T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term growth of Associates, Inc.
GROWTH capital by investing predominantly
in the equity securities of a
limited number of large, carefully
selected, high-quality U.S.
companies that are judged likely to
achieve superior earnings growth.
The Portfolio takes a growth
approach to investment selection and
normally invests at least 80% of its
net assets in the common stocks of
large companies. Large companies are
defined as those whose market cap is
larger than the median market cap of
companies in the Russell 1000 Growth
Index as of the time of purchase.
-------------------------------------------------------------------------
30
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio invests,
under normal circumstances, at least
80% of the value of its assts in
natural resource companies. The
Portfolio may also invest in
non-resource companies with the
potential for growth. The Portfolio
looks for companies that have the
ability to expand production, to
maintain superior exploration
programs and production facilities,
and the potential to accumulate new
resources. Although at least 50% of
Portfolio assets will be invested in
U.S. securities, up to 50% of total
assets also may be invested in
foreign securities.
--------------------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio: UBS Global Asset
ALLOCA seeks to maximize total return, Management
TION/ consisting of capital appreciation (Americas) Inc.
BALANCED and current income. The Portfolio
invests in securities and financial
instruments to gain exposure to
global equity, global fixed income
and cash equivalent markets,
including global currencies. The
Portfolio may invest in equity and
fixed income securities of issuers
located within and outside the
United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's subadviser, to
gain exposure to certain global
equity and global fixed income
markets.
--------------------------------------------------------------------------
FIXED AST Western Asset Core Plus Bond Western Asset
INCOME Portfolio: seeks to maximize total Management
return, consistent with prudent Company
investment management and liquidity
needs, by investing to obtain its
average specified duration. The
Portfolio's current target average
duration is generally 2.5 to 7
years. The Portfolio pursues this
objective by investing in all major
fixed income sectors with a bias
towards non-Treasuries.
--------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
--------------------------------------------------------------------------
LARGE Equity Portfolio: seeks long-term ClearBridge
CAP growth of capital. The Portfolio Advisors, LLC;
BLEND invests at least 80% of its Jennison Associates
investable assets in common stocks LLC
of major established corporations as
well as smaller companies that the
subadvisers believe offer attractive
prospects of appreciation.
--------------------------------------------------------------------------
INTER Global Portfolio: seeks long-term LSV Asset
NATIONAL growth of capital. The Portfolio Management;
EQUITY invests primarily in common stocks Marsico Capital
(and their equivalents) of foreign Management, LLC;
and U.S. companies. Each subadviser T. Rowe Price
for the Portfolio generally will use Associates, Inc.;
either a "growth" approach or a William Blair &
"value" approach in selecting either Company, LLC
foreign or U.S. common stocks.
--------------------------------------------------------------------------
LARGE Jennison Portfolio: seeks long-term Jennison Associates
CAP growth of capital. The Portfolio LLC
GROWTH invests primarily in equity
securities of major, 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 equity
and equity- related securities of
companies with capitalization in
excess of $1 billion.
--------------------------------------------------------------------------
FIXED Money Market Portfolio: seeks Prudential
INCOME maximum current income consistent Investment
with the stability of capital and Management, Inc.
the 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.
--------------------------------------------------------------------------
ASSET SP Aggressive Growth Asset Prudential
ALLOCA Allocation Portfolio: seeks to Investments LLC
TION/ obtain the highest potential total
BALANCED return consistent with the specified
level of risk tolerance. The
Portfolio may invest in any other
Portfolio of the Fund (other than
another SP Asset Allocation
Portfolio), the AST Marsico Capital
Growth Portfolio of Advanced Series
Trust (AST), and the AST
International Value Portfolio of AST
(the Underlying Portfolios). Under
normal circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
--------------------------------------------------------------------------
31
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
----------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------------
ASSET SP Balanced Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios). The
Portfolio will invest in equity and
fixed-income Underlying Portfolios.
----------------------------------------------------------------------
ASSET SP Conservative Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
fixed-income Underlying Portfolios
but will also invest in equity
Underlying Portfolios.
----------------------------------------------------------------------
LARGE SP Davis Value Portfolio: seeks Davis Selected
CAP growth of capital. The Portfolio Advisers, L.P.
VALUE invests primarily in common stocks
of U.S. companies with market
capitalizations within the market
capitalization range of the Russell
1000 Value Index. It may also invest
in stocks of foreign companies and
U.S. companies with smaller
capitalizations. The subadviser
attempts to select common stocks of
businesses that possess
characteristics that the subadviser
believe foster the creation of
long-term value, such as proven
management, a durable franchise and
business model, and sustainable
competitive advantages. The
subadviser aims to invest in such
businesses when they are trading at
a discount to their intrinsic 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.
----------------------------------------------------------------------
ASSET SP Growth Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
equity Underlying Portfolios but
will also invest in fixed-income
Underlying Portfolios.
----------------------------------------------------------------------
INTER SP International Growth Portfolio: Marsico Capital
NATIONAL seeks long-term capital Management, LLC;
EQUITY appreciation. The Portfolio invests William Blair &
primarily in equity-related Company, LLC.
securities of foreign issuers. The
Portfolio invests primarily in the
common stock of large and
medium-sized foreign companies,
although it may also invest in
companies of all sizes. 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, which may
include countries with emerging
markets. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth
potential.
----------------------------------------------------------------------
INTER SP International Value Portfolio: LSV Asset
NATIONAL seeks long-term capital Management;
EQUITY appreciation. The Portfolio normally Thornburg
invests at least 80% of the Investment
Portfolio's assets in equity Management, Inc.
securities. The Portfolio will
invest at least 65% of its net
assets in the equity securities of
companies in at least three
different countries, without limit
as to the amount of assets that may
be invested in a single country.
----------------------------------------------------------------------
32
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
MID CAP SP Mid Cap Growth Portfolio: seeks Neuberger Berman
GROWTH long-term growth of capital. The Management Inc.
Portfolio normally invests at least
80% of investable assets in common
stocks and related securities, such
as preferred stocks, convertible
securities and depositary receipts
of companies with medium market
capitalizations, which the
subadviser believes have
above-average growth potential. The
Portfolio generally defines medium
market capitalization companies as
those companies with market
capitalizations within the market
capitalization range of the Russell
Mid Cap Growth(R) Index. 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).
-------------------------------------------------------------------------
FIXED SP PIMCO High Yield Portfolio: seeks Pacific Investment
INCOME to maximize total return consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio normally invests at least
80% of its investable assets in a
diversified portfolio of
high-yield/high-risk debt securities
rated below high grade but rated at
least CCC by Moody's Investor
Services, Inc. or equivalently rated
by Standard & Poor's Rating Group or
fitch, or, if unrated, determined by
the subadviser to be of comparable
quality.
-------------------------------------------------------------------------
FIXED SP PIMCO Total Return Portfolio: Pacific Investment
INCOME seeks to maximize total return Management
consistent with preservation of Company LLC
capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a diversified portfolio of
fixed-income investment instruments
of varying maturities.
-------------------------------------------------------------------------
MID CAP SP Prudential U.S. Emerging Growth Jennison Associates
GROWTH Portfolio: seeks long-term capital LLC
appreciation. The Portfolio normally
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 earnings
growth. The subadviser seeks to
invest in companies that it believes
are poised to benefit from an
acceleration of growth or an
inflection point in a company's
growth rate that is not currently
reflected in the stock price. The
team uses a research-intensive
approach based on internally
generated fundamental research.
-------------------------------------------------------------------------
SMALL SP Small-Cap Value Portfolio: seeks ClearBridge
CAP long-term capital appreciation. The Advisors, LLC;
VALUE Portfolio normally invests at least Goldman Sachs
80% its net assets plus borrowings Asset Management,
for investment purposes in the L.P.
equity securities of small
capitalization companies. The
Portfolio generally defines small
capitalization companies as those
companies with market capitalization
within the market capitalization
range of the Russell 2000 Value
Index. The Portfolio focuses on
equity securities that are believed
to be undervalued in the marketplace.
-------------------------------------------------------------------------
LARGE SP Strategic Partners Focused Growth AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.; Jennison
GROWTH capital. The Portfolio normally Associates LLC
invests at least 65% of total assets
in equity-related securities of U.S.
companies that the subadvisers
believe to have strong 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:
Jennison selects approximately 20
securities and AllianceBernstein
selects approximately 30 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 50 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.
-------------------------------------------------------------------------
33
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
LARGE Stock Index Portfolio: seeks Quantitative
CAP investment results that generally Management
BLEND correspond to the performance of Associates LLC
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.
-------------------------------------------------------------------------
LARGE Value Portfolio: seeks capital Jennison Associates
CAP appreciation. The Portfolio invests LLC
VALUE primarily in common stocks that the
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 Russell 1000(R) Value Index and,
over the long term, the S&P 500
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.
-------------------------------------------------------------------------
NATIONWIDE VARIABLE INSURANCE TRUST
-------------------------------------------------------------------------
INTER Gartmore NVIT Developing Markets NWD Management
NATIONAL Fund: seeks long-term capital & Research Trust/
EQUITY appreciation, under normal Gartmore Global
conditions by investing at least 80% Partners
of the value of its net assets in
equity securities of companies of
any size based in the world's
developing market countries. Under
normal market conditions,
investments are maintained in at
least six countries at all times
with no more than 35% of the value
of its net assets invested in
securities of any one country.
-------------------------------------------------------------------------
JANUS ASPEN SERIES
-------------------------------------------------------------------------
LARGE Janus Aspen Series: Large Cap Growth Janus Capital
CAP Portfolio - Service Shares: seeks Management LLC
GROWTH long-term growth of capital in a
manner consistent with the
preservation of capital. The
Portfolio invests under normal
circumstances, at least 80% of its
net assets in common stocks of
large-sized companies. Large-sized
companies are those whose market
capitalizations fall within the
range of companies in the Russell
1000(R) Index at the time of
purchase. The portfolio managers
apply a "bottom up" approach in
choosing investments. In other
words, the portfolio managers look
at companies one at a time to
determine if a company is an
attractive investment opportunity
and if it is consistent with the
Portfolio's investment policies. If
the portfolio managers are unable to
find such investments, the
Portfolio's uninvested assets may be
held in cash or similar investments,
subject to the Portfolio's specific
investment policies.
Within the parameters of its
specific investment policies, the
Portfolio may invest in foreign
equity and debt securities, which
may include investments in emerging
markets.
The Portfolio may also lend
portfolio securities on a short-term
or long-term basis, up to one-third
of its total assets.
-------------------------------------------------------------------------
"Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Industrials/SM/", "The
Dow/SM/", and the other Dow indices, are service marks of Dow Jones & Company,
Inc. ("Dow Jones") and have been licensed for use for certain purposes by
First Trust Advisors L.P. ("First Trust"). The portfolios are not endorsed,
sold or promoted by Dow Jones, and Dow Jones makes no representation regarding
the advisability of investing in such products.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by First Trust. The Portfolios are not sponsored, endorsed, managed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Portfolio.
34
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 dictated by
applicable state law. We may offer lower interest rates for Contracts With
Credit than for Contracts Without Credit. The interest rates we pay on the
fixed interest rate options may be influenced by the asset-based charges
assessed against the Separate Account.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Please note that if you elect Highest Daily Lifetime
Five, you cannot invest in either of these fixed interest rate options.
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 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 the minimum interest rate dictated by applicable state law
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.
35
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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 of 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 the minimum interest rate dictated by applicable state law.
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.
36
.. 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 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.
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 a 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 in good order by us, or by certain entities that we
have specifically designated. Our business day generally closes at 4:00 p.m.
Eastern time. Our business day may close earlier, for example if regular
trading on the New York Stock Exchange closes early. Transfer requests
received after the close of the business day 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.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. (As noted in the
fee table, we have different transfer charges under the Beneficiary
Continuation Option). 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.)
For purposes of the 12 free transfers per year that we allow, we will treat
multiple transfers that are submitted on the same business day as a single
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
sub-accounts 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 any transfer that
involves 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
37
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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.
.. The portfolios may have adopted their own policies and procedures with
respect to excessive trading of their respective shares, and we reserve the
right to enforce these policies and procedures. The prospectuses for the
portfolios describe any such policies and procedures, which may be more or
less restrictive than the policies and procedures we have adopted. Under
SEC rules, we are required to: (1) enter into a written agreement with each
portfolio or its principal underwriter that obligates us to provide to the
portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from
the portfolio to restrict or prohibit further purchases or transfers by
specific contract owners who violate the excessive trading policies
established by the portfolio. In addition, you should be aware that some
portfolios may receive "omnibus" purchase and redemption orders from other
insurance companies or intermediaries such as retirement plans. The omnibus
orders reflect the aggregation and netting of multiple orders from
individual owners of variable insurance contracts and/or individual
retirement plan participants. The omnibus nature of these orders may limit
the portfolios in their ability to apply their excessive trading policies
and procedures. In addition, the other insurance companies and/or
retirement plans may have different policies and procedures or may not have
any such policies and procedures because of contractual limitations. For
these reasons, we cannot guarantee that the portfolios (and thus contract
owners) will not be harmed by transfer activity relating to other insurance
companies and/or retirement plans that may invest in the portfolios.
.. A portfolio also may assess a short term trading fee in connection with a
transfer out of the variable investment option investing in that portfolio
that occurs within a certain number of days following the date of
allocation to the variable investment option. Each portfolio determines the
amount of the short term trading fee and when the fee is imposed. The fee
is retained by or paid to the portfolio and is not retained by us. The fee
will be deducted from your Contract Value, to the extent allowed by law. At
present, no Portfolio has adopted a short-term trading fee.
.. 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.
38
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. 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 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.
SCHEDULED TRANSACTIONS
Scheduled transactions include transfers under dollar cost averaging, the
asset allocation program, auto-rebalancing, systematic withdrawals, systematic
investments, required minimum distributions, substantially equal periodic
payments under Section 72(t) or 72(q) of the Internal Revenue Code of 1986, as
amended (Code), and annuity payments. Scheduled transactions are processed and
valued as of the date they are scheduled, unless the scheduled day is not a
business day. In that case, the transaction will be processed and valued on
the next business day, unless (with respect to required minimum distributions,
substantially equal periodic payments under Section 72(t) or 72(q) of the
Code, and annuity payments only), the next business day falls in the
subsequent calendar year, in which case the transaction will be processed and
valued on the prior business day.
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. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend to vote all of such shares
when that underlying fund seeks a vote of its shareholders. As such, all such
shares will be counted towards whether there is a quorum at the underlying
fund's shareholder meeting and towards the ultimate outcome of the vote. We
may change the way your voting instructions are calculated if it is required
or permitted by federal or state regulation.
39
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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.
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
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 Section 8, "What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract?"
Please note that annuitization essentially involves converting your Contract
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
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. IN ADDITION TO THE ANNUITY
PAYMENT OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE AN
OPTIONAL LIFETIME WITHDRAWAL BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT
OPTIONS THAT ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS
PROSPECTUS FOR ADDITIONAL DETAILS.
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.
40
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 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, you should consider the
required minimum distribution rules under the tax law when selecting your
annuity option.
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. The maximum GMIB charge
is 1.00% of average GMIB protected value. Please note that the charge is
calculated based on average GMIB protected value, not Contract Value. Thus,
for example, the fee would not decline on account of a reduction in
Contract Value. 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. IN LIGHT OF THIS WAITING PERIOD
UPON RESETS, IT IS NOT RECOMMENDED THAT YOU RESET YOUR GUARANTEED MINIMUM
INCOME BENEFIT IF THE REQUIRED BEGINNING DATE UNDER IRS MINIMUM
DISTRIBUTION REQUIREMENTS WOULD COMMENCE DURING THE 7 YEAR WAITING PERIOD.
SEE "MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION" IN SECTION 10
FOR ADDITIONAL INFORMATION ON IRS REQUIREMENTS.
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).
41
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
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). 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 the GMIB protected value after
subtracting 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 GMIB roll-up cap is reduced by the sum of all reductions described above.
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, 2006; 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, 2006 (in the first contract
year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the GMIB protected value is $251,038.10 (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 $251,038.10 to $241,038.10).
.. 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, 2006 (still within the first
contract year). Immediately before the withdrawal, the Contract Value is
$220,000 and the GMIB protected value is $241,941.95. 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
$241,941.95 to $239,441.95).
.. 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: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
.. The GMIB 200% cap is reduced by the sum of all reductions above ($490,000 -
$2,500 - $8,256.62, or $479,243.38).
.. 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, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. 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 $240,837.69 to $230,837.69).
.. The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,243.38 to $469,243.38).
.. The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
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
42
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 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 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.
43
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
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).
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.
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
developments. 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 referenced how we determine annuity payments 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.
44
4: WHAT IS THE DEATH BENEFIT?
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. For
entity-owned contracts, we pay a death benefit upon the death of the annuitant.
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 who is the owner's spouse on the date of death, then the
surviving spouse may continue the contract under the Spousal Continuance
Option. 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 Option.
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,
(i)if you have chosen a Guaranteed Minimum Death Benefit (GMDB), the GMDB
protected value or
(ii)if you have chosen the Highest Daily Value Death Benefit, a death
benefit equal to the highest daily value (computed as described below in
this section).
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit 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. You cannot elect a
GMDB option if you choose the Highest Daily Value Death Benefit.
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
value will increase by subsequent invested purchase payments and reduce by the
effect of 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%.
45
4: WHAT IS THE DEATH BENEFIT? continued
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%
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.
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.
GMDB Greater of Roll-Up and Step-Up
Under this option, the death benefit is equal to the greater of the step-up
value and the roll-up value, calculated as described above.
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 Option 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 Option 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 Option may apply. 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.
46
HIGHEST DAILY VALUE DEATH BENEFIT
The Highest Daily Value Death Benefit (HDV) is a feature under which the death
benefit may be "stepped-up" on a daily basis to reflect increasing Contract
Value. HDV is currently being offered in those jurisdictions where we have
received regulatory approval. Certain terms and conditions may differ between
jurisdictions once approved. The HDV is not available if you elect the
Guaranteed Minimum Death Benefit. Currently, HDV can only be elected at the
time you purchase your contract. Please note that you may not terminate the
HDV death benefit once elected. Moreover, because this benefit may not be
terminated once elected, you must, as detailed below, keep your Contract Value
allocated to certain asset allocation portfolios.
Under HDV, the amount of the benefit depends on whether the "target date" is
reached. The target date is reached upon the later of the contract anniversary
coinciding with or next following the elder owner's (or annuitant's, if entity
owned) 80th birthday or five years after the contract date. Prior to the
target date, the death benefit amount is increased on any business day if the
Contract Value on that day exceeds the most recently determined death benefit
amount under this option. These possible daily adjustments cease on and after
the target date, and instead adjustments are made only for purchase payments
and withdrawals.
IF THE CONTRACT HAS ONE CONTRACT OWNER, the contract owner must be age 79 or
less at the time the HDV is elected. If the contract has joint owners, the
older owner must be age 79 or less. If there are joint owners, death of the
owner refers to the first to die of the joint owners. If the contract is owned
by an entity, the annuitant must be age 79 or less, and death of the contract
owner refers to the death of the annuitant.
Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit on or after December 5,
2005 must allocate Contract Value to one or more of the following asset
allocation portfolios of Advanced Series Trust: AST Capital Growth Asset
Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio or to the AST Advanced Strategies Portfolio, AST First Trust
Balanced Target Portfolio, AST First Trust Capital Appreciation Target
Portfolio, AST UBS Dynamic Alpha Portfolio, American Century Strategic
Allocation Portfolio or AST T. Rowe Price Asset Allocation Portfolio. In
general, you must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and maintain
the Highest Daily Value death benefit. If, subsequent to your election of the
benefit, we change our requirements for how Contract Value must be allocated
under the benefit, that new requirement will apply only to new elections of
the benefit, and will not compel you to re-allocate your Contract Value in
accordance with our newly-adopted requirements. All subsequent transfers and
purchase payments will be subject to the new investment limitations.
The HDV death benefit depends on whether death occurs before or after the
Death Benefit Target Date.
IF THE CONTRACT OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
-- the base death benefit; and
-- the HDV as of the contract owner's date of death.
IF THE CONTRACT OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE, THE
DEATH BENEFIT EQUALS THE GREATER OF:
-- the base death benefit; and
-- the HDV on the Death Benefit Target Date plus the sum of all purchase
payments less the sum of all proportional withdrawals since the Death
Benefit Target Date.
The amount determined by this calculation is increased by any purchase
payments received after the contract owner's date of death and decreased by
any proportional withdrawals since such date.
CALCULATION OF THE HIGHEST DAILY VALUE DEATH BENEFIT
Examples of Highest Daily Value Death Benefit Calculation
The following are examples of how the HDV death benefit is calculated. Each
example assumes an initial purchase payment of $50,000. Each example assumes
that there is one contract owner who is age 70 on the contract date.
Example with Market Increase and Death Before Death Benefit Target Date
Assume that the contract owner's Contract Value has generally been increasing
due to positive market performance and that no withdrawals have been made. On
the date we receive due proof of death, the Contract Value is $75,000;
however, the Highest Daily Value was $90,000. Assume as well that the contract
owner has died before the Death Benefit Target Date. The death benefit is
equal to the greater of HDV or the base death benefit. The death benefit would
be the Highest Daily Value ($90,000) because it is greater than the amount
that would have been payable under the base death benefit ($75,000).
47
4: WHAT IS THE DEATH BENEFIT? continued
Example with Withdrawals
Assume that the Contract Value has been increasing due to positive market
performance and the contract owner made a withdrawal of $15,000 in contract
year 7 when the Contract Value was $75,000. On the date we receive due proof
of death, the Contract Value is $80,000; however, the Highest Daily Value
($90,000) was attained during the fifth contract year. Assume as well that the
contract owner has died before the Death Benefit Target Date. The Death
Benefit is equal to the greater of the Highest Daily Value (proportionally
reduced by the subsequent withdrawal) or the base death benefit.
Highest Daily Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Base Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The death benefit therefore is $80,000.
Example with Death after Death Benefit Target Date
Assume that the contract owner's Contract Value has generally been increasing
due to positive market performance and that no withdrawals had been made prior
to the Death Benefit Target Date. Further assume that the contract owner dies
after the Death Benefit Target Date, when the Contract Value is $75,000. The
Highest Daily Value on the Death Benefit Target Date was $80,000; however,
following the Death Benefit Target Date, the contract owner made a purchase
payment of $15,000 and later had taken a withdrawal of $5,000 when the
Contract Value was $70,000. The death benefit is equal to the greater of the
Highest Daily Value on the Death Benefit Target Date plus purchase payments
minus proportional withdrawals after the Death Benefit Target Date or the base
death benefit.
Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Base Death Benefit = max [$75,000, ($50,000 + $15,000) - [($50,000 + $15,000) * $5,000/$70,000]]
= max [$75,000, $60,357]
= $75,000
The death benefit therefore is $88,214.
PAYOUT OPTIONS
Originally, a beneficiary could, within 60 days of providing proof of death,
take the death benefit as follows:
With respect to a death benefit paid before March 19, 2007, the death benefit
payout options were:
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 of the first-to-die of the owner or joint owner.
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.
During this 5 year period, we will continue to deduct from the death benefit
proceeds the charges and costs that were associated with the features and
benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the Guaranteed Minimum Income Benefit.
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.
48
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 Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners Annuity One 3 Contract?"
With respect to a death benefit paid on or after March 19, 2007, unless the
surviving spouse opts to continue the contract (or spousal continuance is
required under the terms of your contract), a beneficiary of the death benefit
may, within 60 days of providing proof of death, also take the death benefit
as indicated above or as follows:
.. As a lump sum. If the beneficiary does not choose a payout option within
sixty days, the beneficiary will be paid in this manner; or
.. As payment of the entire death benefit within a period of 5 years from the
date of death; or
.. As a series of payments not extending beyond the life expectancy of the
beneficiary, or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death; or
.. As the beneficiary continuation option, described immediately below.
BENEFICIARY CONTINUATION OPTION
Instead of receiving the death benefit in a single payment, or under an
annuity option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code and described above.
This "Beneficiary Continuation Option" is described below and is available for
an IRA, Roth IRA, SEP IRA, 403(b), or a non-qualified contract.
Under the Beneficiary Continuation Option:
.. The owner's contract will be continued in the owner's name, for the benefit
of the beneficiary.
.. The beneficiary will incur a Settlement Service Charge which is an annual
charge assessed on a daily basis against the average assets allocated to
the Sub-accounts. The charge is 1.00% per year.
.. The beneficiary will incur an annual maintenance fee equal to the lesser of
$30 or 2% of Contract Value if the Contract Value is less than $25,000 at
the time the fee is assessed. The fee will not apply if it is assessed 30
days prior to a surrender request.
.. The initial Contract Value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the beneficiary
if they had taken a lump sum distribution.
.. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
.. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers in
excess of 20 per year will incur a $10 transfer fee.
.. No additional Purchase Payments can be applied to the contract.
.. the basic death benefit and any optional benefits elected by the owner will
no longer apply to the beneficiary.
.. The beneficiary can request a withdrawal of all or a portion of the
Contract Value at any time without application of any applicable CDSC
unless the Beneficiary Continuation Option was the payout predetermined by
the owner and the owner restricted the beneficiary's withdrawal rights.
.. Withdrawals are not subject to CDSC.
.. Upon the death of the beneficiary, any remaining Contract Value will be
paid in a lump sum to the person(s) named by the beneficiary, unless the
beneficiary named a successor who may continue receiving payments.
Currently only investment options corresponding to Portfolios of the Advanced
Series Trust and the Prudential Money Market Portfolio of the Prudential
Series Fund are available under the Beneficiary Continuation Option.
Your beneficiary will be provided with a prospectus and a settlement agreement
that will describe this option. Please contact us for additional information
on the availability, restrictions and limitations that will apply to a
beneficiary under the beneficiary continuation option. We may pay compensation
to the selling broker-dealer based on amounts held in the Beneficiary
Continuation Option.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - CONTRACTS OWNED BY INDIVIDUALS
(NOT ASSOCIATED WITH TAX-FAVORED PLANS)
Except in the case of Spousal Continuance as described below, 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.
In the event of your death before the annuity date, the death benefit must be
distributed:
.. by December 31st of the year including the five year anniversary of the
date of death; or
.. as a series of annuity payments not extending beyond the life expectancy of
the beneficiary or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death.
49
4: WHAT IS THE DEATH BENEFIT? continued
Unless you have made an election prior to death benefit proceeds becoming due,
a beneficiary can elect to receive the death benefit proceeds under the
Beneficiary Continuation Option as described above in the section entitled
"Beneficiary Continuation Option," or as a series of fixed annuity payments.
See the section entitled "What Kind of Payments Will I Receive During the
Income Phase?"
Alternative Death Benefit Payment Options - Contracts Held by Tax-Favored Plans
The Code provides for alternative death benefit payment options when a
contract is used as an IRA, 403(b) or other "qualified investment" that
requires minimum distributions. Upon your death under an IRA, 403(b) or other
"qualified investment", the designated beneficiary may generally elect to
continue the contract and receive Required Minimum Distributions under the
contract, instead of receiving the death benefit in a single payment. The
available payment options will depend on whether you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the beneficiary is your surviving
spouse.
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by December 31st the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated beneficiary (provided
such payments begin by December 31st of the year following the year of
death). However, if your surviving spouse is the beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31st of the year
following the year of death or December 31st of the year in which you would
have reached age 70 1/2, which ever is later. Additionally, 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.
.. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out within five years from the date of death. For contracts
where multiple beneficiaries have been named and at least one of the
beneficiaries does not qualify as a designated beneficiary and the account
has not been divided into separate accounts by December 31st of the year
following the year of death, such contract is deemed to have no designated
beneficiary.
.. If you die before a designated beneficiary is named and after the date
Required Minimum Distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31st of the
year following the year of death, such contract is deemed to have no
designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the Minimum Distribution rules, are
subject to tax. You may wish to consult a professional tax advisor for tax
advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
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. You may, if you wish, select both the
Earnings Appreciator Benefit and the Highest Daily Value Death Benefit.
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.
50
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.
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.
.. 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 Option (See "Spousal Continuance Option" 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 Option 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 Option 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 Option) 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 Option,
.. the date the contract terminates, or
.. the date you annuitize the contract.
Upon termination of the Earnings Appreciator Benefit, we cease imposing the
associated charge.
SPOUSAL CONTINUANCE OPTION
This Option is available if, on the date we receive proof of the owner's death
(or annuitant's death, for custodial contracts) 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 or (3) (i) the contract is held by a Custodial Account established to
hold retirement assets for the benefit of the natural person annuitant
pursuant to the provisions of Section 408(a) of the Internal Revenue Code (or
any successor Code section thereto) ("Custodial Account"), and (ii) the
custodian of the account has elected to continue the contract, and designate
the surviving spouse as annuitant. Continuing the contract in the latter
scenario will result in the contract no longer qualifying for tax deferral
under the Internal Revenue Code. However, such tax deferral should result from
the ownership of the contract by the Custodial Account. Spousal continuance
may also be available where the contract is owned by certain other types of
entity-owners. Please consult your tax or legal adviser.
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 (or the annuitant's death,
in the case of a custodially-owned contract referenced above). Assuming the
above conditions are present, the surviving spouse (or custodian, for the
custodially-owned contracts referenced above) can elect the Spousal
Continuance Option, but must do so no later than 60 days after furnishing
proof of death in good order.
Upon activation of the Spousal Continuance Option, 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 Option, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the
Spousal Continuance Option. However, we will continue to impose withdrawal
charges on purchase payments made after activation of this benefit. In
addition, the Contract Value allocated to the market value adjustment option
will remain subject to a potential market value adjustment.
51
4: WHAT IS THE DEATH BENEFIT? continued
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Option, 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 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.
IF YOU HAVE ELECTED THE HIGHEST DAILY VALUE DEATH BENEFIT, we will adjust the
Contract Value to equal the greater of:
.. the Contract Value, or
.. the Highest Daily Value,
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, or HDV
death benefit (as applicable), 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 or Highest Daily
Value 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 Option.
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 Option, 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 ONE OF THE LIFETIME WITHDRAWAL BENEFITS, on the owner's
death, the Benefit will end. However, if the owner's surviving spouse would be
eligible to acquire the Benefit as if he/she were a new purchaser, then the
surviving spouse may elect the Benefit under the Spousal Continuance Option.
52
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death (or
first-to-die, in the case of joint owners), the Income Appreciator Benefit
will end unless the contract is continued by the deceased owner's surviving
spouse under the Spousal Continuance Option. 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 Option, 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.
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS?
LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)/SM/
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an
initial principal value (called the "Protected Withdrawal Value"), regardless
of the impact of market performance on your Contract Value, subject to our
rules regarding the timing and amount of withdrawals. There are two options -
one is designed to provide an annual withdrawal amount for life (the "Life
Income Benefit") and the other is designed to provide a greater annual
withdrawal amount (than the first option) as long as there is Protected
Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If
there is no Protected Withdrawal Value, the Withdrawal Benefit will be zero.
You do not choose between these two options; each option will continue to be
available as long as the annuity has a Contract Value and Lifetime Five is in
effect. Certain benefits under Lifetime Five may remain in effect even if the
Contract Value is zero. The option may be appropriate if you intend to make
periodic withdrawals from your contract and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals - the guarantees are not lost if you withdraw
less than the maximum allowable amount each year. Lifetime Five is only being
offered in those jurisdictions where we have received regulatory approval and
will be offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved.
Lifetime Five is subject to certain restrictions described below.
.. Currently, Lifetime Five can only be elected once each contract year, and
only where the annuitant and the contract owner are the same person or, if
the contract owner is an entity, where there is only one annuitant. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income
Benefit.
.. The annuitant must be at least 45 years old when Lifetime Five is elected.
.. Lifetime Five may not be elected if you have elected any other optional
living benefit.
.. Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit on or after December 5,
2005 must allocate Contract Value to one or more of the following asset
allocation portfolios of Advanced Series Trust: AST Capital Growth Asset
Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio, AST Advanced Strategies Portfolio, AST First Trust Balanced
Target Portfolio, AST First Trust Capital Appreciation Target Portfolio,
AST UBS Dynamic Alpha Portfolio, AST American Century Strategic Allocation
or AST T. Rowe Price Asset Allocation Portfolio. As specified in this
paragraph, you generally must allocate your Contract Value in accordance
with the then-available option(s) that we may prescribe, in order to elect
and maintain Lifetime Five. If, subsequent to your election of the benefit,
we change our requirements for how Contract Value must be allocated under
the benefit, that new requirement will apply only to new elections of the
benefit, and will not compel you to re-allocate your Contract Value in
accordance with our newly-adopted requirements. All subsequent transfers
and purchase payments will be subject to the new investment limitations.
53
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your contract following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of:
(A)the Contract Value on the date you elect Lifetime Five, plus any additional
Purchase Payments (and any Credits), each growing at 5% per year from the
date of your election of the benefit, or application of the Purchase
Payment to your contract, as applicable, until the date of your first
withdrawal or the 10th anniversary of the benefit effective date, if
earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments (plus any Credits) prior to the first withdrawal or the
10th anniversary of the benefit effective date, if earlier.
With respect to A and C above, after the 10th anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments (plus any Credits).
If you elect Lifetime Five at the time you purchase your contract, the
Contract Value will be your initial Purchase Payment (plus any Credits).
For existing contract owners who are electing the Lifetime Five Benefit, the
Contract Value on the date of the contract owner's election of Lifetime Five
will be used to determine the initial Protected Withdrawal Value.
If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each additional
Purchase Payment (plus any Credits).
Step-Up of the Protected Withdrawal Value
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Contract Value is greater than the Protected
Withdrawal Value.
If you elected the Lifetime Five program on or after March 20, 2006:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
1st anniversary of the first withdrawal under the Lifetime Five program
.. the Protected Withdrawal Value can be stepped up again on or after the 1st
anniversary of the preceding step-up
If you elected the Lifetime Five program prior to March 20, 2006 and that
original election remains in effect:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
5th anniversary of the first withdrawal under the Lifetime Five program
.. the Protected Withdrawal Value can be stepped up again on or after the 5th
anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the program, and on the
date you elect to step-up, the charges under the Lifetime Five program have
changed for new purchasers, you may be subject to the new charge at the time
of step-up. Upon election of the step-up, we increase the Protected Withdrawal
Value to be equal to the then current Contract Value. For example, assume your
initial Protected Withdrawal Value was $100,000 and you have made cumulative
withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On
the date you are eligible to step-up the Protected Withdrawal Value, your
Contract Value is equal to $75,000. You could elect to step-up the Protected
Withdrawal Value to $75,000 on the date you are eligible. If your current
Annual Income Amount and Annual Withdrawal Amount are less than they would be
if we did not reflect the step-up in Protected Withdrawal Value, then we will
increase these amounts to reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected Lifetime Five on or after March 20, 2006 and have also elected
the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1st contract
anniversary that is at least one year after the later of (1) the date of
the first withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by any amount.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive contract anniversary until a
step-up occurs.
54
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1/st/ contract anniversary that is at least one year after the most recent
step-up.
If you elected Lifetime Five prior to March 20, 2006 and have also elected the
Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the contract anniversary
that is at least five years after the later of (1) the date of the first
withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by 5% or more.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive contract anniversary
until a step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
contract anniversary that is at least 5 years after the most recent step-up.
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected
Withdrawal Value and on the greater of a "dollar-for-dollar" basis or a pro
rata basis for withdrawals in a contract year in excess of that amount until
the Protected Withdrawal Value is reduced to zero. At that point, the Annual
Withdrawal Amount will be zero until such time (if any) as the contract
reflects a Protected Withdrawal Value (for example, due to a step-up or
additional purchase payments being made into the contract).
Annual Income Amount Under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will
not reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount (Excess
Income), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Income to the Contract Value immediately prior to such withdrawal
(see examples of this calculation below). Reductions include the actual amount
of the withdrawal, including any withdrawal charges that may apply. A
withdrawal can be considered Excess Income under the Life Income Benefit even
though it does not exceed the Annual Withdrawal Amount under the Withdrawal
Benefit. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Contract Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional purchase payments. The amount of the increase is equal to
5% of any additional purchase payments. Any increase will be added to your
Annual Income Amount beginning on the day that the step-up is effective or the
purchase payment is made. A determination of whether you have exceeded your
Annual Income Amount is made at the time of each withdrawal; therefore, a
subsequent increase in the Annual Income Amount will not offset the effect of
a withdrawal that exceeded the Annual Income Amount at the time the withdrawal
was made.
Annual Withdrawal Amount Under the Withdrawal Benefit
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
(Excess Withdrawal), your Annual Withdrawal Amount will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Withdrawal to the Contract Value immediately prior to such
withdrawal (see the examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charges that may
apply. When you elect a step-up, your Annual Withdrawal Amount increases to
equal 7% of your Contract Value after the step-up if such amount is greater
than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 7% of any additional purchase payments. A determination of whether
you have exceeded your Annual Withdrawal Amount is made at the time of each
withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to
withdraw all or any portion of the Annual Withdrawal Amount or Annual Income
Amount in each contract year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent contract years.
55
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may extend the period of time until
the remaining Protected Withdrawal Value is reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and
Annual Income Amount assume: 1.) the contract date and the effective date of
Lifetime Five are February 1, 2005; 2.) an initial purchase payment of
$250,000; 3.) the Contract Value on February 1, 2006 is equal to $265,000; and
4.) the first withdrawal occurs on March 1, 2006 when the Contract Value is
equal to $263,000. The values set forth here are purely hypothetical, and do
not reflect the charge for Lifetime Five.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Contract Value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract Value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
Example 1. Dollar-for-Dollar Reduction
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
.. Annual Withdrawal Amount for future contract years remains at $18,550
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
.. Annual Income Amount for future contract years remains at $13,250
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
Example 2. Dollar-for-Dollar and Proportional Reductions
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
. Annual Withdrawal Amount for future contract years remains at $18,550
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
. Protected Withdrawal Value is reduced by $15,000 from $265,000 to
$250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current contract year = $0
. Excess of withdrawal over the Annual Withdrawal Amount ($25,000 -
$18,550 = $6,450) reduces Annual Withdrawal Amount for future contract
years.
. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Contract Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
. Annual Withdrawal Amount for future contract years = $18,550 - $489 =
$18,061
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623
. Annual Income Amount for future contract years = $13,250 - $623 = $12,627
. Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
56
. Proportional reduction = Excess Withdrawal/Contract Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503
. Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
Example 3. Step-up of the Protected Withdrawal Value
If the Annual Income Amount ($13,250) is withdrawn each year starting on
March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on
February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a
step-up is elected on February 1, 2012, and the Contract Value on February 1,
2012 is $280,000, then the following values would result:
.. Protected Withdrawal Value = Contract Value on February 1, 2012 = $280,000
.. Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value
is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is
increased to $14,000.
.. Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value.
Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected
Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual
Withdrawal Amount is increased to $19,600.
.. Because the Contract Date and Effective Date of Lifetime Five for this
example is prior to March 20, 2006, if the step-up request on February 1,
2012 was due to the election of the auto step-up feature, we would first
check to see if an auto step-up should occur by checking to see if 5% of
the Contract Value exceeds the Annual Income Amount by 5% or more. 5% of
the Contract Value is equal to 5% of $280,000, which is $14,000. 5% of the
Annual Income Amount ($13,250) is $662.50, which added to the Annual Income
Amount is $13,912.50. Since 5% of the Contract Value is greater than
$13,912.50, the step-up would still occur in this scenario, and all of the
values would be increased as indicated above. Had the Contract Date and
effective date of the Lifetime Five Benefit been on or after March 20,
2006, the step-up would still occur because 5% of the Contract Value is
greater than the Annual Income Amount.
Benefits Under Lifetime Five
.. If your Contract Value is equal to zero, and the cumulative withdrawals in
the current contract year are greater than the Annual Withdrawal Amount,
Lifetime Five will terminate. To the extent that your Contract Value was
reduced to zero as a result of cumulative withdrawals that are equal to or
less than the Annual Income Amount and amounts are still payable under both
the Life Income Benefit and the Withdrawal Benefit, you will be given the
choice of receiving the payments under the Life Income Benefit or under the
Withdrawal Benefit. Once you make this election we will make an additional
payment for that contract year equal to either the remaining Annual Income
Amount or Annual Withdrawal Amount for the contract year, if any, depending
on the option you choose. In subsequent contract years we make payments
that equal either the Annual Income Amount or the Annual Withdrawal Amount.
You will not be able to change the option after your election and no
further purchase payments will be accepted under your contract. If you do
not make an election, we will pay you annually under the Life Income
Benefit. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount but less than or equal to the Annual Withdrawal Amount and
amounts are still payable under the Withdrawal Benefit, you will receive
the payments under the Withdrawal Benefit. In the year of a withdrawal that
reduced your Contract Value to zero, we will make an additional payment to
equal any remaining Annual Withdrawal Amount and make payments equal to the
Annual Withdrawal Amount in each subsequent year (until the Protected
Withdrawal Value is depleted). Once your Contract Value equals zero no
further purchase payments will be accepted under your contract.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
1. apply your Contract Value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay out
any remaining Protected Withdrawal Value as annuity payments. Each year
such annuity payments will equal the Annual Withdrawal Amount or the
remaining Protected Withdrawal Value if less. We make such annuity
payments until the earlier of the annuitant's death or the date the
Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your contract. The amount that
will be applied to provide such annuity payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed annuity
rates then currently available or the single life fixed annuity rates
guaranteed in your contract; and
2. the Contract Value.
57
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as
if you made your first withdrawal on the date the annuity payments are to
begin.
Other Important Considerations
.. Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the Contract Value or surrender
value, but any withdrawal will decrease the Contract Value by the amount of
the withdrawal (plus any applicable withdrawal charges). If you surrender
your contract, you will receive the current Contract Value, not the
Protected Withdrawal Value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides
a guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Protected Withdrawal Value or Annual
Income Amount in the form of periodic benefit payments.
Election of Lifetime Five
Lifetime Five can be elected at the time you purchase your contract, or after
the contract date. Elections of Lifetime Five are subject to our eligibility
rules and restrictions. The contract owner's Contract Value as of the date of
election will be used as the basis to calculate the initial Protected
Withdrawal Value, the initial Annual Withdrawal Amount, and the initial Annual
Income Amount.
Termination of Lifetime Five
Lifetime Five terminates automatically when your Protected Withdrawal Value
and Annual Income Amount reach zero. You may terminate Lifetime Five at any
time by notifying us. If you terminate Lifetime Five, any guarantee provided
by the benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
.. upon your surrender of the contract,
.. upon the death of the annuitant (but your surviving spouse may elect a new
Lifetime Five Benefit if your spouse elects the Spousal Continuance Option
and your spouse would then be eligible to elect the Benefit as if he/she
were a new purchaser),
.. upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
.. upon your election to begin receiving annuity payments.
We cease imposing the charge for Lifetime Five upon the earliest to occur of
(i) your election to terminate the benefit, (ii) our receipt of appropriate
proof of the death of the owner (or annuitant, for entity owned contracts),
(iii) the annuity date, (iv) automatic termination of the benefit due to an
impermissible change of owner or annuitant, or (v) a withdrawal that causes
the benefit to terminate.
While you may terminate Lifetime Five at any time, we may not terminate the
benefit other than in the circumstances listed above. However, we may stop
offering Lifetime Five for new elections or re-elections at any time in the
future.
Currently, if you terminate Lifetime Five, you generally will be able to
re-elect the benefit or elect another lifetime withdrawal benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
If you elected Lifetime Five at the time you purchased your contract and prior
to March 20, 2006, and you terminate Lifetime Five, there will be no waiting
period before you can re-elect the benefit or elect Spousal Lifetime Five.
However, once you choose to re-elect/elect, the waiting period described above
will apply to subsequent re-elections. If you elected Lifetime Five after the
time you purchased your contract, but prior to March 20, 2006, and you
terminate Lifetime Five, you must wait until the contract anniversary
following your cancellation before you can re-elect the benefit or elect
Spousal Lifetime Five. Once you choose to re-elect/elect, the waiting period
described above will apply to subsequent re-elections. We reserve the right to
limit the re-election/election frequency in the future. Before making any such
change to the re-election/election frequency, we will provide prior notice to
contract owners who have an effective Lifetime Five Income Benefit.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. Roth IRAs are not subject to these rules during
the owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract are
greater than such
58
amounts. Any such payments will reduce your Protected Withdrawal Value. In
addition, the amount and duration of payments under the contract payment and
death benefit provisions may be adjusted so that the payments do not trigger
any penalty or excise taxes due to tax considerations such as required minimum
distribution provisions under the tax law.
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT (SPOUSAL LIFETIME FIVE)/SM/
The Spousal Lifetime Five Income Benefit (Spousal Lifetime Five) described
below is only being offered in those jurisdictions where we have received
regulatory approval and will be offered subsequently in other jurisdictions
when we receive regulatory approval in those jurisdictions. Certain terms and
conditions may differ between jurisdictions once approved. Currently, if you
elect Spousal Lifetime Five and subsequently terminate the benefit, there may
be a restriction on your ability to re-elect Spousal Lifetime Five and elect
another lifetime withdrawal benefit. We reserve the right to further limit the
election frequency in the future. Before making any such change to the
election frequency, we will provide prior notice to contract owners who have
an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must
be elected based on two Designated Lives, as described below. Each Designated
Life must be at least 55 years old when the benefit is elected. Spousal
Lifetime Five is not available if you elect any other optional living or death
benefit. As long as your Spousal Lifetime Five Income Benefit is in effect,
you must allocate your Contract Value in accordance with the then permitted
and available option(s). Owners electing this benefit must allocate Contract
Value to one or more of the following asset allocation portfolios of the
Advanced Series Trust (we reserve the right to change these required
portfolios on a prospective basis): AST Capital Growth Asset Allocation
Portfolio, AST Balanced Asset Allocation Portfolio, AST Conservative Asset
Allocation Portfolio, AST Preservation Asset Allocation Portfolio, AST
Advanced Strategies Portfolio, AST First Trust Balanced Target Portfolio, AST
First Trust Capital Appreciation Target Portfolio, AST T. Rowe Price Asset
Allocation Portfolio, AST UBS Dynamic Alpha Portfolio, or AST American Century
Strategic Allocation Portfolio.
We offer a benefit that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount (Spousal
Life Income Benefit) equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our rules regarding the timing and amount of
withdrawals. The Spousal Life Income Benefit may remain in effect even if the
Contract Value is zero. Spousal Lifetime Five may be appropriate if you intend
to make periodic withdrawals from your annuity, wish to ensure that market
performance will not affect your ability to receive annual payments and you
wish either spouse to be able to continue the Spousal Life Income Benefit
after the death of the first. You are not required to make withdrawals as part
of the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit.
Initial Protected Withdrawal Value.
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under your contract following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of:
(A)the Contract Value on the date you elect Spousal Lifetime Five, plus any
additional Purchase Payments (and any Credits), each growing at 5% per year
from the date of your election of the benefit, or application of the
Purchase Payment to your contract, as applicable, until the date of your
first withdrawal or the 10th anniversary of the benefit effective date, if
earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments (plus any Credits) prior to the first withdrawal or the
10th anniversary of the benefit effective date, if earlier.
With respect to A and C above, after the 10th anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments (plus any Credits)
.. If you elect Spousal Lifetime Five at the time you purchase your contract,
the Contract Value will be your initial purchase payment (plus any credits).
.. For existing contract owners who are electing the Spousal Lifetime Five
Benefit, the Contract Value on the date of your election of Spousal
Lifetime Five will be used to determine the initial Protected Withdrawal
Value.
Annual Income Amount Under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Spousal Lifetime Five, if your cumulative withdrawals
in a contract year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent contract years, but
any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of
the withdrawal, including any withdrawal charges that may apply.
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Contract Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1st anniversary of
59
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
the first withdrawal under Spousal Lifetime Five. The Annual Income Amount can
be stepped up again on or after the 1st anniversary of the preceding step-up.
If you elect to step-up the Annual Income Amount, and on the date you elect to
step-up, the charges under Spousal Lifetime Five have changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
When you elect a step-up, your Annual Income Amount increases to equal 5% of
your Contract Value after the step-up. Your Annual Income Amount also
increases if you make additional Purchase Payments. The amount of the increase
is equal to 5% of any additional Purchase Payments. Any increase will be added
to your Annual Income Amount beginning on the day that the step-up is
effective or the Purchase Payment is made. A determination of whether you have
exceeded your Annual Income Amount is made at the time of each withdrawal;
therefore a subsequent increase in the Annual Income Amount will not offset
the effect of a withdrawal that exceeded the Annual Income Amount at the time
the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1st contract anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
Spousal Lifetime Five or (2) the most recent step-up. At this time, your
Annual Income Amount will be stepped-up if 5% of your Contract Value is
greater than the Annual Income Amount by any amount. If 5% of the Contract
Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive contract anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st contract anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Spousal Lifetime Five does not affect your ability to make withdrawals under
your contract or limit your ability to request withdrawals that exceed the
Annual Income Amount. Under Spousal Lifetime Five, if your cumulative
withdrawals in a contract year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent contract
years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount
under Spousal Lifetime Five Income Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Income Amount to subsequent
contract years.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the contract date and the
effective date of Spousal Lifetime Five are February 1, 2005; 2.) an initial
purchase payment of $250,000; 3.) the Contract Value on February 1, 2006 is
equal to $265,000; and 4.) the first withdrawal occurs on March 1, 2006 when
the Contract Value is equal to $263,000. The values set forth here are purely
hypothetical, and do not reflect the charge for the Spousal Lifetime Income
Five Benefit.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365) = $263,484.33
(b)Contract Value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract Value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
Example 1. Dollar-for-Dollar Reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250 Annual Income Amount for future contract years remains at
$13,250
Example 2. Dollar-for-Dollar and Proportional Reductions
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
.. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
.. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
60
Example 3. Step-Up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Contract Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
Benefits Under Spousal Lifetime Five
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount and amounts are still payable under the Spousal Life Income Benefit,
we will make an additional payment for that contract year equal to the
remaining Annual Income Amount for the contract year, if any. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described above. No
further purchase payments will be accepted under your contract. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life as
long as the Designated Lives were spouses at the time of the first death.
To the extent that cumulative withdrawals in the current contract year that
reduced your Contract Value to zero are more than the Annual Income Amount,
the Spousal Life Income Benefit terminates and no additional payments will
be made.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
1. apply your Contract Value to any annuity option available; or
2. request that, as of the date annuity payments are to begin, we make annuity
payments each year equal to the Annual Income Amount. We will make payments
until the first of the Designated Lives to die, and will continue to make
payments until the death of the second Designated Life as long as the
Designated Lives were spouses at the time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your contract. The
amount that will be applied to provide such annuity payments will be the
greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the same basis that is used to calculate
the single life fixed annuity rates guaranteed in your contract; and
2. the Contract Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
Other Important Considerations
.. Withdrawals under Spousal Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Spousal Lifetime Five is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the
contract. Spousal Lifetime Five does not directly affect the Contract Value
or surrender value, but any withdrawal will decrease the Contract Value by
the amount of the withdrawal (plus any applicable withdrawal charges). If
you surrender your contract, you will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Spousal Lifetime Five. Spousal
Lifetime Five provides a guarantee that if your Contract Value declines due
to market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. In general, you must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and
maintain Spousal Lifetime Five. If, subsequent to your election of the
benefit, we change our requirements for how Contract Value must be
allocated under the benefit, that new requirement will apply only to new
elections of the benefit, and will not compel you to re-allocate your
Contract Value in accordance with our newly-adopted requirements. All
subsequent transfers and purchase payments will be subject to the new
investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for Spousal Lifetime Five even when the benefit is only providing a
guarantee of income based on one life with no survivorship.
.. In order for the surviving Designated Life to continue Spousal Lifetime
Five upon the death of an owner, the Designated Life must elect to assume
ownership of the contract under the Spousal Continuance Option.
61
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Election of and Designations of Spousal Lifetime Five
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the
Designated Lives to die. Currently, the benefit may only be elected where the
contract owner, annuitant and beneficiary designations are as follows:
.. One contract owner, where the annuitant and the contract owner are the same
person and the beneficiary is the contract owner's spouse. The contract
owner/annuitant and the beneficiary each must be at least 55 years old at
the time of election; or
.. Co-contract owners, where the contract owners are each other's spouses. The
beneficiary designation must be the surviving spouse. The first named
contract owner must be the annuitant. Both contract owners must each be 55
years old at the time of election.
.. One contract owner, where the owner is a custodial account established to
hold retirement assets for the benefit of the annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the annuitant is the co-annuitant.
Both the annuitant and co-annuitant must each be at least 55 years old at
the time of election.
No ownership changes or annuitant changes will be permitted once this benefit
is elected. However, if the contract is co-owned, the contract owner that is
not the annuitant may be removed without affecting the benefit.
Spousal Lifetime Five can be elected at the time that you purchase your
contract. We also offer existing contract owners the option to elect Spousal
Lifetime Five after the contract date of their contract, subject to our
eligibility rules and restrictions. Your Contract Value as of the date of
election will be used as a basis to calculate the initial Protected Withdrawal
Value and the Annual Income Amount.
Currently, if you terminate Spousal Lifetime Five, you may only be permitted
to re-elect the benefit or elect another lifetime withdrawal Benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Spousal Lifetime Five Income
Benefit.
Termination of Spousal Lifetime Five
Spousal Lifetime Five terminates automatically when your Annual Income Amount
equals zero. You may terminate Spousal Lifetime Five at any time by notifying
us. If you terminate Spousal Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. We
reserve the right to further limit the frequency election in the future.
Spousal Lifetime Five terminates upon your surrender of the contract, upon the
first Designated Life to die if the contract is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments.
The charge for Spousal Lifetime Five will no longer be deducted from your
Contract Value upon termination of the benefit.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your contract beginning
after age 70 1/2. Roth IRAs are not subject to these rules during the contract
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distributions under the tax law.
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HD5)/SM/
We offer a Benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Total Annual Income
Amount") equal to a percentage of an initial principal value (the "Total
Protected Withdrawal Value") regardless of the impact of market performance on
the Contract Value, subject to our program rules regarding the timing and
amount of withdrawals. The Benefit may be appropriate if you intend to make
periodic withdrawals from your Contract, and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the program - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the Benefit. We discuss Highest Daily Lifetime Five in
greater detail immediately below. In addition, please see the Glossary section
of this prospectus for definitions of some of the key terms used with this
Benefit. As discussed below, we require that you participate in our asset
transfer program in order to participate in Highest Daily Lifetime Five, and
in the Appendices to this prospectus, we set forth the formula under which we
make those asset transfers.
62
Currently, if you elect Highest Daily Lifetime Five and subsequently terminate
the Benefit, you will not be able to re-elect Highest Daily Lifetime Five, and
may have a waiting period until you can elect another lifetime withdrawal
Benefit. Specifically, you will be permitted to elect another lifetime
withdrawal Benefit only on an anniversary of the contract date that is at
least 90 calendar days from the date that Highest Daily Lifetime Five was
terminated. We reserve the right to further limit the election frequency in
the future. The income Benefit under Highest Daily Lifetime Five currently is
based on a single "designated life" who is at least 55 years old on the date
that the Benefit is acquired. The Highest Daily Lifetime Five Benefit is not
available if you elect any other optional living Benefit, although you may
elect any optional death Benefit (other than the Highest Daily Value Death
Benefit). As long as your Highest Daily Lifetime Five Benefit is in effect,
you must allocate your Contract Value in accordance with the then-permitted
and available investment option(s) with this program.
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
Contract Value. Because each of the Total Protected Withdrawal Value and Total
Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Total Annual Income Amount remains. You are guaranteed to be able
to withdraw the Total Annual Income Amount for the rest of your life, provided
that you have not made "excess withdrawals." Excess withdrawals, as discussed
below, will reduce your Total Annual Income Amount. Thus, you could experience
a scenario in which your Contract Value was zero, and, due to your excess
withdrawals, your Total Annual Income Amount also was reduced to zero. In that
scenario, no further amount would be payable under Highest Daily Lifetime Five.
KEY FEATURE - Total Protected Withdrawal Value
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value, then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Contract Value on the
date that you elect Highest Daily Lifetime Five. On each business day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the Benefit, we recalculate the Protected Withdrawal
Value. Specifically, on each such business day (the "Current Business Day"),
the Protected Withdrawal Value is equal to the greater of:
.. the Protected Withdrawal Value for the immediately preceding business day
(the "Prior Business Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Business Day and the
Current Business Day (i.e., one day for successive business days, but more
than one calendar day for business days that are separated by weekends
and/or holidays), plus the amount of any Purchase Payment (including any
associated Credit) made on the Current Business Day; and
.. the Contract Value.
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Contract Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take
a withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If no such withdrawal is taken, then on or after
the Tenth Anniversary up until the date of the first withdrawal, the Enhanced
Protected Withdrawal Value is equal to the sum of:
(a)200% of the Contract Value on the date you elected Highest Daily Lifetime
Five;
(b)200% of all Purchase Payments (and any associated Credits) made during the
one-year period after the date you elected Highest Daily Lifetime Five; and
(c)100% of all Purchase Payments (and any associated Credits) made more than
one year after the date you elected Highest Daily Lifetime Five, but prior
to the date of your first withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments (and any associated Credits) will increase
the Total Annual Income Amount, while "excess" withdrawals (as described
below) may decrease the Total Annual Income Amount.
KEY FEATURE - Total Annual Income Amount under the Highest Daily Lifetime Five
Benefit
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value. For purposes of the asset transfer formula described below,
we also calculate a Highest Daily Annual Income Amount, which is initially
equal to 5% of the Protected
63
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Withdrawal Value. Under the Highest Daily Lifetime Five Benefit, if your
cumulative withdrawals in a Contract Year are less than or equal to the Total
Annual Income Amount, they will not reduce your Total Annual Income Amount in
subsequent Contract Years, but any such withdrawals will reduce the Total
Annual Income Amount on a dollar-for-dollar basis in that Contract Year. If
your cumulative withdrawals are in excess of the Total Annual Income Amount
("Excess Income"), your Total Annual Income Amount in subsequent years will be
reduced (except with regard to required minimum distributions) by the result
of the ratio of the Excess Income to the Contract Value immediately prior to
such withdrawal (see examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charge that may
apply. A Purchase Payment that you make will increase the then-existing Total
Annual Income Amount and Highest Daily Annual Income Amount by an amount equal
to 5% of the Purchase Payment (including the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this Benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of this feature starting with the
anniversary of the Contract Date (the "Contract Anniversary") immediately
after your first withdrawal under the Benefit. Specifically, upon the first
such Contract Anniversary, we identify the Contract Value on the business days
corresponding to the end of each quarter that (i) is based on your Contract
Year, rather than a calendar year; (ii) is subsequent to the first withdrawal;
and (iii) falls within the immediately preceding Contract Year. If the end of
any such quarter falls on a holiday or a weekend, we use the next business
day. We multiply each of those quarterly Contract Values by 5%, adjust each
such quarterly value for subsequent withdrawals and Purchase Payments, and
then select the highest of those values. If the highest of those values
exceeds the existing Total Annual Income Amount, we replace the existing
amount with the new, higher amount. Otherwise, we leave the existing Total
Annual Income Amount intact. In later years, (i.e., after the first Contract
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Contract Anniversary, by performing a similar
examination of the Contract Values on the end of the four immediately
preceding quarters. If, on the date that we implement a Highest Quarterly Auto
Step-Up to your Total Annual Income Amount, the charge for Highest Daily
Lifetime Five has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime Five upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your contract, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in a Contract Year are less than or equal to
the Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Contract Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Contract Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Contract Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Contract Years.
Examples of dollar-for-dollar and proportional reductions and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Five Benefit or any other fees and charges. Assume the following for
all three examples:
.. The Contract Date is December 1, 2006.
.. The Highest Daily Lifetime Five Benefit is elected on March 5, 2007.
Dollar-for-dollar reductions
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Contract on this date, the remaining Total Annual Income
Amount for that Contract Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Total
Annual Income Amount - $6,000 less $2,500 = $3,500.
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Contract Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Contract Years on a
proportional basis based on the ratio of the excess withdrawal to the Contract
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Contract Year, each would result in another
proportional reduction to the Total Annual Income Amount).
64
Here is the calculation:
Contract Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Total Annual Income Amount for future Contract Years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Total Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal
(or last Contract Anniversary in subsequent years), adjusted for excess
withdrawals and additional Purchase Payments, is higher than the Total Annual
Income Amount, adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Total Annual Income Amount for this
Contract Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Contract
Year, the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Contract Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the
June 1 value is being adjusted for excess withdrawals as the September 1 and
December 1 Business Days occur after the excess withdrawal on August 6.
Highest Quarterly
Value (adjusted with Adjusted Total Annual
withdrawal and Income Amount (5% of the
Date* Contract Value Purchase Payments)** Highest Quarterly Value)
- ----------------------------------------------------------------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
- ----------------------------------------------------------------------------------
August 6, 2007 $110,000.00 $112,885.55 $5,644.28
- ----------------------------------------------------------------------------------
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
- ----------------------------------------------------------------------------------
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
- ----------------------------------------------------------------------------------
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Contract Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Total Annual Income Amount of
$5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Contract Year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Contract Value on September 1. Since the June 1 adjusted
Total Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Contract Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Total Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Contract Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
Benefits Under the Highest Daily Lifetime Five Program.
To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual Income
Amount and amounts are still payable under Highest Daily Lifetime Five, we
will make an additional payment, if any, for that Contract Year equal to the
remaining Total Annual Income Amount for the Contract Year. Thus, in that
scenario, the remaining Total Annual Income Amount would be payable even
though your Contract Value was reduced to zero. In subsequent Contract Years
we make payments that equal the Total Annual Income Amount as described in
this section. We will make payments until the death of the single designated
life. To the extent that cumulative withdrawals in the current Contract Year
that reduced your Contract Value to zero are more than the Total Annual Income
Amount, the Highest Daily Lifetime Five Benefit terminates, and no additional
payments will be made.
65
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
If annuity payments are to begin under the terms of your Contract, or if you
decide to begin receiving annuity payments and there is a Total Annual Income
Amount due in subsequent Contract Years, you can elect one of the following
two options:
(1)apply your Contract Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make annuity
payments each year equal to the Total Annual Income Amount. We will make
payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments in the form of a single life fixed annuity
with ten payments certain, by applying the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Contract. The
amount that will be applied to provide such annuity payments will be the
greater of:
(1)the present value of the future Total Annual Income Amount payments. Such
present value will be calculated using the greater of the single life fixed
annuity rates then currently available or the single life fixed annuity
rates guaranteed in your Contract; and
(2)the Contract Value.
. If no withdrawal was ever taken, we will calculate the Total Annual
Income Amount as if you made your first withdrawal on the date that
annuity payments are to begin.
. Please note that payments that we make under this Benefit after the
contract anniversary coinciding with or next following the annuitant's
95th birthday will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Five Benefit are subject to
all of the terms and conditions of the Contract, including any withdrawal
charge.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Contract. The Highest Daily Lifetime Five Benefit does not
directly affect the Contract Value or surrender value, but any withdrawal
will decrease the Contract Value by the amount of the withdrawal (plus any
applicable withdrawal charge). If you surrender your Contract, you will
receive the current surrender value.
.. You can make withdrawals from your Contract while your Contract Value is
greater than zero without purchasing the Highest Daily Lifetime Five
Benefit. The Highest Daily Lifetime Five Benefit provides a guarantee that
if your Contract Value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic Benefit
payments. Please note that the payments that we make under this Benefit
after the contract anniversary coinciding with or next following the
Annuitant's 95th birthday will be treated as annuity payments.
.. Upon inception of the Benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts. However, the asset transfer
component of the Benefit as described below may transfer Contract Value to
the Benefit Fixed Rate Account as of the effective date of the Benefit in
some circumstances.
.. You cannot allocate Purchase Payments or transfer Contract Value to a Fixed
Interest Rate Option if you elect Highest Daily Lifetime Five.
.. Transfers to and from the Sub-accounts and the Benefit Fixed Rate Account
triggered by the asset transfer component of the Benefit will not count
toward the maximum number of free transfers allowable under the Contract.
.. In general, you must allocate your Contract Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the Highest Daily Lifetime Five Benefit. If, subsequent to
your election of the Benefit, we change our requirements for how Contract
Value must be allocated under the Benefit, the new requirement will apply
only to new elections of the Benefit, and we will not compel you to
re-allocate your Contract Value in accordance with our newly-adopted
requirements. Subsequent to any change in requirements, transfers of
Contract Value and allocation of additional Purchase Payments may be
subject to the new investment limitations.
Election of and Designations Under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Contract is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Contract will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Currently, if you terminate the Highest Daily Lifetime Five Benefit, you will
(a) not be permitted to re-elect the Benefit and (b) may be allowed to elect
another lifetime withdrawal benefit only on any anniversary of the Contract
Date that is at least 90
66
calendar days from the date the Highest Daily Lifetime Five Benefit was
terminated. We reserve the right to further limit the election frequency in
the future. Before making any such change to the election frequency, we will
provide prior notice to Owners who have an effective Highest Daily Lifetime
Five Benefit. We also have administrative rules with regard to your subsequent
election of the other lifetime withdrawal benefits.
Termination of the Program
You may terminate the Benefit at any time by notifying us. If you terminate
the Benefit, any guarantee provided by the Benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The Benefit terminates: (i) upon your
termination of the Benefit (ii) upon your surrender of the Contract (iii) upon
your election to begin receiving annuity payments (iv) upon the death of the
Annuitant (v) if both the Contract Value and Total Annual Income Amount equal
zero or (vi) if you fail to meet our requirements for issuing the Benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the Benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Contract Value on that Tenth Anniversary (or the next business
day, if that anniversary is not a business day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
(a)your Contract Value on the day that you elected Highest Daily Lifetime
Five; and
(b)the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the Benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options and
the Benefit Fixed Rate Account (described below), in the same proportion that
each such investment option bears to your total Contract Value, immediately
prior to the application of the amount. Any such amount will not be considered
a purchase payment when calculating your Total Protected Withdrawal Value,
your death Benefit, or the amount of any other optional Benefit that you may
have selected, and therefore will have no direct impact on any such values at
the time we add this amount. This potential addition to Contract Value is
available only if you have elected Highest Daily Lifetime Five and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Upon termination, we may limit or prohibit investment in the fixed interest
rate options.
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Five. For purposes of this
Benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". The Permitted Sub-accounts are identified in the contract
application. As a requirement of participating in Highest Daily Lifetime Five,
we require that you participate in our specialized asset transfer program,
under which we may transfer Contract Value between the Permitted Sub-accounts
and a fixed interest rate account that is part of our general account (the
"Benefit Fixed Rate Account"). We determine whether to make a transfer, and
the amount of any transfer, under a non-discretionary formula, discussed
below. The Benefit Fixed Rate Account is available only with this Benefit, and
thus you may not allocate Purchase Payments to that Account. The interest rate
that we pay with respect to the Benefit Fixed Rate Account is reduced by an
amount that corresponds generally to the charge that we assess against your
variable sub-accounts for Highest Daily Lifetime Five. The Benefit Fixed Rate
Account is not subject to the Investment Company Act of 1940 or the Securities
Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Contract Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this Benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the
formula, which we apply each business day, operates as follows. The formula
starts by identifying your Protected Withdrawal Value for that day and then
multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
Highest Daily Annual Income Amount. Then, using our actuarial tables, we
produce an estimate of the total amount we would target in our allocation
model, based on the projected Highest Daily Annual Income Amount each year for
the rest of your life. In the formula, we refer to that value as the "Target
Value" or "L". If you have already made a withdrawal, your projected Highest
Daily Annual Income Amount (and thus your Target Value) would take into
67
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
account any automatic step-up that was scheduled to occur according to the
step-up formula described above. Next, the formula subtracts from the Target
Value the amount held within the Benefit Fixed Rate Account on that day, and
divides that difference by the amount held within the Permitted Sub-accounts.
That ratio, which essentially isolates the amount of your Target Value that is
not offset by amounts held within the Benefit Fixed Rate Account, is called
the "Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the Benefit Fixed Rate Account, and therefore we will
transfer an amount from your Permitted Sub-accounts to the Benefit Fixed Rate
Account. Conversely, if the Target Ratio falls below a certain percentage
(currently 77%), then a transfer from the Benefit Fixed Rate Account to the
Permitted Sub-accounts would occur. Note that the formula is calculated with
reference to the Highest Daily Annual Income Amount, rather than with
reference to the Total Annual Income Amount.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Target Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to rebalance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For newly issued annuities that elect Highest
Daily Lifetime Five and existing annuities that elect Highest Daily Lifetime
Five, however, we reserve the right to change the ratios.
While you are not notified when your contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the Benefit
Fixed Rate Account, transfer all or a portion of those amounts to the
Permitted Sub-accounts, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e., in the same
proportion as the current balances in your variable investment options).
Amounts taken out of the Benefit Fixed Rate Account will be withdrawn for
this purpose on a last-in, first-out basis (an amount renewed into a new
guarantee period under the Benefit Fixed Rate Account will be deemed a new
investment for purposes of this last-in, first-out rule); or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest that
you earn on such transferred amount will be equal to the annual rate that
we have set for that day, and we will credit the daily equivalent of that
annual interest until the earlier of one year from the date of the transfer
or the date that such amount in the Benefit Fixed Rate Account is
transferred back to the Permitted Sub-accounts.
If a significant amount of your Contract Value is systematically transferred
to the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Contract Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that over time a significant portion, and under certain
circumstances all, of your Contract Value may be allocated to the Benefit
Fixed Rate Account. Note that if your entire Contract Value is transferred to
the Benefit Fixed Rate Account, then based on the way the formula operates,
that value would remain in the Benefit Fixed Rate Account unless you made
additional purchase payments to the Permitted Sub-accounts, which could cause
Contract Value to transfer out of the Benefit Fixed Rate Account.
Additional Tax Considerations
If you purchase a contract as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your contract
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if
later. Roth IRAs are not subject to these rules during the owner's lifetime.
The amount required under the Code may exceed the Total Annual Income Amount,
which will cause us to increase the Total Annual Income Amount in any Contract
Year that required minimum distributions due from your Contract are greater
than such amounts. In addition, the amount and duration of payments under the
contract payment and death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as required minimum distribution under the tax law. Please note, however,
that any withdrawal you take prior to the Tenth Anniversary, even if withdrawn
to satisfy required minimum distribution rules, will cause you to lose the
ability to receive Enhanced Protected Withdrawal Value and an amount under the
Return of Principal Guarantee.
68
As indicated, withdrawals made while the Highest Daily Lifetime Five Benefit
is in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the contract. Please see the Tax Considerations section of
the prospectus for a detailed discussion of the tax treatment of withdrawals.
We do not address each potential tax scenario that could arise with respect to
this Benefit here. However, we do note that if you participate in Highest
Daily Lifetime Five through a non-qualified annuity, and your annuity has
received Enhanced Protected Withdrawal Value and/or an additional amount under
the Return of Principal Guarantee, as with all withdrawals, once all purchase
payments are returned under the contract, all subsequent withdrawal amounts
will be taxed as ordinary income.
HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (HD7)/SM/
Highest Daily Lifetime Seven is offered as an alternative to Lifetime Five,
Spousal Lifetime Five, and Highest Daily Lifetime Five. Currently, if you
elect Highest Daily Lifetime Seven and subsequently terminate the benefit, you
may have a waiting period until you can elect Spousal Lifetime Five, Lifetime
Five, Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime Seven.
See "Election of and Designations under the Program" below for details. The
income benefit under Highest Daily Lifetime Seven currently is based on a
single "designated life" who is at least 55 years old on the date that the
benefit is acquired. The Highest Daily Lifetime Seven Benefit is not available
if you elect any other optional living benefit, although you may elect any
optional death benefit (other than the Highest Daily Value Death Benefit). As
long as your Highest Daily Lifetime Seven Benefit is in effect, you must
allocate your Contract Value in accordance with the then permitted and
available investment option(s) with this program. In the application for this
benefit, we specify the permitted investment options - you may also contact us
or your registered representative for further information.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of market performance on the Contract Value,
subject to our program rules regarding the timing and amount of withdrawals.
The benefit may be appropriate if you intend to make periodic withdrawals from
your Contract, and wish to ensure that market performance will not affect your
ability to receive annual payments. You are not required to make withdrawals
as part of the program - the guarantees are not lost if you withdraw less than
the maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Seven, and in Appendix D to
this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Seven is the
Protected Withdrawal Value. Because each of the Protected Withdrawal Value and
Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount for the rest of your life, provided that you
have not made "excess withdrawals." Excess withdrawals, as discussed below,
will reduce your Annual Income Amount. Thus, you could experience a scenario
in which your Contract Value was zero, and, due to your excess withdrawals,
your Annual Income Amount also was reduced to zero. In that scenario, no
further amount would be payable under Highest Daily Lifetime Seven.
KEY FEATURE - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Contract Value. On each business day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each business day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each business day (the "Current Business Day"), the Periodic Value is
equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Business Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Business Day and the Current Business
Day (i.e., one day for successive Business Days, but more than one calendar
day for business days that are separated by weekends and/or holidays), plus
the amount of any adjusted Purchase Payment made on the Current business
day; and
(2)the Contract Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
a. the Contract Value; or
b. the Periodic Value on the date of the withdrawal.
69
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Contract Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Contract Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Contract Value.
KEY FEATURE - Annual Income Amount under the Highest Daily Lifetime Seven
Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage depends on the age of the Annuitant on the
date of the first withdrawal after election of the benefit. The percentages
are: 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8%
for ages 85 and older. Under the Highest Daily Lifetime Seven benefit, if your
cumulative withdrawals in a contract year are less than or equal to the Annual
Income Amount, they will not reduce your Annual Income Amount in subsequent
contract years, but any such withdrawals will reduce the Annual Income Amount
on a dollar-for-dollar basis in that contract year. If your cumulative
withdrawals are in excess of the Annual Income Amount ("Excess Income"), your
Annual Income Amount in subsequent years will be reduced (except with regard
to required minimum distributions) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of
the withdrawal, including any CDSC that may apply. Withdrawals of any amount
up to and including the Annual Income Amount will reduce the Protected
Withdrawal Value by the amount of the withdrawal. Withdrawals of Excess Income
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the Annual Income Amount.
A Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment
(including the amount of any associated Credits) based on the age of the
Annuitant at the time of the first withdrawal (the percentages are: 5% for
ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85
and older) and (ii) increase the Protected Withdrawal Value by the amount of
the Purchase Payment (including the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Contract Date of the Annuity (the
"Contract Anniversary") immediately after your first withdrawal under the
benefit. Specifically, upon the first such Contract Anniversary, we identify
the Contract Value on the business days corresponding to the end of each
quarter that (i) is based on your contract year, rather than a calendar year;
(ii) is subsequent to the first withdrawal; and (iii) falls within the
immediately preceding contract year. If the end of any such quarter falls on a
holiday or a weekend, we use the next business day. Having identified each of
those quarter-end Contract Values, we then multiply each such value by a
percentage that varies based on the age of the Annuitant on the Contract
Anniversary as of which the step-up would occur. The percentages are 5% for
ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85
and older. Thus, we multiply each quarterly value by the applicable
percentage, adjust each such quarterly value for subsequent withdrawals and
Purchase Payments, and then select the highest of those values. If the highest
of those values exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. In later years, (i.e., after the first Contract
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Contract Anniversary, by performing a similar
examination of the Contract Values on the end of the four immediately
preceding quarters. At the time that we increase your Annual Income Amount, we
also increase your Protected Withdrawal Value to equal the highest quarterly
value upon which your step-up was based. If, on the date that we implement a
Highest Quarterly Auto Step-Up to your Annual Income Amount, the charge for
Highest Daily Lifetime Seven has changed for new purchasers, you may be
subject to the new charge at the time of such step-up. Prior to increasing
your charge for Highest Daily Lifetime Seven upon a step-up, we would notify
you, and give you the opportunity to cancel the automatic step-up feature. If
you receive notice of a proposed step-up and accompanying fee increase, you
should carefully evaluate whether the amount of the step-up justifies the
increased fee to which you will be subject.
70
The Highest Daily Lifetime Seven program does not affect your ability to make
withdrawals under your contract, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime Seven, if
your cumulative withdrawals in an contract year are less than or equal to the
Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent contract years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any contract year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent contract years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Seven benefit or any other fees and charges. Assume the following for
all three examples:
.. The Contract Date is December 1, 2007
.. The Highest Daily Lifetime Seven benefit is elected on March 5, 2008
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime Seven benefit
Dollar-for-Dollar Reductions
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the Annuitant is younger than 75 at the
time of the 1/st/ withdrawal, the Annual Income Amount is 5% of the Protected
Withdrawal Value, in this case 5% of $120,000). Assuming $2,500 is withdrawn
from the Annuity on this date, the remaining Annual Income Amount for that
contract year (up to and including December 1, 2008) is $3,500.
This is the result of a dollar-for-dollar reduction of the Annual Income
Amount - $6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that contract year to $0. The remaining withdrawal amount - $1,500
- reduces the Annual Income Amount in future contract years on a proportional
basis based on the ratio of the excess withdrawal to the Contract Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that contract year, each would result in another proportional
reduction to the Annual Income Amount).
Here is the calculation:
Contract Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% -$ 84.51
Annual Income Amount for future contract years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Contract
Anniversary) of the highest quarterly value since your first withdrawal (or
last Contract Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments (plus any
Credits).
Continuing the same example as above, the Annual Income Amount for this
contract year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next contract
year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 75 on the date of the potential step-up) of
the highest quarterly Contract Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 business days occur after the excess withdrawal on
August 6.
71
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Highest Quarterly
Value (adjusted with Adjusted Annual Income
withdrawal and Amount (5% of the Highest
Date* Contract Value Purchase Payments)** Quarterly Value)
- -----------------------------------------------------------------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
- -----------------------------------------------------------------------------------
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
- -----------------------------------------------------------------------------------
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
- -----------------------------------------------------------------------------------
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
- -----------------------------------------------------------------------------------
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Contract Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the contract year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Contract Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Contract Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next contract year, starting on December 2, 2008 and continuing
through December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME SEVEN PROGRAM
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Highest Daily Lifetime
Seven, and amounts are still payable under Highest Daily Lifetime Seven, we
will make an additional payment, if any, for that contract year equal to
the remaining Annual Income Amount for the contract year. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described in this
section. We will make payments until the death of the single designated
life. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount, the Highest Daily Lifetime Seven benefit terminates, and no
additional payments are made. However, if a withdrawal in the latter
scenario was taken to meet required minimum distribution requirements under
the Annuity, then the benefit will not terminate, and we will continue to
pay the Annual Income Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
(1)apply your Contract Value to any Annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
contract. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Contract Value.
72
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the annuitant's 95th
birthday will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Seven benefit are subject to
all of the terms and conditions of the Contract, including any CDSC.
.. Withdrawals made while the Highest Daily Lifetime Seven Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Contract. The Highest Daily Lifetime Seven Benefit
does not directly affect the Contract Value or surrender value, but any
withdrawal will decrease the Contract Value by the amount of the withdrawal
(plus any applicable CDSC). If you surrender your Contract you will receive
the current surrender value.
.. You can make withdrawals from your Contract while your Contract Value is
greater than zero without purchasing the Highest Daily Lifetime Seven
benefit. The Highest Daily Lifetime Seven benefit provides a guarantee that
if your Contract Value declines due to market performance, you will be able
to receive your Annual Income Amount in the form of periodic benefit
payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to the AST
Investment Grade Bond Portfolio Sub-account (see description below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Investment
Options Can I Choose?". Upon the initial transfer of your Account Value
into the AST Investment Grade Bond Portfolio, we will send a prospectus for
that Portfolio to you, along with your confirmation. In addition, you can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and an AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under the contract.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Highest Daily Lifetime Seven benefit. If, subsequent to your election
of the benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements.
.. Currently, Owners electing this benefit must allocate Contract Value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust: AST Capital Growth Asset Allocation Portfolio, AST Balanced Asset
Allocation Portfolio, AST Conservative Asset Allocation Portfolio, AST
Preservation Asset Allocation Portfolio, AST Advanced Strategies Portfolio,
AST First Trust Balanced Target Portfolio, AST First Trust Capital
Appreciation Target Portfolio AST T. Rowe Price Asset Allocation Portfolio,
AST UBS Dynamic Alpha, or AST American Century Strategic Allocation.
.. The fee for Highest Daily Lifetime Seven is 0.60% annually of the Protected
Withdrawal Value. We deduct this fee at the end of each quarter, where each
such quarter is part of a year that begins on the effective date of the
benefit or an anniversary thereafter. Thus, on each such quarter-end (or
the next business day, if the quarter-end is not a business day), we deduct
0.15% of the Protected Withdrawal Value at the end of the quarter. We
deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Portfolio Sub-account. Since this fee is based on the
Protected Withdrawal Value the fee for Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Contract Value
alone. If the fee to be deducted exceeds the current Contract Value, we
will reduce the Contract Value to zero, and continue the benefit as
described above.
Election of and Designations under the Program
For Highest Daily Lifetime Seven, there must be either a single Owner who is
the same as the Annuitant, or if the Contract is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Contract will result in cancellation of
Highest Daily Lifetime Seven. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Seven, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) ownership is
transferred from a custodian to the Annuitant, or vice versa or (c) ownership
is transferred from one entity to another entity.
Highest Daily Lifetime Seven can be elected at the time that you purchase your
Contract or after the Contract Date, subject to our eligibility rules and
restrictions.
Currently, if you terminate the Highest Daily Lifetime Seven benefit, you may
only be allowed to re-elect the benefit or elect another lifetime withdrawal
benefit on any anniversary of the Contract Date that is at least 90 calendar
days from the date the Highest Daily Lifetime Seven Benefit was terminated. We
reserve the right to further limit the election frequency in the future.
Similarly, we generally may permit those who have terminated Lifetime Five,
Spousal Lifetime Five, Highest Daily Lifetime Five or the Spousal Highest
Daily Lifetime Seven to elect Highest Daily Lifetime Seven only on an
anniversary of the Contract Date that is at least 90 calendar days from the
date that such benefit was terminated. We reserve the right to waive that
requirement.
73
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Contract Value on that Tenth Anniversary (or the next business
day, if that anniversary is not a business day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a. your Contract Value on the day that you elected Highest Daily Lifetime
Seven; and
b. the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options (other
than a bond Sub-account used with this benefit), in the same proportion that
each such Sub-account bears to your total Contract Value, immediately before
the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. This potential addition to Contract Value is available only if
you have elected Highest Daily Lifetime Seven and if you meet the conditions
set forth in this paragraph. Thus, if you take a withdrawal prior to the Tenth
Anniversary, you are not eligible to receive the Return of Principal Guarantee.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Contract (iii) upon
your election to begin receiving annuity payments (although if you have
elected to take the Annual Income Amount in the form of Annuity payments, we
will continue to pay the Annual Income Amount), (iv) upon the death of the
Annuitant (v) if both the Contract Value and Annual Income Amount equal zero
or (vi) if you cease to meet our requirements for issuing the benefit (see
Elections and Designations under the Program).
Upon termination of Highest Daily Lifetime Seven other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
Asset Transfer Component of Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Seven. For purposes of this
benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The AST Investment Grade Bond Sub-account is available only
with this benefit, and thus you may not allocate Purchase Payments to the AST
Investment Grade Bond Sub-account. Under the asset transfer component of
Highest Daily Lifetime Seven, we monitor your Contract Value daily and, if
dictated by the formula, systematically transfer amounts between the Permitted
Sub-accounts you have chosen and the AST Investment Grade Bond Sub-account.
Any transfer would be made in accordance with a formula, which is set forth in
the Appendices to this prospectus. Speaking generally, the formula, which we
apply each business day, operates as follows. The formula starts by
identifying an income basis for that day and then multiplies that figure by
5%, to produce a projected (i.e., hypothetical) income amount. Note that we
use 5% in the formula, irrespective of the Annuitant's attained age. Then we
produce an estimate of the total amount we would target in our allocation
model, based on the projected income amount and factors set forth in the
formula. In the formula, we refer to that value as the "Target Value" or "L".
If you have already made a withdrawal, your projected income amount (and thus
your Target Value) would take into account any automatic step-up, any
subsequent purchase payments, and any excess withdrawals. Next, the formula
subtracts from the Target Value the amount held within the AST Investment
Grade Bond Sub-account on that day, and divides that difference by the amount
held within the Permitted Sub-accounts. That ratio, which essentially isolates
the amount of your Target Value that is not offset by amounts held within the
AST Investment Grade Bond Sub-account, is called the "Target Ratio" or "r". If
the Target Ratio exceeds a certain percentage (currently 83%), it means
essentially that too much Target Value is not offset by assets within the AST
Investment Grade Bond Sub-account, and therefore we will transfer an amount
from your Permitted Sub-accounts to the AST Investment Grade Bond Sub-account.
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts would occur.
74
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime Seven, the ratios we use will be fixed. For
newly-issued contracts that elect Highest Daily Lifetime Seven and existing
contracts that elect Highest Daily Lifetime Seven, however, we reserve the
right to change the ratios.
While you are not notified when your Contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the AST Investment Grade Bond
Sub-account will be withdrawn for this purpose on a last-in, first-out
basis; or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Contract Value is systematically transferred
to the AST Investment Grade Bond Sub-account during periods of market declines
or low interest rates, less of your Contract Value may be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a subsequent market recovery. Under the reallocation formula that we
employ, it is possible that all or a significant portion of your Contract
Value may be allocated to the AST Investment Grade Bond Sub-account. Note that
if your entire Contract Value is transferred to the AST Investment Grade Bond
Sub-account, then based on the way the formula operates, that value would
remain in the AST Investment Grade Bond Sub-account unless you made additional
Purchase Payments to the Permitted Sub-accounts, which could cause Contract
Value to transfer out of the AST Investment Grade Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Contract year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit
here. However, we do note that if you participate in Highest Daily Lifetime
Seven through a non-qualified annuity, as with all withdrawals, once all
Purchase Payments are returned under the contract, all subsequent withdrawal
amounts will be taxed as ordinary income.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (SPOUSAL HIGHEST DAILY
LIFETIME SEVEN)
Spousal Highest Daily Lifetime Seven is the spousal version of Highest Daily
Lifetime Seven. Currently, if you elect Spousal Highest Daily Lifetime Seven
and subsequently terminate the benefit, you may have a waiting period until
you can elect Spousal Lifetime Five, Lifetime Five, Highest Daily Lifetime
Seven, or Spousal Highest Daily Lifetime Seven. See "Election of and
Designations under the Program" below for details. Spousal Highest Daily
Lifetime Seven must be elected based on two Designated Lives, as described
below. Each Designated Life must be at least 59 1/2 years old when the benefit
is elected. Spousal Highest Daily Lifetime Seven is not available if you elect
any other optional living benefit. As long as your Spousal Highest Daily
Lifetime Seven Benefit is in effect, you must allocate your Contract Value in
accordance with the then permitted and available
75
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
investment option(s) with this program. In the application for this benefit,
we specify the permitted investment options - you may also contact us or your
registered representative for further information.
We offer a benefit that guarantees until the later death of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them (the "Designated Lives", and each, a
"Designated Life") the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our program rules regarding the timing and
amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your Contract, wish to ensure that market
performance will not affect your ability to receive annual payments, and wish
either spouse to be able to continue the Spousal Highest Daily Lifetime Seven
benefit after the death of the first spouse. You are not required to make
withdrawals as part of the program - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our asset
transfer program in order to participate in Spousal Highest Daily Lifetime
Seven, and in Appendix D to this prospectus, we set forth the formula under
which we make those asset transfers.
As discussed below, a key component of Spousal Highest Daily Lifetime Seven is
the Protected Withdrawal Value. Because each of the Protected Withdrawal Value
and Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount until the death of the second Designated
Life, provided that there have not been "excess withdrawals." Excess
withdrawals, as discussed below, will reduce your Annual Income Amount. Thus,
you could experience a scenario in which your Contract Value was zero, and,
due to your excess withdrawals, your Annual Income Amount also was reduced to
zero. In that scenario, no further amount would be payable under Spousal
Highest Daily Lifetime Seven.
KEY FEATURE - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Contract Value. On each business day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each business day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each business day (the "Current Business Day"), the Periodic Value is
equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Business Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Business Day and the Current Business
Day (i.e., one day for successive business Days, but more than one calendar
day for business days that are separated by weekends and/or holidays), plus
the amount of any adjusted Purchase Payment made on the Current Business
Day; and
(2)the Contract Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
a. the Contract Value; or
b. the Periodic Value on the date of the withdrawal.
If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Contract Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Contract Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
76
On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Contract Value.
KEY FEATURE - Annual Income Amount under the Spousal Highest Daily Lifetime
Seven Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage depends on the age of the youngest Designated
Life on the date of the first withdrawal after election of the benefit. The
percentages are: 5% for ages 79 and younger, 6% for ages 80 to 84, 7% for ages
85 to 89, and 8% for ages 90 and older. We use the age of the youngest
Designated Life even if that Designated Life is no longer a participant under
the Contract due to death or divorce. Under the Spousal Highest Daily Lifetime
Seven benefit, if your cumulative withdrawals in a contract year are less than
or equal to the Annual Income Amount, they will not reduce your Annual Income
Amount in subsequent contract years, but any such withdrawals will reduce the
Annual Income Amount on a dollar-for-dollar basis in that contract year. If
your cumulative withdrawals are in excess of the Annual Income Amount ("Excess
Income"), your Annual Income Amount in subsequent years will be reduced
(except with regard to required minimum distributions) by the result of the
ratio of the Excess Income to the Contract Value immediately prior to such
withdrawal (see examples of this calculation below). Reductions include the
actual amount of the withdrawal, including any CDSC that may apply.
Withdrawals of any amount up to and including the Annual Income Amount will
reduce the Protected Withdrawal Value by the amount of the withdrawal.
Withdrawals of Excess Income will reduce the Protected Withdrawal Value by the
same ratio as the reduction to the Annual Income Amount. A Purchase Payment
that you make will (i) increase the then-existing Annual Income Amount by an
amount equal to a percentage of the Purchase Payment (including the amount of
any associated Credits) based on the age of the Annuitant at the time of the
first withdrawal (the percentages are: 5% for ages 79 and younger, 6% for ages
80-84, 7% for ages 85-89, and 8% for ages 90 and older) and (ii) increase the
Protected Withdrawal Value by the amount of the Purchase Payment (including
the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Contract Date of the Annuity (the
"Contract Anniversary") immediately after your first withdrawal under the
benefit. Specifically, upon the first such Contract Anniversary, we identify
the Contract Value on the business days corresponding to the end of each
quarter that (i) is based on your contract year, rather than a calendar year;
(ii) is subsequent to the first withdrawal; and (iii) falls within the
immediately preceding contract year. If the end of any such quarter falls on a
holiday or a weekend, we use the next business day. Having identified each of
those quarter-end Contract Values, we then multiply each such value by a
percentage that varies based on the age of the youngest Designated Life on the
Contract Anniversary as of which the step-up would occur. The percentages are
5% for ages 79 and younger, 6% for ages 80-84, 7% for ages 85-89, and 8% for
ages 90 and older. Thus, we multiply each quarterly value by the applicable
percentage, adjust each such quarterly value for subsequent withdrawals and
Purchase Payments, and then select the highest of those values. If the highest
of those values exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. In later years, (i.e., after the first Contract
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Contract Anniversary, by performing a similar
examination of the Contract Values on the end of the four immediately
preceding quarters. At the time that we increase your Annual Income Amount, we
also increase your Protected Withdrawal Value to equal the highest quarterly
value upon which your step-up was based. If, on the date that we implement a
Highest Quarterly Auto Step-Up to your Annual Income Amount, the charge for
Spousal Highest Daily Lifetime Seven has changed for new purchasers, you may
be subject to the new charge at the time of such step-up. Prior to increasing
your charge for Spousal Highest Daily Lifetime Seven upon a step-up, we would
notify you, and give you the opportunity to cancel the automatic step-up
feature. If you receive notice of a proposed step-up and accompanying fee
increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
The Spousal Highest Daily Lifetime Seven program does not affect your ability
to make withdrawals under your annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime Seven, if your cumulative withdrawals in a contract year are less
than or equal to the Annual Income Amount, they will not reduce your Annual
Income Amount in subsequent contract years, but any such withdrawals will
reduce the Annual Income Amount on a dollar-for-dollar basis in that contract
year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any contract year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent contract years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Spousal Highest
Daily Lifetime Seven benefit or any other fees and charges. Assume the
following for all three examples:
.. The Contract Date is December 1, 2007
.. The Spousal Highest Daily Lifetime Seven benefit is elected on March 5,
2008.
.. The youngest Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime Seven benefit.
77
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Dollar-for-Dollar Reductions
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the youngest Designated Life is younger
than 80 at the time of the 1/st/ withdrawal, the Annual Income Amount is 5% of
the Protected Withdrawal Value, in this case 5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Annual Income Amount
for that contract year (up to and including December 1, 2008) is $3,500. This
is the result of a dollar-for-dollar reduction of the Annual Income Amount -
$6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that contract year to $0. The remaining withdrawal amount - $1,500
- reduces the Annual Income Amount in future contract years on a proportional
basis based on the ratio of the excess withdrawal to the Contract Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that contract year, each would result in another proportional
reduction to the Annual Income Amount).
Here is the calculation:
Contract Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% -$ 84.51
Annual Income Amount for future contract years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest Designated Life's age on the
Contract Anniversary) of the highest quarterly value since your first
withdrawal (or last Contract Anniversary in subsequent years), adjusted for
withdrawals and additional Purchase Payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional Purchase Payments (plus
any Credits).
Continuing the same example as above, the Annual Income Amount for this
contract year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next contract
year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 80 on the date of the potential step-up) of
the highest quarterly Contract Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 business days occur after the excess withdrawal on
August 6.
Highest Quarterly
Value (adjusted with Adjusted Annual Income
withdrawal and Amount (5% of the Highest
Date* Contract Value Purchase Payments)** Quarterly Value)
- -----------------------------------------------------------------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
- -----------------------------------------------------------------------------------
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
- -----------------------------------------------------------------------------------
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
- -----------------------------------------------------------------------------------
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
- -----------------------------------------------------------------------------------
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Contract Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the contract year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
78
The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Contract Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Contract Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next contract year, starting on December 2, 2008 and continuing
through December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN PROGRAM
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Spousal Highest Daily
Lifetime Seven, and amounts are still payable under Spousal Highest Daily
Lifetime Seven, we will make an additional payment, if any, for that
contract year equal to the remaining Annual Income Amount for the contract
year. Thus, in that scenario, the remaining Annual Income Amount would be
payable even though your Contract Value was reduced to zero. In subsequent
contract years we make payments that equal the Annual Income Amount as
described in this section. We will make payments until the death of the
first of the Designated Lives to die, and will continue to make payments
until the death of the second Designated Life as long as the Designated
Lives were spouses at the time of the first death. To the extent that
cumulative withdrawals in the current contract year that reduced your
Contract Value to zero are more than the Annual Income Amount, the Spousal
Highest Daily Lifetime Seven benefit terminates, and no additional payments
will be made. However, if a withdrawal in the latter scenario was taken to
meet required minimum distribution requirements under the contract, then
the benefit will not terminate, and we will continue to pay the Annual
Income Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your contract, or if
you decide to begin receiving annuity payments and there is a Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
(1)apply your Contract Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life
as long as the Designated Lives were spouses at the time of the first
death. If, due to death of a Designated Life or divorce prior to
annuitization, only a single Designated Life remains, then annuity
payments will be made as a life annuity for the lifetime of the
Designated Life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your contract. The amount that will be applied to provide
such annuity payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as applicable)
life fixed annuity rates guaranteed in your Contract; and
(2)the Contract Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the older of the
owner or Annuitant's 95th birthday, will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Spousal Highest Daily Lifetime Seven Benefit are
subject to all of the terms and conditions of the contract, including any
CDSC.
.. Withdrawals made while the Spousal Highest Daily Lifetime Seven Benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the contract. The Spousal Highest Daily Lifetime Seven
Benefit does not directly affect the Contract Value or surrender value, but
any withdrawal will decrease the Contract Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your contract you
will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime
Seven Benefit. The Spousal Highest Daily Lifetime benefit provides a
guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Annual Income Amount in the form of
periodic benefit payments.
79
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to the AST
Investment Grade Bond Portfolio Sub-account (as described below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Investment
Options Can I Choose?". Upon the initial transfer of your Account Value
into the AST Investment Grade Bond Portfolio, we will send a prospectus for
that Portfolio to you, along with your confirmation. In addition, you can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Spousal Highest Daily Lifetime Seven benefit. If, subsequent to your
election of the benefit, we change our requirements for how Account Value
must be allocated under the benefit, the new requirement will apply only to
new elections of the benefit, and we will not compel you to re-allocate
your Account Value in accordance with our newly adopted requirements.
.. Currently, Owners electing this benefit must allocate Contract Value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust: AST Capital Growth Asset Allocation Portfolio, AST Balanced Asset
Allocation Portfolio, AST Conservative Asset Allocation Portfolio, AST
Preservation Asset Allocation Portfolio, AST Advanced Strategies Portfolio,
AST First Trust Balanced Target Portfolio, AST First Trust Capital
Appreciation Target Portfolio AST T. Rowe Price Asset Allocation Portfolio,
AST UBS Dynamic Alpha, or AST American Century Strategic Allocation.
.. The fee for Spousal Highest Daily Lifetime Seven is 0.75% annually of the
Protected Withdrawal Value. We deduct this fee at the end of each quarter,
where each such quarter is part of a year that begins on the effective date
of the benefit or an anniversary thereafter. Thus, on each such quarter-end
(or the next business day, if the quarter-end is not a business day), we
deduct 0.1875% of the Protected Withdrawal Value at the end of the quarter.
We deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Sub-account. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Contract Value
alone. If the fee to be deducted exceeds the current Contract Value, we
will reduce the Contract Value to zero, and continue the benefit as
described above.
Election of and Designations under the Program
Spousal Highest Daily Lifetime Seven can only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the program and at the death of the
first of the Designated Lives to die. Currently, Spousal Highest Daily
Lifetime Seven only may be elected where the Owner, Annuitant, and Beneficiary
designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 59 1/2 years old at the time of election;
or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be
at least 59 1/2 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 59 1/2 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b) if the contract initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under this
benefit. If the Designated Lives divorce, the Spousal Highest Daily Lifetime
Seven benefit may not be divided as part of the divorce settlement or
judgment. Nor may the divorcing spouse who retains ownership of the contract
appoint a new Designated Life upon re-marriage.
Spousal Highest Daily Lifetime Seven can be elected at the time that you
purchase your contract or after the Contract Date, subject to our eligibility
rules and restrictions.
Currently, if you terminate the Spousal Highest Daily Lifetime Seven benefit,
you may only be allowed to re-elect the benefit or to elect the Lifetime Five
Benefit, the Spousal Lifetime Five Benefit, or the Highest Daily Lifetime
Seven Benefit on any anniversary of the Contract Date that is at least 90
calendar days from the date the Spousal Highest Daily Lifetime Seven Benefit
was terminated. We reserve the right to further limit the election frequency
in the future. Similarly, we generally may permit those who have terminated
Lifetime Five, Spousal Lifetime Five, Highest Daily Lifetime Five, or Highest
Daily Lifetime Seven to elect Spousal Highest Daily Lifetime Seven only on an
anniversary of the Contract Date that is at least 90 calendar days from the
date that such benefit was terminated. We reserve the right to waive that
requirement.
80
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Contract Value on that Tenth Anniversary (or the next business
day, if that anniversary is not a business day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a. your Contract Value on the day that you elected Spousal Highest Daily
Lifetime Seven; and
b. the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options (other
than a bond Sub-account used with this benefit), in the same proportion that
each such Sub-account bears to your total Contract Value, immediately before
the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. This potential addition to Contract Value is available only if
you have elected Spousal Highest Daily Lifetime Seven and if you meet the
conditions set forth in this paragraph. Thus, if you take a withdrawal prior
to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) if upon the death
of the first Designated Life, the surviving Designated Life opts to take the
death benefit under the contract (thus, the benefit does not terminate solely
because of the death of the first Designated Life), (ii) upon the death of the
second Designated Life, (iii) upon your termination of the benefit (although
if you have elected to take annuity payments in the form of the Annual Income
Amount, we will continue to pay the Annual Income Amount), (iv) upon your
surrender of the contract (v) upon your election to begin receiving annuity
payments (vi) if both the Contract Value and Annual Income Amount equal zero
or (vii) if you cease to meet our requirements for issuing the benefit (see
Election of and Designations under the Program).
Upon termination of Spousal Highest Daily Lifetime Seven other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account (as
defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Spousal Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Spousal Highest Daily Lifetime Seven. For purposes
of this benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Spousal Highest Daily
Lifetime Seven, we require that you participate in our specialized asset
transfer program, under which we may transfer Contract Value between the
Permitted Sub-accounts and a specified bond fund within the Advanced Series
Trust (the "AST Investment Grade Bond Sub-account"). We determine whether to
make a transfer, and the amount of any transfer, under a non-discretionary
formula, discussed below. The AST Investment Grade Bond Sub-account is
available only with this benefit, and thus you may not allocate Purchase
Payments to the AST Investment Grade Bond Sub-account. Under the asset
transfer component of Spousal Highest Daily Lifetime Seven, we monitor your
Contract Value daily and, if dictated by the formula, systematically transfer
amounts between the Permitted Sub-accounts you have chosen and the AST
Investment Grade Bond Sub-account. Any transfer would be made in accordance
with a formula, which is set forth in the Appendix D to this prospectus.
Speaking generally, the formula, which we apply each business day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
Highest Daily annual income amount. Note that we use 5% in the formula,
irrespective of the youngest Designated Life's attained age. Then we produce
an estimate of the total amount we would target in our allocation model, based
on the projected income amount and factors set forth in the formula. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected income amount (and thus your Target
Value) would take into account any automatic step-up, any subsequent purchase
payments, and any excess withdrawals. Next, the formula subtracts from the
Target Value the amount held within the AST Investment Grade Bond Sub-account
on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the AST Investment
Grade Bond Sub-account, is called the "Target Ratio" or "r". If the Target
Ratio exceeds a certain percentage (currently 83%), it means essentially that
too much Target Value is not offset by assets within the AST Investment Grade
Bond Sub-account, and therefore we will transfer an amount from your Permitted
Sub-accounts to the AST Investment Grade Bond Sub-account Conversely, if the
Target Ratio falls below a certain percentage (currently 77%), then a transfer
from the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts
would occur.
81
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Spousal Highest Daily Lifetime Seven, the ratios we use will be fixed.
For newly-issued Annuities that elect Spousal Highest Daily Lifetime Seven and
existing Annuities that elect Spousal Highest Daily Lifetime Seven, however,
we reserve the right to change the ratios.
While you are not notified when your contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Spousal Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the AST Investment Grade Bond
Sub-account will be withdrawn for this purpose on a last-in, first-out
basis; or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Contract Value is systematically transferred
to the AST Investment Grade Bond Sub-account during periods of market declines
or low interest rates, less of your Contract Value may be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a subsequent market recovery. Under the reallocation formula that we
employ, it is possible that all or a significant portion of your Contract
Value may be allocated to the AST Investment Grade Bond Sub-account. Note that
if your entire Contract Value is transferred to the AST Investment Grade Bond
Sub-account, then based on the way the formula operates, that value would
remain in the AST Investment Grade Bond Sub-account unless you made additional
Purchase Payments to the Permitted Sub-accounts, which could cause Contract
Value to transfer out of the AST Investment Grade Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that Required Minimum Distributions due from your Contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Spousal Highest Daily
Lifetime Seven through a non-qualified annuity, as with all withdrawals, once
all Purchase Payments are returned under the contract, all subsequent
withdrawal amounts will be taxed as ordinary income.
82
6: WHAT IS THE INCOME APPRECIATOR BENEFIT?
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 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?" in
Section 8.
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.
Income Appreciator Benefit payments are treated as earnings and may be subject
to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners Annuity One 3 Contract?"
If you do not activate the benefit prior to the maximum annuitization age you
may lose all or part of the IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
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 Option, 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.
Number of Years Income Appreciator Benefit Income Appreciator
has been in Force Benefit Percentage
---------------------------------------------------------------
0-6 0%
---------------------------------------------------------------
7-9 15%
---------------------------------------------------------------
10-14 20%
---------------------------------------------------------------
15+ 25%
---------------------------------------------------------------
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.
83
6: WHAT IS THE INCOME APPRECIATOR BENEFIT? continued
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 Option;
.. 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.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
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 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.
84
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
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.
7: 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. Unless we agree otherwise, and subject to our rules, the minimum
initial purchase payment is $10,000. You must get our prior approval for any
initial and additional purchase payment of $1,000,000 or more, unless we are
prohibited under applicable state law from insisting on such 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.)
85
7: HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT? continued
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. Our business day may
close earlier, for example if regular trading on the New York Stock Exchange
closes early. Subsequent purchase payments received in good order after the
close of the business day will be credited on the following business day. With
respect to both your initial purchase payment and any subsequent purchase
payment that is pending investment in our separate account, we may hold the
amount temporarily in our general account and may earn interest on such
amount. You will not be credited with interest during that period.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered
representative.
Applicable laws designed to counter terrorists and prevent money laundering
might, in certain circumstances, require us to block a contract owner's
ability to make certain transactions, and thereby refuse to accept purchase
payments or requests for transfers, partial withdrawals, total withdrawals,
death benefits, or income payments until instructions are received from the
appropriate regulator. We also may be required to provide additional
information about you and your contract to government regulators.
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
.. 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.
86
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 variable 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.
8: 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. 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 CHARGES
If you choose an optional 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.
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 (or other)
option that you choose.
The death benefit charge is equal to:
.. 1.40% 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, (i.e., 0.25% in addition to the
base death benefit charge),
87
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT? continued
.. 1.75% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option (i.e., 0.35% in addition to
the base death benefit charge), or
.. 1.90% on an annual basis if you choose the Highest Daily Value Death
Benefit (i.e., 0.50% in addition to the base death benefit charge).
We impose an additional insurance and administrative charge of 0.10% annually
(of Contract Value attributable to the variable investment options) for the
Contract With Credit.
We impose an additional charge of 0.60% annually if you choose the Lifetime
Five Income Benefit or the Highest Daily Lifetime Five Benefit. We impose a
charge of 0.60% or 0.75% of the Protected Withdrawal Value for Highest Daily
Lifetime Seven and Spousal Highest Daily Lifetime Seven, respectively. We
impose an additional charge of 0.75% annually if you choose the Spousal
Lifetime Five Income Benefit. Upon any reset of the amounts guaranteed under
these benefits, we reserve the right to adjust the charge to that being
imposed at that time for new elections of the benefits.
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 these
charges. Any profits made from these charges 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.
The charges that we discuss in this section are assessed against the assets of
the separate account. Certain of these charges are part of the base annuity
and other charges are assessed only if any available optional benefit is
selected. If a fixed interest rate option is available under your contract,
the interest rate that we credit to that option may be reduced by an amount
that corresponds to the asset-based charges to which you are subject under the
variable investment options.
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.
Number of Contract
Anniversaries since Contract with Credit Contract without
the Date of each 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%
-------------------------------------------------------------
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.
88
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 (including a withdrawal under a lifetime withdrawal
benefit), 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. We will then apply a withdrawal charge to the adjusted amount.
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. Please consult your contract for details about how we define the
key terms used for this waiver (e.g., eligible nursing home). Note that our
requirements for this waiver may vary, depending on the state in which your
contract was issued.
MINIMUM DISTRIBUTION REQUIREMENTS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Annuity One 3 Contract?"
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 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 $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.
89
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT? continued
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.
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 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 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.
90
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.
BENEFICIARY CONTINUATION OPTION CHARGES
If your beneficiary takes the Beneficiary Continuation Option, we deduct a
Settlement Service Charge. The charge is assessed daily against the average
assets allocated to the variable investment options, and is equal to an annual
charge of 1.00%. In addition, the beneficiary will incur an annual maintenance
fee equal to the lesser of $30 or 2% of Contract Value if the Contract Value
is less than $25,000 at the time the fee is assessed. The fee will not apply
if it is assessed 30 days prior to a surrender request. Finally, transfers in
excess of 20 per year will incur a $10 transfer fee.
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 deduction from the value of the contract to pay some or all of these
taxes. We generally will deduct the state premium tax charge at the time of a
withdrawal or surrender of your Contract or at the time you elect to begin
receiving annuity payments. However, we also reserve the right to deduct the
charge from each purchase payment at the time the tax is imposed, if earlier.
In the states that impose a premium tax on us, the current rates range up to
3.5%. It is 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.
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. The
transfer fee is deducted before the market value adjustment, if any, is
calculated. There is a different transfer fee under the Beneficiary
Continuation Option.
COMPANY TAXES
We pay company income taxes on the taxable corporate earnings created by this
separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the contract. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividend received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract. We reserve
the right to change these tax practices.
91
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT? continued
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 2007, the fees of these funds ranged from
0.37% to 1.64% annually. For certain funds, expenses are reduced pursuant to
expense waivers and comparable arrangements. In general, these expense waivers
and comparable arrangements are not guaranteed, and may be terminated at any
time. For additional information about these fund fees, please consult the
prospectuses for the funds.
9: HOW CAN I ACCESS MY MONEY?
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. For a more Complete Explanation, See Section 10.
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. An assignment of the contract
terminates any automated withdrawal program that you had in effect.
Income Taxes, Tax Penalties, Withdrawal Charges, and Certain Restrictions may
Apply to Automated Withdrawals. For a more Complete Explanation, See
Section 10.
92
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.
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT?
The tax considerations associated with an annuity vary depending on whether
the contract is (i) owned by an individual or non-natural person, and not
associated with a tax-favored retirement plan, or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. 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. Cost
basis for a tax-favored retirement plan is provided only in limited
circumstances, such as for contributions to a Roth IRA or nondeductible IRA
contributions. The discussion includes a description of certain spousal rights
under the contract, and 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). Depending on the state in which
your annuity is issued, we may offer certain spousal benefits to civil union
couples. You should be aware, however, that federal tax law does not recognize
civil unions. Therefore, we cannot permit a civil union partner to continue
the annuity upon the death of the first partner under the annuity's "spousal
continuance" provision. Civil union couples should consider that limitation
before selecting a spousal benefit under the annuity.
The discussion includes a description of certain spousal rights under the
contract, and 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). Depending on the state in which your annuity
is issued, we may offer certain spousal benefits to civil union couples. You
should be aware, however, that federal tax law does not recognize civil
unions. Therefore, we cannot permit a civil union partner to continue the
annuity upon the death of the first partner under the annuity's "spousal
continuance" provision. Civil union couples should consider that limitation
before selecting a spousal benefit under the annuity.
NONQUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Nonqualified Annuity is owned by an
individual or non-natural person and is not associated with a tax-favored
retirement plan.
Taxes Payable by You
We believe this annuity 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. Charges for investment advisory fees that are taken
from the contract are treated as a partial withdrawal from the contract and
will be reported as such to the contract owner.
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 should be
treated for federal income tax purposes as a partial withdrawal from the
contract. If this were the case, the charge for this benefit 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.
You must commence annuity payments no later than the first day of the calendar
month next following the maximum Annuity Date for your contract. Please refer
to your annuity contract for the applicable maximum Annuity Date. For some of
our contracts, you are able to choose to defer the Annuity Date beyond the
default Annuity Date described in your contract. However, the IRS may not then
consider your contract to be an annuity under the tax law.
93
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
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.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of purchase payments until all purchase payments have been returned.
After all purchase payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefit programs or as a
systematic payment are taxed under these rules. 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. If you transfer your contract for less than
full consideration, such as by gift, you will also 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.
If you choose to receive payments under an interest payment option, or a
beneficiary chooses to receive a death benefit under an interest payment
option, that election will be treated, for tax purposes, as surrendering your
annuity and will immediately subject any gain in the contract to income tax.
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 for Early Withdrawal From a Nonqualified Annuity Contract
You may owe a 10% tax penalty on the taxable part of distributions received
from your Nonqualified annuity contract 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;
.. generally 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 and modification of payments during that time period will 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).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
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. 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. In
Revenue Procedure 2008-24, the IRS has indicated that where there is a
surrender or distribution from either the initial annuity contract or
receiving annuity contract within 12 months of the date on which the partial
exchange was completed, the transfer will retroactively be treated as a
taxable distribution from the initial annuity contract and a contribution to
the receiving annuity contract. Tax free exchange treatment will be retained
if the subsequent surrender or distribution would be eligible for an exception
to the 10% federal income tax penalty, other than the exceptions for
substantially equal periodic payments or distributions under an immediate
annuity. 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.
If an 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
94
the new contract prior to that date. Generally, such pre-August 14, 1982
withdrawals are treated as a recovery of your investment in the contract first
until purchase payments made before August 14, 1982 are withdrawn. Moreover,
any income allocable to purchase payments made before August 14, 1982, is not
subject to the 10% tax penalty.
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 in the Annuity Qualification
section. Tax consequences to the beneficiary vary depending upon the Death
Benefit payment option selected. Generally, for payment of the Death Benefit
.. As a lump sum payment: the beneficiary is taxed on gain in the contract.
.. Within 5 years of death of owner: the beneficiary is taxed as amounts are
withdrawn (in this case gain is treated as being distributed first).
.. Under an annuity or annuity settlement option with distribution beginning
within one year of the date of death of the owner: the beneficiary is taxed
on each payment (part will be treated as gain and part as return of
purchase payments).
Considerations for Contingent Annuitants: We may allow the naming of a
contingent annuitant when a Nonqualified annuity contract is held by a pension
plan or a tax favored retirement plan. In such a situation, the annuity may no
longer qualify for tax deferral where the annuity contract continues after the
death of the Annuitant. Note that in certain annuity contracts issued by Pruco
Life Insurance Company and Pruco Life Insurance Company of New Jersey, we
allow for the naming of a co-annuitant, which also is used to mean the
successor annuitant (and not another life used for measuring the duration of
an annuity payment option). Like in the case of a contingent annuitant, the
annuity may no longer qualify for tax deferral where the contract continues
after the death of the annuitant.
Reporting and Withholding on Distributions
Taxable amounts distributed from an annuity 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 (3) exemptions unless
you designate a different withholding status. If no U.S. taxpayer
identification number is provided, we will automatically withhold using single
with zero exemptions as the default. 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
discussion below regarding withholding rules for a Qualified annuity.
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.
Entity Owners
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract over its cost basis will be subject to tax annually.
Where a contract is issued to a trust, and such trust is characterized as a
grantor trust under the Internal Revenue Code, such contract shall not be
considered to be held by a non-natural person and will generally be subject to
the tax reporting and withholding requirements for a Nonqualified annuity.
Where a contract is structured so that it is owned by a grantor trust but the
annuitant is not the grantor, then the contract is required to terminate upon
the death of the grantor if the grantor pre-deceases the annuitant under
Section 72(s) of the Code. Under this circumstance, the contract value will be
paid out to the beneficiary and it is not eligible for the death benefit
provided under the contract.
Annuity Qualification
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an annuity must be diversified, according to certain rules
under the Internal Revenue Code. Each portfolio is required to diversify its
investments each quarter so that no more than 55% of the value of its assets
is represented by any one investment, no more than 70% is represented by any
two investments, no more than 80% is represented by any three investments, and
no more than 90% is represented by any four investments. Generally, securities
of a single issuer are treated as
95
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
one investment and obligations of each U.S. Government agency and
instrumentality (such as the Government National Mortgage Association) are
treated as issued by separate issuers. In addition, any security issued,
guaranteed or insured (to the extent so guaranteed or insured) by the United
States or an instrumentality of the U.S. will be treated as a security issued
by the U.S. Government or its instrumentality, where applicable. We believe
the portfolios underlying the variable investment options of the annuity meet
these diversification requirements.
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 might have on transfers between
the investment options offered pursuant to this Prospectus. We reserve the
right to take any action, including modifications to your annuity or the
investment options, required to comply with such guidelines if promulgated.
Any such changes will apply uniformly to affected owners and will be made with
such notice to affected owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Nonqualified Annuity Contracts.
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 the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of
such designated beneficiary (provided such payments begin within one year of
your death). 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. Additionally, if the annuity 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. For Nonqualified annuity contracts
owned by a non-natural person, the required distribution rules apply upon the
death of the annuitant. This means that for a contract held by a non-natural
person (such as a trust) for which there is named a co-annuitant, then such
required distributions will be triggered by the death of the first
co-annuitants to die.
Changes In Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your annuity 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.
QUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Qualified annuity is an annuity
contract with applicable endorsements for a tax-favored plan or a Nonqualified
annuity contract held by a tax-favored retirement plan.
The following is a general discussion of the tax considerations for Qualified
annuity contracts. This annuity may or may not be available for all types of
the tax-favored retirement plans discussed below. This discussion assumes that
you have satisfied the eligibility requirements for any tax-favored retirement
plan. Please consult your Financial Professional prior to purchase to confirm
if this contract is available for a particular type of tax-favored retirement
plan or whether we will accept the type of contribution you intend for this
contract.
A Qualified annuity may typically be purchased for use in connection with:
.. Individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a) and 408(b) of the Code;
.. Roth IRAs under Section 408A of the Code;
.. A corporate Pension or Profit-sharing plan (subject to 401(a) of the Code);
.. H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code);
.. Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax
Deferred Annuities or TDAs);
.. Section 457 plans (subject to 457 of the Code).
A Nonqualified annuity may also be purchased by a 401(a) trust or custodial
IRA or Roth IRA account, or a Section 457 plan which can hold other
permissible assets. The terms and administration of the trust or custodial
account or plan in accordance with the laws and regulations for 401(a) plans,
IRAs or Roth IRAs, or a Section 457 plan as applicable, are the responsibility
of the applicable trustee or custodian.
96
You should be aware that tax favored plans such as IRAs generally provide
income 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 benefits (such as income tax
deferral and income tax free transfers).
Types of Tax-Favored Plans
IRAs. If you buy an annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" and "Roth IRA
Disclosure Statement" which accompany the prospectus contain 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 annuity by notifying us in
writing, and we will refund all of the purchase payments under the annuity
(or, if provided by applicable state law, the amount credited under the
annuity, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers. Subject to the minimum purchase payment
requirements of an annuity, you may purchase an annuity for an IRA in
connection with a "rollover" of amounts from a qualified retirement plan, as a
transfer from another IRA, by making a single contribution consisting of your
IRA contributions and catch-up contributions, if applicable, attributable to
the prior year and the current year during the period from January 1 to
April 15, or as a current year contribution. In 2008 the contribution limit is
$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, allowing these individuals an additional $1,000 contribution each
year. The catch-up amount is not indexed for inflation.
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 an annuity, you can make regular IRA
contributions under the annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA. In some circumstances, non-spouse
beneficiaries may directly roll over to an IRA amounts due from qualified
plans, 403(b) plans, and governmental 457(b) plans.
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;
.. 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 required minimum distributions 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 "required minimum distribution" rules
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier regarding a Nonqualified annuity. In addition to this
normal tax liability, you may also be liable for the following, depending on
your actions:
.. A 10% early withdrawal penalty described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a required minimum distribution, also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $46,000 in 2008 ($45,000 in 2007) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as compensation for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2008, this limit is $230,000 ($225,000
for 2007);
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $15,500 in 2008 with the employer making
these contributions to the SEP. However, no new "salary reduction" or
"SARSEPs" can be established after 1996. Individuals participating in a
SARSEP who are age 50 or above by the end of the year will be permitted to
contribute an additional $5,000 in 2008. These amounts are indexed for
inflation. These annuities are not available for SARSEPs. You will also be
provided the same information, and have the same "free look" period, as you
would have if you purchased the contract for a standard IRA.
97
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. 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 earnings will be taxed generally in the same
manner as distributions from a traditional IRA.
.. 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.
Subject to the minimum purchase payment requirements of an annuity, if you
meet certain income limitations you may purchase an annuity for a Roth IRA in
connection with a "rollover" of amounts of another traditional IRA, conduit
IRA, SEP, SIMPLE-IRA or Roth IRA by making a single contribution consisting of
your Roth IRA contributions and catch-up contributions, if applicable,
attributable to the prior year and the current year during the period from
January 1 to April 15 of the current year, or with a current contribution. The
Code permits persons who meet certain income limitations (generally, adjusted
gross income under $100,000) who are not married filing a separate return 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. Beginning
January 2008, an individual receiving an eligible rollover distribution from
an employer sponsored retirement plan under sections 401(a) or 403(b) of the
Code can directly roll over contributions to a Roth IRA, subject to the same
income limits. This conversion triggers current taxation (but is not subject
to a 10% early distribution penalty). Once an annuity has been purchased,
regular Roth IRA contributions will be accepted to the extent permitted by
law. In addition, an individual receiving an eligible rollover distribution
from a designated Roth account under an employer plan may roll over the
distribution to a Roth IRA even if the individual is not eligible to make
regular contributions to a Roth IRA. Until 2010, participants with an adjusted
gross income greater than $100,000 are not permitted to roll over funds from
an employer plan, including a Roth 401(k) distribution, to a Roth IRA.
TDAs. You may own a Tax Deferred Annuity (also known as a TDA, Tax Sheltered
Annuity (TSA), 403(b) plan or 403(b) annuity) generally if you are either an
employer or employee of a tax-exempt organization (as defined under Code
Section 501(c)(3)) or a public educational organization, and you may make
contributions to a TDA so long as your rights (or your employee's rights) to
the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are
not taxable until distribution. You may also make contributions to a TDA under
a salary reduction agreement, generally up to a maximum of $15,500 in 2008.
Individuals participating in a TDA who are age 50 or above by the end of the
year will be permitted to contribute an additional $5,000 in 2008. This amount
is indexed for inflation. Further, you may roll over TDA amounts to another
TDA or an IRA. You may also roll over TDA amounts to a qualified retirement
plan, a SEP and a 457 government plan. A contract may generally only qualify
as a TDA if distributions of salary deferrals (other than "grandfathered"
amounts held as of December 31, 1988) may be made only on account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
.. Your total and permanent disability; or
.. Hardship (under limited circumstances, and only related to salary
deferrals, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1/st/ of the calendar year after the calendar year you turn age 70 1/2
or retire, whichever is later. These distribution limits do not apply either
to transfers or exchanges of investments under the contract, or to any "direct
transfer" of your interest in the contract to another TDA or to a mutual fund
"custodial account" described under Code Section 403(b)(7). Employer
contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Final regulations related to 403(b) contracts were issued in 2007. Under these
final regulations, certain contract exchanges may be accepted only if the
employer and the issuer have entered into the required information-sharing
agreements. Such agreements must be in place by January 1, 2009. We do not
currently accept transfers of funds under 403(b) contracts. Funds can only be
added to the contract as a current salary deferral under an agreement with
your employer or as a direct rollover from another employer plan. We intend to
begin accepting such transfers in the future when we can comply with the new
regulations.
98
Required Minimum Distributions and Payment Options
If you hold the contract under an IRA (or other tax-favored plan), required
minimum distribution rules 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. For a TDA or a 401(a) plan for
which the participant is not a greater than 5% owner of the employer, this
required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the Owner's lifetime. 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 at 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 required minimum distribution not made in a timely manner.
Required minimum distributions are calculated based on the sum of the account
value and the actuarial value of any additional death benefits and benefits
from optional riders that you have purchased under the contract. As a result,
the required minimum distributions may be larger than if the calculation were
based on the account value only, which may in turn result in an earlier (but
not before the required beginning date) distribution of amounts under the
annuity and an increased amount of taxable income distributed to the annuity
owner, and a reduction of death benefits and the benefits of any optional
riders.
You can use the Minimum Distribution option to satisfy the required minimum
distribution rules for an annuity without either beginning annuity payments or
surrendering the annuity. We will distribute to you the required minimum
distribution amount, less any other partial withdrawals that you made during
the year. Such amount will be based on the value of the contract as of
December 31 of the prior year, but is determined without regard to other
contracts you may own.
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. If you inherit more than one IRA or more than one Roth IRA
from the same owner, similar rules apply.
Required Distributions Upon Your Death for Qualified Annuity Contracts
Upon your death under an IRA, Roth IRA, 403(b) or other employer sponsored
plan, the designated beneficiary may generally elect to continue the contract
and receive required minimum distributions under the contract instead of
receiving the death benefit in a single payment. The available payment options
will depend on whether you die before the date required minimum distributions
under the Code were to begin, whether you have named a designated beneficiary
and whether that beneficiary is your surviving spouse.
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by December 31/st/ of the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated beneficiary (as long
as payments begin by December 31/st/ of the year following the year of
death). However, if your surviving spouse is the beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31/st/ of the year
following the year of death or December 31/st/ of the year in which you
would have reached age 70 1/2, which ever is later. Additionally, 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.
.. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out by December 31/st/ of the year including the five year
anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following the
year of death, such contract is deemed to have no designated beneficiary. A
designated beneficiary may elect to apply the rules for no designated
beneficiary if those would provide a smaller payment requirement.
.. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31st of the
year following the year of death, such contract is deemed to have no
designated beneficiary. A designated beneficiary may elect to apply the
rules for no designated beneficiary if those would provide a smaller
payment requirement.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in a Qualified annuity contract continue to be tax
deferred. Amounts withdrawn each year, including amounts that are required to
be withdrawn under the required minimum distribution rules, are subject to
tax. You may wish to consult a professional tax advisor for tax advice as to
your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
99
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
Tax Penalty for Early Withdrawals From Qualified Annuity Contracts
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, Roth IRA, TDA or qualified retirement plan 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
.. generally 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 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
We will withhold federal income tax at the rate of 20% for any eligible
rollover distribution paid by us to or for a plan participant, unless such
distribution is "directly" rolled over into another qualified plan, IRA
(including the IRA variations described above), SEP, 457 government plan or
TDA. An eligible rollover distribution is defined under the tax law as a
distribution from an employer plan under 401(a), a TDA or a 457 governmental
plan, excluding any distribution that is part of a series of substantially
equal payments (at least annually) made over the life expectancy of the
employee or the joint life expectancies of the employee and his designated
beneficiary, any distribution made for a specified period of 10 years or more,
any distribution that is a required minimum distribution and any hardship
distribution. Regulations also specify certain other items which are not
considered eligible rollover distributions. For all other distributions,
unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of the withholding certificate that you file with us.
If you do not file a certificate, we will automatically withhold federal taxes
on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions. If no U.S. taxpayer identification number is provided, we will
automatically withhold using single with zero exemptions as the default; 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. There may be additional state income tax
withholding requirements.
ERISA 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 in the applicable sections of
this Prospectus. Information about sales representatives and commissions may
be found in the sections of this Prospectus addressing distribution of the
annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
Spousal Consent Rules for Retirement Plans - Qualified Contracts
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a Death Benefit to your spouse if you are married and die before you
begin receiving your benefit. This benefit must be available in
100
the form of an annuity for your spouse's lifetime and is called a "qualified
pre-retirement survivor annuity" (QPSA). If the plan pays Death Benefits to
other beneficiaries, you may elect to have a beneficiary other than your
spouse receive the Death Benefit, but only if your spouse consents to the
election and waives his or her right to receive the QPSA. If your spouse
consents to the alternate beneficiary, your spouse will receive no benefits
from the plan upon your death. Any QPSA waiver prior to your attaining age 35
will become null and void on the first day of the calendar year in which you
attain age 35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated beneficiary.
Additional Information
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the IRA Disclosure Statement or Roth IRA Disclosure
Statement, as applicable.
Generation - Skipping Transfers
If you transfer your contract to a person two or more generations younger than
you (such as a grandchild or grandniece) or to a person that is more than
37 1/2 years younger than you, there may be generation-skipping transfer tax
consequences.
11: OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company
which was organized on December 23, 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 October 13, 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, 2007, 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 811-07325. You may read and copy
any filings made by Pruco Life with the SEC at the SEC's Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information on
the operation of the Public Reference Room by calling (202) 551-8090. 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.
Pruco Life conducts the bulk of its operations through staff employed by it or
by affiliated companies within the Prudential Financial family. Certain
discrete functions have been delegated to non-affiliates that could be deemed
"service providers" under the Investment Company Act of 1940. The entities
engaged by Pruco Life may change over time. As of December 31, 2007,
non-affiliated entities that could be deemed service providers to Pruco Life
and/or another insurer within the Prudential Annuities business unit consisted
of the following: ADP (proxy tabulation services) located at 100 Burma Road
Jersey City, New Jersey 07305, Alliance-One Services Inc. (administration of
variable life policies) located at 55 Hartland Street East Hartford CT 06108,
BISYS Retirement Services (qualified plan administrator) located at 200 Dryden
Road Dresher, PA 19025, Blue Frog Solutions, Inc. (order entry systems
provider) located at 555 SW 12th Ave, Suite 202 Pompano Beach, FL 33069, EBIX
Inc. (order-entry system) located at 5 Concourse Parkway Suite 3200 Atlanta,
GA 30328, Diversified Information Technologies Inc. (records management)
located at 123 Wyoming Ave Scranton, PA 18503, Fosdick Fulfillment Corp.
(fulfillment of prospectuses and marketing materials) located at 26 Barnes
Industrial Park Road North Wallingford, CT 06492, Insurance Technologies
(annuity illustrations) located at Two South Cascade Avenue, Suite 200
Colorado Springs, CO 80903, Lason Systems Inc. (contract printing
101
11: OTHER INFORMATION continued
and mailing) located at 1305 Stephenson Highway Troy, MI 48083, Morningstar
Associates LLC (asset allocation recommendations) located at 225 West Wacker
Drive Chicago, IL 60606, Pershing LLC (order-entry systems provider) located
at One Pershing Plaza Jersey City, NJ 07399, Personix (printing and
fulfillment of confirmations and client statements) located at 13100 North
Promenade Boulevard Stafford, TX 77477, RR Donnelley Receivables Inc.
(printing annual reports and prospectuses) located at 111 South Wacker Drive
Chicago, IL 60606-4301, Stanton Group (qualified plan administrator) located
at Two Pine Tree Drive Suite 400 Arden Hills, MN 55112 Attention: Alerus
Retirement Solutions, State Street (accumulation unit value calculations)
located at State Street Financial Center One Lincoln Street Boston,
Massachusetts 02111, The Harty Press, Inc. (printing and fulfillment of
marketing materials) located at 25 James Street New Haven, CT 06513, VG Reed &
Sons Inc. (printing and fulfillment of annual reports) located at 1002 South
12th Street Louisville, KY 40210, William B. Meyer (printing and fulfillment
of prospectuses and marketing materials) located at 255 Long Beach Boulevard
Stratford, CT 06615 .
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 Annuities Distributors, Inc. (PAD), a wholly-owned subsidiary of
Prudential Annuities, Inc., is the distributor and principal underwriter of
the annuities offered through this prospectus. PAD acts as the distributor of
a number of annuity and life insurance products, and is the co-distributor of
the Advanced Series Trust. PAD's principal business address is One Corporate
Drive, Shelton, Connecticut 06484. PAD is registered as a broker-dealer under
the Securities Exchange Act of 1934 (Exchange Act), and is a member of the
Financial Industry Regulatory Authority (FINRA).
The contract is offered on a continuous basis. PAD enters into distribution
agreements with broker/dealers who are registered under the Exchange Act and
with entities that may offer the contract but are exempt from registration
(firms). Applications for the contract are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, PAD may
offer the contract directly to potential purchasers.
Commissions are paid to firms on sales of the contract according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her 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. We may also provide compensation to the distributing firm
for providing ongoing service to you in relation to the contract. Commissions
and other compensation paid in relation to the contract do not result in any
additional charge to you or to the separate account.
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 PAD may enter into compensation arrangements with
certain broker/dealer 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 services and/or other
services they provide to us or our affiliates. These services may include, but
are not limited to: educating customers of the firm on the contract's
features; conducting due diligence and analysis; providing office access,
operations and systems support; holding seminars intended to educate
registered representatives and make them more knowledgeable about the
contract; providing a dedicated marketing coordinator; providing priority
sales desk support; and providing expedited marketing compliance approval to
PAD. Further information about the firms that are part of these compensation
arrangements appears in the Statement of Additional Information, which is
available without charge upon request.
To the extent permitted by FINRA rules and other applicable laws and
regulations, PAD 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 contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PAD and will not result in
102
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.
We or PAD also may compensate third-party vendors, for services that such
vendors render to broker-dealer firms. To the extent permitted by the FINRA
rules and other applicable laws and regulations, PAD may pay or allow other
promotional incentives or payments in the forms 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.
The list below identifies three general types of payments that PAD pays which
are broadly defined as follows:
.. Percentage Payments based upon "Assets under Management" or "AUM": This
type of payment is a percentage payment that is based upon the total amount
held in all Pruco Life products that were sold through the firm (or its
affiliated broker-dealers).
.. Percentage Payments based upon sales: This type of payment is a percentage
payment that is based upon the total amount of money received as purchase
payments under Pruco Life annuity products sold through the firm (or its
affiliated broker-dealers).
.. Fixed Payments: These types of payments are made directly to or in
sponsorship of the firm (or its affiliated broker-dealers). Examples of
arrangements under which such payments may be made currently include, but
are not limited to: sponsorships, conferences (national, regional and top
producer), speaker fees, promotional items and reimbursements to firms for
marketing activities or services paid by the firms and/or their individual
representatives. The amount of these payments varies widely because some
payments may encompass only a single event, such as a conference, and
others have a much broader scope. In addition, we may make payments upon
the initiation of a relationship for systems, operational and other support.
The list below includes the names of the firms (or their affiliated
broker/dealers) that we are aware (as of December 31, 2007) received payment
with respect to annuity business during 2007 (or as to which a payment amount
was accrued during 2007). The firms listed below include payments in
connection with products issued by Pruco Life Insurance Company and Pruco Life
Insurance Company of New Jersey. Your registered representative can provide
you with more information about the compensation arrangements that apply upon
the sale of the contract. During 2007, the least amount paid, and greatest
amount paid, were $2,072 and $1,325,582, respectively.
NAME OF FIRM:
Advantage Capital Corporation
AIG Financial Advisors, Inc.
Citigroup Global Markets, Inc.
Financial Network Investment Corp.
FSC Securities Corp.
ING Financial Partners
Merrill Lynch
Morgan Stanley
Multi-Financial Securities Corporation
Primevest
Raymond James & Associates
Raymond James Financial Services
Royal Alliance
Stifel Nicolaus & Co., Inc.
Sunamerica Securities, Inc.
UBS Financial Services
Wachovia
On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia"), and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. Wachovia is the majority
owner and Prudential Financial, indirectly through subsidiaries, is a minority
owner of Wachovia Securities.
LEGAL PROCEEDINGS
Pruco Life is subject to legal and regulatory actions in the ordinary course
of its businesses. Pending legal and regulatory actions include proceedings
specific to Pruco Life and proceedings generally applicable to business
practices in the industries in which Pruco Life operates. Pruco Life is
subject to class action lawsuits and individual lawsuits involving a variety
of issues, including sales practices, underwriting practices, claims payment
and procedures, additional premium charges for premiums paid on a periodic
basis, denial or delay of benefits, return of premiums or excessive premium
charges and breaching fiduciary duties to customers. In its annuity
operations, Pruco Life is subject to litigation involving class action
lawsuits and other litigation alleging, among other things, that Pruco Life
made improper or inadequate disclosures in connection with the sale of annuity
products or charged excessive or impermissible fees on these products,
recommended unsuitable products to customers, mishandled customer accounts or
breached fiduciary duties to customers. Pruco Life is also subject to
litigation arising out of its general business
103
11: OTHER INFORMATION continued
activities, such as its investments and third-party contracts. Regulatory
authorities from time to time make inquiries and conduct investigations and
examinations relating particularly to Pruco Life and its businesses and
products. In addition, Pruco Life, along with other participants in the
businesses in which Pruco Life engage, may be subject from time to time to
investigations, examinations and inquiries, in some cases industry-wide,
concerning issues or matters upon which such regulators have determined to
focus. In some of its pending legal and regulatory actions, parties are
seeking large and/or indeterminate amounts, including punitive or exemplary
damages. The outcome of a litigation or regulatory matter, and the amount or
range of potential loss at any particular time, is often inherently uncertain.
Pruco Life's litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, the outcome cannot be
predicted. It is possible that the results of operations or cash flow in a
particular quarterly or annual period could be materially affected by an
ultimate unfavorable resolution of pending litigation and regulatory matters
depending, in part, upon the results of operations or cash flow for such
period. In light of the unpredictability of Pruco Life's litigation and
regulatory matters, it is also possible that in certain cases an ultimate
unfavorable resolution of one or more pending litigation or regulatory matters
could have a material adverse effect on Pruco Life's financial position.
Management believes, however, that based on information currently known to it,
the ultimate outcome of all pending litigation and regulatory matters, after
consideration of applicable reserves and rights to indemnification, is not
likely to have a material adverse effect on Pruco Life's financial position.
ASSIGNMENT
In general, 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 Section 4, "What Is The Death
Benefit?" 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 you assign the contract, that assignment will result in
the termination of any automated withdrawal program that had been in effect.
If the new owner wants to re-institute an automated withdrawal program, then
he/she needs to submit the forms that we require, in good order.
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 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
.. Financial Statements
.. Separate Account Financial Information
.. Company Financial Information
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.
104
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:
MVA = [ ( 1 + I )//N/12// ] -1
---------
1 + J + .0025
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.
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:
MVA = [ ( 1 + I )//N/12// ] -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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6% (0.06)
J = 5% (0.05)
105
11: OTHER INFORMATION continued
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
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6% (0.06)
J = 7% (0.07)
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6% (0.06)
J = [(61/365) X 0.05] + [((365 - 61)/365) X 0.04] = 0.0417
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power -1 = 0.04871
106
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6%(0.06)
J = [(61/365) X 0.08] + [((365 - 61)/365) X 0.07] = 0.0717
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.01
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6% (0.06)
J = 5% (0.05)
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
107
11: OTHER INFORMATION continued
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6% (0.06)
J = 7% (0.07)
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
108
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. 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 19176. As discussed in the prospectus,
if you select certain optional benefits (e.g., Lifetime Five), we limit the
investment options to which you may allocate your Contract Value. In certain
of these accumulation unit value tables, we set forth accumulation unit values
that assume election of one or more of such optional benefits and allocation
of Contract Value to portfolios that currently are not permitted as part of
such optional benefits. Such unit values are set forth for general reference
purposes only, and are not intended to indicate that such portfolios may be
acquired along with those optional benefits.
STRATEGIC PARTNERS ANNUITY ONE 3
Pruco Life Insurance Company
PROSPECTUS
ACCUMULATION UNIT VALUES: (Contract w/o Credit, Base Death Benefit 1.40)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -----------------------------------------------------------------------------------------
Jennison Portfolio
1/6/2003* to 12/31/2003 $1.01724 $1.24006 2,381,401
1/1/2004 to 12/31/2004 $1.24006 $1.34066 4,524,803
1/1/2005 to 12/31/2005 $1.34066 $1.51459 4,956,862
1/1/2006 to 12/31/2006 $1.51459 $1.52034 4,998,903
1/1/2007 to 12/31/2007 $1.52034 $1.67913 4,618,873
- -----------------------------------------------------------------------------------------
Prudential Equity Portfolio
1/6/2003* to 12/31/2003 $1.01834 $1.25778 1,368,678
1/1/2004 to 12/31/2004 $1.25778 $1.36350 2,684,031
1/1/2005 to 12/31/2005 $1.36350 $1.49905 4,101,155
1/1/2006 to 12/31/2006 $1.49905 $1.66417 4,091,488
1/1/2007 to 12/31/2007 $1.66417 $1.79403 3,606,246
- -----------------------------------------------------------------------------------------
Prudential Global Portfolio
1/6/2003* to 12/31/2003 $1.00588 $1.28481 805,296
1/1/2004 to 12/31/2004 $1.28481 $1.38861 1,508,350
1/1/2005 to 12/31/2005 $1.38861 $1.58951 1,710,458
1/1/2006 to 12/31/2006 $1.58951 $1.87567 1,660,403
1/1/2007 to 12/31/2007 $1.87567 $2.04345 1,667,758
- -----------------------------------------------------------------------------------------
Prudential Money Market Portfolio
1/6/2003* to 12/31/2003 $0.9997 $0.99449 2,049,651
1/1/2004 to 12/31/2004 $0.99449 $0.99063 2,305,599
1/1/2005 to 12/31/2005 $0.99063 $1.00520 2,461,350
1/1/2006 to 12/31/2006 $1.00520 $1.03840 3,178,584
1/1/2007 to 12/31/2007 $1.03840 $1.07563 3,381,860
- -----------------------------------------------------------------------------------------
Prudential Stock Index Portfolio
1/6/2003* to 12/31/2003 $1.02199 $1.22414 3,356,056
1/1/2004 to 12/31/2004 $1.22414 $1.33335 6,275,540
1/1/2005 to 12/31/2005 $1.33335 $1.37464 7,333,743
1/1/2006 to 12/31/2006 $1.37464 $1.56643 7,169,693
1/1/2007 to 12/31/2007 $1.56643 $1.62347 6,745,674
- -----------------------------------------------------------------------------------------
Prudential Value Portfolio
1/6/2003* to 12/31/2003 $1.02526 $1.22392 900,360
1/1/2004 to 12/31/2004 $1.22392 $1.40386 2,404,499
1/1/2005 to 12/31/2005 $1.40386 $1.61508 3,335,527
1/1/2006 to 12/31/2006 $1.61508 $1.91044 3,740,472
1/1/2007 to 12/31/2007 $1.91044 $1.94400 3,573,077
A-1
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
SP Aggressive Growth Asset Allocation Portfolio
1/6/2003* to 12/31/2003 $1.01313 $1.27916 1,545,924
1/1/2004 to 12/31/2004 $1.27916 $1.44765 4,414,881
1/1/2005 to 12/31/2005 $1.44765 $1.57741 5,640,314
1/1/2006 to 12/31/2006 $1.57741 $1.77768 5,283,029
1/1/2007 to 12/31/2007 $1.77768 $1.91433 4,900,641
- -------------------------------------------------------------------------------------------------------
SP AIM Aggressive Growth Portfolio
1/6/2003* to 12/31/2003 $1.01134 $1.22149 436,202
1/1/2004 to 12/31/2004 $1.22149 $1.34749 936,271
1/1/2005 to 4/29/2005 $1.34749 $1.24414 0
- -------------------------------------------------------------------------------------------------------
SP AIM Core Equity Portfolio
1/6/2003* to 12/31/2003 $1.01232 $1.19626 301,134
1/1/2004 to 12/31/2004 $1.19626 $1.28343 837,364
1/1/2005 to 12/31/2005 $1.28343 $1.32432 965,159
1/1/2006 to 12/31/2006 $1.32432 $1.51572 827,880
1/1/2007 to 12/31/2007 $1.51572 $1.61162 664,837
- -------------------------------------------------------------------------------------------------------
SP T. Rowe Price Large-Cap Growth Portfolio
1/6/2003* to 12/31/2003 $1.01908 $1.17938 1,236,101
1/1/2004 to 12/31/2004 $1.17938 $1.23406 2,216,249
1/1/2005 to 12/31/2005 $1.23406 $1.41770 2,320,476
1/1/2006 to 12/31/2006 $1.41770 $1.48086 2,445,987
1/1/2007 to 12/31/2007 $1.48086 $1.58021 2,212,527
- -------------------------------------------------------------------------------------------------------
SP Balanced Asset Allocation Portfolio
1/6/2003* to 12/31/2003 $1.00979 $1.19393 12,267,993
1/1/2004 to 12/31/2004 $1.19393 $1.30793 26,018,065
1/1/2005 to 12/31/2005 $1.30793 $1.38790 33,510,409
1/1/2006 to 12/31/2006 $1.38790 $1.51519 30,348,691
1/1/2007 to 12/31/2007 $1.51519 $1.63393 27,967,179
- -------------------------------------------------------------------------------------------------------
SP Conservative Asset Allocation Portfolio
1/6/2003* to 12/31/2003 $1.00745 $1.13654 7,810,706
1/1/2004 to 12/31/2004 $1.13654 $1.22048 20,504,877
1/1/2005 to 12/31/2005 $1.22048 $1.27471 24,154,580
1/1/2006 to 12/31/2006 $1.27471 $1.36612 23,527,407
1/1/2007 to 12/31/2007 $1.36612 $1.47370 19,741,123
- -------------------------------------------------------------------------------------------------------
SP Davis Value Portfolio
1/6/2003* to 12/31/2003 $1.00887 $1.24835 3,564,458
1/1/2004 to 12/31/2004 $1.24835 $1.38531 6,407,256
1/1/2005 to 12/31/2005 $1.38531 $1.49631 6,823,589
1/1/2006 to 12/31/2006 $1.49631 $1.69738 6,608,881
1/1/2007 to 12/31/2007 $1.69738 $1.75049 5,933,706
- -------------------------------------------------------------------------------------------------------
SP Small-Cap Value Portfolio
1/6/2003* to 12/31/2003 $1.01511 $1.29026 2,793,324
1/1/2004 to 12/31/2004 $1.29026 $1.53570 6,372,012
1/1/2005 to 12/31/2005 $1.53570 $1.58443 7,198,239
1/1/2006 to 12/31/2006 $1.58443 $1.79078 6,637,398
1/1/2007 to 12/31/2007 $1.79078 $1.70189 6,012,163
- -------------------------------------------------------------------------------------------------------
SP Growth Asset Allocation Portfolio
1/6/2003* to 12/31/2003 $1.01135 $1.23975 7,383,151
1/1/2004 to 12/31/2004 $1.23975 $1.38211 19,325,934
1/1/2005 to 12/31/2005 $1.38211 $1.48911 23,285,380
1/1/2006 to 12/31/2006 $1.48911 $1.65769 22,269,583
1/1/2007 to 12/31/2007 $1.65769 $1.78549 21,178,679
A-2
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------------
SP Large Cap Value Portfolio
1/6/2003* to 12/31/2003 $1.02725 $1.21457 1,098,747
1/1/2004 to 12/31/2004 $1.21457 $1.41041 1,973,944
1/1/2005 to 12/31/2005 $1.41041 $1.48345 2,568,911
1/1/2006 to 12/31/2006 $1.48345 $1.73324 2,256,401
1/1/2007 to 12/31/2007 $1.73324 $1.66085 1,977,949
- ------------------------------------------------------------------------------------------------------
SP International Value Portfolio
1/6/2003* to 12/31/2003 $1.01281 $1.23393 1,148,393
1/1/2004 to 12/31/2004 $1.23393 $1.40924 2,233,253
1/1/2005 to 12/31/2005 $1.40924 $1.58122 2,606,065
1/1/2006 to 12/31/2006 $1.58122 $2.01320 2,743,549
1/1/2007 to 12/31/2007 $2.01320 $2.34427 2,352,331
- ------------------------------------------------------------------------------------------------------
SP MFS Capital Opportunities Portfolio
1/6/2003* to 12/31/2003 $1.02112 $1.20717 455,643
1/1/2004 to 12/31/2004 $1.20717 $1.33789 972,645
1/1/2005 to 4/29/2005 $1.33789 $1.25025 0
- ------------------------------------------------------------------------------------------------------
SP Mid Cap Growth Portfolio
1/6/2003* to 12/31/2003 $1.00463 $1.33928 846,352
1/1/2004 to 12/31/2004 $1.33928 $1.57888 2,103,385
1/1/2005 to 12/31/2005 $1.57888 $1.63898 3,625,123
1/1/2006 to 12/31/2006 $1.63898 $1.58504 3,322,902
1/1/2007 to 12/31/2007 $1.58504 $1.81642 2,879,884
- ------------------------------------------------------------------------------------------------------
SP PIMCO High Yield Portfolio
1/6/2003* to 12/31/2003 $1.00530 $1.19841 3,514,084
1/1/2004 to 12/31/2004 $1.19841 $1.29196 7,294,050
1/1/2005 to 12/31/2005 $1.29196 $1.32558 8,189,606
1/1/2006 to 12/31/2006 $1.32558 $1.43180 7,543,576
1/1/2007 to 12/31/2007 $1.43180 $1.46552 7,102,492
- ------------------------------------------------------------------------------------------------------
SP PIMCO Total Return Portfolio
1/6/2003* to 12/31/2003 $1.00076 $1.04684 9,081,987
1/1/2004 to 12/31/2004 $1.04684 $1.08689 15,192,943
1/1/2005 to 12/31/2005 $1.08689 $1.09767 17,074,503
1/1/2006 to 12/31/2006 $1.09767 $1.12250 17,153,661
1/1/2007 to 12/31/2007 $1.12250 $1.21148 15,945,019
- ------------------------------------------------------------------------------------------------------
SP Prudential U.S. Emerging Growth Portfolio
1/6/2003* to 12/31/2003 $1.01864 $1.36653 1,350,535
1/1/2004 to 12/31/2004 $1.36653 $1.63587 2,782,102
1/1/2005 to 12/31/2005 $1.63587 $1.90014 3,759,244
1/1/2006 to 12/31/2006 $1.90014 $2.05363 3,618,481
1/1/2007 to 12/31/2007 $2.05363 $2.36566 3,254,239
- ------------------------------------------------------------------------------------------------------
SP Small Cap Growth Portfolio
1/6/2003* to 12/31/2003 $1.01406 $1.30191 453,998
1/1/2004 to 12/31/2004 $1.30191 $1.27212 1,180,076
1/1/2005 to 12/31/2005 $1.27212 $1.28565 1,407,515
1/1/2006 to 12/31/2006 $1.28565 $1.42492 1,449,680
1/1/2007 to 12/31/2007 $1.42492 $1.49464 1,298,483
- ------------------------------------------------------------------------------------------------------
SP Strategic Partners Focused Growth Portfolio
1/6/2003* to 12/31/2003 $1.01518 $1.19388 620,221
1/1/2004 to 12/31/2004 $1.19388 $1.30209 976,074
1/1/2005 to 12/31/2005 $1.30209 $1.47863 1,062,759
1/1/2006 to 12/31/2006 $1.47863 $1.44859 1,110,143
1/1/2007 to 12/31/2007 $1.44859 $1.64616 897,856
A-3
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------------
SP Technology Portfolio
1/6/2003* to 12/31/2003 $1.03407 $1.34037 281,067
1/1/2004 to 12/31/2004 $1.34037 $1.32188 625,708
1/1/2005 to 4/29/2005 $1.32188 $1.18074 0
- --------------------------------------------------------------------------------------------------------------------
SP International Growth Portfolio
1/6/2003* to 12/31/2003 $1.01151 $1.35112 959,373
1/1/2004 to 12/31/2004 $1.35112 $1.55290 1,816,111
1/1/2005 to 12/31/2005 $1.55290 $1.78245 2,169,905
1/1/2006 to 12/31/2006 $1.78245 $2.12789 2,341,853
1/1/2007 to 12/31/2007 $2.12789 $2.50846 2,275,448
- --------------------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99886 $9.99933 3,576
1/1/2006 to 12/31/2006 $9.99933 $11.40838 119,649
1/1/2007 to 12/31/2007 $11.40838 $12.32551 132,989
- --------------------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth Portfolio
3/14/2005 to 12/02/2005 $10.09338 $11.73323 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value Portfolio
3/14/2005* to 12/31/2005 $10.07970 $10.33229 1,646
1/1/2006 to 12/31/2006 $10.33229 $12.36530 6,319
1/1/2007 to 12/31/2007 $12.36530 $11.75873 12,238
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income Portfolio
3/14/2005* to 12/31/2005 $10.05481 $10.28681 4,368
1/1/2006 to 12/31/2006 $10.28681 $11.89718 15,304
1/1/2007 to 12/31/2007 $11.89718 $12.33375 17,371
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth + Value Portfolio
3/14/2005 to 12/02/2005 $10.05009 $11.34495 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500 Portfolio
3/14/2005* to 12/31/2005 $10.04988 $10.42169 9,629
1/1/2006 to 12/31/2006 $10.42169 $11.57321 14,460
1/1/2007 to 12/31/2007 $11.57321 $11.65038 14,060
- --------------------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
3/14/2005* to 12/31/2005 $10.06658 $10.35426 6,955
1/1/2006 to 12/31/2006 $10.35426 $11.93304 28,450
1/1/2007 to 12/31/2007 $11.93304 $11.75498 32,699
- --------------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation Portfolio
formerly, AST American Century Strategic Balanced Portfolio
3/14/2005* to 12/31/2005 $10.04202 $10.33700 1,647
1/1/2006 to 12/31/2006 $10.33700 $11.18026 4,965
1/1/2007 to 12/31/2007 $11.18026 $12.00848 4,538
- --------------------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99886 $10.01933 41,437
1/1/2006 to 12/31/2006 $10.01933 $11.04402 468,013
1/1/2007 to 12/31/2007 $11.04402 $11.89376 592,510
- --------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99886 $10.00933 3,150
1/1/2006 to 12/31/2006 $10.00933 $11.22130 261,959
1/1/2007 to 12/31/2007 $11.22130 $12.14221 270,474
- --------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
3/14/2005* to 12/31/2005 $10.14710 $12.04155 7,726
1/1/2006 to 12/31/2006 $12.04155 $16.23834 27,937
1/1/2007 to 12/31/2007 $16.23834 $12.82033 27,232
- --------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99886 $10.02932 5,075
1/1/2006 to 12/31/2006 $10.02932 $10.93553 231,745
1/1/2007 to 12/31/2007 $10.93553 $11.76251 285,487
A-4
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.08492 $10.73678 4,470
1/1/2006 to 12/31/2006 $10.73678 $12.88954 23,163
1/1/2007 to 12/31/2007 $12.88954 $12.86054 24,905
- -------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth Portfolio
formerly, AST DeAm Small-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.01133 $10.33264 3,220
1/1/2006 to 12/31/2006 $10.33264 $10.98080 6,732
1/1/2007 to 12/31/2007 $10.98080 $12.85490 6,049
- -------------------------------------------------------------------------------------------------------
AST DeAm Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04570 $10.03757 10,009
1/1/2006 to 12/31/2006 $10.03757 $11.87455 14,889
1/1/2007 to 12/31/2007 $11.87455 $9.62921 17,907
- -------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth Portfolio
3/14/2005* to 12/31/2005 $9.99886 $10.98052 10,883
1/1/2006 to 12/31/2006 $10.98052 $12.22751 24,187
1/1/2007 to 12/31/2007 $12.22751 $13.40975 25,684
- -------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha Portfolio
formerly, AST Global Allocation Portfolio
3/14/2005* to 12/31/2005 $10.01541 $10.64464 397
1/1/2006 to 12/31/2006 $10.64464 $11.66754 889
1/1/2007 to 12/31/2007 $11.66754 $11.72906 9,777
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
3/14/2005* to 12/31/2005 $10.03302 $10.78065 5,713
1/1/2006 to 12/31/2006 $10.78065 $11.69442 17,915
1/1/2007 to 12/31/2007 $11.69442 $13.14587 21,367
- -------------------------------------------------------------------------------------------------------
AST High Yield Portfolio
3/14/2005* to 12/31/2005 $9.97681 $9.87825 13,582
1/1/2006 to 12/31/2006 $9.87825 $10.75063 26,283
1/1/2007 to 12/31/2007 $10.75063 $10.86456 28,479
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $9.99886 $10.60000 15,282
1/1/2006 to 12/31/2006 $10.60000 $11.11019 28,015
1/1/2007 to 12/31/2007 $11.11019 $13.07586 25,547
- -------------------------------------------------------------------------------------------------------
AST JPMorgan International Equity Portfolio
3/14/2005* to 12/31/2005 $9.91389 $10.67460 6,403
1/1/2006 to 12/31/2006 $10.67460 $12.92733 29,504
1/1/2007 to 12/31/2007 $12.92733 $13.95132 32,019
- -------------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.07726 $10.57804 19,588
1/1/2006 to 12/31/2006 $10.57804 $12.35800 30,809
1/1/2007 to 12/31/2007 $12.35800 $11.82253 26,349
- -------------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture Portfolio
3/14/2005* to 12/31/2005 $9.99886 $9.96977 12,066
1/1/2006 to 12/31/2006 $9.96977 $10.79596 20,384
1/1/2007 to 12/31/2007 $10.79596 $11.29424 44,365
- -------------------------------------------------------------------------------------------------------
AST Marsico Capital Growth Portfolio
3/14/2005* to 12/31/2005 $10.12625 $10.92526 23,473
1/1/2006 to 12/31/2006 $10.92526 $11.55444 44,652
1/1/2007 to 12/31/2007 $11.55444 $13.09923 44,836
- -------------------------------------------------------------------------------------------------------
AST MFS Global Equity Portfolio
3/14/2005* to 12/31/2005 $9.96626 $10.49866 6,432
1/1/2006 to 12/31/2006 $10.49866 $12.87030 13,260
1/1/2007 to 12/31/2007 $12.87030 $13.88494 15,561
A-5
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------
AST MFS Growth Portfolio
3/14/2005* to 12/31/2005 $10.03693 $10.78089 8,370
1/1/2006 to 12/31/2006 $10.78089 $11.65979 14,872
1/1/2007 to 12/31/2007 $11.65979 $13.23519 13,994
- --------------------------------------------------------------------------------------------------------------
AST Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.06503 $10.37369 5,745
1/1/2006 to 12/31/2006 $10.37369 $11.68807 10,198
1/1/2007 to 12/31/2007 $11.68807 $11.84309 11,407
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.05576 $11.35869 20,075
1/1/2006 to 12/31/2006 $11.35869 $12.77698 39,746
1/1/2007 to 12/31/2007 $12.77698 $15.39741 39,500
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.02196 $10.90682 36,991
1/1/2006 to 12/31/2006 $10.90682 $11.91306 55,946
1/1/2007 to 12/31/2007 $11.91306 $12.12014 51,061
- --------------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond Portfolio
3/14/2005* to 12/31/2005 $9.99886 $10.07733 18,139
1/1/2006 to 12/31/2006 $10.07733 $10.31847 35,541
1/1/2007 to 12/31/2007 $10.31847 $10.86715 44,564
- --------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99886 $10.03931 16,239
1/1/2006 to 12/31/2006 $10.03931 $10.68916 53,179
1/1/2007 to 12/31/2007 $10.68916 $11.45988 79,407
- --------------------------------------------------------------------------------------------------------------
AST Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04866 $10.66828 9,025
1/1/2006 to 12/31/2006 $10.66828 $12.63027 22,602
1/1/2007 to 12/31/2007 $12.63027 $11.75648 26,186
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.02867 $10.37610 15,317
1/1/2006 to 12/31/2006 $10.37610 $11.51159 59,405
1/1/2007 to 12/31/2007 $11.51159 $12.06970 60,689
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond Portfolio
3/14/2005* to 12/31/2005 $9.94939 $9.46839 12,121
1/1/2006 to 12/31/2006 $9.46839 $9.92364 28,674
1/1/2007 to 12/31/2007 $9.92364 $10.72994 27,378
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources Portfolio
3/14/2005* to 12/31/2005 $10.00286 $11.76236 93,690
1/1/2006 to 12/31/2006 $11.76236 $13.44068 151,231
1/1/2007 to 12/31/2007 $13.44068 $18.62348 170,580
- --------------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
3/14/2005* to 12/31/2005 $9.88103 $12.08600 18,558
1/1/2006 to 12/31/2006 $12.08600 $16.04073 30,757
1/1/2007 to 12/31/2007 $16.04073 $22.70075 36,592
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Large Cap Growth Portfolio--Service Shares
1/6/2003* to 12/31/2003 $1.02245 $1.24622 208,132
1/1/2004 to 12/31/2004 $1.24622 $1.28061 415,826
1/1/2005 to 12/31/2005 $1.28061 $1.31370 497,033
1/1/2006 to 12/31/2006 $1.31370 $1.43985 593,263
1/1/2007 to 12/31/2007 $1.43985 $1.62992 544,343
- --------------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $9.99886 $9.98290 0
* Denotes the start date of these sub-accounts
A-6
STRATEGIC PARTNERS ANNUITY ONE 3
Pruco Life Insurance Company
PROSPECTUS
ACCUMULATION UNIT VALUES: (HDV, and Lifetime Five 2.60)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
Jennison Portfolio
3/14/2005 to 12/31/2005 $10.06129 $11.73220 0
1/1/2006 to 12/31/2006 $11.73220 $11.64007 0
1/1/2007 to 12/31/2007 $11.64007 $12.70471 0
- -------------------------------------------------------------------------------------------------------
Prudential Equity Portfolio
3/14/2005 to 12/31/2005 $10.04766 $11.02297 0
1/1/2006 to 12/31/2006 $11.02297 $12.09475 0
1/1/2007 to 12/31/2007 $12.09475 $12.88570 0
- -------------------------------------------------------------------------------------------------------
Prudential Global Portfolio
3/14/2005 to 12/31/2005 $9.98583 $11.25921 0
1/1/2006 to 12/31/2006 $11.25921 $13.13104 0
1/1/2007 to 12/31/2007 $13.13104 $14.13728 0
- -------------------------------------------------------------------------------------------------------
Prudential Money Market Portfolio
3/14/2005 to 12/31/2005 $9.99976 $10.04005 0
1/1/2006 to 12/31/2006 $10.04005 $10.25107 0
1/1/2007 to 12/31/2007 $10.25107 $10.49516 0
- -------------------------------------------------------------------------------------------------------
Prudential Stock Index Portfolio
3/14/2005 to 12/31/2005 $10.05581 $10.30897 0
1/1/2006 to 12/31/2006 $10.30897 $11.61033 0
1/1/2007 to 12/31/2007 $11.61033 $11.89138 0
- -------------------------------------------------------------------------------------------------------
Prudential Value Portfolio
3/14/2005 to 12/31/2005 $10.03716 $11.18056 0
1/1/2006 to 12/31/2006 $11.18056 $13.07076 0
1/1/2007 to 12/31/2007 $13.07076 $13.14391 0
- -------------------------------------------------------------------------------------------------------
SP Aggressive Growth Asset Allocation Portfolio
3/14/2005 to 12/31/2005 $10.03156 $10.90725 0
1/1/2006 to 12/31/2006 $10.90725 $12.14908 0
1/1/2007 to 12/31/2007 $12.14908 $12.92875 0
- -------------------------------------------------------------------------------------------------------
SP AIM Aggressive Growth Portfolio
3/14/2005 to 4/29/2005 $10.06851 $9.47818 0
- -------------------------------------------------------------------------------------------------------
SP AIM Core Equity Portfolio
3/14/2005 to 12/31/2005 $10.02484 $10.16588 0
1/1/2006 to 12/31/2006 $10.16588 $11.49937 0
1/1/2007 to 12/31/2007 $11.49937 $12.08325 0
- -------------------------------------------------------------------------------------------------------
SP T. Rowe Price Large-Cap Growth Portfolio
3/14/2005 to 12/31/2005 $10.02984 $12.04891 0
1/1/2006 to 12/31/2006 $12.04891 $12.43868 0
1/1/2007 to 12/31/2007 $12.43868 $13.11695 0
- -------------------------------------------------------------------------------------------------------
SP Balanced Asset Allocation Portfolio
3/14/2005 to 12/31/2005 $10.01681 $10.60008 2,803,554
1/1/2006 to 12/31/2006 $10.60008 $11.43660 2,710,795
1/1/2007 to 12/31/2007 $11.43660 $12.18727 2,467,615
- -------------------------------------------------------------------------------------------------------
SP Conservative Asset Allocation Portfolio
3/14/2005 to 12/31/2005 $10.00686 $10.42969 699,364
1/1/2006 to 12/31/2006 $10.42969 $11.04731 718,462
1/1/2007 to 12/31/2007 $11.04731 $11.77663 709,270
A-7
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------------
SP Davis Value Portfolio
3/14/2005 to 12/31/2005 $10.02477 $10.55480 0
1/1/2006 to 12/31/2006 $10.55480 $11.83364 0
1/1/2007 to 12/31/2007 $11.83364 $12.06060 0
- ------------------------------------------------------------------------------------------------------
SP Small-Cap Value Portfolio
3/14/2005 to 12/31/2005 $10.05698 $10.43562 0
1/1/2006 to 12/31/2006 $10.43562 $11.65712 0
1/1/2007 to 12/31/2007 $11.65712 $10.94813 0
- ------------------------------------------------------------------------------------------------------
SP Growth Asset Allocation Portfolio
3/14/2005 to 12/31/2005 $10.02869 $10.76609 3,674,148
1/1/2006 to 12/31/2006 $10.76609 $11.84613 3,563,629
1/1/2007 to 12/31/2007 $11.84613 $12.60979 3,137,227
- ------------------------------------------------------------------------------------------------------
SP Large Cap Value Portfolio
3/14/2005 to 12/31/2005 $10.07548 $10.41036 0
1/1/2006 to 12/31/2006 $10.41036 $12.02174 0
1/1/2007 to 12/31/2007 $12.02174 $11.38440 0
- ------------------------------------------------------------------------------------------------------
SP International Value Portfolio
3/14/2005 to 12/31/2005 $9.91187 $10.59302 0
1/1/2006 to 12/31/2006 $10.59302 $13.32951 0
1/1/2007 to 12/31/2007 $13.32951 $15.33920 0
- ------------------------------------------------------------------------------------------------------
SP MFS Capital Opportunities Portfolio
3/14/2005 to 4/29/2005 $10.05569 $9.59841 0
- ------------------------------------------------------------------------------------------------------
SP Mid Cap Growth Portfolio
3/14/2005 to 12/31/2005 $10.02797 $10.62046 0
1/1/2006 to 12/31/2006 $10.62046 $10.15083 0
1/1/2007 to 12/31/2007 $10.15083 $11.49573 0
- ------------------------------------------------------------------------------------------------------
SP PIMCO High Yield Portfolio
3/14/2005 to 12/31/2005 $9.98863 $10.06754 0
1/1/2006 to 12/31/2006 $10.06754 $10.74615 0
1/1/2007 to 12/31/2007 $10.74615 $10.87019 0
- ------------------------------------------------------------------------------------------------------
SP PIMCO Total Return Portfolio
3/14/2005 to 12/31/2005 $9.99789 $10.09857 0
1/1/2006 to 12/31/2006 $10.09857 $10.20537 0
1/1/2007 to 12/31/2007 $10.20537 $10.88457 0
- ------------------------------------------------------------------------------------------------------
SP Prudential U.S. Emerging Growth Portfolio
3/14/2005 to 12/31/2005 $10.03548 $11.66658 0
1/1/2006 to 12/31/2006 $11.66658 $12.46174 0
1/1/2007 to 12/31/2007 $12.46174 $14.18639 0
- ------------------------------------------------------------------------------------------------------
SP Small Cap Growth Portfolio
3/14/2005 to 12/31/2005 $10.03010 $10.44213 0
1/1/2006 to 12/31/2006 $10.44213 $11.43885 0
1/1/2007 to 12/31/2007 $11.43885 $11.85736 0
- ------------------------------------------------------------------------------------------------------
SP Strategic Partners Focused Growth Portfolio
3/14/2005 to 12/31/2005 $10.07330 $11.90839 0
1/1/2006 to 12/31/2006 $11.90839 $11.53055 0
1/1/2007 to 12/31/2007 $11.53055 $12.94956 0
- ------------------------------------------------------------------------------------------------------
SP Technology Portfolio
3/14/2005 to 4/29/2005 $10.04283 $9.58487 0
- ------------------------------------------------------------------------------------------------------
SP International Growth Portfolio
3/14/2005 to 12/31/2005 $9.92605 $11.22029 0
1/1/2006 to 12/31/2006 $11.22029 $13.23866 0
1/1/2007 to 12/31/2007 $13.23866 $15.42320 0
A-8
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99789 $9.99030 0
1/1/2006 to 12/31/2006 $9.99030 $11.26518 0
1/1/2007 to 12/31/2007 $11.26518 $12.02763 0
- --------------------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth Portfolio
3/14/2005 to 12/02/2005 $10.09241 $11.63321 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value Portfolio
3/14/2005* to 12/31/2005 $10.07873 $10.23479 0
1/1/2006 to 12/31/2006 $10.23479 $12.10594 0
1/1/2007 to 12/31/2007 $12.10594 $11.37667 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income Portfolio
3/14/2005* to 12/31/2005 $10.05384 $10.18979 0
1/1/2006 to 12/31/2006 $10.18979 $11.64751 0
1/1/2007 to 12/31/2007 $11.64751 $11.93286 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth + Value Portfolio
3/14/2005 to 12/02/2005 $10.04912 $11.24827 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500 Portfolio
3/14/2005* to 12/31/2005 $10.04891 $10.32343 0
1/1/2006 to 12/31/2006 $10.32343 $11.33031 0
1/1/2007 to 12/31/2007 $11.33031 $11.27163 0
- --------------------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
3/14/2005* to 12/31/2005 $10.06561 $10.25648 0
1/1/2006 to 12/31/2006 $10.25648 $11.68252 0
1/1/2007 to 12/31/2007 $11.68252 $11.37272 0
- --------------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation Portfolio
formerly, AST American Century Strategic Balanced Portfolio
3/14/2005* to 12/31/2005 $10.04106 $10.23948 0
1/1/2006 to 12/31/2006 $10.23948 $10.94561 0
1/1/2007 to 12/31/2007 $10.94561 $11.61823 113,579
- --------------------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99789 $10.01025 329,867
1/1/2006 to 12/31/2006 $10.01025 $10.90518 4,050,210
1/1/2007 to 12/31/2007 $10.90518 $11.60597 7,210,180
- --------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99789 $10.00027 264,281
1/1/2006 to 12/31/2006 $10.00027 $11.08024 6,134,343
1/1/2007 to 12/31/2007 $11.08024 $11.84864 12,899,751
- --------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
3/14/2005* to 12/31/2005 $10.14613 $11.92816 0
1/1/2006 to 12/31/2006 $11.92816 $15.89804 0
1/1/2007 to 12/31/2007 $15.89804 $12.40393 0
- --------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99789 $10.02023 14,495
1/1/2006 to 12/31/2006 $10.02023 $10.79817 782,409
1/1/2007 to 12/31/2007 $10.79817 $11.47812 1,946,525
- --------------------------------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.08395 $10.63555 0
1/1/2006 to 12/31/2006 $10.63555 $12.61910 0
1/1/2007 to 12/31/2007 $12.61910 $12.44257 0
A-9
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth Portfolio
formerly, AST DeAm Small-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.01036 $10.23522 0
1/1/2006 to 12/31/2006 $10.23522 $10.75030 0
1/1/2007 to 12/31/2007 $10.75030 $12.43714 0
- -------------------------------------------------------------------------------------------------------
AST DeAm Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04473 $9.94281 0
1/1/2006 to 12/31/2006 $9.94281 $11.62528 0
1/1/2007 to 12/31/2007 $11.62528 $9.31608 0
- -------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth Portfolio
3/14/2005* to 12/31/2005 $9.99789 $10.87710 0
1/1/2006 to 12/31/2006 $10.87710 $11.97093 0
1/1/2007 to 12/31/2007 $11.97093 $12.97394 0
- -------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha Portfolio
formerly, AST Global Allocation Portfolio
3/14/2005* to 12/31/2005 $10.01445 $10.54432 0
1/1/2006 to 12/31/2006 $10.54432 $11.42284 0
1/1/2007 to 12/31/2007 $11.42284 $11.34807 172,983
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
3/14/2005* to 12/31/2005 $10.03205 $10.67907 0
1/1/2006 to 12/31/2006 $10.67907 $11.44914 0
1/1/2007 to 12/31/2007 $11.44914 $12.71869 0
- -------------------------------------------------------------------------------------------------------
AST High Yield Portfolio
3/14/2005* to 12/31/2005 $9.97584 $9.78498 0
1/1/2006 to 12/31/2006 $9.78498 $10.52499 0
1/1/2007 to 12/31/2007 $10.52499 $10.51148 0
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $9.99789 $10.50002 0
1/1/2006 to 12/31/2006 $10.50002 $10.87698 0
1/1/2007 to 12/31/2007 $10.87698 $12.65087 0
- -------------------------------------------------------------------------------------------------------
AST JPMorgan International Equity Portfolio
3/14/2005* to 12/31/2005 $9.91292 $10.57386 0
1/1/2006 to 12/31/2006 $10.57386 $12.65607 0
1/1/2007 to 12/31/2007 $12.65607 $13.49800 0
- -------------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.07630 $10.47827 0
1/1/2006 to 12/31/2006 $10.47827 $12.09868 0
1/1/2007 to 12/31/2007 $12.09868 $11.43824 0
- -------------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture Portfolio
3/14/2005* to 12/31/2005 $9.99789 $9.87561 0
1/1/2006 to 12/31/2006 $9.87561 $10.56925 0
1/1/2007 to 12/31/2007 $10.56925 $10.92701 0
- -------------------------------------------------------------------------------------------------------
AST Marsico Capital Growth Portfolio
3/14/2005* to 12/31/2005 $10.12528 $10.82204 0
1/1/2006 to 12/31/2006 $10.82204 $11.31183 0
1/1/2007 to 12/31/2007 $11.31183 $12.67336 0
- -------------------------------------------------------------------------------------------------------
AST MFS Global Equity Portfolio
3/14/2005* to 12/31/2005 $9.96529 $10.39968 0
1/1/2006 to 12/31/2006 $10.39968 $12.60029 0
1/1/2007 to 12/31/2007 $12.60029 $13.43376 0
A-10
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------
AST MFS Growth Portfolio
3/14/2005* to 12/31/2005 $10.03596 $10.67928 0
1/1/2006 to 12/31/2006 $10.67928 $11.41513 0
1/1/2007 to 12/31/2007 $11.41513 $12.80513 0
- --------------------------------------------------------------------------------------------------------------
AST Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.06406 $10.27587 0
1/1/2006 to 12/31/2006 $10.27587 $11.44280 0
1/1/2007 to 12/31/2007 $11.44280 $11.45816 0
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.05479 $11.25162 0
1/1/2006 to 12/31/2006 $11.25162 $12.50869 0
1/1/2007 to 12/31/2007 $12.50869 $14.89685 0
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.02100 $10.80397 0
1/1/2006 to 12/31/2006 $10.80397 $11.66305 0
1/1/2007 to 12/31/2007 $11.66305 $11.72616 0
- --------------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond Portfolio
3/14/2005* to 12/31/2005 $9.99789 $9.98223 0
1/1/2006 to 12/31/2006 $9.98223 $10.10175 0
1/1/2007 to 12/31/2007 $10.10175 $10.51371 0
- --------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99789 $10.03022 0
1/1/2006 to 12/31/2006 $10.03022 $10.55495 166,747
1/1/2007 to 12/31/2007 $10.55495 $11.18302 772,514
- --------------------------------------------------------------------------------------------------------------
AST Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04770 $10.56766 0
1/1/2006 to 12/31/2006 $10.56766 $12.36528 0
1/1/2007 to 12/31/2007 $12.36528 $11.37429 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.02771 $10.27832 0
1/1/2006 to 12/31/2006 $10.27832 $11.27006 29,105
1/1/2007 to 12/31/2007 $11.27006 $11.67732 1,552,226
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond Portfolio
3/14/2005* to 12/31/2005 $9.94843 $9.37907 0
1/1/2006 to 12/31/2006 $9.37907 $9.71544 0
1/1/2007 to 12/31/2007 $9.71544 $10.38123 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources Portfolio
3/14/2005* to 12/31/2005 $10.00189 $11.65151 0
1/1/2006 to 12/31/2006 $11.65151 $13.15868 0
1/1/2007 to 12/31/2007 $13.15868 $18.01835 0
- --------------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
3/14/2005* to 12/31/2005 $9.88006 $11.97195 0
1/1/2006 to 12/31/2006 $11.97195 $15.70405 0
1/1/2007 to 12/31/2007 $15.70405 $21.96321 0
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Large Cap Growth Portfolio--Service Shares
3/14/2005 to 12/31/2005 $10.04383 $10.31860 0
1/1/2006 to 12/31/2006 $10.31860 $11.17733 0
1/1/2007 to 12/31/2007 $11.17733 $12.50435 0
- --------------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $9.99789 $9.96843 0
* Denotes the start date of these sub-accounts
A-11
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
Within the Strategic Partners/(SM)/ family of annuities, we offer several
different deferred variable annuity products. These annuities are issued by
Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of
New Jersey). Not all of these annuities may be available to you due to state
approval or broker-dealer offerings. You can verify which of these annuities
is available to you by asking your registered representative, or by calling us
at (888) PRU-2888. For comprehensive information about each of these
annuities, please consult the prospectus for the annuity.
Each annuity has different features and benefits that may be appropriate for
you, based on your individual financial situation and how you intend to use
the annuity.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay while your contract remains
in force. Additionally, differences may exist in various optional benefits
such as guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart sets forth the prominent features of each Strategic
Partners variable annuity. Please note that Strategic Partners Advisor and
Strategic Partners Select are no longer offered. The availability of optional
features, such as those noted in the chart, may increase the cost of the
contract. Therefore, you should carefully consider which features you plan to
use when selecting your annuity.
In addition to the chart, we set out below certain hypothetical illustrations
that reflect the Contract Value and surrender value of each variable annuity
over a variety of holding periods. These charts are meant to reflect how your
annuities can grow or decrease depending on market conditions and the
comparable value of each of the annuities (which reflects the charges
associated with the annuities) under the assumptions noted. In comparing the
values within the illustrations, a number of distinctions are evident. To
fully appreciate these distinctions, we encourage you to speak to your
registered representative and to read the prospectuses. However, we do point
out the following noteworthy items:
.. Strategic Partners FlexElite 2 offers both an array of optional benefits as
well as the "liquidity" to surrender the annuity without any withdrawal
charge after three contract years have passed. FlexElite 2 also is unique
in offering an optional persistency bonus (which, if taken, extends the
withdrawal charge period).
.. Strategic Partners Annuity One 3/Plus 3 comes in both a bonus version and a
non-bonus version, each of which offers several optional insurance
features. A bonus is added to your purchase payments under the bonus
version, although the withdrawal charges under the bonus version are higher
than those under the non-bonus version. Although the non-bonus version
offers no bonus, it is accompanied by fixed interest rate options and a
market value adjustment option that may provide higher interest rates than
such options accompanying the bonus version.
B-1
STRATEGIC PARTNERS ANNUITY PRODUCT COMPARISON. Below is a summary of Strategic
Partners variable annuity products. You should consider the investment
objectives, risks, charges and expenses of an investment in any contract
carefully before investing. Each product prospectus as well as the underlying
portfolio prospectuses contains this and other information about the variable
annuities and underlying investment options. Your registered representative
can provide you with prospectuses for one or more of these variable annuities
and the underlying portfolios and can help you decide upon the product that
would be most advantageous for you given your individual needs. Please read
the prospectuses carefully before investing.
Strategic Partners Strategic Partners
Advisor FlexElite /1,2/
- ----------------------------------------------------------------------------------------------------
Minimum Investment $10,000 $10,000
- ----------------------------------------------------------------------------------------------------
Maximum Issue Age 85 Qualified & 85 Qualified &
Non-Qualified Non-Qualified
- ----------------------------------------------------------------------------------------------------
Withdrawal Charge None 3 Years
Schedule (7%, 7%, 7%)
Contract date based
- ----------------------------------------------------------------------------------------------------
Annual Charge-Free Full liquidity 10% of gross
Withdrawal/ 2/ purchase payments
made as of last
contract anniversary
per contract year
- ----------------------------------------------------------------------------------------------------
Insurance and 1.40% 1.65%
Administration
Charge
- ----------------------------------------------------------------------------------------------------
Contract Maintenance The lesser of $30 or The lesser of $50 or
Fee (assessed 2% of your Contract 2% of your Contract
Contract Value. Value. Waived if Value. Waived if
annually) Contract Value is contract Value is
$50,000 or More $100,000 or more
- ----------------------------------------------------------------------------------------------------
Contract Credit No Yes 1% credit option
at end of 3rd and 6th
contract years.
Election results in a
new 3 year
withdrawal charge
- ----------------------------------------------------------------------------------------------------
Fixed Rate Account No Yes 1-Year
- ----------------------------------------------------------------------------------------------------
Market Value No Yes 1-10 Years
Adjustment
Account (MVA)
- ----------------------------------------------------------------------------------------------------
Enhanced Dollar Cost No Yes
Averaging (DCA)
- ----------------------------------------------------------------------------------------------------
Variable Investment as indicated in as indicated in
Options Available prospectus prospectus
- ----------------------------------------------------------------------------------------------------
Evergreen Funds N/A N/A
- ----------------------------------------------------------------------------------------------------
Base Death Benefit: The greater of: The greater of:
purchase payment(s) Purchase payment(s)
Minus proportionate Minus proportionate
withdrawal(s) or withdrawal(s) or
Contract Value Contract Value
- ----------------------------------------------------------------------------------------------------
Strategic Partners
Strategic Partners Annuity One /3/
Select Plus 3 Non Bonus
- -----------------------------------------------------------------------------------------------------
Minimum Investment $10,000 $10,000
- -----------------------------------------------------------------------------------------------------
Maximum Issue Age 80 Qualified & 85 85 Qualified &
Non-Qualified Non-Qualified
- -----------------------------------------------------------------------------------------------------
Withdrawal Charge 7 Years 7 Years (7%, 6%,
Schedule (7%, 6%, 5%, 4%, 5%, 4%, 3%, 2%,
3%, 2%, 1%) Contract 1%) Payment date
date based based
- -----------------------------------------------------------------------------------------------------
Annual Charge-Free 10% of gross 10% of gross
Withdrawal/ 2/ Purchase payments purchase payments
per contract year, made as of last
cumulative up to 7 contract anniversary
years or 70% of gross per contract year
purchase payments
- -----------------------------------------------------------------------------------------------------
Insurance and 1.52% 1.40%
Administration
Charge
- -----------------------------------------------------------------------------------------------------
Contract Maintenance $30. Waived if The lesser of $35 or
Fee (assessed Contract Value is 2% of your Contract
Contract Value. $50,000 or more Value. Waived if
annually) Contract Value is
$75,000 or more
- -----------------------------------------------------------------------------------------------------
Contract Credit No No
- -----------------------------------------------------------------------------------------------------
Fixed Rate Account Yes 1-Year Yes 1-Year
- -----------------------------------------------------------------------------------------------------
Market Value Yes 7-Year Yes 1-10 Years
Adjustment
Account (MVA)
- -----------------------------------------------------------------------------------------------------
Enhanced Dollar Cost No Yes
Averaging (DCA)
- -----------------------------------------------------------------------------------------------------
Variable Investment as indicated in as indicated in
Options Available prospectus prospectus
- -----------------------------------------------------------------------------------------------------
Evergreen Funds N/A 6-available in
Strategic Partners
Plus 3 only
- -----------------------------------------------------------------------------------------------------
Base Death Benefit: Step/Roll The greater of:
Withdrawals will purchase payment(s)
proportionately affect minus proportionate
the Death Benefit withdrawal(s) or
Contract Value
- -----------------------------------------------------------------------------------------------------
Strategic Partners
Annuity One /3/
Plus 3 Bonus
- ------------------------------------------------------------
Minimum Investment $10,000
- ------------------------------------------------------------
Maximum Issue Age 85 Qualified &
Non-Qualified
- ------------------------------------------------------------
Withdrawal Charge 7 Years (8%, 8%,
Schedule 8%, 8%, 7%, 6%,
5%) Payment date
based
- ------------------------------------------------------------
Annual Charge-Free 10% of gross
Withdrawal/ 2/ purchase payments
made as of last
contract anniversary
per contract year
- ------------------------------------------------------------
Insurance and 1.50%
Administration
Charge
- ------------------------------------------------------------
Contract Maintenance The lesser of $35 or
Fee (assessed 2% of your Contract
Contract Value. Value. Waived if
annually) Contract Value is
$75,000 or more
- ------------------------------------------------------------
Contract Credit Yes 3%-all amounts
ages 81-85 4%-under
$250,000 5%-
($250,000) $999,999
6%-$1,000,000+
- ------------------------------------------------------------
Fixed Rate Account Yes /3/ 1-Year
- ------------------------------------------------------------
Market Value Yes 1-10 Years
Adjustment
Account (MVA)
- ------------------------------------------------------------
Enhanced Dollar Cost Yes
Averaging (DCA)
- ------------------------------------------------------------
Variable Investment as indicated in
Options Available prospectus
- ------------------------------------------------------------
Evergreen Funds 6-available in
Strategic Partners
Plus 3 only
- ------------------------------------------------------------
Base Death Benefit: The greater of:
purchase payment(s)
minus proportionate
withdrawal(s) or
Contract Value
- ------------------------------------------------------------
1 This column depicts features of the version of Strategic Partners FlexElite
sold on or after May 1, 2003 or upon subsequent state approval. In one
state, Pruco Life continues to sell a prior version of the contract. Under
that version, the charge for the base death benefit is 1.60%, rather than
1.65%. The prior version also differs in certain other respects (e.g.,
availability of optional benefits). The values illustrated below are based
on the 1.65% charge, and therefore are slightly lower than if the 1.60%
charge were used.
2 Withdrawals of taxable amounts will be subject to income tax, and prior to
age 59 1/2, may be subject to a 10% federal income tax penalty.
3 May offer lower interest rates for the fixed rate options than the interest
rates offered in the contracts without credit.
B-2
Strategic Partners Strategic Partners Strategic Partners
Advisor FlexElite /2,1/ Select
- ------------------------------------------------------------------------------------------------------
Optional Death Step/Roll Step-Up, Roll-Up, N/A
Benefit (for an Combo: Step/Roll
Additional cost), /4/ Highest Daily Value
(HDV) Earnings
Appreciator Benefit
(EAB)
- ------------------------------------------------------------------------------------------------------
Living Benefits, /5,6/ Lifetime Five (LT5) Lifetime Five (LT5) N/A
Spousal Lifetime Five
(SLT5)
Highest Daily
Lifetime Five
(HDLT5) Highest
Daily Lifetime Seven
(HDLT7) Spousal
Highest Daily
Lifetime Seven
(SHDLT7)
Guaranteed Minimum
Income Benefit
(GMIB) Income
Appreciator Benefit
(IAB)
- ------------------------------------------------------------------------------------------------------
Strategic Partners Strategic Partners
Annuity One /3/ Annuity One /3/
Plus 3 Non Bonus Plus 3 Bonus
- -----------------------------------------------------------------------------------------------------
Optional Death Step-Up, Roll-Up, Step-Up, Roll-Up,
Benefit (for an Combo: Step/Roll Combo: Step/Roll
Additional cost), /4/ Highest Daily Value Highest Daily Value
(HDV) Earnings (HDV) Earnings
Appreciator Benefit Appreciator Benefit
(EAB) (EAB)
- -----------------------------------------------------------------------------------------------------
Living Benefits, /5,6/ Lifetime Five (LT5) Lifetime Five (LT5)
Spousal Lifetime Five Spousal Lifetime Five
(SLT5) (SLT5)
Highest Daily Highest Daily
Lifetime Five Lifetime Five
(HDLT5) Highest (HDLT5) Highest
Daily Lifetime Seven Daily Lifetime Seven
(HDLT7) Spousal (HDLT7) Spousal
Highest Daily Highest Daily
Lifetime Seven Lifetime Seven
(SHDLT7) (SHDLT7)
Guaranteed
Guaranteed Minimum Minimum Income
Income Benefit Benefit (GMIB)
(GMIB) Income Income Appreciator
Appreciator Benefit Benefit (IAB)
(IAB)
- -----------------------------------------------------------------------------------------------------
4 For more information on these benefits, refer to section 4, "What Is The
Death Benefit?" in the Prospectus.
5 Not all Optional Benefits may be available in all states.
6 For more information on these Benefits, refer to section 3, "What Kind of
Payments Will I Receive During The Income Phase?"; section 5, "What Are The
Lifetime Withdrawal Benefits?"; (discussing Lifetime Five, Spousal Lifetime
Five, Highest Daily Lifetime Five, Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven) and section 6, "What Is The Income
Appreciator Benefit?" in the Prospectus.
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the contract years specified. The values shown below are based
on the following assumptions:
.. An initial investment of $100,000 is made into each contract earning a
gross rate of return of 0% and 6% and 10% respectively.
.. No subsequent deposits or withdrawals are made to/from the contract.
.. The hypothetical gross rates of return are reduced by the arithmetic
average of the fees and expenses of the underlying portfolios (as of
December 31, 2007) and the charges that are deducted from the contract at
the Separate Account level as follows:
.. 0.94% average of all fund expenses are computed by adding Portfolio
management fees, 12b-1 fees and other expenses of all of the underlying
portfolios and then dividing by the number of portfolios. For purposes of
the illustrations, we do not reflect any expense reimbursements or expense
waivers that might apply and are described in the prospectus fee table.
Please note that because the SP Aggressive Growth Asset Allocation
Portfolio, the SP Balanced Asset Allocation Portfolio, the SP Conservative
Asset Allocation Portfolio, and the SP Growth Asset Allocation Portfolio
generally were closed to investors in 2005, the fees for such portfolios
are not reflected in the above-mentioned average.
.. The Separate Account level charges include the Insurance Charge and
Administration Charge (as applicable).
The Contract Value assumes no surrender while the Surrender Value assumes a
100% surrender two days prior to the contract anniversary, therefore
reflecting the withdrawal charge applicable to that contract year. Note that a
withdrawal on the contract anniversary, or the day before the contract
anniversary, would be subject to the withdrawal charge applicable to the next
contract year, which usually is lower. The values that you actually experience
under a contract will be different from what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each product reflected below will remain the same. (We will provide
you with a personalized illustration upon request).
B-3
0% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS -2.57% ALL YEARS -2.30% ALL YEARS -2.40%
--------- --------- - --------- --------- - --------- ---------
CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- --------- - --------- --------- - --------- ---------
1 $97,467 $91,344 $97,707 $91,567 $101,516 $94,194
2 $94,944 $88,997 $95,461 $90,333 $ 99,084 $91,957
3 $92,484 $86,709 $93,266 $89,102 $ 96,710 $89,773
4 $90,086 $90,086 $91,122 $87,876 $ 94,394 $87,642
5 $87,750 $87,750 $89,027 $86,656 $ 92,133 $86,383
6 $85,473 $85,473 $86,980 $85,440 $ 89,926 $85,130
7 $83,254 $83,254 $84,980 $84,230 $ 87,772 $83,883
8 $81,091 $81,091 $83,026 $83,026 $ 85,669 $85,669
9 $78,983 $78,983 $81,117 $81,117 $ 83,617 $83,617
10 $76,928 $76,928 $79,252 $79,252 $ 81,614 $81,614
11 $74,926 $74,926 $77,430 $77,430 $ 79,659 $79,659
12 $72,975 $72,975 $75,650 $75,650 $ 77,751 $77,751
13 $71,073 $71,073 $73,911 $73,911 $ 75,888 $75,888
14 $69,219 $69,219 $72,177 $72,177 $ 74,071 $74,071
15 $67,413 $67,413 $70,483 $70,483 $ 72,262 $72,262
16 $65,652 $65,652 $68,829 $68,829 $ 70,497 $70,497
17 $63,936 $63,936 $67,212 $67,212 $ 68,774 $68,774
18 $62,264 $62,264 $65,633 $65,633 $ 67,093 $67,093
19 $60,634 $60,634 $64,089 $64,089 $ 65,451 $65,451
20 $59,045 $59,045 $62,582 $62,582 $ 63,849 $63,849
21 $57,497 $57,497 $61,109 $61,109 $ 62,286 $62,286
22 $55,988 $55,988 $59,670 $59,670 $ 60,760 $60,760
23 $54,518 $54,518 $58,263 $58,263 $ 59,270 $59,270
24 $53,085 $53,085 $56,890 $56,890 $ 57,816 $57,816
25 $51,688 $51,688 $55,548 $55,548 $ 56,397 $56,397
-----------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-4
6% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS 3.27% ALL YEARS 3.56% ALL YEARS 3.46%
--------- --------- - --------- --------- - --------- ---------
CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- --------- - --------- --------- - --------- ---------
1 $103,299 $ 96,769 $103,553 $ 97,005 $107,589 $ 99,783
2 $106,716 $ 99,947 $107,242 $101,409 $111,313 $103,209
3 $110,247 $103,230 $111,063 $106,011 $115,165 $106,753
4 $113,894 $113,894 $115,021 $110,820 $119,151 $110,420
5 $117,662 $117,662 $119,119 $115,845 $123,275 $115,346
6 $121,554 $121,554 $123,363 $121,096 $127,541 $120,489
7 $125,575 $125,575 $127,758 $126,581 $131,955 $125,858
8 $129,730 $129,730 $132,310 $132,310 $136,522 $136,522
9 $134,021 $134,021 $137,024 $137,024 $141,247 $141,247
10 $138,455 $138,455 $141,906 $141,906 $146,135 $146,135
11 $143,035 $143,035 $146,962 $146,962 $151,193 $151,193
12 $147,767 $147,767 $152,198 $152,198 $156,425 $156,425
13 $152,656 $152,656 $157,621 $157,621 $161,839 $161,839
14 $157,706 $157,706 $163,237 $163,237 $167,440 $167,440
15 $162,923 $162,923 $169,053 $169,053 $173,235 $173,235
16 $168,313 $168,313 $175,076 $175,076 $179,230 $179,230
17 $173,881 $173,881 $181,314 $181,314 $185,433 $185,433
18 $179,633 $179,633 $187,774 $187,774 $191,851 $191,851
19 $185,576 $185,576 $194,464 $194,464 $198,491 $198,491
20 $191,715 $191,715 $201,393 $201,393 $205,360 $205,360
21 $198,057 $198,057 $208,568 $208,568 $212,467 $212,467
22 $204,610 $204,610 $215,999 $215,999 $219,821 $219,821
23 $211,378 $211,378 $223,695 $223,695 $227,428 $227,428
24 $218,371 $218,371 $231,665 $231,665 $235,299 $235,299
25 $225,595 $225,595 $239,919 $239,919 $243,443 $243,443
-----------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-5
10% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS 7.17% ALL YEARS 7.47% ALL YEARS 7.37%
--------- --------- - --------- --------- - --------- ---------
CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- --------- - --------- --------- - --------- ---------
1 $107,186 $100,385 $107,450 $100,630 $111,638 $103,509
2 $114,911 $107,568 $115,477 $109,150 $119,860 $111,073
3 $123,192 $115,270 $124,105 $118,401 $128,688 $119,195
4 $132,070 $132,070 $133,376 $128,442 $138,166 $127,915
5 $141,588 $141,588 $143,341 $139,341 $148,342 $138,660
6 $151,791 $151,791 $154,050 $151,169 $159,267 $150,313
7 $162,730 $162,730 $165,559 $164,003 $170,997 $162,949
8 $174,458 $174,458 $177,927 $177,927 $183,592 $183,592
9 $187,030 $187,030 $191,220 $191,220 $197,113 $197,113
10 $200,509 $200,509 $205,506 $205,506 $211,631 $211,631
11 $214,958 $214,958 $220,860 $220,860 $227,217 $227,217
12 $230,450 $230,450 $237,360 $237,360 $243,952 $243,952
13 $247,057 $247,057 $255,093 $255,093 $261,919 $261,919
14 $264,862 $264,862 $274,151 $274,151 $281,210 $281,210
15 $283,949 $283,949 $294,633 $294,633 $301,921 $301,921
16 $304,412 $304,412 $316,644 $316,644 $324,158 $324,158
17 $326,350 $326,350 $340,301 $340,301 $348,032 $348,032
18 $349,869 $349,869 $365,724 $365,724 $373,665 $373,665
19 $375,083 $375,083 $393,048 $393,048 $401,186 $401,186
20 $402,114 $402,114 $422,412 $422,412 $430,733 $430,733
21 $431,092 $431,092 $453,970 $453,970 $462,457 $462,457
22 $462,160 $462,160 $487,886 $487,886 $496,517 $496,517
23 $495,466 $495,466 $524,336 $524,336 $533,086 $533,086
24 $531,172 $531,172 $563,509 $563,509 $572,348 $572,348
25 $569,451 $569,451 $605,608 $605,608 $614,502 $614,502
-----------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-6
APPENDIX C - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your contract. However, as discussed in
Section 5, we reserve the right to modify this formula with respect to those
who elect Highest Daily Lifetime Five in the future.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee. The factors that we use currently are derived from the
a2000 Individual Annuity Mortality Table with an assumed interest rate
of 3%. Each number in the table "a" factors (which appears below)
represents a factor, which when multiplied by the Highest Daily Annual
Income Amount, projects our total liability for the purpose of asset
transfers under the guarantee.
. Q - age based factors used in calculating the target value. These
factors are established on the Effective Date and are not changed for
the life of the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Contract Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable Contract Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the
Benefit Fixed Rate Account (F (greater than) 0), assets in the
Benefit Fixed Rate Account are transferred to the Permitted
Sub-accounts.
C-1
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T = {Min (V, [L - F - V * C\\t\\] / (1 - C\\t\\))} T (greater than) 0, Money moving from the
Permitted Sub-accounts to the Benefit Fixed Rate
Account
T = {Min (F, - [L - F - V * C\\t\\] / (1 - C\\t\\))} T (less than) 0, Money moving from the Benefit
Fixed Rate Account to the Permitted
Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = {Min (V, [L - F - V * Ct] / (1 - Ct))}
= {Min (92,300.00, [76,710.28 - 0 - 92,300.00 * 0.80] / (1 - 0.80))}
= {Min (92,300.00, 14,351.40)}
= 14,351.40
C-2
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
C-3
APPENDIX D - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFFETIME SEVEN BENEFIT
AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven Benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V - the total value of all Permitted Sub-accounts in the annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Contract
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account
* Note: withdrawals of less than the Annual Income Amount do not reduce
the Income Basis.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable account value (V) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - B) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account.
. If r (less than) C\\l\\, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = {Min (V, [L - B - V * C\\t\\] / (1 - C\\t\\))} Money moving from the Permitted Sub-accounts to the
AST Investment Grade Bond Portfolio Sub-account
T = {Min (B, - [L - B - V * C\\t\\] / (1 - C\\t\\))} Money moving from the AST Investment Grade Bond
Portfolio Sub-account to the Permitted Sub-accounts]
D-1
"a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
D-2
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE PRUCO LIFE ANNUITY DESCRIBED IN
PROSPECTUS ORD01142 (05/2008).
---------------------------------------
(print your name)
---------------------------------------
(address)
---------------------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
----------------
[LOGO] Prudential PRSRT STD
The Prudential Insurance Company of America U.S. POSTAGE
751 Broad Street PAID
Newark, NJ 07102-3777 LANCASTER, PA
PERMIT NO. 1793
----------------
ORD01142
STRATEGIC PARTNERS/SM/ FLEXELITE VARIABLE ANNUITY
PROSPECTUS: MAY 1, 2008
----------------------------------------------
This Prospectus describes an Individual Variable Annuity Contract offered by
Pruco Life Insurance Company (Pruco Life) and Pruco Life Flexible Premium
Variable Annuity Account. Pruco Life offers several different annuities which
your representative may be authorized to offer to you. Please note that
selling broker-dealer firms through which the contract is sold may decline to
make available to their customers certain of the optional features and
investment options offered generally under the contract. Alternatively, such
firms may restrict the availability of the optional benefits that they do make
available to their customers (e.g., imposing a lower maximum issue age for
certain optional benefits than what is prescribed generally under the
contract). Please speak to your registered representative for further details.
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 among each annuity. Differences in
compensation among different annuity products could influence a
representative's decision as to which annuity to recommend to you. 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. 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.
Currently, portfolios within the following underlying mutual funds are being
offered: The Prudential Series Fund, Advanced Series Trust, Nationwide
Variable Insurance Trust, and Janus Aspen Series (see next page for list of
each portfolio currently offered).
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 in the Summary.
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,
2008. 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, 100
F Street, N.E., Washington, D.C. 20549, or from us, free of charge. (See SEC
file numbers 333-75702 and 333-103474.) You may obtain information on the
operation of the Public Reference Room by calling the SEC at (202) 551-8090.
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 set forth in Section 11 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 19176.
You may elect before your 3/rd/ and 6/th/ 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
The Prudential Series Fund
Jennison Portfolio
Equity Portfolio
Global Portfolio
Money Market Portfolio
Stock Index Portfolio
Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Growth Asset Allocation Portfolio
SP Davis Value Portfolio
SP International Growth Portfolio
SP International Value Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small-Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
Advanced Series Trust
AST Advanced Strategies Portfolio
AST Aggressive Asset Allocation Portfolio
AST AllianceBernstein Core Value Portfolio
AST AllianceBernstein Growth & Income Portfolio
AST American Century Income & Growth Portfolio
AST American Century Strategic Allocation Portfolio
AST Balanced Asset Allocation Portfolio
AST Capital Growth Asset Allocation Portfolio
AST Cohen & Steers Realty Portfolio
AST Conservative Asset Allocation Portfolio
AST DeAM Large-Cap Value Portfolio
AST DeAM Small-Cap Value Portfolio
AST Federated Aggressive Growth Portfolio
AST First Trust Balanced Target Portfolio
AST First Trust Capital Appreciation Target Portfolio
AST UBS Dynamic Alpha Strategy Portfolio
AST Goldman Sachs Concentrated Growth Portfolio
AST Goldman Sachs Mid-Cap Growth Portfolio
AST High Yield Portfolio
AST Investment Grade Bond Portfolio
AST JPMorgan International Equity Portfolio
AST Large-Cap Value Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST Marsico Capital Growth Portfolio
AST MFS Global Equity Portfolio
AST MFS Growth Portfolio
AST Mid Cap Value Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Neuberger Berman Small-Cap Growth Portfolio
AST PIMCO Limited Maturity Bond Portfolio
AST Preservation Asset Allocation Portfolio
AST QMA US Equity Alpha Portfolio
AST Small-Cap Growth Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Global Bond Portfolio
AST T. Rowe Price Natural Resources Portfolio
AST T. Rowe Price Large-Cap Growth Portfolio
AST Western Asset Core Plus Bond Portfolio
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets Fund
Janus Aspen Series
Large Cap Growth Portfolio -- Service Shares
CONTENTS
PART I: STRATEGIC PARTNERS FLEXELITE PROSPECTUS SUMMARY................................... 1
GLOSSARY................................................................................. 2
SUMMARY.................................................................................. 7
RISK FACTORS............................................................................. 11
SUMMARY OF CONTRACT EXPENSES............................................................. 12
EXPENSE EXAMPLES......................................................................... 18
PART II: STRATEGIC PARTNERS FLEXELITE PROSPECTUS SECTIONS 1-11............................ 21
SECTION 1: WHAT IS THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY?.................... 22
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"........................................... 22
SECTION 2: WHAT INVESTMENT OPTIONS CAN I CHOOSE?......................................... 22
VARIABLE INVESTMENT OPTIONS............................................................ 23
FIXED INTEREST RATE OPTIONS............................................................ 34
MARKET VALUE ADJUSTMENT OPTION......................................................... 35
TRANSFERS AMONG OPTIONS................................................................ 36
ADDITIONAL TRANSFER RESTRICTIONS....................................................... 37
DOLLAR COST AVERAGING.................................................................. 38
ASSET ALLOCATION PROGRAM............................................................... 39
AUTO-REBALANCING....................................................................... 39
SCHEDULED TRANSACTIONS................................................................. 39
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......................................................................... 41
GMIB OPTION 1 - SINGLE LIFE PAYOUT OPTION............................................ 43
GMIB OPTION 2 - JOINT LIFE PAYOUT OPTION............................................. 43
HOW WE DETERMINE ANNUITY PAYMENTS...................................................... 44
SECTION 4: WHAT IS THE DEATH BENEFIT?.................................................... 45
BENEFICIARY............................................................................ 45
CALCULATION OF THE DEATH BENEFIT....................................................... 45
GUARANTEED MINIMUM DEATH BENEFIT....................................................... 45
GMDB ROLL-UP......................................................................... 45
GMDB STEP-UP......................................................................... 46
HIGHEST DAILY VALUE DEATH BENEFIT...................................................... 47
CALCULATION OF THE HIGHEST DAILY VALUE DEATH BENEFIT................................... 48
PAYOUT OPTIONS......................................................................... 49
BENEFICIARY CONTINUATION OPTION........................................................ 50
EARNINGS APPRECIATOR BENEFIT........................................................... 51
SPOUSAL CONTINUANCE BENEFIT............................................................ 52
SECTION 5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS?.................................... 53
LIFETIME FIVE INCOME BENEFIT........................................................... 53
SPOUSAL LIFETIME FIVE INCOME BENEFIT................................................... 59
HIGHEST DAILY LIFETIME FIVE BENEFIT.................................................... 63
HIGHEST DAILY LIFETIME SEVEN BENEFIT................................................... 69
SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT........................................... 76
SECTION 6: WHAT IS THE INCOME APPRECIATOR BENEFIT?....................................... 83
INCOME APPRECIATOR BENEFIT............................................................. 83
CALCULATION OF THE INCOME APPRECIATOR BENEFIT.......................................... 83
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE....................... 84
i
SECTION 7: HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT?.................... 86
PURCHASE PAYMENTS....................................................................... 86
ALLOCATION OF PURCHASE PAYMENTS......................................................... 86
CREDIT ELECTION......................................................................... 86
CALCULATING CONTRACT VALUE.............................................................. 87
SECTION 8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT?............................................................................... 87
INSURANCE AND ADMINISTRATIVE CHARGES.................................................... 88
WITHDRAWAL CHARGE....................................................................... 88
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE........................................... 89
REQUIRED MINIMUM DISTRIBUTION........................................................... 89
CONTRACT MAINTENANCE CHARGE............................................................. 89
GUARANTEED MINIMUM INCOME BENEFIT CHARGE................................................ 89
INCOME APPRECIATOR BENEFIT CHARGE....................................................... 90
EARNINGS APPRECIATOR BENEFIT CHARGE..................................................... 91
BENEFICIARY CONTINUATION OPTION CHARGES................................................. 91
TAXES ATTRIBUTABLE TO PREMIUM........................................................... 91
TRANSFER FEE............................................................................ 91
COMPANY TAXES........................................................................... 92
UNDERLYING MUTUAL FUND FEES............................................................. 92
SECTION 9: HOW CAN I ACCESS MY MONEY?..................................................... 92
WITHDRAWALS DURING THE ACCUMULATION PHASE............................................... 92
AUTOMATED WITHDRAWALS................................................................... 93
SUSPENSION OF PAYMENTS OR TRANSFERS..................................................... 93
SECTION 10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT?..................................................................... 93
SECTION 11: OTHER INFORMATION............................................................. 101
PRUCO LIFE INSURANCE COMPANY............................................................ 101
THE SEPARATE ACCOUNT.................................................................... 102
SALE AND DISTRIBUTION OF THE CONTRACT................................................... 102
LITIGATION.............................................................................. 103
ASSIGNMENT.............................................................................. 104
FINANCIAL STATEMENTS.................................................................... 104
STATEMENT OF ADDITIONAL INFORMATION..................................................... 104
HOUSEHOLDING............................................................................ 104
MARKET-VALUE ADJUSTMENT FORMULA......................................................... 104
APPENDIX A - ACCUMULATION UNIT VALUES...................................................... A-1
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU........................... B-1
APPENDIX C - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT.............. C-1
APPENDIX D - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN AND SPOUSAL HIGHEST
DAILY LIFETIME SEVEN BENEFIT............................................................. D-1
ii
PART I SUMMARY
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS FLEXELITE PROSPECTUS
1
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.
Annual Income Amount
Under the terms of the Lifetime Five Income Benefit, and the Highest Daily
Lifetime Seven Income Benefit, an amount that you can withdraw each year as
long as the annuitant lives. For the Highest Daily Lifetime Five Benefit only,
we refer to an amount that you can withdraw each year as long as the annuitant
lives as the "Total Annual Income Amount." Under the Spousal Lifetime Five
Income Benefit and Spousal Highest Daily Lifetime Seven Income Benefit, an
annual income amount is paid until the later death of two natural persons who
are each other's spouses at the time of election and at the first death of one
of them.
Annual Withdrawal Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal Value remaining.
The Annual Withdrawal Amount is set initially to equal 7% of the initial
Protected Withdrawal Value, but will be adjusted to reflect subsequent
purchase payments, withdrawals, and any step-up.
Annuitant
The person whose life determines the amount of income payments that we will
make. Except as indicated below, 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.
Generally, if an annuity is owned by an entity and the entity has named a
co-annuitant, the co-annuitant will become the annuitant upon the death of the
annuitant, and no death benefit is payable. If a Custodial Account elects to
receive the Death Benefit the Contract Value as of the date of due proof of
death of the annuitant will reflect the amount that would have been payable
had a death benefit been paid. Unless we agree otherwise, the contract is
eligible to have a co-annuitant designation only if the entity that owns the
contract is (1) a plan described in Internal Revenue Code
Section 72(s)(5)(A)(i) (or any successor Code section thereto); (2) an entity
described in Code Section 72(u)(1) (or any successor Code section thereto); or
(3) a custodial account established pursuant to the provisions in Code
Section 408(a) (or any successor Code section thereto) ("Custodial Account").
Where the contract is held by a Custodial Account, the co-annuitant will not
automatically become the annuitant upon the death of the annuitant. Upon the
death of the annuitant, the Custodial Account will have the choice, subject to
our rules, to either elect to receive the death benefit or elect to continue
the contract.
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.
2
Benefit Fixed Rate Account
An investment option offered as part of this contract that is used only if you
have elected the optional Highest Daily Lifetime Five Benefit. Amounts
allocated to the Benefit Fixed Rate Account earn a fixed rate of interest, and
are held within our general account.
You may not allocate purchase payments to the Benefit Fixed Rate Account.
Rather, Contract Value is transferred to the Benefit Fixed Rate Account only
under the asset transfer feature of the Highest Daily Lifetime Five Benefit.
Business Day
A day on which the New York Stock Exchange is 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.
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 3/rd/ and 6/th/ 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.
Daily Value
For purposes of the Highest Daily Value Death Benefit, which we describe
below, the Contract Value as of the end of each business day. The Daily Value
on the contract date is equal to your purchase payment.
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, or Highest Daily Value Death Benefit, is
available for an additional charge. See Section 4, "What Is The Death Benefit?"
Death Benefit Target Date
With respect to the Highest Daily Value Death Benefit, the later of the
contract anniversary on or after the 80/th/ birthday of the current contract
owner the older of either joint owner or (if owned by an entity) the
annuitant, or five years after the contract date.
Designated Life
For purposes of the Spousal Lifetime Five Income Benefit and Spousal Highest
Daily Lifetime Seven, a Designated Life refers to each of two natural persons
who are each other's spouses at the time of election of the benefit and at the
first death of one of them.
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.
3
GLOSSARY continued
Excess Income/Excess Withdrawal
Under the Lifetime Five Income Benefit, Spousal Lifetime Five Income Benefit,
Highest Daily Lifetime Five Benefit and the Highest Daily Lifetime Seven
benefits, Excess Income refers to cumulative withdrawals that exceed the
Annual Income Amount (the Total Annual Income Amount, for Highest Daily
Lifetime Five only). Under the Lifetime Five Income Benefit, Excess Withdrawal
refers to cumulative withdrawals that exceed the Annual Withdrawal Amount.
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. The GMDB is a different death benefit than the Highest
Daily Value Death Benefit, which we describe below.
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 (for certain contracts), and reduced by the effect of 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, and any withdrawals
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.
4
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.
Highest Daily Lifetime Five/SM/ Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of a principal value called
the Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Contract Value.
Highest Daily Lifetime Seven/SM/ Income Benefit
An optional benefit available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of a principal value called
the Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Contract Value. Highest Daily
Lifetime Seven is the same class of optional benefit as our Highest Daily
Lifetime Five Income Benefit, but differs (among other things) with respect to
how the Protected Withdrawal Value is calculated and to how the lifetime
withdrawals are calculated.
Highest Daily Value Death Benefit
An optional death benefit available for an additional charge that can provide
a death benefit that exceeds the Contract Value on the date of death. The
amount of the death benefit is determined with reference to the Highest Daily
Value, as defined below.
Income Appreciator Benefit (IAB)
An optional feature that may be available for an additional charge that
provides a supplemental living 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. A joint owner must be a natural person.
Lifetime Five/SM/ Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amount of withdrawals. There are two options--one is designed to
provide annual withdrawal amount for life and the other is designed to provide
a greater annual withdrawal amount (than the first option) as long as there is
Protected Withdrawal Value. We also offer a variant of the Lifetime Five
Income Benefit to certain spousal owners--see "Spousal Lifetime Five Income
Benefit."
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.
5
GLOSSARY continued
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.
Proportional Withdrawals
A method that involves calculating the percentage of your Contract Value that
each prior withdrawal represented when withdrawn. In general, proportional
withdrawals result in a reduction to the applicable benefit value by reducing
such value in the same proportion as the Contract Value was reduced by the
withdrawal as of the date the withdrawal occurred.
Protected Withdrawal Value
Under the Lifetime Five Income Benefit, the Spousal Lifetime Five Income
Benefit, the Highest Daily Lifetime Five Benefit and the Highest Daily
Lifetime Seven Benefit, an amount that we guarantee regardless of the
investment performance of your Contract Value. For the Highest Daily Lifetime
Five Benefit only, we also refer to an amount that we guarantee regardless of
the investment performance of your Contract Value as the "Total Protected
Withdrawal Value." As discussed in Section 5, Protected Withdrawal Value is
determined one way with respect to the Lifetime Five Income Benefit and the
Spousal Lifetime Five Income Benefit, another way for the Highest Daily
Lifetime Five Benefit, and yet another way for the Highest Daily Lifetime
Seven Benefit.
Prudential Annuity Service Center
For general correspondence: P.O. Box 7960, Philadelphia, PA, 19176. 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.
Spousal Lifetime Five/SM/ Income Benefit
An optional feature available for an additional charge that guarantees the
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on the Contract Value, subject to our rules regarding the
timing and amount of withdrawals. Under the Spousal Lifetime Five Income
Benefit, an annual income amount is paid until the later death of two natural
persons who are each other's spouses at the time of election and at the first
death of one of them.
Spousal Highest Daily Lifetime Seven/SM/ Income Benefit
The spousal version of the Highest Daily Lifetime Seven Income Benefit.
Spousal Highest Daily Lifetime Seven is the same class of optional benefit as
our Spousal Lifetime Five Income Benefit, but differs (among other things)
with respect to how the Protected Withdrawal Value is calculated and to how
the lifetime withdrawals are calculated.
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 Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners FlexElite Contract?"
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.
6
SUMMARY FOR SECTIONS 1-11
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 to
be at least the minimum interest rate dictated by applicable state law.
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.
SECTION 2
What Investment Options Can I Choose?
You can invest your money in several variable investment options. The variable
investment options are classified according to their investment style, and a
brief description of each portfolio's investment objective and key policies is
set forth in Section 2, to assist you in determining which portfolios may be
of interest to you.
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 allocate your money to fixed interest rate options or in a market
value adjustment option.
7
SUMMARY FOR SECTIONS 1-11 continued
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). 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. See
Section 3, "What Kind Of Payments Will I Receive During The Income Phase?"
The Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit,
the Highest Daily Lifetime Five Benefit, the Highest Daily Lifetime Seven
Benefit, and the Spousal Highest Daily Lifetime Seven Benefit (discussed in
Section 5) and the Income Appreciator Benefit (discussed in Section 6) each
may provide an additional amount upon which your annuity payments are based.
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), or Highest Daily Value Death Benefit.
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.
The Highest Daily Value Death Benefit provides a death benefit equal to the
greater of the base death benefit or the highest daily value less proportional
withdrawals.
For all other contracts, the Death Benefit Options are more limited, and the
Death Benefit 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, in Section 4, below 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
What Are The Lifetime Withdrawal Benefits?
The Lifetime Five Income Benefit is an optional feature that guarantees your
ability to withdraw an amount equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amounts of withdrawals. There are two options--one is designed to
provide an annual withdrawal amount for life (the "Life Income Benefit"), and
the other is designed to provide a greater annual withdrawal amount (than the
first option), as long as there is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the Contract Value allocated to the variable
investment options. This charge is in addition to the charge for the
applicable death benefit.
8
In addition to the Lifetime Five Income Benefit, we offer a benefit called the
Spousal Lifetime Five Income Benefit. The Spousal Lifetime Five Income Benefit
is similar to the Lifetime Five Income Benefit, except that it is offered only
to those who are each other's spouses at the time the benefit is elected, and
the benefit offers only a Life Income Benefit (not the Withdrawal Benefit).
The charge for the Spousal Lifetime Five Income Benefit is a daily fee equal
on an annual basis to 0.75% of the Contract Value allocated to the variable
investment options. The charge is in addition to the charge for the applicable
death benefit.
We offer a benefit called the Highest Daily Lifetime Five Benefit. Highest
Daily Lifetime Five is similar to our Lifetime Five and Spousal Lifetime Five
benefits, in that under each such benefit, there is a "protected withdrawal
value" that serves as the basis for withdrawals you can make (which we refer
to as the "Total Protected Withdrawal Value"). As we discuss in more detail
later, we guarantee this Total Protected Withdrawal Value, even if your
Contract Value declines. Thus, as a participant in Highest Daily Lifetime
Five, you are assured of a certain amount that you can withdraw, even if there
is a significant decline in your Contract Value. Highest Daily Lifetime Five
Benefit differs from Lifetime Five and Spousal Lifetime Five in that (a) the
determination of your Total Protected Withdrawal Value is based, in part, on
the highest daily Contract Value and (b) we require you to participate in an
asset transfer program, under which your Contract Value may be transferred
periodically between the variable investment options and the Benefit Fixed
Rate Account (which is part of our general account). We operate the asset
transfer program under a formula, which is described in the portion of
Section 5 concerning the Highest Daily Lifetime Five Benefit. In addition, in
Appendix C, we set out the formula itself. As discussed in Section 5, when you
elect Highest Daily Lifetime Five, the asset transfer formula is made a part
of your annuity contract, and thus may not be altered thereafter. However, we
do reserve the right to amend the formula for new-issued annuity contracts
that elect Highest Daily Lifetime Five and for existing contracts that elect
the benefit in the future. As we discuss in more detail later in this
prospectus, this required asset transfer program helps us manage our financial
exposure under Highest Daily Lifetime Five, by moving assets out of the
variable investment options in the event of securities market declines. In
essence, we seek to preserve the value of these assets, by transferring them
to a more stable account. Of course, the formula also contemplates the
transfer of assets from the Benefit Fixed Rate Account to the variable
investment options in certain other scenarios.
Finally, we offer Highest Daily Lifetime Seven, an optional feature available
for an additional charge that guarantees your ability to withdraw amounts
equal to a percentage of a principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Contract Value. Highest Daily Lifetime Seven is the same
class of optional benefit as our Lifetime Five Income Benefit, but differs
(among other things) with respect to how the Protected Withdrawal Value is
calculated and to how the lifetime withdrawals are calculated. Spousal Highest
Daily Lifetime Seven is the spousal version of Highest Daily Lifetime Seven,
and thus offers lifetime payments until the second-to-die of two spouses.
SECTION 6
What Is The Income Appreciator Benefit?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, 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. You can
activate this benefit in one of three ways, as described in Section 6. Note,
however, that the annuitization options within this benefit are limited.
SECTION 7
How Can I Purchase A Strategic Partners FlexElite Contract?
You can purchase this contract, unless we agree otherwise and subject to our
rules, with a minimum initial purchase payment of $10,000. You must get our
prior approval for any initial and additional purchase payment of $1,000,000
or more, unless we are prohibited under applicable state law from insisting on
such 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 8
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.
9
SUMMARY FOR SECTIONS 1-11 continued
.. 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 (except as indicated), depending on the death benefit
(or other) option that you choose. The daily cost is equivalent to an
annual charge as follows:
-- 1.65% if you choose the base death benefit,
-- 1.90% if you choose either the roll-up or the step-up Guaranteed Minimum
Death Benefit option (i.e., 0.25% in addition to the base death benefit
charge),
-- 2.00% if you choose the greater of the roll-up and step-up Guaranteed
Minimum Death Benefit option (i.e., 0.35% in addition to the base death
benefit charge),
-- 2.15% if you choose the Highest Daily Value Death Benefit (i.e., 0.50%
in addition to the base death benefit charge),
-- 0.60% if you choose the Lifetime Five Income Benefit (1.50% maximum
charge). This charge is in addition to the charge for the applicable
death benefit,
-- 0.60% if you choose the Highest Daily Lifetime Five Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit,
-- 0.75% if you choose the Spousal Lifetime Five Income Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit,
-- 0.60% of the Protected Withdrawal Value if you choose the Highest Daily
Lifetime Seven benefit (1.50% maximum charge). This charge is in
addition to the charge for the applicable death benefit,
-- 0.75% of the Protected Withdrawal Value if you choose the Spousal
Highest Daily Lifetime Seven Income benefit (1.50% maximum charge). This
charge is in addition to the charge for the applicable death benefit.
The 1.65%, 1.90%, and 2.00% charges referenced immediately above apply to any
Strategic Partners FlexElite contract sold on or after May 1, 2003, or upon
subsequent state approval.
For all other contracts, those charges are 1.60%, 1.80%, and 1.90%,
respectively. We reserve the right to impose an additional insurance charge of
0.10% annually of average Contract Value for contracts issued to those aged 76
or older.
The Highest Daily Value Death Benefit is available only with respect to the
version of the contract sold on or after May 1, 2003 or upon subsequent state
approval.
.. 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 (1.00% maximum charge). (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. 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 2007, the
fees of these funds ranged from 0.37% to 1.65% annually. For certain funds,
expenses are reduced pursuant to expense waivers and comparable
arrangements. In general, these expense waivers and comparable arrangements
are not guaranteed, and 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" and Section 8, "What Are The
Expenses Associated With The Strategic Partners FlexElite Contract?"
SECTION 9
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.
10
We offer optional benefits--the Lifetime Five Income Benefit, the Spousal
Lifetime Five Income Benefit, the Highest Daily Lifetime Five Benefit, the
Highest Daily Lifetime Seven Benefit, and the Spousal Highest Daily Lifetime
Seven Benefit under which we guarantee that certain amounts will be available
to you for withdrawal, regardless of market-related declines in your Contract
Value. You need not participate in this benefit in order to withdraw some or
all of your money. You also may access your Income Appreciator Benefit through
withdrawals.
SECTION 10
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 11
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 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.
11
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, Section 8, "What Are The Expenses Associated With
The Strategic Partners FlexElite Contract?" The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
-------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
-------------------------------------
WITHDRAWAL CHARGE /1/
-------------------------------------
FULL CONTRACT YEARS
-------------------------------------
0 7%
-------------------------------------
1 7%
-------------------------------------
2 7%
-------------------------------------
3 0%
-------------------------------------
CREDIT ELECTION WITHDRAWAL CHARGE /2/
-------------------------------------
FULL CONTRACT YEARS
-------------------------------------
3 7%
-------------------------------------
4 7%
-------------------------------------
5 7%
-------------------------------------
6 7%
-------------------------------------
7 7%
-------------------------------------
8 7%
-------------------------------------
9 0%
-------------------------------------
MAXIMUM TRANSFER FEE
---------------------------------------------------------------------
Each transfer after 12 /3/ $30.00
---------------------------------------------------------------------
Each transfer after 20 $10.00
(Beneficiary Continuation Option only)
---------------------------------------------------------------------
Charge for premium tax imposed on us by certain States/Jurisdictions
---------------------------------------------------------------------
Up to 3.5% of Contract Value
---------------------------------------------------------------------
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" in Section 8. 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 3/rd/ and 6/th/ 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.
12
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.
- ---------------------------------------------------------------------------------------------
PERIODIC ACCOUNT EXPENSES
- ---------------------------------------------------------------------------------------------
Maximum Annual Contract Maintenance Charge and $60.00
Contract Charge Upon Full Withdrawal /4/
- ---------------------------------------------------------------------------------------------
Maximum Annual Contract Fee if Contract Value is less lesser of $30 or 2% of Contract Value
than $25,000
(Beneficiary Continuation option ONLY)
- ---------------------------------------------------------------------------------------------
INSURANCE AND ADMINISTRATIVE EXPENSES WITH THE INDICATED BENEFITS /5/
As a Percentage of Contract Value in Variable Investment Options
(except as indicated):
- ---------------------------------------------------------------------------------------------
Base Death Benefit 1.65% (1.70% for contracts sold prior
to May 1, 2003, or upon subsequent
state approval, and if you are
aged 76 or older)
-----------------------------------------------------------------------------
Guaranteed Minimum Death Benefit 1.90%
Option - Roll-Up or Step-Up
-----------------------------------------------------------------------------
Guaranteed Minimum Death Benefit 2.00%
Option - Greater of Roll-Up or Step-Up
-----------------------------------------------------------------------------
Highest Daily Value Death Benefit 2.15%
-----------------------------------------------------------------------------
Maximum Charge for Lifetime Five /6/ 1.50%
-----------------------------------------------------------------------------
Maximum Charge for Highest Daily 1.50%
Lifetime Five /6/
-----------------------------------------------------------------------------
Maximum Charge for Spousal Lifetime 1.50%
Five /6/
-----------------------------------------------------------------------------
Maximum Charge for Highest Daily 1.50%
Lifetime Seven /6/
-----------------------------------------------------------------------------
Maximum Charge for Spousal Highest 1.50%
Daily Lifetime Seven /6/
-----------------------------------------------------------------------------
Lifetime Five Income Benefit 0.60%
(current charge)
-----------------------------------------------------------------------------
Spousal Lifetime Five Income Benefit 0.75%
(current charge)
-----------------------------------------------------------------------------
Highest Daily Lifetime Five Income 0.60%
Benefit
(current charge)
-----------------------------------------------------------------------------
Highest Daily Lifetime Seven 0.60%
(current charge): assessed against
Protected Withdrawal Value /7/
-----------------------------------------------------------------------------
Spousal Highest Daily Lifetime Seven 0.75%
(current charge): assessed against
Protected Withdrawal Value/ 7/
-----------------------------------------------------------------------------
Annual Guaranteed Minimum Income 0.50%
Benefit Charge and Charge Upon
Certain Withdrawals -
(for contracts sold on or after
January 20, 2004 or upon subsequent
state approval) - as a percentage of
average GMIB Protected Value (current
charge) /8/
-----------------------------------------------------------------------------
Maximum Annual Guaranteed Minimum 1.00%
Income Benefit Charge and Charge Upon
Certain Withdrawals as - as a
percentage of average GMIB Protected
Value
-----------------------------------------------------------------------------
Annual Income Appreciator Benefit 0.25%
Charge and Charge upon certain
Withdrawals/Annuitizations /9/
-----------------------------------------------------------------------------
Annual Earnings Appreciator Charge 0.30%
and Charge upon certain Transactions
/10/
-----------------------------------------------------------------------------
Possible Additional Charge if 66 or 0.10%
older (i.e., 0.40% total charge if 66 or
older, for certain contracts)
-----------------------------------------------------------------------------
Settlement Service Charge 1.00%
(if the Owner's beneficiary elects
the Beneficiary Continuation Option)
/11/
-----------------------------------------------------------------------------
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. We also reserve the right to impose
an additional insurance charge of 0.10% annually of average Contract Value
for contracts issued to those aged 76 or older, and sold prior to May 1,
2003 or upon subsequent state
13
SUMMARY OF CONTRACT EXPENSES continued
approval. The Highest Daily Value Death Benefit is available only with
respect to the version of the contract sold on or after May 1, 2003, or
upon subsequent state approval.
6 We reserve the right to increase the charge to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit. However, we have no present intention of doing so.
7 With respect to Highest Daily Lifetime Seven and Spousal Highest Daily
Lifetime Seven, the 0.60% charge and 0.75% charge, respectively, is
assessed against the Protected Withdrawal Value. With respect to each of
Highest Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven,
one-fourth of the annual charge is deducted at the end of each quarter,
where the quarters are part of years that have as their anniversary the
date that the benefit was elected. The fee is taken out of Contract Value
in the variable investment options. These optional benefits are not
available under the Beneficiary Continuation Option.
8 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. The fee is withdrawn from
each variable investment option in the same proportion as the Contract
Value allocated to that variable investment option represents to the total
Contract Value in all variable investment options. 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. We reserve the right to increase this
charge to the maximum indicated upon any reset of the benefit or new
election.
9 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 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.
10 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
Contract Value for contracts issued to those aged 66 or older, under which
the Earnings Appreciator Benefit has been selected.
11 The other Insurance and Administrative Expense Charges do not apply if you
are a beneficiary under the Beneficiary Continuation Option. Instead, the
Settlement Service Charge set forth here applies, if your beneficiary
elects the Beneficiary Continuation Option.
--------------------------------------------
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, 2007.
Fund expenses are not fixed or guaranteed by the Strategic Partners FlexElite
contract, and may vary from year to year.
------------------------------------------------------
MINIMUM MAXIMUM
------------------------------------------------------
Total Annual Underlying Mutual Fund 0.37% 1.65%
Operating Expenses*
------------------------------------------------------
* See, "Summary of Contract Expenses" - "Underlying Mutual Fund Portfolio
Annual Expenses" for more detail on the expenses of the underlying mutual
funds.
14
- ------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- ------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
----------------------------------------------------------
UNDERLYING PORTFOLIO Management Other 12b-1 Fees Acquired Total Annual
Fee /4/ Expenses Portfolio Fees Portfolio
& Expenses /6/ Expenses
- ------------------------------------------------------------------------------------------------------------
Advanced Series Trust /1,3/
AST Advanced Strategies 0.85% 0.15% 0.00% 0.04% 1.04%
AST Aggressive Asset Allocation /2/ 0.15% 0.03% 0.00% 0.96% 1.14%
AST AllianceBernstein Core Value 0.75% 0.11% 0.00% 0.00% 0.86%
AST AllianceBernstein Growth & Income 0.75% 0.08% 0.00% 0.00% 0.83%
AST American Century Income & Growth 0.75% 0.11% 0.00% 0.00% 0.86%
AST American Century Strategic Allocation 0.85% 0.25% 0.00% 0.00% 1.10%
AST Balanced Asset Allocation /2/ 0.15% 0.01% 0.00% 0.90% 1.06%
AST Capital Growth Asset Allocation /2/ 0.15% 0.01% 0.00% 0.93% 1.09%
AST Cohen & Steers Realty Portfolio 1.00% 0.12% 0.00% 0.00% 1.12%
AST Conservative Asset Allocation /2/ 0.15% 0.02% 0.00% 0.87% 1.04%
AST DeAM Large-Cap Value 0.85% 0.11% 0.00% 0.00% 0.96%
AST DeAM Small-Cap Value 0.95% 0.18% 0.00% 0.00% 1.13%
AST Federated Aggressive Growth 0.95% 0.11% 0.00% 0.00% 1.06%
AST First Trust Balanced Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST First Trust Capital Appreciation Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST Goldman Sachs Concentrated Growth 0.90% 0.10% 0.00% 0.00% 1.00%
AST Goldman Sachs Mid-Cap Growth 1.00% 0.12% 0.00% 0.00% 1.12%
AST High Yield 0.75% 0.12% 0.00% 0.00% 0.87%
AST Investment Grade Bond /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST JPMorgan International Equity 0.87% 0.13% 0.00% 0.00% 1.00%
AST Large-Cap Value 0.75% 0.08% 0.00% 0.00% 0.83%
AST Lord Abbett Bond-Debenture 0.80% 0.11% 0.00% 0.00% 0.91%
AST Marsico Capital Growth 0.90% 0.08% 0.00% 0.00% 0.98%
AST MFS Global Equity 1.00% 0.21% 0.00% 0.00% 1.21%
AST MFS Growth 0.90% 0.12% 0.00% 0.00% 1.02%
AST Mid-Cap Value 0.95% 0.14% 0.00% 0.00% 1.09%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.10% 0.00% 0.00% 1.00%
AST Neuberger Berman Mid-Cap Value 0.89% 0.10% 0.00% 0.00% 0.99%
AST Neuberger Berman Small-Cap Growth 0.95% 0.12% 0.00% 0.00% 1.07%
AST PIMCO Limited Maturity Bond 0.65% 0.11% 0.00% 0.00% 0.76%
AST Preservation Asset Allocation /2/ 0.15% 0.03% 0.00% 0.82% 1.00%
AST QMA US Equity Alpha 1.00% 0.63% 0.00% 0.00% 1.63%
AST Small-Cap Growth 0.90% 0.15% 0.00% 0.00% 1.05%
AST Small-Cap Value 0.90% 0.10% 0.00% 0.00% 1.00%
AST T. Rowe Price Asset Allocation 0.85% 0.12% 0.00% 0.00% 0.97%
AST T. Rowe Price Global Bond 0.80% 0.13% 0.00% 0.00% 0.93%
AST T. Rowe Price Natural Resources 0.90% 0.10% 0.00% 0.00% 1.00%
AST T. Rowe Price Large-Cap Growth 0.88% 0.08% 0.00% 0.00% 0.96%
AST UBS Dynamic Alpha Strategy 1.00% 0.13% 0.00% 0.02% 1.15%
AST Western Asset Core Plus Bond /5/ 0.70% 0.10% 0.00% 0.02% 0.82%
The Prudential Series Fund /7,8,9/
Equity Portfolio 0.45% 0.02% 0.00% 0.00% 0.47%
Global Portfolio 0.75% 0.06% 0.00% 0.00% 0.81%
Jennison Portfolio 0.60% 0.02% 0.00% 0.00% 0.62%
Money Market Portfolio 0.40% 0.03% 0.00% 0.00% 0.43%
Stock Index Portfolio /10/ 0.35% 0.02% 0.00% 0.00% 0.37%
Value Portfolio 0.40% 0.03% 0.00% 0.00% 0.43%
SP Aggressive Growth Asset Allocation Portfolio 0.05% 0.06% 0.00% 0.85% 0.96%
SP Balanced Asset Allocation Portfolio 0.05% 0.01% 0.00% 0.79% 0.85%
SP Conservative Asset Allocation Portfolio 0.05% 0.02% 0.00% 0.75% 0.82%
SP Davis Value Portfolio 0.75% 0.05% 0.00% 0.00% 0.80%
15
SUMMARY OF CONTRACT EXPENSES continued
- -----------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- -----------------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
----------------------------------------------------------
UNDERLYING PORTFOLIO Management Other 12b-1 Fees Acquired Total Annual
Fee /4/ Expenses Portfolio Fees Portfolio
& Expenses /6/ Expenses
- -----------------------------------------------------------------------------------------------------------
SP Growth Asset Allocation Portfolio 0.05% 0.01% 0.00% 0.83% 0.89%
SP International Growth Portfolio 0.85% 0.09% 0.00% 0.00% 0.94%
SP International Value Portfolio 0.90% 0.09% 0.00% 0.00% 0.99%
SP Mid Cap Growth Portfolio 0.80% 0.07% 0.00% 0.00% 0.87%
SP PIMCO High Yield Portfolio 0.60% 0.09% 0.00% 0.00% 0.69%
SP PIMCO Total Return Portfolio 0.60% 0.07% 0.00% 0.00% 0.67%
SP Prudential U.S. Emerging Growth Portfolio 0.60% 0.05% 0.00% 0.00% 0.65%
SP Small Cap Value Portfolio 0.90% 0.06% 0.00% 0.00% 0.96%
SP Strategic Partners Focused Growth Portfolio 0.90% 0.25% 0.00% 0.00% 1.15%
Janus Aspen Series
Large Cap Growth Portfolio--Service Shares 0.64% 0.02% 0.25% 0.01% 0.92%
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets/11/ 1.05% 0.35% 0.25% N/A 1.65%
1 The Fund has entered into arrangements with the issuers of the variable
insurance products offering the Portfolios under which the Fund compensates
the issuers 0.10% for providing ongoing services to Portfolio shareholders
in lieu of the Fund providing such services directly to
shareholders. Amounts paid under these arrangements are included in "Other
Expenses." Subject to the expense limitations set forth below, for each
Portfolio of the Fund other than the Dynamic Asset Allocation Portfolios,
0.03% of the 0.10% administrative services fee is voluntarily waived. The
Dynamic Asset Allocation Portfolios do not directly pay any portion of the
0.10% administrative service fee. The Acquired Portfolios in which the
Dynamic Asset Allocation Portfolios invest, however, are subject to the
administrative services fee. With respect to the AST QMA US Equity Alpha
Portfolio, "Other Expenses" includes dividend expenses on short sales and
interest expenses on short sales. Our reference above to the Dynamic Asset
Allocation Portfolios refers to these portfolios: AST Aggressive Asset
Allocation, AST Balanced Asset Allocation, AST Capital Growth Asset
Allocation, AST Conservative Asset Allocation, and AST Preservation Asset
Allocation.
2 Some of the Portfolios invest in other investment companies (the Acquired
Portfolios). For example, each Dynamic Asset Allocation Portfolio invests
primarily in shares of other Portfolios of Advanced Series Trust. Investors
in a Portfolio indirectly bear the fees and expenses of the Acquired
Portfolios. The expenses shown under "Acquired Portfolio Fees and Expenses"
represent a weighted average of the expense ratios of the Acquired
Portfolios in which each Portfolio invested during the year ended
December 31, 2007. The Dynamic Asset Allocation Portfolios do not pay any
transaction fees when purchasing or redeeming shares of the Acquired
Portfolios. Our reference above to the Dynamic Asset Allocation Portfolios
refers to these portfolios: AST Aggressive Asset Allocation, AST Balanced
Asset Allocation, AST Capital Growth Asset Allocation, AST Conservative
Asset Allocation, and AST Preservation Asset Allocation.
3 Prudential Investments LLC and AST Investment Services, Inc. have
voluntarily agreed to waive a portion of their management fee and/or limit
total expenses (expressed as an annual percentage of average daily
net assets) for certain Portfolios of the Fund. These arrangements, which
are set forth as follows, may be discontinued or otherwise modified at any
time. AST American Century Strategic Allocation: 1.25%; AST Cohen & Steers
Realty: 1.45%; AST DeAM Small-Cap Value: 1.14%; AST Goldman Sachs
Concentrated Growth: 0.86%; AST Goldman Sachs Mid-Cap Growth: 1.12%; AST
High Yield: 0.88%; AST JPMorgan International Equity: 1.01%; AST Large-Cap
Value: 1.20%; AST Lord Abbett Bond-Debenture: 0.88%; AST MFS Global
Equity: 1.18%; AST MFS Growth: 1.35%; AST Marsico Capital Growth: 1.35%;
AST Mid-Cap Value: 1.45%; AST Neuberger Berman Mid-Cap Growth: 1.25%; AST
Neuberger Berman Mid-Cap Value: 1.25%; AST PIMCO Limited Maturity
Bond: 1.05%; AST T. Rowe Price Asset Allocation: 1.25%; AST T. Rowe Price
Natural Resources: 1.35%.
4 The management fee rate shown in the "management fees" column represents
the actual fee rate paid by the indicated Portfolio for the fiscal year
ended December 31, 2007, except that the fee rate shown does not reflect
the impact of any voluntary management fee waivers that may be applicable
and which would result in a reduction in the fee rate paid by the
Portfolio. The management fee rate for certain Portfolios may include
"breakpoints" which are reduced fee rates that are applicable at specified
levels of Portfolio assets; the effective fee rates shown in the table
reflect and incorporate any fee "breakpoints" which may be applicable.
5 The Western Asset Core Plus Bond Portfolio is based on estimated expenses
for 2008 and current period average daily net assets. The AST Investment
Grade Bond Portfolio expenses are based on estimated expenses for 2008 at
an estimated asset level.
6 Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Total Annual Portfolio Operating Expenses listed above may
exceed the expense limit numbers. The impact of the acquired fund fees and
expenses are included in the total returns of the Fund.
7 Investors incur certain fees and expenses in connection with an investment
in the Fund's Portfolios. The following table shows the fees and expenses
that you may incur if you invest in Class 1 shares of the Portfolios
through a variable annuity contract. The fees and expenses shown below are
based the fees and expenses incurred in the year ended December 31, 2007
(except as explained in the footnotes) and are expressed as a percentage of
the average daily net assets of each Portfolio. The table does not include
annuity contract charges. Because annuity contract charges are not
included, the total fees and expenses that you will incur will be higher
than the fees and expenses set forth in the following table. See this
prospectus for the fees and expenses under the annuity contract.
8 Some of the Portfolios invest in other investment companies (the Acquired
Portfolios). For example, each SP Asset Allocation Portfolio invests in
shares of other Portfolios of the Fund, and some Portfolios invest in other
funds, including the Dryden Core Investment Fund. Investors in a Portfolio
indirectly bear
16
the fees and expenses of the Acquired Portfolios. The expenses shown in the
column "Acquired Portfolio Fees and Expenses" represent a weighted average
of the expense ratios of the Acquired Portfolios in which each Portfolio
invested during the year ended December 31, 2007. The SP Asset Allocation
Portfolios do not pay any transaction fees when purchasing or redeeming
shares of the Acquired Portfolios. Each of the Asset Allocation Portfolios
is responsible for the payment of its own "Other Expenses," including,
without limitation, custodian fees, legal fees, trustee fees and audit fee,
in accordance with the terms of the management agreement.
9 Prudential Investments LLC has voluntarily agreed to waive a portion of its
management fee and/or limit total expenses (expressed as an annual
percentage of average daily net assets) for certain Portfolios of the Fund.
These arrangements, which are set forth as follows for Class 1 shares, may
be discontinued or otherwise modified at any time. Stock Index Portfolio:
0.75%; Value Portfolio: 0.75%; SP International Growth Portfolio: 1.24%; SP
Mid Cap Growth Portfolio: 1.00%; SP Small Cap Value Portfolio: 1.05%; SP
Strategic Partners Focused Growth Portfolio: 1.25%.
10 The Portfolio's contractual management fee rate is as follows: 0.35% for
average net assets up to $4 billion, and 0.30% for average net assets in
excess of $4 billion.
11 The Trust and the Adviser have entered into a written contract limiting
operating expenses to 1.40% for all share classes until May 1, 2009.
17
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.
Expense Examples for subsequent version of Strategic Partners FlexElite sold
on or after May 1, 2003
Example 1a: Highest Daily Value 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 Contract;
.. You choose the Highest Daily Value Death Benefit;
.. You choose the Earnings Appreciator Benefit;
.. You choose the Guaranteed Minimum Income Benefit (for contracts sold
beginning January 20, 2004);
.. You choose the Income Appreciator Benefit;. You make credit elections prior
to your 3/rd/ and 6/th/ contract anniversaries;
.. 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;
.. For each charge, we deduct the maximum charge rather than any current
charge; and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 1b: Highest Daily Value Death Benefit, Guaranteed Minimum Income
Benefit, Earnings Appreciator Benefit, Income Appreciator Benefit, Credit
Elections, 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: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
.. You invest $10,000 in the Contract;
.. You choose the Base Death 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;
.. For each charge, we deduct the maximum charge rather than any current
charge*;
.. You do not make a credit election; and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 2b: Base Death Benefit and You Do Not Withdraw All 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.
18
Expense Examples for original version of Strategic Partners FlexElite
Example 3a: Greater of roll-up and step-up GMDB; Earnings Appreciator Benefit;
Credit Elections and You Withdraw All Your Assets
This example assumes that:
.. You invest $10,000 in the Contract;
.. You choose the Greater of roll-up and step-up GMDB;
.. You choose the Earnings Appreciator Benefit;
.. You make credit elections prior to your 3/rd/ and 6/th/ contract
anniversaries;
.. 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;
.. For each charge, we deduct the maximum charge rather than any current
charge; and
.. You withdraw all your assets at the end of the indicated period.
Example 3b: Greater of roll-up and step-up GMDB; Earnings Appreciator Benefit;
Credit Elections; 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.
Example 4a: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
.. You invest $10,000 in the Contract;
.. You choose the Base Death 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;
.. For each charge, we deduct the maximum charge rather than any current
charge;*
.. You do not make a credit election; and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 4b: 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 the examples with
withdrawal charges and the examples without withdrawal charges. This is
because, if 3 or more years have elapsed since your last credit election
before your 6/th/ contract anniversary, no withdrawal charges apply.
The examples use an average contract maintenance charge, which we calculated
based on our general estimate of the total contract fees we expect to collect
in 2008. 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.
19
EXPENSE EXAMPLES continued
The table of accumulation unit values appears in Appendix A to this prospectus.
Highest Daily Value Death Benefit; Guaranteed Minimum Income Benefit; Earnings
Appreciator Benefit; Income Appreciator Benefit; Credit Elections
Example 1a: If You Withdraw Your Assets Example 1b: 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 $2,309 $3,418 $5,524 $563 $1,679 $2,788 $5,524
----------------------------------------------------------------------------------------
Base Death Benefit
Example 2a: If You Withdraw Your Assets Example 2b: If You Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$993 $1,733 $1,864 $3,862 $363 $1,103 $1,864 $3,862
----------------------------------------------------------------------------------------
Greater of Roll-Up and Step-Up Guaranteed Minimum Death Benefit; Earnings
Appreciator Benefit; Credit Elections
Example 3a: If You Withdraw Your Assets Example 3b: If You Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$1,057 $1,919 $2,802 $4,458 $427 $1,289 $2,172 $4,458
----------------------------------------------------------------------------------------
Base Death Benefit
Example 4a: If You Withdraw Your Assets Example 4b: If You Do Not Withdraw Your Assets
----------------------------------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------------------------------------------------------
$993 $1,733 $1,864 $3,862 $363 $1,103 $1,864 $3,862
----------------------------------------------------------------------------------------
20
PART II SECTIONS 1-11
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS FLEXELITE PROSPECTUS
21
1: WHAT IS THE STRATEGIC PARTNERS FLEXELITE VARIABLE ANNUITY?
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 when it is sold outside a
tax-favored plan (generally called a non-qualified annuity). 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. In other words, you need not purchase this contract to gain the
preferential tax treatment provided by your retirement plan. Therefore, before
purchasing an annuity in a tax-favored plan, you should consider whether its
features and benefits beyond tax deferral, including the death benefit and
income benefits, meet your needs and goals. You should consider the relative
features, benefits and costs of this annuity 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
withholding; 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.
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. The mutual fund
options that you select are your choice. We do not recommend or endorse any
particular underlying mutual fund.
22
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 and a short,
summary description of their key policies to assist you in determining which
portfolios may be of interest to you. What appears in the chart below is
merely a summary - please consult the portfolio's prospectus for a
comprehensive discussion of the portfolio's investment policies. There is no
guarantee that any portfolio will meet its investment objective. The name of
the adviser/sub-adviser for each portfolio appears next to the description.
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index
Portfolio, Prudential Value Portfolio, and each "SP" Portfolio of the
Prudential Series Fund, are managed by an indirect, wholly-owned subsidiary of
Prudential Financial, Inc. called Prudential Investments LLC (PI) under a
"manager-of-managers" approach. The portfolios of the Advanced Series Trust
are co-managed by PI and AST Investment Services, Inc., also under a
manager-of- managers approach. AST Investment Services, Inc. is an indirect,
wholly-owned subsidiary of Prudential Financial, Inc.
Under the manager-of-managers approach, PI and AST Investment Services, Inc.
have the ability to assign sub-advisers to manage specific portions of a
portfolio, and the portion managed by a sub-adviser may vary from 0% to 100%
of the portfolio's assets. The sub-advisers that manage some or all of a
portfolio are listed on the following chart.
Please note that we restrict the investment options in which you can
participate, if you elect certain optional benefits. Thus, your participation
in those benefits could result in your missing investment opportunities that
might arise in investment options from which you are excluded. (Of course,
potentially missing investment opportunities in investment options in which
you do not participate is an inherent consequence of any investment choice,
and generally speaking, it is your decision as to how to invest your Purchase
Payments).
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.
Pruco Life has entered into agreements with certain underlying portfolios
and/or the investment adviser or distributor of such portfolios. Pruco Life
may provide administrative and support services to such portfolios pursuant to
the terms of these agreements and under which it receives a fee of up to 0.55%
annually (as of May 1, 2008) of the average assets allocated to the portfolio
under the contract. These agreements, including the fees paid and services
provided, can vary for each underlying mutual fund whose portfolios are
offered as sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the contract. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributors, and the amounts of such payments may vary
between and among each adviser, sub-adviser, and distributor depending on
their respective participation. During 2007, with regard to amounts that were
paid under these kinds of arrangements, the amounts ranged from approximately
$750 to approximately $946,934. These amounts may have been paid to one or
more Prudential-affiliated insurers issuing individual variable annuities.
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.
Upon the introduction of the Advanced Series Trust Asset Allocation Portfolios
on December 5, 2005, we ceased offering the Prudential Series Fund Asset
Allocation Portfolios to new purchasers and to existing contract owners who
had not previously invested in those portfolios. However, a contract owner who
had Contract Value allocated to a Prudential Series Fund Asset Allocation
Portfolio prior to December 5, 2005 may continue to allocate purchase payments
to that Portfolio after that date. In addition, after December 5, 2005, we
ceased offering the Prudential Series Fund SP Large Cap Value Portfolio to new
purchasers and to existing contract owners who had not previously invested in
that Portfolio. However, a contract owner who had Contract Value allocated to
the SP Large Cap Value Portfolio prior to December 5, 2005 may continue to
allocate purchase payments to that Portfolio after that date.
23
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
ADVANCED SERIES TRUST
-------------------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management, LLC;
of equity and fixed income Pacific Investment
securities across different Management
investment categories and investment Company LLC
managers. The Portfolio pursues a (PIMCO); T. Rowe
combination of traditional and Price Associates,
non-traditional investment Inc.; William Blair
strategies. & Company, LLC
-------------------------------------------------------------------------
ASSET AST Aggressive Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
100% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
92.5% to 100%) and the remainder of
its net assets to underlying
portfolios investing primarily in
debt securities and money market
instruments (with a range of 0% -
7.5%).
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The subadviser
expects that the majority of the
Portfolio's assets will be invested
in the common stocks of large
companies that appear to be
undervalued. Among other things, the
Portfolio seeks to identify
compelling buying opportunities
created when companies are
undervalued on the basis of investor
reactions to near-term problems or
circumstances even though their
long-term prospects remain sound.
The subadviser seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Growth & AllianceBernstein
CAP Income Portfolio: seeks long-term L.P.
VALUE growth of capital and income while
attempting to avoid excessive
fluctuations in market value. The
Portfolio normally will invest in
common stocks (and securities
convertible into common stocks). The
subadviser will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects.
-------------------------------------------------------------------------
LARGE AST American Century Income & Growth American Century
CAP Portfolio: seeks capital growth with Investment
VALUE current income as a secondary Management, Inc.
objective. The Portfolio invests
primarily in common stocks that
offer potential for capital growth,
and may, consistent with its
investment objective, invest in
stocks that offer potential for
current income. The subadviser
utilizes a quantitative management
technique with a goal of building an
equity portfolio that provides
better returns than the S&P 500
Index without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-------------------------------------------------------------------------
ASSET AST American Century Strategic American Century
ALLOCA Allocation Portfolio: seeks Investment
TION/ long-term capital growth with some Management, Inc.
BALANCED regular income. The Portfolio will
invest, under normal circumstances,
in any type of U.S. or foreign
equity security that meets certain
fundamental and technical standards.
The portfolio managers will draw on
growth, value and quantitative
investment techniques in managing
the equity portion of the Portfolio
and diversify the Portfolio's
investments among small, medium and
large companies.
-------------------------------------------------------------------------
24
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
ASSET AST Balanced Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
75% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
67.5% to 80%), and 25% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 20.0%
to 32.5%).
------------------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
65% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
57.5% to 72.5%, and 35% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 27.5%
to 42.5%).
------------------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues
its investment objective by
investing, under normal
circumstances, at least 80% of its
net assets in common stocks and
other equity securities issued by
real estate companies, such as real
estate investment trusts (REITs).
Under normal circumstances, the
Portfolio will invest substantially
all of its assets in the equity
securities of real estate companies,
i.e., a company that derives at
least 50% of its revenues from the
ownership, construction, financing,
management or sale of real estate or
that has at least 50% of its assets
in real estate. Real estate
companies may include real estate
investment trusts (REITs).
------------------------------------------------------------------------
ASSET AST Conservative Asset Allocation AST Investment
ALLOC Portfolio: seeks the highest Services, Inc. &
ATION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
55% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
47.5% to 62.5%), and 45% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 37.5%
to 52.5%.
------------------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the
equity securities of large-sized
companies included in the Russell
1000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 1000(R)
Value Index, but which attempts to
outperform the Russell 1000(R) Value
Index through active stock selection.
------------------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in Management
the value stocks of smaller Americas, Inc.
companies. The Portfolio pursues its
objective, under normal market
conditions, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 2000(R)
Value Index, but which attempts to
outperform the Russell 2000(R) Value
Index.
------------------------------------------------------------------------
25
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management Corp.;
the over-the-counter-market. Small Federated MDTA
companies will be defined as LLC
companies with market
capitalizations similar to companies
in the Russell 2000 Growth Index. .
--------------------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust Advisors
ALLOCA Portfolio: seeks long-term capital L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and
approximately 35% in fixed income
securities. The Portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - The Dow(R) Target
Dividend, the Value Line(R) Target
25, the Global Dividend Target 15,
the NYSE(R) International Target 25,
and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index.
--------------------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust Advisors
ALLOCA Target Portfolio: seeks long-term L.P.
TION/ capital growth. The Portfolio seeks
BALANCED to achieve its objective by
investing approximately 80% in
common stocks and 20% in fixed
income securities. The portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Value
Line(R) Target 25, the Global
Dividend Target 15, the Target Small
Cap, the Nasdaq(R) Target 15, and
the NYSE(R) International Target 25.
Each strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index.
--------------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Goldman Sachs
CAP Growth Portfolio: seeks long-term Asset Management,
GROWTH growth of capital. The Portfolio L.P.
will pursue its objective by
investing primarily in equity
securities of companies that the
subadviser believes have the
potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the subadviser to
be positioned for long-term growth.
--------------------------------------------------------------------------
MID AST Goldman Sachs Mid-Cap Growth Goldman Sachs
CAP Portfolio: seeks long-term capital Asset Management,
GROWTH growth. The Portfolio pursues its L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the
time of investment) fall within the
range of companies in the Russell
Mid-cap Growth Index. The subadviser
seeks to identify individual
companies with earnings growth
potential that may not be recognized
by the market at large.
--------------------------------------------------------------------------
FIXED AST High Yield Portfolio: seeks Pacific Investment
INCOME maximum total return, consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio invests, under normal
circumstances, at least 80% of its
net assets plus any borrowings for
investment purposes (measured at
time of purchase) in high yield,
fixed-income securities that, at the
time of purchase, are non-investment
grade securities. Such securities
are commonly referred to as "junk
bonds".
--------------------------------------------------------------------------
26
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
FIXED AST Investment Grade Bond Portfolio: Prudential
INCOME seeks the highest potential total Investment
return consistent with its specified Management, Inc.
level of risk tolerance to meet the
parameters established to support
the Highest Daily Lifetime Seven
benefits and maintain liquidity to
support changes in market conditions
for a fixed duration (weighted
average maturity) of about 6 years.
Please note that you may not make
purchase payments to this Portfolio,
and that this Portfolio is available
only with certain living benefits.
------------------------------------------------------------------------
INTER AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management, Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of
the world. The equity securities
will ordinarily be traded on a
recognized foreign securities
exchange or traded in a foreign
over-the-counter market in the
country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
------------------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management LLC;
VALUE of income, as well as capital Hotchkis and Wiley
appreciation. The Portfolio invests, Capital
under normal circumstances, at least Management LLC;
80% of its net assets in common J.P. Morgan
stocks of large capitalization Investment
companies. Large capitalization Management, Inc.
companies are those companies with
market capitalizations within the
market capitalization range of the
Russell 1000 Value Index.
------------------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett & Co.
INCOME Portfolio: seeks high current income LLC
and the opportunity for capital
appreciation to produce a high total
return. The Portfolio invests, under
normal circumstances, at least 80%
of the value of its assets in fixed
income securities. The Portfolio
allocates its assets principally
among fixed income securities in
four market sectors: U.S. investment
grade securities, U.S. high yield
securities, foreign securities
(including emerging market
securities) and convertible
securities. Under normal
circumstances, the Portfolio invests
in each of the four sectors
described above. However, the
Portfolio may invest substantially
all of its assets in any one sector
at any time, subject to the
limitation that at least 20% of the
Portfolio's net assets must be
invested in any combination of
investment grade debt securities,
U.S. Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in
equity securities.
------------------------------------------------------------------------
LARGE AST Marsico Capital Growth Marsico Capital
CAP Portfolio: seeks capital growth. Management, LLC
GROWTH Income realization is not an
investment objective and any income
realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in common stocks of large companies
that are selected for their growth
potential. Large capitalization
companies are companies with market
capitalizations within the market
capitalization range of the Russell
1000 Growth Index. In selecting
investments for the Portfolio, the
subadviser uses an approach that
combines "top down" macroeconomic
analysis with "bottom up" stock
selection. The "top down" approach
identifies sectors, industries and
companies that may benefit from the
trends the subadviser has observed.
The subadviser then looks for
individual companies with earnings
growth potential that may not be
recognized by the market at large,
utilizing a "bottom up" stock
selection process. The Portfolio
will normally hold a core position
of between 35 and 50 common stocks.
The Portfolio may hold a limited
number of additional common stocks
at times when the Portfolio manager
is accumulating new positions,
phasing out existing or responding
to exceptional market conditions.
------------------------------------------------------------------------
27
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
INTER AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities. The Portfolio will
invest in the securities of U.S. and
foreign issuers (including issuers
in emerging market countries). While
the portfolio may invest its assets
in companies of any size, the
Portfolio generally focuses on
companies with relatively large
market capitalizations relative to
the markets in which they are traded.
-------------------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future, Financial Services
GROWTH rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of
its net assets in common stocks and
related securities, such as
preferred stocks, convertible
securities and depositary receipts,
of companies that the subadviser
believes offer better than average
prospects for long-term growth. The
subadviser uses a "bottom up" as
opposed to a "top down" investment
style in managing the Portfolio.
-------------------------------------------------------------------------
MID AST Mid Cap Value Portfolio: seeks EARNEST Partners
CAP to provide capital growth by LLC; WEDGE
VALUE investing primarily in Capital
mid-capitalization stocks that Management, LLP
appear to be undervalued. The
Portfolio generally invests, under
normal circumstances, at least 80%
of the value of its net assets in
mid-capitalization companies.
Mid-capitalization companies are
generally those that have market
capitalizations, at the time of
purchase, within the market
capitalization range of companies
included in the Russell Mid cap
Value Index during the previous
12-months based on month-end data.
-------------------------------------------------------------------------
MID AST Neuberger Berman Mid-Cap Growth Neuberger Berman
CAP Portfolio: seeks capital growth. Management Inc.
GROWTH Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of mid-capitalization companies.
Mid-capitalization companies are
those companies whose market
capitalization is within the range
of market capitalizations of
companies in the Russell Mid cap(R)
Growth Index. Using fundamental
research and quantitative analysis,
the subadviser looks for
fast-growing companies that are in
new or rapidly evolving industries.
-------------------------------------------------------------------------
MID AST Neuberger Berman Mid-Cap Value Neuberger Berman
CAP Portfolio: seeks capital growth. Management Inc.
VALUE Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of medium capitalization companies.
For purposes of the Portfolio,
companies with market
capitalizations that fall within the
range of the Russell Mid cap(R)
Index at the time of investment are
considered medium capitalization
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
-------------------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Neuberger Berman
CAP Growth Portfolio: seeks maximum Management Inc.
GROWTH growth of investors' capital from a
portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily
investing at least 80% of its total
assets in the equity securities of
small-sized companies included in
the Russell 2000 Growth(R) Index.
-------------------------------------------------------------------------
ASSET AST Niemann Capital Growth Asset Neimann Capital
ALLOCA Allocation Portfolio: seeks the Management Inc.
TION/ highest potential total return
GROWTH consistent with its specified level
of risk tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
-------------------------------------------------------------------------
28
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a one-to
three- year time frame based on the
subadviser's forecast for interest
rates.
------------------------------------------------------------------------
ASSET AST Preservation Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
35% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
27.5% to 42.5%), and 65% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 57.5%
to 72.5%.
------------------------------------------------------------------------
LARGE AST QMA US Equity Portfolio Quantitative
CAP (formerly known as AST Management
BLEND AllianceBernstein Managed Index 500 Associates LLC
Portfolio): seeks to produce returns
that exceed those of the benchmark.
The portfolio utilizes a long/short
investment strategy and will
normally invest at least 80% of its
net assets plus borrowings in equity
and equity related securities of
issuers traded on a securities
exchange or market in the US. The
benchmark index is the Russell
1000(R) which is comprised of stocks
representing more than 90% of the
market cap of the US market and
includes the largest 1000 securities
in the Russell 3000(R) index.
------------------------------------------------------------------------
SMALL AST Small-Cap Growth Portfolio: Eagle Asset
CAP seeks long-term capital growth. The Management;
GROWTH Portfolio pursues its objective by Neuberger Berman
investing, under normal Management Inc.
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000(R) Index at the time of
the Portfolio's investment.
------------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC;
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC;
appear to be undervalued. The J.P. Morgan
Portfolio invests, under normal Investment
circumstances, at least 80% of the Management, Inc.;
value of its net assets in small Lee Munder
capitalization stocks. Small Investments, Ltd
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000(R) Value Index.
------------------------------------------------------------------------
ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total
assets in equity securities and 40%
in fixed income securities. This mix
may vary depending on the
subadviser's outlook for the
markets. The subadviser concentrates
common stock investments in larger,
more established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
------------------------------------------------------------------------
29
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign
and U.S. dollar-denominated bonds.
The Portfolio will invest at least
80% of its total assets in fixed
income securities. The Portfolio
invests in all types of bonds,
including those issued or guaranteed
by U.S. or foreign governments or
their agencies and by foreign
authorities, provinces and
municipalities as well as investment
grade corporate bonds, mortgage and
asset-backed securities, and
high-yield bonds of U.S. and foreign
issuers. The Portfolio generally
invests in countries where the
combination of fixed-income returns
and currency exchange rates appears
attractive, or, if the currency
trend is unfavorable, where the
subadviser believes that the
currency risk can be minimized
through hedging. The Portfolio may
also invest up to 20% of its assets
in the aggregate in below
investment-grade, high-risk bonds
("junk bonds"). In addition, the
Portfolio may invest up to 30% of
its assets in mortgage- related
(including mortgage dollar rolls and
derivatives, such as collateralized
mortgage obligations and stripped
mortgage securities) and
asset-backed securities.
--------------------------------------------------------------------------
LARGE AST T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term growth of Associates, Inc.
GROWTH capital by investing predominantly
in the equity securities of a
limited number of large, carefully
selected, high-quality U.S.
companies that are judged likely to
achieve superior earnings growth.
The Portfolio takes a growth
approach to investment selection and
normally invests at least 80% of its
net assets in the common stocks of
large companies. Large companies are
defined as those whose market cap is
larger than the median market cap of
companies in the Russell 1000 Growth
Index as of the time of purchase.
--------------------------------------------------------------------------
SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio invests,
under normal circumstances, at least
80% of the value of its assets in
natural resource companies. The
Portfolio may also invest in
non-resource companies with the
potential for growth. The Portfolio
looks for companies that have the
ability to expand production, to
maintain superior exploration
programs and production facilities,
and the potential to accumulate new
resources. Although at least 50% of
Portfolio assets will be invested in
U.S. securities, up to 50% of total
assets also may be invested in
foreign securities.
--------------------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio: UBS Global Asset
ALLOCA seeks to maximize total return, Management
TION/ consisting of capital appreciation (Americas) Inc.
BALANCED and current income. The Portfolio
invests in securities and financial
instruments to gain exposure to
global equity, global fixed income
and cash equivalent markets,
including global currencies. The
Portfolio may invest in equity and
fixed income securities of issuers
located within and outside the
United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's subadviser, to
gain exposure to certain global
equity and global fixed income
markets.
--------------------------------------------------------------------------
FIXED AST Western Asset Core Plus Bond Western Asset
INCOME Portfolio: seeks to maximize total Management
return, consistent with prudent Company
investment management and liquidity
needs, by investing to obtain its
average specified duration. The
Portfolio's current target average
duration is generally 2.5 to 7
years. The Portfolio pursues this
objective by investing in all major
fixed income sectors with a bias
towards non-Treasuries.
--------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
--------------------------------------------------------------------------
LARGE Equity Portfolio: seeks long-term ClearBridge
CAP growth of capital. The Portfolio Advisors, LLC;
BLEND invests at least 80% of its Jennison Associates
investable assets in common stocks LLC
of major established corporations as
well as smaller companies that the
subadvisers believe offer attractive
prospects of appreciation.
--------------------------------------------------------------------------
30
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
INTER Global Portfolio: seeks long-term LSV Asset
NATIONAL growth of capital. The Portfolio Management;
EQUITY invests primarily in common stocks Marsico Capital
(and their equivalents) of foreign Management, LLC;
and U.S. companies. Each subadviser T. Rowe Price
for the Portfolio generally will use Associates, Inc.;
either a "growth" approach or a William Blair &
"value" approach in selecting either Company, LLC
foreign or U.S. common stocks.
-------------------------------------------------------------------------
LARGE Jennison Portfolio: seeks long-term Jennison Associates
CAP growth of capital. The Portfolio LLC
GROWTH invests primarily in equity
securities of major, 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 equity
and equity- related securities of
companies with capitalization in
excess of $1 billion.
-------------------------------------------------------------------------
FIXED Money Market Portfolio: seeks Prudential
INCOME maximum current income consistent Investment
with the stability of capital and Management, Inc.
the 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.
-------------------------------------------------------------------------
ASSET SP Aggressive Growth Asset Prudential
ALLOCA Allocation Portfolio: seeks to Investments LLC
TION/ obtain the highest potential total
BALANCED return consistent with the specified
level of risk tolerance. The
Portfolio may invest in any other
Portfolio of the Fund (other than
another SP Asset Allocation
Portfolio), the AST Marsico Capital
Growth Portfolio of Advanced Series
Trust (AST), and the AST
International Value Portfolio of AST
(the Underlying Portfolios). Under
normal circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
-------------------------------------------------------------------------
ASSET SP Balanced Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios). The
Portfolio will invest in equity and
fixed-income Underlying Portfolios.
-------------------------------------------------------------------------
ASSET SP Conservative Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
fixed-income Underlying Portfolios
but will also invest in equity
Underlying Portfolios.
-------------------------------------------------------------------------
LARGE SP Davis Value Portfolio: seeks Davis Selected
CAP growth of capital. The Portfolio Advisers, L.P.
VALUE invests primarily in common stocks
of U.S. companies with market
capitalizations within the market
capitalization range of the Russell
1000 Value Index. It may also invest
in stocks of foreign companies and
U.S. companies with smaller
capitalizations. The subadviser
attempts to select common stocks of
businesses that possess
characteristics that the subadviser
believe foster the creation of
long-term value, such as proven
management, a durable franchise and
business model, and sustainable
competitive advantages. The
subadviser aims to invest in such
businesses when they are trading at
a discount to their intrinsic 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.
-------------------------------------------------------------------------
31
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
ASSET SP Growth Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
equity Underlying Portfolios but
will also invest in fixed- income
Underlying Portfolios.
-------------------------------------------------------------------------
INTER SP International Growth Portfolio: Marsico Capital
NATIONAL seeks long-term capital Management, LLC;
EQUITY appreciation. The Portfolio invests William Blair &
primarily in equity-related Company, LLC.
securities of foreign issuers. The
Portfolio invests primarily in the
common stock of large and
medium-sized foreign companies,
although it may also invest in
companies of all sizes. 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, which may
include countries with emerging
markets. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth
potential.
-------------------------------------------------------------------------
INTER SP International Value Portfolio: LSV Asset
NATIONAL seeks long-term capital Management;
EQUITY appreciation. The Portfolio normally Thornburg
invests at least 80% of the Investment
Portfolio's assets in equity Management, Inc.
securities. The Portfolio will
invest at least 65% of its net
assets in the equity securities of
companies in at least three
different countries, without limit
as to the amount of assets that may
be invested in a single country.
-------------------------------------------------------------------------
MID SP Mid Cap Growth Portfolio: seeks Neuberger Berman
CAP long-term growth of capital. The Management Inc.
GROWTH Portfolio normally invests at least
80% of investable assets in common
stocks and related securities, such
as preferred stocks, convertible
securities and depositary receipts
of companies with medium market
capitalizations, which the
subadviser believes have
above-average growth potential. The
Portfolio generally defines medium
market capitalization companies as
those companies with market
capitalizations within the market
capitalization range of the Russell
Mid Cap Growth(R) Index. 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).
-------------------------------------------------------------------------
FIXED SP PIMCO High Yield Portfolio: seeks Pacific Investment
INCOME to maximize total return consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio normally invests at least
80% of its investable assets in a
diversified portfolio of
high-yield/high-risk debt securities
rated below high grade but rated at
least CCC by Moody's Investor
Services, Inc. or equivalently rated
by Standard & Poor's Rating Group or
fitch, or, if unrated, determined by
the subadviser to be of comparable
quality.
-------------------------------------------------------------------------
FIXED SP PIMCO Total Return Portfolio: Pacific Investment
INCOME seeks to maximize total return Management
consistent with preservation of Company LLC
capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a diversified portfolio of
fixed-income investment instruments
of varying maturities.
-------------------------------------------------------------------------
MID SP Prudential U.S. Emerging Growth Jennison Associates
CAP Portfolio: seeks long-term capital LLC
GROWTH appreciation. The Portfolio normally
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 earnings
growth. The subadviser seeks to
invest in companies that it believes
are poised to benefit from an
acceleration of growth or an
inflection point in a company's
growth rate that is not currently
reflected in the stock price. The
team uses a research-intensive
approach based on internally
generated fundamental research.
-------------------------------------------------------------------------
32
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SMALL SP Small-Cap Value Portfolio: seeks ClearBridge
CAP long-term capital appreciation. The Advisors, LLC;
VALUE Portfolio normally invests at least Goldman Sachs
80% its net assets plus borrowings Asset Management,
for investment purposes in the L.P.
equity securities of small
capitalization companies. The
Portfolio generally defines small
capitalization companies as those
companies with market capitalization
within the market capitalization
range of the Russell 2000 Value
Index. The Portfolio focuses on
equity securities that are believed
to be undervalued in the marketplace.
--------------------------------------------------------------------------
LARGE SP Strategic Partners Focused Growth AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.; Jennison
GROWTH capital. The Portfolio normally Associates LLC
invests at least 65% of total assets
in equity-related securities of U.S.
companies that the subadvisers
believe to have strong 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:
Jennison selects approximately 20
securities and AllianceBernstein
selects approximately 30 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 50 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.
--------------------------------------------------------------------------
LARGE Stock Index Portfolio: seeks Quantitative
CAP investment results that generally Management
BLEND correspond to the performance of Associates LLC
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.
--------------------------------------------------------------------------
LARGE Value Portfolio: seeks capital Jennison Associates
CAP appreciation. The Portfolio invests LLC
VALUE primarily in common stocks that the
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 Russell 1000(R) Value Index and,
over the long term, the S&P 500
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.
--------------------------------------------------------------------------
NATIONWIDE VARIABLE INSURANCE TRUST
--------------------------------------------------------------------------
INTER Gartmore NVIT Developing Markets NWD Management
NATIONAL Fund: seeks long-term capital & Research Trust/
EQUITY appreciation, under normal Gartmore Global
conditions by investing at least 80% Partners
of the value of its net assets in
equity securities of companies of
any size based in the world's
developing market countries. Under
normal market conditions,
investments are maintained in at
least six countries at all times
with no more than 35% of the value
of its net assets invested in
securities of any one country.
--------------------------------------------------------------------------
33
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
JANUS ASPEN SERIES
------------------------------------------------------------------
LARGE Janus Aspen Series: Large Cap Growth Janus Capital
CAP Portfolio - Service Shares: seeks Management LLC
GROWTH long-term growth of capital in a
manner consistent with the
preservation of capital. The
Portfolio invests under normal
circumstances, at least 80% of its
net assets in common stocks of
large-sized companies. Large-sized
companies are those whose market
capitalizations fall within the
range of companies in the Russell
1000(R) Index at the time of
purchase.
The portfolio managers apply a
"bottom up" approach in choosing
investments. In other words, the
portfolio managers look at companies
one at a time to determine if a
company is an attractive investment
opportunity and if it is consistent
with the Portfolio's investment
policies. If the portfolio managers
are unable to find such investments,
the Portfolio's uninvested assets
may be held in cash or similar
investments, subject to the
Portfolio's specific investment
policies.
Within the parameters of its
specific investment policies, the
Portfolio may invest in foreign
equity and debt securities, which
may include investments in emerging
markets.
The Portfolio may also lend
portfolio securities on a short-term
or long-term basis, up to one-third
of its total assets.
------------------------------------------------------------------
"Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Industrials/SM/", "The
Dow/SM/", and the other Dow indices, are service marks of Dow Jones & Company,
Inc. ("Dow Jones") and have been licensed for use for certain purposes by
First Trust Advisors L.P. ("First Trust"). The portfolios are not endorsed,
sold or promoted by Dow Jones, and Dow Jones makes no representation regarding
the advisability of investing in such products.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by First Trust. The Portfolios are not sponsored, endorsed, managed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Portfolio.
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 dictated by
applicable state law. The interest rates we pay on the fixed interest rate
options may be influenced by the asset-based charges assessed against the
Separate Account.
Payments allocated to the fixed interest rate options become part of Pruco
Life's general assets. Please note that if you elect Highest Daily Lifetime
Five, you cannot invest in either of these fixed interest rate options.
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.
34
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 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 1/6/th/ 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 1/12/th/ 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 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 the minimum interest rate dictated by applicable state law
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 of 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.
35
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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.
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 the minimum interest rate dictated by applicable state law.
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 a 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 in good order by us, or by certain entities
36
that we have specifically designated. Our business day generally closes at
4:00 p.m. Eastern time. Our business day may close earlier, for example if
regular trading on the New York Stock Exchange closes early. Transfer requests
received after the close of the business day 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.) (As noted in the
fee table, we have different transfer rules under the beneficiary continuation
option). 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.
For purposes of the 12 free transfers per year that we allow, we will treat
multiple transfers that are submitted on the same business day as a single
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 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 any transfer that involves 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 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.
37
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
.. 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.
.. The Portfolios may have adopted their own policies and procedures with
respect to excessive trading of their respective shares, and we reserve the
right to enforce these policies and procedures. The prospectuses for the
Portfolios describe any such policies and procedures, which may be more or
less restrictive than the policies and procedures we have adopted. Under
SEC rules, we are required to: (1) enter into a written agreement with each
Portfolio or its principal underwriter that obligates us to provide to the
Portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from
the Portfolio to restrict or prohibit further purchases or transfers by
specific contract owners who violate the excessive trading policies
established by the Portfolio. In addition, you should be aware that some
Portfolios may receive "omnibus" purchase and redemption orders from other
insurance companies or intermediaries such as retirement plans. The omnibus
orders reflect the aggregation and netting of multiple orders from
individual owners of variable insurance contracts and/or individual
retirement plan participants. The omnibus nature of these orders may limit
the Portfolios in their ability to apply their excessive trading policies
and procedures. In addition, the other insurance companies and/or
retirement plans may have different policies and procedures or may not have
any such policies and procedures because of contractual limitations. For
these reasons, we cannot guarantee that the Portfolios (and thus the
contract owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the
Portfolios.
.. A Portfolio also may assess a short term trading fee in connection with a
transfer out of the variable investment option investing in that Portfolio
that occurs within a certain number of days following the date of
allocation to the variable investment option. Each Portfolio determines the
amount of the short term trading fee and when the fee is imposed. The fee
is retained by or paid to the Portfolio and is not retained by us. The fee
will be deducted from your Contract Value, to the extent allowed by law. At
present, no Portfolio has adopted a short-term trading fee.
.. 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 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.
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. 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.
38
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 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.
SCHEDULED TRANSACTIONS
Scheduled transactions include transfers under dollar cost averaging, the
asset allocation program, auto-rebalancing, systematic withdrawals, systematic
investments, required minimum distributions, substantially equal periodic
payments under Section 72(t) or 72(q) of the Internal Revenue Code of 1986, as
amended (Code), and annuity payments. Scheduled transactions are processed and
valued as of the date they are scheduled, unless the scheduled day is not a
business day. In that case, the transaction will be processed and valued on
the next business day, unless (with respect to required minimum distributions,
substantially equal periodic payments under Section 72(t) or 72(q) of the
Code, and annuity payments only), the next business day falls in the
subsequent calendar year, in which case the transaction will be processed and
valued on the prior business day.
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. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend to vote all of such shares
when that underlying fund seeks a vote of its shareholders. As such, all such
shares will be counted towards whether there is a quorum at the underlying
fund's shareholder meeting and towards the ultimate outcome of the vote. Thus,
under "mirror voting," it is possible that the votes of a small percentage of
contract owners who actually vote will determine the ultimate outcome. 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.
39
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
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 95/th/ 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 Section 8, "What Are The Expenses
Associated With The Strategic Partners FlexElite Contract?"
Please note that annuitization essentially involves converting your Contract
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
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. IN ADDITION TO THE ANNUITY
PAYMENT OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE AN
OPTIONAL LIFETIME WITHDRAWAL BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT
OPTIONS THAT ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS
PROSPECTUS FOR ADDITIONAL DETAILS.
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 1.50% 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 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.
40
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 1.50% 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, you should consider the
required minimum distribution rules under the tax law when selecting your
annuity option.
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. You may not elect both GMIB and the Lifetime Five
Income Benefit.
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. The maximum GMIB charge
is 1.00% of average GMIB protected value. Please note that the charge is
calculated based on average GMIB protected value, not Contract Value. Thus,
for example, the fee would not decline on account of a reduction in
Contract Value. (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 7/TH/ 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. IN LIGHT OF THIS WAITING PERIOD
UPON RESETS, IT IS NOT RECOMMENDED THAT YOU RESET YOUR GUARANTEED MINIMUM
INCOME BENEFIT IF THE REQUIRED BEGINNING DATE UNDER IRS REQUIRED MINIMUM
DISTRIBUTION PROVISIONS WOULD COMMENCE DURING THE 7 YEAR WAITING PERIOD.
SEE "REQUIRED MINIMUM DISTRIBUTION PROVISIONS AND PAYMENT OPTIONS" IN
SECTION 10 FOR ADDITIONAL INFORMATION ON IRS REQUIREMENTS.
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).
41
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
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
80/th/ birthday,
.. the 7/th/ 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). 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 the GMIB protected value after
subtracting 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 GMIB roll-up cap is reduced by the sum of all reductions described above.
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, 2006; 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, 2006 (in the first contract
year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the GMIB protected value is $251,038.10 (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 $251,038.10 to $241,038.10).
.. 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, 2006 (still within the first
contract year). Immediately before the withdrawal, the Contract Value is
$220,000 and the GMIB protected value is $241,941.95. 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
$241,941.95 to $239,441.95).
.. 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: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
.. The GMIB 200% cap is reduced by the sum of all reductions above ($490,000 -
$2,500 - $8,256.62, or $479,243.38).
.. 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, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. 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 $240,837.69 to $230,837.69).
.. The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,243.38 to $469,243.38).
.. The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
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 76/th/ 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
42
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 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 waiting a 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 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.
43
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
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).
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% (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
developments. 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 referenced how we determine annuity payments 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.
44
4: WHAT IS THE DEATH BENEFIT?
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. For
entity-owned contracts, we pay a death benefit upon the death of the annuitant.
CALCULATION OF THE DEATH BENEFIT
For contracts sold on or after May 1, 2003 or upon subsequent state approval:
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
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.
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 (i) if
you have chosen a Guaranteed Minimum Death Benefit (GMDB), the GMDB
protected value or (ii) if you have chosen the Highest Daily Value Death
Benefit, a death benefit equal to the highest daily value (computed as
detailed below in this section).
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
you may elect (i) the Guaranteed Minimum Death Benefit if you are age 85 or
younger when you purchase the contract or (ii) the Highest Daily Value Death
Benefit if you are 79 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 GMDB if you are 79 or younger when you purchase
the contract.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit 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. You cannot elect a
GMDB option if you choose the Highest Daily Value Death Benefit.
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% (SUBJECT
TO A 200% CAP FOR CONTRACTS SOLD PRIOR TO MAY 1, 2003, OR UPON SUBSEQUENT
STATE APPROVAL) starting on the date that each invested purchase payment is
made. The GMDB roll-up value (AND THE CAP FOR CONTRACTS SOLD PRIOR TO MAY 1,
2003, OR UPON SUBSEQUENT STATE APPROVAL) will increase by subsequent invested
purchase payments and reduce by the effect of withdrawals.
45
4: WHAT IS THE DEATH BENEFIT? continued
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 80/th/ birthday, or
.. the 5/th/ 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.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
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%. FOR ALL OTHER CONTRACTS,
withdrawals will reduce the GMDB protected value and the cap proportionally.
FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL,
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%
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 5/th/ 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 80/th/ birthday, or
.. the 5/th/ 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.
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
46
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.
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 Option 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 Option 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 Option may apply. 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.
HIGHEST DAILY VALUE DEATH BENEFIT
The Highest Daily Value Death Benefit (HDV) is a feature under which the death
benefit may be "stepped-up" on a daily basis to reflect increasing Contract
Value. HDV is currently being offered in those jurisdictions where we have
received regulatory approval, but is not being offered within the original
version of the Strategic Partners FlexElite contracts. Certain terms and
conditions may differ between jurisdictions once approved. The HDV is not
available if you elect the Guaranteed Minimum Death Benefit. Currently, HDV
can only be elected at the time you purchase your contract. Please note that
you may not terminate the HDV death benefit once elected. Moreover, because
this benefit may not be terminated once elected, you must, as detailed below,
keep your Contract Value allocated to certain Prudential Series Fund asset
allocation portfolios.
Under HDV, the amount of the benefit depends on whether the "target date" is
reached. The target date is reached upon the later of the contract anniversary
coinciding with or next following the elder owner's (or annuitant's, if entity
owned) 80/th/ birthday or five years after the contract date. Prior to the
target date, the death benefit amount is increased on any business day if the
Contract Value on that day exceeds the most recently determined death benefit
amount under this option. These possible daily adjustments cease on and after
the target date, and instead adjustments are made only for purchase payments
and withdrawals.
IF THE CONTRACT HAS ONE CONTRACT OWNER, the contract owner must be age 79 or
less at the time the HDV is elected. If the contract has joint owners, the
older owner must be age 79 or less. If there are joint owners, death of the
owner refers to the first to die of the joint owners. If the contract is owned
by an entity, the annuitant must be age 79 or less, and death of the contract
owner refers to the death of the annuitant.
Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit on or after December 5,
2005, must allocate Contract Value to one or more of the following asset
allocation portfolios of Advanced Series Trust: AST Capital Growth Asset
Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio, AST Advanced Strategies Portfolio, AST First Trust Balanced Target
Portfolio, AST First Trust Capital Appreciation Target Portfolio, AST UBS
Dynamic Alpha Portfolio, American Century Strategic Allocation Portfolio, or
AST T. Rowe Price Asset Allocation Portfolio. In general, you must allocate
your Contract Value in accordance with the then-available option(s) that we
may prescribe, in order to elect and maintain the Highest Daily Value Death
Benefit. If, subsequent to your election of the benefit, we change our
requirements for how Contract Value must be allocated under the benefit, that
new requirement will apply only to new elections of the benefit, and will not
compel you to re-allocate your Contract Value in accordance with our
newly-adopted requirements. All subsequent transfers and purchase payments
will be subject to the new investment limitations.
The HDV death benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Contract Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
-- the base death benefit; and
-- the HDV as of the contract owner's date of death.
47
4: WHAT IS THE DEATH BENEFIT? continued
If the Contract Owner Dies on or after the Death Benefit Target Date, the
Death Benefit equals the greater of:
-- the base death benefit; and
-- the HDV on the Death Benefit Target Date plus the sum of all purchase
payments less the sum of all proportional withdrawals since the Death
Benefit Target Date.
The amount determined by this calculation is increased by any purchase
payments received after the contract owner's date of death and decreased by
any proportional withdrawals since such date.
CALCULATION OF THE HIGHEST DAILY VALUE DEATH BENEFIT
Examples of Highest Daily Value Death Benefit Calculation. The following are
examples of how the HDV death benefit is calculated. Each example assumes an
initial purchase payment of $50,000. Each example assumes that there is one
contract owner who is age 70 on the contract date.
Example with Market Increase and Death Before Death Benefit Target Date
Assume that the contract owner's Contract Value has generally been increasing
due to positive market performance and that no withdrawals have been made. On
the date we receive due proof of death, the Contract Value is $75,000;
however, the Highest Daily Value was $90,000. Assume as well that the contract
owner has died before the Death Benefit Target Date. The death benefit is
equal to the greater of HDV or the base death benefit. The death benefit would
be the Highest Daily Value ($90,000) because it is greater than the amount
that would have been payable under the base death benefit ($75,000).
Example with Withdrawals
Assume that the Contract Value has been increasing due to positive market
performance and the contract owner made a withdrawal of $15,000 in contract
year 7 when the Contract Value was $75,000. On the date we receive due proof
of death, the Contract Value is $80,000; however, the Highest Daily Value
($90,000) was attained during the fifth contract year. Assume as well that the
contract owner has died before the Death Benefit Target Date. The Death
Benefit is equal to the greater of the Highest Daily Value (proportionally
reduced by the subsequent withdrawal) or the base death benefit.
Highest Daily Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Base Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The death benefit therefore is $80,000.
Example with Death after Death Benefit Target Date
Assume that the contract owner's Contract Value has generally been increasing
due to positive market performance and that no withdrawals had been made prior
to the Death Benefit Target Date. Further assume that the contract owner dies
after the Death Benefit Target Date, when the Contract Value is $75,000. The
Highest Daily Value on the Death Benefit Target Date was $80,000; however,
following the Death Benefit Target Date, the contract owner made a purchase
payment of $15,000 and later had taken a withdrawal of $5,000 when the
Contract Value was $70,000. The death benefit is equal to the greater of the
Highest Daily Value on the Death Benefit Target Date plus purchase payments
minus proportional withdrawals after the Death Benefit Target Date or the base
death benefit.
Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Base Death Benefit = max [$75,000, ($50,000 + $15,000) - [($50,000 + $15,000) * $5,000/$70,000]]
= max [$75,000, $60,357]
= $75,000
The death benefit therefore is $88,214.
48
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.
With respect to a death benefit paid before March 19, 2007, the death benefit
payout options were:
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 of the first-to-die of the owner or joint owner.
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.
During this 5-year period, we will continue to deduct from the death benefit
proceeds the charges and costs that were associated with the features and
benefits of the contract. Some of these features and benefits may not be
available to the beneficiary.
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 Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners FlexElite Contract?"
With respect to a death benefit paid on or after March 19, 2007, unless the
surviving spouse opts to continue the contract (or spousal continuance is
required under the terms of your contract), a beneficiary may, within 60 days
of providing proof of death, take the death benefit as follows:
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - CONTRACTS OWNED BY
INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED PLANS)
Except in the case of spousal continuance as described below, 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.
In the event of your death before the annuity date, the death benefit must be
distributed:
.. within five (5) years from the date of death; or
.. as a series of annuity payments not extending beyond the life expectancy of
the beneficiary or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death.
Unless you have made an election prior to death benefit proceeds becoming due,
a beneficiary can elect to receive the death benefit proceeds under the
Beneficiary Continuation Option as described below in the section entitled
"Beneficiary Continuation Option," or as a series of fixed annuity payments.
See the section entitled "What Kind of Payments Will I Receive During the
Income Phase?"
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - CONTRACTS HELD BY TAX-FAVORED PLANS
The Code provides for alternative death benefit payment options when a
contract is used as an IRA, 403(b) or other "qualified investment" that
requires minimum distributions. Upon your death under an IRA, 403(b) or other
"qualified investment", the designated beneficiary may generally elect to
continue the contract and receive Required Minimum Distributions under the
contract, instead of receiving the death benefit in a single payment. The
available payment options will depend on whether the you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the beneficiary is your surviving
spouse.
49
4: WHAT IS THE DEATH BENEFIT? continued
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by December 31st of the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated beneficiary (provided
such payments begin by December 31st of the year following the year of
death). However, if your surviving spouse is the beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31st of the year
following the year of death or December 31st of the year in which you would
have reached age 70 1/2, which ever is later. Additionally, 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.
.. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out within five years from the date of death. For contracts
where multiple beneficiaries have been named and at least one of the
beneficiaries does not qualify as a designated beneficiary and the account
has not been divided into separate accounts by December 31st of the year
following the year of death, such contract is deemed to have no designated
beneficiary.
.. If you die before a designated beneficiary is named and after the date
Required Minimum Distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31st of the
year following the year of death, such contract is deemed to have no
designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the Minimum Distribution rules, are
subject to tax. You may wish to consult a professional tax advisor for tax
advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
Beneficiary Continuation Option
Instead of receiving the death benefit in a single payment, or under an
annuity option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code and described above.
This "Beneficiary Continuation Option" is described below and is available for
an IRA, Roth IRA, SEP IRA, 403(b), or a non-qualified contract.
Under the Beneficiary Continuation Option:
.. The Owner's contract will be continued in the Owner's name, for the benefit
of the beneficiary.
.. The beneficiary will incur a Settlement Service Charge which is an annual
charge assessed on a daily basis against the average assets allocated to
the Sub-accounts. The charge is 1.00% per year.
.. The beneficiary will incur an annual maintenance fee equal to the lesser of
$30 or 2% of contract value if the contract value is less than $25,000 at
the time the fee is assessed. The fee will not apply if it is assessed 30
days prior to a surrender request.
.. The initial contract value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the beneficiary
if they had taken a lump sum distribution.
.. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
.. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers in
excess of 20 per year will incur a $10 transfer fee.
.. No fixed interest rate options will be offered.
.. No additional Purchase Payments can be applied to the contract.
.. The basic death benefit and any optional benefits elected by the Owner will
no longer apply to the beneficiary.
.. The beneficiary can request a withdrawal of all or a portion of the
contract value at any time, unless the beneficiary is required to take
pre-determined withdrawal amounts.
.. Withdrawals are not subject to a withdrawal charge.
.. Upon the death of the beneficiary, any remaining contract value will be
paid in a lump sum to the person(s) named by the beneficiary, unless the
beneficiary named a successor who may continue receiving payments.
Currently only investment options corresponding to Portfolios of the Advanced
Series Trust, and the Prudential Money Market Portfolio, are available under
the Beneficiary Continuation Option.
50
In addition to the materials referenced above, the Beneficiary will be
provided with a prospectus and a settlement agreement describing the
Beneficiary Continuation Option. We may pay compensation to the broker-dealer
of record on the contract based on amounts held in the Beneficiary
Continuation Option. Please contact us for additional information on the
availability, restrictions and limitations that will apply to a beneficiary
under the Beneficiary Continuation Option.
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. You may, if you wish, select both the
Earnings Appreciator Benefit and the Highest Daily Value Death Benefit.
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 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
51
4: WHAT IS THE DEATH BENEFIT? continued
.. the date you annuitize the contract.
Upon termination of the Earnings Appreciator Benefit, we cease imposing the
associated charge.
SPOUSAL CONTINUANCE BENEFIT
This benefit is available if, on the date we receive proof of the owner's
death (or annuitant's death, for custodial contracts) 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) 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 or (3) for contracts sold on or after May 1, 2003 or upon
subsequent state approval, (i) the contract is held by a custodial account
established to hold retirement assets for the benefit of the natural person
annuitant pursuant to the provisions of Section 408(a) of the Internal Revenue
Code (or any successor Code section thereto) ("Custodial Account") and
(ii) the custodian of the account has elected to continue the contract, and
designate the surviving spouse as annuitant. Continuing the contract in the
latter scenario will result in the contract no longer qualifying for tax
deferral under the Internal Revenue Code. However, such tax deferral should
result from the ownership of the contract by the Custodial Account. Spousal
continuance may also be available where the contract is owned by certain other
types of entity-owners. Please consult your tax or legal adviser.
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 (or the annuitant's death,
in the case of a custodially-owned contract referenced above). Assuming the
above conditions are present, the surviving spouse (or custodian, for the
custodially-owned contracts referenced above) can elect the Spousal
Continuance Benefit, but must do so no later than 60 days after furnishing
proof of 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 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. However, we will continue to impose withdrawal
charges on purchase payments made after activation of this 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 HIGHEST DAILY VALUE DEATH BENEFIT, we will adjust the
Contract Value to equal the greater of:
.. the Contract Value, or
.. the Highest Daily Value,
52
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, the GMDB step-up, or HDV death
benefit (as applicable), 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 or Highest Daily
Value 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 ONE OF THE LIFETIME WITHDRAWAL BENEFITS, on the owner's death
the Benefit will end. However, if the owner's surviving spouse would be
eligible to acquire the Benefit as if he/she were a new purchaser, then the
surviving spouse may continue the Benefit under the Spousal Continuance
Benefit.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death (or
first-to-die, in the case of joint owners), the Income Appreciator Benefit
will end unless the contract is continued by the deceased 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
95/th/ birthday), or (c) the contract anniversary coinciding with or next
following the annuitants' surviving spouse's 95/th/ 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.
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS?
LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)/SM/
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an
initial principal value (called the "Protected Withdrawal Value"), regardless
of the impact of market performance on your Contract Value, subject to our
rules regarding the timing and amount of withdrawals. There are two options -
one is designed to provide an annual withdrawal amount for life (the "Life
Income Benefit") and the other is designed to provide a greater annual
withdrawal amount (than the first option) as long as there is Protected
Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If
there is no Protected Withdrawal Value, the Withdrawal Benefit will be zero.
You do not choose between these two options; each option will continue to be
available as long as the annuity has a Contract Value and Lifetime Five is in
effect. Certain benefits under Lifetime Five may remain in effect even if the
Contract Value is zero. The option may be appropriate if you intend to make
periodic withdrawals from your contract and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals - the guarantees are not lost if you withdraw
less than the maximum allowable amount each year. Lifetime Five is only being
offered in those jurisdictions where we
53
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
have received regulatory approval and will be offered subsequently in other
jurisdictions when we receive regulatory approval in those jurisdictions.
Certain terms and conditions may differ between jurisdictions once approved.
Lifetime Five is subject to certain restrictions described below.
.. Currently, Lifetime Five can only be elected once each contract year, and
only where the annuitant and the contract owner are the same person or, if
the contract owner is an entity, where there is only one annuitant. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income
Benefit.
.. The annuitant must be at least 45 years old when Lifetime Five is elected.
.. Lifetime Five may not be elected if you have elected any other optional
living benefit.
.. Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit on or after December 5,
2005, must allocate Contract Value to one or more of the following asset
allocation portfolios of the Advanced Series Trust: AST Capital Growth
Asset Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio, AST Advanced Strategies Portfolio, AST First Trust Balanced
Target Portfolio, AST First Trust Capital Appreciation Target Portfolio,
AST T. Rowe Price Asset Allocation Portfolio, AST UBS Dynamic Alpha, or AST
American Century Strategic Allocation. As specified in this paragraph, you
generally must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and
maintain Lifetime Five. If, subsequent to your election of the benefit, we
change our requirements for how Contract Value must be allocated under the
benefit, that new requirement will apply only to new elections of the
benefit, and will not compel you to re-allocate your Contract Value in
accordance with our newly-adopted requirements. All subsequent transfers
and purchase payments will be subject to the new investment limitations.
Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your contract following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greatest of:
(A)the Contract Value on the date you elect Lifetime Five, plus any additional
Purchase Payments, each growing at 5% per year from the date of your
election of the program, or application of the Purchase Payment to your
contract, as applicable, until the date of your first withdrawal or the
10/th/ anniversary of the benefit effective date, if earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments prior to the first withdrawal or the 10/th/ anniversary
of the benefit effective date, if earlier.
With respect to (A) and (C) above, after the 10/th/ anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments.
.. If you elect Lifetime Five at the time you purchase your contract, the
Contract Value will be your initial purchase payment.
.. For existing contract owners who are electing the Lifetime Five Benefit,
the Contract Value on the date of the contract owner's election of Lifetime
Five will be used to determine the initial Protected Withdrawal Value.
.. If you make additional purchase payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional purchase payment.
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Contract Value is greater than the Protected
Withdrawal Value.
If you elected Lifetime Five on or after March 20, 2006:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
1/st/ anniversary of the first withdrawal under Lifetime Five.
.. the Protected Withdrawal Value can be stepped up again on or after the
1/st/ anniversary of the preceding step-up.
If you elected Lifetime Five prior to March 20, 2006 and that original
election remains in effect:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
5/th/ anniversary of the first withdrawal under Lifetime Five.
.. the Protected Withdrawal Value can be stepped up again on or after the
5/th/ anniversary of the preceding step-up.
54
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value, and on the date you elect to
step-up, the charges under Lifetime Five have changed for new purchasers, you
may be subject to the new charge at the time of step-up. Upon election of the
step-up, we increase the Protected Withdrawal Value to be equal to the then
current Contract Value. For example, assume your initial Protected Withdrawal
Value was $100,000 and you have made cumulative withdrawals of $40,000,
reducing the Protected Withdrawal Value to $60,000. On the date you are
eligible to step-up the Protected Withdrawal Value, your Contract Value is
equal to $75,000. You could elect to step-up the Protected Withdrawal Value to
$75,000 on the date you are eligible. If your current Annual Income Amount and
Annual Withdrawal Amount are less than they would be if we did not reflect the
step-up in Protected Withdrawal Value, then we will increase these amounts to
reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected Lifetime Five on or after March 20, 2006 and have also elected
the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1/st/ contract
anniversary that is at least one year after the later of (1) the date of
the first withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by any amount.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive contract anniversary until a
step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1/st/ contract anniversary that is at least one year after the most recent
step-up.
If you elected Lifetime Five prior to March 20, 2006 and have also elected the
Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the contract anniversary
that is at least five years after the later of (1) the date of the first
withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by 5% or more.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive contract anniversary
until a step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
contract anniversary that is at least 5 years after the most recent step-up.
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected
Withdrawal Value and on the greater of a "dollar-for-dollar" basis or a pro
rata basis for withdrawals in a contract year in excess of that amount until
the Protected Withdrawal Value is reduced to zero. At that point, the Annual
Withdrawal Amount will be zero until such time (if any) as the contract
reflects a Protected Withdrawal Value (for example, due to a step-up or
additional purchase payments being made into the contract).
Annual Income Amount Under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will
not reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount (Excess
Income), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Income to the Contract Value immediately prior to such withdrawal
(see examples of this calculation below). Reductions include the actual amount
of the withdrawal, including any withdrawal charges that may apply. A
withdrawal can be considered Excess Income under the Life Income Benefit even
though it does not exceed the Annual Withdrawal Amount under the Withdrawal
Benefit. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Contract Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional purchase payments. The amount of the increase is equal to
5% of any additional purchase payments. Any increase will be added to your
Annual Income Amount beginning on the day that the step-up is effective or the
purchase payment is made. A determination of whether you have exceeded your
Annual Income Amount is made at the time of each withdrawal; therefore, a
subsequent increase in the Annual Income Amount will not offset the effect of
a withdrawal that exceeded the Annual Income Amount at the time the withdrawal
was made.
55
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Annual Withdrawal Amount Under the Withdrawal Benefit
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
(Excess Withdrawal), your Annual Withdrawal Amount will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Withdrawal to the Contract Value immediately prior to such
withdrawal (see the examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charges that may
apply. When you elect a step-up, your Annual Withdrawal Amount increases to
equal 7% of your Contract Value after the step-up if such amount is greater
than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 7% of any additional purchase payments. A determination of whether
you have exceeded your Annual Withdrawal Amount is made at the time of each
withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to
withdraw all or any portion of the Annual Withdrawal Amount or Annual Income
Amount in each contract year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent contract years.
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may extend the period of time until
the remaining Protected Withdrawal Value is reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and
Annual Income Amount assume: 1.) the contract date and the effective date of
Lifetime Five are February 1, 2005; 2.) an initial purchase payment of
$250,000; 3.) the Contract Value on February 1, 2006 is equal to $265,000; and
4.) the first withdrawal occurs on March 1, 2006 when the Contract Value is
equal to $263,000. The values set forth here are purely hypothetical, and do
not reflect the charge for Lifetime Five.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365) = $263,484
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
Example 1. Dollar-for-Dollar Reduction
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
.. Annual Withdrawal Amount for future contract years remains at $18,550
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
.. Annual Income Amount for future contract years remains at $13,250
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
Example 2. Dollar-for-Dollar and Proportional Reductions
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
. Annual Withdrawal Amount for future contract years remains at $18,550
. Remaining Annual Income Amount for current contract year = $0
56
. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
. Annual Income Amount for future contract years = $13,250--$93 = $13,157
. Protected Withdrawal Value is reduced by $15,000 from $265,000 to
$250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current contract year = $0
. Excess of withdrawal over the Annual Withdrawal Amount ($25,000 -
$18,550 = $6,450) reduces Annual Withdrawal Amount for future contract
years.
. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Contract Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
. Annual Withdrawal Amount for future contract years = $18,550 - $489 =
$18,061
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623
. Annual Income Amount for future contract years = $13,250 - $623 = $12,627
. Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
. Proportional reduction = Excess Withdrawal/Contract Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503
. Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
Example 3. Step-Up of the Protected Withdrawal Value
If the Annual Income Amount ($13,250) is withdrawn each year starting on
March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on
February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a
step-up is elected on February 1, 2012, and the Account Value on February 1,
2012 is $280,000, then the following values would result:
.. Protected Withdrawal Value = Account Value on February 1, 2012 = $280,000
.. Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value
is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is
increased to $14,000.
.. Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value.
Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected
Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual
Withdrawal Amount is increased to $19,600.
.. Because the Issue Date and Effective Date of Lifetime Five for this example
is prior to March 20, 2006, if the step-up request on February 1, 2012 was
due to the election of the auto step-up feature, we would first check to
see if an auto step-up should occur by checking to see if 5% of the Account
Value exceeds the Annual Income Amount by 5% or more. 5% of the Account
Value is equal to 5% of $280,000, which is $14,000. 5% of the Annual Income
Amount ($13,250) is $662.50, which added to the Annual Income Amount is
$13,912.50. Since 5% of the Account Value is greater than $13,912.50, the
step-up would still occur in this scenario, and all of the values would be
increased as indicated above. Had the Issue Date and Effective Date of the
Lifetime Five benefit been on or after March 20, 2006, the step-up would
still occur because 5% of the Account Value is greater than the Annual
Income Amount.
Benefits Under Lifetime Five
.. If your Contract Value is equal to zero, and the cumulative withdrawals in
the current contract year are greater than the Annual Withdrawal Amount,
Lifetime Five will terminate. To the extent that your Contract Value was
reduced to zero as a result of cumulative withdrawals that are equal to or
less than the Annual Income Amount and amounts are still payable under both
the Life Income Benefit and the Withdrawal Benefit, you will be given the
choice of receiving the payments under the Life Income Benefit or under the
Withdrawal Benefit. Once you make this election we will make an additional
payment for that contract year equal to either the remaining Annual Income
Amount or Annual Withdrawal Amount for the contract year, if any, depending
on the option you choose. In subsequent contract years we make payments
that equal either the Annual Income Amount or the Annual Withdrawal Amount.
You will not be able to change the option after your election and no
further purchase payments will be accepted under your contract. If you do
not make an election, we will pay you annually under the Life Income
Benefit. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount but less than or equal to the Annual Withdrawal Amount and
amounts are still payable under the Withdrawal Benefit, you will receive
the payments under the Withdrawal Benefit. In the year of a withdrawal that
reduced your Contract Value to zero, we will make an additional payment to
equal any remaining Annual
57
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Withdrawal Amount and make payments equal to the Annual Withdrawal Amount in
each subsequent year (until the Protected Withdrawal Value is depleted).
Once your Contract Value equals zero no further purchase payments will be
accepted under your contract.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
1. apply your Contract Value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make annuity
payments each year equal to the Annual Income Amount. We make such annuity
payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay out any
remaining Protected Withdrawal Value as annuity payments. Each year such
annuity payments will equal the Annual Withdrawal Amount or the remaining
Protected Withdrawal Value if less. We make such annuity payments until the
earlier of the annuitant's death or the date the Protected Withdrawal Value
is depleted.
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your contract. The amount that
will be applied to provide such annuity payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed annuity
rates then currently available or the single life fixed annuity rates
guaranteed in your contract; and
2. the Contract Value.
.. If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
Other Important Considerations
.. Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the Contract Value or surrender
value, but any withdrawal will decrease the Contract Value by the amount of
the withdrawal (plus any applicable withdrawal charges). If you surrender
your contract, you will receive the current Contract Value, not the
Protected Withdrawal Value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides
a guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Protected Withdrawal Value or Annual
Income Amount in the form of periodic benefit payments.
Election of Lifetime Five
WITH RESPECT TO THE SUBSEQUENT VERSION OF STRATEGIC PARTNERS FLEXELITE SOLD ON
OR AFTER MAY 1, 2003, OR UPON SUBSEQUENT STATE APPROVAL, Lifetime Five can be
elected at the time you purchase your contract, or after the contract date.
WITH RESPECT TO THE ORIGINAL VERSION OF STRATEGIC PARTNERS FLEXELITE, Lifetime
Five can be elected only after the contract date. Elections of Lifetime Five
are subject to our eligibility rules and restrictions. The contract owner's
Contract Value as of the date of election will be used as the basis to
calculate the initial Protected Withdrawal Value, the initial Annual
Withdrawal Amount, and the initial Annual Income Amount.
Termination of Lifetime Five
Lifetime Five terminates automatically when your Protected Withdrawal Value
and Annual Income Amount reach zero. You may terminate Lifetime Five at any
time by notifying us. If you terminate Lifetime Five, any guarantee provided
by the benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
.. upon your surrender of the contract,
.. upon the death of the annuitant (but your surviving spouse may elect a new
Lifetime Five benefit if your spouse elects the spousal continuance option
and your spouse would then be eligible to elect the benefit as if he/she
were a new purchaser),
.. upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
.. upon your election to begin receiving annuity payments.
58
We cease imposing the charge for Lifetime Five upon the earliest to occur of
(i) your election to terminate the benefit, (ii) our receipt of appropriate
proof of the death of the owner (or annuitant, for entity owned contracts),
(iii) the annuity date, (iv) automatic termination of the benefit due to an
impermissible change of owner or annuitant, or (v) a withdrawal that causes
the benefit to terminate.
While you may terminate Lifetime Five at any time, we may not terminate the
benefit other than in the circumstances listed above. However, we may stop
offering Lifetime Five for new elections or re-elections at any time in the
future.
Currently, if you terminate Lifetime Five, you generally will only be
permitted to re-elect the benefit or elect another lifetime withdrawal benefit
on any anniversary of the contract date that is at least 90 calendar days from
the date the benefit was last terminated.
If you elected Lifetime Five at the time you purchased your contract and prior
to March 20, 2006, and you terminate Lifetime Five, there will be no waiting
period before you can re-elect the benefit or elect Spousal Lifetime Five.
However, once you choose to re-elect/elect, the waiting period described above
will apply to subsequent re-elections. If you elected Lifetime Five after the
time you purchased your contract, but prior to March 20, 2006, and you
terminate Lifetime Five, you must wait until the contract anniversary
following your cancellation before you can re-elect the benefit or elect
Spousal Lifetime Five. Once you choose to re-elect/elect, the waiting period
described above will apply to subsequent re-elections. We reserve the right to
limit the re-election/election frequency in the future. Before making any such
change to the re-election/ election frequency, we will provide prior notice to
contract owners who have an effective Lifetime Five Income Benefit.
Additional Tax Considerations
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. Roth IRAs are not subject to these rules during
the owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as required minimum distribution provisions under the tax law.
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT (SPOUSAL LIFETIME FIVE)/SM/
The Spousal Lifetime Five Income Benefit (Spousal Lifetime Five) described
below is only being offered in those jurisdictions where we have received
regulatory approval and will be offered subsequently in other jurisdictions
when we receive regulatory approval in those jurisdictions. Certain terms and
conditions may differ between jurisdictions once approved. Currently, if you
elect Spousal Lifetime Five and subsequently terminate the benefit, there may
be a restriction on your ability to re-elect Spousal Lifetime Five or elect
another lifetime withdrawal benefit. We reserve the right to further limit the
election frequency in the future. Before making any such change to the
election frequency, we will provide prior notice to contract owners who have
an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must
be elected based on two Designated Lives, as described below. Each Designated
Life must be at least 55 years old when the benefit is elected. Spousal
Lifetime Five is not available if you elect any other optional living or
optional death benefit. As long as your Spousal Lifetime Five Income Benefit
is in effect, you must allocate your Contract Value in accordance with the
then permitted and available option(s). Owners electing this benefit must
allocate contract value to one or more of the following asset allocation
portfolios of the Advanced Series Trust (we reserve the right to change these
required portfolios on a prospective basis):
AST Capital Growth Asset Allocation Portfolio, AST Balanced Asset Allocation
Portfolio, AST Conservative Asset Allocation Portfolio, AST Preservation Asset
Allocation Portfolio, AST Advanced Strategies Portfolio, AST First Trust
Balanced Target Portfolio, AST First Trust Capital Appreciation Target
Portfolio, AST T. Rowe Price Asset Allocation Portfolio, AST UBS Dynamic Alpha
Strategy, or AST American Century Strategic Allocation.
We offer a benefit that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount (Spousal
Life Income Benefit) equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our rules regarding the timing and amount of
withdrawals. The Spousal Life Income Benefit may remain in effect even if the
Contract Value is zero. Spousal Lifetime Five may be appropriate if you intend
to make periodic withdrawals from your annuity, wish to ensure that market
performance will not affect your ability to receive annual payments and you
wish either spouse to be able to continue the Spousal Life Income Benefit
after the death of the first. You are not required to make withdrawals as part
of the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit.
59
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under your contract following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greatest of:
(A)the Contract Value on the date you elect Spousal Lifetime Five, plus any
additional Purchase Payments, each growing at 5% per year from the date of
your election of the program, or application of the Purchase Payment to
your contract, as applicable, until the date of your first withdrawal or
the 10/th/ anniversary of the benefit effective date, if earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments prior to the first withdrawal or the 10/th/ anniversary
of the benefit effective date, if earlier.
With respect to (A) and (C) above, after the 10/th/ anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments.
.. If you elect Spousal Lifetime Five at the time you purchase your contract,
the Contract Value will be your initial purchase payment.
.. For existing contract owners who are electing the Spousal Lifetime Five
Benefit, the Contract Value on the date of your election of Spousal
Lifetime Five will be used to determine the initial Protected Withdrawal
Value.
Annual Income Amount Under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Spousal Lifetime Five, if your cumulative withdrawals
in a contract year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent contract years, but
any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of
the withdrawal, including any withdrawal charges that may apply.
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Contract Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1/st/ anniversary of the first withdrawal under Spousal Lifetime Five. The
Annual Income Amount can be stepped up again on or after the 1/st/ anniversary
of the preceding step-up. If you elect to step-up the Annual Income Amount,
and on the date you elect to step-up, the charges under Spousal Lifetime Five
have changed for new purchasers, you may be subject to the new charge at the
time of such step-up. When you elect a step-up, your Annual Income Amount
increases to equal 5% of your Contract Value after the step-up. Your Annual
Income Amount also increases if you make additional Purchase Payments. The
amount of the increase is equal to 5% of any additional Purchase Payments. Any
increase will be added to your Annual Income Amount beginning on the day that
the step-up is effective or the Purchase Payment is made. A determination of
whether you have exceeded your Annual Income Amount is made at the time of
each withdrawal; therefore a subsequent increase in the Annual Income Amount
will not offset the effect of a withdrawal that exceeded the Annual Income
Amount at the time the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1/st/ contract anniversary that is
at least one year after the later of (1) the date of the first withdrawal
under Spousal Lifetime Five or (2) the most recent step-up. At this time, your
Annual Income Amount will be stepped-up if 5% of your Contract Value is
greater than the Annual Income Amount by any amount. If 5% of the Contract
Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive contract anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1/st/ contract anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Spousal Lifetime Five does not affect your ability to make withdrawals under
your contract or limit your ability to request withdrawals that exceed the
Annual Income Amount. Under Spousal Lifetime Five, if your cumulative
withdrawals in a contract year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent contract
years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount
under Spousal Life Income Benefit in any contract year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent contract years.
60
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the contract date and the
effective date of Spousal Lifetime Five are February 1, 2005; 2.) an initial
purchase payment of $250,000; 3.) the Contract Value on February 1, 2006 is
equal to $265,000; and 4.) the first withdrawal occurs on March 1, 2006 when
the Contract Value is equal to $263,000. The values set forth here are purely
hypothetical, and do not reflect the charge for the Spousal Lifetime Income
Benefit.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
Example 1. Dollar-for-Dollar Reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250 Annual Income Amount for future contract years remains at
$13,250
Example 2. Dollar-for-Dollar and Proportional Reductions
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
.. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
.. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
Example 3. Step-up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Contract Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
Benefits Under Spousal Lifetime Five
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount and amounts are still payable under the Spousal Life Income Benefit,
we will make an additional payment for that contract year equal to the
remaining Annual Income Amount for the contract year, if any. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described above. No
further purchase payments will be accepted under your contract. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life as
long as the Designated Lives were spouses at the time of the first death.
To the extent that cumulative withdrawals in the current contract year that
reduced your Contract Value to zero are more than the Annual Income Amount,
the Spousal Life Income Benefit terminates and no additional payments will
be made.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
1. apply your Contract Value to any annuity option available; or
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your contract. The
amount that will be applied to provide such annuity payments will be the
greater of:
1. the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates guaranteed in your
contract; and
2. the Contract Value.
61
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
Other Important Considerations
.. Withdrawals under Spousal Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Spousal Lifetime Five is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the
contract. Spousal Lifetime Five does not directly affect the Contract Value
or surrender value, but any withdrawal will decrease the Contract Value by
the amount of the withdrawal (plus any applicable withdrawal charges). If
you surrender your contract, you will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Spousal Lifetime Five. Spousal
Lifetime Five provides a guarantee that if your Contract Value declines due
to market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. In general, you must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and
maintain Spousal Lifetime Five. If, subsequent to your election of the
benefit, we change our requirements for how Contract Value must be
allocated under the benefit, that new requirement will apply only to new
elections of the benefit, and will not compel you to re-allocate your
Contract Value in accordance with our newly-adopted requirements. All
subsequent transfers and purchase payments will be subject to the new
investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for Spousal Lifetime Five even when the benefit is only providing a
guarantee of income based on one life with no survivorship.
.. In order for the surviving Designated Life to continue Spousal Lifetime
Five upon the death of an owner, the Designated Life must elect to assume
ownership of the contract under the spousal continuation benefit.
Election of and Designations of Spousal Lifetime
Five Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the
Designated Lives to die. Currently, the benefit may only be elected where the
contract owner, annuitant and beneficiary designations are as follows:
.. One contract owner, where the annuitant and the contract owner are the same
person and the beneficiary is the contract owner's spouse. The contract
owner/annuitant and the beneficiary each must be at least 55 years old at
the time of election; or
.. Co-contract owners, where the contract owners are each other's spouses. The
beneficiary designation must be the surviving spouse. The first named
contract owner must be the annuitant. Both contract owners must each be 55
years old at the time of election.
.. One contract owner, where the owner is a custodial account established to
hold retirement assets for the benefit of the annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the annuitant is the co-annuitant.
Both the annuitant and co-annuitant must each be at least 55 years old at
the time of election. When the contract is set up in this manner, in order
for Spousal Lifetime Five to be continued after the death of the first
designated life (the annuitant), the custodian must have elected to
continue the contract, with the second designated life (the co-annuitant)
named as annuitant.
No ownership changes or annuitant changes will be permitted once this benefit
is elected. However, if the contract is co-owned, the contract owner that is
not the annuitant may be removed without affecting the benefit.
Spousal Lifetime Five can be elected at the time that you purchase your
contract. We also offer existing contract owners the option to elect Spousal
Lifetime Five after the contract date of their contract, subject to our
eligibility rules and restrictions. Your Contract Value as of the date of
election will be used as a basis to calculate the initial Protected Withdrawal
Value and the Annual Income Amount.
Currently, if you terminate Spousal Lifetime Five, you may only be permitted
to re-elect the benefit or elect another lifetime withdrawal benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Spousal Lifetime Five Income
Benefit.
Termination of Spousal Lifetime Five
Spousal Lifetime Five terminates automatically when your Annual Income Amount
equals zero. You may terminate Spousal Lifetime Five at any time by notifying
us. If you terminate Spousal Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. We
reserve the right to further limit the frequency election in the future.
Spousal Lifetime Five terminates upon your surrender of the contract, upon the
first Designated Life to die if the contract is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments.
62
The charge for Spousal Lifetime Five will no longer be deducted from your
Contract Value upon termination of the benefit.
Additional Tax Considerations
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your contract beginning
after age 70 1/2. Roth IRAs are not subject to these rules during the contract
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distributions under the tax law.
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HD5)/SM/
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Highest Daily Lifetime Five is offered as
an alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you
elect Highest Daily Lifetime Five and subsequently terminate the benefit, you
will not be able to re-elect Highest Daily Lifetime Five, and may have a
waiting period until you can elect another lifetime withdrawal benefit.
Specifically, you may be permitted to elect Lifetime Five or Spousal Lifetime
Five only on an anniversary of the contract date that is at least 90 calendar
days from the date that Highest Daily Lifetime Five was terminated. We reserve
the right to further limit the election frequency in the future. The income
benefit under Highest Daily Lifetime Five currently is based on a single
"designated life" who is at least 55 years old on the date that the benefit is
acquired. The Highest Daily Lifetime Five Benefit is not available if you
elect any other optional living benefit, although you may elect any optional
death benefit (other than the Highest Daily Value death benefit). As long as
your Highest Daily Lifetime Five Benefit is in effect, you must allocate your
Contract Value in accordance with the then-permitted and available investment
option(s) with this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Total Annual Income
Amount") equal to a percentage of an initial principal value (the "Total
Protected Withdrawal Value") regardless of the impact of market performance on
the Contract Value, subject to our program rules regarding the timing and
amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your Contract, and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the program - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the benefit. We discuss Highest Daily Lifetime Five in
greater detail immediately below. In addition, please see the Glossary section
of this prospectus for definitions of some of the key terms used with this
benefit. As discussed below, we require that you participate in our asset
transfer program in order to participate in Highest Daily Lifetime Five, and
in the Appendices to this prospectus, we set forth the formula under which we
make those asset transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
Contract Value. Because each of the Total Protected Withdrawal Value and Total
Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Total Annual Income Amount remains. You are guaranteed to be able
to withdraw the Total Annual Income Amount for the rest of your life, provided
that you have not made "excess withdrawals." Excess withdrawals, as discussed
below, will reduce your Total Annual Income Amount. Thus, you could experience
a scenario in which your Contract Value was zero, and, due to your excess
withdrawals, your Total Annual Income Amount also was reduced to zero. In that
scenario, no further amount would be payable under Highest Daily Lifetime Five.
Key Feature - Total Protected Withdrawal Value
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Contract Value on the
date that you elect Highest Daily Lifetime Five. On each business day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the benefit, we recalculate the Protected Withdrawal
Value. Specifically, on each such business day (the "Current Business Day"),
the Protected Withdrawal Value is equal to the greater of:
.. the Protected Withdrawal Value for the immediately preceding business day
(the "Prior Business Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Business Day and the
Current Business Day (i.e., one day for successive business days , but more
than one calendar day for business days that are separated by weekends
and/or holidays), plus the amount of any Purchase Payment (including any
associated credit) made on the Current Business Day; and
.. the Contract Value.
63
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Contract Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take
a withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If no such withdrawal is taken, then on or after
the Tenth Anniversary up until the date of the first withdrawal, the Enhanced
Protected Withdrawal Value is equal to the sum of:
(a)200% of the Contract Value on the date you elected Highest Daily Lifetime
Five;
(b)200% of all Purchase Payments made during the one-year period after the
date you elected Highest Daily Lifetime Five; and
(c)100% of all Purchase Payments made more than one year after the date you
elected Highest Daily Lifetime Five, but prior to the date of your first
withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments will increase the Total Annual Income
Amount, while "excess" withdrawals (as described below) may decrease the Total
Annual Income Amount.
Key Feature - Total Annual Income Amount under the Highest Daily Lifetime Five
Benefit
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value. For purposes of the asset transfer formula described below,
we also calculate a Highest Daily Annual Income Amount, which is initially
equal to 5% of the Protected Withdrawal Value. Under the Highest Daily
Lifetime Five Benefit, if your cumulative withdrawals in a Contract Year are
less than or equal to the Total Annual Income Amount, they will not reduce
your Total Annual Income Amount in subsequent Contract Years, but any such
withdrawals will reduce the Total Annual Income Amount on a dollar-for-dollar
basis in that Contract Year. If your cumulative withdrawals are in excess of
the Total Annual Income Amount ("Excess Income"), your Total Annual Income
Amount in subsequent years will be reduced (except with regard to required
minimum distributions) by the result of the ratio of the Excess Income to the
Contract Value immediately prior to such withdrawal (see examples of this
calculation below). Reductions include the actual amount of the withdrawal,
including any withdrawal charge that may apply. A Purchase Payment that you
make will increase the then-existing Total Annual Income Amount and Highest
Daily Annual Income Amount by an amount equal to 5% of the Purchase Payment.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of this feature starting with the
anniversary of the Contract Date (the "Contract Anniversary") immediately
after your first withdrawal under the benefit. Specifically, upon the first
such Contract Anniversary, we identify the Contract Value on the business days
corresponding to the end of each quarter that (i) is based on your Contract
Year, rather than a calendar year; (ii) is subsequent to the first withdrawal;
and (iii) falls within the immediately preceding Contract Year. If the end of
any such quarter falls on a holiday or a weekend, we use the next business
day. We multiply each of those quarterly Contract Values by 5%, adjust each
such quarterly value for subsequent withdrawals and Purchase Payments, and
then select the highest of those values. If the highest of those values
exceeds the existing Total Annual Income Amount, we replace the existing
amount with the new, higher amount. Otherwise, we leave the existing Total
Annual Income Amount intact. In later years, (i.e., after the first Contract
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Contract Anniversary, by performing a similar
examination of the Contract Values on the end of the four immediately
preceding quarters. If, on the date that we implement a Highest Quarterly Auto
Step-Up to your Total Annual Income Amount, the charge for Highest Daily
Lifetime Five has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime Five upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your contract, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in a Contract Year are less than or equal to
the Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Contract Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Contract Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Contract Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Contract Years.
64
Examples of dollar-for-dollar and proportional reductions and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Five benefit or any other fees and charges. Assume the following for
all three examples:
.. The Contract Date is December 1, 2006
.. The Highest Daily Lifetime Five benefit is elected on March 5, 2007.
Dollar-for-Dollar Reductions
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Contract on this date, the remaining Total Annual Income
Amount for that Contract Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Total
Annual Income Amount - $6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Contract Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Contract Years on a
proportional basis based on the ratio of the excess withdrawal to the Contract
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Contract Year, each would result in another
proportional reduction to the Total Annual Income Amount).
Here is the calculation:
Contract value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Total Annual Income Amount for future Contract Years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Total Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal
(or last Contract Anniversary in subsequent years), adjusted for excess
withdrawals and additional Purchase Payments, is higher than the Total Annual
Income Amount, adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Total Annual Income Amount for this
Contract Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Contract
Year, the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Contract Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the
June 1 value is being adjusted for excess withdrawals as the September 1 and
December 1 Business Days occur after the excess withdrawal on August 6.
Highest Quarterly Value
(adjusted with Adjusted Total Annual
withdrawal and Purchase Income Amount (5% of the
Date* Contract Value Payments)** Highest Quarterly Value)
- ----- -------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $110,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter - March
1, June 1, September 1, and December 1. In this example, we do not use the
March 1 date as the first withdrawal took place after March 1. The Contract
Anniversary Date of December 1 is considered the fourth and final quarterly
valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Total Annual Income Amount of
$5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Contract Year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Contract Value on September 1. Since the June 1 adjusted
Total Annual Income Amount of
65
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
$5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to carry
$5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Contract Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Total Annual
Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Contract Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
Benefits Under the Highest Daily Lifetime Five Program
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual
Income Amount and amounts are still payable under Highest Daily Lifetime
Five, we will make an additional payment, if any, for that Contract Year
equal to the remaining Total Annual Income Amount for the Contract Year.
Thus, in that scenario, the remaining Total Annual Income Amount would be
payable even though your Contract Value was reduced to zero. In subsequent
Contract Years we make payments that equal the Total Annual Income Amount
as described in this section. We will make payments until the death of the
single designated life. To the extent that cumulative withdrawals in the
current Contract Year that reduced your Contract Value to zero are more
than the Total Annual Income Amount, the Highest Daily Lifetime Five
benefit terminates, and no additional payments will be made.
.. If Annuity payments are to begin under the terms of your Contract, or if
you decide to begin receiving annuity payments and there is a Total Annual
Income Amount due in subsequent Contract Years, you can elect one of the
following two options:
(1)apply your Contract Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Total Annual Income Amount.
We will make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory contract payments are to begin,
we will make annual contract payments in the form of a single life fixed
contract with ten payments certain, by applying the greater of the contract
rates then currently available or the contract rates guaranteed in your
Contract. The amount that will be applied to provide such annuity payments
will be the greater of:
(1)the present value of the future Total Annual Income Amount payments. Such
present value will be calculated using the greater of the single life fixed
contract rates then currently available or the single life fixed contract
rates guaranteed in your Contract; and
(2)the Contract Value.
.. If no withdrawal was ever taken, we will calculate the Total Annual Income
Amount as if you made your first withdrawal on the date the contract
payments are to begin.
.. Please note that payments that we make under this benefit after the
contract anniversary coinciding with or next following the annuitant's
95/th/ birthday will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Five Benefit are subject to
all of the terms and conditions of the Contract, including any withdrawal
charge.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Contract. The Highest Daily Lifetime Five Benefit does not
directly affect the Contract Value or surrender value, but any withdrawal
will decrease the Contract Value by the amount of the withdrawal (plus any
applicable withdrawal charge). If you surrender your Contract you will
receive the current surrender value.
.. You can make withdrawals from your Contract while your Contract Value is
greater than zero without purchasing the Highest Daily Lifetime Five
Benefit. The Highest Daily Lifetime Five Benefit provides a guarantee that
if your Contract value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic benefit
payments.
.. Please note that the payments that we make under this benefit after the
contract anniversary coinciding with or next following the Annuitant's
95/th/ birthday will be treated as annuity payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts. However, the asset transfer
component of the benefit as described below may transfer Contract Value to
the Benefit Fixed Rate Account as of the effective date of the benefit in
some circumstances.
.. You cannot allocate Purchase Payments or transfer Contract Value to a Fixed
Interest Rate Option if you elect Highest Daily Lifetime Five.
66
.. Transfers to and from the Sub-accounts and the Benefit Fixed Rate Account
triggered by the asset transfer component of the benefit will not count
toward the maximum number of free transfers allowable under the Contract.
.. In general, you must allocate your Contract Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the Highest Daily Lifetime Five benefit. If, subsequent to
your election of the benefit, we change our requirements for how Contract
Value must be allocated under the benefit, the new requirement will apply
only to new elections of the benefit, and we will not compel you to
re-allocate your Contract Value in accordance with our newly-adopted
requirements. Subsequent to any change in requirements, transfers of
Contract Value and allocation of additional Purchase Payments may be
subject to the new investment limitations.
Election of and Designations Under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Contract is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Contract will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) may be allowed to elect
another lifetime withdrawal benefit only on any anniversary of the Contract
Date that is at least 90 calendar days from the date the Highest Daily
Lifetime Five Benefit was terminated. We reserve the right to further limit
the election frequency in the future. Before making any such change to the
election frequency, we will provide prior notice to Owners who have an
effective Highest Daily Lifetime Five benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. if you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Contract (iii) upon
your election to begin receiving Contract payments (iv) upon the death of the
Annuitant (v) if both the Contract Value and Total Annual Income Amount equal
zero or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Return of Principal Guarantee If you have not made a withdrawal before the
Tenth Anniversary, we will increase your Contract Value on that Tenth
Anniversary (or the next business day, if that anniversary is not a business
day), if the requirements set forth in this paragraph are met. On the Tenth
Anniversary, we add:
(a)your Contract Value on the day that you elected Highest Daily Lifetime
Five; and
(b)the sum of each Purchase Payment you made during the one-year period after
you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options and
the Benefit Fixed Rate Account (described below), in the same proportion that
each such investment option bears to your total Contract Value, immediately
prior to the application of the amount. Any such amount will not be considered
a purchase payment when calculating your Total Protected Withdrawal Value,
your death benefit, or the amount of any other optional benefit that you may
have selected, and therefore will have no direct impact on any such values at
the time we add this amount. This potential addition to Contract Value is
available only if you have elected Highest Daily Lifetime Five and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Upon termination, we may limit or prohibit investment in the fixed interest
rate options.
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a fixed interest rate account that is part of our general
account (the "Benefit
67
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Fixed Rate Account"). We determine whether to make a transfer, and the amount
of any transfer, under a non-discretionary formula, discussed below. The
Benefit Fixed Rate Account is available only with this benefit, and thus you
may not allocate Purchase Payments to that Account. The interest rate that we
pay with respect to the Benefit Fixed Rate Account is reduced by an amount
that corresponds generally to the charge that we assess against your variable
sub-accounts for Highest Daily Lifetime Five. The Benefit Fixed Rate Account
is not subject to the Investment Company Act of 1940 or the Securities Act of
1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Contract Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the
formula, which we apply each business day, operates as follows. The formula
starts by identifying your Protected Withdrawal Value for that day and then
multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
Highest Daily Annual Income Amount. Then, using our actuarial tables, we
produce an estimate of the total amount we would target in our allocation
model, based on the projected Highest Daily Annual Income Amount each year for
the rest of your life. In the formula, we refer to that value as the "Target
Value" or "L". If you have already made a withdrawal, your projected Highest
Daily Annual Income Amount (and thus your Target Value) would take into
account any automatic step-up that was scheduled to occur according to the
step-up formula described above. Next, the formula subtracts from the Target
Value the amount held within the Benefit Fixed Rate Account on that day, and
divides that difference by the amount held within the Permitted Sub-accounts.
That ratio, which essentially isolates the amount of your Target Value that is
not offset by amounts held within the Benefit Fixed Rate Account, is called
the "Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the Benefit Fixed Rate Account, and therefore we will
transfer an amount from your Permitted Sub-accounts to the Benefit Fixed Rate
Account. Conversely, if the Target Ratio falls below a certain percentage
(currently 77%), then a transfer from the Benefit Fixed Rate Account to the
Permitted Sub-accounts would occur. Note that the formula is calculated with
reference to the Highest Daily Annual Income Amount, rather than with
reference to the Total Annual Income Amount.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Liability Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to rebalance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Liability Ratio meets a target
ratio, which currently is equal to 80%. Once you elect Highest Daily Lifetime
Five, the ratios we use will be fixed. For new elections in the future,
however, we reserve the right to change the ratios.
While you are not notified when your Contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the Benefit
Fixed Rate Account, transfer all or a portion of those amounts to the
Permitted Sub-accounts, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e., in the same
proportion as the current balances in your variable investment options).
Amounts taken out of the Benefit Fixed Rate Account will be withdrawn for
this purpose on a last-in, first-out basis (an amount renewed into a new
guarantee period under the Benefit Fixed Rate Account will be deemed a new
investment for purposes of this last-in, first-out rule); or
Transfer all or a portion of your Contract Value in the Permitted Sub-accounts
pro-rata to the Benefit Fixed Rate Account. The interest that you earn on such
transferred amount will be equal to the annual rate that we have set for that
day, and we will credit the daily equivalent of that annual interest until the
earlier of one year from the date of the transfer or the date that such amount
in the Benefit Fixed Rate Account is transferred back to the Permitted
Sub-accounts.
If a significant amount of your Contract Value is systematically transferred
to the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Contract Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that over time a significant portion, and under certain
circumstances all, of your Contract Value may be allocated to the Benefit
Fixed Rate Account. Note that if your entire Contract Value is transferred to
the Benefit Fixed Rate Account, then based on the way the formula operates,
that value would remain in the Benefit Fixed Rate Account unless you made
additional purchase payments to the Permitted Sub-accounts, which could cause
Contract Value to transfer out of the Benefit Fixed Rate Account.
68
Additional Tax Considerations
If you purchase a contract as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your contract
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if
later. Roth IRAs are not subject to these rules during the owner's lifetime.
The amount required under the Code may exceed the Total Annual Income Amount,
which will cause us to increase the Total Annual Income Amount in any Contract
Year that required minimum distributions due from your Contract are greater
than such amounts. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as required minimum distribution under the tax law. Please note, however,
that any withdrawal you take prior to the Tenth Anniversary, even if withdrawn
to satisfy required minimum distribution rules, will cause you to lose the
ability to receive Enhanced Protected Withdrawal Value and an amount under the
Return of Principal Guarantee.
As indicated, withdrawals made while the Highest Daily Lifetime Five Benefit
is in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the contract. Please see the Tax Considerations section of
the prospectus for a detailed discussion of the tax treatment of withdrawals.
We do not address each potential tax scenario that could arise with respect to
this Benefit here. However, we do note that if you participate in Highest
Daily Lifetime Five through a non-qualified annuity, and your annuity has
received Enhanced Protected Withdrawal Value and/or an additional amount under
the Return of Principal Guarantee, as with all withdrawals, once all purchase
payments are returned under the contract, all subsequent withdrawal amounts
will be taxed as ordinary income.
HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (HD7)/SM/
Highest Daily Lifetime Seven is offered as an alternative to Lifetime Five,
Spousal Lifetime Five, and Highest Daily Lifetime Five. Currently, if you
elect Highest Daily Lifetime Seven and subsequently terminate the benefit, you
may have a waiting period until you can elect Spousal Lifetime Five, Lifetime
Five, Highest Daily Lifetime Five or Spousal Highest Daily Lifetime Seven. See
"Election of and Designations under the Program" below for details. The income
benefit under Highest Daily Lifetime Seven currently is based on a single
"designated life" who is at least 55 years old on the date that the benefit is
acquired. The Highest Daily Lifetime Seven Benefit is not available if you
elect any other optional living benefit, although you may elect any optional
death benefit (other than the Highest Daily Value death benefit). As long as
your Highest Daily Lifetime Seven Benefit is in effect, you must allocate your
Contract Value in accordance with the then permitted and available investment
option(s) with this program. In the application for this benefit, we specify
the permitted investment options - you may also contact us or your registered
representative for further information.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of market performance on the Contract Value,
subject to our program rules regarding the timing and amount of withdrawals.
The benefit may be appropriate if you intend to make periodic withdrawals from
your Contract, and wish to ensure that market performance will not affect your
ability to receive annual payments. You are not required to make withdrawals
as part of the program - the guarantees are not lost if you withdraw less than
the maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Seven, and in Appendix D to
this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Seven is the
Protected Withdrawal Value. Because each of the Protected Withdrawal Value and
Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount for the rest of your life, provided that you
have not made "excess withdrawals." Excess withdrawals, as discussed below,
will reduce your Annual Income Amount. Thus, you could experience a scenario
in which your Contract Value was zero, and, due to your excess withdrawals,
your Annual Income Amount also was reduced to zero. In that scenario, no
further amount would be payable under Highest Daily Lifetime Seven.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Contract Value. On each business day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each business day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each business day (the "Current Business Day"), the Periodic Value is
equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Business Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Business Day and the Current Business
Day (i.e., one day for
69
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
successive Business Days, but more than one calendar day for business days
that are separated by weekends and/or holidays), plus the amount of any
adjusted Purchase Payment made on the Current business day; and
(2)the Contract Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
a. the Contract Value; or
b. the Periodic Value on the date of the withdrawal.
If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Contract Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Contract Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Contract Value.
Key Feature - Annual Income Amount under the Highest Daily Lifetime Seven
Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage depends on the age of the Annuitant on the
date of the first withdrawal after election of the benefit. The percentages
are: 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8%
for ages 85 and older. Under the Highest Daily Lifetime Seven benefit, if your
cumulative withdrawals in a contract year are less than or equal to the Annual
Income Amount, they will not reduce your Annual Income Amount in subsequent
contract years, but any such withdrawals will reduce the Annual Income Amount
on a dollar-for-dollar basis in that contract year. If your cumulative
withdrawals are in excess of the Annual Income Amount ("Excess Income"), your
Annual Income Amount in subsequent years will be reduced (except with regard
to required minimum distributions) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of
the withdrawal, including any CDSC that may apply. Withdrawals of any amount
up to and including the Annual Income Amount will reduce the Protected
Withdrawal Value by the amount of the withdrawal. Withdrawals of Excess Income
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the Annual Income Amount.
A Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment
(including the amount of any associated Credits) based on the age of the
Annuitant at the time of the first withdrawal (the percentages are: 5% for
ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85
and older) and (ii) increase the Protected Withdrawal Value by the amount of
the Purchase Payment (including the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Contract Date of the Annuity (the
"Contract Anniversary") immediately after your first withdrawal under the
benefit. Specifically, upon the first such Contract Anniversary, we identify
the Contract Value on the business days corresponding to the end of each
quarter that (i) is based on your contract year, rather than a calendar year;
(ii) is subsequent to the first withdrawal; and (iii) falls within the
immediately preceding contract year. If the end of any such quarter falls on a
holiday or a weekend, we use the next business day. Having identified each of
those quarter-end Contract Values, we then multiply each such value by a
percentage that varies based on the age of the Annuitant on the Contract
Anniversary as of which the step-up would occur. The percentages are 5% for
ages 74 and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85
and older. Thus, we multiply each quarterly value by the applicable
percentage, adjust each such quarterly value for subsequent withdrawals and
Purchase Payments, and then select the highest of those values. If the highest
of those values exceeds the existing
70
Annual Income Amount, we replace the existing amount with the new, higher
amount. Otherwise, we leave the existing Annual Income Amount intact. In later
years, (i.e., after the first Contract Anniversary after the first withdrawal)
we determine whether an automatic step-up should occur on each Contract
Anniversary, by performing a similar examination of the Contract Values on the
end of the four immediately preceding quarters. At the time that we increase
your Annual Income Amount, we also increase your Protected Withdrawal Value to
equal the highest quarterly value upon which your step-up was based. If, on
the date that we implement a Highest Quarterly Auto Step-Up to your Annual
Income Amount, the charge for Highest Daily Lifetime Seven has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Highest Daily Lifetime Seven upon a
step-up, we would notify you, and give you the opportunity to cancel the
automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
The Highest Daily Lifetime Seven program does not affect your ability to make
withdrawals under your contract, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime Seven, if
your cumulative withdrawals in an contract year are less than or equal to the
Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent contract years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any contract year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent contract years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Seven benefit or any other fees and charges. Assume the following for
all three examples:
.. The Contract Date is December 1, 2007
.. The Highest Daily Lifetime Seven benefit is elected on March 5, 2008
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime Seven benefit
Dollar-for-Dollar Reductions
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the Annuitant is younger than 75 at the
time of the 1/st/ withdrawal, the Annual Income Amount is 5% of the Protected
Withdrawal Value, in this case 5% of $120,000). Assuming $2,500 is withdrawn
from the Annuity on this date, the remaining Annual Income Amount for that
contract year (up to and including December 1, 2008) is $3,500.
This is the result of a dollar-for-dollar reduction of the Annual Income
Amount - $6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that contract year to $0. The remaining withdrawal amount - $1,500
- reduces the Annual Income Amount in future contract years on a proportional
basis based on the ratio of the excess withdrawal to the Contract Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that contract year, each would result in another proportional
reduction to the Annual Income Amount).
Here is the calculation:
Contract Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future contract years $ 5,915.49
71
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Contract
Anniversary) of the highest quarterly value since your first withdrawal (or
last Contract Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments (plus any
Credits).
Continuing the same example as above, the Annual Income Amount for this
contract year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next contract
year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 75 on the date of the potential step-up) of
the highest quarterly Contract Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 business days occur after the excess withdrawal on
August 6.
Highest Quarterly Value
(adjusted with Adjusted Annual
withdrawal and Purchase Income Amount (5% of the
Date* Contract Value Payments)** Highest Quarterly Value)
- ----- -------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Contract Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the contract year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. . This amount ($114,500) is further reduced by 1.41% (this is the ratio
in the above example which is the excess withdrawal divided by the
Contract Value immediately preceding the excess withdrawal) resulting in
a Highest Quarterly Value of $112,885.55.
The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Contract Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Contract Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next contract year, starting on December 2, 2008 and continuing
through December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME SEVEN PROGRAM
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Highest Daily Lifetime
Seven, and amounts are still payable under Highest Daily Lifetime Seven, we
will make an additional payment, if any, for that contract year equal to
the remaining Annual Income Amount for the contract year. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described in this
section. We will make payments until the death of the single designated
life. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount, the Highest Daily Lifetime Seven benefit terminates, and no
additional payments are made. However, if a withdrawal in the latter
scenario was taken to meet required minimum distribution requirements under
the Annuity, then the benefit will not terminate, and we will continue to
pay the Annual Income Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
(1)apply your Contract Value to any Annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the death of the single designated life.
72
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
contract. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Contract Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the annuitant's
95/th/ birthday will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Seven benefit are subject to
all of the terms and conditions of the Contract, including any CDSC.
.. Withdrawals made while the Highest Daily Lifetime Seven Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Contract. The Highest Daily Lifetime Seven Benefit
does not directly affect the Contract Value or surrender value, but any
withdrawal will decrease the Contract Value by the amount of the withdrawal
(plus any applicable CDSC). If you surrender your Contract you will receive
the current surrender value.
.. You can make withdrawals from your Contract while your Contract Value is
greater than zero without purchasing the Highest Daily Lifetime Seven
benefit. The Highest Daily Lifetime Seven benefit provides a guarantee that
if your Contract Value declines due to market performance, you will be able
to receive your Annual Income Amount in the form of periodic benefit
payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to the AST
Investment Grade Bond Portfolio Sub-account (see description below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Investment
Options Can I Choose?". Upon the initial transfer of your Account Value
into the AST Investment Grade Bond Portfolio, we will send a prospectus for
that Portfolio to you, along with your confirmation. In addition, you can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and an AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under the contract.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Highest Daily Lifetime Seven benefit. If, subsequent to your election
of the benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements.
.. Currently, Owners electing this benefit must allocate Contract Value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust: AST Capital Growth Asset Allocation Portfolio, AST Balanced Asset
Allocation Portfolio, AST Conservative Asset Allocation Portfolio, AST
Preservation Asset Allocation Portfolio, AST Advanced Strategies Portfolio,
AST First Trust Balanced Target Portfolio, AST First Trust Capital
Appreciation Target Portfolio AST T. Rowe Price Asset Allocation Portfolio,
AST UBS Dynamic Alpha, or AST American Century Strategic Allocation.
.. The fee for Highest Daily Lifetime Seven is 0.60% annually of the Protected
Withdrawal Value. We deduct this fee at the end of each quarter, where each
such quarter is part of a year that begins on the effective date of the
benefit or an anniversary thereafter. Thus, on each such quarter-end (or
the next business day, if the quarter-end is not a business day), we deduct
0.15% of the Protected Withdrawal Value at the end of the quarter. We
deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Portfolio Sub-account. Since this fee is based on the
Protected Withdrawal Value the fee for Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Contract Value
alone. If the fee to be deducted exceeds the current Contract Value, we
will reduce the Contract Value to zero, and continue the benefit as
described above.
Election of and Designations under the Program
For Highest Daily Lifetime Seven, there must be either a single Owner who is
the same as the Annuitant, or if the Contract is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Contract will result in cancellation of
Highest Daily Lifetime Seven. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Seven, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) ownership is
transferred from a custodian to the Annuitant, or vice versa or (c) ownership
is transferred from one entity to another entity.
73
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Highest Daily Lifetime Seven can be elected at the time that you purchase your
Contract or after the Contract Date, subject to our eligibility rules and
restrictions.
Currently, if you terminate the Highest Daily Lifetime Seven benefit, you may
only be allowed to re-elect the benefit or elect the Spousal Lifetime Five
Benefit, the Lifetime Five Income Benefit, or the Spousal Highest Daily
Lifetime Seven Income Benefit on any anniversary of the Contract Date that is
at least 90 calendar days from the date the Highest Daily Lifetime Seven
Benefit was terminated. We reserve the right to further limit the election
frequency in the future. Similarly, we generally may permit those who have
terminated Lifetime Five, Spousal Lifetime Five, Highest Daily Lifetime Five
or the Spousal Highest Daily Lifetime Seven to elect Highest Daily Lifetime
Seven only on an anniversary of the Contract Date that is at least 90 calendar
days from the date that such benefit was terminated. We reserve the right to
waive that requirement.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Contract Value on that Tenth Anniversary (or the next business
day, if that anniversary is not a business day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a. your Contract Value on the day that you elected Highest Daily Lifetime
Seven; and
b. the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options (other
than a bond Sub-account used with this benefit), in the same proportion that
each such Sub-account bears to your total Contract Value, immediately before
the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. This potential addition to Contract Value is available only if
you have elected Highest Daily Lifetime Seven and if you meet the conditions
set forth in this paragraph. Thus, if you take a withdrawal prior to the Tenth
Anniversary, you are not eligible to receive the Return of Principal Guarantee.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Contract (iii) upon
your election to begin receiving annuity payments (although if you have
elected to take the Annual Income Amount in the form of Annuity payments, we
will continue to pay the Annual Income Amount), (iv) upon the death of the
Annuitant (v) if both the Contract Value and Annual Income Amount equal zero
or (vi) if you cease to meet our requirements for issuing the benefit (see
Elections and Designations under the Program).
Upon termination of Highest Daily Lifetime Seven other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
Asset Transfer Component of Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Seven. For purposes of this
benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The AST Investment Grade Bond Sub-account is available only
with this benefit, and thus you may not allocate Purchase Payments to the AST
Investment Grade Bond Sub-account. Under the asset transfer component of
Highest Daily Lifetime Seven, we monitor your Contract Value daily and, if
dictated by the formula, systematically transfer amounts between the Permitted
Sub-accounts you have chosen and the AST Investment Grade Bond Sub-account.
Any transfer would be made in accordance with a formula, which is set forth in
the Appendices to this prospectus. Speaking generally, the formula, which we
apply each business day, operates as follows. The formula starts by
identifying an income basis for that day and then multiplies that figure by
5%, to produce a projected (i.e., hypothetical) income amount. Note
74
that we use 5% in the formula, irrespective of the Annuitant's attained age.
Then we produce an estimate of the total amount we would target in our
allocation model, based on the projected income amount and factors set forth
in the formula. In the formula, we refer to that value as the "Target Value"
or "L". If you have already made a withdrawal, your projected income amount
(and thus your Target Value) would take into account any automatic step-up,
any subsequent purchase payments, and any excess withdrawals. Next, the
formula subtracts from the Target Value the amount held within the AST
Investment Grade Bond Sub-account on that day, and divides that difference by
the amount held within the Permitted Sub-accounts. That ratio, which
essentially isolates the amount of your Target Value that is not offset by
amounts held within the AST Investment Grade Bond Sub-account, is called the
"Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the AST Investment Grade Bond Sub-account, and therefore we
will transfer an amount from your Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account. Conversely, if the Target Ratio falls below a certain
percentage (currently 77%), then a transfer from the AST Investment Grade Bond
Sub-account to the Permitted Sub-accounts would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime Seven, the ratios we use will be fixed. For
newly-issued contracts that elect Highest Daily Lifetime Seven and existing
contracts that elect Highest Daily Lifetime Seven, however, we reserve the
right to change the ratios.
While you are not notified when your Contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the AST Investment Grade Bond
Sub-account will be withdrawn for this purpose on a last-in, first-out
basis; or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Contract Value is systematically transferred
to the AST Investment Grade Bond Sub-account during periods of market declines
or low interest rates, less of your Contract Value may be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a subsequent market recovery. Under the reallocation formula that we
employ, it is possible that a significant portion of your Contract Value may
be allocated to the AST Investment Grade Bond Sub-account. Note that if your
entire Contract Value is transferred to the AST Investment Grade Bond
Sub-account, then based on the way the formula operates, that value would
remain in the AST Investment Grade Bond Sub-account unless you made additional
Purchase Payments to the Permitted Sub-accounts, which could cause Contract
Value to transfer out of the AST Investment Grade Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Contract year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax
75
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
treatment of withdrawals. We do not address each potential tax scenario that
could arise with respect to this Benefit here. However, we do note that if you
participate in Highest Daily Lifetime Seven through a non-qualified annuity,
as with all withdrawals, once all Purchase Payments are returned under the
contract, all subsequent withdrawal amounts will be taxed as ordinary income.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (HD7)/SM/
Spousal Highest Daily Lifetime Seven is the spousal version of Highest Daily
Lifetime Seven. Currently, if you elect Spousal Highest Daily Lifetime Seven
and subsequently terminate the benefit, you may have a waiting period until
you can elect Spousal Lifetime Five, Lifetime Five, Highest Daily Lifetime
Five, or Highest Daily Lifetime Seven. See "Election of and Designations under
the Program" below for details. Spousal Highest Daily Lifetime Seven must be
elected based on two Designated Lives, as described below. Each Designated
Life must be at least 59 1/2 years old when the benefit is elected. Spousal
Highest Daily Lifetime Seven is not available if you elect any other optional
living benefit. As long as your Spousal Highest Daily Lifetime Seven Benefit
is in effect, you must allocate your Contract Value in accordance with the
then permitted and available investment option(s) with this program. In the
application for this benefit, we specify the permitted investment options -
you may also contact us or your registered representative for further
information.
We offer a benefit that guarantees until the later death of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them (the "Designated Lives", and each, a
"Designated Life") the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our program rules regarding the timing and
amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your Contract, wish to ensure that market
performance will not affect your ability to receive annual payments, and wish
either spouse to be able to continue the Spousal Highest Daily Lifetime Seven
benefit after the death of the first spouse. You are not required to make
withdrawals as part of the program - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our asset
transfer program in order to participate in Spousal Highest Daily Lifetime
Seven, and in Appendix D to this prospectus, we set forth the formula under
which we make those asset transfers.
As discussed below, a key component of Spousal Highest Daily Lifetime Seven is
the Protected Withdrawal Value. Because each of the Protected Withdrawal Value
and Annual Income Amount is determined in a way that is not solely related to
Contract Value, it is possible for the Contract Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount until the death of the second Designated
Life, provided that there have not been "excess withdrawals." Excess
withdrawals, as discussed below, will reduce your Annual Income Amount. Thus,
you could experience a scenario in which your Contract Value was zero, and,
due to your excess withdrawals, your Annual Income Amount also was reduced to
zero. In that scenario, no further amount would be payable under Spousal
Highest Daily Lifetime Seven.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Contract Value. On each business day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each business day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each business day (the "Current Business Day"), the Periodic Value is
equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the
"Prior Business Day") appreciated at the daily equivalent of 7%
annually during the calendar day(s) between the Prior Business Day
and the Current Business Day (i.e., one day for successive business
Days, but more than one calendar day for business days that are
separated by weekends and/or holidays), plus the amount of any
adjusted Purchase Payment made on the Current Business Day; and
(2)the Contract Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
a. the Contract Value; or
b. the Periodic Value on the date of the withdrawal.
76
If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Contract Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Contract Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Contract Value.
Key Feature - Annual Income Amount under the Spousal Highest Daily Lifetime
Seven Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage depends on the age of the youngest Designated
Life on the date of the first withdrawal after election of the benefit. The
percentages are: 5% for ages 79 and younger, 6% for ages 80 to 84, 7% for ages
85 to 89, and 8% for ages 90 and older. We use the age of the youngest
Designated Life even if that Designated Life is no longer a participant under
the Contract due to death or divorce. Under the Spousal Highest Daily Lifetime
Seven benefit, if your cumulative withdrawals in a contract year are less than
or equal to the Annual Income Amount, they will not reduce your Annual Income
Amount in subsequent contract years, but any such withdrawals will reduce the
Annual Income Amount on a dollar-for-dollar basis in that contract year. If
your cumulative withdrawals are in excess of the Annual Income Amount ("Excess
Income"), your Annual Income Amount in subsequent years will be reduced
(except with regard to required minimum distributions) by the result of the
ratio of the Excess Income to the Contract Value immediately prior to such
withdrawal (see examples of this calculation below). Reductions include the
actual amount of the withdrawal, including any CDSC that may apply.
Withdrawals of any amount up to and including the Annual Income Amount will
reduce the Protected Withdrawal Value by the amount of the withdrawal.
Withdrawals of Excess Income will reduce the Protected Withdrawal Value by the
same ratio as the reduction to the Annual Income Amount. A Purchase Payment
that you make will (i) increase the then-existing Annual Income Amount by an
amount equal to a percentage of the Purchase Payment (including the amount of
any associated Credits) based on the age of the Annuitant at the time of the
first withdrawal (the percentages are: 5% for ages 79 and younger, 6% for ages
80-84, 7% for ages 85-89, and 8% for ages 90 and older) and (ii) increase the
Protected Withdrawal Value by the amount of the Purchase Payment (including
the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Contract Value increases subsequent to your first withdrawal. We begin
examining the Contract Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Contract Date of the Annuity (the
"Contract Anniversary") immediately after your first withdrawal under the
benefit. Specifically, upon the first such Contract Anniversary, we identify
the Contract Value on the business days corresponding to the end of each
quarter that (i) is based on your contract year, rather than a calendar year;
(ii) is subsequent to the first withdrawal; and (iii) falls within the
immediately preceding contract year. If the end of any such quarter falls on a
holiday or a weekend, we use the next business day. Having identified each of
those quarter-end Contract Values, we then multiply each such value by a
percentage that varies based on the age of the youngest Designated Life on the
Contract Anniversary as of which the step-up would occur. The percentages are
5% for ages 79 and younger, 6% for ages 80-84, 7% for ages 85-89, and 8% for
ages 90 and older. Thus, we multiply each quarterly value by the applicable
percentage, adjust each such quarterly value for subsequent withdrawals and
Purchase Payments, and then select the highest of those values. If the highest
of those values exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. In later years, (i.e., after the first Contract
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Contract Anniversary, by performing a similar
examination of the Contract Values on the end of the four immediately
preceding quarters. At the time that we increase your Annual Income Amount, we
also increase your Protected Withdrawal Value to equal the highest quarterly
value upon which your step-up was based. If, on the date that we implement a
Highest Quarterly Auto Step-Up to your Annual Income Amount, the charge for
Spousal Highest Daily Lifetime Seven has changed for new purchasers, you may
be subject to the new charge at the time of such step-up. Prior to increasing
your charge for Spousal Highest Daily Lifetime Seven upon a step-up, we would
notify you, and give you the opportunity to cancel the automatic step-up
feature. If you receive notice of a proposed step-up and accompanying fee
increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
The Spousal Highest Daily Lifetime Seven program does not affect your ability
to make withdrawals under your annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime Seven, if your cumulative withdrawals in a contract year are less
than or equal to the Annual Income Amount, they will not reduce your Annual
Income Amount in subsequent contract years, but any such withdrawals will
reduce the Annual Income Amount on a dollar-for-dollar basis in that contract
year.
77
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any contract year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent contract years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Spousal Highest
Daily Lifetime Seven benefit or any other fees and charges. Assume the
following for all three examples:
.. The Contract Date is December 1, 2007
.. The Spousal Highest Daily Lifetime Seven benefit is elected on March 5,
2008.
.. The youngest Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime Seven benefit.
Dollar-for-Dollar Reductions
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the youngest Designated Life is younger
than 80 at the time of the 1/st/ withdrawal, the Annual Income Amount is 5% of
the Protected Withdrawal Value, in this case 5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Annual Income Amount
for that contract year (up to and including December 1, 2008) is $3,500. This
is the result of a dollar-for-dollar reduction of the Annual Income Amount -
$6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Contract Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that contract year to $0. The remaining withdrawal amount - $1,500
- reduces the Annual Income Amount in future contract years on a proportional
basis based on the ratio of the excess withdrawal to the Contract Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that contract year, each would result in another proportional
reduction to the Annual Income Amount).
Here is the calculation:
Contract Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Contract Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Contract Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future contract years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest Designated Life's age on the
Contract Anniversary) of the highest quarterly value since your first
withdrawal (or last Contract Anniversary in subsequent years), adjusted for
withdrawals and additional Purchase Payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional Purchase Payments (plus
any Credits).
Continuing the same example as above, the Annual Income Amount for this
contract year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next contract
year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 80 on the date of the potential step-up) of
the highest quarterly Contract Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 business days occur after the excess withdrawal on
August 6.
Highest Quarterly Value
(adjusted with Adjusted Annual
withdrawal and Purchase Income Amount (5% of the
Date* Contract Value Payments)** Highest Quarterly Value)
- ----- -------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
78
* In this example, the Contract Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Contract Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Contract Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the contract year), resulting in an adjusted Contract Value
of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Contract Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Contract Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next contract year, starting on December 2, 2008 and continuing
through December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN PROGRAM
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Spousal Highest Daily
Lifetime Seven, and amounts are still payable under Spousal Highest Daily
Lifetime Seven, we will make an additional payment, if any, for that
contract year equal to the remaining Annual Income Amount for the contract
year. Thus, in that scenario, the remaining Annual Income Amount would be
payable even though your Contract Value was reduced to zero. In subsequent
contract years we make payments that equal the Annual Income Amount as
described in this section. We will make payments until the death of the
first of the Designated Lives to die, and will continue to make payments
until the death of the second Designated Life as long as the Designated
Lives were spouses at the time of the first death. To the extent that
cumulative withdrawals in the current contract year that reduced your
Contract Value to zero are more than the Annual Income Amount, the Spousal
Highest Daily Lifetime Seven benefit terminates, and no additional payments
will be made. However, if a withdrawal in the latter scenario was taken to
meet required minimum distribution requirements under the contract, then
the benefit will not terminate, and we will continue to pay the Annual
Income Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your contract, or if
you decide to begin receiving annuity payments and there is a Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
(1)apply your Contract Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death. If, due to death of a Designated Life or
divorce prior to annuitization, only a single Designated Life
remains, then annuity payments will be made as a life annuity for the
lifetime of the Designated Life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your contract. The amount that will be applied to provide
such annuity payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Contract; and
(2)the Contract Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the older of the
owner or Annuitant's 95/th/ birthday, will be treated as annuity payments.
79
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
Other Important Considerations
.. Withdrawals under the Spousal Highest Daily Lifetime Seven Benefit are
subject to all of the terms and conditions of the contract, including any
CDSC.
.. Withdrawals made while the Spousal Highest Daily Lifetime Seven Benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the contract. The Spousal Highest Daily Lifetime Seven
Benefit does not directly affect the Contract Value or surrender value, but
any withdrawal will decrease the Contract Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your contract you
will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime
Seven Benefit. The Spousal Highest Daily Lifetime benefit provides a
guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Annual Income Amount in the form of
periodic benefit payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to the AST
Investment Grade Bond Portfolio Sub-account (as described below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Investment
Options Can I Choose?". Upon the initial transfer of your Account Value
into the AST Investment Grade Bond Portfolio, we will send a prospectus for
that Portfolio to you, along with your confirmation. In addition, you can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Spousal Highest Daily Lifetime Seven benefit. If, subsequent to your
election of the benefit, we change our requirements for how Account Value
must be allocated under the benefit, the new requirement will apply only to
new elections of the benefit, and we will not compel you to re-allocate
your Account Value in accordance with our newly adopted requirements.
.. Currently, Owners electing this benefit must allocate Contract Value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust: AST Capital Growth Asset Allocation Portfolio, AST Balanced Asset
Allocation Portfolio, AST Conservative Asset Allocation Portfolio, AST
Preservation Asset Allocation Portfolio, AST Advanced Strategies Portfolio,
AST First Trust Balanced Target Portfolio, AST First Trust Capital
Appreciation Target Portfolio AST T. Rowe Price Asset Allocation Portfolio,
AST UBS Dynamic Alpha, or AST American Century Strategic Allocation.
.. The fee for Spousal Highest Daily Lifetime Seven is 0.75% annually of the
Protected Withdrawal Value. We deduct this fee at the end of each quarter,
where each such quarter is part of a year that begins on the effective date
of the benefit or an anniversary thereafter. Thus, on each such quarter-end
(or the next business day, if the quarter-end is not a business day), we
deduct 0.1875% of the Protected Withdrawal Value at the end of the quarter.
We deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Sub-account. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Contract Value
alone. If the fee to be deducted exceeds the current Contract Value, we
will reduce the Contract Value to zero, and continue the benefit as
described above.
Election of and Designations under the Program
Spousal Highest Daily Lifetime Seven can only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the program and at the death of the
first of the Designated Lives to die. Currently, Spousal Highest Daily
Lifetime Seven only may be elected where the Owner, Annuitant, and Beneficiary
designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 59 1/2 years old at the time of election;
or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be
at least 59 1/2 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 59 1/2 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b) if the contract initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under this
benefit. If the Designated Lives divorce, the Spousal Highest Daily Lifetime
Seven benefit may not be divided as part of the divorce settlement or
judgment. Nor may the divorcing spouse who retains ownership of the contract
appoint a new Designated Life upon re-marriage.
80
Spousal Highest Daily Lifetime Seven can be elected at the time that you
purchase your contract or after the Contract Date, subject to our eligibility
rules and restrictions.
Currently, if you terminate the Spousal Highest Daily Lifetime Seven benefit,
you may only be allowed to re-elect the benefit or to elect the Lifetime Five
Benefit, the Spousal Lifetime Five Benefit, or the Highest Daily Lifetime
Seven Benefit on any anniversary of the Contract Date that is at least 90
calendar days from the date the Spousal Highest Daily Lifetime Seven Benefit
was terminated. We reserve the right to further limit the election frequency
in the future. Similarly, we generally may permit those who have terminated
Lifetime Five, Spousal Lifetime Five, Highest Daily Lifetime Five, or Highest
Daily Lifetime Seven to elect Spousal Highest Daily Lifetime Seven only on an
anniversary of the Contract Date that is at least 90 calendar days from the
date that such benefit was terminated. We reserve the right to waive that
requirement.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Contract Value on that Tenth Anniversary (or the next business
day, if that anniversary is not a business day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a. your Contract Value on the day that you elected Spousal Highest Daily
Lifetime Seven; and
b. the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options (other
than a bond Sub-account used with this benefit), in the same proportion that
each such Sub-account bears to your total Contract Value, immediately before
the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. This potential addition to Contract Value is available only if
you have elected Spousal Highest Daily Lifetime Seven and if you meet the
conditions set forth in this paragraph. Thus, if you take a withdrawal prior
to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) if upon the death
of the first Designated Life, the surviving Designated Life opts to take the
death benefit under the contract (thus, the benefit does not terminate solely
because of the death of the first Designated Life), (ii) upon the death of the
second Designated Life, (iii) upon your termination of the benefit (although
if you have elected to take annuity payments in the form of the Annual Income
Amount, we will continue to pay the Annual Income Amount), (iv) upon your
surrender of the contract (v) upon your election to begin receiving annuity
payments (vi) if both the Contract Value and Annual Income Amount equal zero
or (vii) if you cease to meet our requirements for issuing the benefit (see
Election of and Designations under the Program).
Upon termination of Spousal Highest Daily Lifetime Seven other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account (as
defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Spousal Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Spousal Highest Daily Lifetime Seven. For purposes
of this benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Spousal Highest Daily
Lifetime Seven, we require that you participate in our specialized asset
transfer program, under which we may transfer Contract Value between the
Permitted Sub-accounts and a specified bond fund within the Advanced Series
Trust (the "AST Investment Grade Bond Sub-account"). We determine whether to
make a transfer, and the amount of any transfer, under a non-discretionary
formula, discussed below. The AST Investment Grade Bond Sub-account s
available only with this benefit, and thus you may not allocate Purchase
Payments to the AST Investment Grade Bond Sub-account. Under the asset
transfer component of Spousal Highest Daily Lifetime Seven, we monitor your
Contract Value daily and, if dictated by the formula, systematically transfer
amounts between the Permitted Sub-accounts you have chosen and the AST
Investment Grade Bond Sub-account. Any transfer would be made in accordance
with a formula, which is set forth in the Appendix D to this prospectus.
Speaking generally, the formula, which we apply each business day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e.,
81
5: WHAT ARE THE LIFETIME WITHDRAWAL BENEFITS? continued
hypothetical) Highest Daily annual income amount. Note that we use 5% in the
formula, irrespective of the youngest Designated Life's attained age. Then we
produce an estimate of the total amount we would target in our allocation
model, based on the projected income amount and factors set forth in the
formula. In the formula, we refer to that value as the "Target Value" or "L".
If you have already made a withdrawal, your projected income amount (and thus
your Target Value) would take into account any automatic step-up, any
subsequent purchase payments, and any excess withdrawals. Next, the formula
subtracts from the Target Value the amount held within the AST Investment
Grade Bond Sub-account on that day, and divides that difference by the amount
held within the Permitted Sub-accounts. That ratio, which essentially isolates
the amount of your Target Value that is not offset by amounts held within the
AST Investment Grade Bond Sub-account, is called the "Target Ratio" or "r". If
the Target Ratio exceeds a certain percentage (currently 83%), it means
essentially that too much Target Value is not offset by assets within the AST
Investment Grade Bond Sub-account, and therefore we will transfer an amount
from your Permitted Sub-accounts to the AST Investment Grade Bond Sub-account
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Contract Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Spousal Highest Daily Lifetime Seven, the ratios we use will be fixed.
For newly-issued Annuities that elect Spousal Highest Daily Lifetime Seven and
existing Annuities that elect Spousal Highest Daily Lifetime Seven, however,
we reserve the right to change the ratios.
While you are not notified when your contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Spousal Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer; or
.. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the AST Investment Grade Bond
Sub-account will be withdrawn for this purpose on a last-in, first-out
basis; or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Contract Value is systematically transferred
to the AST Investment Grade Bond Sub-account during periods of market declines
or low interest rates, less of your Contract Value may be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a subsequent market recovery. Under the reallocation formula that we
employ, it is possible that a significant portion of your Contract Value may
be allocated to the AST Investment Grade Bond Sub-account. Note that if your
entire Contract Value is transferred to the AST Investment Grade Bond
Sub-account, then based on the way the formula operates, that value would
remain in the AST Investment Grade Bond Sub-account unless you made additional
Purchase Payments to the Permitted Sub-accounts, which could cause Contract
Value to transfer out of the AST Investment Grade Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that Required Minimum Distributions due from your Contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
82
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Spousal Highest Daily
Lifetime Seven through a non-qualified annuity, as with all withdrawals, once
all Purchase Payments are returned under the contract, all subsequent
withdrawal amounts will be taxed as ordinary income.
Spousal Highest Daily Lifetime Seven Asset Allocation Formula. As indicated
above, Spousal Highest Daily Lifetime Seven uses the same asset transfer
formula as Highest Daily Lifetime Seven and uses the same table of age-related
factors. See Appendix D.
6: WHAT IS THE INCOME APPRECIATOR BENEFIT?
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 Section 8, "What Are The
Expenses Associated With The Strategic Partners FlexElite Contract?"
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.
Income Appreciator Benefit payments are treated as earnings and may be subject
to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners FlexElite Contract?"
If you do not activate the benefit prior to the maximum annuitization age you
may lose all or part of the IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
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, 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.
Number of Years Income Appreciator Income Appreciator
Benefit has been in Force Benefit Percentage
-------------------------------------------------------
0-6 0%
-------------------------------------------------------
7-9 15%
-------------------------------------------------------
10-14 20%
-------------------------------------------------------
15+ 25%
-------------------------------------------------------
83
6: WHAT IS THE INCOME APPRECIATOR BENEFIT? continued
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.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE 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 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.
84
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. 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.
85
7: HOW CAN I PURCHASE A STRATEGIC PARTNERS FLEXELITE CONTRACT?
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase
the contract. Unless we agree otherwise and subject to our rules, the minimum
initial purchase payment is $10,000. You must get our prior approval for any
initial and additional purchase payment of $1,000,000 or more, unless we are
prohibited under applicable state law from insisting on such 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
86/th/ 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 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. Our business day may
close earlier, for example if regular trading on the New York Stock Exchange
closes early. Subsequent purchase payments received in good order after the
close of the business day will be credited on the following business day. With
respect to both your initial Purchase Payment and any subsequent Purchase
Payment that is pending investment in our Separate Account, we may hold the
amount temporarily in our general account and may earn interest on such
amount. You will not be credited with interest during that period.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered
representative.
Applicable laws designed to counter terrorists and prevent money laundering
might, in certain circumstances, require us to block a contract owner's
ability to make certain transactions, and thereby refuse to accept purchase
payments or requests for transfers, partial withdrawals, total withdrawals,
death benefits, or income payments until instructions are received from the
appropriate regulator. We also may be required to provide additional
information about you and your contract to government regulators.
CREDIT ELECTION
We will notify you of your option to make a credit election thirty days before
your 3/rd/ and 6/th/ contract anniversaries. If you make a credit election, we
will add to your Contract Value 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
86
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.
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. 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.
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
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.
87
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT? continued
INSURANCE AND ADMINISTRATIVE CHARGES
In addition to the basic insurance and administrative charge, we impose an
additional charge of 0.60% annually if you choose the Lifetime Five Income
Benefit, or the Highest Daily Lifetime Five Benefit, and an additional charge
of 0.75% annually if you choose the Spousal Lifetime Five Income Benefit. If
you choose one of those benefits, or the Guaranteed Minimum Death Benefit
option, or Highest Daily Value 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.
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 (or other)
option that you choose.
For Contracts Sold on or After May 1, 2003, or upon Subsequent State Approval
the death benefit charge is equal to:
.. 1.65% on an annual basis if you choose the base benefit,
.. 1.90% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option (i.e., 0.25% in addition to the
base death benefit charge),
.. 2.00% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option (i.e., 0.35% in addition to
the base death benefit charge), or
.. 2.15% on an annual basis if you choose the Highest Daily Value Death
Benefit (i.e., 0.50% in addition to the base death benefit charge).
For All Other Contracts:
.. 1.60% on an annual basis if you choose the base benefit, and
.. 1.80% on an annual basis if you choose either the roll-up or step-up
Guaranteed Minimum Death Benefit option (i.e., 0.20% in addition to the
base death benefit charge).
.. 1.90% on an annual basis if you choose the greater of the roll-up and
step-up Guaranteed Minimum Death Benefit option (i.e., 0.30% in addition to
the base death benefit charge).
We reserve the right to impose an additional insurance charge of 0.10%
annually of average Contract Value for contracts issued to those aged 76 or
older.
As discussed in the Fee Table, we impose an additional fee, based on the
Protected Withdrawal Value, for each of Highest Daily Lifetime Seven and
Spousal Highest Daily Lifetime Seven.
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 these
charges. The insurance risk charge for your contract cannot be increased. Any
profits made from these charges may be used by us to pay for the costs of
distributing the contracts.
The charges that we discuss in this section are assessed against the assets of
the separate account (except as indicated). Certain of these charges are part
of the base annuity and other charges are assessed only if any available
optional benefit is selected. If a fixed interest rate option is available
under your contract, the interest rate that we credit to that option may be
reduced by an amount that corresponds to the asset-based charges to which you
are subject under the variable investment options.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. 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.
88
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%
----------------------------------------------------------------
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 (including a withdrawal under a lifetime withdrawal
benefit), 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. Please consult your contract for details about how we define the
key terms used for this waiver (e.g., eligible nursing home). Note that our
requirements for this waiver may vary, depending on the state in which your
contract was issued.
REQUIRED MINIMUM DISTRIBUTION
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 Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Flex Elite Contract?"
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
89
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT? continued
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:
.. 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
90
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 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.
BENEFICIARY CONTINUATION OPTION CHARGES
If your beneficiary takes the death benefit under the beneficiary continuation
option, we deduct a Settlement Service Charge. The charge is assessed daily
against the average assets allocated to the variable investment options, and
is equal to an annual charge of 1.00%. In addition, the beneficiary will incur
an annual maintenance fee equal to the lesser of $30 or 2% of contract value
if the contract value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender request.
Finally, transfers in excess of 20 per year will incur a $10 transfer fee.
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 deduction from the value of the contract to pay some or all of these
taxes. We generally will deduct the state premium tax charge at the time of a
withdrawal or surrender of your Contract or at the time you elect to begin
receiving annuity payments. However, we also reserve the right to deduct the
charge from each purchase payment at the time the tax is imposed, if earlier.
In the states that impose a premium tax on us, the current rates range up to
3.5%. It is 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. The
transfer fee is deducted before the market value adjustment, if any, is
calculated. There is a different transfer fee under the beneficiary
continuation option.
91
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS FLEXELITE
CONTRACT? continued
COMPANY TAXES
We pay company income taxes on the taxable corporate earnings created by this
separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the contract. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividend received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract. We reserve
the right to change these tax practices.
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 2007, the fees of these funds ranged from
0.37% to 1.65% annually. For certain funds, expenses are reduced pursuant to
expense waivers and comparable arrangements. In general, these expense waivers
and comparable arrangements are not guaranteed, and may be terminated at any
time. For additional information about these fund fees, please consult the
prospectuses for the funds.
9: HOW CAN I ACCESS MY MONEY?
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 10.
92
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. An assignment of the contract
terminates any automated withdrawal program that you had in effect.
Income taxes, tax penalties, withdrawal charges, and certain restrictions may
apply to automated withdrawals. For a more complete explanation, see
Section 10.
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.
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT?
The tax considerations associated with an annuity vary depending on whether
the contract is (i) owned by an individual or non-natural person, and not
associated with a tax-favored retirement plan, or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. 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. Cost
basis for a tax-favored retirement plan is provided only in limited
circumstances, such as for contributions to a Roth IRA or nondeductible IRA
contributions.
The discussion includes a description of certain spousal rights under the
contract, and 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). Depending on the state in which your annuity
is issued, we may offer certain spousal benefits to civil union couples. You
should be aware, however, that federal tax law does not recognize civil
unions. Therefore, we cannot permit a civil union partner to continue the
annuity upon the death of the first partner under the annuity's "spousal
continuance" provision. Civil union couples should consider that limitation
before selecting a spousal benefit under the annuity.
NONQUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Nonqualified Annuity is owned by an
individual or non-natural person and is not associated with a tax-favored
retirement plan.
TAXES PAYABLE BY YOU
We believe this annuity 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. Charges for investment advisory fees that are taken
from the contract are treated as a partial withdrawal from the contract and
will be reported as such to the contract owner.
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 should be
treated for federal income tax purposes as a partial withdrawal from the
contract. If this were the case, the charge for this benefit 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.
93
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT? continued
You must commence annuity payments no later than the first day of the calendar
month next following the maximum Annuity Date for your contract. Please refer
to your annuity contract for the applicable maximum Annuity Date. For some of
our contracts, you are able to choose to defer the Annuity Date beyond the
default Annuity Date described in your contract. However, the IRS may not then
consider your contract to be an annuity under the tax law.
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.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of purchase payments until all purchase payments have been returned.
After all purchase payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefit programs or as a
systematic payment are taxed under these rules. 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. If you transfer your contract for less than
full consideration, such as by gift, you will also 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.
If you choose to receive payments under an interest payment option, or a
beneficiary chooses to receive a death benefit under an interest payment
option, that election will be treated, for tax purposes, as surrendering your
annuity and will immediately subject any gain in the contract to income tax.
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 FOR EARLY WITHDRAWAL FROM A NONQUALIFIED ANNUITY CONTRACT
You may owe a 10% tax penalty on the taxable part of distributions received
from your Nonqualified annuity contract 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;
.. generally 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 and modification of payments during that time period will 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).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
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. 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.
94
If an 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.
Generally, such pre-August 14, 1982 withdrawals are treated as a recovery of
your investment in the contract first until purchase payments made before
August 14, 1982 are withdrawn. Moreover, any income allocable to purchase
payments made before August 14, 1982, is not subject to the 10% tax penalty.
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 in the Annuity Qualification
section. Tax consequences to the beneficiary vary depending upon the Death
Benefit payment option selected. Generally, for payment of the Death Benefit
.. As a lump sum payment: the beneficiary is taxed on gain in the contract.
.. Within 5 years of death of owner: the beneficiary is taxed as amounts are
withdrawn (in this case gain is treated as being distributed first).
.. Under an annuity or annuity settlement option with distribution beginning
within one year of the date of death of the owner: the beneficiary is taxed
on each payment (part will be treated as gain and part as return of
purchase payments).
Considerations for Contingent Annuitants:
We may allow the naming of a contingent annuitant when a Nonqualified annuity
contract is held by a pension plan or a tax favored retirement plan. In such a
situation, the annuity may no longer qualify for tax deferral where the
annuity contract continues after the death of the Annuitant. Note that in
certain annuity contracts issued by Pruco Life Insurance Company and Pruco
Life Insurance Company of New Jersey, we allow for the naming of a
co-annuitant, which also is used to mean the successor annuitant (and not
another life used for measuring the duration of an annuity payment option).
Like in the case of a contingent annuitant, the annuity may no longer qualify
for tax deferral where the contract continues after the death of the annuitant.
DISTRIBUTIONS
Taxable amounts distributed from an annuity 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 (3) exemptions unless
you designate a different withholding status. If no U.S. taxpayer
identification number is provided, we will automatically withhold using single
with zero exemptions as the default. 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
discussion below regarding withholding rules for a Qualified annuity.
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.
Entity Owners
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract over its cost basis will be subject to tax annually.
Where a contract is structured so that it is owned by a grantor trust but the
annuitant is not the grantor, then the contract is required to terminate upon
the death of the grantor if the grantor pre-deceases the annuitant under
Section 72(s) of the Code. Under this circumstance, the contract value will be
paid out to the beneficiary and it is not eligible for the death benefit
provided under the contract.
ANNUITY QUALIFICATION
Diversification and Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an annuity must be diversified, according to certain rules
under the Internal Revenue Code. Each portfolio is required to diversify its
investments each quarter so that no more than 55% of the value of its assets
is represented by any one investment, no more than 70% is represented by any
two investments, no more than 80% is represented by any three investments, and
no more than 90% is represented by any four investments. Generally, securities
of a single issuer are treated as
95
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT? continued
one investment and obligations of each U.S. Government agency and
instrumentality (such as the Government National Mortgage Association) are
treated as issued by separate issuers. In addition, any security issued,
guaranteed or insured (to the extent so guaranteed or insured) by the United
States or an instrumentality of the U.S. will be treated as a security issued
by the U.S. Government or its instrumentality, where applicable. We believe
the portfolios underlying the variable investment options of the annuity meet
these diversification requirements.
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 might have on transfers between
the investment options offered pursuant to this Prospectus. We reserve the
right to take any action, including modifications to your annuity or the
investment options, required to comply with such guidelines if promulgated.
Any such changes will apply uniformly to affected owners and will be made with
such notice to affected owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Nonqualified Annuity Contracts.
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 the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of
such designated beneficiary (provided such payments begin within one year of
your death). 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. Additionally, if the annuity 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. For Nonqualified annuity contracts
owned by a non-natural person, the required distribution rules apply upon the
death of the annuitant. This means that for a contract held by a non-natural
person (such as a trust) for which there is named a co-annuitant, then such
required distributions will be triggered by the death of the first
co-annuitants to die.
Changes In Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your annuity 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.
QUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Qualified annuity is an annuity
contract with applicable endorsements for a tax-favored plan or a Nonqualified
annuity contract held by a tax-favored retirement plan.
The following is a general discussion of the tax considerations for Qualified
annuity contracts. This annuity may or may not be available for all types of
the tax-favored retirement plans discussed below. This discussion assumes that
you have satisfied the eligibility requirements for any tax-favored retirement
plan. Please consult your Financial Professional prior to purchase to confirm
if this contract is available for a particular type of tax-favored retirement
plan or whether we will accept the type of contribution you intend for this
contract.
A Qualified annuity may typically be purchased for use in connection with:
.. Individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a) and 408(b) of the Code;
.. Roth IRAs under Section 408A of the Code;
.. A corporate Pension or Profit-sharing plan (subject to 401(a) of the Code);
.. H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code);
.. Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax
Deferred Annuities or TDAs);
.. Section 457 plans (subject to 457 of the Code).
A Nonqualified annuity may also be purchased by a 401(a) trust or custodial
IRA or Roth IRA account, or a Section 457 plan, which can hold other
permissible assets. The terms and administration of the trust or custodial
account or plan in accordance with the laws and regulations for 401(a) plans,
IRAs or Roth IRAs, or a Section 457 plan, as applicable, are the
responsibility of the applicable trustee or custodian.
96
You should be aware that tax favored plans such as IRAs generally provide
income 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 benefits (such as income tax
deferral and income tax free transfers).
TYPES OF TAX-FAVORED PLANS
IRAs. If you buy an annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" and "Roth IRA
Disclosure Statement" which accompany the prospectus contain 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 annuity by notifying us in
writing, and we will refund all of the purchase payments under the annuity
(or, if provided by applicable state law, the amount credited under the
annuity, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers. Subject to the minimum purchase payment
requirements of an annuity, you may purchase an annuity for an IRA in
connection with a "rollover" of amounts from a qualified retirement plan, as a
transfer from another IRA, by making a single contribution consisting of your
IRA contributions and catch-up contributions, if applicable, attributable to
the prior year and the current year during the period from January 1 to
April 15, or as a current year contribution. In 2008 the contribution limit is
$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, allowing these individuals an additional $1,000 contribution each
year. The catch-up amount is not indexed for inflation.
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 an annuity, you can make regular IRA
contributions under the annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA. In some circumstances, non-spouse
beneficiaries may directly roll over to an IRA amounts due from qualified
plans, 403(b) plans, and governmental 457(b) plans.
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;
.. 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 required minimum distributions 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 "required minimum distribution" rules
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier regarding a Nonqualified annuity. In addition to this
normal tax liability, you may also be liable for the following, depending on
your actions:
.. A 10% early withdrawal penalty described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a required minimum distribution, also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $46,000 in 2008 ($45,000 in 2007) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as compensation for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2008, this limit is $230,000 ($225,000
for 2007);
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $15,500 in 2008 with the employer making
these contributions to the SEP. However, no new "salary reduction" or
"SARSEPs" can be established after 1996. Individuals participating in a
SARSEP who are age 50 or above by the end of the year will be permitted to
contribute an additional $5,000 in 2008. These amounts are indexed for
inflation. These annuities are not available for SARSEPs. You will also be
provided the same information, and have the same "free look" period, as you
would have if you purchased the contract for a standard IRA.
97
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT? continued
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. 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 earnings will be taxed generally in the same
manner as distributions from a traditional IRA.
.. 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.
Subject to the minimum purchase payment requirements of an annuity, if you
meet certain income limitations you may purchase an annuity for a Roth IRA in
connection with a "rollover" of amounts of another traditional IRA, conduit
IRA, SEP, SIMPLE-IRA or Roth IRA by making a single contribution consisting of
your Roth IRA contributions and catch-up contributions, if applicable,
attributable to the prior year and the current year during the period from
January 1 to April 15 of the current year, or with a current contribution. The
Code permits persons who meet certain income limitations (generally, adjusted
gross income under $100,000) who are not married filing a separate return 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. Beginning
January 2008, an individual receiving an eligible rollover distribution from
an employer sponsored retirement plan under sections 401(a) or 403(b) of the
Code can directly roll over contributions to a Roth IRA, subject to the same
income limits. This conversion triggers current taxation (but is not subject
to a 10% early distribution penalty). Once an annuity has been purchased,
regular Roth IRA contributions will be accepted to the extent permitted by
law. In addition, an individual receiving an eligible rollover distribution
from a designated Roth account under an employer plan may roll over the
distribution to a Roth IRA even if the individual is not eligible to make
regular contributions to a Roth IRA. Until 2010, participants with an adjusted
gross income greater than $100,000 are not permitted to roll over funds from
an employer plan, including a Roth 401(k) distribution, to a Roth IRA.
TDAs. You may own a Tax Deferred Annuity (also known as a TDA, Tax Sheltered
Annuity (TSA), 403(b) plan or 403(b) annuity) generally if you are either an
employer or employee of a tax-exempt organization (as defined under Code
Section 501(c)(3)) or a public educational organization, and you may make
contributions to a TDA so long as your rights (or your employee's rights) to
the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are
not taxable until distribution. You may also make contributions to a TDA under
a salary reduction agreement, generally up to a maximum of $15,500 in 2008.
Individuals participating in a TDA who are age 50 or above by the end of the
year will be permitted to contribute an additional $5,000 in 2008. This amount
is indexed for inflation. Further, you may roll over TDA amounts to another
TDA or an IRA. You may also roll over TDA amounts to a qualified retirement
plan, a SEP and a 457 government plan. A contract may generally only qualify
as a TDA if distributions of salary deferrals (other than "grandfathered"
amounts held as of December 31, 1988) may be made only on account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
.. Your total and permanent disability; or
.. Hardship (under limited circumstances, and only related to salary
deferrals, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1st of the calendar year after the calendar year you turn age 70 1/2 or
retire, whichever is later. These distribution limits do not apply either to
transfers or exchanges of investments under the contract, or to any "direct
transfer" of your interest in the contract to another TDA or to a mutual fund
"custodial account" described under Code Section 403(b)(7). Employer
contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Final regulations related to 403(b) contracts were issued in 2007. Under these
final regulations, certain contract exchanges may be accepted only if the
employer and the issuer have entered into the required information-sharing
agreements. Such agreements must be in place by January 1, 2009. We do not
currently accept transfers of funds under 403(b) contracts. Funds can only be
added to the contract as a current salary deferral under an agreement with
your employer or as a direct rollover from another employer plan. We intend to
begin accepting such transfers in the future when we can comply with the new
regulations.
98
REQUIRED MINIMUM DISTRIBUTIONS AND PAYMENT OPTIONS
If you hold the contract under an IRA (or other tax-favored plan), required
minimum distribution rules 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. For a TDA or a 401(a) plan for
which the participant is not a greater than 5% owner of the employer, this
required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the Owner's lifetime. 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 at 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 required minimum distribution not made in a timely manner.
Required minimum distributions are calculated based on the sum of the account
value and the actuarial value of any additional death benefits and benefits
from optional riders that you have purchased under the contract. As a result,
the required minimum distributions may be larger than if the calculation were
based on the account value only, which may in turn result in an earlier (but
not before the required beginning date) distribution of amounts under the
annuity and an increased amount of taxable income distributed to the annuity
owner, and a reduction of death benefits and the benefits of any optional
riders.
You can use the Minimum Distribution option to satisfy the required minimum
distribution rules for an annuity without either beginning annuity payments or
surrendering the annuity. We will distribute to you the required minimum
distribution amount, less any other partial withdrawals that you made during
the year. Such amount will be based on the value of the contract as of
December 31 of the prior year, but is determined without regard to other
contracts you may own.
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. If you inherit more than one Roth IRA from the same owner,
similar rules apply.
Required Distributions Upon Your Death for Qualified Annuity Contracts
Upon your death under an IRA, Roth IRA, 403(b) or other employer sponsored
plan, the designated beneficiary may generally elect to continue the contract
and receive required minimum distributions under the contract instead of
receiving the death benefit in a single payment. The available payment options
will depend on whether you die before the date required minimum distributions
under the Code were to begin, whether you have named a designated beneficiary
and whether that beneficiary is your surviving spouse.
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by December 31st of the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated beneficiary (as long
as payments begin by December 31st of the year following the year of
death). However, if your surviving spouse is the beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31st of the year
following the year of death or December 31st of the year in which you would
have reached age 70 1/2, which ever is later. Additionally, 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.
.. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out by December 31st of the year including the five year
anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31st of the year following the
year of death, such contract is deemed to have no designated beneficiary.
.. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31st of the
year following the year of death, such contract is deemed to have no
designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in a Qualified annuity contract continue to be tax
deferred. Amounts withdrawn each year, including amounts that are required to
be withdrawn under the required minimum distribution rules, are subject to
tax. You may wish to consult a professional tax advisor for tax advice as to
your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
TAX PENALTY FOR EARLY WITHDRAWALS FROM QUALIFIED ANNUITY CONTRACTS
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain
age 59 1/2. Amounts are not subject to this tax penalty if:
99
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
FLEXELITE CONTRACT? continued
.. 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
.. generally 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 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
We will withhold federal income tax at the rate of 20% for any eligible
rollover distribution paid by us to or for a plan participant, unless such
distribution is "directly" rolled over into another qualified plan, IRA
(including the IRA variations described above), SEP, 457 government plan or
TDA. An eligible rollover distribution is defined under the tax law as a
distribution from an employer plan under 401(a), a TDA or a 457 governmental
plan, excluding any distribution that is part of a series of substantially
equal payments (at least annually) made over the life expectancy of the
employee or the joint life expectancies of the employee and his designated
beneficiary, any distribution made for a specified period of 10 years or more,
any distribution that is a required minimum distribution and any hardship
distribution. Regulations also specify certain other items which are not
considered eligible rollover distributions. For all other distributions,
unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of the withholding certificate that you file with us.
If you do not file a certificate, we will automatically withhold federal taxes
on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions. If no U.S. taxpayer identification number is provided, we will
automatically withhold using single with zero exemptions as the default; 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. There may be additional state income tax
withholding requirements.
ERISA 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 in the applicable sections of
this Prospectus. Information about sales representatives and commissions may
be found in the sections of this Prospectus addressing distribution of the
annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS - QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a
100
Death Benefit to your spouse if you are married and die before you begin
receiving your benefit. This benefit must be available in the form of an
annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
beneficiaries, you may elect to have a beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election
and waives his or her right to receive the QPSA. If your spouse consents to
the alternate beneficiary, your spouse will receive no benefits from the plan
upon your death. Any QPSA waiver prior to your attaining age 35 will become
null and void on the first day of the calendar year in which you attain age
35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the IRA Disclosure Statement or Roth IRA Disclosure
Statement, as applicable.
GENERATION-SKIPPING TRANSFERS
If you transfer your contract to a person two or more generations younger than
you (such as a grandchild or grandniece) or to a person that is more than
37 1/2 years younger than you, there may be generation-skipping transfer tax
consequences.
11. OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company (Pruco Life) is a stock life insurance company
which was organized on December 23, 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 October 13, 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, 2007, 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 811-07325. You may read and copy
any filings made by Pruco Life with the SEC at the SEC's Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information on
the operation of the Public Reference Room by calling (202) 551-8090. 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.
Pruco Life conducts the bulk of its operations through staff employed by it or
by affiliated companies within the Prudential Financial family. Certain
discrete functions have been delegated to non-affiliates that could be deemed
"service providers" under the Investment Company Act of 1940. The entities
engaged by Pruco Life may change over time. As of December 31, 2007,
non-affiliated entities that could be deemed service providers to Pruco Life
and/or another insurer within the Prudential Annuities business unit consisted
of the following: ADP (proxy tabulation services) located at 100 Burma Road
Jersey City, New Jersey 07305, Alliance-One Services Inc. (administration of
variable life policies) located at 55 Hartland Street East Hartford CT 06108,
BISYS Retirement Services (qualified plan administrator) located at 200 Dryden
Road Dresher, PA 19025, Blue Frog Solutions, Inc. (order entry systems
provider) located at 555 SW 12th Ave, Suite 202 Pompano Beach, FL 33069, EBIX
Inc. (order-entry system) located at 5 Concourse Parkway Suite 3200 Atlanta,
GA 30328, Diversified Information Technologies Inc. (records management)
located at 123 Wyoming Ave Scranton, PA 18503, Fosdick Fulfillment Corp.
(fulfillment of prospectuses and marketing materials) located at 26 Barnes
Industrial Park Road North Wallingford, CT 06492, Insurance Technologies
(annuity
101
11. OTHER INFORMATION continued
illustrations) located at Two South Cascade Avenue, Suite 200 Colorado
Springs, CO 80903, Lason Systems Inc. (contract printing and mailing) located
at 1305 Stephenson Highway, Troy, MI 48083, Morningstar Associates LLC (asset
allocation recommendations) located at 225 West Wacker Drive, Chicago, IL
60606, Pershing LLC (order-entry systems provider) located at One Pershing
Plaza Jersey City, NJ 07399, Personix (printing and fulfillment of
confirmations and client statements) located at 13100 North Promenade
Boulevard Stafford, TX 77477, RR Donnelley Receivables Inc. (printing annual
reports and prospectuses) located at 111 South Wacker Drive Chicago, IL
60606-4301, Stanton Group (qualified plan administrator) located at Two Pine
Tree Drive Suite 400 Arden Hills, MN 55112 Attention: Alerus Retirement
Solutions, State Street (accumulation unit value calculations) located at
State Street Financial Center One Lincoln Street Boston, Massachusetts 02111,
The Harty Press, Inc. (printing and fulfillment of marketing materials)
located at 25 James Street, New Haven, CT 06513, VG Reed & Sons Inc. (printing
and fulfillment of annual reports) located at 1002 South 12th Street
Louisville, KY 40210, William B. Meyer (printing and fulfillment of
prospectuses and marketing materials) located at 255 Long Beach Boulevard
Stratford, CT 06615.
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 Annuities Distributors, Inc. (PAD), a wholly-owned subsidiary of
Prudential Annuities, Inc., is the distributor and principal underwriter of
the annuities offered through this prospectus. PAD acts as the distributor of
a number of annuity and life insurance products, and is the co-distributor of
the Advanced Series Trust. PAD's principal business address is One Corporate
Drive, Shelton, Connecticut 06484. PAD is registered as a broker-dealer under
the Securities Exchange Act of 1934 (Exchange Act), and is a member of the
Financial Industry Regulatory Authority (FINRA).
The contract is offered on a continuous basis. PAD enters into distribution
agreements with broker/dealers who are registered under the Exchange Act and
with entities that may offer the contract but are exempt from registration
(firms). Applications for the contract are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, PAD may
offer the contract directly to potential purchasers.
Commissions are paid to firms on sales of the contract according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her 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. We may also provide compensation to the distributing firm
for providing ongoing service to you in relation to the contract. Commissions
and other compensation paid in relation to the contract do not result in any
additional charge to you or to the separate account.
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 PAD may enter into compensation arrangements with
certain broker/ dealer 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 services and/or other
services they provide to us or our affiliates. These services may include, but
are not limited to: educating customers of the firm on the contract's
features; conducting due diligence and analysis; providing office access,
operations and systems support; holding seminars intended to educate
registered representatives and make them more knowledgeable about the
contract; providing a dedicated marketing coordinator; providing priority
sales desk support; and providing expedited marketing compliance approval to
PAD.
We or PAD also may compensate third-party vendors, for services that such
vendors render to broker-dealer firms. To the extent permitted by the FINRA
rules and other applicable laws and regulations, PAD may pay or allow other
promotional incentives or payments in the forms 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.
The list below identifies three general types of payments that PAD pays which
are broadly defined as follows:
.. Percentage Payments based upon "Assets under Management" or "AUM": This
type of payment is a percentage payment that is based upon the total amount
held in all Pruco Life products that were sold through the firm (or its
affiliated broker-dealers).
.. Percentage Payments based upon sales: This type of payment is a percentage
payment that is based upon the total amount of money received as purchase
payments under Pruco Life annuity products sold through the firm (or its
affiliated broker-dealers).
102
.. Fixed Payments: These types of payments are made directly to or in
sponsorship of the firm (or its affiliated broker-dealers). Examples of
arrangements under which such payments may be made currently include, but
are not limited to: sponsorships, conferences (national, regional and top
producer), speaker fees, promotional items and reimbursements to firms for
marketing activities or services paid by the firms and/or their individual
representatives. The amount of these payments varies widely because some
payments may encompass only a single event, such as a conference, and
others have a much broader scope. In addition, we may make payments upon
the initiation of a relationship for systems, operational and other support.
The list below includes the names of the firms (or their affiliated
broker/dealers) that we are aware (as of December 31, 2007) received payment
with respect to annuity business during 2007 (or as to which a payment amount
was accrued during 2007). The firms listed below include payments in
connection with products issued by Pruco Life Insurance Company and Pruco Life
Insurance Company of New Jersey. Your registered representative can provide
you with more information about the compensation arrangements that apply upon
the sale of the contract. During 2007, the least amount paid, and greatest
amount paid, were $ 2,072 and $1,325,582, respectively.
NAME OF FIRM:
Advantage Capital Corporation
AIG Financial Advisors, Inc.
Citigroup Global Markets, Inc.
Financial Network Investment Corp.
FSC Securities Corp.
ING Financial Partners
Merrill Lynch
Morgan Stanley
Multi-Financial Securities Corporation
Primevest
Raymond James & Associates
Raymond James Financial Services
Royal Alliance
Stifel Nicolaus & Co., Inc.
Sunamerica Securities, Inc.
UBS Financial Services
Wachovia
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 contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PAD 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
Pruco Life is subject to legal and regulatory actions in the ordinary course
of its businesses. Pending legal and regulatory actions include proceedings
specific to Pruco Life and proceedings generally applicable to business
practices in the industries in which Pruco Life operates. Pruco Life is
subject to class action lawsuits and individual lawsuits involving a variety
of issues, including sales practices, underwriting practices, claims payment
and procedures, additional premium charges for premiums paid on a periodic
basis, denial or delay of benefits, return of premiums or excessive premium
charges and breaching fiduciary duties to customers. In its annuity
operations, Pruco Life is subject to litigation involving class action
lawsuits and other litigation alleging, among other things, that Pruco Life
made improper or inadequate disclosures in connection with the sale of annuity
products or charged excessive or impermissible fees on these products,
recommended unsuitable products to customers, mishandled customer accounts or
breached fiduciary duties to customers. Pruco Life is also subject to
litigation arising out of its general business activities, such as its
investments and third-party contracts. Regulatory authorities from time to
time make inquiries and conduct investigations and examinations relating
particularly to Pruco Life and its businesses and products. In addition, Pruco
Life, along with other participants in the businesses in which Pruco Life
engage, may be subject from time to time to investigations, examinations and
inquiries, in some cases industry-wide, concerning issues or matters upon
which such regulators have determined to focus. In some of its pending legal
and regulatory actions, parties are seeking large and/or indeterminate
amounts, including punitive or exemplary damages. The outcome of a litigation
or regulatory matter, and the amount or range of potential loss at any
particular time, is often inherently uncertain.
Pruco Life's litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, the outcome cannot be
predicted. It is possible that the results of operations or cash flow in a
particular quarterly or annual period could be materially affected by an
ultimate unfavorable resolution of pending litigation and regulatory matters
depending, in part, upon the results of operations or cash flow for such
period. In light of the unpredictability of Pruco Life's litigation and
regulatory matters, it is also possible that in certain cases an ultimate
unfavorable resolution of one or more pending litigation or regulatory matters
103
11. OTHER INFORMATION continued
could have a material adverse effect on Pruco Life's financial position.
Management believes, however, that based on information currently known to it,
the ultimate outcome of all pending litigation and regulatory matters, after
consideration of applicable reserves and rights to indemnification, is not
likely to have a material adverse effect on Pruco Life's financial position.
ASSIGNMENT
In general, 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 Section 4, "What Is The Death
Benefit?" 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 you assign the contract, that assignment will result in
the termination of any automated withdrawal program that had been in effect.
If the new owner wants to re-institute an automated withdrawal program, then
he/she needs to submit the forms that we require, in good order.
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 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
.. 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.
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:
MVA = [ ( 1 + I )//N/12// ] -1
---------
1 + J + .0025
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.
104
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:
MVA = [ ( 1 + I )//N/12// ] -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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6%(0.06)
J = 5%(0.05)
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
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
105
11. OTHER INFORMATION continued
The following computations would be made:
1) Determine the Market Value Adjustment factor.
N = 38
I = 6%(0.06)
J = 7%(0.07)
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6%(0.06)
J = [(61/365)X 0.05] + [((365 - 61)/365) X 0.04] = 0.0417
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the
(38/12) power -1 = 0.04871
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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%.
106
The following computations would be made:
1) Determine the Market Value Adjustment factor.
N = 38
I = 6%(0.06)
J = [(61/365)X 0.08] + [((365 - 61)/365) X 0.07] = 0.0717
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the
(38/12) power -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.01
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 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.
N = 38
I = 6%(0.06)
J = 5%(0.05)
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, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. 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, 2007 the interest rate declared by Pruco Life for a guarantee
period of 4 years (the number of whole years remaining plus 1) is 7%.
107
11. OTHER INFORMATION continued
The following computations would be made:
1) Determine the Market Value Adjustment factor.
N = 38
I = 6%(0.06)
J = 7%(0.07)
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
108
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. 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 19176. As discussed in the prospectus, if you
select certain optional benefits (e.g., Lifetime Five), we limit the
investment options to which you may allocate your Contract Value. In certain
of these accumulation unit value tables, we set forth accumulation unit values
that assume election of one or more of such optional benefits and allocation
of Contract Value to portfolios that currently are not permitted as part of
such optional benefits. Such unit values are set forth for general reference
purposes only, and are not intended to indicate that such portfolios may be
acquired along with those optional benefits.
STRATEGIC PARTNERS FLEXELITE
Pruco Life Insurance Company
PROSPECTUS
ACCUMULATION UNIT VALUES: (Base Death Benefit (Flex 1) 1.60)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period 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
1/1/2004 to 12/31/2004 $0.96574 $1.04212 519,492
1/1/2005 to 12/31/2005 $1.04212 $1.17505 279,576
1/1/2006 to 12/31/2006 $1.17505 $1.17730 236,479
1/1/2007 to 12/31/2007 $1.17730 $1.29763 185,731
- -----------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.04229 $1.12776 327,748
1/1/2005 to 12/31/2005 $1.12776 $1.23737 211,784
1/1/2006 to 12/31/2006 $1.23737 $1.37106 164,693
1/1/2007 to 12/31/2007 $1.37106 $1.47518 149,066
- -----------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.03683 $1.11832 189,864
1/1/2005 to 12/31/2005 $1.11832 $1.27756 35,197
1/1/2006 to 12/31/2006 $1.27756 $1.50460 49,799
1/1/2007 to 12/31/2007 $1.50460 $1.63594 44,950
- -----------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $0.99175 $0.98636 1,732,006
1/1/2005 to 12/31/2005 $0.98636 $0.99903 2,157,271
1/1/2006 to 12/31/2006 $0.99903 $1.02989 1,524,913
1/1/2007 to 12/31/2007 $1.02989 $1.06525 1,440,746
- -----------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.03180 $1.12172 1,441,905
1/1/2005 to 12/31/2005 $1.12172 $1.15421 791,358
1/1/2006 to 12/31/2006 $1.15421 $1.31265 421,287
1/1/2007 to 12/31/2007 $1.31265 $1.35766 363,757
A-1
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.00386 $1.14926 359,660
1/1/2005 to 12/31/2005 $1.14926 $1.31966 397,305
1/1/2006 to 12/31/2006 $1.31966 $1.55794 298,621
1/1/2007 to 12/31/2007 $1.55794 $1.58221 276,815
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.03928 $1.17378 980,943
1/1/2005 to 12/31/2005 $1.17378 $1.27649 900,240
1/1/2006 to 12/31/2006 $1.27649 $1.43576 927,514
1/1/2007 to 12/31/2007 $1.43576 $1.54297 950,894
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $0.97382 $1.07230 71,567
1/1/2005 to 4/29/2005 $1.07230 $0.98940 0
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.04209 $1.11577 192,135
1/1/2005 to 12/31/2005 $1.11577 $1.14907 128,530
1/1/2006 to 12/31/2006 $1.14907 $1.31251 69,880
1/1/2007 to 12/31/2007 $1.31251 $1.39273 63,364
- -------------------------------------------------------------------------------------------------------
SP T. Rowe Price 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
1/1/2004 to 12/31/2004 $0.95090 $0.99301 1,470,174
1/1/2005 to 12/31/2005 $0.99301 $1.13871 648,886
1/1/2006 to 12/31/2006 $1.13871 $1.18710 584,425
1/1/2007 to 12/31/2007 $1.18710 $1.26422 559,101
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.07623 $1.17676 9,469,017
1/1/2005 to 12/31/2005 $1.17676 $1.24626 8,775,371
1/1/2006 to 12/31/2006 $1.24626 $1.35784 5,451,257
1/1/2007 to 12/31/2007 $1.35784 $1.46121 4,518,514
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.07673 $1.15394 2,394,175
1/1/2005 to 12/31/2005 $1.15394 $1.20301 3,179,088
1/1/2006 to 12/31/2006 $1.20301 $1.28681 2,986,642
1/1/2007 to 12/31/2007 $1.28681 $1.38538 2,186,268
- -------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.08886 $1.20600 1,886,439
1/1/2005 to 12/31/2005 $1.20600 $1.30008 1,125,990
1/1/2006 to 12/31/2006 $1.30008 $1.47193 775,434
1/1/2007 to 12/31/2007 $1.47193 $1.51509 729,917
A-2
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------
SP 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
1/1/2004 to 12/31/2004 $1.02081 $1.21256 906,230
1/1/2005 to 12/31/2005 $1.21256 $1.24863 550,261
1/1/2006 to 12/31/2006 $1.24863 $1.40852 385,684
1/1/2007 to 12/31/2007 $1.40852 $1.33593 311,963
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.06394 $1.18378 2,586,101
1/1/2005 to 12/31/2005 $1.18378 $1.27280 2,332,131
1/1/2006 to 12/31/2006 $1.27280 $1.41424 1,904,867
1/1/2007 to 12/31/2007 $1.41424 $1.52034 1,735,517
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.04013 $1.20534 547,463
1/1/2005 to 12/31/2005 $1.20534 $1.26529 446,285
1/1/2006 to 12/31/2006 $1.26529 $1.47551 195,961
1/1/2007 to 12/31/2007 $1.47551 $1.41118 130,149
- ----------------------------------------------------------------------------------------------
SP International Value 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
1/1/2004 to 12/31/2004 $1.02601 $1.16945 525,090
1/1/2005 to 12/31/2005 $1.16945 $1.30965 660,686
1/1/2006 to 12/31/2006 $1.30965 $1.66419 554,380
1/1/2007 to 12/31/2007 $1.66419 $1.93404 519,518
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $0.95573 $1.05721 184,299
1/1/2005 to 4/29/2005 $1.05721 $0.98737 0
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $0.93944 $1.10534 1,479,218
1/1/2005 to 12/31/2005 $1.10534 $1.14515 732,772
1/1/2006 to 12/31/2006 $1.14515 $1.10524 661,034
1/1/2007 to 12/31/2007 $1.10524 $1.26405 586,601
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.17106 $1.26025 2,570,594
1/1/2005 to 12/31/2005 $1.26025 $1.29024 1,129,082
1/1/2006 to 12/31/2006 $1.29024 $1.39070 842,140
1/1/2007 to 12/31/2007 $1.39070 $1.42082 671,111
- ----------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.10183 $1.14172 3,829,364
1/1/2005 to 12/31/2005 $1.14172 $1.15064 2,616,515
1/1/2006 to 12/31/2006 $1.15064 $1.17420 1,702,419
1/1/2007 to 12/31/2007 $1.17420 $1.26474 1,269,528
A-3
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------------
SP Prudential U.S. 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
1/1/2004 to 12/31/2004 $1.05808 $1.26419 219,324
1/1/2005 to 12/31/2005 $1.26419 $1.46554 192,853
1/1/2006 to 12/31/2006 $1.46554 $1.58082 118,334
1/1/2007 to 12/31/2007 $1.58082 $1.81748 102,776
- ----------------------------------------------------------------------------------------------------------
SP 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
1/1/2004 to 12/31/2004 $1.01108 $0.98594 1,185,252
1/1/2005 to 12/31/2005 $0.98594 $0.99462 379,320
1/1/2006 to 12/31/2006 $0.99462 $1.10025 324,210
1/1/2007 to 12/31/2007 $1.10025 $1.15174 298,286
- ----------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $1.00077 $1.08939 58,732
1/1/2005 to 12/31/2005 $1.08939 $1.23467 84,874
1/1/2006 to 12/31/2006 $1.23467 $1.20726 66,240
1/1/2007 to 12/31/2007 $1.20726 $1.36925 50,619
- ----------------------------------------------------------------------------------------------------------
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
1/1/2004 to 12/31/2004 $0.95387 $0.93892 856,847
1/1/2005 to 4/29/2005 $0.93892 $0.83813 0
- ----------------------------------------------------------------------------------------------------------
SP 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
1/1/2004 to 12/31/2004 $1.05634 $1.21164 1,093,796
1/1/2005 to 12/31/2005 $1.21164 $1.38795 239,742
1/1/2006 to 12/31/2006 $1.38795 $1.65375 170,864
1/1/2007 to 12/31/2007 $1.65375 $1.94566 131,334
- ----------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99870 $9.99781 0
1/1/2006 to 12/31/2006 $9.99781 $11.38426 53,943
1/1/2007 to 12/31/2007 $11.38426 $12.27510 50,357
- ----------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth Portfolio
3/14/2005* to 12/02/2005 $10.09321 $11.71644 0
- ----------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value Portfolio
3/14/2005* to 12/31/2005 $10.07954 $10.31589 0
1/1/2006 to 12/31/2006 $10.31589 $12.32152 0
1/1/2007 to 12/31/2007 $12.32152 $11.69400 0
- ----------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income Portfolio
3/14/2005* to 12/31/2005 $10.05465 $10.27041 613
1/1/2006 to 12/31/2006 $10.27041 $11.85492 2,008
1/1/2007 to 12/31/2007 $11.85492 $12.26546 1,381
- ----------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth + Value Portfolio
3/14/2005* to 12/02/2005 $10.04992 $11.32871 0
- ----------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500 Portfolio
3/14/2005* to 12/31/2005 $10.04972 $10.40528 0
1/1/2006 to 12/31/2006 $10.40528 $11.53220 7,864
1/1/2007 to 12/31/2007 $11.53220 $11.58612 11,890
A-4
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
3/14/2005* to 12/31/2005 $10.06642 $10.33775 0
1/1/2006 to 12/31/2006 $10.33775 $11.89059 0
1/1/2007 to 12/31/2007 $11.89059 $11.68985 0
- --------------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation Portfolio
formerly, AST American Century Strategic Balanced Portfolio
3/14/2005* to 12/31/2005 $10.04186 $10.32060 0
1/1/2006 to 12/31/2006 $10.32060 $11.14052 0
1/1/2007 to 12/31/2007 $11.14052 $11.94219 490
- --------------------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99870 $10.01777 709
1/1/2006 to 12/31/2006 $10.01777 $11.02058 76,081
1/1/2007 to 12/31/2007 $11.02058 $11.84495 168,512
- --------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99870 $10.00777 0
1/1/2006 to 12/31/2006 $10.00777 $11.19746 118,037
1/1/2007 to 12/31/2007 $11.19746 $12.09240 183,213
- --------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
3/14/2005* to 12/31/2005 $10.14694 $12.02239 3,255
1/1/2006 to 12/31/2006 $12.02239 $16.18074 5,324
1/1/2007 to 12/31/2007 $16.18074 $12.74957 11,689
- --------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99870 $10.02777 5,377
1/1/2006 to 12/31/2006 $10.02777 $10.91230 44,365
1/1/2007 to 12/31/2007 $10.91230 $11.71433 62,590
- --------------------------------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.08475 $10.71961 0
1/1/2006 to 12/31/2006 $10.71961 $12.84370 0
1/1/2007 to 12/31/2007 $12.84370 $12.78943 0
- --------------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth Portfolio
formerly, AST DeAm Small-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.01116 $10.31628 916
1/1/2006 to 12/31/2006 $10.31628 $10.94179 0
1/1/2007 to 12/31/2007 $10.94179 $12.78395 0
- --------------------------------------------------------------------------------------------------------------------
AST DeAm Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04553 $10.02163 1,790
1/1/2006 to 12/31/2006 $10.02163 $11.83230 0
1/1/2007 to 12/31/2007 $11.83230 $9.57593 0
- --------------------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth Portfolio
3/14/2005* to 12/31/2005 $9.99870 $10.96320 484
1/1/2006 to 12/31/2006 $10.96320 $12.18419 1,440
1/1/2007 to 12/31/2007 $12.18419 $13.33590 1,273
- --------------------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha Portfolio
formerly, AST Global Allocation Portfolio
3/14/2005* to 12/31/2005 $10.01525 $10.62776 0
1/1/2006 to 12/31/2006 $10.62776 $11.62614 413
1/1/2007 to 12/31/2007 $11.62614 $11.66435 413
- --------------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
3/14/2005* to 12/31/2005 $10.03286 $10.76377 0
1/1/2006 to 12/31/2006 $10.76377 $11.65320 268
1/1/2007 to 12/31/2007 $11.65320 $13.07351 268
- --------------------------------------------------------------------------------------------------------------------
AST High Yield Portfolio
3/14/2005* to 12/31/2005 $9.97664 $9.86257 29,224
1/1/2006 to 12/31/2006 $9.86257 $10.71259 31,288
1/1/2007 to 12/31/2007 $10.71259 $10.80461 1,967
A-5
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -----------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $9.99870 $10.58316 0
1/1/2006 to 12/31/2006 $10.58316 $11.07077 1,032
1/1/2007 to 12/31/2007 $11.07077 $13.00360 1,032
- -----------------------------------------------------------------------------------------------------
AST JPMorgan International Equity Portfolio
3/14/2005* to 12/31/2005 $9.91372 $10.65770 1,055
1/1/2006 to 12/31/2006 $10.65770 $12.88158 7,194
1/1/2007 to 12/31/2007 $12.88158 $13.87448 8,997
- -----------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.07710 $10.56123 1,255
1/1/2006 to 12/31/2006 $10.56123 $12.31413 6,595
1/1/2007 to 12/31/2007 $12.31413 $11.75713 6,707
- -----------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture Portfolio
3/14/2005* to 12/31/2005 $9.99870 $9.95397 1,234
1/1/2006 to 12/31/2006 $9.95397 $10.75768 3,320
1/1/2007 to 12/31/2007 $10.75768 $11.23188 3,318
- -----------------------------------------------------------------------------------------------------
AST Marsico Capital Growth Portfolio
3/14/2005* to 12/31/2005 $10.12608 $10.90783 1,433
1/1/2006 to 12/31/2006 $10.90783 $11.51340 9,041
1/1/2007 to 12/31/2007 $11.51340 $13.02694 10,292
- -----------------------------------------------------------------------------------------------------
AST MFS Global Equity Portfolio
3/14/2005* to 12/31/2005 $9.96610 $10.48203 0
1/1/2006 to 12/31/2006 $10.48203 $12.82457 1,924
1/1/2007 to 12/31/2007 $12.82457 $13.80820 1,940
- -----------------------------------------------------------------------------------------------------
AST MFS Growth Portfolio
3/14/2005* to 12/31/2005 $10.03677 $10.76384 0
1/1/2006 to 12/31/2006 $10.76384 $11.61849 0
1/1/2007 to 12/31/2007 $11.61849 $13.16232 0
- -----------------------------------------------------------------------------------------------------
AST Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.06487 $10.35723 1,182
1/1/2006 to 12/31/2006 $10.35723 $11.64662 1,871
1/1/2007 to 12/31/2007 $11.64662 $11.77774 1,870
- -----------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.05559 $11.34064 1,721
1/1/2006 to 12/31/2006 $11.34064 $12.73152 1,414
1/1/2007 to 12/31/2007 $12.73152 $15.31219 4,548
- -----------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.02180 $10.88951 3,280
1/1/2006 to 12/31/2006 $10.88951 $11.87082 6,058
1/1/2007 to 12/31/2007 $11.87082 $12.05329 5,168
- -----------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond Portfolio
3/14/2005* to 12/31/2005 $9.99870 $10.06112 2,109
1/1/2006 to 12/31/2006 $10.06112 $10.28150 3,451
1/1/2007 to 12/31/2007 $10.28150 $10.80668 2,853
- -----------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99870 $10.03777 0
1/1/2006 to 12/31/2006 $10.03777 $10.66664 0
1/1/2007 to 12/31/2007 $10.66664 $11.41316 6,615
- -----------------------------------------------------------------------------------------------------
AST Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04850 $10.65131 480
1/1/2006 to 12/31/2006 $10.65131 $12.58550 3,420
1/1/2007 to 12/31/2007 $12.58550 $11.69149 3,582
A-6
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.02851 $10.35969 145
1/1/2006 to 12/31/2006 $10.35969 $11.47079 214
1/1/2007 to 12/31/2007 $11.47079 $12.00305 213
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond Portfolio
3/14/2005* to 12/31/2005 $9.94923 $9.45336 317
1/1/2006 to 12/31/2006 $9.45336 $9.88855 1,433
1/1/2007 to 12/31/2007 $9.88855 $10.67078 1,116
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources Portfolio
3/14/2005* to 12/31/2005 $10.00270 $11.74369 6,423
1/1/2006 to 12/31/2006 $11.74369 $13.39296 11,461
1/1/2007 to 12/31/2007 $13.39296 $18.52067 24,982
- --------------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
3/14/2005* to 12/31/2005 $9.88086 $12.06669 4,825
1/1/2006 to 12/31/2006 $12.06669 $15.98374 6,883
1/1/2007 to 12/31/2007 $15.98374 $22.57525 8,562
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Large Cap 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
1/1/2004 to 12/31/2004 $1.00180 $1.02749 87,502
1/1/2005 to 12/31/2005 $1.02749 $1.05188 67,596
1/1/2006 to 12/31/2006 $1.05188 $1.15075 44,804
1/1/2007 to 12/31/2007 $1.15075 $1.30013 39,102
- --------------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
3/20/2006* to 12/31/2006 $9.99870 $10.66600 11,810
1/1/2007 to 12/31/2007 $10.66600 $11.49517 9,552
- --------------------------------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Target Portfolio
3/20/2006* to 12/31/2006 $9.99870 $10.48825 0
1/1/2007 to 12/31/2007 $10.48825 $11.50076 0
- --------------------------------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
3/20/2006* to 12/31/2006 $9.99870 $10.58698 0
1/1/2007 to 12/31/2007 $10.58698 $11.31105 9,640
- --------------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $9.99870 $9.98048 0
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
A-7
STRATEGIC PARTNERS FLEXELITE
Pruco Life Insurance Company
PROSPECTUS
ACCUMULATION UNIT VALUES: (HDV, and Lifetime Five (Flex2) 2.75)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
Jennison Portfolio
3/14/2005* to 12/31/2005 $10.06117 $11.71852 0
1/1/2006 to 12/31/2006 $11.71852 $11.60950 0
1/1/2007 to 12/31/2007 $11.60950 $12.65264 0
- -------------------------------------------------------------------------------------------------------
Prudential Equity Portfolio
3/14/2005* to 12/31/2005 $10.04754 $11.00992 0
1/1/2006 to 12/31/2006 $11.00992 $12.06300 0
1/1/2007 to 12/31/2007 $12.06300 $12.83298 0
- -------------------------------------------------------------------------------------------------------
Prudential Global Portfolio
3/14/2005* to 12/31/2005 $9.98571 $11.24606 0
1/1/2006 to 12/31/2006 $11.24606 $13.09664 0
1/1/2007 to 12/31/2007 $13.09664 $14.07968 0
- -------------------------------------------------------------------------------------------------------
Prudential Money Market Portfolio
3/14/2005* to 12/31/2005 $9.99964 $10.02827 0
1/1/2006 to 12/31/2006 $10.02827 $10.22412 0
1/1/2007 to 12/31/2007 $10.22412 $10.45225 0
- -------------------------------------------------------------------------------------------------------
Prudential Stock Index Portfolio
3/14/2005* to 12/31/2005 $10.05569 $10.29682 0
1/1/2006 to 12/31/2006 $10.29682 $11.57989 0
1/1/2007 to 12/31/2007 $11.57989 $11.84277 0
- -------------------------------------------------------------------------------------------------------
Prudential Value Portfolio
3/14/2005* to 12/31/2005 $10.03704 $11.16744 0
1/1/2006 to 12/31/2006 $11.16744 $13.03651 0
1/1/2007 to 12/31/2007 $13.03651 $13.09025 0
- -------------------------------------------------------------------------------------------------------
SP Aggressive Growth Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.03144 $10.89452 0
1/1/2006 to 12/31/2006 $10.89452 $12.11717 0
1/1/2007 to 12/31/2007 $12.11717 $12.87581 0
- -------------------------------------------------------------------------------------------------------
SP AIM Aggressive Growth Portfolio
3/14/2005* to 4/29/2005 $10.06839 $9.47634 0
- -------------------------------------------------------------------------------------------------------
SP AIM Core Equity Portfolio
3/14/2005* to 12/31/2005 $10.02472 $10.15397 0
1/1/2006 to 12/31/2006 $10.15397 $11.46923 0
1/1/2007 to 12/31/2007 $11.46923 $12.03388 0
- -------------------------------------------------------------------------------------------------------
SP T. Rowe Price Large-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.02972 $12.03478 0
1/1/2006 to 12/31/2006 $12.03478 $12.40608 0
1/1/2007 to 12/31/2007 $12.40608 $13.06336 0
- -------------------------------------------------------------------------------------------------------
SP Balanced Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.01669 $10.58751 76,778
1/1/2006 to 12/31/2006 $10.58751 $11.40644 64,795
1/1/2007 to 12/31/2007 $11.40644 $12.13741 61,455
- -------------------------------------------------------------------------------------------------------
SP Conservative Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.00674 $10.41736 40,172
1/1/2006 to 12/31/2006 $10.41736 $11.01825 18,272
1/1/2007 to 12/31/2007 $11.01825 $11.72848 16,770
A-8
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------------
SP Davis Value Portfolio
3/14/2005* to 12/31/2005 $10.02465 $10.54231 0
1/1/2006 to 12/31/2006 $10.54231 $11.80245 0
1/1/2007 to 12/31/2007 $11.80245 $12.01119 0
- ------------------------------------------------------------------------------------------------------
SP Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.05686 $10.42337 0
1/1/2006 to 12/31/2006 $10.42337 $11.62655 0
1/1/2007 to 12/31/2007 $11.62655 $10.90329 0
- ------------------------------------------------------------------------------------------------------
SP Growth Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.02857 $10.75346 165,231
1/1/2006 to 12/31/2006 $10.75346 $11.81507 164,735
1/1/2007 to 12/31/2007 $11.81507 $12.55835 165,751
- ------------------------------------------------------------------------------------------------------
SP Large Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.07536 $10.39807 0
1/1/2006 to 12/31/2006 $10.39807 $11.99010 0
1/1/2007 to 12/31/2007 $11.99010 $11.33766 0
- ------------------------------------------------------------------------------------------------------
SP International Value Portfolio
3/14/2005* to 12/31/2005 $9.91175 $10.58053 0
1/1/2006 to 12/31/2006 $10.58053 $13.29449 0
1/1/2007 to 12/31/2007 $13.29449 $15.27652 0
- ------------------------------------------------------------------------------------------------------
SP MFS Capital Opportunities Portfolio
3/14/2005* to 12/31/2005 $10.05557 $9.59656 0
- ------------------------------------------------------------------------------------------------------
SP Mid Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.02785 $10.60799 0
1/1/2006 to 12/31/2006 $10.60799 $10.12419 0
1/1/2007 to 12/31/2007 $10.12419 $11.44876 0
- ------------------------------------------------------------------------------------------------------
SP PIMCO High Yield Portfolio
3/14/2005* to 12/31/2005 $9.98851 $10.05567 0
1/1/2006 to 12/31/2006 $10.05567 $10.71775 0
1/1/2007 to 12/31/2007 $10.71775 $10.82555 0
- ------------------------------------------------------------------------------------------------------
SP PIMCO Total Return Portfolio
3/14/2005* to 12/31/2005 $9.99777 $10.08669 0
1/1/2006 to 12/31/2006 $10.08669 $10.17850 0
1/1/2007 to 12/31/2007 $10.17850 $10.83997 0
- ------------------------------------------------------------------------------------------------------
SP Prudential U.S. Emerging Growth Portfolio
3/14/2005* to 12/31/2005 $10.03536 $11.65286 0
1/1/2006 to 12/31/2006 $11.65286 $12.42904 0
1/1/2007 to 12/31/2007 $12.42904 $14.12835 0
- ------------------------------------------------------------------------------------------------------
SP Small Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.02998 $10.42978 0
1/1/2006 to 12/31/2006 $10.42978 $11.40870 0
1/1/2007 to 12/31/2007 $11.40870 $11.80868 0
- ------------------------------------------------------------------------------------------------------
SP Strategic Partners Focused Growth Portfolio
3/14/2005* to 12/31/2005 $10.07318 $11.89439 0
1/1/2006 to 12/31/2006 $11.89439 $11.50025 0
1/1/2007 to 12/31/2007 $11.50025 $12.89652 0
- ------------------------------------------------------------------------------------------------------
SP Technology Portfolio
3/14/2005* to 12/31/2005 $10.04271 $9.58302 0
- ------------------------------------------------------------------------------------------------------
SP International Growth Portfolio
3/14/2005* to 12/31/2005 $9.92593 $11.20713 0
1/1/2006 to 12/31/2006 $11.20713 $13.20385 0
1/1/2007 to 12/31/2007 $13.20385 $15.36006 0
A-9
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99777 $9.98918 0
1/1/2006 to 12/31/2006 $9.98918 $11.24761 0
1/1/2007 to 12/31/2007 $11.24761 $11.99132 0
- --------------------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth Portfolio
3/14/2005* to 12/02/2005 $10.09229 $11.62084 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value Portfolio
3/14/2005* to 12/31/2005 $10.07861 $10.22287 0
1/1/2006 to 12/31/2006 $10.22287 $12.07405 0
1/1/2007 to 12/31/2007 $12.07405 $11.33004 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income Portfolio
3/14/2005* to 12/31/2005 $10.05372 $10.17785 0
1/1/2006 to 12/31/2006 $10.17785 $11.61695 0
1/1/2007 to 12/31/2007 $11.61695 $11.88399 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth + Value Portfolio
3/14/2005* to 12/02/2005 $10.04900 $11.23624 0
- --------------------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500 Portfolio
3/14/2005* to 12/31/2005 $10.04879 $10.31138 0
1/1/2006 to 12/31/2006 $10.31138 $11.30061 0
1/1/2007 to 12/31/2007 $11.30061 $11.22565 0
- --------------------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
3/14/2005* to 12/31/2005 $10.06549 $10.24446 0
1/1/2006 to 12/31/2006 $10.24446 $11.65186 0
1/1/2007 to 12/31/2007 $11.65186 $11.32623 0
- --------------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation Portfolio
formerly, AST American Century Strategic Balanced Portfolio
3/14/2005* to 12/31/2005 $10.04094 $10.22754 0
1/1/2006 to 12/31/2006 $10.22754 $10.91679 0
1/1/2007 to 12/31/2007 $10.91679 $11.57064 0
- --------------------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99777 $10.00913 5,593
1/1/2006 to 12/31/2006 $10.00913 $10.88808 29,966
1/1/2007 to 12/31/2007 $10.88808 $11.57088 41,875
- --------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99777 $9.99914 90,558
1/1/2006 to 12/31/2006 $9.99914 $11.06284 178,182
1/1/2007 to 12/31/2007 $11.06284 $11.81270 178,284
- --------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
3/14/2005* to 12/31/2005 $10.14601 $11.91406 0
1/1/2006 to 12/31/2006 $11.91406 $15.85615 0
1/1/2007 to 12/31/2007 $15.85615 $12.35302 0
- --------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99777 $10.01910 4,195
1/1/2006 to 12/31/2006 $10.01910 $10.78120 16,594
1/1/2007 to 12/31/2007 $10.78120 $11.44341 12,414
- --------------------------------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.08383 $10.62294 0
1/1/2006 to 12/31/2006 $10.62294 $12.58576 0
1/1/2007 to 12/31/2007 $12.58576 $12.39154 0
- --------------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth Portfolio
formerly, AST DeAm Small-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.01024 $10.22322 0
1/1/2006 to 12/31/2006 $10.22322 $10.72193 0
1/1/2007 to 12/31/2007 $10.72193 $12.38612 0
A-10
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------
AST DeAm Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04461 $9.93126 0
1/1/2006 to 12/31/2006 $9.93126 $11.59492 0
1/1/2007 to 12/31/2007 $11.59492 $9.27809 0
- -------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth Portfolio
3/14/2005* to 12/31/2005 $9.99777 $10.86427 0
1/1/2006 to 12/31/2006 $10.86427 $11.93940 0
1/1/2007 to 12/31/2007 $11.93940 $12.92083 0
- -------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha Portfolio
formerly, AST Global Allocation Portfolio
3/14/2005* to 12/31/2005 $10.01433 $10.53185 0
1/1/2006 to 12/31/2006 $10.53185 $11.39263 0
1/1/2007 to 12/31/2007 $11.39263 $11.30143 0
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
3/14/2005* to 12/31/2005 $10.03193 $10.66654 0
1/1/2006 to 12/31/2006 $10.66654 $11.41899 0
1/1/2007 to 12/31/2007 $11.41899 $12.66654 0
- -------------------------------------------------------------------------------------------------------
AST High Yield Portfolio
3/14/2005* to 12/31/2005 $9.97572 $9.77353 0
1/1/2006 to 12/31/2006 $9.77353 $10.49735 0
1/1/2007 to 12/31/2007 $10.49735 $10.46840 0
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $9.99777 $10.48770 0
1/1/2006 to 12/31/2006 $10.48770 $10.84831 0
1/1/2007 to 12/31/2007 $10.84831 $12.59892 0
- -------------------------------------------------------------------------------------------------------
AST JPMorgan International Equity Portfolio
3/14/2005* to 12/31/2005 $9.91280 $10.56143 0
1/1/2006 to 12/31/2006 $10.56143 $12.62280 0
1/1/2007 to 12/31/2007 $12.62280 $13.44273 0
- -------------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.07618 $10.46601 0
1/1/2006 to 12/31/2006 $10.46601 $12.06704 0
1/1/2007 to 12/31/2007 $12.06704 $11.39152 0
- -------------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture Portfolio
3/14/2005* to 12/31/2005 $9.99777 $9.86405 0
1/1/2006 to 12/31/2006 $9.86405 $10.54159 0
1/1/2007 to 12/31/2007 $10.54159 $10.88232 0
- -------------------------------------------------------------------------------------------------------
AST Marsico Capital Growth Portfolio
3/14/2005* to 12/31/2005 $10.12516 $10.80945 0
1/1/2006 to 12/31/2006 $10.80945 $11.28217 0
1/1/2007 to 12/31/2007 $11.28217 $12.62154 0
- -------------------------------------------------------------------------------------------------------
AST MFS Global Equity Portfolio
3/14/2005* to 12/31/2005 $9.96517 $10.38754 0
1/1/2006 to 12/31/2006 $10.38754 $12.56729 0
1/1/2007 to 12/31/2007 $12.56729 $13.37892 0
- -------------------------------------------------------------------------------------------------------
AST MFS Growth Portfolio
3/14/2005* to 12/31/2005 $10.03584 $10.66678 0
1/1/2006 to 12/31/2006 $10.66678 $11.38515 0
1/1/2007 to 12/31/2007 $11.38515 $12.75286 0
- -------------------------------------------------------------------------------------------------------
AST Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.06394 $10.26369 0
1/1/2006 to 12/31/2006 $10.26369 $11.41265 0
1/1/2007 to 12/31/2007 $11.41265 $11.41117 0
A-11
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio
3/14/2005* to 12/31/2005 $10.05467 $11.23844 0
1/1/2006 to 12/31/2006 $11.23844 $12.47591 0
1/1/2007 to 12/31/2007 $12.47591 $14.83594 0
- --------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.02088 $10.79135 0
1/1/2006 to 12/31/2006 $10.79135 $11.63249 0
1/1/2007 to 12/31/2007 $11.63249 $11.67818 0
- --------------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond Portfolio
3/14/2005* to 12/31/2005 $9.99777 $9.97047 0
1/1/2006 to 12/31/2006 $9.97047 $10.07526 0
1/1/2007 to 12/31/2007 $10.07526 $10.47083 0
- --------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
12/5/2005* to 12/31/2005 $9.99777 $10.02910 0
1/1/2006 to 12/31/2006 $10.02910 $10.53839 20,418
1/1/2007 to 12/31/2007 $10.53839 $11.14909 20,418
- --------------------------------------------------------------------------------------------------------------
AST Small-Cap Value Portfolio
3/14/2005* to 12/31/2005 $10.04758 $10.55522 0
1/1/2006 to 12/31/2006 $10.55522 $12.33274 0
1/1/2007 to 12/31/2007 $12.33274 $11.32764 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation Portfolio
3/14/2005* to 12/31/2005 $10.02759 $10.26630 0
1/1/2006 to 12/31/2006 $10.26630 $11.24064 0
1/1/2007 to 12/31/2007 $11.24064 $11.62992 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond Portfolio
3/14/2005* to 12/31/2005 $9.94831 $9.36794 0
1/1/2006 to 12/31/2006 $9.36794 $9.68974 0
1/1/2007 to 12/31/2007 $9.68974 $10.33861 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources Portfolio
3/14/2005* to 12/31/2005 $10.00177 $11.63782 0
1/1/2006 to 12/31/2006 $11.63782 $13.12406 0
1/1/2007 to 12/31/2007 $13.12406 $17.94469 0
- --------------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
3/14/2005* to 12/31/2005 $9.87994 $11.95787 0
1/1/2006 to 12/31/2006 $11.95787 $15.66273 0
1/1/2007 to 12/31/2007 $15.66273 $21.87322 0
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Large Cap Growth Portfolio--Service Shares
3/14/2005* to 12/31/2005 $10.04371 $10.30638 0
1/1/2006 to 12/31/2006 $10.30638 $11.14794 0
1/1/2007 to 12/31/2007 $11.14794 $12.45315 0
- --------------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
3/20/2006* to 12/31/2006 $9.99777 $10.57202 0
1/1/2007 to 12/31/2007 $10.57202 $11.26573 0
- --------------------------------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Target Portfolio
3/20/2006* to 12/31/2006 $9.99777 $10.39574 1,698
1/1/2007 to 12/31/2007 $10.39574 $11.27110 3,082
- --------------------------------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
3/20/2006* to 12/31/2006 $9.99777 $10.49366 0
1/1/2007 to 12/31/2007 $10.49366 $11.08525 0
- --------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth Portfolio
11/19/2007* to 12/31/2007 $9.83621 $9.96178 0
A-12
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------
AST Money Market
11/19/2007* to 12/31/2007 $9.99898 $10.01976 0
- --------------------------------------------------------------------------------------------------
AST Small Cap Growth
11/19/2007* to 12/31/2007 $9.76108 $10.16114 0
- --------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
11/19/2007* to 12/31/2007 $10.02234 $10.10513 0
- --------------------------------------------------------------------------------------------------
AST International Value Portfolio
11/19/2007* to 12/31/2007 $9.76031 $9.91043 0
- --------------------------------------------------------------------------------------------------
AST International Growth Portfolio
11/19/2007* to 12/31/2007 $9.69535 $9.89782 0
- --------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $9.99777 $9.96661 0
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
A-13
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
Within the Strategic Partners(SM) family of annuities, we offer several
different deferred variable annuity products. These annuities are issued by
Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of
New Jersey). Not all of these annuities may be available to you due to state
approval or broker-dealer offerings. You can verify which of these annuities
is available to you by asking your registered representative, or by calling us
at (888) PRU-2888. For comprehensive information about each of these
annuities, please consult the prospectus for the annuity.
Each annuity has different features and benefits that may be appropriate for
you, based on your individual financial situation and how you intend to use
the annuity.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay while your contract remains
in force. Additionally, differences may exist in various optional benefits
such as guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart sets forth the prominent features of each Strategic
Partners variable annuity. Please note that Strategic Partners Advisor and
Strategic Partners Select are no longer offered. The availability of optional
features, such as those noted in the chart, may increase the cost of the
contract. Therefore, you should carefully consider which features you plan to
use when selecting your annuity.
In addition to the chart, we set out below certain hypothetical illustrations
that reflect the Contract Value and surrender value of each variable annuity
over a variety of holding periods. These charts are meant to reflect how your
annuities can grow or decrease depending on market conditions and the
comparable value of each of the annuities (which reflects the charges
associated with the annuities) under the assumptions noted. In comparing the
values within the illustrations, a number of distinctions are evident. To
fully appreciate these distinctions, we encourage you to speak to your
registered representative and to read the prospectuses. However, we do point
out the following noteworthy items:
.. Strategic Partners FlexElite 2 offers both an array of optional benefits as
well as the "liquidity" to surrender the annuity without any withdrawal
charge after three contract years have passed. FlexElite 2 also is unique
in offering an optional persistency bonus (which, if taken, extends the
withdrawal charge period).
.. Strategic Partners Annuity One 3/Plus 3 comes in both a bonus version and a
non-bonus version, each of which offers several optional insurance
features. A bonus is added to your purchase payments under the bonus
version, although the withdrawal charges under the bonus version are higher
than those under the non-bonus version. Although the non-bonus version
offers no bonus, it is accompanied by fixed interest rate options and a
market value adjustment option that may provide higher interest rates than
such options accompanying the bonus version.
.. Strategic Partners FlexElite has a shorter CDSC period than Strategic
Partners Annuity One 3/Plus 3, but does not offer bonuses on purchase
payments.
B-1
STRATEGIC PARTNERS ANNUITY PRODUCT COMPARISON. Below is a summary of Strategic
Partners variable annuity products. You should consider the investment
objectives, risks, charges and expenses of an investment in any contract
carefully before investing. Each product prospectus as well as the underlying
portfolio prospectuses contains this and other information about the variable
annuities and underlying investment options. Your registered representative
can provide you with prospectuses for one or more of these variable annuities
and the underlying portfolios and can help you decide upon the product that
would be most advantageous for you given your individual needs. Please read
the prospectuses carefully before investing.
Strategic Partners Strategic Partners Strategic Partners
Advisor Flexelite 2 /1/ Select
- ---------------------------------------------------------------------------------------------------------------------
Minimum Investment $10,000 $10,000 $10,000
- ---------------------------------------------------------------------------------------------------------------------
Maximum Issue Age 85 Qualified & Non- 85 Qualified & Non- 80 Qualified & 85 Non-
Qualified Qualified Qualified
- ---------------------------------------------------------------------------------------------------------------------
Withdrawal Charge None 3 Years 7 Years
Schedule (7%, 7%, 7%) Contract (7%, 6%, 5%, 4%, 3%,
date based 2%, 1%) Contract date
based
- ---------------------------------------------------------------------------------------------------------------------
Annual Charge-Free Full liquidity 10% of gross purchase 10% of gross purchase
Withdrawal /2/ payments made as of last payments per contract year,
contract anniversary per cumulative up to 7 years or
contract year 70% of gross purchase
payments
- ---------------------------------------------------------------------------------------------------------------------
Insurance and 1.40% 1.65% 1.52%
Administration Charge
- ---------------------------------------------------------------------------------------------------------------------
Contract Maintenance Fee The lesser of $30 or 2% of The lesser of $50 or 2% of $30. Waived if Contract
(assessed annually) your Contract Value. your Contract Value Value is $50,000 or more
Waived if contract value is Waived if contract value is
$50,000 or more $100,000 or more
- ---------------------------------------------------------------------------------------------------------------------
Contract Credit No Yes 1% credit option at No
end of 3/rd/ and 6/th/ contract
years. Election results in a
new 3 year withdrawal
charge
- ---------------------------------------------------------------------------------------------------------------------
Strategic Partners
Annuity One 3/Plus 3
Non Bonus
- -----------------------------------------------------
Minimum Investment $10,000
- -----------------------------------------------------
Maximum Issue Age 85 Qualified & Non-
Qualified
- -----------------------------------------------------
Withdrawal Charge 7 Years
Schedule (7%, 6%, 5%, 4%, 3%,
2%, 1%) Payment date
based
- -----------------------------------------------------
Annual Charge-Free 10% of gross purchase
Withdrawal /2/ payments made as of last
contract anniversary per
contract year
- -----------------------------------------------------
Insurance and 1.40%
Administration Charge
- -----------------------------------------------------
Contract Maintenance Fee The lesser of $35 or 2% of
(assessed annually) your contract value.
Waived if Contract Value
is $75,000 or more
- -----------------------------------------------------
Contract Credit No
- -----------------------------------------------------
Strategic Partners Annuity One 3/Plus 3
Bonus
- ---------------------------------------------------------------------------------
Minimum Investment $10,000
- ---------------------------------------------------------------------------------
Maximum Issue Age 85 Qualified & Non-Qualified
- ---------------------------------------------------------------------------------
Withdrawal Charge Schedule 7 Years (8%, 8%, 8%, 8%, 7%, 6%, 5%)
Payment date based
- ---------------------------------------------------------------------------------
Annual Charge-Free Withdrawal /2/ 10% of gross purchase payments made as
of last contract anniversary per
contract year
- ---------------------------------------------------------------------------------
Insurance and Administration Charge 1.50%
- ---------------------------------------------------------------------------------
Contract Maintenance Fee (assessed The lesser of $35 or 2% of your
annually) contract value. Waived if Contract
Value is $75,000 or more
- ---------------------------------------------------------------------------------
Contract Credit Yes
3% - all amounts ages
81 - 85 4% - under $250,000
5% - $250,000 - $999,999
6% - $1,000,000+
- ---------------------------------------------------------------------------------
1 This column depicts features of the version of Strategic Partners FlexElite
sold on or after May 1, 2003 or upon subsequent state approval. In one
state, Pruco Life continues to sell a prior version of the contract. Under
that version, the charge for the base death benefit is 1.60%, rather than
1.65%. The prior version also differs in certain other respects (e.g.,
availability of optional benefits). The values illustrated below are based
on the 1.65% charge, and therefore are slightly lower than if the 1.60%
charge were used.
2 Withdrawals of taxable amounts will be subject to income tax, and prior to
age 59 1/2, may be subject to a 10% Federal Income Tax penalty.
B-2
Strategic Partners Strategic Partners Strategic Partners
Advisor Flexelite 2 /1/ Select
- ---------------------------------------------------------------------------------------------------------
Fixed Rate Account No Yes 1-Year Yes 1-Year
- ---------------------------------------------------------------------------------------------------------
Market Value No Yes 1-10 Years Yes 7-Year
Adjustment Account
(MVA)
- ---------------------------------------------------------------------------------------------------------
Enhanced Dollar No Yes No
Cost Averaging
(DCA)
- ---------------------------------------------------------------------------------------------------------
Variable Investment as indicated in prospectus as indicated in prospectus as indicated in prospectus
Options Available
- ---------------------------------------------------------------------------------------------------------
Evergreen Funds N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
Base Death Benefit: The greater of: purchase The greater of: purchase Contract Value
payment(s) minus payment(s) minus
proportionate proportionate
withdrawal(s) or Contract withdrawal(s) or Contract
Value Value
- ---------------------------------------------------------------------------------------------------------
Optional Death Combo: Step/Roll Step-Up Roll-Up Combo: N/A
Benefit (for an Step/Roll Highest Daily
additional cost) Value (HDV) Earnings
/4,5/ Appreciator Benefit (EAB)
- ---------------------------------------------------------------------------------------------------------
Living Benefits Lifetime Five Lifetime Five, Guaranteed N/A
(for an additional Minimum Income Benefit
cost) /5,6/ (GMIB), Income
Appreciator Benefit (IAB),
Spousal Lifetime
Spousal Lifetime Five Five Income Benefit,
Highest Daily Lifetime
Five, Highest Daily
Lifetime Seven Benefits.
- ---------------------------------------------------------------------------------------------------------
Strategic Partners
Annuity One 3/Plus 3
Non Bonus
- ------------------------------------------------
Fixed Rate Account Yes 1-Year
- ------------------------------------------------
Market Value Yes 1-10 Years
Adjustment Account
(MVA)
- ------------------------------------------------
Enhanced Dollar Yes
Cost Averaging
(DCA)
- ------------------------------------------------
Variable Investment as indicated in prospectus
Options Available
- ------------------------------------------------
Evergreen Funds 6-available in Strategic
Partners Plus 3 only
- ------------------------------------------------
Base Death Benefit: The greater of: purchase
payment(s) minus
proportionate
withdrawal(s) or Benefit
- ------------------------------------------------
Optional Death Step-Up Roll-Up Combo:
Benefit (for an Step/Roll Highest Daily
additional cost) Value (HDV) Earnings
/4,5/ Appreciator Benefit (EAB)
- ------------------------------------------------
Living Benefits Lifetime Five, Guaranteed
(for an additional Minimum Income Benefit
cost) /5,6/ (GMIB), Income
Appreciator Benefit (IAB),
Spousal Lifetime Five,
Income Benefit, Highest
Daily Lifetime Five,
Highest Daily Lifetime
Seven Benefits.
- ------------------------------------------------
Strategic Partners Annuity One 3/Plus 3
Bonus
- ---------------------------------------------------------------------------------
Fixed Rate Account Yes /3/ 1-Year
- ---------------------------------------------------------------------------------
Market Value Adjustment Account (MVA) Yes 1-10 Years
- ---------------------------------------------------------------------------------
Enhanced Dollar Cost Averaging (DCA) Yes
- ---------------------------------------------------------------------------------
Variable Investment Options Available See prospectus
- ---------------------------------------------------------------------------------
Evergreen Funds 6-available in Strategic Partners Plus
3 only
- ---------------------------------------------------------------------------------
Base Death Benefit: The greater of: purchase payment(s)
minus proportionate withdrawal(s) or
Contract Value
- ---------------------------------------------------------------------------------
Optional Death Benefit (for an Step-Up Roll-Up Combo: Step/Roll
additional cost) /4,5/ Highest Daily Value (HDV) Earnings
Appreciator Benefit (EAB)
- ---------------------------------------------------------------------------------
Living Benefits (for an additional Lifetime Five, Guaranteed Minimum
cost) /5,6/ Income Benefit (GMIB), Income
Appreciator Benefit (IAB), Spousal
Lifetime Five Income Benefit, Highest
Daily Lifetime Five, Highest Daily
Lifetime Seven benefits.
- ---------------------------------------------------------------------------------
3 We may offer lower interest rates for the fixed rate options than the
interest rates offered in the contracts without credit.
4 For more information on these benefits, refer to Section 4, "What is the
Death Benefit?" in the prospectus.
5 Not all optional benefits may be available in all states.
6 For more information on these benefits, refer to Section 3, "What kind of
payments will I receive during the income phase?"; Section 5, "What are the
Lifetime Withdrawal Benefits?" and Section 6, "What is the Income
Appreciator Benefit?" in the prospectus.
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the contract years specified. The values shown below are based
on the following assumptions:
.. An initial investment of $100,000 is made into each contract earning a
gross rate of return of 0% and 6% and 10% respectively.
.. No subsequent deposits or withdrawals are made from the contract.
.. The hypothetical gross rates of return (as of December 31, 2007) are
reduced by the arithmetic average of the fees and expenses of the
underlying portfolios (as of December 31, 2007) and the charges that are
deducted from the contract at the Separate Account level as follows:
B-3
.. 0.94% average of all fund expenses are computed by adding Portfolio
management fees, 12b-1 fees and other expenses of all of the underlying
portfolios and then dividing by the number of portfolios. For purposes of
the illustrations, we do not reflect any expense reimbursements or expense
waivers that might apply and are described in the prospectus fee table.
Please note that because the SP Aggressive Growth Asset Allocation
Portfolio, the SP Balanced Asset Allocation Portfolio, the SP Conservative
Asset Allocation Portfolio, and the SP Growth Asset Allocation Portfolio
generally were closed to investors in 2005, the fees for such portfolios
are not reflected in the above-mentioned average.
.. The Separate Account level charges include the Insurance Charge and
Administration Charge (as applicable).
The Contract Value assumes no surrender, while the Surrender Value assumes a
100% surrender two days prior to the contract anniversary, therefore
reflecting the withdrawal charge applicable to that contract year. Note that a
withdrawal on the contract anniversary, or the day before the contract
anniversary, would be subject to the withdrawal charge applicable to the next
contract year, which usually is lower. The values that you actually experience
under a contract will be different from what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each product reflected below will remain the same. (We will provide
you with a personalized illustration upon request).
0% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS -2.57% ALL YEARS -2.30% ALL YEARS -2.40%
--------- ------- --------- ------- --------- -------
CONTRACT SURR CONTRACT SURR CONTRACT SURR
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- ------- - --------- ------- - --------- -------
1 $97,467 $91,344 $97,707 $91,567 $101,516 $94,194
2 $94,944 $88,997 $95,461 $90,333 $ 99,084 $91,957
3 $92,484 $86,709 $93,266 $89,102 $ 96,710 $89,773
4 $90,086 $90,086 $91,122 $87,876 $ 94,394 $87,642
5 $87,750 $87,750 $89,027 $86,656 $ 92,133 $86,383
6 $85,473 $85,473 $86,980 $85,440 $ 89,926 $85,130
7 $83,254 $83,254 $84,980 $84,230 $ 87,772 $83,883
8 $81,091 $81,091 $83,026 $83,026 $ 85,669 $85,669
9 $78,983 $78,983 $81,117 $81,117 $ 83,617 $83,617
10 $76,928 $76,928 $79,252 $79,252 $ 81,614 $81,614
11 $74,926 $74,926 $77,430 $77,430 $ 79,659 $79,659
12 $72,975 $72,975 $75,650 $75,650 $ 77,751 $77,751
13 $71,073 $71,073 $73,911 $73,911 $ 75,888 $75,888
14 $69,219 $69,219 $72,177 $72,177 $ 74,071 $74,071
15 $67,413 $67,413 $70,483 $70,483 $ 72,262 $72,262
16 $65,652 $65,652 $68,829 $68,829 $ 70,497 $70,497
17 $63,936 $63,936 $67,212 $67,212 $ 68,774 $68,774
18 $62,264 $62,264 $65,633 $65,633 $ 67,093 $67,093
19 $60,634 $60,634 $64,089 $64,089 $ 65,451 $65,451
20 $59,045 $59,045 $62,582 $62,582 $ 63,849 $63,849
21 $57,497 $57,497 $61,109 $61,109 $ 62,286 $62,286
22 $55,988 $55,988 $59,670 $59,670 $ 60,760 $60,760
23 $54,518 $54,518 $58,263 $58,263 $ 59,270 $59,270
24 $53,085 $53,085 $56,890 $56,890 $ 57,816 $57,816
25 $51,688 $51,688 $55,548 $55,548 $ 56,397 $56,397
-----------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-4
6% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS 3.27% ALL YEARS 3.56% ALL YEARS 3.46%
--------- -------- - --------- -------- - --------- --------
CONTRACT SURR CONTRACT SURR CONTRACT SURR
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- -------- - --------- -------- - --------- --------
1 $103,299 $ 96,769 $103,553 $ 97,005 $107,589 $ 99,783
2 $106,716 $ 99,947 $107,242 $101,409 $111,313 $103,209
3 $110,247 $103,230 $111,063 $106,011 $115,165 $106,753
4 $113,894 $113,894 $115,021 $110,820 $119,151 $110,420
5 $117,662 $117,662 $119,119 $115,845 $123,275 $115,346
6 $121,554 $121,554 $123,363 $121,096 $127,541 $120,489
7 $125,575 $125,575 $127,758 $126,581 $131,955 $125,858
8 $129,730 $129,730 $132,310 $132,310 $136,522 $136,522
9 $134,021 $134,021 $137,024 $137,024 $141,247 $141,247
10 $138,455 $138,455 $141,906 $141,906 $146,135 $146,135
11 $143,035 $143,035 $146,962 $146,962 $151,193 $151,193
12 $147,767 $147,767 $152,198 $152,198 $156,425 $156,425
13 $152,656 $152,656 $157,621 $157,621 $161,839 $161,839
14 $157,706 $157,706 $163,237 $163,237 $167,440 $167,440
15 $162,923 $162,923 $169,053 $169,053 $173,235 $173,235
16 $168,313 $168,313 $175,076 $175,076 $179,230 $179,230
17 $173,881 $173,881 $181,314 $181,314 $185,433 $185,433
18 $179,633 $179,633 $187,774 $187,774 $191,851 $191,851
19 $185,576 $185,576 $194,464 $194,464 $198,491 $198,491
20 $191,715 $191,715 $201,393 $201,393 $205,360 $205,360
21 $198,057 $198,057 $208,568 $208,568 $212,467 $212,467
22 $204,610 $204,610 $215,999 $215,999 $219,821 $219,821
23 $211,378 $211,378 $223,695 $223,695 $227,428 $227,428
24 $218,371 $218,371 $231,665 $231,665 $235,299 $235,299
25 $225,595 $225,595 $239,919 $239,919 $243,443 $243,443
--------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-5
10% GROSS RATE OF RETURN
SP FLEX ELITE II SPAO 3 NON BONUS SPAO 3 BONUS
ALL YEARS 7.17% ALL YEARS 7.47% ALL YEARS 7.37%
--------- -------- - --------- -------- - --------- --------
CONTRACT SURR CONTRACT SURR CONTRACT SURR
YR VALUE VALUE VALUE VALUE VALUE VALUE
-- --------- -------- - --------- -------- - --------- --------
1 $107,186 $100,385 $107,450 $100,630 $111,638 $103,509
2 $114,911 $107,568 $115,477 $109,150 $119,860 $111,073
3 $123,192 $115,270 $124,105 $118,401 $128,688 $119,195
4 $132,070 $132,070 $133,376 $128,442 $138,166 $127,915
5 $141,588 $141,588 $143,341 $139,341 $148,342 $138,660
6 $151,791 $151,791 $154,050 $151,169 $159,267 $150,313
7 $162,730 $162,730 $165,559 $164,003 $170,997 $162,949
8 $174,458 $174,458 $177,927 $177,927 $183,592 $183,592
9 $187,030 $187,030 $191,220 $191,220 $197,113 $197,113
10 $200,509 $200,509 $205,506 $205,506 $211,631 $211,631
11 $214,958 $214,958 $220,860 $220,860 $227,217 $227,217
12 $230,450 $230,450 $237,360 $237,360 $243,952 $243,952
13 $247,057 $247,057 $255,093 $255,093 $261,919 $261,919
14 $264,862 $264,862 $274,151 $274,151 $281,210 $281,210
15 $283,949 $283,949 $294,633 $294,633 $301,921 $301,921
16 $304,412 $304,412 $316,644 $316,644 $324,158 $324,158
17 $326,350 $326,350 $340,301 $340,301 $348,032 $348,032
18 $349,869 $349,869 $365,724 $365,724 $373,665 $373,665
19 $375,083 $375,083 $393,048 $393,048 $401,186 $401,186
20 $402,114 $402,114 $422,412 $422,412 $430,733 $430,733
21 $431,092 $431,092 $453,970 $453,970 $462,457 $462,457
22 $462,160 $462,160 $487,886 $487,886 $496,517 $496,517
23 $495,466 $495,466 $524,336 $524,336 $533,086 $533,086
24 $531,172 $531,172 $563,509 $563,509 $572,348 $572,348
25 $569,451 $569,451 $605,608 $605,608 $614,502 $614,502
--------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Surrender value is accounted for 2 days prior to contract anniversary
B-6
APPENDIX C - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your contract. However, as discussed in
Section 5, we reserve the right to modify this formula with respect to those
who elect Highest Daily Lifetime Five in the future.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee. The factors that we use currently are derived from the
a2000 Individual Annuity Mortality Table with an assumed interest rate
of 3%. Each number in the table "a" factors (which appears below)
represents a factor, which when multiplied by the Highest Daily Annual
Income Amount, projects our total liability for the purpose of asset
transfers under the guarantee.
. Q - age based factors used in calculating the target value. These
factors are established on the Effective Date and are not changed for
the life of the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Contract Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable Contract Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the
Benefit Fixed Rate Account (F (greater than) 0), assets in the
Benefit Fixed Rate Account are transferred to the Permitted
Sub-accounts.
C-1
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T = {Min(V, [L - F - V * C\\t\\] / (1 - C\\t\\))} T(greater than)0, Money moving from the Permitted
Sub-accounts to the Benefit Fixed Rate Account
T = {Min(F, [L - F - V * C\\t\\] / (1 - C\\t\\))} T(less than)0, Money moving from the Benefit Fixed Rate
Account to the Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = {Min (V, [L - F - V * Ct] / (1 - Ct))}
= {Min (92,300.00, [76,710.28 - 0 - 92,300.00 * 0.80] / (1 - 0.80))}
= {Min (92,300.00, 14,351.40)}
= 14,351.40
C-2
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
C-3
APPENDIX D - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN BENEFIT
AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V - the total value of all Permitted Sub-accounts in the annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Contract
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable account value (V) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - B) / V.
. If r (greater than) C\\u,\\ assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account.
. If r (less than) C\\l,\\ and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = {Min(V, [L - B - V * C\\t\\] / (1-C\\t\\))} Money moving from the Permitted Sub-accounts
to the AST Investment Grade Bond Portfolio
Sub-account
T = {Min(B,-[L - B - V * C\\t\\] / (1-C\\t\\))} Money moving from the AST Investment Grade
Bond Portfolio Sub-account to the Permitted
Sub-accounts]
D-1
"a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
D-2
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE PRUCO LIFE ANNUITY DESCRIBED IN
PROSPECTUS ORD01142 (05/2008)
---------------------------------------
(print your name)
---------------------------------------
(address)
---------------------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
----------------
[LOGO] Prudential PRSRT STD
The Prudential Insurance Company of America U.S. POSTAGE
751 Broad Street PAID
Newark, NJ 07102-3777 LANCASTER, PA
PERMIT NO. 1793
----------------
ORD01091
PRUCO LIFE INSURANCE COMPANY
Supplement, dated February 11, 2009
To
Prospectus, dated May 1, 2001
This supplement should be read and retained with your current prospectus. If you
would like another copy of that prospectus, please call us at 800-752-6342.
Pruco Life Insurance Company ("Pruco") incorporates by reference into the
prospectus its latest annual report on Form 10-K filed pursuant to Section 13(a)
or Section 15(d) of the Exchange Act since the end of the fiscal year covered by
its latest annual report. In addition, all documents subsequently filed by Pruco
pursuant to Sections 13(a), 13 (c), 14 or 15(d) of the Exchange Act also are
incorporated into the prospectus by reference. Pruco will provide to each
person, including any beneficial owner, to whom a prospectus is delivered, a
copy of any or all of the information that has been incorporated by reference
into the prospectus but not delivered with the prospectus. Such information will
be provided upon written or oral request at no cost to the requester by writing
to Prudential Annuities Life Assurance Corporation, One Corporate Drive,
Shelton, CT 06484 or by calling 800-752-6342. PLNJ files periodic reports as
required under the Securities Exchange Act of 1934. The public may read and copy
any materials that Pruco files with the SEC at the SEC's Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-
0330. The SEC maintains an Internet site that contains reports, proxy, and
information statements, and other information regarding issuers that file
electronically with the SEC (see http://www.sec.gov). Our internet address is
http://www.prudentialannuities.com.
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Strategic Partners Plus 3
Supplement to Prospectuses Dated May 1, 2008
Supplement dated May 1, 2008
This Supplement should be read and retained with the current Prospectus for your
annuity. This Supplement is intended to update certain information in the
Prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own. If you would like another copy of the current Prospectus, please contact us
at 1-888-PRU-2888.
We are issuing this supplement to describe a name and investment objective
change of the Evergreen VA Balanced Fund, which takes place on May 30, 2008. The
Fund expenses are not changing in connection with this change.
In Part II Section 2 of your Prospectus, "What Investment Options Can I Choose?"
please replace the INVESTMENT OBJECTIVES/POLICIES of the Evergreen VA Balanced
Fund with the information below
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- ----------------- ------------------------------------------------------------ --------------------
Asset Allocation/ Evergreen VA Balanced (effective May 30, 2008, will be Evergreen Investment
Balanced renamed Evergreen VA Diversified Capital Builder): seeks Management Company,
capital growth and current income. The Portfolio invests in LLC
a portfolio of equity and debt securities chosen for the
potential for current income and capital growth. The
proportion of the Fund's assets invested in fixed income and
equity securities will change based on the portfolio
manager's assessment of economic conditions and investment
opportunities. The equity portion of the Portfolio may
include principally common and preferred stocks of U.S.
companies across a broad range of market capitalizations,
but will generally maintain a dollar-weighted average market
capitalization within the market capitalization range
tracked by the Russell 1000 Index. The Portfolio's manager
will seek out companies that she believes have strong
fundamental attributes and growth prospects with valuations
that leave ample room for capital appreciation. Through May
29, 2008, the Portfolio normally invests at least 25% of its
assets in fixed income securities. Effective May 30, 2008,
the Fund generally expects to invest approximately 10-30% of
its assets in fixed income securities. The Portfolio's fixed
income investments may include U.S. government securities,
corporate bonds, convertible bonds, mortgage-backed
securities, asset-backed securities, collateralized mortgage
obligations (CMOs) and other income producing securities.
The Portfolio may invest without limit in securities rated
below investment grade (or unrated securities determined by
the portfolio manager to be of comparable quality). The Fund
may, but will not necessarily, use derivative instruments,
such as structured notes, futures and options, and swap
agreements, as an alternative to investments directly in
income-producing securities or to manage risk. The Portfolio
may also, but will not necessarily, enter into foreign
currency exchange contracts to hedge against adverse changes
in currency exchange rates related to non-US dollar
denominated holdings. The Portfolio can invest up to 25% of
its assets in foreign equity and fixed income securities.
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STRATEGIC PARTNERS(SM) ANNUITY ONE 3
STRATEGIC PARTNERS(SM) PLUS 3
STRATEGIC PARTNERS FLEXELITE
(Pruco Life Insurance Company only)
Supplement, dated July 21, 2008
To
Prospectus, dated May 1, 2008
This supplement should be read and retained with the prospectus for your
annuity. If you would like another copy of the prospectus, please call us at
1-888-PRU-2888.
This supplement is being issued to describe several changes that we are making
to the variable investment options within each of the above-referenced
annuities. We summarize each change immediately below, and then indicate how the
pertinent portion of each prospectus is amended to reflect the change.
The changes are as follows:
1. AST Conservative Asset Allocation Portfolio; AST Balanced Asset Allocation
Portfolio; and AST American Century Strategic Allocation Portfolio. The name and
investment objectives of each Portfolio are being changed. (In the case of the
AST Balanced Asset Allocation Portfolio and AST American Century Strategic
Allocation Portfolio only, the changed investment objective was authorized by a
vote of Annuity Owners). AST Conservative Asset Allocation Portfolio has been
renamed AST Balanced Asset Allocation Portfolio and will be sub-advised by
Quantitative Management Associates LLC, the original AST Balanced Asset
Allocation Portfolio has become AST Academic Strategies Asset Allocation
Portfolio, and AST American Century Strategic Allocation Portfolio has become
AST Schroders Multi-Asset World Strategies Portfolio. Accordingly, we (a)
reflect the revised Portfolio names in the list of Investment Options on the
inside front cover, and (b) with respect to AST Balanced Asset Allocation
Portfolio and AST Schroders Multi-Asset World Strategies Portfolio only, set
forth the revised fees of each Portfolio in the table of Underlying Mutual Fund
Portfolio Annual Expenses, and (c) in the prospectus section discussing the
applicable optional benefit, include each Portfolio within the group of
portfolios that are permitted if you elect Lifetime Five, Spousal Lifetime Five,
Highest Daily Lifetime Five, Highest Daily Lifetime Seven, Spousal Highest Daily
Lifetime Seven, or the Highest Daily Value death benefit (if available), and (d)
include a summary description of the Portfolio in the chart of each Portfolio's
Investment Objectives and Policies. In addition, to reflect the effect of each
Portfolio on the average fees of all Portfolios available under the Annuity, we
describe the effect of the revised average fees on the comparison charts
appearing within the section entitled "Selecting the Annuity That's Right for
You."
2. Merger of AST DeAm Small-Cap Value Portfolio into AST Small-Cap Value
Portfolio. The AST DeAm Small-Cap Value Portfolio has merged out of existence
into the AST Small-Cap Value Portfolio. Accordingly, we remove the AST DeAm
Small-Cap Value Portfolio from the list of Investment Options on the inside
front cover.
3. AST Small-Cap Growth Portfolio. Neuberger Berman Management Inc. is no longer
a sub-adviser to this Portfolio. The assets formerly managed by Neuberger Berman
now are managed by Eagle Asset Management. Accordingly, we revise the summary
description of this Portfolio in the chart of each Portfolio's Investment
Objectives and Policies.
4. AST Neuberger Berman Mid-Cap Value Portfolio. We have added LSV Asset
Management as a sub-adviser to this Portfolio and have re-named the Portfolio
the AST Neuberger Berman / LSV Mid-Cap Value Portfolio. Accordingly, we (a)
reflect the revised Portfolio name in the list of Investment Options on the
inside front cover and in footnote 3 to the table within Underlying Mutual Fund
Portfolio Annual Expenses, and (b) include a revised summary description of the
Portfolio in the chart of the Portfolio's Investment objectives and Policies.
5. SP Aggressive Asset Allocation Portfolio, SP Growth Asset Allocation
Portfolio, SP Balanced Asset Allocation Portfolio, SP Conservative Asset
Allocation Portfolio, Global Portfolio. We are adding Quantitative Management
Associates LLC as a sub-adviser to each Portfolio. Accordingly, we include a
revised summary description of each Portfolio in the chart of each Portfolio's
Investment Objectives and Policies. Also being added as sub-advisers are
Prudential Investment Management, Inc. and Jennison Associates LLC.
With respect to the changed fees referenced above, here is a fee table showing
the applicable underlying mutual fund portfolio annual expenses:
Acquired Total
Portfolio Annual
Management Other Fees & Portfolio
FUNDS Fee Expenses 12b-1 Fee Expenses Expenses
- --------------------------------------------------------------------------------------------------------------------
AST Academic Strategies Asset Allocation /1,2,3,4/ 0.72% 0.10% 0.00% 0.69% 1.51%
Management and Other Expense fee waivers/reduction: 0.02%
Net expenses after fee reimbursement/expense waiver: 1.49%
AST Schroders Multi-Asset World Strategies 1.10% 0.16% 0.00% 0.14% 1.40%
AST Balanced Asset Allocation 0.15% 0.02% 0.00% 0.87% 1.04%
1 Estimated Other Expenses for the fiscal year ending December 31, 2008. As
used in connection with the Portfolio, "Other Expenses" include certain
operating expenses, including, without limitation, fees for custodian
services, Independent Trustees' fees, and fees for legal, accounting,
valuation, and transfer agency services. The Trust has also entered into
arrangements with the issuers of the variable insurance products offering
the Portfolio under which the Trust currently compensates such issuers for
providing ongoing services to Portfolio shareholders (e.g., the printing
and mailing of Trust prospectuses and shareholder reports) in lieu of the
Trust providing such services directly to shareholders. The contractual
administrative services fee is 0.10% of the Portfolio's average daily net
assets. The Portfolio is not directly subject to the administrative
services fee to the extent it invests in the Core Plus Bond Portfolio or
any other Trust Portfolio (each, an Underlying Trust Portfolio and
collectively, the Underlying Trust Portfolios). The Core Plus Bond
Portfolio and each Underlying Trust Portfolio in which the Portfolio
invests, however, are subject to the administrative services fee. See
footnote 1 of the table within "Underlying Mutual Fund Portfolio Annual
Expenses" in the May 1, 2008 prospectus for a discussion of the
administrative services fee applicable to certain other AST Portfolios.
2 Estimated Underlying Portfolio Fees & Expenses for the fiscal year ending
December 31, 2008. The Portfolio will indirectly incur a pro rata portion
of the fees and expenses of the Core Plus Bond Portfolio and any other
Underlying Trust Portfolio in which it invests. The expenses shown under
"Underlying Portfolio Fees and Expenses" represent the portion of the Core
Plus Bond Portfolio's estimated annualized operating expense ratio for the
fiscal year ending December 31, 2008 to be borne by the Portfolio based
upon the Portfolio's expected initial holdings in the Core Plus Bond
Portfolio. No sales loads, distribution fees, service fees, redemption
fees, or other transaction fees will be assessed in connection with the
Portfolio's purchase or redemption of shares of Underlying Trust
Portfolios.
3 Estimated Contractual Fee Waiver and/or Expense Reimbursement for the
fiscal year ending December 31, 2008. The Investment Managers have
contractually agreed to waive their investment management fees with respect
to the Portfolio's investments in the Core Plus Bond Portfolio (i.e.,
assumes a waiver of 25% of the Investment Managers' contractual investment
management fee).
4 The Co-Managers have contractually agreed to reimburse expenses and/or
waive fees so that the Academic Strategies Portfolio's investment
management fees plus "Other Expenses" (exclusive in all cases of taxes,
interest, brokerage commissions, distribution fees, and extraordinary
expenses) do not exceed 0.80% of the Portfolio's average daily net assets
during the Academic Strategies Portfolio's first year of operations (i.e.,
expected to be July 21, 2008 through July 20, 2009).
2
With respect to the changed Investment Objectives/Policies referenced above,
here is a table showing the applicable changes:
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- -----------------------------------------------------------------------
ADVANCED SERIES TRUST
ASSET AST Schroders Multi-Asset World Schroder
ALLOCA Strategies (formerly known as AST Investment
TION/ American Century Strategic Management North
BALANCED Allocation Portfolio): The AST America Inc.
Schroders Multi-Asset World
Strategies Portfolio seeks long-term
capital appreciation through a
global flexible asset allocation
approach. This asset allocation
approach entails investing in
traditional asset classes, such as
equity and fixed-income investments,
and alternative asset classes, such
as investments in real estate,
commodities, currencies, private
equity, and absolute return
strategies. The sub-advisor seeks to
emphasize the management of risk and
volatility. Exposure to different
asset classes and investment
strategies will vary over time based
upon the sub advisor's assessments
of changing market, economic,
financial and political factors and
events.
ASSET AST Academic Strategies Asset Credit Suisse
ALLOCA Allocation (formerly known as AST Securities (USA)
TION/ Balanced Asset Allocation LLC; Jennison
BALANCED Portfolio): seeks total return Associates LLC;
consistent with its specified level Mellon Capital
of risk. The Portfolio will be a Management
multi-asset class fund that employs Corporation; Pacific
both top-down asset allocation Investment
strategies and bottom-up Management
manager/security selection. Under Company LLC
normal circumstances, approximately (PIMCO);
60% of the assets will be allocated Prudential Bache
to traditional asset classes Asset Management,
(including US and international Incorporated;
equities and bonds) and Quantitative
approximately 40% of the assets will Management
be allocated to nontraditional asset Associates LLC
classes (including real estate,
commodities, and alternative
strategies). Those percentages are
subject to change by the Investment
Managers.
ASSET AST Balanced Asset Allocation AST Investment
ALLOCA (formerly known as AST Conservative Services, Inc. &
TION/ Asset Allocation Portfolio): seeks Prudential
BALANCED the highest potential total return Investments LLC;
consistent with its specified level Quantitative
of risk tolerance. The Portfolio Management
will invest its assets in several Associates LLC
other Advanced Series Trust
Portfolios. Under normal market
conditions, the Portfolio will
devote approximately 60% of its net
assets to underlying portfolios
investing primarily in equity
securities (with a range of 52.5% to
67.5%), and 40% of its net assets to
underlying portfolios investing
primarily in debt securities and
money market instruments (with a
range of 32.5% to 47.5%).
MID CAP AST Neuberger Berman / LSV Mid-Cap LSV Asset
VALUE Value Portfolio (formerly known as Management;
AST Neuberger Berman Mid-Cap Value Neuberger Berman
Portfolio): seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of medium capitalization companies.
For purposes of the Portfolio,
companies with market
capitalizations that fall within the
range of the Russell Mid-cap(R)
Index at the time of investment are
considered medium capitalization
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for companies whose stock
prices are undervalued and that may
raise in price before other
investors realize their worth.
SMALL AST Small-Cap Growth Portfolio: Eagle Asset
CAP seeks long-term capital growth. The Management
GROWTH Portfolio pursues its objective by
investing, under normal
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000(R) Index at the time of
the Portfolio's investment.
3
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- ----------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
INTERNA Global Portfolio: seeks long-term LSV Asset
TIONAL growth of capital. The Portfolio Management;
EQUITY invests primarily in common stocks Marsico Capital
(and their equivalents) of foreign Management, LLC;
and U.S. companies. Each subadviser T. Rowe Price
for the Portfolio generally will use Associates, Inc.;
either a "growth" approach or a William Blair &
"value" approach in selecting either Company, LLC;
foreign or U.S. common stocks. Quantitative
Management
Associates LLC
ASSET SP Aggressive Growth Asset Prudential
ALLOCA Allocation Portfolio: seeks to Investments LLC;
TION/ obtain the highest potential total Quantitative
BALANCED return consistent with the specified Management
level of risk tolerance. The Associates LLC
Portfolio may invest in any other
Portfolio of the Fund (other than
another SP Asset Allocation
Portfolio), the AST Marsico Capital
Growth Portfolio of Advanced Series
Trust (AST), and the AST
International Value Portfolio of AST
(the Underlying Portfolios). Under
normal circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
ASSET SP Balanced Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC;
TION/ highest potential total return Quantitative
BALANCED consistent with the specified level Management
of risk tolerance. The Portfolio may Associates LLC
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios). The
Portfolio will invest in equity and
fixed-income Underlying Portfolios.
ASSET SP Conservative Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC;
TION/ highest potential total return Quantitative
BALANCED consistent with the specified level Management
of risk tolerance. The Portfolio may Associates LLC
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
fixed-income Underlying Portfolios
but will also invest in equity
Underlying Portfolios.
ASSET SP Growth Asset Allocation Prudential
ALLOCA Portfolio: seeks to obtain the Investments LLC;
TION/ highest potential total return Quantitative
BALANCED consistent with the specified level Management
of risk tolerance. The Portfolio may Associates LLC
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST), and the
AST International Value Portfolio of
AST (the Underlying Portfolios).
Under normal circumstances, the
Portfolio generally will focus on
equity Underlying Portfolios but
will also invest in fixed- income
Underlying Portfolios.
In the May 1, 2008 prospectuses, the summary fund descriptions of the AST
Balanced Asset Allocation Portfolio and the AST Capital Growth Asset Allocation
Portfolio were reversed. Thus, the correct summary fund description for each
such Portfolio should have been as follows:
AST Balanced Asset Allocation Portfolio: seeks the highest potential total
return consistent with its specified level of risk tolerance. The Portfolio will
invest its assets in several other Advanced Series Trust Portfolios. Under
normal market conditions, the Portfolio will devote approximately 65% of its net
assets to underlying portfolios investing primarily in equity securities (with a
range of 57.5% to 72.5%), and 35% of its net assets to underlying portfolios
investing primarily in debt securities and money market instruments (with a
range of 27.5% to 42.5%).
AST Capital Growth Asset Allocation Portfolio: seeks the highest potential total
return consistent with its specified level of risk tolerance. The Portfolio will
invest its assets in several other Advanced Series Trust Portfolios. Under
normal market conditions, the Portfolio will devote approximately 75% of its net
assets to underlying portfolios investing primarily in equity securities (with a
range of 67.5% to 80%), and 25% of its net assets to underlying portfolios
investing primarily in debt securities and money market instruments (with a
range of 20.0% to 32.5%).
In the appendices to each prospectus, entitled Selecting The Variable Annuity
That's Right For You, we set forth hypothetical illustrations of Contract Value
and Surrender Value for each annuity. Those illustrations assume average fund
expenses of 0.94% (which, for Strategic Partners Plus, excludes Evergreen fund
expenses). As a result of the fund changes described in this supplement, the
average fund expenses have changed to 0.95%. This change in average fund
expenses would have the effect of decreasing the hypothetical illustrated values
by a commensurate amount.
4
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Strategic Partners Annuity One 3
Strategic Partners Plus 3
Strategic Partners FlexElite (Pruco Life Insurance Company only)
Supplement, dated November 24, 2008
To
Prospectuses, dated May 1, 2008
This Supplement should be read and retained with the current Prospectus for your
contract. This Supplement is intended to update certain information in the
Prospectus for the variable contract you own, and is not intended to be a
prospectus or offer for any other variable contract listed here that you do not
own. If you would like another copy of the current Prospectus, please contact us
at 1-888-PRU-2888.
A. Effective November 24, 2008, two additional sub-advisors are being added to
AST Academic Strategies Asset Allocation Portfolio. Accordingly, in the section
entitled "What Investment Options Can I Choose?", we add the sub-advisors
referenced below to the column entitled "Portfolio Advisor/Sub-Advisor."
First Quadrant L.P. (First Quadrant) and AlphaSimplex Group, LLC (AlphaSimplex)
are being added as additional sub-advisors to AST Academic Strategies Asset
Allocation Portfolio. The expenses and investment objectives/policies do not
change as a result of the addition of the new sub-advisors.
B. Effective on or about December 15, 2008, Eaton Vance LLC will replace J.P.
Morgan Investment Management, Inc. as sub-advisor for AST Large-Cap Value
Portfolio.
C. Closing of Lifetime Five and Spousal Lifetime Five. Lifetime Five Income
Benefit and Spousal Lifetime Five Income Benefit (the "Benefits" and each, a
"Benefit") are described in the section of the prospectus entitled "What Are The
Lifetime Withdrawal Benefits?". Effective December 8, 2008, we will cease
offering the Benefits, for both new contract sales and in-force elections. If
you currently participate in either Benefit, this closing does not affect you or
the guarantees associated with your Benefit. However, subsequent to the closure,
you will no longer be allowed to re-elect either Benefit if you decide to
terminate a Benefit. Other living benefits may be available, subject to our
election rules. Please refer to your prospectus for further details.
D. Asset Transfer Component of HD5 - Allocation of Contract Value. We replace
the section of the prospectus entitled "Asset Transfer Component of Highest
Daily Lifetime Five" with the following:
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Contract
Value if you elect Highest Daily Lifetime Five. For purposes of this benefit, we
refer to those permitted sub-accounts as the "Permitted Sub-accounts". As a
requirement of participating in Highest Daily Lifetime Five, we require that you
participate in our specialized asset transfer program, under which we may
transfer Contract Value between the Permitted Sub-accounts and a fixed interest
rate account that is part of our general account (the "Benefit Fixed Rate
Account"). We determine whether to make a transfer, and the amount of any
transfer, under a non-discretionary formula, discussed below. The Benefit Fixed
Rate Account is available only with this benefit, and thus you may not allocate
Purchase Payments to the Benefit Fixed Rate Account. The interest rate that we
pay with respect to the Benefit Fixed Rate Account is reduced by an amount that
corresponds generally to the charge that we assess against your variable
Sub-accounts for Highest Daily Lifetime Five. The Benefit Fixed Rate Account is
not subject to the Investment Company Act of 1940 or the Securities Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Contract Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to the prospectus). Speaking generally, the formula,
which we apply each Business Day, operates as follows. The formula starts by
identifying
your Protected Withdrawal Value for that day and then multiplies that figure by
5%, to produce a projected (i.e., hypothetical) Highest Daily Annual Income
Amount. Then, using our actuarial tables, we produce an estimate of the total
amount we would target in our allocation model, based on the projected Highest
Daily Annual Income Amount each year for the rest of your life. In the formula,
we refer to that value as the "Target Value" or "L". If you have already made a
withdrawal, your projected Highest Daily Annual Income Amount (and thus your
Target Value) would take into account any automatic step-up that was scheduled
to occur according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds a
certain percentage (currently 83%) it means essentially that too much Target
Value is not offset by assets within the Benefit Fixed Rate Account, and
therefore we will transfer an amount from your Permitted Sub-accounts to the
Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed Rate
Account to the Permitted Sub-accounts would occur. Note that the formula is
calculated with reference to the Highest Daily Annual Income Amount, rather than
with reference to the Annual Income Amount.
As you can glean from the formula, poor investment performance of your Contract
Value may result in a transfer of a portion of your Contract Value to the
Benefit Fixed Rate Account, because such poor investment performance will tend
to increase the Target Ratio. Moreover, "flat" investment returns of your
Contract Value over a period of time also could result in the transfer of your
Contract Value to the Benefit Fixed Rate Account. Because the amount allocated
to the Benefit Fixed Rate Account and the amount allocated to the Permitted
Sub-accounts each is a variable in the formula, the investment performance of
each affects whether a transfer occurs for your contract. In deciding how much
to transfer, we use another formula, which essentially seeks to re-balance
amounts held in the Permitted Sub-accounts and the Benefit Fixed Rate Account so
that the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime Five, the ratios we use will be fixed. For newly
issued contracts that elect Highest Daily Lifetime Five and existing contracts
that elect Highest Daily Lifetime Five, however, we reserve the right to change
the ratios.
While you are not notified when your contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer between the Permitted Sub-accounts and the
Benefit Fixed Rate Account; or
. If a portion of your Contract Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts
to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro
rata (i.e., in the same proportion as the current balances in your
variable investment options). Amounts taken out of the Benefit Fixed
Rate Account will be withdrawn for this purpose on a last-in,
first-out basis (an amount renewed into a new guarantee period under
the Benefit Fixed Rate Account will be deemed a new investment for
purposes of this last-in, first-out rule); or
. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual
rate that we have set for that day, and we will credit the daily
equivalent of that annual interest until the earlier of one year from
the date of the transfer or the date that such amount in the Benefit
Fixed Rate Account is transferred back to the Permitted Sub-accounts.
If your entire Contract Value is transferred to the Benefit Fixed Rate Account,
then based on the way the formula operates, the formula will not transfer
amounts out of the Benefit Fixed Rate Account to the Permitted Sub-accounts and
the entire Contract Value would remain in the Benefit Rate Fixed Account. If you
make additional Purchase Payments to your contract, they will be allocated to
the Sub-accounts according to your allocation instructions. Such additional
Purchase Payments may or may not cause the formula to transfer money in or out
of the Benefit Fixed Rate Account. Once the Purchase Payments are allocated to
your contract, they will also be subject to the mathematical formula, which may
result in immediate transfers to or from the Benefit Fixed Rate Account, if
dictated by the formula.
2
The amount that is transferred to and from the Benefit Fixed Rate Account
pursuant to the mathematical formula depends upon a number of factors unique to
your contract (and is not necessarily directly correlated with the securities
markets, bond markets, or interest rates, in general) including:
. How long you have owned Highest Daily Lifetime Five;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the Benefit Fixed Rate Account (i.e., the amount of
interest credited to the Benefit Fixed Rate Account);
. The amount you have allocated to each of the Permitted Sub-accounts
you have chosen;
. The amount you have allocated to the Benefit Fixed Rate Account;
. Additional Purchase Payments, if any, you make to your contract;
. Withdrawals, if any, you take from your contract (withdrawals are
taken pro rata from your Contract Value).
Any Contract Value in the Benefit Fixed Rate Account will not be available to
participate in the investment experience of the Permitted Sub-accounts if there
is a recovery until it is moved out of the Benefit Fixed Rate Account.
The more of your Contract Value allocated to the Benefit Fixed Rate Account
under the formula, the greater the impact of the performance of the Benefit
Fixed Rate Account in determining whether (and how much) of your Contract Value
is transferred back to the Permitted Sub-accounts. Further, it is possible under
the formula, that if a significant portion your Contract Value is allocated to
the Benefit Fixed Rate Account and that Account has good performance but the
performance of your Permitted Sub-accounts is negative, that the formula might
transfer your Contract Value to the Permitted Sub-accounts. Thus, the converse
is true too (the more you have allocated to the Permitted Sub-accounts, the
greater the impact of the performance of those Sub-accounts will have on any
transfer to the Benefit Fixed Rate Account).
E. Asset Transfer Component of HD7 and SHD7 - Allocation of Contract Value. We
replace the sections of the prospectus entitled "Asset Transfer Component of
Highest Daily Lifetime Seven" and "Asset Transfer Component of Spousal Highest
Daily Lifetime Seven" (as applicable) with the following:
Asset Transfer Component of Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven As indicated above, we limit the Sub-accounts to which you may
allocate Contract Value if you elect Highest Daily Lifetime Seven/Spousal
Highest Daily Lifetime Seven. For purposes of the benefit, we refer to those
permitted Sub-accounts as the "Permitted Sub-accounts". As a requirement of
participating in Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary mathematical
formula, discussed below. The AST Investment Grade Bond Sub-account is available
only with this benefit, and thus you may not allocate Purchase Payments to the
AST Investment Grade Bond Sub-account. Under the asset transfer component of
Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven, we monitor
your Contract Value daily and, if dictated by the formula, systematically
transfer amounts between the Permitted Sub-accounts you have chosen and the AST
Investment Grade Bond Sub-account. Any transfer would be made in accordance with
a formula, which is set forth in the Appendices to this prospectus.
Speaking generally, the formula, which we apply each Business Day, operates as
follows. The formula starts by identifying an income basis for that day and then
multiplies that figure by 5%, to produce a projected (i.e., hypothetical) income
amount. Note that we use 5% in the formula, irrespective of the Annuitant's
attained age. Then we produce an estimate of the total amount we would target in
our allocation model, based on the projected income amount and factors set forth
in the formula. In the formula, we refer to that value as the "Target Value" or
"L". If you have already made a withdrawal, your projected income amount (and
thus your Target Value) would take into account any automatic step-up, any
subsequent purchase payments, and any excess withdrawals. Next, the formula
subtracts from the Target Value the amount held within the AST Investment Grade
Bond Sub-account on that day, and divides that difference by the amount held
within the Permitted Sub-accounts. That ratio, which essentially isolates the
amount of your Target Value that is not offset by amounts held within the AST
Investment Grade Bond Sub-account, is called the "Target Ratio" or "r". If the
Target Ratio exceeds a certain percentage (currently 83%), it
3
means essentially that too much Target Value is not offset by assets within the
AST Investment Grade Bond Sub-account, and therefore we will transfer an amount
from your Permitted Sub-accounts to the AST Investment Grade Bond Sub-account.
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts would occur.
As you can glean from the formula, poor investment performance of your Contract
Value may result in a transfer of a portion of your Contract Value to the AST
Investment Grade Bond Sub-account because such poor investment performance will
tend to increase the Target Ratio. Moreover, "flat" investment returns of your
Contract Value over a period of time also could result in the transfer of your
Contract Value from the Permitted Sub-accounts to the AST Investment Grade Bond
Sub-account. Because the amount allocated to the AST Investment Grade Bond
Sub-account and the amount allocated to the Permitted Sub-accounts each is a
variable in the formula, the investment performance of each affects whether a
transfer occurs for your Contract. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that the
Target Ratio meets a target, which currently is equal to 80%. Once you elect
Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven, the ratios we
use will be fixed. For newly-issued contracts that elect Highest Daily Lifetime
Seven/Spousal Highest Daily Lifetime Seven and existing contracts that elect
Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven, however, we
reserve the right to change the ratios.
While you are not notified when your contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is designed
primarily to mitigate the financial risks that we incur in providing the
guarantee under Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime
Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
. If a portion of your Contract Value was previously allocated to the
AST Investment Grade Bond Sub-account, transfer all or a portion of
those amounts to the Permitted Sub-accounts, based on your existing
allocation instructions or (in the absence of such existing
instructions) pro rata (i.e., in the same proportion as the current
balances in your variable investment options). Amounts taken out of
the AST Investment Grade Bond Sub-account will be withdrawn for this
purpose on a last-in, first-out basis; or
. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If your entire Contract Value is transferred to the AST Investment Grade Bond
Sub-account, then based on the way the formula operates, the formula will not
transfer amounts out of the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts and the entire Contract Value would remain in the AST
Investment Grade Bond Sub-account. If you make additional Purchase Payments to
your contract, they will be allocated to the Sub-accounts according to your
allocation instructions. Such additional Purchase Payments may or may not cause
the formula to transfer money in or out of the AST Investment Grade Bond
Sub-account. Once the Purchase Payments are allocated to your contract, they
will also be subject to the mathematical formula, which may result in immediate
transfers to or from the AST Investment Grade Bond Sub-accounts, if dictated by
the formula.
The amount that is transferred to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to your contract (and is not necessarily directly correlated with
the securities markets, bond markets, or interest rates, in general) including:
. How long you have owned Highest Daily Lifetime Seven/Spousal Highest
Daily Lifetime Seven;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the AST Investment Grade Bond Sub-account;
. The amount you have allocated to each of the Permitted Sub-accounts
you have chosen;
. The amount you have allocated to the AST Investment Grade Bond
Sub-account;
. Additional Purchase Payments, if any, you make to your contract;
4
. Withdrawals, if any, you take from your contract (withdrawals are
taken pro rata from your Contract Value).
Any Contract Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts if there is a recovery until it is moved out of the AST Investment
Grade Bond Sub-account.
The more of your Contract Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of that
Sub-account in determining whether (and how much) of your Contract Value is
transferred back to the Permitted Sub-accounts. Further, it is possible under
the formula, that if a significant portion your Contract Value is allocated to
the AST Investment Grade Bond Sub-account and that Sub-account has good
performance but the performance of your Permitted Sub-accounts is negative, that
the formula might transfer your Contract Value to the Permitted Sub-accounts.
Thus, the converse is true too (the more you have allocated to the Permitted
Sub-accounts, the greater the impact of the performance of those Sub-accounts
will have on any transfer to the AST Investment Grade Bond Sub-account).
5
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Strategic Partners Annuity One 3
Strategic Partners Plus 3
Strategic Partners FlexElite (Pruco Life Insurance Company only)
Supplement, dated December 15, 2008
To
Prospectuses, dated May 1, 2008
This Supplement should be read and retained with the current Prospectus for your
contract. This Supplement is intended to update certain information in the
Prospectus for the variable contract you own, and is not intended to be a
prospectus or offer for any other variable contract listed here that you do not
own. If you would like another copy of the current Prospectus, please contact us
at 1-888-PRU-2888.
As detailed below, this supplement announces changes to your ability to cancel
certain optional living benefits and either re-elect the same benefit or elect
another living benefit.
WHEN CONSIDERING CANCELLATION OF AN EXISTING OPTIONAL LIVING BENEFIT WITH OR
WITHOUT THE RE-ELECTION OF THE SAME BENEFIT OR ELECTION OF A NEW OPTIONAL LIVING
BENEFIT, PLEASE REVIEW THE PROSPECTUS FOR COMPLETE DETAILS AND SPEAK TO YOUR
FINANCIAL PROFESSIONAL. AMONG OTHER THINGS, THE NEW BENEFIT MAY BE MORE
EXPENSIVE THAN YOUR EXISTING BENEFIT.
A. Lifetime Five - Elections of Highest Daily Lifetime Seven or Spousal Highest
Daily Lifetime Seven. Under the section of the prospectus entitled "Lifetime
Five Income Benefit", we replace the last two paragraphs within the sub-section
entitled "Election of Lifetime Five" with the following:
We no longer permit elections of Lifetime Five -- whether for those who
currently participate in Lifetime Five or for those who are buying a Contract
for the first time. If you wish, you may cancel the Lifetime Five benefit. You
may then elect Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven (or any other currently available living benefit) on the Business Day
after you have cancelled the Lifetime Five benefit provided, the request is
received in good order (subject to state availability and in accordance with any
applicable age requirements). Upon your election of Highest Daily Lifetime Seven
or Spousal Highest Daily Lifetime Seven, Contract Value may be transferred
between the AST Investment Grade Bond Portfolio Sub-account and the other
Sub-accounts according to the formula (See "Asset Transfer Component of Highest
Daily Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for more
details). It is possible that over time the formula could transfer some, all, or
none of the Contract Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of the Lifetime Five benefit, you will lose the Protected Withdrawal
Value, Annual Income Amount, and Annual Withdrawal Amount that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Account Value. Finally,
please note that the fee for the Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven benefits is a percentage of Protected Withdrawal
Value. Thus, if Protected Withdrawal Value is larger than Contract Value, the
fee will be greater than it would have been had it been based on Contract Value.
Once the Lifetime Five benefit is canceled you are not required to re-elect
another optional living benefit and any subsequent benefit election may be made
on or after the first Business Day following the cancellation of the Lifetime
Five benefit provided that the benefit you are looking to elect is available on
a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
B. Spousal Lifetime Five - Elections of Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven. Under the section of the prospectus entitled
"Spousal Lifetime Five Income Benefit", we replace the last two paragraphs
within the sub-section entitled "Election of and Designations of Spousal
Lifetime Five" with the following:
We no longer permit elections of Spousal Lifetime Five -- whether for those who
currently participate in Spousal Lifetime Five or for those who are buying a
Contract for the first time. If you wish, you may cancel the Spousal Lifetime
Five benefit. You may then elect Highest Daily Lifetime Seven or Spousal Highest
Daily Lifetime Seven (or any other currently available living benefit) on the
Business Day after have you cancelled the Spousal Lifetime Five benefit,
provided the request is received in good order (subject to state availability
and any applicable age requirements). Upon your election of Highest Daily
Lifetime Seven or Spousal Highest Daily Lifetime Seven, Contract Value may be
transferred between the AST Investment Grade Bond Portfolio Sub-account and the
other Sub-accounts according to the formula (See "Asset Transfer Component of
Highest Daily Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for
more details). It is possible that over time the formula could transfer some,
all, or none of the Contract Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of the Spousal Lifetime Five benefit, you will lose the Protected
Withdrawal Value and Annual Income Amount that you had accumulated under the
benefit. Thus, the initial guarantees under any newly-elected benefit will be
based on your current Contract Value. Also note that the fee for the Highest
Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits is a
percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal Value is
larger than Contract Value, the fee will be greater than it would have been had
it been based on Contract Value. Once the Spousal Lifetime Five benefit is
canceled you are not required to re-elect another optional living benefit and
any subsequent benefit election may be made on or after the first Business Day
following the cancellation of the Spousal Lifetime Five benefit provided that
the benefit you are looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations for the
benefit you are electing.
C. Highest Daily Lifetime Five - Elections of Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven. Under the section of the prospectus
entitled "Highest Daily Lifetime Five", we replace the last paragraph in the
sub-section entitled "Election of and Designation under the Program" with the
following:
We no longer permit elections of Highest Daily Lifetime Five -- whether for
those who currently participate in Highest Daily Lifetime Five or for those who
are buying a Contract for the first time. If you wish, you may cancel the
Highest Daily Lifetime Five benefit. You may then elect Highest Daily Lifetime
Seven or Spousal Highest Daily Lifetime Seven (or any other currently available
living benefit) on the Business Day after you have cancelled the Highest Daily
Lifetime Five benefit, provided the request is received in good order (subject
to state availability and any applicable age requirements). Upon cancellation of
the Highest Daily Lifetime Five benefit, any Contract Value allocated to the
Benefit Fixed Rate Account used with the asset transfer formula will be
reallocated to the Permitted Sub-Accounts according to your most recent
allocation instructions or, in absence of such instructions, pro-rata. Upon your
election of Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven, Contract Value may be transferred between the AST Investment Grade Bond
Portfolio Sub-account and the other Sub-accounts according to the formula (See
"Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal Highest Daily
Lifetime Seven" section for more details). It is possible that over time the
formula could transfer some, all or none of the Contract Value to the AST
Investment Grade Bond Portfolio Sub-account under the newly-elected benefit. You
should be aware that upon termination of the Highest Daily Lifetime Five
benefit, you will lose the Protected Withdrawal Value and Annual Income Amount
that you had accumulated under the benefit, as well as any Enhanced Protected
Withdrawal Value and Return of Principal Guarantees (if no withdrawals have been
taken). Thus, the initial guarantees under any newly-elected benefit will be
based on your current Contract Value. Finally, please note that the fee for the
Highest Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits
is a percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal
Value is larger than Contract Value, the fee will be greater than it would have
been had it been based on Contract Value. Once the Highest Daily Lifetime Five
benefit is canceled you are not required to re-elect another optional living
benefit and any subsequent benefit election may be made on or after the first
Business Day following the cancellation of the Highest Daily Lifetime Five
benefit provided that the benefit you are looking to elect is available on a
post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
D. Highest Daily Lifetime Seven -- Elections of Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven. Under the section of the prospectus
entitled "Highest Daily Lifetime Seven", we replace the last paragraph in the
sub-section
entitled "Election of and Designations under the Program" with the following:
If you wish, you may cancel the Highest Daily Lifetime Seven benefit. You may
then re-elect Highest Daily Lifetime Seven or elect Spousal Highest Daily
Lifetime Seven (or any other currently available living benefit) on the Business
Day after you have cancelled the Highest Daily Lifetime Seven benefit, provided
the request is received in good order (subject to state availability and any
applicable age requirements). Upon cancellation of the Highest Daily Lifetime
Seven benefit, any Contract Value allocated to the AST Investment Grade Bond
Portfolio Sub-account used with the asset transfer formula will be reallocated
to the Permitted Sub-Accounts according to your most recent allocation
instructions or, in absence of such instructions, pro-rata. Upon your election
of either the Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven benefit, Contract Value may be transferred between the AST Investment
Grade Bond Portfolio Sub-account and the other Sub-accounts according to the
formula (See "Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal
Highest Daily Lifetime Seven" section for more details). It is possible that
over time the formula could transfer some, all or none of the Contract Value to
the AST Investment Grade Bond Portfolio Sub-account under the newly-elected
benefit. You should be aware that upon termination of Highest Daily Lifetime
Seven, you will lose the Protected Withdrawal Value (including the Tenth
Anniversary Date Guarantee), Annual Income Amount, and the Return of Principal
Guarantee that you had accumulated under the benefit. Thus, the initial
guarantees under any newly-elected benefit will be based on your current
Contract Value. Once the Highest Daily Lifetime Seven benefit is canceled you
are not required to re-elect another optional living benefit and any subsequent
benefit election may be made on or after the first Business Day following the
cancellation of the Highest Daily Lifetime Seven benefit provided that the
benefit you are looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
E. Spousal Highest Daily Lifetime Seven -- Elections of Highest Daily Lifetime
Seven or Spousal Highest Daily Lifetime Seven. Under the section of the
prospectus entitled "Spousal Highest Daily Lifetime Seven", we replace the last
paragraph in the sub-section entitled "Election of and Designations under the
Program" with the following:
If you wish, you may cancel the Spousal Highest Daily Lifetime Seven benefit.
You may then re-elect Spousal Highest Daily Lifetime Seven or elect Highest
Daily Lifetime Seven (or any other currently available living benefit) on the
Business Day after you have cancelled the Spousal Highest Daily Lifetime Seven
benefit, provided the request is received in good order (subject to state
availability and any applicable age requirements). Upon cancellation of the
Spousal Highest Daily Lifetime Seven benefit, any Contract Value allocated to
the AST Investment Grade Bond Portfolio Sub-account used with the asset transfer
formula will be reallocated to the Permitted Sub-Accounts according to your most
recent allocation instruction or in absence of such instruction, pro-rata. Upon
your election of Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven, Contract Value may be transferred between the AST Investment Grade Bond
Portfolio Sub-account and the other Sub-accounts according to the formula (See
"Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal Highest Daily
Lifetime Seven" section for more details). It is possible that over time the
formula could transfer some, all or, none of the Contract Value to the AST Bond
Portfolio Sub-accounts under the newly-elected benefit. You should be aware that
upon termination of Spousal Highest Daily Lifetime Seven, you will lose the
Protected Withdrawal Value (including the Tenth Anniversary Date Guarantee),
Annual Income Amount, and the Return of Principal Guarantee that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Contract Value. Once the
Spousal Highest Daily Lifetime Seven benefit is canceled you are not required to
re-elect another optional living benefit and any subsequent benefit election may
be made on or after the first Business Day following the cancellation of the
Spousal Highest Daily Lifetime Seven benefit provided that the benefit you are
looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Strategic Partners Annuity One 3
Strategic Partners Plus 3
Strategic Partners FlexElite (Pruco Life Insurance Company only)
Supplement, dated January 20, 2009
To
Prospectuses, dated May 1, 2008
This Supplement should be read and retained with the current Prospectus for your
contract. This Supplement is intended to update certain information in the
Prospectus for the variable contract you own, and is not intended to be a
prospectus or offer for any other variable contract listed here that you do not
own. If you would like another copy of the current Prospectus, please contact us
at 1-888-PRU-2888.
As detailed below, this supplement announces changes to your ability to cancel
certain optional living benefits and either re-elect the same benefit or elect
another living benefit.
WHEN CONSIDERING CANCELLATION OF AN EXISTING OPTIONAL LIVING BENEFIT WITH OR
WITHOUT THE RE-ELECTION OF THE SAME BENEFIT OR ELECTION OF A NEW OPTIONAL LIVING
BENEFIT, PLEASE REVIEW THE PROSPECTUS FOR COMPLETE DETAILS AND SPEAK TO YOUR
FINANCIAL PROFESSIONAL. AMONG OTHER THINGS, THE NEW BENEFIT MAY BE MORE
EXPENSIVE THAN YOUR EXISTING BENEFIT.
A. Lifetime Five - Elections of Highest Daily Lifetime Seven or Spousal Highest
Daily Lifetime Seven. Under the section of the prospectus entitled "Lifetime
Five Income Benefit", we replace the last two paragraphs within the sub-section
entitled "Election of Lifetime Five" with the following:
We no longer permit elections of Lifetime Five -- whether for those who
currently participate in Lifetime Five or for those who are buying a Contract
for the first time. If you wish, you may cancel the Lifetime Five benefit. You
may then elect Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven (or any other currently available living benefit) on the Business Day
after you have cancelled the Lifetime Five benefit provided, the request is
received in good order (subject to state availability and in accordance with any
applicable age requirements). Upon your election of Highest Daily Lifetime Seven
or Spousal Highest Daily Lifetime Seven, Contract Value may be transferred
between the AST Investment Grade Bond Portfolio Sub-account and the other
Sub-accounts according to the formula (See "Asset Transfer Component of Highest
Daily Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for more
details). It is possible that over time the formula could transfer some, all, or
none of the Contract Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of the Lifetime Five benefit, you will lose the Protected Withdrawal
Value, Annual Income Amount, and Annual Withdrawal Amount that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Account Value. Finally,
please note that the fee for the Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven benefits is a percentage of Protected Withdrawal
Value. Thus, if Protected Withdrawal Value is larger than Contract Value, the
fee will be greater than it would have been had it been based on Contract Value.
Once the Lifetime Five benefit is canceled you are not required to re-elect
another optional living benefit and any subsequent benefit election may be made
on or after the first Business Day following the cancellation of the Lifetime
Five benefit provided that the benefit you are looking to elect is available on
a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
B. Spousal Lifetime Five - Elections of Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven. Under the section of the prospectus entitled
"Spousal Lifetime Five Income Benefit", we replace the last two paragraphs
within the sub-section entitled "Election of and Designations of Spousal
Lifetime Five" with the following:
We no longer permit elections of Spousal Lifetime Five -- whether for those who
currently participate in Spousal Lifetime Five or for those who are buying a
Contract for the first time. If you wish, you may cancel the Spousal Lifetime
Five benefit. You may then elect Highest Daily Lifetime Seven or Spousal Highest
Daily Lifetime Seven (or any other currently available living benefit) on the
Business Day after have you cancelled the Spousal Lifetime Five benefit,
provided the request is received in good order (subject to state availability
and any applicable age requirements). Upon your election of Highest Daily
Lifetime Seven or Spousal Highest Daily Lifetime Seven, Contract Value may be
transferred between the AST Investment Grade Bond Portfolio Sub-account and the
other Sub-accounts according to the formula (See "Asset Transfer Component of
Highest Daily Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for
more details). It is possible that over time the formula could transfer some,
all, or none of the Contract Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of the Spousal Lifetime Five benefit, you will lose the Protected
Withdrawal Value and Annual Income Amount that you had accumulated under the
benefit. Thus, the initial guarantees under any newly-elected benefit will be
based on your current Contract Value. Also note that the fee for the Highest
Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits is a
percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal Value is
larger than Contract Value, the fee will be greater than it would have been had
it been based on Contract Value. Once the Spousal Lifetime Five benefit is
canceled you are not required to re-elect another optional living benefit and
any subsequent benefit election may be made on or after the first Business Day
following the cancellation of the Spousal Lifetime Five benefit provided that
the benefit you are looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations for the
benefit you are electing.
C. Highest Daily Lifetime Five - Elections of Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven. Under the section of the prospectus
entitled "Highest Daily Lifetime Five", we replace the last paragraph in the
sub-section entitled "Election of and Designation under the Program" with the
following:
We no longer permit elections of Highest Daily Lifetime Five -- whether for
those who currently participate in Highest Daily Lifetime Five or for those who
are buying a Contract for the first time. If you wish, you may cancel the
Highest Daily Lifetime Five benefit. You may then elect Highest Daily Lifetime
Seven or Spousal Highest Daily Lifetime Seven (or any other currently available
living benefit) on the Business Day after you have cancelled the Highest Daily
Lifetime Five benefit, provided the request is received in good order (subject
to state availability and any applicable age requirements). Upon cancellation of
the Highest Daily Lifetime Five benefit, any Contract Value allocated to the
Benefit Fixed Rate Account used with the asset transfer formula will be
reallocated to the Permitted Sub-Accounts according to your most recent
allocation instructions or, in absence of such instructions, pro-rata. Upon your
election of Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven, Contract Value may be transferred between the AST Investment Grade Bond
Portfolio Sub-account and the other Sub-accounts according to the formula (See
"Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal Highest Daily
Lifetime Seven" section for more details). It is possible that over time the
formula could transfer some, all or none of the Contract Value to the AST
Investment Grade Bond Portfolio Sub-account under the newly-elected benefit. You
should be aware that upon termination of the Highest Daily Lifetime Five
benefit, you will lose the Protected Withdrawal Value and Annual Income Amount
that you had accumulated under the benefit, as well as any Enhanced Protected
Withdrawal Value and Return of Principal Guarantees (if no withdrawals have been
taken). Thus, the initial guarantees under any newly-elected benefit will be
based on your current Contract Value. Finally, please note that the fee for the
Highest Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits
is a percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal
Value is larger than Contract Value, the fee will be greater than it would have
been had it been based on Contract Value. Once the Highest Daily Lifetime Five
benefit is canceled you are not required to re-elect another optional living
benefit and any subsequent benefit election may be made on or after the first
Business Day following the cancellation of the Highest Daily Lifetime Five
benefit provided that the benefit you are looking to elect is available on a
post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
D. Highest Daily Lifetime Seven -- Elections of Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven. Under the section of the prospectus
entitled "Highest Daily Lifetime Seven", we replace the last paragraph in the
sub-section
entitled "Election of and Designations under the Program" with the following:
If you wish, you may cancel the Highest Daily Lifetime Seven benefit. You may
then re-elect Highest Daily Lifetime Seven or elect Spousal Highest Daily
Lifetime Seven (or any other currently available living benefit) on the Business
Day after you have cancelled the Highest Daily Lifetime Seven benefit, provided
the request is received in good order (subject to state availability and any
applicable age requirements). Upon cancellation of the Highest Daily Lifetime
Seven benefit, any Contract Value allocated to the AST Investment Grade Bond
Portfolio Sub-account used with the asset transfer formula will be reallocated
to the Permitted Sub-Accounts according to your most recent allocation
instructions or, in absence of such instructions, pro-rata. Upon your election
of either the Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven benefit, Contract Value may be transferred between the AST Investment
Grade Bond Portfolio Sub-account and the other Sub-accounts according to the
formula (See "Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal
Highest Daily Lifetime Seven" section for more details). It is possible that
over time the formula could transfer some, all or none of the Contract Value to
the AST Investment Grade Bond Portfolio Sub-account under the newly-elected
benefit. You should be aware that upon termination of Highest Daily Lifetime
Seven, you will lose the Protected Withdrawal Value (including the Tenth
Anniversary Date Guarantee), Annual Income Amount, and the Return of Principal
Guarantee that you had accumulated under the benefit. Thus, the initial
guarantees under any newly-elected benefit will be based on your current
Contract Value. Once the Highest Daily Lifetime Seven benefit is canceled you
are not required to re-elect another optional living benefit and any subsequent
benefit election may be made on or after the first Business Day following the
cancellation of the Highest Daily Lifetime Seven benefit provided that the
benefit you are looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
E. Spousal Highest Daily Lifetime Seven -- Elections of Highest Daily Lifetime
Seven or Spousal Highest Daily Lifetime Seven. Under the section of the
prospectus entitled "Spousal Highest Daily Lifetime Seven", we replace the last
paragraph in the sub-section entitled "Election of and Designations under the
Program" with the following:
If you wish, you may cancel the Spousal Highest Daily Lifetime Seven benefit.
You may then re-elect Spousal Highest Daily Lifetime Seven or elect Highest
Daily Lifetime Seven (or any other currently available living benefit) on the
Business Day after you have cancelled the Spousal Highest Daily Lifetime Seven
benefit, provided the request is received in good order (subject to state
availability and any applicable age requirements). Upon cancellation of the
Spousal Highest Daily Lifetime Seven benefit, any Contract Value allocated to
the AST Investment Grade Bond Portfolio Sub-account used with the asset transfer
formula will be reallocated to the Permitted Sub-Accounts according to your most
recent allocation instruction or in absence of such instruction, pro-rata. Upon
your election of Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven, Contract Value may be transferred between the AST Investment Grade Bond
Portfolio Sub-account and the other Sub-accounts according to the formula (See
"Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal Highest Daily
Lifetime Seven" section for more details). It is possible that over time the
formula could transfer some, all or, none of the Contract Value to the AST Bond
Portfolio Sub-accounts under the newly-elected benefit. You should be aware that
upon termination of Spousal Highest Daily Lifetime Seven, you will lose the
Protected Withdrawal Value (including the Tenth Anniversary Date Guarantee),
Annual Income Amount, and the Return of Principal Guarantee that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Contract Value. Once the
Spousal Highest Daily Lifetime Seven benefit is canceled you are not required to
re-elect another optional living benefit and any subsequent benefit election may
be made on or after the first Business Day following the cancellation of the
Spousal Highest Daily Lifetime Seven benefit provided that the benefit you are
looking to elect is available on a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
In this registration statement, Pruco Life Insurance Company is registering
$40 million of securities and paying a filing fee of $1,572 therefor.
Federal Taxes
Pruco Life Insurance Company estimated the federal tax effect associated with
the deferred acquisition costs attributable to receipt of $1 million of
purchase payments over a two year period to be approximately $74,000
State Taxes
Pruco Life Insurance Company estimated that approximately $10,000 in premium
taxes would be owed upon receipt of purchase payments under the contracts and
that additional premium taxes in the approximate amount of $8,000 would be owed
if the full $40 million of purchase payments would be applied to annuity
options.
Printing Costs
Pruco Life Insurance Company estimated that the printing cost will be reflected
in the printing of the annually updated prospectuses.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life Insurance Company.
Accounting Costs
PricewaterhouseCoopers LLP, the independent registered public accounting firm
that audits Pruco Life Insurance Company's financial statements, charges
approximately $3333.33 in connection with each filing of this registration
statement with the Commission.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in conjunction with certain of its affiliates, maintains
insurance on behalf of any person who is or was a trustee, director, officer,
employee, or agent of the Registrant, or who is or was serving at the request
of the Registrant as a trustee, director, officer, employee or agent of such
other affiliated trust or corporation, against any liability asserted against
and incurred by him or her arising out of his or her position with such trust
or corporation.
Arizona, being the state of organization of Pruco Life Insurance Company
Arizona ("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 By-law,
Article VIII, which relates to indemnification of officers and directors,
is incorporated by reference to Exhibit 1A(6)(c) to Form S-6 filed August 13,
1999 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"), 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 Securities 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 Securities 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 Annuities Distributors,
Inc., "PAD" (Principal Underwriter) and Pruco Life Insurance Company
(Depositor). (Note 18)
(3)(i) Articles of Incorporation of Pruco Life Insurance Company, as amended
through October 19, 1993 (Note 6)
(ii) By-Laws of Pruco Life Insurance Company, as amended through May 6, 1997
(Note 7)
(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 5)
(d) Strategic Partners Application ORD 99730 (Note 5)
(e) Strategic Partners FlexElite Variable Annuity Contract VFLX-2003 (Note 4)
(f) Strategic Partners FlexElite Application (Note 8)
(g) Strategic Partners SPAO and FlexElite GMIB Endorsement ORD 112963 (Note
9)
(h) Strategic Partners SPAO Application (Note 10)
(i) Strategic Partners FlexElite Application (Note 10)
(j) Strategic Partners SPAO and FlexElite GMIB Endorsement Supplement ORD
112963(Note 10)
(k) Periodic Value Death Benefit Endorsement (HDV) (Note 11)
(l) Schedule Supplement Periodic Value Death Benefit (HDV) (Note 11)
(m) Guaranteed Minimum Payments Benefit Endorsement (Lifetime 5) (Note 11)
(n) Schedule Supplement Guaranteed Minimum Payments Benefit (Lifetime 5)
(Note 11)
(o) Strategic Partners SPAO and FlexElite Joint and Survivor Guaranteed
Minimum Payments Benefit Schedule (Spousal Lifetime Five) (Note 12)
(p) Highest Daily Lifetime Five Benefit Rider (Enhanced) (Note 15)
(q) Joint and Survivor Guaranteed Minimum Payments Benefit Rider (Spousal
Lifetime Five) (Note 16)
(r) Endorsement Supplement (Highest Daily Lifetime Five) (Note 17)
(s) Highest Daily Lifetime Five Benefit Rider (Enhanced) (Note 17)
(t) Highest Daily Lifetime Seven Benefit Rider (Note 18)
(5)Opinion of Counsel as to legality of the Securities being registered. (Note
1)
(23)Written Consent of PricewaterhouseCoopers LLP, Independent accountants
(Note 1)
(24)Powers of Attorney
(a) James J. Avery, Jr., Helen M. Galt, Bernard J. Jacob, Tucker I. Marr,
Scott D. Kaplan, and Scott G. Sleyster (Note 19)
(b) Stephen Pelletier (Note 1)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post Effective Amendment No. 4 on Form
S-1, Registration No. 33-61143, filed April 15, 1999, on behalf the
Pruco Life Insurance Company.
(Note 3) Incorporated by reference to 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.
(Note 4) 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 5) 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 6) 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 7) Incorporated by reference to Form 10-Q as filed August 15, 1997 on
behalf of Pruco Life Insurance Company.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 2 to From
N-4, Registration No. 333-75702, filed April 23, 2003 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 11 to Form
N-4, Registration No. 333-37728, filed November 14, 2003 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 3 to Form
S-3, Registration No. 333-103474, filed April 12, 2004 on behalf of
Pruco Life Insurance Company.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 5 to Form
N-4, Registration No. 333-75702, filed January 20, 2005 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 6 to Form
S-3, Registration No. 333-103474, filed February 7, 2006 on behalf of
Pruco Life Insurance Company.
(Note 13) Incorporated by reference to Post-Effective Amendment No. 13 to Form
S-3, Registration No. 33-61143, filed April 19, 2006 on behalf of
Pruco Life Insurance Company.
(Note 14) Incorporated by reference to Post-Effective Amendment No. 6 to Form
S-3, Registration No. 333-103474, filed April 21, 2006 on behalf of
Pruco Life Insurance Company.
(Note 15) Incorporated by reference to Pre-Effective Amendment No. 16 to Form
N-4, Registration 333-75702, filed October 6, 2006 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
(Note 16) Incorporated by reference to Post-Effective Amendment NO. 9 to Form
N-4, Registration 333-75702, filed December 9, 2005 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 17) Incorporated by reference to Post-Effective Amendment No. 18 to Form
N-4, Registration 333-75702, filed April 19, 2007 on behalf of Pruco
Life Flexible Premium Variable Annuity Account.
(Note 18) Incorporated by reference to Post-Effective Amendment No. 9 to Form
N-4, Registration 333-130989, filed December 18, 2007 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 19) An Corporated by reference to Post-Effective Amendment No. 10 to Form
N-4, Registration No. 333-130989, filed April 15, 2008.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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 the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newark, State of New
Jersey, on the 11th day of February 2009.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (Registrant)
Attest: /s/ Thomas C. Castano /s/ Scott D. Kaplan
------------------------------------ -----------------------------------
Thomas C. Castano Scott D. Kaplan
Chief Legal Officer and Secretary President and Chief Executive
Officer
Signature and Title
*
- --------------------------
JAMES J. AVERY JR.
VICE CHAIRMAN AND DIRECTOR Date: February 11, 2009
* **By: /s/ Thomas C. Castano
- ------------------------------------ -----------------------------------
SCOTT D. KAPLAN THOMAS C. CASTANO
DIRECTOR VICE PRESIDENT AND CORPORATE
COUNSEL
*
- --------------------------
TUCKER I. MARR
CHIEF ACCOUNTING OFFICER
*
- --------------------------
BERNARD J. JACOB
DIRECTOR
*
- --------------------------
SCOTT G. SLEYSTER
DIRECTOR
*
- --------------------------
HELEN M. GALT
DIRECTOR
*
- --------------------------
STEPHEN PELLETIER
DIRECTOR
EXHIBIT INDEX
Exhibit No.
- -----------
5 Opinion of Counsel
23 Written Consent of PricewaterhouseCoopers LLP, Independent
Registered Public Accounting Firm
24 Power of attorney for Director, Stephen Pelletier.