s3plnjdiscovery.htm
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 2011
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
OF NEW JERSEY
(Exact Name of Registrant)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2426091
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-5740
(Address and telephone number of principal executive offices)
SUN-JIN MOON, ESQ.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-6000
(Name, address and telephone number of agent for service)
Copies to:
LYNN K. STONE
VICE PRESIDENT
PRUCO LIFE INSURANCE COMPAY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NJ 07102-2992
(203) 402-1382
Approximate Date of Commencement of Sales to Public: As soon as practicable after the effective date of Registration Statement
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, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [X] Smaller reporting company [_]
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Calculation of Registration fee
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Proposed Proposed
Title of each class of Amount maximum maximum
securities to be to be offering price aggregate Amount of
registered registered per unit(1) offering price registration fee
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Market-value adjustment
annuity contracts (or
modified guaranteed
annuity contracts) $39,456,248 $1.00 $39,456,248 $0
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(1)
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Interests in the market value adjustment account are sold on a dollar basis, not on the basis of a price per share or unit.
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This filing is being made under the Securities Act of 1933 to register $39,456,248 of interests in market value adjusted annuity contracts. The interests being registered herein are carried over, as unsold securities, from an existing Form S-3 registration statement of the same issuer (333-157345) filed on February 13, 2009. Because a filing fee of $2,201.66 previously was paid with respect to those securities, there is no filing fee under this registration statement. In accordance with Rule 415 (a)(6), the offering of securities on the earlier registration statement will be deemed terminated as of the effective date of this registration statement.
Risk Factors are discussed in the sections of the prospectus included in Part 1 of this Form concerning the Market Value Adjustment option.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of each prospectus included in this registration statement. Any representation to the contrary is a criminal offense.
The principal underwriter for these securities, Prudential Annuities Distributors, Inc. is not required to sell any specific number or dollar amount of securities, but will use its best efforts to sell the securities offered. The offering under this registration statement will conclude three years from the effective date of this registration statement, unless terminated earlier by the Registrant. See each prospectus included in Part 1 hereof for the date of the prospectus.
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.
Audited financial statements for variable annuity separate accounts registered under the Investment Company Act of 1940 are not included in this Form S-3 registration statement.
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Supplement, dated May 1, 2009
To The Prospectuses For The Following Annuities
Discovery Select
Discovery Preferred
Strategic Partners Annuity One
Strategic Partners Annuity One 3
Strategic Partners Plus and Plus 3
Strategic Partners FlexElite
Strategic Partners Select
Strategic Partners Horizon
This supplement should be read and retained with the prospectus for the annuity you own. This supplement is not intended to be an
offer of any annuity listed here that you do not own.
Each of Pruco Life Insurance Company ("Pruco Life") and Pruco Life Insurance Company of New Jersey ("PLNJ") 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 each of Pruco Life
and PLNJ pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act also are incorporated into the prospectus by reference.
Each of Pruco Life and PLNJ 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. Each of Pruco Life and PLNJ files periodic
reports as required under the Securities Exchange Act of 1934. The public may read and copy any materials that each of Pruco Life
and PLNJ 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
OF NEW JERSEY
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 of New Jersey ("PLNJ") 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 PLNJ pursuant to Sections 13(a), 13 (c), 14 or 15(d) of the Exchange Act also are incorporated into the prospectus by reference. PLNJ 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 PLNJ 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 OF NEW JERSEY
Supplement to Variable Life Insurance Prospectuses
and
Variable Annuity Prospectuses and Statements of Additional Information
December 18, 2001
On December 18, 2001, The Prudential Insurance Company of America completed its transition from a mutual insurance company to a stock insurance company. Accordingly, we revise the description of Pruco Life Insurance Company of New Jersey to provide as follows:
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey") is a stock life insurance company, organized in 1982 under the laws of the State of New Jersey. It is licensed to sell life insurance and annuities in New Jersey and New York.
Pruco Life of New Jersey is an indirect, wholly owned subsidiary of The Prudential Insurance Company of America ("Prudential"), a New Jersey stock life insurance company doing business since 1875. Prudential is an indirect wholly-owned subsidiary of Prudential Financial, Inc. ("Prudential Financial"), a New Jersey insurance holding company. As Pruco Life of New Jersey's ultimate parent, Prudential Financial exercises significant influence over the operations and capital structure of Pruco Life of New Jersey and Prudential. However, neither Prudential Financial, Prudential, nor any other related company has any legal responsibility to pay amounts that Pruco Life of New Jersey may owe under the contract or policy.
PLNJIPOSUP Ed. 12-2001
TO
MAY 1, 2001 PROSPECTUS
This prospectus was published prior to the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001. This Act increased the contribution limits for traditional IRAs and Roth IRAs as follows: for 2001, the limit remains at $2,000; for 2002 to 2004 it rises to $3,000; for 2005 to 2007, to $4,000; and for 2008, $5,000. After 2008 the contribution amount will be indexed for inflation. The Act also provides for a catch up provision for individuals who are age 50 and above. These taxpayers will be permitted to contribute an additional $500 in years 2002 to 2005 and an additional $1,000 in 2006 and years thereafter. This product can also be used for Simplified Employee Pensions (SEPs). The Act increased the amount of compensation for contribution purposes from $170,000 to $200,000 in 2002, indexed for inflation. This will cap the annual SEP contribution at $30,000 in 2002.
TAX SUPP 6/2001
NEW YORK PROSPECTUS | MAY 1, 2001
Discovery Select(R) Variable Annuity
Discovery Select(R) Variable Annuity is issued by Pruco Life Insurance Company of New Jersey and distributed by Prudential Investment Management Services LLC. All are Prudential companies.
IFS-A053626 [LOGO] Prudential Financial
Understanding Variable Annuities
ANNUITIES AND THE BIG RETIREMENT PICTURE:
A tax-deferred retirement plan may lower your current taxable income, postpone taxes on earnings until withdrawn,/1/ and allow tax-free transfers among investment options.
Sources of Retirement Income
If you're like most Americans, you may have to provide more than half of the income you'll need for the more than 20 years you may live in retirement.
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42% Personal Investments, Savings, Earnings and Others
40% Social Security
18% Employer Retirement Programs
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Source: Social Security Administration, Facts and Figures About Social Security, 1998.
Consider an Annuity
Nonqualified annuities won't lower your taxable income, but they can postpone taxes on earnings until withdrawn./1/ Nonqualified annuities add other important benefits.
. Unlimited contributions.
. No required distributions at age 70 1/2.
. Option of guaranteed income for life./2/
. Offers a guaranteed fixed rate of return/2/ (fixed annuity option in many variable annuities).
. A death benefit that passes account values to beneficiaries, and which may avoid probate, but is not tax free.
/1/ Withdrawals prior to age 59 1/2 are subject to tax penalties and ordinary income tax.
/2/ Guarantee is based on the claims-paying ability of the issuing company, and does not apply to the investment performance or safety of the underlying investment.
This material includes a prospectus that describes in detail the Fund's objectives, investment policies, risks, sales charges, and other matters of interest. Please read the prospectus carefully, which begins on page 1, before you invest or send money.
This is not part of the Discovery Select Variable Annuity prospectus. The prospectus begins on page 1.
What Is a Variable Annuity?
A variable annuity allows you to create a personal investment strategy by choosing among a range of investment options that will fluctuate in value. A variable annuity is designed for people willing to take more risk with their money in exchange for greater growth potential.
The Potential of Tax-Deferred Growth
You pay no taxes on annuity earnings until you withdraw your money. This means that all your money keeps working for you without being reduced by annual taxation. Later, when you need your money, only your earnings are taxed. (See the chart below.)
VALUE OF $50,000 INVESTED FOR 25 YEARS EARNING AN 8% AVERAGE ANNUAL RETURN
[CHART]
This chart shows two hypothetical $50,000 investments, a taxable and tax-deferred. Both earn 8% a year for 25 years. It does not include the effect of mortality and expense charges, sales charges, and administrative fees typically found with variable annuities, which would lower the performance shown. The taxable investment is assumed to pay a combined federal and state tax rate of 28% each year on investment returns. The tax-deferred investment pays a combined federal and state tax of 33% on lump-sum withdrawal of earnings at the end of 25 years. According to this example, a $342,424 lump-sum withdrawal would have been worth $245,924 after taxes. Investors under the age of 59 1/2 at the time of withdrawal may be subject to a 10% IRS penalty. This hypothetical example is not intended to represent the performance of any specific product.
Please note that the above illustration is hypothetical and is not intended to be a projection of future values. Discovery Select Variable Annuity has a mortality and expense risk charge of 1.40%, as well as an annual contract charge of $30 if the contract value is less than $50,000. If these fees and charges were included in the illustration above, the performance would have been lower.
And How Does It Work?
You select an investment program by choosing from stock, bond, and money market portfolios according to a strategy of growth, income and/or stability. The value of your annuity will vary according to the performance of the investment options that you choose. You can change your investment strategy as your needs or market conditions change without losing money to taxes.
This is not part of the Discovery Select prospectus. The prospectus begins on page 1.
How the Variable Options Work
Variable annuity purchasers are looking for more growth potential through their choice of investment options.
Variable investment options are associated with specific funds, each of which is managed by a portfolio manager who invests the money of annuity owners according to guidelines that specify the type of stocks or bonds to be purchased and the investment approach. The guidelines may be broadly or narrowly defined according to the prospectus of each subaccount.
Variable annuity owners need to be sure their choice of options is in line with their personal goals, their tolerance for risk, and the number of years until their retirement. Make sure you understand the purpose and strategy of your variable options, and don't be afraid to ask questions of your financial professional--that's what he or she is paid for.
YOUR VARIABLE INVESTMENT OPTIONS
[CHART]
The chart above shows the approximate relationship among various investment categories in terms of risk and return potential as reported by Morningstar Inc. in August 1996.
Questions?
Dial (888) PRU-2888 (778-2888) to speak to a Prudential service specialist.
This is not part of the Discovery Select prospectus. The prospectus begins on page 1.
DISCOVERY SELECT(R)
Variable Annuity
PROSPECTUS: MAY 1, 2001
This prospectus describes an individual variable annuity contract offered by Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey). Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The Prudential Insurance Company of America.
The Funds
Discovery Select offers a wide variety of investment choices, including 40 variable investment options that invest in mutual funds managed by these leading asset managers.
Prudential Investments
A I M Capital Management, Inc.
Alliance Capital Management L.P.
American Century
Credit Suisse Asset Management, LLC
Davis Selected Advisers, L.P.
Fidelity Management & Research Co.
Franklin Advisers
INVESCO Funds Group, Inc.
Janus Capital
Jennison Associates
MFS
Oppenheimer Capital
PIMCO
T. Rowe Price
Please Read this Prospectus
Please read this prospectus before purchasing a Discovery Select variable annuity contract and keep it for future reference. Current prospectuses for each of the underlying mutual funds accompany this prospectus. These prospectuses contain important information about the mutual funds. Please read these prospectuses and keep them for reference.
To Learn More About Discovery Select
To learn more about the Discovery Select variable annuity, you can request a copy of the Statement of Additional Information (SAI) dated May 1, 2001. The SAI has been filed with the Securities and Exchange Commission (SEC) and is legally a part of this prospectus. Pruco Life of New Jersey also files other reports with the SEC. All of these filings can be reviewed and copied at the SEC's offices, and can also be obtained from the SEC's Public Reference Section, 450 5th Street N.W., Washington, D.C. 20549. The SEC also maintains a Web site (http://www.sec.gov) that contains the Discovery Select SAI, material incorporated by reference, and other information regarding registrants that file electronically with the SEC. The Table of Contents of the SAI is on Page 35 of this prospectus.
For a Free Copy of the SAI call us at:
. (888) PRU-2888 or write to us at:
. Pruco Life Insurance Company of New Jersey 213 Washington Street Newark, New Jersey 07102-2992
. Prudential Annuity Service Center P.O. Box 7960 Philadelphia, PA 19101
The SEC has not determined that this contract is a good investment, nor has the SEC determined that this prospectus is complete or accurate. It is a criminal offense to state otherwise. Investment in a variable annuity contract is subject to risk, including the possible loss of your money. An investment in Discovery Select is not a bank deposit and is not insured by the Federal Deposit Insurance Corporation or any other government agency.
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Contents
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PART I: DISCOVERY SELECT PROSPECTUS
SUMMARY
Glossary 6
Summary 7
Summary of Contract Expenses 10
Expense Examples 13
PART II: DISCOVERY SELECT PROSPECTUS
SECTIONS 1-9
Section 1: What is the Discovery Select Variable Annuity? 18
Short Term Cancellation Right or "Free Look" 18
Section 2: What Investment Options Can I Choose? 19
Variable Investment Options 19
Fixed Interest-Rate Options 20
Transfers Among Options 21
Other Available Features 21
Voting Rights 22
Substitution 22
Section 3: What Kind of Payments Will I Receive During the Income Phase?
(Annuitization) 23
Payment Provisions 23
Option 1: Annuity Payments for a Fixed Period 23
Option 2: Life Annuity with 120 Payments (10 Years) Certain 23
Option 3: Interest Payment Option 23
Option 4: Other Annuity Options 23
Section 4: What is the Death Benefit? 24
Beneficiary 24
Calculation of the Death Benefit 24
Section 5: How Can I Purchase a Discovery Select Contract? 25
Purchase Payments 25
Allocation of Purchase Payments 25
Calculating Contract Value 25
Section 6: What are the Expenses Associated with the Discovery Select
Contract? 26
Insurance Charges 26
Annual Contract Fee 26
Withdrawal Charge 26
Taxes Attributable to Premium 27
Transfer Fee 27
Company Taxes 27
Section 7: How Can I Access My Money? 28
Automated Withdrawals 28
Suspension of Payments or Transfers 28
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Section 8: What are the Tax Considerations Associated with the Discovery Select Contract? 29
Contracts Owned By Individuals (Not Associated with Tax Favored Retirement Plans) 29
Contracts Held by Tax Favored Plans 30
Section 9: Other Information 34
Pruco Life Insurance Company of New Jersey 34
The Separate Account 34
Sale and Distribution of the Contract 34
Assignment 35
Financial Statements 35
Statement of Additional Information 35
Householding 35
Accumulation Unit Values 36
Market-Value Adjustment Formula 39
IRA Disclosure Statement 41
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PART III: PROSPECTUSES
VARIABLE INVESTMENT OPTIONS
The Prudential Series Fund
AIM Variable Insurance Funds
Alliance Variable Products Series Fund, Inc.
American Century Variable Portfolios, Inc.
Credit Suisse Warburg Pincus Trust
Davis Variable Account Fund, Inc.
Franklin Templeton Variable Insurance Products Trust
Janus Aspen Series
MFS Variable Insurance Trust
OCC Accumulation Trust
T. Rowe Price
3
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4
Part I Summary
Discovery Select Prospectus
5
PART I DISCOVERY SELECT 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 (see below definition) and ends when you start receiving income payments or earlier if the contract is terminated through a full withdrawal or payment of a death benefit.
ANNUITANT
The person whose life determines how long the contract lasts and the amount of income payments that will be paid.
ANNUITY DATE
The date when income payments are scheduled to begin.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
CASH VALUE
This is the total value of your contract minus any withdrawal charge(s) or market-value adjustment, if applicable.
CO-ANNUITANT
The person shown on the contract data pages who becomes the Annuitant upon the death of the Annuitant before the Annuity Date. No Co-Annuitant may be designated if the Owner is a non-natural person.
CONTRACT DATE
The date we receive your initial purchase payment and all necessary paperwork in good order at the Prudential Annuity Service Center. Contract anniversaries are measured from the contract date. A contract year starts on the contract date or on a contract anniversary.
CONTRACTOWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
The total value of the amounts in a contract allocated to the variable investment options and the interest rate options as of a particular date.
DEATH BENEFIT
If the sole or last surviving annuitant dies, the designated person(s) or the beneficiary will receive, at a minimum, the total amount invested or a potentially greater amount related to market appreciation. See "What is the Death Benefit?" on page 24.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income payments. In your contract, these are referred to as payout or annuity options.
INTEREST-RATE OPTION
An investment option that offers a fixed-rate of interest for a selected period during which periodic transfers are made to selected variable investment options (dollar cost averaging option), a one-year period (fixed-rate option) or a seven-year period (market-value adjustment option).
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA 19101. For express overnight mail: 2101 Welsh Road, Dresher, PA 19025. The phone number is
(888) PRU-2888.
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 of New Jersey Flexible Premium Variable Annuity Account. The Separate Account is set apart from all of the general assets of Pruco Life of New Jersey.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. You do not pay taxes on your contract earnings until you take money out of your contract.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the mutual fund which are held as an investment for that option. We hold these shares in the Separate Account. The division of the Separate Account of Pruco Life of New Jersey that invests in a particular mutual fund is referred to in your contract as a subaccount.
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PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Sections 1--9
For a more complete discussion of the following topics, see the corresponding section in the prospectus.
SECTION 1
What is the Discovery Select Variable Annuity?
This variable annuity contract, offered by Pruco Life of New Jersey, is a contract between you, as the owner, and us. The contract allows you to invest on a tax-deferred basis in one or more of 40 variable investment options. There are also two fixed interest rate options which are available in most states. The contract is intended for retirement savings or other long-term investment purposes and provides a death benefit and guaranteed income options.
The variable investment options are designed to offer the opportunity over the long term for a better return than the fixed interest rate options. However, this is NOT guaranteed. It is possible, due to market changes, that your investments may decrease in value.
The fixed interest-rate options offer an interest-rate that is guaranteed. While your money is in a fixed account, your principal amount is guaranteed and the interest amount that your money will earn is guaranteed by us to always be at least 3.0%. Payments allocated to the fixed interest-rate options become part of Pruco Life of New Jersey's general assets. As a result, the strength of our guarantee is based on the overall financial strength of Pruco Life of New Jersey.
You can invest your money in any or all of the variable investment options and the interest-rate options. You are allowed 12 transfers each contract year among the variable investment options, without a charge. There are certain restrictions on transfers involving the interest-rate options.
The contract, like all deferred annuity contracts, has two phases: the accumulation phase and the income phase. During the accumulation phase, earnings grow on a tax-deferred basis and are taxed as income when you make a withdrawal. The income phase starts when you begin receiving regular payments from your contract. The amount of money you are able to accumulate in your contract during the accumulation phase will help determine the amount of the payments you will receive during the income phase. Other factors will affect the amount of your payments such as age, gender and the payout option you selected.
Free Look. If you change your mind about owning Discovery Select, you may cancel your contract within 10 days after receiving it (or whatever time period is required in the state where the contract was issued).
SECTION 2
What Investment Options Can I Choose?
You generally can invest your money in any of the variable investment options that invest in the mutual funds described in the fund prospectuses provided with this prospectus:
The Prudential Series Fund
Diversified Bond Portfolio
Diversified Conservative Growth Portfolio Equity Portfolio
Global Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
Value Portfolio
20/20 Focus Portfolio
SP Aggressive Growth Asset Allocation Portfolio SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio SP Conservative Asset Allocation Portfolio SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio SP Jennison International Growth Portfolio SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio SP MFS Mid-Cap Growth Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio SP Small/Mid Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio AIM Variable Insurance Funds
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
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PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Sections 1-9 continued
Alliance Variable Products Series Fund, Inc. Alliance Premier Growth Portfolio
American Century Variable Portfolios, Inc. American Century VP Value
Credit Suisse Warburg Pincus Trust
Global Post-Venture Capital Portfolio Davis Variable Account Fund, Inc.
Davis Value Portfolio
Franklin Templeton Variable Insurance Products Trust Franklin Small Cap Fund -- Class 2
Janus Aspen Series
Growth Portfolio
International Growth Portfolio
MFS Variable Insurance Trust
Emerging Growth Series
Research Series
OCC Accumulation Trust
Managed Portfolio
Small Cap Portfolio
T. Rowe Price
Equity Series--Equity Income Portfolio International Series--International Stock Portfolio
Depending upon market conditions, you may earn or lose money in any of these options. The value of your contract will fluctuate depending upon the investment performance of the mutual funds used by the variable investment options you choose. Performance information for the variable investment options is provided in the Statement of Additional Information (SAI). Past performance is not a guarantee of future results.
You can also put your money into one or more of the fixed interest-rate options.
Depending on the terms of your contract, not all portfolios of the Prudential Series Fund may be available to you.
SECTION 3
What Kind Of Payments Will I Receive During The Income Phase? (Annuitization)
If you want to receive regular income from your annuity, you can choose one of several options, including guaranteed payments for the annuitant's lifetime. Generally, once you begin receiving regular payments, you cannot change your payment plan.
SECTION 4
What Is The Death Benefit?
If the sole or last surviving annuitant dies the designated person(s) or the beneficiary will receive at a minimum, the total amount invested or a potentially greater amount related to market appreciation.
SECTION 5
How Can I Purchase A Discovery Select Annuity Contract?
You can purchase this contract, under most circumstances, with a minimum initial purchase payment of $10,000. You can add $1,000 or more at any time during the accumulation phase of the contract. Your representative can help you fill out the proper forms.
SECTION 6
What Are The Expenses Associated With The Discovery Select Contract?
The contract has insurance features and investment features, and there are costs related to each.
Each year we deduct a $30 contract maintenance charge if your contract value is less than $50,000. For insurance and administrative costs, we also deduct an annual charge of 1.40% of the average daily value of all assets allocated to the variable investment options. This charge is not assessed against amounts allocated to the interest-rate investment options.
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PART I DISCOVERY SELECT PROSPECTUS SUMMARY
There are also charges associated with the mutual funds. These charges currently range from 0.39% to 1.40% per year of a fund's average daily assets.
During the accumulation phase, if you withdraw money less than eight years after making a purchase payment, you may have to pay a withdrawal charge on all or part of the withdrawal. This charge ranges from 1-7%.
SECTION 7
How Can I Access My Money?
You may take money out at any time during the accumulation phase. If you do so, however, you may be subject to income tax, and if you make a withdrawal prior to age 59 1/2, an additional tax penalty as well. Each year, you may withdraw up to 10% of your total purchase payments without charge. Withdrawals greater than 10% of your purchase payments will be subject to a withdrawal charge. This charge decreases 1% each year. After the 7th year, there is no charge for a withdrawal. You may also be subject to income tax and a tax penalty if you make an early withdrawal.
SECTION 8
What Are The Tax Considerations Associated With The Discovery Select Contract?
Your earnings are not taxed until withdrawn. If you take money out during the accumulation phase, earnings are withdrawn first and are taxed as ordinary income. If you are younger than age 59 1/2 when you take money out, you may be charged a 10% federal tax penalty on the earnings in addition to ordinary taxation. A portion of the payments you receive during the income phase is considered partly a return of your original investment. As a result, that portion of each payment is not taxable as income. Generally, all amounts withdrawn from IRA contracts (excluding Roth IRAs) are fully taxable and subject to the 10% penalty if withdrawn prior to age 59 1/2.
SECTION 9
Other Information
This contract is issued by Pruco Life of New Jersey, a subsidiary of The Prudential Insurance Company of America.
9
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Contract Expenses
The purpose of this summary is to help you to understand the costs you will pay for Discovery Select. This summary includes the expenses of the mutual funds used by the variable investment options but does not include any premium taxes that might be applicable in your state.
For More Detailed Information:
More detailed information can be found on page 26 under the section called, "What Are The Expenses Associated With The Discovery Select Contract?" For more detailed expense information about the mutual funds, please refer to the individual fund prospectuses which you will find at the back of this prospectus.
TRANSACTION EXPENSES
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Withdrawal Charge (see Note 1 below)
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
Transfer Fee (see Note 2 below)
first 12 transfers per year $ 0.00
each transfer after 12 $25.00
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Annual Contract Fee and Full Withdrawal Fee (see Note 3 below) $30.00
ANNUAL ACCOUNT EXPENSES
AS A PERCENTAGE OF THE AVERAGE ACCOUNT VALUE
|
Mortality and Expense Risk: 1.25%
Administrative Fee: 0.15%
Total: 1.40%
|
Note 1: As of the beginning of the contract year, you may withdraw up to 10% of
the total purchase payments plus any charge-free amount carried over from the previous contract year without charge. There is no withdrawal charge on any amount used to provide income under the Life Annuity with 120 payments (10 years) certain option. (see page 23). Surrender charges are waived when a death benefit is paid.
Note 2: You will not be charged for transfers made in connection with dollar
cost averaging and auto-rebalancing.
Note 3: This fee is not charged on withdrawals if the value of your contract is
$50,000 or more.
Notes for Annual Mutual Fund Expenses:
These expenses are based on the historical fund expenses for the year ended December 31, 2000, except as indicated. Fund expenses are not fixed or guaranteed by the Discovery Select contract and may vary from year to year.
(1) The Prudential Series Fund:
Because this is the first full year of operations for all "SP" Portfolios, other expenses are estimated based on management projections of non-advisory fee expenses. Each ''SP'' Portfolio has expense reimbursement in effect, and the table shows total expenses both with and without these expense reimbursements. These expense reimbursements are voluntary and may be terminated at any time.
(2) American Century Variable Portfolios Inc. and T. Rowe Price Funds
Investment Management Fees include ordinary expenses of operating the funds.
(3) Credit Suisse Warburg Pincus Trust and Davis Variable Account Fund, Inc.
Fee waivers and expense reimbursement or credits reduced investment management fees and other expenses during 2000, but may be discontinued at any time.
(4) Franklin Templeton Variable Insurance Products Trust
The Fund's class 2 distribution plan or "rule 12b-1 plan" is described in the Fund's prospectus. The manager has agreed in advance to make an estimated reduction of 0.04% of its fee to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission.
(5) Janus Aspen Series
Table reflects expenses based upon expenses for the fiscal year ended December 31, 2000, restated to reflect a reduction in the management fee. All expenses are shown without the effect of any offset arrangement.
(6) MFS Variable Insurance Trust
An expense offset arrangement with the Fund's custodian resulted in a reduction in other expenses by 0.01%.
10
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
ANNUAL MUTUAL FUND EXPENSES (AFTER REIMBURSEMENT, IF ANY):
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
|
INVESTMENT TOTAL TOTAL
MANAGEMENT 12b-1 OTHER CONTRACTUAL ACTUAL
FEE FEE EXPENSES EXPENSES EXPENSES*
---------- ----- -------- ----------- ---------
The Prudential Series Fund/1/
Diversified Bond Portfolio 0.40% N/A 0.05% 0.45% 0.45%
Diversified Conservative Growth Portfolio 0.75% N/A 0.18% 0.93% 0.93%
Equity Portfolio 0.45% N/A 0.04% 0.49% 0.49%
Global Portfolio 0.75% N/A 0.10% 0.85% 0.85%
High Yield Bond Portfolio 0.55% N/A 0.05% 0.60% 0.60%
Money Market Portfolio 0.40% N/A 0.04% 0.44% 0.44%
Prudential Jennison Portfolio 0.60% N/A 0.04% 0.64% 0.64%
Small Capitalization Stock Portfolio 0.40% N/A 0.08% 0.48% 0.48%
Stock Index Portfolio 0.35% N/A 0.04% 0.39% 0.39%
Value Portfolio 0.40% N/A 0.05% 0.45% 0.45%
20/20 Focus Portfolio 0.75% N/A 0.13% 0.88% 0.88%
SP Aggressive Growth Asset Allocation Portfolio 0.84%** N/A 0.40% 1.24% 1.04%
SP Alliance Technology Portfolio 1.15% N/A 0.65% 1.80% 1.30%
SP Balanced Asset Allocation Portfolio 0.75%** N/A 0.33% 1.08% 0.92%
SP Conservative Asset Allocation Portfolio 0.71%** N/A 0.30% 1.01% 0.87%
SP Growth Asset Allocation Portfolio 0.80%** N/A 0.35% 1.15% 0.97%
SP INVESCO Small Company Growth Portfolio 0.95% N/A 1.08% 2.03% 1.15%
SP Jennison International Growth Portfolio 0.85% N/A 0.45% 1.30% 1.24%
SP Large Cap Value Portfolio 0.80% N/A 1.00% 1.80% 0.90%
SP MFS Capital Opportunities Portfolio 0.75% N/A 0.96% 1.71% 1.00%
SP MFS Mid-Cap Growth Portfolio 0.80% N/A 0.63% 1.43% 1.00%
SP PIMCO Total Return Portfolio 0.60% N/A 0.26% 0.86% 0.76%
SP Prudential U.S. Emerging Growth Portfolio 0.60% N/A 0.47% 1.07% 0.90%
SP Small/Mid Cap Value Portfolio 0.90% N/A 0.51% 1.41% 1.05%
SP Strategic Partners Focused Growth Portfolio 0.90% N/A 0.85% 1.75% 1.01%
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth and Income Fund 0.60% N/A 0.24% 0.84% 0.84%
AIM V.I. Value Fund 0.61% N/A 0.23% 0.84% 0.84%
Alliance Variable Products Series Fund, Inc./2/
Alliance Premier Growth Portfolio--Class B 1.00% 0.25% 0.05% 1.30% 1.30%
American Century Variable Portfolios, Inc./3/
American Century VP Value 1.00% N/A 0.00% 1.00% 1.00%
Credit Suisse Warburg Pincus Trust/4/
Global Post-Venture Capital Portfolio 1.25% N/A 0.28% 1.53% 1.40%
Davis Variable Account Fund, Inc./4/
Davis Value Portfolio 0.75% N/A 0.26% 1.01% 1.00%
Franklin Templeton Variable Insurance Products Trust/5/
Franklin Small Cap Investments Fund--Class 2 0.53% 0.25% 0.28% 1.06% 1.02%
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THIS CHART CONTINUES ON THE NEXT PAGE
11
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Contract Expenses continued
ANNUAL MUTUAL FUND EXPENSES (CONTINUED) (AFTER REIMBURSEMENT, IF ANY):
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
|
INVESTMENT TOTAL TOTAL
MANAGEMENT FEE OTHER CONTRACTUAL ACTUAL
12b-1 FEE EXPENSES EXPENSES EXPENSES*
-------------- --- -------- ----------- ---------
Janus Aspen Series--Institutional Shares/6/
Growth Portfolio 0.65% N/A 0.02% 0.67% 0.67%
International Growth Portfolio 0.65% N/A 0.06% 0.71% 0.71%
MFS Variable Insurance Trust/7/
Emerging Growth Series 0.75% N/A 0.10% 0.85% 0.84%
Research Series 0.75% N/A 0.10% 0.85% 0.84%
OCC Accumulation Trust
Managed Portfolio 0.78% N/A 0.08% 0.86% 0.86%
Small Cap Portfolio 0.80% N/A 0.10% 0.90% 0.90%
T. Rowe Price/3/
Equity Series--Equity Income Portfolio 0.85% N/A 0.00% 0.85% 0.85%
International Series--International Stock Portfolio 1.05% N/A 0.00% 1.05% 1.05%
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* Reflects the effect of management fee waivers and reimbursement of expenses, if any. See notes on page 10.
** Each Asset Allocation portfolio invests in shares of other Series Fund portfolios. The advisory fees for the Asset Allocation Portfolios depicted above are the product of a blend of the fees of those other Fund Portfolios, plus a 0.05% annual advisory fee payable to PIFM.
The "Expenses Examples" on the following pages are calculated using the total actual expenses.
12
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Expense Examples
These examples will help you compare the fees and expenses of the different variable investment options offered by Discovery Select. You can also use the examples to compare the cost of Discovery Select with other variable annuity contracts.
Example 1: If You Withdraw Your Assets
Example 1 assumes that you invest $10,000 in Discovery Select and that you allocate all of your assets to one of the variable investment options and withdraw all your assets at the end of the time period indicated. The example also assumes that your investment has a 5% return each year and that the mutual fund's operating expenses remain the same. Your actual costs may be higher or lower.
Example 2: If You Do Not Withdraw Your Assets
Example 2 assumes that you invest $10,000 in Discovery Select and allocate all of your assets to one of the variable investment options and do not withdraw any of your assets at the end of the time period indicated. The example also assumes that your investment has a 5% return each year and that the mutual fund's operating expenses remain the same. Your actual costs may be higher or lower.
On the following page are examples of what your costs would be using these assumptions.
Notes for Annual Mutual Fund Expenses:
These examples should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown.
The charges shown in the 10 year column are the same for Example 1 and Example
2. This is because after 10 years, the withdrawal charges are no longer deducted by us when you make a withdrawal or when you begin the income phase of your contract.
If your contract value is less than $50,000, on your contract anniversary (and upon a surrender), we deduct a $30 fee. The examples use an average number as the amount of the annual contract fee. This amount was calculated by taking the total annual contract fees collected in 2000 and then dividing that number by the total assets allocated to the variable investment options. Based on this calculation the annual contract fee is included as an annual charge of .023% of contract value.
Your actual fees will vary based on the amount of your contract and your specific allocation(s). A table of accumulation unit values of interests in each variable investment option appears on page 36. Charges for premium taxes are not reflected. In these examples. Premium taxes may apply depending on the state where you live.
13
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
EXPENSE EXAMPLES 1 AND 2
|
EXAMPLE 1: EXAMPLE 2:
----------------------- -----------------------
IF YOU WITHDRAW YOUR IF YOU DO NOT WITHDRAW
ASSETS YOUR ASSETS
----------------------- -----------------------
1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------ ---- ----- ----- ------
The Prudential Series Fund
Diversified Bond Portfolio $821 $1130 $1374 $2197 $191 $590 $1014 $2197
Diversified Conservative Growth Portfolio $869 $1275 $1619 $2692 $239 $735 $1259 $2692
Equity Portfolio $825 $1142 $1395 $2239 $195 $602 $1035 $2239
Global Portfolio $861 $1251 $1578 $2612 $231 $711 $1218 $2612
High Yield Bond Portfolio $836 $1175 $1451 $2355 $206 $635 $1091 $2355
Money Market Portfolio $820 $1127 $1369 $2187 $190 $587 $1009 $2187
Prudential Jennison Portfolio $840 $1188 $1472 $2396 $210 $648 $1112 $2396
Small Capitalization Stock Portfolio $824 $1139 $1390 $2229 $194 $599 $1030 $2229
Stock Index Portfolio $815 $1111 $1343 $2133 $185 $571 $ 983 $2133
Value Portfolio $821 $1130 $1374 $2197 $191 $590 $1014 $2197
20/20 Focus Portfolio $864 $1260 $1593 $2642 $234 $720 $1233 $2642
SP Aggressive Growth Asset Allocation Portfolio $880 $1359 $1721 $2843 $250 $819 $1361 $2843
SP Alliance Technology Portfolio $906 $1346 $1755 $3018 $276 $796 $1395 $3018
SP Balanced Asset Allocation Portfolio $868 $1346 $1684 $2742 $238 $806 $1324 $2742
SP Conservative Asset Allocation Portfolio $863 $1267 $1598 $2640 $233 $727 $1238 $2640
SP Growth Asset Allocation Portfolio $873 $1268 $1620 $2717 $243 $728 $1260 $2717
SP INVESCO Small Company Growth Portfolio $891 $1306 $1695 $2884 $261 $766 $1335 $2884
SP Jennison International Growth Portfolio $900 $1351 $1757 $2985 $270 $811 $1397 $2985
SP Large Cap Value Portfolio $866 $1333 $1666 $2716 $236 $793 $1306 $2716
SP MFS Capital Opportunities Portfolio $876 $1277 $1635 $2747 $246 $737 $1275 $2747
SP MFS Mid-Cap Growth Portfolio $876 $1296 $1654 $2763 $246 $756 $1294 $2763
SP PIMCO Total Return Portfolio $852 $1271 $1578 $2558 $222 $731 $1218 $2558
SP Prudential U.S. Emerging Growth Portfolio $866 $1239 $1577 $2640 $238 $699 $1217 $2640
SP Small/Mid Cap Value Portfolio $881 $1282 $1651 $2789 $251 $742 $1291 $2789
SP Strategic Partners Focused Growth Portfolio $877 $1307 $1666 $2779 $247 $767 $1306 $2779
AIM Variable Insurance Funds
AIM V.I. Growth and Income Fund $860 $1248 $1573 $2602 $230 $708 $1213 $2602
AIM V.I. Value Fund $860 $1248 $1573 $2602 $230 $708 $1213 $2602
Alliance Variable Products Series Fund, Inc.
Alliance Premier Growth Portfolio--Class B $906 $1386 $1803 $3057 $276 $846 $1443 $3057
American Century Variable Portfolios, Inc.
American Century VP Value $876 $1296 $1654 $2763 $246 $756 $1294 $2763
Credit Suisse Warburg Pincus Trust
Global Post-Venture Capital Portfolio $918 $1422 $1862 $3172 $288 $882 $1502 $3172
Davis Variable Account Fund, Inc.
Davis Value Fund $876 $1296 $1654 $2763 $246 $756 $1294 $2763
Franklin Templeton Variable Insurance Products Trust
Franklin Small Cap Fund--Class 2 $878 $1302 $1664 $2783 $248 $762 $1304 $2783
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THIS CHART CONTINUES ON THE NEXT PAGE
14
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
EXPENSE EXAMPLES 1 AND 2 (CONTINUED)
|
EXAMPLE 1: EXAMPLE 2:
----------------------- -----------------------
IF YOU WITHDRAW YOUR IF YOU DO NOT WITHDRAW
ASSETS YOUR ASSETS
----------------------- -----------------------
1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS
---- ----- ----- ------ ---- ----- ----- ------
Janus Aspen Series
Growth Portfolio $843 $1197 $1487 $2427 $213 $657 $1127 $2427
International Growth Portfolio $847 $1209 $1507 $2469 $217 $669 $1147 $2469
MFS Variable Insurance Trust
Emerging Growth Series $860 $1248 $1573 $2602 $230 $708 $1213 $2602
Research Series $860 $1248 $1573 $2602 $230 $708 $1213 $2602
OCC Accumulation Trust
Managed Portfolio $862 $1254 $1583 $2622 $232 $714 $1223 $2622
Small Cap Portfolio $866 $1266 $1603 $2662 $236 $726 $1243 $2662
T. Rowe Price
Equity Series--Equity Income Portfolio $861 $1251 $1578 $2612 $231 $711 $1218 $2612
International Series--Int'l Stock Portfolio $881 $1311 $1679 $2812 $251 $771 $1319 $2812
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These examples do not show past or future expenses. Actual expenses for a particular year may be more or less than shown in the examples.
15
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16
Part II Sections 1-9
Discovery Select Prospectus
17
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
1:
What is the Discovery Select
Variable Annuity?
The Discovery Select Variable Annuity is a contract between you, the owner, and us, the insurance company, Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey, We or Us).
Under our contract or agreement, in exchange for your payment to us, we promise to pay you a guaranteed income stream that can begin any time after the first contract anniversary. Your annuity is in the accumulation phase until you decide to begin receiving annuity payments. The date you begin receiving annuity payments is the annuity date. On the annuity date, your contract switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that you are not taxed on earnings or appreciation on the assets in your contract until you withdraw money from your contract.
Discovery Select is a variable annuity contract. This means that during the accumulation phase, you can allocate your assets among 40 variable investment options as well as 2 guaranteed interest-rate options. If you select a variable investment option, the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the investment performance of the mutual fund associated with that variable investment option. Because the mutual funds' portfolios fluctuate in value depending upon market conditions, your contract value can either increase or decrease. This is important, since the amount of the annuity payments you receive during the income phase depends upon the value of your contract at the time you begin receiving payments.
As mentioned above, Discovery Select also contains three guaranteed interest-rate options: a fixed-rate option, a dollar cost averaging option, and a market-value adjustment option. The fixed-rate option offers an interest rate that is guaranteed by us for one year and will always be at least 3.0% per year. The dollar cost averaging option offers an interest-rate that is guaranteed by us for a selected period during which periodic transfers are made to selected variable investment options. The market-value adjustment option guarantees a stated interest rate, generally higher than the fixed-rate option. However, in order to get the full benefit of the stated interest rate, assets in this option must be held for a seven-year period.
As the owner of the contract, you have all of the decision-making rights under the contract. You will also be the annuitant unless you designate someone else. The annuitant(s) is the person upon whose death during the accumulation phase, the death benefit is payable. The annuitant is the person who receives the annuity payments when the income phase begins. The annuitant is also the person whose life is used to determine how much and how long these payments will continue. On and after the annuity date, the annuitant is the owner and may not be changed. The beneficiary becomes the owner when a death benefit is payable.
The beneficiary is: the person(s) or entity designated to receive any death benefit if the annuitant(s) dies during the accumulation phase. You may change the beneficiary any time prior to the annuity date by making a written request to us. Your request becomes effective when we approve it.
Short Term Cancellation Right or "Free Look"
If you change your mind about owning Discovery Select, 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:
. Your contract value; and
. Any fees deducted at the time of sale
18
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options
Can I Choose?
The contract gives you the choice of allocating your purchase payments to any one or more of 40 variable investment options, as well as three guaranteed interest-rate options.
The 40 variable investment options invest in mutual funds managed by leading investment advisors. Each of these mutual funds has a separate prospectus that is provided with this prospectus. You should read the mutual fund prospectus before you decide to allocate your assets to the variable investment option using that fund.
VARIABLE INVESTMENT OPTIONS
Listed below are the mutual funds in which the variable investment options invest. Depending on the terms of your contract, not all of these options may be available to you. Each variable investment option has a different investment objective.
The Prudential Series Fund, Inc.
. Diversified Bond Portfolio
. Diversified Conservative Growth Portfolio
. Equity Portfolio
. Global Portfolio
. High Yield Bond Portfolio
. Money Market Portfolio
. Prudential Jennison Portfolio (domestic equity)
. Small Capitalization Stock Portfolio
. Stock Index Portfolio
. Value Portfolio (domestic equity) (formerly Equity Income Portfolio)
. 20/20 Focus Fund (domestic equity)
. SP Aggressive Growth Asset Allocation Portfolio
. SP Alliance Technology Portfolio
. SP Balanced Asset Allocation Portfolio
. SP Conservative Asset Allocation Portfolio
. SP Growth Asset Allocation Portfolio
. SP INVESCO Small Company Growth Portfolio
. SP Jennison International Growth Portfolio
. SP Large Cap Value Portfolio
. SP MFS Capital Opportunities Portfolio
. SP MFS Mid-Cap Growth Portfolio
. SP PIMCO Total Return Portfolio
. SP Prudential U.S. Emerging Growth Portfolio
. SP Small/Mid Cap Value Portfolio
. SP Strategic Partners Focused Growth Portfolio
The Prudential Series Fund, Inc. is managed by Prudential Investments Fund Management LLC ("PIFM"), a Prudential subsidiary, through subadvisers that PIFM employs by using a manager-of-managers approach. Prudential Investment Management, Inc., also a Prudential subsidiary, serves as subadviser to the Diversified Bond Portfolio, the fixed income sleeve of the Diversified Conservative Growth Portfolio, the High Yield Bond Portfolio, the Money Market Portfolio, the Small Capitalization Stock Portfolio, and the Stock Index Portfolio. Jennison Associates LLC, also a Prudential subsidiary, serves as subadviser to the growth and value sleeves of the Diversified Conservative Growth Portfolio, the Equity Portfolio, the Global Portfolio, the Prudential Jennison Portfolio, the Value Portfolio, the 20/20 Focus Portfolio, the SP Jennison International Growth Portfolio, the SP Prudential U.S. Emerging Growth Portfolio, and a portion of the SP Strategic Partners Focused Growth Portfolio. Franklin Advisers, Inc., the Deyfus Corporation and Pacific Investment Management Company also each manage a portion of the Diversified Conservative Growth Portfolio. GE Asset Management Incorporated and Salomon Brothers Asset Management Inc. each manage a portion of the Equity Portfolio. Deutsche Asset Management Inc. and Victory Capital Management Inc. each manage a portion of the Value Portfolio. Alliance Capital Management, L.P. serves as subadviser to the SP Alliance Technology Portfolio and a portion of the assets of the SP Strategic Partners Focused Growth Portfolio. INVESCO Funds Group, Inc. serves as subadviser to the SP INVESCO Small Company Growth Portfolio. Fidelity Management and Research Company serves as subadviser to the SP Large Cap Value Portfolio and the SP Small/Mid Cap Value Portfolio. Massachu-setts Financial Services Company serves as subadviser to the SP MFS Capital Opportunities Portfolio and the SP MFS Mid-Cap Growth Portfolio. Pacific Investment Management Company serves as subadviser to the SP PIMCO Total Return Portfolio. Each of the asset allocation portfolios is managed solely by PIFM.
AIM Variable Insurance Funds
. AIM V.I. Growth and Income Fund
. AIM V.I. Value Fund
AIM Advisors, Inc. serves as investment adviser to both of these funds.
19
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options Can I Choose? continued
Alliance Variable Products Series Fund, Inc.
. Alliance Premier Growth Portfolio
Alliance Capital Management L.P. is the investment adviser of the Alliance Variable Products Series Fund.
American Century Variable Portfolios, Inc.
. American Century VP Value
American Century Investment Management, Inc. is the investment adviser for American Century VP Value.
Credit Suisse Warburg Pincus Trust
. Global Post-Venture Capital Portfolio
Credit Suisse Asset Management, LLC serves as investment adviser and Abbott Capital Management, L.P. serves as sub-investment advise for that portion of the Global Post-Venture Capital Portfolio allocated to private limited partnerships or other investment funds.
Davis Variable Account Fund, Inc.
. Davis Value Portfolio
Davis Selected Advisers, L.P. is the investment adviser and Davis Selected Advisers-NY, Inc. is sub-adviser to the Davis Value Portfolio.
Franklin Templeton Variable Insurance Products Trust
. Franklin Small Cap Fund--Class 2
Franklin Advisers, Inc. is the investment manager for this portfolio of the Franklin Templeton Variable Insurance Products Trust.
Janus Aspen Series
. Growth Portfolio
. International Growth Portfolio
Janus Capital Corporation serves as investment adviser to the Growth Portfolio and the International Growth Portfolio.
MFS Variable Insurance Trust
. Emerging Growth Series
. Research Series (long-term growth and future income)
Massachusetts Financial Services Company, a Delaware corporation, is the investment adviser to the Emerging Growth Series and the Research Series.
OCC Accumulation Trust
. Managed Portfolio (equity)
. Small Cap Portfolio
OpCap Advisors is the investment adviser to the Managed Portfolio and the Small Cap Portfolio.
T. Rowe Price
. T. Rowe Price Equity Series, Inc., Equity Income Portfolio
. T. Rowe Price International Series, Inc., International Stock Portfolio
T. Rowe Price Associates, Inc. is the investment manager for the Equity Income Portfolio and Rowe Price-Fleming International, Inc. is the investment manager for the International Stock Portfolio.
Except for the Prudential Series Fund Inc., we are paid by the fund or an affiliate of each fund for administrative and other services that we provide. The amount we receive is based on an annual percentage of the average assets of Discovery Select invested in the fund held by the associated variable investment option.
FIXED INTEREST-RATE OPTIONS
We offer two interest-rate options: a one-year fixed-rate option, and a market-value adjustment option. We set a one year guaranteed annual interest rate that is always available for the one-year 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. Transfers are not permitted to the DCA Option. You may have money allocated in more than one interest rate period at the same time. This could result in your money earning interest at different rates and each interest rate period maturing at a different time. While these interest rates may change from time to time, the minimum rate will never be less than 3.0%.
Payments that you apply to the fixed interest-rate option become part of Pruco Life of New Jersey's general assets. As a result, the strength of the interest rate guarantee is based on the overall financial strength of Pruco Life of New Jersey. If Pruco Life of New Jersey suffered a material financial set back, the ability of Pruco Life of New Jersey to meet its financial obligations could be affected.
20
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value Adjustment
If you transfer or withdraw assets or annuitize from the market-value adjustment option before an interest rate period is over, the assets will be subject to a market value adjustment. The market-value adjustment may increase or decrease the amount being withdrawn or transferred and may be substantial. The adjustment, whether up or down will never be greater than 40%. The amount of the market-value adjustment is based on the difference between the:
1) Guaranteed interest rate for the amount you are withdrawing or transferring; and
2) Interest rate that is in effect on the date of the withdrawal or transfer.
The amount of time left in the interest rate period is also a factor. You will find a detailed description of how the market-value adjustment is calculated on Page 39 of this prospectus.
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options and the fixed interest-rate options. Your transfer request may be made by telephone, electronically, or in paper form to the Prudential Annuity Service Center (electronic transfer capability will become available during 2001). Only two transfers per month may be made by telephone or electronically. After that, all transfer requests must be in writing with an original signature. We have procedures in place to confirm that instructions received by telephone or electronically are genuine. We will not be liable for following telephone or electronic instructions that we reasonably believe to be genuine. Your transfer request will take effect at the end of the business day on which it was received. Our business day usually closes at 4:00 p.m. Eastern time.
You can make transfers out of a fixed interest-rate option, only during the 30-day period following the end of an interest rate period. If you transfer money from a market-value adjustment option after the 30-day period has ended, the money will be subject to a market-value adjustment.
During the contract accumulation phase, you can make 12 transfers each contract year, among the investment options, without charge. If you make more than 12 transfers in one contract year, you will be charged $25 for each additional transfer. (Dollar Cost Averaging and Auto-Rebalancing transfers do not count toward the 12 free transfers per year.)
OTHER AVAILABLE FEATURES
Dollar Cost Averaging Feature
This feature allows you to systematically transfer either a fixed dollar amount or a percentage out of any variable investment option or the one-year fixed interest-rate option and into any variable investment option(s). You can transfer money to more than one variable investment option. The investment option used for the transfers is designated as the DCA account. If this feature is elected, your assets are not allocated to the DCA Option. You can have these automatic transfers made from the DCA account monthly, quarterly, semiannually or annually. By allocating amounts on a regular schedule instead of allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. Of course, there is no guarantee that dollar cost averaging will ensure a profit or protect against a loss in declining markets.
Transfers must be at least $100 from your DCA account. After that, transfers will continue automatically until the entire amount in your DCA account has been transferred or until you tell us to discontinue the transfers. If your DCA account balance drops below $100, the entire remaining balance of the account will be transferred on the next transfer date. You can allocate subsequent purchase payments to re-open the DCA account at any time.
Your transfers will be made on the last calendar day of each transfer period you have selected, provided that the New York Stock Exchange is open on that date. If the New York Stock Exchange is not open on a particular transfer date, the transfer will take effect on the next business day.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options Can I Choose? continued
Any transfers you make because of dollar cost averaging are not counted toward the 12 free transfers you are allowed per year. This feature is available only during the contract accumulation phase.
Asset Allocation Program
We recognize the value of having advice when deciding on the allocation of your money. If you choose to participate in the Asset Allocation Program, your financial professional will give you a questionnaire to complete that will help determine a program that is appropriate for you. Your asset allocation will be prepared based on your answers to the questionnaire. You will not be charged for this service and you are not obligated to participate or to invest according to program recommendations.
Auto-Rebalancing
Once your money has been allocated among the variable investment options, the actual performance of the investment options may cause your allocation to shift. For example, an investment option that initially holds only a small percentage of your assets could perform much better than another investment option. Over time, this option could increase to a larger percentage of your assets than you desire. You can direct us to automatically rebalance your assets to return to your original allocation or to change allocations by selecting the Auto-Rebalancing feature. The fixed interest-rate option and the DCA account cannot participate in this feature.
Your rebalancing will be done monthly, quarterly, semiannually or annually based on your choice. The rebalancing will be done on the last calendar day of the period you have chosen, provided that the New York Stock Exchange is open on that date. If the New York Stock Exchange is not open on that date, the rebalancing will take effect on the next business day.
Any transfers you make because of Auto-Rebalanc-ing are not counted toward the 12 free transfers you are allowed per year. This feature is available only during the contract accumulation phase. If you choose auto-rebalancing and dollar cost averaging, auto-rebalanc-ing will take place after the transfers from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares in the mutual funds associated with the variable investment options. However, we vote the shares of the mutual funds according to voting instructions we receive from contractowners. We will mail you a proxy which is a form you need to complete and return to us to tell us how you wish us to vote. When we receive those instructions, we will vote all of the shares we own on your behalf in accordance with those instructions. We will vote the shares for which we do not receive instructions, and shares that we own in our own right, in the same proportion as the shares for which instructions are received. We may change the way your voting instructions are calculated if it is required by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable investment options. We may also cease to allow investments in existing funds. We would do this only if events such as investment policy changes or tax law changes make the mutual fund unsuitable. We would not do this without the approval of the Securities and Exchange Commission and necessary state insurance department approvals. You will be given specific notice in advance of any substitution we intend to make.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
3:
What Kind of Payments Will I Receive During the Income Phase? (Annuitization)
PAYMENT PROVISIONS
We can begin making annuity payments any time after the first contract anniversary. Annuity payments must begin no later than the annuitant's 90th birthday.
We make the income plans described below available at any time before the annuity date. These plans are called annuity options. During the income phase, all of the annuity options under this contract are fixed annuity options. This means that your participation in the variable investment options ends on the annuity date. If an annuity option is not selected by the annuity date, the Interest Payment Option (Option 3, described below) will automatically be selected. Once the annuity payments begin, the annuity option can not be changed.
Option 1
Annuity Payments for a Fixed Period
Under this option, we will make equal payments for the period chosen, up to 25 years. The annuity payments may be made monthly, quarterly, semiannually, or annually for as long as the annuitant is alive. If the annuitant dies during the income phase, a lump sum payment will be made to the beneficiary. The amount of the lump sum payment is determined by calculating the present value of the unpaid future payments. This is done by using the interest rate used to compute the actual payments. The interest rate used will always be at least 3.50% a year. For payment periods of 5 years or more, we will waive any withdrawal charges that otherwise would have been applied.
Option 2
Life Annuity with 120 Payments (10 Years) Certain
Under this option, we will make annuity payments monthly, quarterly, semiannually, or annually as long as the annuitant is alive. If the annuitant dies before we have made 10 years worth of payments, we will pay the beneficiary the present value of the remaining annuity payments in one lump sum unless we are specifically instructed that the remaining monthly annuity payments continue to be paid to the beneficiary. The present value of the remaining annuity payments is calculated by using the interest rate used to compute the amount of the original 120 payments. The interest rate used will always be at least 3.50% a year.
Option 3
Interest Payment Option
Under this option, we hold all or a portion of your contract value in order to accumulate interest. We can make interest payments on a monthly, quarterly, semiannual, or annual basis or allow the interest to accrue on your contract assets. If an annuity option is not selected by the annuity date, this is the option we will automatically select for you. Under this option, we will pay you interest at an effective rate of at least 3.0% a year. Under this option, all gains in the annuity will be taxable as of the annuity date.
This option is not available if your contract is held in an Individual Retirement Account.
Option 4
Other Annuity Options
We currently offer a variety of other annuity options not described above. At the time annuity payments are chosen, we may make available any of the fixed annuity options that are offered at your annuity date.
You should be aware that depending on your contract date and the annuity option you choose, you may have to pay withdrawal charges.
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4:
What is the
Death Benefit?
The death benefit feature protects the value of the contract for the beneficiary.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death benefit. The beneficiary is named at the time the contract is issued, unless you change it at a later date. Unless an irrevocable beneficiary has been named, you can change the beneficiary at any time before the annuitant or last surviving annuitant dies.
CALCULATION OF THE DEATH BENEFIT
If the annuitant (or the last surviving annuitant, if there are co-annuitants) dies during the accumulation phase, we will, upon receiving appropriate proof of death and any other needed documentation, pay a death benefit to the beneficiary designated by the contractowner. If death is prior to age 80, the beneficiary will receive the greater of the following (as of the time we receive appropriate proof of death):
. Current value of your contract; or
. Guaranteed Minimum Death Benefit--This is the highest value of the contract on any contract anniversary date. This is called the step-up value. Between anniversary dates, the step-up value is only increased by additional purchase payments and reduced proportionally by withdrawals.
If death occurs on or after age 80, the beneficiary will receive the greater of: 1) the current contract value as of the date that due proof of death is received, and 2) the Guaranteed Minimum Death benefit as of age 80, increased by additional purchase payments, and reduced proportionally by withdrawals. For this purpose, an annuitant is deemed to reach age 80 on the contract anniversary on or following the annuitant's actual 80th birthday.
If the sole or older annuitant is age 80 or older at the time the contract is issued, upon death, the beneficiary will receive, as of the date that due proof of death is received, the greater of: 1) current contract value; or 2) the total purchase payments reduced proportionally by withdrawals.
Here is an example of a proportional reduction:
If an owner withdrew 50% of a contract valued at $100,000 and if the step-up value was $80,000, the new step-up value following the withdrawal would be $40,000 or 50% of what it had been prior to the withdrawal.
If the contractowner and annuitant are not the same, the death benefit is payable only in the event of the death of a sole annuitant or last surviving annuitant, not the death of the contractowner.
This death benefit was enhanced in January, 1998, to provide for the Guaranteed Minimum Death Benefit. Certain contractowners must have elected an endorsement in order for this enhanced death benefit to apply. See the Statement of Additional Information (SAI) for details.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
5:
How Can I Purchase a
Discovery Select Contract?
PURCHASE PAYMENTS
A purchase payment is the amount of money you give us to purchase the contract. The minimum purchase payment is $10,000. You can make additional purchase payments of at least $1,000 or more at any time during the accumulation phase. You must get our prior approval for any purchase payments over $5 million.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the variable investment options and the fixed interest-rate options based on the percentages you choose. The percentage of your allocation to a specific investment option can range in whole percentages from 0% to 100%. If, after the initial invested purchase payment, we receive a purchase payment without allocation instructions, we will allocate the corresponding invested purchase payment in the same proportion as your most recent purchase payment (unless you directed us to allocate that purchase payment on a one-time-only basis). (If you allocated all or part of your initial payment to the DCA Fixed Option and do not change your allocation instructions, we will treat your allocation instructions for the DCA Fixed Option as part of your allocation instructions for all subsequent purchase payments.) You may submit an allocation change request at any time. Contact the Prudential Annuity Service Center for details.
We will credit the initial purchase payment to your contract within two business days from the day on which we receive your payment 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. We will generally credit subsequent purchase payments received in good order after the close of a business day on the following business day.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending on the investment performance of the variable investment option(s) you choose. To determine the value of your contract, we use a unit of measure called an accumulation unit. An accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the variable investment options. We do this by:
1) Adding up the total amount of money allocated to a specific investment option;
2) Subtracting from that amount insurance charges and any other applicable charges; and
3) Dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation units relating to the variable investment options you have chosen. The number of accumulation units credited to your contract is determined by dividing the amount of the purchase payment allocated to an investment option by the unit price of the accumulation unit for that investment option. We calculate the unit price for each investment option after the New York Stock Exchange closes each day and then credit your contract. The value of the accumulation units can increase, decrease, or remain the same from day to day. The Accumulation Unit Values chart provided in page 36 to this prospectus gives you more detailed information about the accumulation units of the variable investment options.
We cannot guarantee that the value of your contract will increase or that it will not fall below the amount of your total purchase payments. However, we do guarantee a minimum interest rate of 3.0% a year on that portion of the contract value allocated to the fixed interest-rate options.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
6:
What are the Expenses Associated with the
Discovery Select Contract?
There are charges and other expenses associated with the contract that reduce the return on your investment. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we makes a deduction for its insurance charges. The insurance charges have two parts:
1) Mortality and expense risk charge
2) Administrative expense charge
1) Mortality and Expense Risk Charge
The mortality risk charge is for assuming the risk that the annuitant(s) will live longer than expected based on our life expectancy tables. When this happens, we pay a greater number of annuity payments. The expense risk charge is for assuming that the current charges will be insufficient in the future to cover the cost of administering the contract.
The mortality and expense risk charge is equal, on an annual basis, to 1.25% of the daily value of the contract invested in the variable investment options, after expenses have been deducted. This charge is not assessed against amounts allocated to the interest-rate options.
If the charges under the contract are not sufficient, then we will bear the loss. We do, however, expect to profit from this charge. The mortality and expense risk charge cannot be increased. Any profits made from this charge may be used by us to pay for the costs of distributing the contracts.
2) Administrative Expense Charge
This charge is for the expenses associated with the administration of the contract. The administration of the contract includes preparing and issuing the contract, establishing and maintaining contract records, issuing confirmations and annual reports, personnel costs, legal and accounting fees, filing fees, and systems costs.
This charge is equal, on an annual basis, to 0.15% of the daily value of the contract invested in the variable investment options, after expenses have been deducted.
ANNUAL CONTRACT FEE
During the accumulation phase, if your contract value is less than $50,000, we will deduct $30 per contract year (this fee may differ in certain states). This annual contract fee is used for administrative expenses and cannot be increased. The $30 charge will be deducted proportionately from each of the contract's investment options. This charge will also be deducted when you surrender your contract if your contract value is less than $50,000.
WITHDRAWAL CHARGE
During the accumulation phase you can make withdrawals from your contract. When you make a withdrawal, money will be taken first from your purchase payments for purposes of determining withdrawal charges. When your purchase payments have been used up, then we will take the money from your earnings. You will not have to pay any withdrawal charge when you withdraw your earnings.
The withdrawal charge is for the payment of the expenses involved in selling and distributing the contracts, including sales commissions, printing of prospectuses, sales administration, preparation of sales literature and other promotional activities. If the contract is sold under circumstances that reduce the sales expenses, we may reduce or eliminate the withdrawal charge. For example, a large group of individuals purchasing contracts or an individual who already has a relationship with us may receive such a reduction.
You can withdraw up to 10% of your total purchase payments each contract year without paying a withdrawal charge. This amount is referred to as the "charge-free amount." If any of the charge-free amount is not used during a contract year, it will be carried over to the next contract year. During the first seven contract years, if your withdrawal of purchase payments is more than the charge-free amount, a withdrawal charge will be applied. This charge is based on your contract date.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
The following table shows the percentage of withdrawal charges that would apply:
Percentage of Applicable Withdrawal Charges
|
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
After that 0%
|
Note: As of the beginning of the contract year, you may withdraw up to 10% of the total purchase payments plus any charge-free amount carried over from the previous contract year without charge. There is no withdrawal charge on any amount used to provide income under the Life Annuity with 120 Payments (10 years) Certain Option or for a fixed period of 5 years or more. Surrender charges are waived when a death benefit is paid. There will be a reduction in the withdrawal charge for contracts issued to contractowners whose age is 84 and older.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your purchase payment. We are responsible for the payment of these taxes and may make a deduction from the value of the contract to pay some or all of these taxes. Some of these taxes are due when the contract is issued, others are due when the annuity payments begin. It is our current practice not to deduct a charge for state premium taxes until annuity payments begin. In the states that impose a premium tax, the current rates range up to 3.5%. New York does not, however, currently charge premium taxes. It is also our current practice not to deduct a charge for the federal deferred acquisition costs paid by us that are based on premium received. However, we reserve the right to charge the contractowner in the future for any such 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 year. If you make more than 12 transfers in a year (excluding Dollar Cost Averaging and Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional transfer. We will deduct the transfer fee pro-rata from the investment options from which the transfer is made. The transfer fee is deducted before the market value adjustment, if any, is calculated.
COMPANY TAXES
We will pay the taxes on the earnings of the Separate Account. We are not currently charging the Separate Account for taxes. We will periodically review the issue of charging the Separate Account for these taxes, and may impose such a charge in the future.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
7:
How Can I
Access My Money?
You can access your money by:
. Making a withdrawal (either partial or complete); or
. electing to receive annuity payments during the income phase.
YOU CAN MAKE WITHDRAWALS ONLY DURING THE ACCUMULATION PHASE
When you make a complete withdrawal, you will receive the value of your contract, less any applicable charges. We will calculate the value of your contract, and charges, if any, as of the date we receive your request in good order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal will be made proportionately from all of the affected investment options and interest-rate options you have selected. You will need our consent to make a partial withdrawal if the requested withdrawal is less than $500.
We will generally pay the withdrawal amount, less any required tax withholding, within seven days after we receive a properly completed withdrawal request. We will deduct applicable charges, and apply a market-value adjustment, if any, from the assets in your contract.
Income taxes, tax penalties and certain restrictions may apply to any withdrawal you make. For a more complete explanation, see Section 8 of this prospectus and the tax discussion in the Statement of Additional Information.
AUTOMATED WITHDRAWALS
We offer an Automated Withdrawal feature. This feature enables you to receive periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We will process your withdrawals at the end of the business day at the intervals you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally from all investment options. Market-value adjustments may apply. Withdrawal charges may be deducted if the withdrawals in any contract year are more than the charge-free amount. The minimum automated withdrawal amount you can make is $250.
Income taxes, tax penalties and certain restrictions may apply to automated withdrawals. For a more complete explanation, see Section 8 of this prospectus and the tax discussion in the Statement of Additional Information.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments made in connection with withdrawals or transfers for any period when:
. The New York Stock Exchange is closed (other than customary weekend and holiday closings);
. Trading on the New York Stock Exchange is restricted;
. An emergency exists, as determined by the SEC, during which sales of shares of the mutual funds are not feasible or we cannot reasonably value the accumulation units; or
. The Securities and Exchange Commission, by order, permits suspension or postponement of payments for the protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the fixed interest-rate options promptly upon request.
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
8:
What are the Tax Considerations Associated with the
Discovery Select Contract?
The tax considerations associated with the Discovery Select contact vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan, or (ii) held under a tax-favored plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. It is not intended as tax advice. A qualified tax adviser should be consulted for complete information and advice.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX FAVORED RETIREMENT PLANS)
Taxes Payable by You
We believe the contract is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract.
Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below.
Taxes on Withdrawals and Surrender
If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of purchase payments, until all gain has been withdrawn.
If you assign or pledge all or part of your contract as collateral for a loan, the part assigned will be treated as a withdrawal. Also, if you elect the interest payment option, you will be treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on the gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce.
Taxes on Annuity Payments
A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your purchase payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract.
After the full amount of your purchase payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount.
Tax Penalty on Withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10 percent tax penalty. Amounts are not subject to this tax penalty if:
. the amount is paid on or after you reach age 59 1/2 or die;
. the amount received is attributable to your becoming disabled;
. the amount paid or received is in the form of level annuity payments not less frequently than annually under a lifetime annuity; and
. the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase).
If you modify the lifetime annuity payment stream (other than as a result of death or disability) before you reach age 59 1/2 (or before the end of the five year period beginning with the first payment and ending after you reach age 59 1/2), your tax for the year of modification will be increased by the penalty tax that would have been imposed without the exception, plus interest for the deferral.
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8:
Tax Considerations Associated with the Discovery Select Contract continued
Taxes Payable by Beneficiaries
All of the death benefit options are subject to income tax to the extent the distribution exceeds the adjusted basis in the contract and the full value of the contract and the full value of the death benefit is included in the owner's estate. Generally, the same tax rules apply to amounts received by your beneficiary as those set forth above with respect to you. The election of an annuity payment option instead of a lump sum death benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below.
Withholding of Tax from Distributions
Taxable amounts distributed from your annuity contracts are subject to tax withholding. You may generally elect not to have tax withheld from your payments. These elections must be made on the appropriate forms that we provide.
Annuity Qualification
Diversification and Investor Control In order to qualify for the tax rules applicable to annuity contracts described above, the contract must be an annuity contract for tax purposes. This means that the assets underlying the annuity contract must be diversified, according to certain rules. It also means that we, and not you as the contractowner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. We believe these rules, which are further discussed in the Statement of Additional Information, will be met.
Required Distributions Upon Your Death Upon your death (or the death of a joint owner, if earlier), certain distributions must be made under the contract. The required distributions depend on whether you die on or before you start taking annuity payments under the contract or after you start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if an annuity payment option is selected by your designated beneficiary and if annuity payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom ownership of the contract passes by reason of death, and must be a natural person.
If any portion of the contract is payable to (or for the benefit of) your surviving spouse, such portion of the contract may be continued with your spouse as the owner.
Changes in the Contract We reserve the right to make any changes we deem necessary to assure that the contract qualifies as an annuity contract for tax purposes. Any such changes will apply to all contractowners and you will be given notice to the extent feasible under the circumstances.
Additional Information
You should refer to the Statement of Additional Information if:
. The contract is held by a corporation or other entity instead of by an individual or as agent for an individual.
. Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982.
. You are a nonresident alien.
. You transfer your contract to, or designate, a beneficiary who is either 37 1/2 years younger than you or a grandchild.
. You wish additional information on withholding taxes.
CONTRACTS HELD BY TAX FAVORED PLANS
Currently, the contract may be purchased for use in connection with individual retirement accounts and annuities ("IRAs") which are subject to Sections 408(a),
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
408(b) and 408A of the Code. At some future time we may allow the contract to be purchased in connection with other retirement arrangements which are also entitled to favorable federal income tax treatment ("tax favored plans"). These other tax favored plans include:
. Simplified employee pension plans ("SEPs") under Section 408(k) of the Code;
. Saving incentive match plans for employees-IRAs ("SIMPLE-IRAs") under
Section 408(p) of the Code; and
. Tax-deferred annuities ("TDAs") under Section 403(b) of the Code.
This description assumes that (i) we will be offering this to both IRA and non-IRA tax favored plans, and (ii) you have satisfied the general requirements for eligibility for these products.
You should be aware that tax favored plans such as IRAs generally provide tax deferral regardless whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax deferral benefits.
IRAs If you buy a contract for use as an IRA, we will provide you a copy of the prospectus and the contract. The IRA Disclosure Statement on page 41 contains information about eligibility, contribution limits, tax particulars and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free look" after making an initial contribution to the contract. During this time, you can cancel the contract by notifying us in writing, and we will refund all of the purchase payments under the contract (or, if greater, the amount credited under the contract, calculated as of the valuation period that we receive this cancellation notice).
Contributions Limits/Rollovers: Because of the way the contract is designed, you may only purchase a contract for an IRA in connection with a "rollover" of amounts from a qualified retirement plan or transfer from another IRA. You must make a minimum initial payment of $10,000 to purchase a contract. This minimum is greater than the maximum amount of any annual contribution you may make to an IRA (which is generally $2,000/year). The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy the contract, you can make regular IRA contributions under the contract (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not be able subsequently to "roll over" the contract funds originally derived from a qualified retirement plan into another
Section 401(a) plan or TDA (although you may be able to transfer the funds to another IRA).
Required Provisions: Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions:
. You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce);
. Your rights as owner are non-forfeitable;
. You cannot sell, assign or pledge the contract, other than to us;
. The annual premium you pay cannot be greater than $2,000 (which does not include any rollover amounts);
. The date on which annuity payments must begin cannot be later than the April 1st of the calendar year after the calendar year you turn age 70 1/2; and
. Death and annuity payments must meet "minimum distribution requirements" (described 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. In addition to this normal tax
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PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
8:
Tax Considerations Associated with the Discovery Select Contract continued
liability, you may also be liable for the following, depending on your actions:
. A 10% "early distribution penalty" (described below);
. Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or
. Failure to take a minimum distribution (also generally described below).
SEPs SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences:
. If you participate in a SEP, you generally do not include into income any employer contributions made to the SEP on your behalf up to the lesser of
(a) $35,000 (in 2001) or (b) 15% of the employee's earned income (not including the employer contribution amount as "earned income" for these purposes). However, for these purposes, compensation in excess of certain limits established by IRS will not be considered. In 2001, this limit is $170,000;
. SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and
. Some SEPs for small employers permit salary deferrals (up to $10,500 in 2001) with the employer making these contributions to the SEP. However, no new "salary reduction" or "SAR-SEPs" can be established after 1996.
You will also be provided the same information, and have the same "free look" period, as you would have if you were purchasing the contract for a standard IRA.
SIMPLE-IRAs SIMPLE-IRAs are another variation on the standard IRA, available to small employers (under 100 employees, on a "controlled group" basis) that do not offer other tax favored plans. SIMPLE-IRAs are also subject to the same basic IRA requirements with the following exceptions:
. Participants in a SIMPLE-IRA may contribute up to $6,500 (in 2001, indexed), as opposed to the usual $2,000 limit, and employer contributions may also be provided as either a match (up to 3% of your compensation); and
. SIMPLE -IRAs are not subject to the SEP nondiscrimination rules.
TDAs You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a public educational organization, you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $10,500 (2001, indexed). Further, you may roll over TDA amounts to another TDA or an IRA.
A contract may only qualify as a TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of:
. Your attainment of age 59 1/2;
. Your severance of employment;
. Your death;
. Your total and permanent disability; OR
. Hardship (under limited circumstances, and only related to salary deferrals and any earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by April 1st of the calendar year after the calendar year you turn age 70 1/2 or retire, whichever is later.
These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a mutual fund "custodial account" described under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans.
Minimum Distribution Requirements and Payment Option
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that payments must start by April 1 of the year after the year you reach age 70 1/2 and must be made for each year thereafter. The
32
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount, including a new method permitted under IRS rules released in January 2001. More information on the mechanics of this calculation is available on request. Please contact us a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% IRS penalty tax on the amount of any minimum distribution not made in a timely manner.
You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for this contract without either beginning annuity payments or surrendering the contract. We will send you a check for this minimum distribution amount, less any other partial withdrawals that you made during the year. Please note that the Minimum Distribution option may need to be modified after 2001 to satisfy recently announced changes in IRS rules.
Penalty for Early Withdrawals
You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2.
There are only limited exceptions to this tax, and you should consult your tax adviser for further details.
Withholding
The Code requires a mandatory 20% federal income tax withholding for certain distributions from a TDA or qualified retirement plan, unless the distribution is an eligible rollover contribution that is "directly" rolled into another qualified plan, IRA (including the IRA variations described above) or TDA. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis:
. For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and
. For all other distributions, you will be withheld at a 10% rate.
We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes.
ERISA Disclosure/Requirements
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit from any party dealing with the plan, as a result of the sale of the contract.
Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or adjustments may be found under "What Are the Expenses Associated with the Discovery Select Contract" starting on page 26. Information about sales representatives and commissions may be found under "Other Information" and "Sale and Distribution of the Contract" on page 34.
In addition, other relevant information required by the exemptions is contained in the contract and accompanying documentation. Please consult your tax advisor if you have any additional questions.
Additional Information
For additional information about the requirements of federal tax law applicable to tax favored plans, see the "IRA Disclosure Statement" on page 41.
33
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
9:
Other
Information
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey is a stock life insurance company organized in 1982 under the laws of the State of New Jersey. Pruco Life of New Jersey is licensed to sell life insurance and annuities in the states of New Jersey and New York and therefore is subject to the insurance laws and regulations of those states where it is licensed to do business. Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance Company, which is a wholly-owned subsidiary of The Prudential Life Insurance Company of America (Prudential), a mutual insurance company founded in 1875 under the laws of the State of New Jersey.
Pruco Life of New Jersey publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about Pruco Life of New Jersey that is annually audited by independent accountants. The most recent annual report is contained in the SAI. While Pruco Life of New Jersey's annual report is not ordinarily mailed to contractholders, you can obtain a copy at no cost by calling us at our number listed on the cover. This information, together with all the more current reports filed with the SEC as required by section 15 of the Exchange Act of 1934, is legally a part of this prospectus.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of America ("Prudential"), a mutual insurance company founded in 1875 under the laws of the State of New Jersey. Prudential is currently pursuing reorganizing itself into a stock life insurance company through a process known as "demutualization". On July 1, 1998, legislation was enacted in New Jersey that would permit this conversion to occur and that specified the process for conversion. On December 15, 2000, the Board of Directors adopted a plan of reorganization pursuant to that legislation and authorized management to submit an application to the New Jersey Commissioner of Banking and Insurance for approval of the plan. The application was submitted on March 14, 2001. However, demutualization is a complex process and a number of additional steps must be taken before the demutualization can occur, including a public hearing, voting by qualified policyholders, and regulatory approval. Prudential is planning on completing this process in 2001, but there is no certainty that the demutualization will be completed in this timeframe or that the necessary approvals will be obtained. Also it is possible that after careful review, Prudential could decide not to demutualize or could decide to delay its plans. As a general rule, the plan of reorganization provides that, in order for policies or contracts to be eligible for compensation in the demutualization, they must have been in force on the date the Board of Directors adopted the plan, December 15, 2000. If demutualization does occur, all the guaranteed benefits described in your policy or contract would stay the same.
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible Premium Variable Annuity Account (Separate Account), to hold the assets that are associated with the contracts. The Separate Account was established under New Jersey law on May 20, 1996, and is registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as a unit investment trust, which is a type of investment company. The assets of the Separate Account are held in the name of Pruco Life of New Jersey 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 of New Jersey, including its audited financial statements, is provided in the Statement of Additional Information.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 100 Mulberry Street, Newark, New Jersey 07102-4077, acts as the distributor of the contracts. PIMS is a wholly-owned subsidiary of Prudential and is a limited liability corporation organized under Delaware
34
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
law in 1996. It is a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. We pay the broker-dealer whose registered representatives sell the Contract either:
. a commission of up to 6.25% of your Purchase Payments; or
. a combination of a commission on Purchase Payments and a "trail" commission -- which is a commission determined as a percentage of your Contract Value that is paid periodically over the life of your Contract.
The commission amount quoted above is the maximum amount which is paid. In most circumstances, the registered representative who sold the contract will receive significantly less.
From time to time, Prudential or its affiliates may offer and pay non-cash compensation to registered representatives who sell the Contract. For example, Prudential or an affiliate may pay for a training and education meeting that is attended by registered representatives of both Prudential-affiliated broker-dealers and independent broker-dealers. Prudential and its affiliates retain discretion as to which broker-dealers to offer non-cash (and cash) compensation arrangements, and will comply with NASD rules and other pertinent laws in making such offers and payments. Our payment of cash or non-cash compensation in connection with sales of the Contract does not result directly in any additional charge to you.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be bound by the assignment until we receive written notice. We will not be liable for any payment or other action we take in accordance with the contract if that action occurs before we receive notice of the assignment. An assignment, like any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on your ability to assign the contract. For further information please speak to your financial professional.
FINANCIAL STATEMENTS
The financial statements of the Separate Account associated with Discovery Select are included in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
. Company
. Experts
. Litigation
. Legal Opinions
. Principal Underwriter
. Determination of Accumulation Unit Values
. Performance Information
. Comparative Performance Information
. Further Information about the Death Benefit
. Federal Tax Status
. 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 contractholder that resides in the household. If you are a member of such a household, you should be aware that you can revoke your consent to householding at any time, and begin to receive your own copy of prospectuses and shareholder reports, by calling 1-877-778-5008.
35
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Accumulation Unit Values
ACCUMULATION UNIT VALUES: AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
|
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
----------------------- ----------------------- ----------------------------
Prudential Diversified Bond
Portfolio
1/24/97* to 12/31/97 $1.05924 $1.13525 4,451,359
1/1/98 to 12/31/98 $1.13525 $1.19977 28,376,932
1/1/99 to 12/31/99 $1.19977 $1.17457 45,438,932
1/1/00 to 12/31/00 $1.17457 $1.27085 45,259,883
Prudential Diversified
Conservative Growth
Portfolio
5/3/99* to 12/31/99 $0.99960 $1.05128 7,816,513
1/1/00 to 12/31/00 $1.05128 $1.07605 10,776,781
Prudential Equity Portfolio
1/24/97* to 12/31/97 $1.23280 $1.48518 9,062,852
1/1/98 to 12/31/98 $1.48518 $1.60144 27,877,412
1/1/99 to 12/31/99 $1.60144 $1.77642 38,608,928
1/1/00 to 12/31/00 $1.77642 $1.80930 36,432,147
Prudential Global Portfolio
1/24/97* to 12/31/97 $1.20025 $1.26079 1,544,582
1/1/98 to 12/31/98 $1.26079 $1.55516 3,115,243
1/1/99 to 12/31/99 $1.55516 $2.27423 6,113,646
1/1/00 to 12/31/00 $2.27423 $1.84646 7,911,406
Prudential High Yield Bond
Portfolio
1/24/97* to 12/31/97 $1.12690 $1.25972 5,397,207
1/1/98 to 12/31/98 $1.25972 $1.21296 23,777,679
1/1/99 to 12/31/99 $1.21296 $1.25119 28,531,566
1/1/00 to 12/31/00 $1.25119 $1.13618 28,565,345
Prudential Money Market
Portfolio
1/24/97* to 12/31/97 $1.04778 $1.08688 5,366,453
1/1/98 to 12/31/98 $1.08688 $1.12985 16,317,010
1/1/99 to 12/31/99 $1.12985 $1.16977 24,579,687
1/1/00 to 12/31/00 $1.16977 $1.22545 22,639,187
Prudential Jennison
Portfolio
1/24/97* to 12/31/97 $1.19836 $1.48006 4,356,135
1/1/98 to 12/31/98 $1.48006 $2.00651 19,579,080
1/1/99 to 12/31/99 $2.00651 $2.81446 37,559,381
1/1/00 to 12/31/00 $2.81446 $2.29341 43,123,474
Prudential Small
Capitalization Stock
Portfolio
9/1/98* to 12/31/98 $1.02621 $1.25353 514,051
1/1/99 to 12/31/99 $1.25353 $1.39319 3,488,013
1/1/00 to 12/31/00 $1.39319 $1.55006 5,540,523
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THIS CHART CONTINUES ON THE NEXT PAGE
36
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES (CONTINUED): AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
|
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
----------------------- ----------------------- ----------------------------
Prudential Stock Index
Portfolio
1/24/97* to 12/31/97 $1.18151 $1.48876 8,543,943
1/1/98 to 12/31/98 $1.48876 $1.88540 25,485,050
1/1/99 to 12/31/99 $1.88540 $2.24149 38,786,276
1/1/00 to 12/31/00 $2.24149 $2.01096 40,625,059
Prudential Value Portfolio
1/24/97* to 12/31/97 $1.24933 $1.66167 5,978,495
1/1/98 to 12/31/98 $1.66167 $1.59960 25,310,440
1/1/99 to 12/31/99 $1.59960 $1.77516 27,398,451
1/1/00 to 12/31/00 $1.77516 $2.02329 24,717,539
Prudential 20/20 Focus
Portfolio
1/1/99* to 12/31/99 $0.99960 $1.17842 4,526,683
1/1/00 to 12/31/00 $1.17842 $1.09942 7,425,122
AIM VI Growth and Income
Fund
1/24/97* to 12/31/97 $1.08005 $1.28644 2,414,429
1/1/98 to 12/31/98 $1.28644 $1.61976 5,636,579
1/1/99 to 12/31/99 $1.61976 $2.14458 8,448,068
1/1/00 to 12/31/00 $2.14458 $1.80711 9,720,950
AIM VI Value Fund
1/24/97* to 12/31/97 $1.06636 $1.27997 2,687,877
1/1/98 to 12/31/98 $1.27997 $1.67125 6,623,349
1/1/99 to 12/31/99 $1.67125 $2.14096 13,867,703
1/1/00 to 12/31/00 $2.14096 $1.80208 18,081,829
Alliance Premier Growth
5/1/00* to 12/31/00 $1.01651 $0.79874 1,767,797
American Century VP Value
Fund
9/1/98* to 12/31/98 $1.02098 $1.17305 122,871
1/1/99 to 12/31/99 $1.17305 $1.14715 2,092,340
1/1/00 to 12/31/00 $1.14715 $1.33658 3,271,112
Credit Suisse Warburg
Pincus Trust Global Post-
Venture Capital Portfolio
1/24/97* to 12/31/97 $0.98396 $1.07018 624,929
1/1/98 to 12/31/98 $1.07018 $1.12410 1,555,894
1/1/99 to 12/31/99 $1.12410 $1.81263 2,104,691
1/1/00 to 12/31/00 $1.81263 $1.44905 3,551,598
Davis Value Portfolio
5/1/00* to 12/31/00 $1.01069 $0.99182 3,277,583
Franklin Templeton
Variable Insurance
Products Trust
Franklin Small Cap
Investments Fund--
Class 2
9/1/98* to 12/31/98 $1.00945 $1.24477 253,350
1/1/99 to 12/31/99 $1.24477 $2.14040 1,955,833
1/1/00 to 12/31/00 $2.14040 $1.76141 4,980,000
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THIS CHART CONTINUES ON THE NEXT PAGE
37
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Accumulation Unit Values continued
ACCUMULATION UNIT VALUES (CONTINUED): AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
|
ACCUMULATION UNIT VALUE ACCUMULATION UNIT VALUE NUMBER OF ACCUMULATION UNITS
AT BEGINNING OF PERIOD AT END OF PERIOD OUTSTANDING AT END OF PERIOD
----------------------- ----------------------- ----------------------------
Janus Aspen Series Growth
Portfolio
1/24/97* to 12/31/97 $1.04112 $1.22056 2,360,624
1/1/98 to 12/31/98 $1.22056 $1.63278 6,145,905
1/1/99 to 12/31/99 $1.63278 $2.31865 13,375,166
1/1/00 to 12/31/00 $2.31865 $1.95266 18,498,576
Janus Aspen Series Intn'l
Growth Portfolio
1/24/97* to 12/31/97 $1.07728 $1.23121 3,626,939
1/1/98 to 12/31/98 $1.23121 $1.42337 7,490,614
1/1/99 to 12/31/99 $1.42337 $2.55865 10,899,400
1/1/00 to 12/31/00 $2.55865 $2.12110 14,820,457
MFS Emerging Growth
Series
1/24/97* to 12/31/97 $0.99843 $1.15186 2,636,905
1/1/98 to 12/31/98 $1.15186 $1.52386 8,147,991
1/1/99 to 12/31/99 $1.52386 $2.65585 11,792,762
1/1/00 to 12/31/00 $2.65585 $2.10566 15,272,415
MFS Research Series
1/24/97* to 12/31/97 $1.05478 $1.21695 2,159,262
1/1/98 to 12/31/98 $1.21695 $1.48048 4,582,935
1/1/99 to 12/31/99 $1.48048 $1.81149 5,510,866
1/1/00 to 12/31/00 $1.81149 $1.69985 5,861,621
OCC Accumulation Trust
Managed Portfolio
1/24/97* to 12/31/97 $1.08859 $1.26668 7,302,011
1/1/98 to 12/31/98 $1.26668 $1.34022 21,770,163
1/1/99 to 12/31/99 $1.34022 $1.38780 23,288,748
1/1/00 to 12/31/00 $1.38780 $1.50197 19,918,367
OCC Accumulation Trust
Small Cap Portfolio
1/24/97* to 12/31/97 $1.05425 $1.26710 2,630,491
1/1/98 to 12/31/98 $1.26710 $1.13668 6,811,750
1/1/99 to 12/31/99 $1.13668 $1.10051 7,804,349
1/1/00 to 12/31/00 $1.10051 $1.56487 7,859,955
T. Rowe Price Equity
Income Portfolio
1/24/97* to 12/31/97 $1.07051 $1.33212 3,846,266
1/1/98 to 12/31/98 $1.33212 $1.43277 9,576,908
1/1/99 to 12/31/99 $1.43277 $1.46583 11,645,491
1/1/00 to 12/31/00 $1.46583 $1.63398 11,413,962
T. Rowe Price Intn'l Series
--Intn'l Stock Portfolio
1/24/97* to 12/31/97 $1.02164 $1.05690 1,286,791
1/1/98 to 12/31/98 $1.05690 $1.20747 2,623,440
1/1/99 to 12/31/99 $1.20747 $1.58765 3,593,199
1/1/00 to 12/31/00 $1.58765 $1.28651 4,135,787
|
* Commencement of Business
38
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value
Adjustment Formula
MARKET-VALUE ADJUSTMENT FORMULA
The Market-Value Adjustment, which is applied to withdrawals and transfers made at any time other than the 30-day period following the end of an interest rate period, involves three amounts:
1) The number of whole months remaining in the existing interest rate period.
2) The guaranteed interest rate.
3) The interest rate that Pruco Life declares for a duration of one year longer than the number of whole years remaining on the existing cell being withdrawn from.
Stated as a Formula, the Market Value is Equal to: (M/12) X (R-C)
not to exceed +0.40 or be less than -0.40; where,
|
M = the number of whole months (not to be less than
one) remaining in the interest-rate period
R = the Contract's guaranteed interest-rate expressed
as a decimal. Thus 6.2% is converted to 0.062.
C = the interest-rate, expressed as a decimal, that
Pruco Life declares for a duration equal to the
number of whole years remaining in the present
interest-rate period, plus 1 year as of the date the
request for a withdrawal or transaction is received
|
The Market-Value Adjustment is then equal to the Market Value Factor multiplied by the amount subject to a Market-Value Adjustment.
Step by Step
The steps below explain how a market-value adjustment is calculated.
Step 1: Divide the number of whole months left in the existing interest rate period (not to be less than one) by 12.
Step 2: Divide the interest rate Pruco Life declares on the date the request for withdrawal or transfer is received for a duration of years equal to the whole number of years determined in Step 1, plus 1 additional year. Subtract this interest rate from the guaranteed interest rate. The result could be negative.
Step 3: Multiply the results of Step 1 and Step 2. Again, the result could be negative. If the result is less than -0.4, use the value -0.4. If the result is in between -0.4 and 0.4, use the actual value. If the result is more than 0.4, use the value 0.4.
Step 4: Multiply the result of Step 3 (which is the Market Value Factor) by the value of the amount subject to a Market-Value Adjustment. The result is the Market-Value Adjustment.
Step 5: The result of Step 4 is added to the interest cell. If the Market-Value Adjustment is positive, the interest cell will go up in value. If the Market-Value Adjustment is negative, the interest cell will go down in value.
Depending upon when the withdrawal request is made, a withdrawal charge may apply.
The following example will illustrate the application of a market-value adjustment and the determination of the withdrawal charge: Suppose a contractowner made two invested purchase payments, the first in the amount of $10,000 on December 1, 1995, all of which was allocated to the Equity Subaccount, and the second in the amount of $5,000 on October 1, 1997, all of which was allocated to the MVA Option with a guaranteed interest rate of 8%
(0.08) for 7 years. A request for withdrawal of $8,500 is made on February 1, 2000 (the contract owner does not provide any withdrawal instructions). On that date the amount in the Equity Subaccount is equal to $12,000 and the amount in the interest cell with a maturity date of September 30, 2004 is $5,985.23, so that the contract fund on that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life for the duration of 5 Years (4 whole years remaining until September 30, 2004, plus 1 year) is 11%.
39
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value Adjustment Formula continued
The following computations would be made:
1) Calculate the Contract Fund value as of the effective date of the transaction. This would be $17,985.23.
2) Calculate the charge-free amount (the amount of the withdrawal that is not subject to a withdrawal charge).
|
Date Payment Free
---- ------- ------
12/1/95 $10,000 $1,000
12/1/96 $2,000
10/1/97 $ 5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
|
The charge-free amount in the fifth Contract year is 10% of $15,000 (total purchase payments) plus $5,500 (the charge-free amount available in the fourth Contract year) for a total of $7,000.
3) Since the withdrawal request is in the fifth Contract year, a 3% withdrawal charge rate applies to any portion of the withdrawal which is not charge-free.
|
$8,500.00 requested withdrawal amount
-$7,000.00 charge-free
$1,500.00 additional amount needed to
complete withdrawal
|
The Contract provides that the Contract Fund will be reduced by an amount which, when reduced by the withdrawal charge, will equal the amount requested. Therefore, in order to produce the amount needed to complete the withdrawal request ($1,500), we must "gross-up" that amount, before applying the withdrawal charge rate. This is done by dividing by 1 minus the withdrawal charge rate.
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces it to $1,500, the balance needed to complete the request.
$1,546.39 grossed-up amount
X .03 withdrawal charge rate $46.39 withdrawal charge
4) The Market Value Factor is determined as described in steps 1 through 5, above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the existing cell) minus 0.11 (11% is the interest-rate that would be offered for an interest cell with a duration of the remaining whole years plus 1), which is -0.03, multiplied by 4.58333 (55 months remaining until September 30, 2004, divided by 12) or -0.13750. Thus, there will be a negative Market-Value Adjustment of 14% of the amount in the interest cell that is subject to the adjustment.
-0.13750 X$5,985.23 =
|
-822.97 negative MVA
$5,985.23 unadjusted value
$5,162.26 adjusted value
$12,000.00 equity value
$17,162.26 adjusted contract fund
|
5) The total amount to be withdrawn, $8,546.39, (sum of the surrender charge, $46.39, and the requested withdrawal amount of $8,500) is apportioned over all accounts making up the Contract Fund following the Market-Value Adjustments, if any, associated with the MVA option.
Equity
($12,000/$17,162.26) X$8,546.39 $5,975.71 7-Yr MVA
($5,162.26/$17,162.26) X$8,546.39 = $2,570.68 $8,546.39
6) The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal of $2,570.68 leaves $2,591.58. This amount must be ''unadjusted'' by dividing it by 0.86250 (1 plus the Market-Value Adjustment of -0.13750) to determine the amount remaining in the interest cell to which the guaranteed interest-rate of 8% will continue to be credited until September 30, 2004 or a subsequent withdrawal. That amount is $3,004.73.
40
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement
This statement is designed to help you understand the requirements of federal tax law which apply to your individual retirement annuity (IRA), your Roth IRA, your simplified employee pension IRA (SEP) for employer contributions, your Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase for your spouse. You can obtain more information regarding your IRA either from your sales representative or from any district office of the Internal Revenue Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to return the contract for a full refund within 10 days (or whatever period is required by applicable state law) after it is delivered. This is a more liberal provision than is required in connection with IRAs. To exercise this "free-look" provision, return the contract to the representative who sold it to you or to the Prudential Annuity Service Center at the address shown on the first page of this prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they are covered under other retirement programs. Additionally, if you have a non-working spouse (and you file a joint tax return), you may establish an IRA on behalf of your non-working spouse. A working spouse may establish his or her own IRA. A divorced spouse receiving taxable alimony (and no other income) may also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active participant" in an employer maintained qualified retirement plan or you have "Adjusted Gross Income" (as defined under Federal tax laws) which does not exceed the "applicable dollar limit." IRA (or SEP) contributions must be made by no later than the time you file your income tax return for that year. For a single taxpayer, the applicable dollar limitation is $33,000 (in 2001), with the amount of IRA contribution which may be deducted reduced proportionately for Adjusted Gross Income between $33,000-$43,000. For married couples filing jointly, the applicable dollar limitation is $53,000, with the amount of IRA contribution which may be deducted reduced proportionately for Adjusted Gross Income between $53,000-$63,000. There is no deduction allowed for IRA contributions when Adjusted Gross Income reaches $43,000 for individuals and $63,000 for married couples filing jointly. These amounts are for 2001. Income limits are scheduled to increase until 2006 for single taxpayers and 2007 for married taxpayers.
Contributions made by your employer to your SEP are excludable from your gross income for tax purposes in the calendar year for which the amount is contributed. Certain employees who participate in a SEP will be entitled to elect to have their employer make contributions to their SEP on their behalf or to receive the contributions in cash. If the employee elects to have contributions made on the employee's behalf to the SEP, those funds are not treated as current taxable income to the employee. Elective deferrals under a SEP are subject to an inflation-adjusted limit, which is $10,500 in 2001. Salary-reduction SEPs (also called "SARSEPs") are available only if at least 50% of the employees elect to have amounts contributed to the SARSEP and if the employer has 25 or fewer employees at all times during the preceding year. New SARSEPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the lesser of: (1) $2,000 or (2) 100% of your earned compensation. Contributions in excess of the deduction limits may be subject to penalty. See below.
Under a SEP agreement, the maximum annual contribution which your employer may make on your behalf to a SEP contract that is excludable from your income is the lesser of 15% of your salary or $25,500 (in 2001). An employee who is a participant in a SEP agreement may make after-tax contributions to the SEP contract, subject to the contribution limits applicable to IRAs in general. Those employee contributions will be deductible subject to the deductibility rules described above.
41
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement continued
The maximum tax deductible annual contribution that a divorced spouse with no other income may make to an IRA is the lesser of (1) $2,000 or (2) 100% of taxable alimony.
If you or your employer should contribute more than the maximum contribution amount to your IRA or SEP, the excess amount will be considered an "excess contribution." You are permitted to withdraw an excess contribution from your IRA or SEP before your tax filing date without adverse tax consequences. If, however, you fail to withdraw any such excess contribution before your tax filing date, a 6% excise tax will be imposed on the excess for the tax year of contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the following tax year can be avoided if the excess is (1) withdrawn before the end of the following year, or (2) treated as a current contribution for the following year. (See Premature Distributions below for penalties imposed on withdrawal when the contribution exceeds $2,000.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an IRA for your "non-working" spouse. In order to be eligible to establish such a spousal IRA, you must file a joint tax return with your spouse and, if your non-working spouse has compensation, his/her compensation must be less than your compensation for the year. Contributions of up to $2,000 each may be made to your IRA and the spousal IRA if the combined compensation of you and your spouse is at least equal to the amount contributed. If requirements for deductibility (including income levels) are met, you will be able to deduct an amount equal to the least of (i) the amount contributed to the IRAs;
(ii) $4,000; or (iii) 100% of your combined gross income.
Contributions in excess of the contribution limits may be subject to penalty. See above under "Contributions and Deductions." If you contribute more than the allowable amount, the excess portion will be considered an excess contribution. The rules for correcting it are the same as discussed above for regular IRAs.
Other than the items mentioned in this section, all of the requirements generally applicable to IRAs are also applicable to IRAs established for non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made from other IRAs and contributed to this contract. This transfer of funds from one IRA to another is called a "rollover" IRA. To qualify as a rollover contribution, the entire portion of the withdrawal must be reinvested in another IRA within 60 days after the date it is received. You will not be allowed a tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a qualified distribution from a qualified retirement plan or tax-sheltered annuity. Properly made, such a distribution will not be taxable until you receive payments from the IRA created with it. Unless you were a self-employed participant in the distributing plan, you may later roll over such a contribution to another qualified retirement plan as long as you have not mixed it with IRA (or SEP) contributions you have deducted from your income. (You may roll less than all of a qualified distribution into an IRA, but any part of it not rolled over will be currently includable in your income without any capital gains treatment.)
DISTRIBUTIONS
(a) Premature Distributions
At no time can your interest in your IRA or SEP be forfeited. To insure that your contributions will be used for retirement, the federal tax law does not permit you to use your IRA or SEP as security for a loan. Furthermore, as a general rule, you may not sell or assign your interest in your IRA or SEP to anyone. Use of an IRA (or SEP) as security or assignment of it to another will invalidate the entire annuity. It then will be includable in your income in the year it is invalidated and will be subject to a 10% tax penalty if you are not at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or SEP without penalty to your former spouse in accordance with the terms of a divorce decree.)
42
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
You may surrender any portion of the value of your IRA (or SEP). In the case of a partial surrender which does not qualify as a rollover, the amount withdrawn will be includable in your income and subject to the 10% penalty if you are not at least age 59 1/2 or totally disabled unless you comply with special rules requiring distributions to be made at least annually over your life expectancy.
The 10% tax penalty does not apply to the withdrawal of an excess contribution as long as the excess is withdrawn before the due date of your tax return. Withdrawals of excess contributions after the due date of your tax return will generally be subject to the 10% penalty unless the excess contribution results from erroneous information from a plan trustee making an excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b)Distribution After Age 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may elect to receive a distribution of your IRA (or SEP) regardless of when you actually retire. In addition, you must commence distributions from your IRA by April 1 following the year you attain age 70 1/2 . You may elect to receive the distribution under any one of the periodic payment options available under the contract. The distributions from your IRA under any one of the period payment options or in one sum will be treated as ordinary income as you receive them to the degree that you have made deductible contributions. If you have made both deductible and nondeductible contributions, the portion of the distribution attributable to the nondeductible contribution will be tax-free.
(c)Inadequate Distributions--50% Tax
Your IRA or SEP is intended to provide retirement benefits over your lifetime. Thus, federal tax law requires that you either (1) receive a lump-sum distribution of your IRA by April 1 of the year following the year in which you attain age 70 1/2 or (2) start to receive periodic payments by that date. If you elect to receive periodic payments, those payments must be sufficient to pay out the entire value of your IRA during your life expectancy (or over the joint life expectancies of you and your spouse/beneficiary.) The calculation method is revised under the IRS proposed regulations for distributions beginning in 2002 and are optional for distributions in 2001. If the payments are not sufficient to meet these requirements, an excise tax of 50% will be imposed on the amount of any underpayment.
(d)Death Benefits
If you, (or your surviving spouse) die before receiving the entire value of your IRA (or SEP), the remaining interest must be distributed to your beneficiary (or your surviving spouse's beneficiary) in one lump-sum within 5 years of death, or applied to purchase an immediate annuity for the beneficiary. This annuity must be payable over the life expectancy of the beneficiary beginning by December 31 of the year following the year after your or your spouse's death. If your spouse is the designated beneficiary, he or she is treated as the owner of the IRA. If minimum required distributions have begun, the entire amount must be distributed at least as rapidly as if the owner had survived. A distribution of the balance of your IRA upon your death will not be considered a gift for federal tax purposes, but will be included in your gross estate for purposes of federal estate taxes.
ROTH IRAS
Section 408A of the Tax Code permits eligible individuals to contribute to a type of IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers with adjusted gross incomes of less than $160,000 for married individuals filing jointly and less than $110,000 for single individuals. Married individuals filing separately are not eligible to contribute to a IRA. The maximum amount of contributions allowable for any taxable year to all Roth IRAs maintained by an individual is generally the lesser of $2,000 and 100% of compensation for that year (the $2,000 limit is phased out for incomes between $150,000 and $160,000 for married and between $95,000 and $110,000 for singles). The contribution limit is reduced by the amount of any contributions made to a traditional IRA. Contributions to a Roth IRA are not deductible.
43
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement continued
For taxpayers with adjusted gross income of $100,000 or less, all or part of amounts in a traditional IRA may be converted, transferred or rolled over to a Roth IRA. Some or all of the IRA value will typically be includable in the taxpayer's gross income. If such a rollover, transfer or conversion occurred before January 1, 1999, the portion of the amount includable in gross income must be included in income ratably over the next four years beginning with the year in which the transaction occurred. Provided a rollover contribution meets the requirements of IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth IRA to another Roth IRA.
Under some circumstances, it may not be advisable to roll over, transfer or convert all or part of a non-Roth IRA to a Roth IRA. Persons considering a rollover, transfer or conversion should consult their own tax advisor.
"Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements:
(1) the distribution must be made (a) after the owner of the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's disability; or
(d) for a qualified first time homebuyer distribution within the meaning of
Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and taxed generally in the same manner as distributions from a traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2 . However, if the owner dies before the entire interest in a Roth IRA is distributed, any remaining interest in the contract must be distributed by December 31 of the calendar year containing the fifth anniversary of the owner's death subject to certain exceptions.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for excess contributions, 10% for premature distributions or 50% for underpayments), you must file Form 5329 with the Internal Revenue Service. The form is to be attached to your federal income tax return for the tax year in which the penalty applies. Normal contributions and distributions must be shown on your income tax return for the year to which they relate.
44
Discovery Select is a variable annuity issued by Pruco Life Insurance Company of New Jersey, located at 213 Washington Street, Newark, NJ 07102-2992, and is distributed through Prudential Investment Management Services LLC, Three Gateway Center, 14th Floor, Newark, NJ 07102-4077, and offered through Prudential Securities Incorporated, 199 Water Street, New York, NY 10292, and Pruco Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777. All are Prudential companies.
Prudential and Pruco Life are each solely responsible for their respective financial condition and contractual obligations.
Discovery is a registered mark of Prudential.
Prudential Financial is a service mark of Prudential, Newark, NJ and its affiliates.
Norman Rockwell Illustration (C) The Curtis Publishing Company.
[LOGO] Prudential Financial
The Prudential Insurance Company of America 751 Broad Street
Newark, New Jersey 07102-3777
IFS-A053626
ORD96639NY
Ed. 05/01/2001
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
There is no filing fee due under this registration statement, because the units registered herein are carried over from a predecessor registration statement.
Federal Taxes
The company estimates the federal tax effect associated with the deferred acquisition costs attributable to each $1,000,000 of annual purchase payments to be approximately $2,500.
State Taxes
Currently, some states charge up to 3.5% of premium taxes or similar taxes on annuities. The company estimates that premium taxes in the amount of $35,000 would be owed if 3.5% premium tax was owed on $1,000,000, of purchase payments. To the extent sales are limited to New York, there would be no premium taxes as New York does not currently have a premium tax.
Printing Costs
Pruco Life Insurance Company of New Jersey estimated that the cost of printing prospectuses for the amount of securities registered herein would be $0 because the variable annuity with which this market value adjustment option is associated is no longer offered or sold.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is allocated to Pruco Life Insurance Company of New Jersey.
Accounting Costs
The independent registered public accounting firm that audits the company's financial statements charges approximately $10,000 in connection with each set of S-3 registration statements filed by the company with the Commission on a given date. The fee is allocated among the filings.
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.
New Jersey, being the state of organization of Pruco Life Insurance Company of New Jersey ("PLNJ"), permits entities organized under its jurisdiction to indemnify directors and officers with certain limitations. The relevant provisions of New Jersey law permitting indemnification can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The text of PLNJ's By-law, Article V, 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)Underwriting Agreement between Prudential Annuities Distributors, Inc. and Pruco Life Insurance Company of New Jersey. (Note 1)
(4)Discovery Select Variable Annuity Contract (Note 2)
(5)Opinion of Counsel as to legality of the securities being registered. (Note 3)
(23)Written consent of Independent Registered Public Accounting Firm (Note 3)
(24) Powers of Attorney:
(a) Power of Attorney for James J. Avery (Note 3)
(b) Power of Attorney for Thomas J. Diemer (Note 3)
(d) Power of Attorney for Robert M. Falzon (Note 3)
(d) Power of Attorney for Bernard J. Jacob (Note 3)
(e) Power of Attorney for Stephen Pelletier (Note 3)
(f) Power of Attorney for Yanela C. Frias (Note 3)
(Note 1) Incorporated by reference to Post-Effective Amendment No. 9, Form N-4, Registration No. 333-131035, filed December 18, 2007 on behalf of Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 2) Incorporated by reference to Registration Statement, Form S-1, Registration No. 333-18053, filed December 17, 1996, on behalf of Pruco Life Insurance Company of New Jersey.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment to this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(2) 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.
(3) That each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(5) 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 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to 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.
(6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, 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.
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 21st day of October, 2011.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Registrant)
By: /s/Stephen Pelletier
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
|
*
----------------------------------
James J. Avery Jr.
Director Date: October 21, 2011
* By: /s/C. Christopher Sprague
---------------------------------- --------------------------------
Stephen Pelletier C. Christopher Sprague
Chief Executive Officer, President Vice President and Corporate
and Director Counsel
*
----------------------------------
Thomas J. Diemer
Chief Financial Officer, Chief
Accounting Officer,
and Director
*
----------------------------------
Bernard J. Jacob
Director
*
----------------------------------
Robert M. Falzon
Director
*
----------------------------------
Yanela C. Frias
Director
*Executed by C. Christopher Sprague on behalf of those indicated pursuant to Power of Attorney.
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Signature and Title
Exhibit No.
(5) Opinion of Counsel as to legality of securities being registered
(23) Written Consent of Independent Registered Public Accounting Firm
(24)(a) Power of Attorney for James J. Avery, Jr.
(b) Power of Attorney for Thomas J. Diemer
(c) Power of Attorney for Robert M. Falzon
(d) Power of Attorney for Bernard J. Jacob
(e) Power of Attorney for Stephen Pelletier
(f) Power of Attorney for Yanela C. Frias