0001193125-15-161357.txt : 20150430
0001193125-15-161357.hdr.sgml : 20150430
20150430151013
ACCESSION NUMBER: 0001193125-15-161357
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20150430
DATE AS OF CHANGE: 20150430
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PRUDENTIAL ANNUITIES LIFE ASSURANCE CORP/CT
CENTRAL INDEX KEY: 0000881453
STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE CARRIERS, NEC [6399]
IRS NUMBER: 061241288
STATE OF INCORPORATION: CT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-198399
FILM NUMBER: 15817756
BUSINESS ADDRESS:
STREET 1: ONE CORPORATE DRIVE
CITY: SHELTON
STATE: CT
ZIP: 06484
BUSINESS PHONE: 2039261888
MAIL ADDRESS:
STREET 1: ONE CORPORATE DRIVE
CITY: SHELTON
STATE: CT
ZIP: 06484
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT
DATE OF NAME CHANGE: 19920929
424B3
1
d853199d424b3.txt
APEX
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
A Prudential Financial Company
One Corporate Drive, Shelton, Connecticut 06484
ADVANCED SERIES ADVISOR PLAN/SM/ III ("ASAP III/SM/")
ADVANCED SERIES APEX II/SM/ ("APEX II/SM/")
ADVANCED SERIES XTRA CREDIT SIX/SM/ ("ASXT6/SM/") OR ("XT6")
ADVANCED SERIES LIFEVEST II/SM/ ("ASL II/SM/")
FLEXIBLE PREMIUM DEFERRED ANNUITIES
PROSPECTUS: APRIL 30, 2015
This prospectus describes four different flexible premium deferred annuities
(the "Annuities" or the "Annuity") issued by Prudential Annuities Life
Assurance Corporation ("Prudential Annuities(R)", "we", "our", or "us"). If you
are receiving this prospectus, it is because you currently own one of these
Annuities. These Annuities are no longer offered for new sales. These Annuities
were offered as an individual annuity contract or as an interest in a group
annuity. Each Annuity has different features and benefits that may be
appropriate for you based on your financial situation, your age and how you
intend to use the Annuity. This Prospectus describes the important features of
the Annuities. The Prospectus also describes differences among the Annuities
which include differences in the fees and charges you pay and variations in
some product features such as the availability of certain bonus amounts and
basic death benefit protection. There may also be differences in the
compensation paid to your Financial Professional for each Annuity. Differences
in compensation among different annuity products could influence a Financial
Professional's decision as to which annuity to recommend to you. In addition,
selling broker-dealer firms through which each Annuity is sold may not make
available or may not recommend to their customers certain of the optional
features and investment options offered generally under the Annuity.
Alternatively, such firms may restrict the optional benefits that they do make
available to their customers (e.g., by imposing a lower maximum issue age for
certain optional benefits than what is prescribed generally under the Annuity).
Selling broker-dealer firms may not offer all the Annuities described in this
prospectus and/or may impose restrictions on the availability of the Annuity
based on certain criteria. Please speak to your Financial Professional for
further details. EACH ANNUITY OR CERTAIN OF ITS INVESTMENT OPTIONS AND/OR
FEATURES MAY NOT BE AVAILABLE IN ALL STATES. For some of the variations
specific to Annuities approved for sale by the New York State Insurance
Department, see Appendix G. The guarantees provided by the variable annuity
contracts and the optional benefits are the obligations of and subject to the
claims paying ability of Prudential Annuities. Certain terms are capitalized in
this Prospectus. Those terms are either defined in the Glossary of Terms or in
the context of the particular section. BECAUSE THE XT6 ANNUITY GRANTS CREDITS
WITH RESPECT TO YOUR PURCHASE PAYMENTS, THE EXPENSES OF THE XT6 ANNUITY MAY BE
HIGHER THAN EXPENSES FOR AN ANNUITY WITHOUT A CREDIT. IN ADDITION, THE AMOUNT
OF THE CREDITS THAT YOU RECEIVE UNDER THE XT6 ANNUITY MAY BE MORE THAN OFFSET
OVER TIME BY THE ADDITIONAL FEES AND CHARGES ASSOCIATED WITH THE CREDIT.
THE SUB-ACCOUNTS
Each Sub-account of Prudential Annuities Life Assurance Corporation Variable
Account B invests in an underlying mutual fund portfolio. Prudential Annuities
Life Assurance Corporation Variable Account B is a separate account of
Prudential Annuities, and is the investment vehicle in which your Purchase
Payments are held. Currently, portfolios of the following underlying mutual
funds are being offered: AIM Variable Insurance Funds (Invesco Variable
Insurance Funds), Advanced Series Trust, Nationwide Variable Insurance Trust,
ProFunds VP, The Prudential Series Fund, and Wells Fargo Variable Trust. See
the following page for the complete list of Sub-accounts.
PLEASE READ THIS PROSPECTUS
PLEASE READ THIS PROSPECTUS AND THE CURRENT PROSPECTUSES FOR THE UNDERLYING
MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE.
AVAILABLE INFORMATION
We have also filed a Statement of Additional Information that is available from
us, without charge, upon your request. The contents of the Statement of
Additional Information are described below--see Table of Contents. The
Statement of Additional Information is incorporated by reference into this
prospectus. This Prospectus is part of the registration statement we filed with
the SEC regarding this offering. Additional information on us and this offering
is available in the registration statement and the exhibits thereto. You may
review and obtain copies of these materials at no cost to you by contacting us.
These documents, as well as documents incorporated by reference, may also be
obtained through the SEC's Internet Website (http://www.sec.gov) for this
registration statement as well as for other registrants that file
electronically with the SEC. Please see "How to Contact Us" later in this
prospectus for our Service Office Address.
In compliance with U.S. law, Prudential Annuities Life Assurance Corporation
delivers this prospectus to current contract owners that reside outside of the
United States.
THESE ANNUITIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ISSUED, GUARANTEED OR
ENDORSED BY, ANY BANK, ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY. AN INVESTMENT IN AN ANNUITY INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF VALUE, EVEN WITH RESPECT TO AMOUNTS ALLOCATED TO THE
AST MONEY MARKET SUB-ACCOUNT.
--------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ADVANCED SERIES ADVISOR PLAN/SM/ III, APEX II/SM/, XTRA CREDIT/(R)/ AND
LIFEVEST II/SM/ ARE SERVICE MARKS OR REGISTERED TRADEMARKS OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA AND ARE USED UNDER LICENSE BY ITS AFFILIATES.
--------------------------------------------------------------------------------
FOR FURTHER INFORMATION CALL: 1-888-PRU-2888
Prospectus Dated: April 30, 2015 Statement of Additional Information Dated: April 30, 2015
COREPROS ASAP3SAI, APEX2SAI, XT6SAI, ASL2SAI
INVESTMENT OPTIONS
Please note that you may not allocate Purchase Payments to the AST Investment
Grade Bond Portfolio or the target date bond portfolios (e.g., AST Bond
Portfolio 2025)
ADVANCED SERIES TRUST AST T. Rowe Price Natural Resources Portfolio
AST Academic Strategies Asset Allocation AST Templeton Global Bond Portfolio
Portfolio
AST Advanced Strategies Portfolio AST Wellington Management Hedged Equity Portfolio
AST AQR Emerging Markets Equity Portfolio AST Western Asset Core Plus Bond Portfolio
AST AQR Large-Cap Portfolio AST Western Asset Emerging Markets Debt Portfolio
AST Balanced Asset Allocation Portfolio
AST BlackRock Global Strategies Portfolio AIM VARIABLE INSURANCE FUNDS
AST BlackRock iShares ETF Portfolio (INVESCO VARIABLE INSURANCE FUNDS)
AST BlackRock/Loomis Sayles Bond Portfolio Invesco V.I. Diversified Dividend Fund - Series I shares
AST Bond Portfolio 2015 Invesco V.I. Global Health Care Fund - Series I shares
AST Bond Portfolio 2016 Invesco V.I. Mid Cap Growth Fund - Series I shares
AST Bond Portfolio 2017 Invesco V.I. Technology Fund - Series I shares
AST Bond Portfolio 2018
AST Bond Portfolio 2019 NATIONWIDE VARIABLE INSURANCE TRUST
AST Bond Portfolio 2020 NVIT Developing Markets Fund
AST Bond Portfolio 2021
AST Bond Portfolio 2022 PROFUNDS VP
AST Bond Portfolio 2023 Access VP High Yield
AST Bond Portfolio 2024 Asia 30
AST Bond Portfolio 2025 Banks
AST Bond Portfolio 2026 Basic Materials
AST Boston Partners Large-Cap Value Portfolio Bear
AST Capital Growth Asset Allocation Portfolio Biotechnology
AST ClearBridge Dividend Growth Portfolio Bull
AST Cohen & Steers Realty Portfolio Consumer Goods
AST Defensive Asset Allocation Portfolio Consumer Services
AST FI Pyramis(R) Asset Allocation Portfolio/1/ Europe 30
AST FI Pyramis(R) Quantitative Portfolio/1/ Financials
AST Franklin Templeton Founding Funds
Allocation Portfolio* Health Care
AST Franklin Templeton Founding Funds Plus
Portfolio Industrials
AST Global Real Estate Portfolio Internet
AST Goldman Sachs Large-Cap Value Portfolio Japan
AST Goldman Sachs Mid-Cap Growth Portfolio Large-Cap Growth
AST Goldman Sachs Multi-Asset Portfolio Large-Cap Value
AST Goldman Sachs Small-Cap Value Portfolio Mid-Cap Growth
AST Herndon Large-Cap Value Portfolio Mid-Cap Value
AST High Yield Portfolio NASDAQ-100
AST International Growth Portfolio Oil & Gas
AST International Value Portfolio Pharmaceuticals
AST Investment Grade Bond Portfolio Precious Metals
AST J.P. Morgan Global Thematic Portfolio Real Estate
AST J.P. Morgan International Equity Portfolio Rising Rates Opportunity
AST J.P. Morgan Strategic Opportunities
Portfolio Semiconductor
AST Jennison Large-Cap Growth Portfolio Short Mid-Cap
AST Large-Cap Value Portfolio Short NASDAQ-100
AST Loomis Sayles Large-Cap Growth Portfolio Short Small-Cap
AST Lord Abbett Core Fixed Income Portfolio Small-Cap Growth
AST MFS Global Equity Portfolio Small-Cap Value
AST MFS Growth Portfolio Technology
AST MFS Large-Cap Value Portfolio Telecommunications
AST Mid-Cap Value Portfolio U.S. Government Plus
AST Money Market Portfolio UltraBull
AST Neuberger Berman Core Bond Portfolio UltraMid-Cap
AST Neuberger Berman Mid-Cap Growth Portfolio UltraNASDAQ-100
AST Neuberger Berman/LSV Mid-Cap Value
Portfolio UltraSmall-Cap
AST New Discovery Asset Allocation Portfolio Utilities
AST Parametric Emerging Markets Equity
Portfolio
AST PIMCO Limited Maturity Bond Portfolio THE PRUDENTIAL SERIES FUND
AST Preservation Asset Allocation Portfolio SP International Growth*
AST Prudential Core Bond Portfolio
AST Prudential Growth Allocation Portfolio WELLS FARGO VARIABLE TRUST
AST QMA Emerging Markets Equity Portfolio Wells Fargo Advantage VT International Equity - Class 1
AST QMA Large-Cap Portfolio Wells Fargo Advantage VT Intrinsic Value - Class 2
AST QMA US Equity Alpha Portfolio Wells Fargo Advantage VT Omega Growth - Class 1
AST Quantitative Modeling Portfolio Wells Fargo Advantage VT Small Cap Growth - Class 1
AST RCM World Trends Portfolio
AST Schroders Global Tactical Portfolio /1/ Pyramis is a registed service mark of FMR LLC. Used
with permission.
AST Schroders Multi-Asset World Strategies *No longer offered for new investment. See description
Portfolio regarding the Portfolio in
AST Small-Cap Growth Portfolio "Investment Options."
AST Small-Cap Growth Opportunities Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Equity Income Portfolio
AST T. Rowe Price Large-Cap Growth Portfolio
CONTENTS
GLOSSARY OF TERMS.............................................................. 1
SUMMARY OF CONTRACT FEES AND CHARGES........................................... 5
EXPENSE EXAMPLES............................................................... 18
SUMMARY........................................................................ 20
INVESTMENT OPTIONS............................................................. 25
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?.......... 25
WHAT ARE THE FIXED ALLOCATIONS?............................................. 39
FEES AND CHARGES............................................................... 41
WHAT ARE THE CONTRACT FEES AND CHARGES?..................................... 41
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?................................ 43
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?................... 43
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES................................... 43
PURCHASING YOUR ANNUITY........................................................ 44
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?.............. 44
MANAGING YOUR ANNUITY.......................................................... 47
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?............. 47
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?................................ 48
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.................................... 48
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?................ 49
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?............ 49
MANAGING YOUR ACCOUNT VALUE.................................................... 50
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?................................ 50
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE ASAP III AND APEX II ANNUITIES?. 50
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE ASAP III AND
APEX II ANNUITIES?........................................................ 50
HOW DO I RECEIVE CREDITS UNDER THE XT6 ANNUITY?............................. 51
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE XT6 ANNUITY?............. 51
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?.. 52
DO YOU OFFER DOLLAR COST AVERAGING?......................................... 54
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?............................ 56
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?................................ 56
WHAT IS THE BALANCED INVESTMENT PROGRAM?.................................... 56
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION
INSTRUCTIONS?............................................................. 56
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?..... 57
HOW DO THE FIXED ALLOCATIONS WORK?.......................................... 57
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?........................... 58
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?.................................. 58
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?.............................. 59
ACCESS TO ACCOUNT VALUE? 60
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?............................ 60
(i)
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS FROM NONQUALIFIED ANNUITIES?.............. 60
CAN I WITHDRAW A PORTION OF MY ANNUITY?................................................ 60
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?.......................................... 61
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?........ 61
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(t) AND 72(q) OF THE INTERNAL
REVENUE CODE?........................................................................ 62
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?............ 62
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?.............................................. 62
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?............................ 62
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?........................................... 63
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?................................... 64
HOW ARE ANNUITY PAYMENTS CALCULATED?................................................... 64
LIVING BENEFITS........................................................................... 65
DO YOU OFFER BENEFITS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY
ARE ALIVE?........................................................................... 65
GUARANTEED RETURN OPTION PLUS II (GRO Plus II)......................................... 67
HIGHEST DAILY GUARANTEED RETURN OPTION II (HD GRO II).................................. 71
GUARANTEED RETURN OPTION PLUS (GRO Plus)............................................... 75
GUARANTEED RETURN OPTION (GRO)......................................................... 79
GUARANTEED RETURN OPTION Plus 2008 (GRO Plus 2008)..................................... 82
HIGHEST DAILY GUARANTEED RETURN OPTION (HD GRO)........................................ 87
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)........................................... 92
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)............................................... 95
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE)........................................... 99
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)........................... 104
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT (HD5)....................................... 107
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (HD 7)..................................... 115
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (SHD7)............................. 126
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT (HD 7 Plus)............................... 136
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT (SHD7 Plus)....................... 149
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (HD 6 Plus)............................... 157
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (SHD6 Plus)....................... 170
DEATH BENEFIT............................................................................. 180
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?.......................................... 180
BASIC DEATH BENEFIT.................................................................... 180
OPTIONAL DEATH BENEFITS................................................................ 180
PRUDENTIAL ANNUITIES' ANNUITY REWARDS.................................................. 185
PAYMENT OF DEATH BENEFITS.............................................................. 185
VALUING YOUR INVESTMENT................................................................... 189
HOW IS MY ACCOUNT VALUE DETERMINED?.................................................... 189
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?............................................. 189
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?............................................ 189
HOW DO YOU VALUE FIXED ALLOCATIONS?.................................................... 189
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?............................................ 189
(ii)
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?... 191
TAX CONSIDERATIONS................................................................. 192
GENERAL INFORMATION................................................................ 201
HOW WILL I RECEIVE STATEMENTS AND REPORTS?...................................... 201
WHO IS PRUDENTIAL ANNUITIES?.................................................... 201
WHAT ARE SEPARATE ACCOUNTS?..................................................... 202
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?............................ 203
WHO DISTRIBUTES ANNUITIES OFFERED BY PRUDENTIAL ANNUITIES?...................... 204
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................. 206
FINANCIAL STATEMENTS............................................................ 206
HOW TO CONTACT US............................................................... 206
INDEMNIFICATION................................................................. 207
LEGAL PROCEEDINGS............................................................... 207
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............................. 209
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B.............. A-1
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS................................ B-1
APPENDIX C - PLUS40 OPTIONAL LIFE INSURANCE RIDER.................................. C-1
APPENDIX D - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAM.................... D-1
APPENDIX E - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL DEATH
BENEFITS......................................................................... E-1
APPENDIX F - FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT.............. F-1
APPENDIX G - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE
DEPARTMENT....................................................................... G-1
APPENDIX H - FORMULA UNDER GRO PLUS 2008........................................... H-1
APPENDIX I - FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT...................................... I-1
APPENDIX J - FORMULA FOR HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT..................................... J-1
APPENDIX K - SPECIAL CONTRACT PROVISIONS FOR ANNUITIES ISSUED IN CERTAIN STATES.... K-1
APPENDIX L - FORMULA UNDER THE GUARANTEED RETURN OPTION PLUS BENEFIT............... L-1
APPENDIX M - FORMULA UNDER THE GUARANTEED RETURN OPTION BENEFIT.................... M-1
APPENDIX N - FORMULA FOR HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT..................................... N-1
APPENDIX O - FORMULA FOR GRO PLUS II............................................... O-1
APPENDIX P - FORMULA FOR HIGHEST DAILY GRO......................................... P-1
APPENDIX Q - FORMULA FOR HIGHEST DAILY GRO II...................................... Q-1
(iii)
GLOSSARY OF TERMS
Many terms used within this Prospectus are described within the text where they
appear. The description of those terms are not repeated in this Glossary of
Terms.
ACCOUNT VALUE: The value of each allocation to a Sub-account (also referred to
as a "variable investment option") plus any Fixed Allocation prior to the
Annuity Date, increased by any earnings, and/or less any losses, distributions
and charges. The Account Value is calculated before we assess any applicable
Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or, unless
the Account Value is being calculated on an annuity anniversary, any fee that
is deducted from the Annuity annually in arrears. The Account Value is
determined separately for each Sub-account and for each Fixed Allocation, and
then totaled to determine the Account Value for your entire Annuity. The
Account Value of each MVA Fixed Allocation on any day other than its Maturity
Date may be calculated using a market value adjustment. With respect to XT6,
the Account Value includes any Credits we applied to your purchase payments
that we are entitled to take back under certain circumstances. With respect to
ASAP III and APEX II, the Account Value includes any Loyalty Credit we apply.
With respect to Annuities with a Highest Daily Lifetime Five Income Benefit
election, Account Value includes the value of any allocation to the Benefit
Fixed Rate Account.
ADJUSTED PURCHASE PAYMENTS: As used in the discussion of certain optional
benefits in this prospectus and elsewhere, Adjusted Purchase Payments are
purchase payments, increased by any Credits applied to your Account Value in
relation to such purchase payments, and decreased by any charges deducted from
such purchase payments.
ANNUAL INCOME AMOUNT: This is the annual amount of income you are eligible for
life under the optional benefits.
ANNUITIZATION: The application of Account Value to one of the available annuity
options for the Owner to begin receiving periodic payments for life (or joint
lives), for a guaranteed minimum number of payments or for life with a
guaranteed minimum number of payments.
ANNUITY DATE: The date you choose for annuity payments to commence. Unless we
agree otherwise, for Annuities issued on or after November 20, 2006, the
Annuity Date must be no later than the first day of the calendar month
coinciding with or next following the later of: (a) the oldest Owner's or
Annuitant's 95/th/ birthday and (b) the fifth anniversary of the Issue Date,
whichever occurs first. With respect to Annuities issued prior to November 20,
2006, please see the section of this Prospectus entitled "How and When Do I
Choose the Annuity Payment Option?".
ANNUITY YEAR: A 12-month period commencing on the Issue Date of the Annuity and
each successive 12-month period thereafter.
BENEFICIARY ANNUITY: If you are a beneficiary of an annuity that was owned by a
decedent, subject to the requirements discussed in this Prospectus, you may
transfer the proceeds of the decedent's annuity into one of the Annuities
described in this prospectus and continue receiving the distributions that are
required by the tax laws. This transfer option is only available for purchase
of an IRA, Roth IRA, or a nonqualified annuity.
BENEFIT FIXED RATE ACCOUNT: A fixed investment option that is used only if you
have elected the optional Highest Daily Lifetime Five Income Benefit. Amounts
allocated to the Benefit Fixed Rate Account earn a fixed rate of interest, and
are held within our general account. You may not allocate purchase payments to
the Benefit Fixed Rate Account. Rather, Account Value is transferred to and
from the Benefit Fixed Rate Account only under the pre-determined mathematical
formula of the Highest Daily Lifetime Five Income Benefit.
CODE: The Internal Revenue Code of 1986, as amended from time to time.
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT: We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing the greater of the Highest Anniversary
Value Death Benefit and a 5% annual increase on purchase payments adjusted for
withdrawals.
CONTINGENT DEFERRED SALES CHARGE (CDSC): This is a sales charge that may be
deducted when you make a full or partial withdrawal under your Annuity. We
refer to this as a "contingent" charge because it can be imposed only if you
make a withdrawal. The charge is a percentage of each applicable Purchase
Payment that is being withdrawn. The period during which a particular
percentage applies is measured from the Issue Date of the Annuity. The amount
and duration of the CDSC varies among ASAP III, APEX II and XT6. There is no
CDSC for ASL II. See "Summary of Contract Fees and Charges" for details on the
CDSC for each Annuity.
DCA FIXED RATE OPTION: An investment option that offers a fixed rate of
interest for a specified period during the accumulation period. The DCA Fixed
Rate Option is used only with our 6 or 12 Month Dollar Cost Averaging Program
("6 or 12 Month DCA Program"), under which the Purchase Payments that you have
allocated to that DCA Fixed Rate Option are transferred to the designated
Sub-accounts over a 6 month or 12 month period. Withdrawals or transfers from
the DCA Fixed Rate Option are not subject to any Market Value Adjustment. We no
longer offer our 6 or 12 Month DCA Program.
1
ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT: An Optional Death Benefit that,
for an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing amounts in addition to the basic Death Benefit
that can be used to offset federal and state taxes payable on any taxable gains
in your Annuity at the time of your death. We no longer offer the Enhanced
Beneficiary Protection Death Benefit.
EXCESS INCOME: All or a portion of a Lifetime Withdrawal that exceeds the
Annual Income Amount for that benefit year is considered excess income ("Excess
Income"). Each withdrawal of Excess Income proportionally reduces the Annual
Income Amount for future benefit years.
FIXED ALLOCATION: An investment option that offers a fixed rate of interest for
a specified Guarantee Period during the accumulation period. Certain Fixed
Allocations are subject to a market value adjustment if you withdraw Account
Value prior to the Fixed Allocation's maturity (MVA Fixed Allocation). We also
offer DCA Fixed Rate Options that are used with our 6 or 12 Month Dollar Cost
Averaging Program ("6 or 12 Month DCA Program"), and are not subject to any
market value adjustment. You may participate in a dollar cost averaging program
outside of the 6 or 12 Month DCA Program, where the source of the funds to be
transferred is a Fixed Allocation. We no longer offer our 6 or 12 Month DCA
Program.
FREE LOOK: Under state insurance laws, you have the right, during a limited
period of time, to examine your Annuity and decide if you want to keep it or
cancel it. This right is referred to as your "free look" right. The length of
this time period depends on the law of your state, and may vary depending on
whether your purchase is a replacement or not.
GOOD ORDER: An instruction received by us, utilizing such forms, signatures,
and dating as we require, which is sufficiently complete and clear that we do
not need to exercise any discretion to follow such instructions. In your
Annuity contract, we use the term "In Writing" to refer to this general
requirement.
GUARANTEE PERIOD: A period of time during the accumulation period where we
credit a fixed rate of interest on a Fixed Allocation.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB): An optional benefit that, for an
additional cost, after a seven-year waiting period, guarantees your ability to
begin receiving income from your Annuity in the form of annuity payments based
on your total purchase payments and an annual increase of 5% on such purchase
payments adjusted for withdrawals (called the "Protected Income Value"),
regardless of the impact of market performance on your Account Value. We no
longer offer GMIB.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB): An optional benefit that, for an
additional cost, guarantees your ability to withdraw amounts over time equal to
an initial principal value, regardless of the impact of market performance on
your Account Value. We no longer offer GMWB.
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)/GUARANTEED RETURN OPTION PLUS
2008/SM/ (GRO PLUS 2008)/GUARANTEED RETURN OPTION (GRO)(R)/HIGHEST DAILY
GUARANTEED RETURN OPTION (HIGHEST DAILY GRO)/SM//GUARANTEED RETURN OPTION/SM/
PLUS II (GRO PLUS II)/SM//HIGHEST DAILY/SM/ GUARANTEED RETURN OPTION/SM/ II (HD
GRO II). Each of GRO Plus, GRO Plus 2008, GRO, Highest Daily GRO, GRO Plus II,
and HD GRO II is a separate optional benefit that, for an additional cost,
guarantees a minimum Account Value at one or more future dates and that
requires your participation in a program that may transfer your Account Value
according to a predetermined mathematical formula. Each benefit has different
features, so please consult the pertinent benefit description in the section of
the prospectus entitled "Living Benefits". Certain of these benefits are no
longer available for election.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV"): An optional Death Benefit
that, for an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing a death benefit equal to the greater of the basic
Death Benefit and the Highest Anniversary Value, less proportional withdrawals.
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT: An optional benefit that, for an
additional cost, guarantees your ability to withdraw an annual amount equal to
a percentage of a guaranteed benefit base called the Total Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. We no longer offer Highest Daily Lifetime
Five.
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT: An optional benefit for an
additional charge that guarantees your ability to withdraw amounts equal to a
percentage of a guaranteed benefit base called the Protected Withdrawal Value.
Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. Highest Daily Lifetime Seven is the same
class of optional benefit as our Highest Daily Lifetime Five Income Benefit,
but differs (among other things) with respect to how the Protected Withdrawal
Value is calculated and how the lifetime withdrawals are calculated. We no
longer offer Highest Daily Lifetime Seven.
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT: An optional benefit that is
available for an additional charge. The benefit guarantees your ability to
withdraw amounts equal to a percentage of a guaranteed benefit base called the
Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of the
impact of market performance on your Account Value. Highest Daily Lifetime 7
Plus is the same class of optional benefits as our Highest Daily Lifetime Seven
Income Benefit, but differs (among other things) with respect to how the
Protected Withdrawal Value is calculated and how the lifetime withdrawals are
calculated. We no longer offer Highest Daily Lifetime 7 Plus.
2
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT: An optional benefit that is
available for an additional charge. The benefit guarantees your ability to
withdraw amounts equal to a percentage of a guaranteed benefit base called the
Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of the
impact of market performance on your Account Value. Highest Daily Lifetime 6
Plus is the same class of optional benefit as our Highest Daily Lifetime 7 Plus
Income Benefit, but differs (among other things) with respect to how the
Protected Withdrawal Value is calculated and how the lifetime withdrawals are
calculated.
HIGHEST DAILY VALUE DEATH BENEFIT ("HDV"): An optional Death Benefit that, for
an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing a death benefit equal to the greater of the basic
Death Benefit and the Highest Daily Value, less proportional withdrawals. We no
longer offer HDV.
INTERIM VALUE: The value of the MVA Fixed Allocations on any date other than
the Maturity Date. The Interim Value is equal to the initial value allocated to
the MVA Fixed Allocation plus all interest credited to the MVA Fixed Allocation
as of the date calculated, less any transfers or withdrawals from the MVA Fixed
Allocation. The Interim Value does not include the effect of any MVA.
ISSUE DATE: The effective date of your Annuity.
KEY LIFE: Under the Beneficiary Continuation Option, or the Beneficiary
Annuity, the person whose life expectancy is used to determine payments.
LIFETIME FIVE INCOME BENEFIT: An optional benefit that, for an additional cost,
guarantees your ability to withdraw an annual amount equal to a percentage of
an initial principal value called the Protected Withdrawal Value. Subject to
our rules regarding the timing and amount of withdrawals, we guarantee these
withdrawal amounts, regardless of the impact of market performance on your
Account Value. We no longer offer Lifetime Five.
MVA: A market value adjustment used in the determination of Account Value of a
MVA Fixed Allocation on any day more than 30 days prior to the Maturity Date of
such MVA Fixed Allocation.
OWNER: With an Annuity issued as an individual annuity contract, the Owner is
either an eligible entity or person named as having ownership rights in
relation to the Annuity. With an Annuity issued as a certificate under a group
annuity contract, the "Owner" refers to the person or entity who has the rights
and benefits designated as to the "Participant" in the certificate.
SERVICE OFFICE: The place to which all requests and payments regarding an
Annuity are to be sent. We may change the address of the Service Office at any
time. Please see the section of this prospectus entitled "How to Contact Us"
for the Service Office address.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT: An optional benefit that,
for an additional charge, guarantees your ability to withdraw amounts equal to
a percentage of a guaranteed benefit base called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. The benefit is the spousal version of the
Highest Daily Lifetime Seven Income Benefit and is the same class of optional
benefit as our Highest Daily Lifetime Five Income Benefit, but differs (among
other things) with respect to how the Protected Withdrawal Value is calculated
and to how the lifetime withdrawals are calculated. We no longer offer Spousal
Highest Daily Lifetime Seven.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT: An optional benefit that,
for an additional charge, guarantees your ability to withdraw amounts equal to
a percentage of a guaranteed benefit base called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. The benefit is the spousal version of the
Highest Daily Lifetime 7 Plus Income Benefit and is the same class of optional
benefit as our Spousal Highest Daily Lifetime Seven Income Benefit, but differs
(among other things) with respect to how the Protected Withdrawal Value is
calculated and to how the lifetime withdrawals are calculated. We no longer
offer Spousal Highest Daily Lifetime 7 Plus.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT: An optional benefit that,
for an additional charge, guarantees your ability to withdraw amounts equal to
a percentage of a guaranteed benefit base called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. The benefit is the spousal version of the
Highest Daily Lifetime 6 Plus Income Benefit and is the same class of optional
benefit as our Spousal Highest Daily Lifetime 7 Plus Income Benefit, but
differs (among other things) with respect to how the Protected Withdrawal Value
is calculated and to how the lifetime withdrawals are calculated.
SPOUSAL LIFETIME FIVE INCOME BENEFIT: An optional benefit that, for an
additional cost, guarantees until the later death of two Designated Lives (as
defined in this Prospectus) the ability to withdraw an annual amount equal to a
percentage of an initial principal value called the Protected Withdrawal Value.
Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. We no longer offer Spousal Lifetime Five.
3
SUB-ACCOUNT: We issue your Annuity through our separate account. See "What is
the Separate Account?" under the General Information section. The separate
account invests in underlying mutual fund portfolios. From an accounting
perspective, we divide the separate account into a number of sections, each of
which corresponds to a particular underlying mutual fund portfolio. We refer to
each such section of our separate account as a "Sub-account".
SURRENDER VALUE: The value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and the
charge for any optional benefits and any additional amounts we applied to your
purchase payments that we may be entitled to recover under certain
circumstances. The surrender value may be calculated using a MVA with respect
to amounts in any MVA Fixed Allocation. No CDSC applies to the ASL II Annuity.
UNIT: A measure used to calculate your Account Value in a Sub-account during
the accumulation period.
VALUATION DAY: Every day the New York Stock Exchange is open for trading or any
other day the Securities and Exchange Commission requires mutual funds or unit
investment trusts to be valued.
4
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and charges for the Annuities. Some fees and
charges are assessed against each Annuity while others are assessed against
assets allocated to the Sub-accounts. The fees and charges that are assessed
against an Annuity include any applicable Contingent Deferred Sales Charge,
Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are
assessed against the Sub-accounts are the Mortality and Expense Risk charge,
the charge for Administration of the Annuity, any applicable Distribution
Charge and the charge for certain optional benefits you elect. Certain optional
benefits deduct a charge from each Annuity based on a percentage of a
"protected value." Each underlying mutual fund portfolio assesses a fee for
investment management, other expenses and, with some mutual funds, a 12b-1 fee.
The prospectus for each underlying mutual fund provides more detailed
information about the expenses for the underlying mutual funds.
The following tables provide a summary of the fees and charges you will pay if
you surrender your Annuity or transfer Account Value among investment options.
These fees and charges are described in more detail within this Prospectus.
FOR CHARGES SPECIFIC TO CONTRACTS ISSUED IN NEW YORK STATE, PLEASE REFER TO
APPENDIX G - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE
DEPARTMENT.
TRANSACTION FEES AND CHARGES
CONTINGENT DEFERRED SALES CHARGES (CDSC) FOR EACH ANNUITY /1/
ASAP III
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9
----- ----- ----- ----- ----- ----- ----- ----- -----
7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
APEX II
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5
----- ----- ----- ----- -----
8.5% 8.0% 7.0% 6.0% 0.0%
XT6
For Annuities issued prior to November 20, 2006, the following schedule applies:
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
For Annuities issued on or after November 20, 2006, the following schedule
applies
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
ASL II
There is no CDSC for this Annuity
1 The Contingent Deferred Sales Charges, if applicable, are assessed upon
surrender or withdrawal. The charge is a percentage of each applicable
Purchase Payment deducted upon surrender or withdrawal. The period during
which a particular percentage applies is measured from the Issue Date of the
Annuity. Purchase Payments are withdrawn on a "first-in, first-out" basis.
OTHER TRANSACTION FEES AND CHARGES
(assessed against each Annuity)
FEE/CHARGE ASAP III APEX II ASL II XT6
---------------------------------- ---------- ---------- ---------- ----------
TRANSFER FEE /1/ MAXIMUM $15.00 $15.00 $15.00 $15.00
CURRENT $10.00 $10.00 $10.00 $10.00
TAX CHARGE (CURRENT) /2/ 0% to 3.5% 0% to 3.5% 0% to 3.5% 0% to 3.5%
1 Currently, we deduct the fee after the 20/th/ transfer each Annuity Year. We
guarantee that the number of charge free transfers per Annuity Year will
never be less than 8.
2 In some states a tax is payable, either when purchase payments are received,
upon surrender or when the Account Value is applied under an annuity option.
The tax charge is assessed as a percentage of purchase payments, Surrender
Value, or Account Value, as applicable. We reserve the right to deduct the
charge either at the time the tax is imposed, upon a full surrender of the
Annuity, or upon annuitization. See the subsection "Tax Charge" under "Fees
and Charges" in this Prospectus.
5
The following table provides a summary of the periodic fees and charges you
will pay while you own your Annuity, excluding the underlying mutual fund
Portfolio annual expenses. These fees and charges are described in more detail
within this Prospectus.
PERIODIC FEES AND CHARGES
(assessed against each Annuity)
FEE/CHARGE ASAP III APEX II ASL II XT6
------------------------- ------------------------ ------------------------ ------------------------ ------------------------
ANNUAL MAINTENANCE FEE/1/ Lesser of $35 or 2% of Lesser of $35 or 2% of Lesser of $35 or 2% of Lesser of $35 or 2% of
Account Value/2/ Account Value/2/ Account Value/2/ Account Value/2/
BENEFICIARY CONTINUATION Lesser of $30 or 2% of Lesser of $30 or 2% of Lesser of $30 or 2% of Lesser of $30 or 2% of
OPTION ONLY Account Value Account Value Account Value Account Value
ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS/3/
(assessed as a percentage of the daily net assets of the Sub-accounts)
FEE/CHARGE
------------------------
MORTALITY & EXPENSE RISK 0.50% 1.50% 1.50% 0.50%
CHARGE/4/
ADMINISTRATION CHARGE/4/ 0.15% 0.15% 0.15% 0.15%
DISTRIBUTION CHARGE/5/ 0.60% in Annuity Years N/A N/A 1.00% in Annuity Years
1-8 1-10
TOTAL ANNUAL CHARGES OF 1.25% in Annuity 1.65% 1.65% 1.65% in Annuity
THE SUB-ACCOUNTS Years 1-8; Years 1-10;
(EXCLUDING SETTLEMENT 0.65% in Annuity 0.65% in Annuity
SERVICE CHARGE) Years 9 and later Years 11 and later
SETTLEMENT SERVICE 1.40% (qualified); 1.40% (qualified); 1.40% (qualified); 1.40% (qualified);
CHARGE/6/ 1.00% (nonqualified) 1.00% (nonqualified) 1.00% (nonqualified) 1.00% (nonqualified)
1. Assessed annually on the Annuity's anniversary date or upon surrender. For
beneficiaries who elect the nonqualified Beneficiary Continuation Option,
the fee is only applicable if Account Value is less than $25,000 at the
time the fee is assessed.
2. Only applicable if Account Value is less than $100,000. Fee may differ in
certain States.
3. These charges are deducted daily and apply to the Sub-accounts only.
4. The combination of the Mortality and Expense Risk Charge and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus
5. The Distribution Charge is 0.00% in Annuity Years 9+ for ASAP III and in
Annuity Years 11+ for XT6
6. The Mortality & Expense Risk Charge, the Administration Charge and the
Distribution Charge (if applicable) do not apply if you are a beneficiary
under the Beneficiary Continuation Option. The Settlement Service Charge
applies only if your beneficiary elects the Beneficiary Continuation Option.
6
The following table sets forth the charge for each optional benefit under the
Annuity. These fees would be in addition to the periodic fees and transaction
fees set forth in the tables above. The first column shows the charge for each
optional benefit on a maximum and current basis. Then, we show the total
expenses you would pay for an Annuity if you purchased the relevant optional
benefit. More specifically, we show the total charge for the optional benefit
plus the Total Annualized Insurance Fees/Charges applicable to the Annuity.
Where the charges cannot actually be totaled (because they are assessed against
different base values), we show both individual charges.
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
TOTAL TOTAL TOTAL TOTAL
OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL
BENEFIT/FEE CHARGE/2/ CHARGE/2/ CHARGE/2/ CHARGE/2/
OPTIONAL BENEFIT CHARGE FOR ASAP III FOR APEX II FOR ASL II FOR XT6
------------------------------------------- ----------- ------------- ------------- ------------- -------------
GRO PLUS II
CURRENT AND MAXIMUM CHARGE /4/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.60% 1.85% 2.25% 2.25% 2.25%
HIGHEST DAILY GRO II
CURRENT AND MAXIMUM CHARGE /4/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.60% 1.85% 2.25% 2.25% 2.25%
HIGHEST DAILY LIFETIME 6 PLUS
(HD 6 PLUS)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% + 1.50%
CURRENT CHARGE
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 0.85% 1.25% + 0.85% 1.65% + 0.85% 1.65% + 0.85% 1.65% + 0.85%
HIGHEST DAILY LIFETIME 6 PLUS
WITH LIFETIME INCOME
ACCELERATOR (LIA)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 1.20% 1.25% + 1.20% 1.65% + 1.20% 1.65% + 1.20% 1.65% + 1.20%
SPOUSAL HIGHEST DAILY LIFETIME
6 PLUS
MAXIMUM CHARGE /3/
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% +1.50%
CURRENT CHARGE
(ASSESSED AGAINST GREATER OF ACCOUNT VALUE
AND PWV) 0.95% 1.25% + 0.95% 1.65% + 0.95% 1.65% + 0.95% 1.65% + 0.95%
GUARANTEED RETURN OPTION
(GRO)/GRO PLUS
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.75% 2.00% 2.40% 2.40% 2.40%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.25% 1.50% 1.90% 1.90% 1.90%
7
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
TOTAL TOTAL TOTAL TOTAL
OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL
BENEFIT/FEE CHARGE/2/ CHARGE/2/ CHARGE/2/ CHARGE/2/
OPTIONAL BENEFIT CHARGE FOR ASAP III FOR APEX II FOR ASL II FOR XT6
------------------------------------------ ----------- ------------- ------------- ------------- -------------
GUARANTEED RETURN OPTION PLUS
2008 (GRO PLUS 2008)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.75% 2.00% 2.40% 2.40% 2.40%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS)
(IF ELECTED ON OR AFTER MAY 1, 2009) 0.60% 1.85% 2.25% 2.25% 2.25%
HIGHEST DAILY GUARANTEED
RETURN OPTION (HD GRO)
CURRENT AND MAXIMUM CHARGE /3/
(IF ELECTED ON OR AFTER MAY 1, 2009)
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.60% 1.85% 2.25% 2.25% 2.25%
GUARANTEED MINIMUM
WITHDRAWAL BENEFIT (GMWB)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 1.00% 2.25% 2.65% 2.65% 2.65%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.35% 1.60% 2.00% 2.00% 2.00%
GUARANTEED MINIMUM INCOME
BENEFIT (GMIB)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST PIV) 1.00% 1.25% + 1.00% 1.65% + 1.00% 1.65% + 1.00% 1.65% + 1.00%
CURRENT CHARGE
(ASSESSED AGAINST PIV) 0.50% 1.25% + 0.50% 1.65% + 0.50% 1.65% + 0.50% 1.65 + 0.50%
LIFETIME FIVE INCOME BENEFIT
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 1.50% 2.75% 3.15% 3.15% 3.15%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.60% 1.85% 2.25% 2.25% 2.25%
SPOUSAL LIFETIME FIVE INCOME
BENEFIT
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 1.50% 2.75% 3.15% 3.15% 3.15%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.75% 2.00% 2.40% 2.40% 2.40%
8
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
TOTAL TOTAL TOTAL TOTAL
OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL
BENEFIT/FEE CHARGE/2/ CHARGE/2/ CHARGE/2/ CHARGE/2/
OPTIONAL BENEFIT CHARGE FOR ASAP III FOR APEX II FOR ASL II FOR XT6
------------------------------------------ ----------- ------------- ------------- ------------- -------------
HIGHEST DAILY LIFETIME FIVE
INCOME BENEFIT
MAXIMUM CHARGE /3/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 1.50% 2.75% 3.15% 3.15% 3.15%
CURRENT CHARGE
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.60% 1.85% 2.25% 2.25% 2.25%
HIGHEST DAILY LIFETIME SEVEN
INCOME BENEFIT
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% + 1.50%
CURRENT CHARGE
(ASSESSED AGAINST THE PWV) 0.60% 1.25% + 0.60% 1.65% + 0.60% 1.65% + 0.60% 1.65% + 0.60%
HIGHEST DAILY LIFETIME SEVEN
WITH BENEFICIARY INCOME
OPTION (BIO)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE PWV) 0.95% 1.25% + 0.95% 1.65% + 0.95% 1.65% + 0.95% 1.65% + 0.95%
HIGHEST DAILY LIFETIME SEVEN
WITH LIFETIME INCOME
ACCELERATOR (LIA)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE PWV) 0.95% 1.25% + 0.95% 1.65% + 0.95% 1.65% + 0.95% 1.65% + 0.95%
SPOUSAL HIGHEST DAILY LIFETIME
SEVEN INCOME BENEFIT
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% + 1.50%
CURRENT CHARGE
(ASSESSED AGAINST THE PWV) 0.75% 1.25% + 0.75% 1.65% + 0.75% 1.65% + 0.75% 1.65% + 0.75%
SPOUSAL HIGHEST DAILY LIFETIME
SEVEN WITH BENFEFICIARY
INCOME BENEFIT (BIO)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE PWV) 0.95% 1.25% + 0.95% 1.65% + 0.95% 1.65% + 0.95% 1.65% + 0.95%
9
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
TOTAL TOTAL TOTAL TOTAL
OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL
BENEFIT/FEE CHARGE/ 2/ CHARGE /2/ CHARGE /2/ CHARGE /2/
OPTIONAL BENEFIT CHARGE FOR ASAP III FOR APEX II FOR ASL II FOR XT6
------------------------------------------ ----------- ------------- ------------- ------------- -------------
HIGHEST DAILY LIFETIME 7 PLUS
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% + 1.50%
CURRENT CHARGE
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 0.75% 1.25% + 0.75% 1.65% + 0.75% 1.65% + 0.75% 1.65% + 0.75%
HIGHEST DAILY LIFETIME 7 PLUS
WITH BENEFICIARY INCOME
OPTION (BIO)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 1.10% 1.25% + 1.10% 1.65% + 1.10% 1.65% + 1.10% 1.65% + 1.10%
HIGHEST DAILY LIFETIME 7 PLUS
WITH LIFETIME INCOME
ACCELERATOR (LIA)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 1.10% 1.25% + 1.10% 1.65% + 1.10% 1.65% + 1.10% 1.65% + 1.10%
SPOUSAL HIGHEST DAILY LIFETIME
7 PLUS
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 1.50% 1.25% + 1.50% 1.65% + 1.50% 1.65% + 1.50% 1.65% + 1.50%
CURRENT CHARGE (ASSESSED AGAINST THE
GREATER OF ACCOUNT VALUE AND PWV) 0.90% 1.25% + 0.90% 1.65% + 0.90% 1.65% + 0.90% 1.65% + 0.90%
SPOUSAL HIGHEST DAILY LIFETIME
7 PLUS WITH BENEFICIARY INCOME
OPTION (BIO)
MAXIMUM CHARGE /3/
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 2.00% 1.25% + 2.00% 1.65% + 2.00% 1.65% + 2.00% 1.65% + 2.00%
CURRENT CHARGE
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV) 1.10% 1.25% + 1.10% 1.65% + 1.10% 1.65% + 1.10% 1.65% + 1.10%
ENHANCED BENEFICIARY
PROTECTION DEATH BENEFIT
CURRENT AND MAXIMUM CHARGE /4/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.25% 1.50% 1.90% 1.90% 1.90%
10
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
TOTAL TOTAL TOTAL TOTAL
OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL
BENEFIT/FEE CHARGE/ 2/ CHARGE /2/ CHARGE /2/ CHARGE /2/
OPTIONAL BENEFIT CHARGE FOR ASAP III FOR APEX II FOR ASL II FOR XT6
------------------------------------------ ----------- ------------ ----------- ---------- ---------
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
("HAV")
CURRENT AND MAXIMUM CHARGE /4/
(IF ELECTED ON OR AFTER MAY 1, 2009)
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.40% 1.65% 2.05% 2.05% 2.05%
COMBINATION 5% ROLL-UP AND HAV DEATH
BENEFIT
CURRENT AND MAXIMUM CHARGE /4/
(IF ELECTED ON OR AFTER MAY 1, 2009)
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.80% 2.05% 2.45% 2.45% 2.45%
HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")
CURRENT AND MAXIMUM CHARGE /4/
(ASSESSED AGAINST SUB-ACCOUNT NET ASSETS) 0.50% 1.75% 2.15% 2.15% 2.15%
PLEASE REFER TO THE SECTION OF THIS PROSPECTUS THAT DESCRIBES EACH OPTIONAL
BENEFIT FOR A COMPLETE DESCRIPTION OF THE BENEFIT, INCLUDING ANY RESTRICTIONS
OR LIMITATIONS THAT MAY APPLY.
HOW CHARGE IS DETERMINED
1 GRO PLUS II: Charge for this benefit is assessed against the daily net
assets of the Sub-accounts. For ASAP III, the 1.85% total annual charge
applies in Annuity Years 1-8 and is 1.25% thereafter. For APEX II and ASL
II, the 2.25% total annual charge applies in all Annuity Years, and for XT6,
the 2.25% total annual charge applies in Annuity Years 1-10 and is 1.25%
thereafter.
HIGHEST DAILY GRO II: Charge for this benefit is assessed against the daily
net assets of the Sub-accounts. For ASAP III, the 1.85% total annual charge
applies in Annuity Years 1-8 and is 1.25% thereafter. For APEX II and ASL
II, the 2.25% total annual charge applies in all Annuity Years, and for XT6,
the 2.25% total annual charge applies in Annuity Years 1-10 and is 1.25%
thereafter.
HIGHEST DAILY LIFETIME 6 PLUS: Charge for this benefit is assessed against
the greater of Account Value and Protected Withdrawal Value. As discussed in
the description of the benefit, the charge is taken out of the Sub-accounts
and the DCA Fixed Rate Options, if applicable. Under certain circumstances,
we may not deduct the charge or may only deduct a portion of the charge (see
the description of the benefit for details). For ASAP III, 0.85% is in
addition to 1.25% annual charge of amounts invested in the Sub-accounts (in
Annuity Years 1-8) and 0.65% annual charge of amounts invested in the
Sub-accounts in subsequent Annuity Years. For APEX II and ASL II, 0.85% is
in addition to 1.65% annual charge of amounts invested in the Sub-accounts.
For XT6, 0.85% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-10) and 0.65% annual charge of the
amounts invested in the Sub-accounts in subsequent Annuity Years. This
benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME 6 PLUS WITH LIA: Charge for this benefit is assessed
against the greater of Account Value and Protected Withdrawal Value. As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts and the DCA Fixed Rate Options, if applicable. Under certain
circumstances, we may not deduct the charge or may only deduct a portion of
the charge (see the description of the benefit for details). For ASAP III,
1.20% is in addition to 1.25% annual charge of amounts invested in the
Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 1.20% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 1.20% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS: Charge for this benefit is assessed
against the greater of Account Value and Protected Withdrawal Value. As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts and the DCA Fixed Rate Options, if applicable. Under certain
circumstances, we may not deduct the charge or may only deduct a portion of
the charge (see the description of the benefit for details). For ASAP III,
0.95% is in addition to 1.25% annual charge of amounts invested in the
Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 0.95% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 0.95% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of the amounts invested in the Sub-accounts in subsequent
Annuity Years. This benefit is no longer available for new elections.
GUARANTEED RETURN OPTION/GRO PLUS: Charge for each benefit is assessed
against the daily net assets of the Sub-accounts. For ASAP III, 1.50% total
annual charge applies in Annuity years 1-8 and is 0.90% thereafter. For APEX
II and ASL II, 1.90% total annual charge applies in all Annuity Years, and
for XT6, 1.90% total annual charge applies in Annuity Years 1-10 and is
0.90% thereafter. This benefit is no longer available for new elections.
GRO PLUS 2008: Charge for the benefit is assessed against the daily net
assets of the Sub-accounts. IF YOU ELECTED THE BENEFIT PRIOR TO MAY 1, 2009,
THE FEES ARE AS FOLLOWS: The charge is 0.35% of Sub-account assets. For ASAP
III, 1.60% total annual charge applies in Annuity Years 1-8 and is 1.00%
thereafter. For APEX II and ASL II, 2.00% total annual charge applies in all
Annuity Years, and for XT6, 2.00% total annual charge applies in Annuity
Years 1-10 and is 1.00% thereafter. IF YOU ELECTED THE BENEFIT ON OR AFTER
MAY 1, 2009, THE FEES ARE AS FOLLOWS: For ASAP III, 1.85% total annual
charge applies in Annuity Years 1-8 and is 1.25% thereafter. For APEX II and
ASL II, 2.25% total annual charge applies in all Annuity Years, and for XT6,
2.25% total annual charge applies in Annuity Years 1-10 and is 1.25%
thereafter. This benefit is no longer available for new elections.
HIGHEST DAILY GRO: Charge for this benefit is assessed against the daily net
assets of the Sub-accounts. IF YOU ELECTED THE BENEFIT PRIOR TO MAY 1, 2009,
THE FEES ARE AS FOLLOWS: The current charge is .35% of Sub-account assets.
For ASAP III, 1.60% total annual charge applies in Annuity years 1-8 and is
1.00% thereafter. For APEX II and ASL II, 2.00% total annual charge applies
in all Annuity years, and for XT6, 2.00% total annual charge applies in
Annuity Years 1-10 and is 1.00% thereafter. IF YOU ELECTED THE BENEFIT ON OR
AFTER MAY 1, 2009, THE FEES ARE AS FOLLOWS: For ASAP III, 1.85% total annual
charge applies in Annuity years 1-8 and is 1.25% thereafter. For APEX II and
ASL II, 2.25% total annual charge applies in all Annuity years, and for XT6,
2.25% total annual charge applies in Annuity Years 1-10 and is 1.25%
thereafter. This benefit is no longer available for new elections.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT: Charge for this benefit is assessed
against the daily net assets of the Sub-accounts. For ASAP III, 1.60% total
annual charge applies in Annuity Years 1-8 and is 1.00% thereafter. For APEX
II and ASL II, 2.00% total annual charge applies in all Annuity Years, and
for XT6, 2.00% total annual charge applies in Annuity Years 1-10 and is
1.00% thereafter. This benefit is no longer available for new elections.
GUARANTEED MINIMUM INCOME BENEFIT: Charge for this benefit is assessed
against the GMIB Protected Income Value ("PIV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the Fixed Allocations. For ASAP III, 0.50% of PIV for GMIB is in addition to
1.25% annual charge in years 1-8 and 0.65% thereafter. For APEX II and ASL
II, 0.50% of PIV for GMIB is in addition to 1.65% annual charge. For XT6,
0.50% of PIV for GMIB is in addition to 1.65% in years 1-10 and 0.65%
thereafter. This benefit is no longer available for new elections.
LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is assessed against
the daily net assets of the Sub-accounts. For ASAP III, 1.85% total annual
charge applies in Annuity years 1-8 and is 1.25% thereafter. For APEX II and
ASL II, 2.25% total annual charge applies in all Annuity years, and for XT6,
2.25% total annual charge applies in Annuity Years 1-10 and is 1.25%
thereafter. This benefit is no longer available for new elections.
SPOUSAL LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is assessed
against the daily net assets of the Sub-accounts. For ASAP III, 2.00% total
annual charge applies in Annuity years 1-8 and is 1.40% thereafter. For APEX
II and ASL II, 2.40% total annual charge applies in all Annuity years, and
for XT6, 2.40% total annual charge applies in Annuity Years 1-10 and is
1.40% thereafter. This benefit is no longer available for new elections.
11
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is
assessed against the daily net assets of the Sub-accounts. For ASAP III,
1.85% total annual charge applies in Annuity years 1-8 and is 1.25%
thereafter. For APEX II and ASL II, 2.25% total annual charge applies in all
Annuity years, and for XT6, 2.25% total annual charge applies in Annuity
Years 1-10 and is 1.25% thereafter. This benefit is no longer available for
new elections.
HIGHEST DAILY LIFETIME SEVEN: Charge for this benefit is assessed against
the Protected Withdrawal Value ("PWV"). PWV is described in the Living
Benefits section of this Prospectus. As discussed in the description of the
benefit, the charge is taken out of the Sub-accounts. For ASAP III, 0.60%
for Highest Daily Lifetime Seven is in addition to 1.25% annual charge in
years 1-8 and 0.65% thereafter. For APEX II and ASL II, 0.60% for Highest
Daily Lifetime Seven is in addition to 1.65% annual charge. For XT6, 0.60%
for Highest Daily Lifetime Seven is in addition to 1.65% in years 1-10 and
0.65% thereafter. This benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME SEVEN WITH BIO: Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts. For
ASAP III, 0.95% is in addition to 1.25% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 0.95% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 0.95% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts in Annuity Years 1-10 and 0.65% annual
charge of the amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME SEVEN WITH LIA: Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts. For
ASAP III, 0.95% is in addition to 1.25% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 0.95% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 0.95% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts in Annuity Years 1-10 and 0.65% annual
charge of the amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN: Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). For ASAP III, 0.75% for
Spousal Highest Daily Lifetime Seven is in addition to 1.25% annual charge
in years 1-8 and 0.65% thereafter. For APEX II and ASL II, 0.75% for Spousal
Highest Daily Lifetime Seven is in addition to 1.65% annual charge. For XT6,
0.75% for Spousal Highest Daily Lifetime Seven is in addition to 1.65% in
years 1-10 and 0.65% thereafter. This benefit is no longer available for new
elections.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN WITH BIO: Charge for this benefit is
assessed against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts. For
ASAP III, 0.95% is in addition to 1.25% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 0.95% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 0.95% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts in Annuity Years 1-10 and 0.65% annual
charge of the amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME 7 PLUS: Charge for this benefit is assessed against
the greater of Account Value and Protected Withdrawal Value. As discussed in
the description of the benefit, the charge is taken out of the Sub-accounts
and the DCA Fixed Rate Options, if applicable. For ASAP III, 0.75% is in
addition to 1.25% annual charge of amounts invested in the Sub-accounts (in
Annuity Years 1-8) and 0.65% annual charge of amounts invested in the
Sub-accounts in subsequent Annuity Years. For APEX II and ASL II, 0.75% is
in addition to 1.65% annual charge of amounts invested in the Sub-accounts.
For XT6, 0.75% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-10) and .65% annual charge of the
amounts invested in the Sub-accounts in subsequent Annuity Years. This
benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME 7 PLUS WITH BIO: Charge for this benefit is assessed
against the greater of Account Value and Protected Withdrawal Value. As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts and the DCA Fixed Rate Options, if applicable. For ASAP III,
1.10% is in addition to 1.25% annual charge of amounts invested in the
Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 1.10% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 1.10% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME 7 PLUS WITH LIA: Charge for this benefit is assessed
against the greater of Account Value and Protected Withdrawal Value. As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts and the DCA Fixed Rate Options, if applicable. For ASAP III,
1.10% is in addition to 1.25% annual charge of amounts invested in the
Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 1.10% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 1.10% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS: Charge for this benefit is assessed
against the greater of Account Value and Protected Withdrawal Value. As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts and the DCA Fixed Rate Options, if applicable. For ASAP III,
0.90% is in addition to 1.25% annual charge of amounts invested in the
Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 0.90% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 0.90% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BIO: Charge for this benefit is
assessed against the greater of Account Value and Protected Withdrawal
Value. As discussed in the description of the benefit, the charge is taken
out of the Sub-accounts and the DCA Fixed Rate Options, if applicable. For
ASAP III, 1.10% is in addition to 1.25% annual charge of amounts invested in
the Sub-accounts (in Annuity Years 1-8) and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years. For APEX II and
ASL II, 1.10% is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts. For XT6, 1.10% is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts (in Annuity Years 1-10) and 0.65%
annual charge of amounts invested in the Sub-accounts in subsequent Annuity
Years. This benefit is no longer available for new elections.
ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT: Charge for this benefit is
assessed against the daily net assets of the Sub-accounts. For ASAP III,
1.50% total annual charge applies in Annuity years 1-8 and is 0.90%
thereafter. For APEX II and ASL II, 1.90% total annual charge applies in all
Annuity years, and for XT6, 1.90% total annual charge applies in Annuity
Years 1-10 and is 0.90% thereafter. This benefit is no longer available for
new elections.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Charge for this benefit is assessed
against the daily net assets of the Sub-accounts. IF YOU ELECTED THE BENEFIT
PRIOR TO MAY 1, 2009, THE FEES ARE AS FOLLOWS: The charge is 0.25% of
Sub-account assets if you elected the benefit prior to May 1, 2009. For ASAP
III, 1.50% total annual charge applies in Annuity Years 1-8 and is 0.90%
thereafter. For APEX II and ASL II, 1.90% total annual charge applies in all
Annuity Years, and for XT6, 1.90% total annual charge applies in Annuity
Years 1-10 and is 0.90% thereafter. IF YOU ELECTED THE BENEFIT ON OR AFTER
MAY 1, 2009, THE FEES ARE AS FOLLOWS: For ASAP III, 1.65% total annual
charge applies in Annuity Years 1-8 and is 1.05% thereafter. For APEX II and
ASL II, 2.05% total annual charge applies in all Annuity Years, and for XT6,
2.05% total annual charge applies in Annuity Years 1-10 and is
1.05% thereafter. This benefit is no longer available for new elections.
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT: Charge for this benefit is
assessed against the daily net assets of the Sub-accounts. IF YOU ELECTED
THE BENEFIT PRIOR TO MAY 1, 2009, THE FEES ARE AS FOLLOWS: The charge is
0.50% of Sub-account assets if you elected the benefit prior to May 1, 2009.
For ASAP III, 1.75% total annual charge applies in Annuity Years 1-8 and is
1.15% thereafter. For APEX II and ASL II, 2.15% total annual charge applies
in all Annuity Years, and for XT6, 2.15% total annual charge applies in
Annuity Years 1-10 and is 1.15% thereafter. IF YOU ELECTED THE BENEFIT ON OR
AFTER MAY 1, 2009, THE FEES ARE AS FOLLOWS: For ASAP III, 2.05% total annual
charge applies in Annuity Years 1-8 and is 1.45% thereafter. For APEX II and
ASL II, 2.45% total annual charge applies in all Annuity Years, and for XT6,
2.45% total annual charge applies in Annuity Years 1-10 and is
1.45% thereafter. This benefit is no longer available for new elections.
HIGHEST DAILY VALUE DEATH BENEFIT: Charge for this benefit is assessed
against the daily net assets of the Sub-accounts. For ASAP III, 1.75% total
annual charge applies in Annuity years 1-8 and is 1.15% thereafter. For APEX
II and ASL II, 2.15% total annual charge applies in all Annuity years, and
for XT6, 2.15% total annual charge applies in Annuity Years 1-10 and is
1.15% thereafter. This benefit is no longer available for new elections.
2 The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit. With respect to GMIB, the 0.50% charge is assessed against
the GMIB Protected Income Value. With respect to Highest Daily Lifetime
Seven, Spousal Highest Daily Lifetime Seven, Highest Daily Lifetime 7 Plus,
Spousal Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus, and
Spousal Highest Daily Lifetime 6 Plus the charge is assessed against the
Protected Withdrawal Value (greater of PWV and Account Value, for the "Plus"
benefits). With respect to each of Highest Daily Lifetime Seven, Spousal
Highest Daily Lifetime Seven, Highest Daily Lifetime 7 Plus, Spousal Highest
Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus, and Spousal Highest
Daily Lifetime 6 Plus one-fourth of the annual charge is deducted quarterly.
These optional benefits are not available under the Beneficiary Continuation
Option.
3 We reserve the right to increase the charge up to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit.
4 Our reference in the fee table to "current and maximum" charge does not
connote that we have the authority to increase the charge for Annuities that
already have been issued. Rather, the reference indicates that there is no
maximum charge to which the current charge could be increased for existing
Annuities. However, our State filings may have included a provision allowing
us to impose an increased charge for newly-issued Annuities.
12
The following table provides the range (minimum and maximum) of the total
annual expenses for the underlying mutual funds ("Portfolios") for the year
ended December 31, 2014 before any contractual waivers and expense
reimbursements. Each figure is stated as a percentage of the underlying
Portfolio's average daily net assets.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES
MINIMUM MAXIMUM
TOTAL PORTFOLIO OPERATING EXPENSE 0.60% 2.51%
The following are the total annual expenses for each underlying mutual fund
("Portfolio") for the year ended December 31, 2014, except as noted and except
if the underlying portfolio's inception date is subsequent to December 31,
2014. The "Total Annual Portfolio Operating Expenses" reflect the combination
of the underlying Portfolio's investment management fee, other expenses, any
12b-1 fees, and certain other expenses. Each figure is stated as a percentage
of the underlying Portfolio's average daily net assets. For certain of the
Portfolios, a portion of the management fee has been contractually waived
and/or other expenses have been contractually partially reimbursed, which is
shown in the table. The following expenses are deducted by the underlying
Portfolio before it provides Prudential Annuities with the daily net asset
value. The underlying Portfolio information was provided by the underlying
mutual funds and has not been independently verified by us. See the
prospectuses or statements of additional information of the underlying
Portfolios for further details. The current prospectus and statement of
additional information for the underlying Portfolios can be obtained by calling
1-888-PRU-2888, or at www.prudentialannuities.com.
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
For the year ended December 31, 2014
-----------------------------------------------------------------------------------------------------
Total
Distribution Broker Fees Acquired Annual Contractual Net Annual
and/or Dividend and Expenses Portfolio Portfolio Fee Waiver Portfolio
Management Other Service Fees Expense on on Short Fees & Operating or Expense Operating
UNDERLYING PORTFOLIO Fees Expenses (12b-1 fees) Short Sales Sales Expenses Expenses Reimbursement Expenses
------------------------- ---------- -------- ------------ ----------- ------------ --------- --------- ------------- ----------
Access VP High Yield
Fund* 0.75% 0.68% 0.25% 0.00% 0.00% 0.00% 1.68% 0.00% 1.68%
AST Academic Strategies
Asset Allocation
Portfolio 0.70% 0.03% 0.04% 0.05% 0.01% 0.63% 1.46% 0.00% 1.46%
AST Advanced Strategies
Portfolio* 0.80% 0.02% 0.10% 0.00% 0.00% 0.05% 0.97% 0.01% 0.96%
AST AQR Emerging Markets
Equity Portfolio 1.09% 0.16% 0.10% 0.00% 0.00% 0.00% 1.35% 0.00% 1.35%
AST AQR Large-Cap
Portfolio* 0.72% 0.01% 0.10% 0.00% 0.00% 0.00% 0.83% 0.24% 0.59%
AST Balanced Asset
Allocation Portfolio 0.15% 0.01% 0.00% 0.00% 0.00% 0.75% 0.91% 0.00% 0.91%
AST BlackRock Global
Strategies Portfolio 0.97% 0.04% 0.10% 0.00% 0.00% 0.02% 1.13% 0.00% 1.13%
AST BlackRock iShares
ETF Portfolio* 0.89% 0.07% 0.10% 0.00% 0.00% 0.21% 1.27% 0.25% 1.02%
AST BlackRock/Loomis
Sayles Bond Portfolio* 0.61% 0.02% 0.10% 0.00% 0.00% 0.00% 0.73% 0.03% 0.70%
AST Bond Portfolio 2015* 0.63% 0.45% 0.10% 0.00% 0.00% 0.00% 1.18% 0.19% 0.99%
AST Bond Portfolio 2016* 0.63% 1.50% 0.10% 0.00% 0.00% 0.00% 2.23% 1.24% 0.99%
AST Bond Portfolio 2017* 0.63% 0.14% 0.10% 0.00% 0.00% 0.00% 0.87% 0.00% 0.87%
AST Bond Portfolio 2018* 0.63% 0.10% 0.10% 0.00% 0.00% 0.00% 0.83% 0.00% 0.83%
AST Bond Portfolio 2019* 0.63% 0.21% 0.10% 0.00% 0.00% 0.00% 0.94% 0.00% 0.94%
AST Bond Portfolio 2020* 0.63% 0.11% 0.10% 0.00% 0.00% 0.00% 0.84% 0.00% 0.84%
AST Bond Portfolio 2021* 0.63% 0.10% 0.10% 0.00% 0.00% 0.00% 0.83% 0.00% 0.83%
AST Bond Portfolio 2022* 0.63% 0.20% 0.10% 0.00% 0.00% 0.00% 0.93% 0.00% 0.93%
AST Bond Portfolio 2023* 0.63% 0.06% 0.10% 0.00% 0.00% 0.00% 0.79% 0.01% 0.78%
AST Bond Portfolio 2024* 0.63% 0.09% 0.10% 0.00% 0.00% 0.00% 0.82% 0.00% 0.82%
AST Bond Portfolio 2025* 0.63% 0.38% 0.10% 0.00% 0.00% 0.00% 1.11% 0.12% 0.99%
AST Bond Portfolio 2026* 0.63% 0.05% 0.10% 0.00% 0.00% 0.00% 0.78% 0.00% 0.78%
AST Boston Partners
Large-Cap Value
Portfolio 0.73% 0.03% 0.10% 0.00% 0.00% 0.00% 0.86% 0.00% 0.86%
AST Capital Growth Asset
Allocation Portfolio 0.15% 0.01% 0.00% 0.00% 0.00% 0.76% 0.92% 0.00% 0.92%
AST ClearBridge Dividend
Growth Portfolio* 0.82% 0.02% 0.10% 0.00% 0.00% 0.00% 0.94% 0.11% 0.83%
AST Cohen & Steers
Realty Portfolio* 0.98% 0.03% 0.10% 0.00% 0.00% 0.00% 1.11% 0.07% 1.04%
AST Defensive Asset
Allocation Portfolio 0.15% 0.06% 0.00% 0.00% 0.00% 0.73% 0.94% 0.00% 0.94%
AST FI Pyramis(R) Asset
Allocation Portfolio* 0.82% 0.03% 0.10% 0.00% 0.00% 0.00% 0.95% 0.02% 0.93%
AST FI Pyramis(R)
Quantitative Portfolio* 0.81% 0.03% 0.10% 0.00% 0.00% 0.00% 0.94% 0.14% 0.80%
AST Franklin Templeton
Founding Funds
Allocation Portfolio* 0.91% 0.02% 0.10% 0.00% 0.00% 0.00% 1.03% 0.00% 1.03%
AST Franklin Templeton
Founding Funds Plus
Portfolio 0.02% 0.02% 0.00% 0.00% 0.00% 1.01% 1.05% 0.00% 1.05%
AST Global Real Estate
Portfolio 0.98% 0.05% 0.10% 0.00% 0.00% 0.00% 1.13% 0.00% 1.13%
AST Goldman Sachs
Large-Cap Value
Portfolio* 0.72% 0.02% 0.10% 0.00% 0.00% 0.00% 0.84% 0.01% 0.83%
13
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
For the year ended December 31, 2014
-----------------------------------------------------------------------------------------------------
Total
Distribution Broker Fees Acquired Annual Contractual Net Annual
and/or Dividend and Expenses Portfolio Portfolio Fee Waiver Portfolio
Management Other Service Fees Expense on on Short Fees & Operating or Expense Operating
UNDERLYING PORTFOLIO Fees Expenses (12b-1 fees) Short Sales Sales Expenses Expenses Reimbursement Expenses
------------------------- ---------- -------- ------------ ----------- ------------ --------- --------- ------------- ----------
AST Goldman Sachs
Mid-Cap Growth
Portfolio* 0.98% 0.03% 0.10% 0.00% 0.00% 0.00% 1.11% 0.05% 1.06%
AST Goldman Sachs
Multi-Asset Portfolio* 0.92% 0.05% 0.10% 0.00% 0.00% 0.00% 1.07% 0.21% 0.86%
AST Goldman Sachs
Small-Cap Value
Portfolio* 0.93% 0.03% 0.10% 0.00% 0.00% 0.06% 1.12% 0.01% 1.11%
AST Herndon Large-Cap
Value Portfolio* 0.83% 0.02% 0.10% 0.00% 0.00% 0.00% 0.95% 0.15% 0.80%
AST High Yield Portfolio 0.72% 0.04% 0.10% 0.00% 0.00% 0.00% 0.86% 0.00% 0.86%
AST International Growth
Portfolio* 0.97% 0.02% 0.10% 0.00% 0.00% 0.00% 1.09% 0.01% 1.08%
AST International Value
Portfolio 0.97% 0.03% 0.10% 0.00% 0.00% 0.00% 1.10% 0.00% 1.10%
AST Investment Grade
Bond Portfolio* 0.63% 0.05% 0.10% 0.00% 0.00% 0.00% 0.78% 0.03% 0.75%
AST J.P. Morgan Global
Thematic Portfolio 0.92% 0.04% 0.10% 0.00% 0.00% 0.00% 1.06% 0.00% 1.06%
AST J.P. Morgan
International Equity
Portfolio 0.86% 0.06% 0.10% 0.00% 0.00% 0.00% 1.02% 0.00% 1.02%
AST J.P. Morgan
Strategic
Opportunities Portfolio 0.97% 0.05% 0.10% 0.10% 0.00% 0.00% 1.22% 0.00% 1.22%
AST Jennison Large-Cap
Growth Portfolio 0.88% 0.02% 0.10% 0.00% 0.00% 0.00% 1.00% 0.00% 1.00%
AST Large-Cap Value
Portfolio 0.72% 0.02% 0.10% 0.00% 0.00% 0.00% 0.84% 0.00% 0.84%
AST Loomis Sayles
Large-Cap Growth
Portfolio* 0.87% 0.01% 0.10% 0.00% 0.00% 0.00% 0.98% 0.06% 0.92%
AST Lord Abbett Core
Fixed Income Portfolio* 0.77% 0.02% 0.10% 0.00% 0.00% 0.00% 0.89% 0.29% 0.60%
AST MFS Global Equity
Portfolio 0.98% 0.05% 0.10% 0.00% 0.00% 0.00% 1.13% 0.00% 1.13%
AST MFS Growth Portfolio 0.87% 0.02% 0.10% 0.00% 0.00% 0.00% 0.99% 0.00% 0.99%
AST MFS Large-Cap Value
Portfolio 0.83% 0.04% 0.10% 0.00% 0.00% 0.00% 0.97% 0.00% 0.97%
AST Mid-Cap Value
Portfolio 0.94% 0.04% 0.10% 0.00% 0.00% 0.00% 1.08% 0.00% 1.08%
AST Money Market
Portfolio 0.47% 0.03% 0.10% 0.00% 0.00% 0.00% 0.60% 0.00% 0.60%
AST Neuberger Berman /
LSV Mid-Cap Value
Portfolio* 0.88% 0.02% 0.10% 0.00% 0.00% 0.00% 1.00% 0.00% 1.00%
AST Neuberger Berman
Core Bond Portfolio* 0.68% 0.04% 0.10% 0.00% 0.00% 0.00% 0.82% 0.15% 0.67%
AST Neuberger Berman
Mid-Cap Growth
Portfolio* 0.88% 0.03% 0.10% 0.00% 0.00% 0.00% 1.01% 0.01% 1.00%
AST New Discovery Asset
Allocation Portfolio* 0.83% 0.08% 0.10% 0.00% 0.00% 0.00% 1.01% 0.01% 1.00%
AST Parametric Emerging
Markets Equity 1.08% 0.24% 0.10% 0.00% 0.00% 0.00% 1.42% 0.00% 1.42%
AST PIMCO Limited
Maturity Bond Portfolio 0.63% 0.04% 0.10% 0.00% 0.00% 0.00% 0.77% 0.00% 0.77%
AST Preservation Asset
Allocation Portfolio 0.15% 0.01% 0.00% 0.00% 0.00% 0.71% 0.87% 0.00% 0.87%
AST Prudential Core Bond
Portfolio* 0.66% 0.02% 0.10% 0.00% 0.00% 0.00% 0.78% 0.03% 0.75%
AST Prudential Growth
Allocation Portfolio 0.80% 0.03% 0.10% 0.00% 0.00% 0.01% 0.94% 0.00% 0.94%
AST QMA Emerging Markets
Equity Portfolio 1.09% 0.24% 0.10% 0.00% 0.00% 0.02% 1.45% 0.00% 1.45%
AST QMA Large-Cap Core
Portfolio 0.72% 0.01% 0.10% 0.00% 0.00% 0.00% 0.83% 0.00% 0.83%
AST QMA US Equity Alpha
Portfolio 0.99% 0.04% 0.10% 0.13% 0.25% 0.00% 1.51% 0.00% 1.51%
AST Quantitative
Modeling Portfolio 0.25% 0.03% 0.00% 0.00% 0.00% 0.84% 1.12% 0.00% 1.12%
AST RCM World Trends
Portfolio 0.91% 0.03% 0.10% 0.00% 0.00% 0.00% 1.04% 0.00% 1.04%
AST Schroders Global
Tactical Portfolio 0.91% 0.03% 0.10% 0.00% 0.00% 0.11% 1.15% 0.00% 1.15%
AST Schroders
Multi-Asset World
Strategies Portfolio 1.06% 0.04% 0.10% 0.00% 0.00% 0.09% 1.29% 0.00% 1.29%
AST Small Cap Growth
Portfolio 0.88% 0.03% 0.10% 0.00% 0.00% 0.00% 1.01% 0.00% 1.01%
AST Small Cap Value
Portfolio 0.87% 0.03% 0.10% 0.00% 0.00% 0.02% 1.02% 0.00% 1.02%
AST Small-Cap Growth
Opportunities Portfolio 0.93% 0.04% 0.10% 0.00% 0.00% 0.00% 1.07% 0.00% 1.07%
AST T. Rowe Price Asset
Allocation Portfolio 0.79% 0.02% 0.10% 0.00% 0.00% 0.00% 0.91% 0.02% 0.89%
AST T. Rowe Price Equity
Income Portfolio 0.72% 0.02% 0.10% 0.00% 0.00% 0.00% 0.84% 0.00% 0.84%
AST T. Rowe Price
Large-Cap Growth
Portfolio 0.85% 0.02% 0.10% 0.00% 0.00% 0.00% 0.97% 0.00% 0.97%
AST T. Rowe Price
Natural Resources
Portfolio 0.88% 0.04% 0.10% 0.00% 0.00% 0.00% 1.02% 0.00% 1.02%
AST Templeton Global
Bond Portfolio 0.78% 0.09% 0.10% 0.00% 0.00% 0.00% 0.97% 0.00% 0.97%
14
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
For the year ended December 31, 2014
-----------------------------------------------------------------------------------------------------
Total
Distribution Broker Fees Acquired Annual Contractual Net Annual
and/or Dividend and Expenses Portfolio Portfolio Fee Waiver Portfolio
Management Other Service Fees Expense on on Short Fees & Operating or Expense Operating
UNDERLYING PORTFOLIO Fees Expenses (12b-1 fees) Short Sales Sales Expenses Expenses Reimbursement Expenses
------------------------- ---------- -------- ------------ ----------- ------------ --------- --------- ------------- ----------
AST Wellington Mgmt
Hedged Equity Portfolio 0.97% 0.03% 0.10% 0.00% 0.00% 0.02% 1.12% 0.00% 1.12%
AST Western Asset Core
Plus Bond Portfolio* 0.66% 0.03% 0.10% 0.00% 0.00% 0.00% 0.79% 0.20% 0.59%
AST Western Asset
Emerging Markets Debt* 0.84% 0.06% 0.10% 0.00% 0.00% 0.00% 1.00% 0.05% 0.95%
Invesco V.I. Diversified
Dividend Fund - Series
I shares* 0.49% 0.24% 0.00% 0.00% 0.00% 0.01% 0.74% 0.01% 0.73%
Invesco V.I. Global
Health Care Fund -
Series I shares* 0.75% 0.34% 0.00% 0.00% 0.00% 0.01% 1.10% 0.01% 1.09%
Invesco V.I. Mid Cap
Growth Fund - Series I
shares 0.75% 0.32% 0.00% 0.00% 0.00% 0.00% 1.07% 0.00% 1.07%
Invesco V.I. Technology
Fund - Series I shares 0.75% 0.41% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 1.16%
NVIT Developing Markets
Fund 0.95% 0.49% 0.25% 0.00% 0.00% 0.02% 1.71% 0.05% 1.66%
ProFund VP Asia 30~ 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06% 1.68%
ProFund VP Banks~ 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11% 1.68%
ProFund VP Basic
Materials~ 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06% 1.68%
ProFund VP Bear~ 0.75% 0.76% 0.25% 0.00% 0.00% 0.00% 1.76% 0.08% 1.68%
ProFund VP Biotechnology* 0.75% 0.68% 0.25% 0.00% 0.00% 0.00% 1.68% 0.00% 1.68%
ProFund VP Bull~ 0.75% 0.70% 0.25% 0.00% 0.00% 0.00% 1.70% 0.02% 1.68%
ProFund VP Consumer
Goods Portfolio~ 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06% 1.68%
ProFund VP Consumer
Services~ 0.75% 0.75% 0.25% 0.00% 0.00% 0.00% 1.75% 0.07% 1.68%
ProFund VP Europe 30~ 0.75% 0.71% 0.25% 0.00% 0.00% 0.00% 1.71% 0.03% 1.68%
ProFund VP Financials~ 0.75% 0.73% 0.25% 0.00% 0.00% 0.00% 1.73% 0.05% 1.68%
ProFund VP Health Care~ 0.75% 0.69% 0.25% 0.00% 0.00% 0.00% 1.69% 0.01% 1.68%
ProFund VP Industrials~ 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
ProFund VP Internet~ 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06% 1.68%
ProFund VP Japan~ 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
ProFund VP Large-Cap
Growth~ 0.75% 0.76% 0.25% 0.00% 0.00% 0.00% 1.76% 0.08% 1.68%
ProFund VP Large-Cap
Value~ 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
ProFund VP Mid-Cap
Growth~ 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11% 1.68%
ProFund VP Mid-Cap Value~ 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11% 1.68%
ProFund VP NASDAQ-100~ 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06% 1.68%
ProFund VP Oil & Gas~ 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
ProFund VP
Pharmaceuticals~ 0.75% 0.71% 0.25% 0.00% 0.00% 0.00% 1.71% 0.03% 1.68%
ProFund VP Precious
Metals~ 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
ProFund VP Real Estate~ 0.75% 0.75% 0.25% 0.00% 0.00% 0.00% 1.75% 0.07% 1.68%
ProFund VP Rising Rates
Opportunity~* 0.75% 0.70% 0.25% 0.00% 0.00% 0.00% 1.70% 0.02% 1.68%
ProFund VP Semiconductor~ 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10% 1.68%
ProFund VP Short Mid-Cap~ 0.75% 1.51% 0.25% 0.00% 0.00% 0.00% 2.51% 0.83% 1.68%
ProFund VP Short
NASDAQ-100~ 0.75% 0.99% 0.25% 0.00% 0.00% 0.00% 1.99% 0.31% 1.68%
ProFund VP Short
Small-Cap~ 0.75% 0.96% 0.25% 0.00% 0.00% 0.00% 1.96% 0.28% 1.68%
ProFund VP Small-Cap
Growth~ 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14% 1.68%
ProFund VP Small-Cap
Value~ 0.75% 0.87% 0.25% 0.00% 0.00% 0.02% 1.89% 0.19% 1.70%
ProFund VP Technology* 0.75% 0.68% 0.25% 0.00% 0.00% 0.00% 1.68% 0.00% 1.68%
ProFund VP
Telecommunications~ 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10% 1.68%
ProFund VP U.S.
Government Plus~ 0.50% 0.71% 0.25% 0.00% 0.00% 0.00% 1.46% 0.08% 1.38%
ProFund VP Ultra Mid-Cap* 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11% 1.68%
ProFund VP UltraBull* 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10% 1.68%
ProFund VP
UltraNASDAQ-100~ 0.75% 0.72% 0.25% 0.00% 0.00% 0.00% 1.72% 0.04% 1.68%
ProFund VP
UltraSmall-Cap~ 0.75% 0.76% 0.25% 0.00% 0.00% 0.01% 1.77% 0.08% 1.69%
ProFund VP Utilities~ 0.75% 0.76% 0.25% 0.00% 0.00% 0.00% 1.76% 0.08% 1.68%
PSF SP International
Growth Portfolio-Class
1 0.85% 0.39% 0.00% 0.00% 0.00% 0.00% 1.24% 0.01% 1.23%
Wells Fargo Advantage VT
International Equity
Fund - Class 1* 0.75% 0.19% 0.00% 0.00% 0.00% 0.01% 0.95% 0.25% 0.70%
Wells Fargo Advantage VT
Intrinsic Value Fund
Class 2* 0.55% 0.28% 0.25% 0.00% 0.00% 0.00% 1.08% 0.08% 1.00%
Wells Fargo Advantage VT
Omega Growth Fund
Class 1* 0.55% 0.20% 0.00% 0.00% 0.00% 0.00% 0.75% 0.00% 0.75%
Wells Fargo Advantage VT
Small Cap Growth Fund
Class 1* 0.75% 0.18% 0.00% 0.00% 0.00% 0.00% 0.93% 0.00% 0.93%
* See notes immediately below for important information about this fund.
15
ACCESS VP HIGH YIELD FUND The recoupment expense of 0.06% is reflected in
"Other" expenses.
AST ADVANCED STRATEGIES PORTFOLIO The Investment Managers have contractually
agreed to waive 0.014% of their investment management fees through June 30,
2016. This waiver may not be terminated prior to June 30, 2016 June 30, 2016
without the prior approval of the Trust's Board of Trustees.
AST AQR LARGE-CAP PORTFOLIO The Investment Managers have contractually agreed
to waive 0.24% of their investment management fees through June 30, 2016. This
waiver may not be terminated prior to June 30, 2016 without the prior approval
of the Trust's Board of Trustees.
AST BLACKROCK ISHARES ETF PORTFOLIO The Investment Managers have contractually
agreed to waive a portion of their investment management fee equal to the
acquired fund fees and expenses due to investments in iShares ETFs. In
addition, the Investment Managers have contractually agreed to waive a portion
of their investment management fee and/or reimburse certain expenses for the
Portfolio so that the Portfolio's investment management fees (after the waiver
described in the first sentence) and other expenses (including distribution
fees, acquired fund fees and expenses due to investments in iShares ETFs, and
other expenses excluding taxes, interest and brokerage commissions) do not
exceed 1.02% of the Portfolio's average daily net assets through June 30, 2016.
These waivers may not be terminated prior to June 30, 2016 without the prior
approval of the Trust's Board of Trustees.
AST BLACKROCK/LOOMIS SAYLES BOND PORTFOLIO The Investment Managers have
contractually agreed to waive 0.035% of their investment management fees
through June 30, 2016. This waiver may not be terminated prior to June 30, 2016
without the prior approval of the Trust's Board of Trustees.
AST TARGET YEAR BOND PORTFOLIOS The Investment Managers have contractually
agreed to waive a portion of their investment management fees and/or reimburse
certain expenses for each Portfolio so that each Portfolio's investment
management fees plus other expenses (exclusive in all cases of taxes, interest,
brokerage commissions, acquired fund fees and expenses, and extraordinary
expenses) do not exceed 0.99% of each Portfolio's average daily net assets
through June 30, 2016. This waiver may not be terminated prior to June 30, 2016
without the prior approval of the Trust's Board of Trustees.
AST CLEARBRIDGE DIVIDEND GROWTH PORTFOLIO The Investment Managers have
contractually agreed to waive 0.11% of their investment management fees through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST COHEN & STEERS REALTY PORTFOLIO The Investment Managers have contractually
agreed to waive 0.07% of their investment management fees through June 30,
2016. This waiver may not be terminated prior to June 30, 2016 without the
prior approval of the Trust's Board of Trustees.
AST FI PYRAMIS(R) ASSET ALLOCATION PORTFOLIO The Investment Managers have
contractually agreed to waive 0.018% of their investment management fees
through June 30, 2016. This waiver may not be terminated prior to June 30, 2016
without the prior approval of the Trust's Board of Trustees.
AST FI PYRAMIS(R) QUANTITATIVE PORTFOLIO The Investment Managers have
contractually agreed to waive 0.14% of their investment management fees through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION PORTFOLIO The Investment
Managers have contractually agreed to waive a portion of their investment
management fees and/or reimburse certain expenses so that the investment
management fees plus other expenses (exclusive in all cases of taxes, short
sale interest and dividend expenses, brokerage commissions, distribution fees,
underlying fund fees and expenses, and extraordinary expenses) for the
Portfolio do not exceed 1.10% of the average daily net assets of the Portfolio
through June 30, 2016. This expense limitation may not be terminated prior to
June 30, 2016 without the prior approval of the Trust's Board of Trustees.
AST Goldman Sachs Large-Cap Value Portfolio The Investment Managers have
contractually agreed to waive 0.013% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST GOLDMAN SACHS MID-CAP GROWTH PORTFOLIO The Investment Managers have
contractually agreed to waive 0.053% of their investment management fees
through June 30, 2016. This waiver may not be terminated prior to June 30, 2016
without the prior approval of the Trust's Board of Trustees.
AST Goldman Sachs Multi-Asset Portfolio The Investment Managers have
contractually agreed to waive 0.213% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST GOLDMAN SACHS SMALL-CAP VALUE PORTFOLIO The Investment Managers have
contractually agreed to waive 0.013% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST HERNDON LARGE-CAP VALUE PORTFOLIO The Investment Managers have
contractually agreed to waive 0.15% of their investment management fees through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST INTERNATIONAL GROWTH PORTFOLIO The Investment Managers have contractually
agreed to waive 0.013% of their investment management fees through June 30,
2016. This waiver may not be terminated prior to June 30, 2016 without the
prior approval of the Trust's Board of Trustees.
AST INVESTMENT GRADE BOND THE INVESTMENT MANAGERS HAVE CONTRACTUALLY AGREED TO
WAIVE A PORTION OF THEIR INVESTMENT MANAGEMENT FEES AND/OR REIMBURSE CERTAIN
EXPENSES FOR EACH Portfolio so that each Portfolio's investment management fees
plus other expenses (exclusive in all cases of taxes, interest, brokerage
commissions, acquired fund fees and expenses, and extraordinary expenses) do
not exceed 0.99% of each Portfolio's average daily net assets through June 30,
2016. This waiver may not be terminated prior to June 30, 2016 without the
prior approval of the Trust's Board of Trustees.
AST LOOMIS SAYLES LARGE-CAP GROWTH PORTFOLIO The Investment Managers have
contractually agreed to waive 0.06% of their investment management fees through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST LORD ABBETT CORE FIXED INCOME PORTFOLIO The Investment Managers have
contractually agreed to waive 0.16% of their investment management fees through
June 30, 2016. In addition, the Investment Managers have contractually agreed
to waive a portion of their investment management fee, as follows: 0.10% on the
first $500 million of average daily net assets; 0.125% of the Portfolio's
average daily net assets between $500 million and $1 billion; and 0.15% of the
Portfolio's average daily net assets in excess of $1 billion through June 30,
2016. These waivers may not be terminated prior to June 30, 2016 without the
prior approval of the Trust's Board of Trustees.
AST NEUBERGER BERMAN CORE BOND PORTFOLIO The Investment Managers have
contractually agreed to waive 0.14% of their investment management fee through
June 30, 2016. In addition, the Investment Managers have contractually agreed
to waive a portion of their investment management fees, as follows: 0.025% of
the Portfolio's average daily net assets between $500 million and $1 billion,
and 0.05% of the Portfolio's average daily net assets in excess of $1 billion
through June 30, 2016. These waivers may not be terminated prior to June 30,
2016 without the prior approval of the Trust's Board of Trustees.
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO The Investment Managers have
contractually agreed to waive 0.005% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST NEUBERGER BERMAN/LSV MID-CAP VALUE PORTFOLIO The Investment Managers have
contractually agreed to waive 0.003% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST NEW DISCOVERY ASSET ALLOCATION PORTFOLIO The Investment Managers have
contractually agreed to waive 0.009% their investment management fees through
June 30, 2016. In addition, the Investment Managers have contractually agreed
to waive a portion of their investment management fees and/or reimburse certain
expenses for the Portfolio so that the Portfolio's investment management fees
plus other expenses (exclusive in all cases of taxes, interest, brokerage
commissions, acquired fund fees and expenses, and extraordinary expenses) do
not exceed 1.08% of the Portfolio's average daily net assets through June 30,
2016. These waivers may not be terminated prior to June 30, 2016 without the
prior approval of the Trust's Board of Trustees.
AST PRUDENTIAL CORE BOND PORTFOLIO The Investment Managers have contractually
agreed to waive a portion of their investment management fees as follows:
0.025% of the Portfolio's average daily net assets between $500 million and $1
billion, and 0.05% of the Portfolio's average daily net assets in excess of $1
billion through June 30, 2016. The waiver may not be terminated prior to
June 30, 2016 without the prior approval of the Trust's Board of Trustees.
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO The Investment Managers have
contractually agreed to waive 0.022% of their investment management fee through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
16
AST WESTERN ASSET CORE PLUS BOND PORTFOLIO The Investment Managers have
contractually agreed to waive 0.20% of their investment management fees through
June 30, 2016. This waiver may not be terminated prior to June 30, 2016 without
the prior approval of the Trust's Board of Trustees.
AST WESTERN ASSET EMERGING MARKETS DEBT PORTFOLIO The Investment Managers have
contractually agreed to waive 0.05% of their investment management fee through
June 30, 2016. This waiver arrangement may not be terminated prior to June 30,
2016 without the prior approval of the Trust's Board of Trustees.
INVESCO V.I. DIVERSIFIED DIVIDEND FUND - SERIES I SHARES
INVESCO V.I. GLOBAL HEALTH CARE FUND - SERIES I SHARES
Invesco Advisers, Inc. ("Invesco" or the "Adviser") has contractually agreed to
waive a portion of the Fund's management fee in an amount equal to the net
management fee that Invesco earns on the Fund's investments in certain
affiliated funds. This waiver will have the effect of reducing Acquired Fund
Fees and Expenses that are indirectly borne by the Fund. Unless Invesco
continues the fee waiver agreement, it will terminate on June 30, 2016. The fee
waiver agreement cannot be terminated during its term.
PROFUND VP FUNDS ProFund Advisors LLC ("ProFund Advisors" or the "Advisor") has
contractually agreed to waive Investment Advisory and Management Services Fees
and to reimburse Other Expenses to the extent Total Annual Fund Operating
Expenses Before Fee Waivers and Expense Reimbursements (excluding "Acquired
Fund Fees and Expenses"), as a percentage of average daily net assets, exceed
1.68% (1.38% for ProFund VP U.S. Government Plus and 1.35% for ProFund VP Money
Market) through April 30, 2016. After such date, the expense limitation may be
terminated or revised by the Advisor. Amounts waived or reimbursed in a
particular contractual period may be recouped by ProFund Advisors within three
years of the end of the contractual period to the extent that recoupment will
not cause the Fund's expenses to exceed any expense limitation in place at that
time. The Advisor may also waive fees and/or reimburse expenses to the extent
necessary to maintain the net yield of the ProFund VP Money Market at a certain
level as determined by the Advisor. The Advisor may recoup from the ProFund VP
Money Market any of the fees or expenses it has waived and/or reimbursed until
the third anniversary of the end of the 12 month period ending April 30 in
which such waiver and/or reimbursement occurs, subject to certain limitations.
This recoupment could negatively affect the ProFund VP Money Market's future
yield.
PROFUND VP BIOTECHNOLOGY The recoupment expense of 0.04% is reflected in
"Other" expenses.
PROFUND VP TECHNOLOGY The recoupment expense of 0.02% is reflected in "Other"
expenses.
PROFUND VP ULTRABULL The recoupment expense of 0.01% is reflected in "Other"
expenses.
PROFUND VP ULTRAMID-CAP Acquired Fund Fees and Expenses for the fiscal year end
December 31, 2014 were less than 0.01% and are included in "Other" expenses.
WELLS FARGO ADVANTAGE VT INTERNATIONAL EQUITY - CLASS 1 The Adviser has
committed through April 30, 2016 to waive fees and/or reimburse expenses to the
extent necessary to cap the Fund's Total Annual Fund Operating Expenses After
Fee Waiver at 0.69% for Class 1. Brokerage commissions, stamp duty fees,
interest, taxes, acquired fund fees and expenses and extraordinary expenses are
excluded from the cap. After this time, the cap may be increased or the
commitment to maintain the cap may be terminated only with the approval of the
Board of Trustees.
WELLS FARGO ADVANTAGE VT INTRINSIC VALUE - CLASS 2 The Adviser has committed
through April 30, 2016 to waive fees and/or reimburse expenses to the extent
necessary to cap the Fund's Total Annual Fund Operating Expenses After Fee
Waiver at the amounts shown above. Brokerage commissions, stamp duty fees,
interest, taxes, acquired fund fees and expenses and extraordinary expenses are
excluded from the cap. After this time, the cap may be increased or the
commitment to maintain the cap may be terminated only with the approval of the
Board of Trustees.
WELLS FARGO ADVANTAGE VT OMEGA GROWTH - CLASS 1 The Adviser has committed
through April 30, 2016 to waive fees and/or reimburse expenses to the extent
necessary to cap the Fund's Total Annual Fund Operating Expenses After Fee
Waiver at the amounts shown above. Brokerage commissions, stamp duty fees,
interest, taxes, acquired fund fees and expenses and extraordinary expenses are
excluded from the cap. After this time, the cap may be increased or the
commitment to maintain the cap may be terminated only with the approval of the
Board of Trustees.
WELLS FARGO ADVANTAGE VT SMALL CAP GROWTH - CLASS 1 The Adviser has committed
through April 30, 2016 to waive fees and/or reimburse expenses to the extent
necessary to cap the Fund's Total Annual Fund Operating Expenses After Fee
Waiver at 0.95% for Class 1. Brokerage commissions, stamp duty fees, interest,
taxes, acquired fund fees and expenses and extraordinary expenses are excluded
from the cap. After this time, the cap may be increased or the commitment to
maintain the cap may be terminated only with the approval of the Board of
Trustees.
17
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in one
Prudential Annuities Annuity with the cost of investing in other Prudential
Annuities and/or other variable annuities.
Below are examples for each Annuity showing what you would pay in expenses at
the end of the stated time periods had you invested $10,000 in the Annuity and
your investment has a 5% return each year.
The examples reflect the fees and charges listed below for each Annuity as
described in "Summary of Contract Fees and Charges":
. Insurance Charge
. Distribution Charge (if applicable)
. Contingent Deferred Sales Charge (when and if applicable)
. Annual Maintenance Fee
. The maximum combination of optional benefit charges
The examples also assume the following for the period shown:
. You allocate all of your Account Value to the Sub-account with the
maximum gross total annual operating expenses for 2014, and those
expenses remain the same each year*
. For each charge, we deduct the maximum charge rather than the current
charge
. You make no withdrawals of Account Value
. You make no transfers, or other transactions for which we charge a fee
. No tax charge applies
. You elect the Highest Daily Lifetime 6 Plus with Combination 5% Roll-up
and HAV Death Benefit, which are the maximum combination of optional
benefit charges. There is no other optional benefit combination that
would result in higher maximum charges than those shown in the examples.
. For the XT6 example, no Purchase Payment Credit is granted under the
Annuity
. For the APEX II example, no Loyalty Credit applies
. For the ASAP III example, no Loyalty Credit applies
Amounts shown in the examples are rounded to the nearest dollar.
* Note: Not all portfolios offered as Sub-accounts may be available depending
on optional benefit selection, the applicable jurisdiction and selling firm.
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES WILL BE LESS THAN THOSE SHOWN DEPENDING UPON
WHICH OPTIONAL BENEFIT YOU ELECT OTHER THAN INDICATED IN THE EXAMPLES OR IF YOU
ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS.
EXPENSE EXAMPLES ARE PROVIDED AS FOLLOWS:
To be filed by amendment
If you surrender your annuity at the end of the applicable time period: /1/
1 YR 3 YRS 5 YRS 10 YRS
------ ------ ------ ------
ASAP III $1,387 $2,572 $3,721 $6,542
APEX II $1,524 $2,727 $3,385 $6,807
ASL II $ 674 $2,027 $3,385 $6,807
XT6/3/ $1,574 $2,827 $3,985 $6,907
If you annuitize your annuity at the end of the applicable time period: /2/
1 YR 3 YRS 5 YRS 10 YRS
---- ------ ------ ------
ASAP III $637 $1,922 $3,221 $6,542
APEX II $674 $2,027 $3,385 $6,807
ASL II $674 $2,027 $3,385 $6,807
XT6/3/ $674 $2,027 $3,385 $6,807
18
If you do not surrender your annuity:
1 YR 3 YRS 5 YRS 10 YRS
---- ------ ------ ------
ASAP III $637 $1,922 $3,221 $6,542
APEX II $674 $2,027 $3,385 $6,807
ASL II $674 $2,027 $3,385 $6,807
XT6/3/ $674 $2,027 $3,385 $6,807
1 There is no CDSC for ASL II. See "Summary of Contract Fees and Charges" for
the CDSC schedule for each Annuity.
2 If you own XT6, you may not annuitize in the first Three (3) Annuity Years.
If you own ASAP III or APEX II, you may not annuitize in the first
Annuity Year.
3 XT6 Annuities purchased prior to November 20, 2006 are subject to a
different CDSC schedule. Expense examples calculations for XT6 Annuities
are not adjusted to reflect the Purchase Credit. If the Purchase Credit
were reflected in the calculations, expenses would be higher.
For information relating to accumulation unit values pertaining to the
Sub-accounts, please see Appendix A - Condensed Financial Information About
Separate Account B.
19
SUMMARY
Advanced Series Advisor Plan III ("ASAP III")
Advanced Series APEX II ("APEX II")
Advanced Series XTra Credit Six ("XT6")
Advanced Series LifeVest II ("ASL II")
This Summary describes key features of the variable annuities described in this
Prospectus. It is intended to help give you an overview, and to point you to
sections of the prospectus that provide greater detail. This Summary is
intended to supplement the prospectus, so you should not rely on the Summary
alone for all the information you need to know before purchase. You should read
the entire Prospectus for a complete description of the variable annuities.
Your Financial Professional can also help you if you have questions.
WHAT IS A VARIABLE ANNUITY? A variable annuity is a contract between you and an
insurance company. It is designed to help you save money for retirement, and
provide income during your retirement. With the help of your Financial
Professional, you choose how to invest your money within your annuity (subject
to certain restrictions; see "Investment Options"). Any allocation that is
recommended to you by your Financial Professional may be different than
automatic asset transfers that may be made under the Annuity, such as under a
pre-determined mathematical formula used with an optional living benefit. The
value of your annuity will rise or fall depending on whether the investment
options you choose perform well or perform poorly. Investing in a variable
annuity involves risk and you can lose your money. By the same token, investing
in a variable annuity can provide you with the opportunity to grow your money
through participation in mutual fund-type investments. Your Financial
Professional will help you choose the investment options that are suitable for
you based on your tolerance for risk and your needs.
Variable annuities also offer a variety of optional guarantees to receive an
income for life through withdrawals or provide minimum death benefits for your
beneficiaries, or minimum account value guarantees. These benefits provide a
degree of insurance in the event your annuity performs poorly. These optional
benefits are available for an extra cost, and are subject to limitations and
conditions more fully described later in this Prospectus. The guarantees are
based on the long-term financial strength of the insurance company.
WHAT DOES IT MEAN THAT MY VARIABLE ANNUITY IS "TAX DEFERRED"? Because variable
annuities are issued by an insurance company, you pay no taxes on any earnings
from your annuity until you withdraw the money. You may also transfer among
your investment options without paying a tax at the time of the transfer. Until
you withdraw the money, tax deferral allows you to keep money invested that
would otherwise go to pay taxes. When you take your money out of the variable
annuity, however, you will be taxed on the earnings at ordinary income tax
rates rather than lower capital gains rates. If you withdraw earnings before
you reach age 59 1/2, you also may be subject to a 10% federal tax penalty.
WHAT VARIABLE ANNUITIES ARE OFFERED IN THIS PROSPECTUS? This Prospectus
describes the variable annuities listed below. The annuities differ primarily
in the fees deducted, and whether the annuity provides credits in certain
circumstances. The annuities described in this prospectus are:
.. Advanced Series Advisor Plan III ("ASAP III")
.. Advanced Series APEX II ("APEX II")
.. Advanced Series XTra Credit Six ("XT6")
.. Advanced Series LifeVest II ("ASL II")
HOW DO I PURCHASE ONE OF THE VARIABLE ANNUITIES? These Annuities are no longer
available for new purchases. Our eligibility criteria for purchasing the
Annuities are as follows:
MAXIMUM AGE FOR MINIMUM INITIAL
PRODUCT INITIAL PURCHASE PURCHASE PAYMENT
--------------------------------------- ---------------- ----------------
ASAP III 80 $ 1,000
APEX II 85 $10,000
XT6 75 $10,000
ASL II 85 $15,000
The "Maximum Age for Initial Purchase" applies to the oldest owner as of the
day we would issue the Annuity. If the Annuity is to be owned by an entity, the
maximum age applies to the annuitant as of the day we would issue the Annuity.
For annuities purchased as a Beneficiary Annuity, the maximum issue age is 70
and applies to the Key Life. The availability and level of protection of
certain optional benefits may also vary based on the age of the owner or
annuitant on the issue date of the annuity, the date the benefit is elected, or
the date of the owner's death. Please see the sections entitled "Living
Benefits" and "Death Benefit" for additional information on these benefits.
You may make additional payments of at least $100 into your Annuity at any
time, subject to maximums allowed by us and as provided by law.
After you purchase your Annuity you will have usually ten days to examine it
and cancel it if you change your mind for any reason (referred to as the "free
look period"). The period of time and the amount returned to you is dictated by
State law, and is stated on the front cover of your contract. You must cancel
your Annuity in writing.
See "What Are Our Requirements for Purchasing One of the Annuities?" for more
detail.
20
WHERE SHOULD I INVEST MY MONEY? With the help of your Financial Professional,
you choose where to invest your money within the Annuity. Our optional benefits
may limit your ability to invest in the investment options otherwise available
to you under the Annuity. You may choose from a variety of investment options
ranging from conservative to aggressive. These investment options participate
in mutual fund investments that are kept in a separate account from our other
general assets. Although you may recognize some of the names of the money
managers, these investment options are designed for variable annuities and are
not the same mutual funds available to the general public. You can decide on a
mix of investment options that suit your goals. Or, you can choose one of our
investment options that participates in several mutual funds according to a
specified goal such as balanced asset allocation, or capital growth asset
allocation. If you select optional benefits, we may limit the investment
options that you may elect. Each of the underlying mutual funds is described by
its own prospectus, which you should read before investing. You can obtain the
summary prospectuses and prospectuses for the underlying mutual funds by
calling 1-888-PRU-2888 or at www.prudentialannuities.com. There is no assurance
that any investment option will meet its investment objective.
We also offer programs to help discipline your investing, such as dollar cost
averaging or automatic rebalancing.
See "Investment Options," and "Managing Your Account Value."
HOW CAN I RECEIVE INCOME FROM MY ANNUITY? You can receive income by taking
withdrawals or electing annuity payments. If you take withdrawals, you should
plan them carefully, because withdrawals may be subject to tax, and may be
subject to a contingent deferred sales charge (discussed below). See the "Tax
Considerations" section of this Prospectus. You may withdraw up to 10% of your
investment each year without being subject to a contingent deferred sales
charge.
You may elect to receive income through annuity payments over your lifetime,
also called "annuitization". This option may appeal to those who worry about
outliving their Account Value through withdrawals. If you elect to receive
annuity payments, you convert your Account Value into a stream of future
payments. This means in most cases you no longer have an Account Value and
therefore cannot make withdrawals. We offer different types of annuity options
to meet your needs, and you can choose the benefits and costs that make sense
for you. For example, some of our annuity options allow for withdrawals, and
some provide a death benefit, while others guarantee payments for life without
a death benefit or the ability to make withdrawals.
See "Access to Account Value."
OPTIONS FOR GUARANTEED LIFETIME WITHDRAWALS. We offer optional benefits for an
additional fee that guarantee your ability to take withdrawals for life as a
percentage of an initial guaranteed benefit base, even after your Account Value
falls to zero (unless it does so due to a withdrawal of Excess Income). The
Account Value has no guarantees, may fluctuate, and can lose value.
These benefits may appeal to you if you wish to maintain flexibility and
control over your Account Value invested (instead of converting it to an
annuity stream) and want the assurance of predictable income. If you withdraw
more than the allowable amount during any year, your future level of guaranteed
withdrawals decreases.
As part of these benefits you are required to invest only in certain permitted
investment options. Some of the benefits utilize a predetermined mathematical
formula to help manage your guarantee through all market cycles. Please see the
applicable optional benefits section for more information. In the Living
Benefits section, we describe these guaranteed minimum withdrawal benefits,
which allow you to withdraw a specified amount each year for life (or joint
lives, for the spousal version of the benefit). Please be aware that if you
withdraw more than that amount in a given year (i.e., Excess Income), that may
permanently reduce the guaranteed amount you can withdraw in future years.
Please note that if your Account Value is reduced to zero as a result of a
withdrawal of Excess Income, both the optional benefit and the Annuity will
terminate. Thus, you should think carefully before taking a withdrawal of
Excess Income. If you purchased your contract in New York and wish to withdraw
Excess Income but are uncertain how it will impact your future guaranteed
amounts, you may contact us prior to requesting the withdrawal to obtain a
personalized, transaction-specific calculation showing the effect of taking the
withdrawal.
21
These benefits contain detailed provisions, so please see the following
sections of the Prospectus for complete details:
.. Highest Daily Lifetime 6 Plus
.. Highest Daily Lifetime 6 Plus with Lifetime Income Accelerator
.. Spousal Highest Daily Lifetime 6 Plus
.. Highest Daily Lifetime 7 Plus
.. Spousal Highest Daily Lifetime 7 Plus
.. Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator
.. Highest Daily Lifetime 7 Plus with Beneficiary Income Option
.. Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option
.. Highest Daily Lifetime Seven
.. Spousal Highest Daily Lifetime Seven
.. Highest Daily Lifetime Seven with Lifetime Income Accelerator
.. Highest Daily Lifetime Seven with Beneficiary Income Option
.. Spousal Highest Daily Lifetime Seven with Beneficiary Income Option
THE GUARANTEED LIFETIME WITHDRAWAL BENEFIT OPTIONS ARE NO LONGER OFFERED FOR
NEW ELECTIONS.
OPTIONS FOR GUARANTEED ACCUMULATION. We offer optional benefits for an
additional fee that guarantee your Account Value to a certain level after a
period of years. As part of these benefits you are required to invest only in
certain permitted investment options. Please see applicable optional benefits
sections for more information.
These benefits contain detailed provisions, so please see the following
sections of the Prospectus for complete details:
.. Guaranteed Return Option Plus II
.. Highest Daily Guaranteed Return Option II
.. Guaranteed Return Option Plus (GRO Plus)*
.. Guaranteed Return Option (GRO)*
.. Guaranteed Return Option Plus 2008*
.. Highest Daily Guaranteed Return Option*
* No longer available for new elections.
WHAT HAPPENS TO MY ANNUITY UPON DEATH? You may name a beneficiary to receive
the proceeds of your annuity upon your death. Your annuity must be distributed
within the time periods required by the tax laws. Each of our annuities offers
a basic death benefit. The basic death benefit provides your beneficiaries with
the greater of your purchase payments less all proportional withdrawals or your
value in the annuity at the time of death (the amount of the basic death
benefit may depend on the decedent's age).
We also have optional death benefits for an additional charge:
.. HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Offers the greater of the basic
death benefit and a highest anniversary value of the annuity.
.. COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Offers
the greatest of the basic death benefit, the highest anniversary value death
benefit described above, and a value assuming 5% growth of your investment
adjusted for withdrawals.
Each death benefit has certain age restrictions and could only have been
elected at time of contract purchase. Please see the "Death Benefit" section of
the Prospectus for more information.
HOW DO I RECEIVE CREDITS?
With XT6, we apply a credit to your Annuity each time you make a purchase
payment during the first six (6) years. Because of the credits, the expenses of
this Annuity may be higher than other annuities that do not offer credits. The
amount of the credit depends on the year during which the purchase payment is
made:
For annuities issued on or after February 13, 2006:
ANNUITY YEAR CREDIT
------------------------ ------------------------
1 6.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
* For annuities issued before February 13, 2006, the Credit during Annuity Year
1 is 6.00%.
22
Please note that during the first 10 years, the total asset-based charges on
the XT6 annuity are higher than many of our other annuities. In addition, the
Contingent Deferred Sales Charge (CDSC) on the XT6 annuity is higher and is
deducted for a longer period of time as compared to our other annuities. Unless
prohibited by applicable State law, we may take back credits applied within 12
months of death or a Medically-Related Surrender. We may also take back credits
if you return your Annuity under the "free-look" provision.
For ASAP III annuities issued on or after February 13, 2006, and APEX II
annuities issued on or after June 20, 2005, we apply a "loyalty credit" at the
end of your fifth anniversary for money invested with us during the first four
years of your Annuity (less adjustments for any withdrawals). For ASAP III, the
credit is 0.50%. For APEX II, the credit is either 0%, 2.25% or 2.75% depending
on the Issue Date of your Annuity.
Please see the section entitled "Managing Your Account Value" for more
information.
WHAT ARE THE ANNUITY'S FEES AND CHARGES?
CONTINGENT DEFERRED SALES CHARGE: If you withdraw all or part of your annuity
before the end of a period of years, we may deduct a contingent deferred sales
charge, or "CDSC". The CDSC is calculated as a percentage of your purchase
payment being withdrawn, and the applicable CDSC percentage (as indicated in
the table below) depends on the Annuity Year in which the purchase payment is
withdrawn. The CDSC is different depending on which annuity you purchase:
YR. 1 YR. 2 YR. 3 YR. 4 YR. 5 YR. 6 YR. 7 YR. 8 YR. 9 YR. 10 YR. 11+
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ -------
ASAP III 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% -- --
APEX II 8.5% 8.0% 7.0% 6.0% 0.0% -- -- -- -- -- --
XT6* 9.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
ASL II - There is no CDSC for this Annuity
* For annuities issued before November 20, 2006, the schedule is as follows:
Year 1: 9.0%; Year 2: 9.0%; Year 3: 8.5%; Year 4: 8.0%; Year 5: 7.0%; Year
6: 6.0%; Year 7: 5.0%; Year 8: 4.0%; Year 9: 3.0%; Year 10: 2.0%; Year 11+:
0.0%.
Each year you may withdraw up to 10% of your purchase payments without the
imposition of a CDSC. This free withdrawal feature does not apply when fully
surrendering your Annuity. We may also waive the CDSC under certain
circumstances, such as for medically-related circumstances or taking required
minimum distributions under a qualified contracts.
TRANSFER FEE: You may make 20 transfers between investment options each year
free of charge. After the 20th transfer, we will charge $10.00 for each
transfer. We do not consider transfers made as part of any Dollar Cost
Averaging, Automatic Rebalancing or asset allocation program when we count the
20 free transfers. All transfers made on the same day will be treated as one
(1) transfer. Any transfers made as a result of the mathematical formula used
with an optional benefit will not count towards the total transfers allowed.
ANNUAL MAINTENANCE FEE: Until you start annuity payments, we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account
Value invested in the Sub-accounts, whichever is less. Except for XT6, the
Annual Maintenance Fee is only deducted if your Account Value is less than
$100,000.
TAX CHARGE: We may deduct a charge to reimburse us for taxes we may pay on
premiums received in certain jurisdictions. The tax charge currently ranges up
to 3 1/2% of your purchase payments and is designed to approximate the taxes
that we are required to pay.
INSURANCE CHARGE: We deduct an Insurance Charge. It is an annual charge
assessed on a daily basis. It is the combination of the Mortality & Expense
Risk Charge and the Administration Charge. The charge is assessed against the
daily assets allocated to the Sub-accounts and depends on which annuity you
hold:
FEE/CHARGE ASAP III APEX II ASL II XT6
----------------------------------------------- -------- ------- ------ ----
MORTALITY & EXPENSE RISK CHARGE 0.50% 1.50% 1.50% 0.50%
ADMINISTRATION CHARGE 0.15% 0.15% 0.15% 0.15%
TOTAL INSURANCE CHARGE 0.65% 1.65% 1.65% 0.65%
DISTRIBUTION CHARGE: For ASAP III and XT6, we deduct a Distribution Charge
daily. It is an annual charge assessed on a daily basis. The charge is assessed
for a certain number of years against the daily net assets allocated to the
Sub-accounts and is equal to the following:
FEE/CHARGE ASAP III APEX II ASL II XT6
-------------------- ----------------------- ------- ------ -----------------------
DISTRIBUTION CHARGE 0.60% in Annuity Years 1.00% in Annuity Years
1-8 N/A N/A 1-10
CHARGES FOR OPTIONAL BENEFITS: If you elect to purchase certain optional
benefits, we will deduct an additional charge. For some optional benefits, the
charge is deducted from your Account Value allocated to the Sub-accounts. This
charge is included in the daily calculation of the Unit Price for each
Sub-account. For certain other optional benefits, such as Highest Daily
Lifetime Seven, the charge is assessed against the
23
Protected Withdrawal Value and taken out of the Sub-accounts periodically.
Please refer to the section entitled "Summary of Contract Fees and Charges" for
the list of charges for each optional benefit.
SETTLEMENT SERVICE CHARGE: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge,
although the Insurance Charge no longer applies. The charge is assessed daily
against the daily net assets allocated to the Sub-accounts and is equal to an
annual charge of 1.00% for nonqualified Annuities and 1.40% for
qualified Annuities.
FEES AND EXPENSES INCURRED BY THE PORTFOLIOS: Each Portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. More
detailed information about fees and expenses can be found in the prospectuses
for the Portfolios. Please see the "Fees and Charges" section of the Prospectus
for more information.
COSTS TO SELL AND ADMINISTER OUR VARIABLE ANNUITY: Your Financial Professional
may receive a commission for selling one of our variable annuities to you. We
may pay fees to your Financial Professional's broker dealer firm to cover costs
of marketing or administration. These commissions and fees may incent your
Financial Professional to sell our variable annuity instead of one offered by
another company. We also receive fees from the mutual fund companies that offer
the investment options for administrative costs and marketing. These fees may
influence our decision to offer one family of funds over another. If you have
any questions you may speak with your Financial Professional or us. See
"General Information".
OTHER INFORMATION: Please see the section entitled "General Information" for
more information about our annuities, including legal information about our
company, separate account, and underlying funds.
24
INVESTMENT OPTIONS
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
Each variable investment option is a Sub-account of Prudential Annuities Life
Assurance Corporation Variable Account B (see "What are Separate Accounts" for
more detailed information). Each Sub-account invests exclusively in one
Portfolio. You should carefully read the prospectus for any Portfolio in which
you are interested. The Investment Objectives/Policies chart below provides a
description of each Portfolio's investment objective and a short, summary
description of their key policies to assist you in determining which Portfolios
may be of interest to you. There is no guarantee that any underlying Portfolio
will meet its investment objective. Not all portfolios offered as Sub-accounts
may be available depending on optional benefit selection, the applicable
jurisdiction and selling firm. The Portfolios that you select are your choice -
we do not provide investment advice, and we do not recommend or endorse any
particular Portfolio. You bear the investment risk for amounts allocated to the
Portfolios. Please see the General Information section of this Prospectus,
under the heading "Fees and Payments Received by Prudential Annuities" for a
discussion of fees that we may receive from underlying mutual funds and/or
their affiliates.
The name of the advisor/sub-advisor for each Portfolio appears next to the
description. Those Portfolios whose name includes the prefix "AST" are
Portfolios of Advanced Series Trust. The investment managers for AST are AST
Investment Services, Inc., a Prudential Financial Company, and Prudential
Investments LLC, both of which are affiliated companies of Prudential
Annuities. However, a sub-advisor, as noted below, is engaged to conduct
day-to-day management.
The Portfolios are not publicly traded mutual funds. They are only available as
Investment Options in variable annuity contracts and variable life insurance
policies issued by insurance companies, or in some cases, to participants in
certain qualified retirement plans. However, some of the Portfolios available
as Sub-accounts under the Annuities are managed by the same Portfolio adviser
or subadviser as a retail mutual fund of the same or similar name that the
Portfolio may have been modeled after at its inception. While the investment
objective and policies of the retail mutual funds and the Portfolios may be
substantially similar, the actual investments will differ to varying degrees.
Differences in the performance of the funds and Portfolios can be expected, and
in some cases could be substantial. You should not compare the performance of a
publicly traded mutual fund with the performance of any similarly named
Portfolio offered as a Sub-account. Details about the investment objectives,
policies, risks, costs and management of the Portfolios are found in the
prospectuses for the Portfolios.
This Annuity offers Portfolios managed by AST Investment Services, Inc. and/or
Prudential Investments LLC, both of which are affiliated companies of
Prudential Annuities ("Affiliated Portfolios") and Portfolios managed by
companies not affiliated with Prudential Annuities ("Unaffiliated Portfolios").
Prudential Annuities and its affiliates ("Prudential Companies") receive fees
and payments from both the Affiliated Portfolios and the Unaffiliated
Portfolios. Generally, Prudential Companies receive revenue sharing payments
from the Unaffiliated Portfolios. We consider the amount of these fees and
payments when determining which portfolios to offer through the Annuity.
Affiliated Portfolios may provide Prudential Companies with greater fees and
payments than Unaffiliated Portfolios. Because of the potential for greater
profits earned by the Prudential Companies with respect to the Affiliated
Portfolios, we have an incentive to offer Affiliated Portfolios over
Unaffiliated Portfolios. As indicated next to each Portfolio's description in
the table that follows, each Portfolio has one or more subadvisers that conduct
day to day management. We have an incentive to offer Portfolios with certain
subadvisers, either because the subadviser is a Prudential Company or because
the subadviser provides payments or support, including distribution and
marketing support, to the Prudential Companies. We may consider those
subadviser factors in determining which portfolios to offer under the
Annuities. Also, in some cases, we offer Portfolios based on the
recommendations made by selling broker-dealer firms. These firms may receive
payments from the Portfolios they recommend and may benefit accordingly from
allocations of Account Value to the sub-accounts that invest in these
Portfolios. Please see "Other Information" under the heading concerning "Fees
and Payments Received by Prudential Annuities" for more information about fees
and payments we may receive from underlying Portfolios and/or their affiliates.
In addition, we may consider the potential risk to us of offering a Portfolio
in light of the benefits provided by the Annuity.
Effective MAY 1, 2004, the SP INTERNATIONAL GROWTH PORTFOLIO (formerly the SP
WILLIAM BLAIR INTERNATIONAL GROWTH PORTFOLIO) was no longer offered as a
Sub-account under the Annuities, except as follows: if at any time prior to
May 1, 2004 you had any portion of your Account Value allocated to the SP
International Growth Sub-account, you may continue to allocate Account Value
and make transfers into and/or out of the SP International Growth Sub-account,
including any electronic funds transfer, dollar cost averaging, asset
allocation and rebalancing programs. If you never had a portion of your Account
Value allocated to the SP International Growth Sub-account prior to May 1, 2004
or if you purchased your Annuity on or after May 1, 2004, you cannot allocate
Account Value to the SP International Growth Sub-account.
Effective APRIL 29, 2013, the AST FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION
PORTFOLIO was no longer offered as a Sub-account under the Annuities, except as
follows: if at any time prior to April 29, 2013 you had any portion of your
Account Value allocated to the AST Franklin Templeton Founding Funds Allocation
Sub-account, you may continue to allocate Account Value and make transfers into
and/or out of the AST Franklin Templeton Founding Funds Allocation Sub-account,
including any electronic funds transfer, dollar cost averaging, asset
allocation and rebalancing programs. If you never had a portion of your Account
Value allocated to the AST Franklin Templeton Founding Funds Allocation
Sub-account prior to April 29, 2013, you cannot allocate Account Value to the
AST Franklin Templeton Founding Funds Allocation Sub-account.
STIPULATED INVESTMENT OPTIONS IF YOU ELECT CERTAIN OPTIONAL BENEFITS
As a condition to your participating in certain optional benefits, we limit the
investment options to which you may allocate your Account Value. Broadly
speaking, we offer two groups of "Permitted Sub-accounts". Under the first
group (Group I), your allowable investment options are more limited, but you
are not subject to mandatory quarterly re-balancing. Under the second group
(Group II), you may allocate your Account Value
25
between a broader range of investment options, but must participate in
quarterly re-balancing. The set of tables immediately below describes the first
category of permitted investment options.
While those who do not participate in any optional benefit generally may invest
in any of the investment options described in the Prospectus, only those who
participate in the optional benefits listed in Group II below may participate
in the second category (along with its attendant re-balancing requirement).
This second category is called our "Custom Portfolios Program" (we may have
referred to the "Custom Portfolios Program" as the "Optional Allocation and
Rebalancing Program" in other materials). If you participate in the Custom
Portfolios Program, you may not participate in an Automatic Rebalancing
Program. We may modify or terminate the Custom Portfolios Program at any time.
ANY SUCH MODIFICATION OR TERMINATION WILL (I) BE IMPLEMENTED ONLY AFTER WE HAVE
NOTIFIED YOU IN ADVANCE, (II) NOT AFFECT THE GUARANTEES YOU HAD ACCRUED UNDER
THE OPTIONAL BENEFIT OR YOUR ABILITY TO CONTINUE TO PARTICIPATE IN THOSE
OPTIONAL BENEFITS, AND (III) NOT REQUIRE YOU TO TRANSFER ACCOUNT VALUE OUT OF
ANY PORTFOLIO IN WHICH YOU PARTICIPATED IMMEDIATELY PRIOR TO THE MODIFICATION
OR TERMINATION.
GROUP I: ALLOWABLE BENEFIT ALLOCATIONS
OPTIONAL BENEFIT NAME* ALLOWABLE BENEFIT ALLOCATIONS:
GRO Plus II AST Academic Strategies Asset
Highest Daily GRO II Allocation Portfolio
Highest Daily Lifetime Five Income AST Advanced Strategies Portfolio
Benefit AST Balanced Asset Allocation
Highest Daily Lifetime Seven Income Portfolio
Benefit AST BlackRock Global Strategies
Highest Daily Lifetime 7 Plus Income Portfolio
Benefit AST BlackRock iShares ETF Portfolio
Highest Daily Lifetime 7 Plus with AST BlackRock/Loomis Sayles Bond
Beneficiary Income Option Portfolio
Highest Daily Lifetime 7 Plus with AST Boston Partners Large-Cap Value
Lifetime Income Accelerator Portfolio
Highest Daily Lifetime Seven with AST Capital Growth Asset Allocation
Beneficiary Income Option Portfolio
Highest Daily Lifetime Seven with AST Defensive Asset Allocation
Lifetime Income Accelerator Portfolio
Highest Daily Lifetime 6 Plus AST FI Pyramis(R) Asset Allocation
Highest Daily Lifetime 6 Plus with Portfolio
Lifetime Income Accelerator AST FI Pyramis(R) Quantitative
Highest Daily Value Death Benefit Portfolio
Lifetime Five Income Benefit AST Franklin Templeton Founding Funds
Spousal Highest Daily Lifetime Seven Allocation Portfolio**
Income Benefit AST Franklin Templeton Founding Funds
Spousal Highest Daily Lifetime 7 Plus Plus Portfolio
Income Benefit Spousal Highest Daily AST Goldman Sachs Multi-Asset
Lifetime 7 Plus with Beneficiary Portfolio
Income Option AST J.P. Morgan Global Thematic
Spousal Highest Daily Lifetime Seven Portfolio
with Beneficiary Income Option AST J.P. Morgan Strategic
Spousal Highest Daily Lifetime 6 Plus Opportunities Portfolio
Spousal Lifetime Five Income Benefit AST Loomis Sayles Large-Cap Growth
Portfolio
AST New Discovery Asset Allocation
Portfolio
AST Preservation Asset Allocation
Portfolio
AST Prudential Growth Allocation
Portfolio
AST RCM World Trends Portfolio
AST Schroders Global Tactical
Portfolio
AST Schroders Multi-Asset World
Strategies Portfolio
AST Small-Cap Growth Opportunities
Portfolio
AST T. Rowe Price Asset Allocation
Portfolio
AST Wellington Management Hedged
Equity Portfolio
-----------------------------------------------------------------------------
OPTIONAL BENEFIT NAME* ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
Combo 5% Rollup & HAV Death Benefit Access VP High Yield
Guaranteed Minimum Income Benefit AST AQR Emerging Markets Equity
Guaranteed Minimum Withdrawal Benefit Portfolio
Highest Anniversary Value Death AST QMA Emerging Markets Equity
Benefit Portfolio
AST Western Asset Emerging Markets
Debt Portfolio
Invesco V.I. Technology
ProFund VP Biotechnology
ProFund VP Internet
ProFund VP Semiconductor
ProFund VP Short Mid-Cap
ProFund VP Short Small-Cap
ProFund VP Technology
ProFund VP UltraBull
ProFund VP UltraNASDAQ-100
ProFund VP UltraSmall-Cap
-----------------------------------------------------------------------------
26
-------------------------------------------------------------------------------
ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
GRO PLUS 2008 Access VP High Yield
Highest Daily GRO AST AQR Emerging Markets Equity
Portfolio
AST QMA Emerging Markets Equity
Portfolio
AST Quantitative Modeling Portfolio
AST Western Asset Emerging Markets Debt
Portfolio
Invesco V.I. Technology
ProFund VP Asia 30
ProFund VP Biotechnology
ProFund VP Internet
ProFund VP NASDAQ-100
ProFund VP Precious Metals
ProFund VP Semiconductor
ProFund VP Short Mid-Cap
ProFund VP Short NASDAQ-100
ProFund VP Short Small-Cap
ProFund VP Technology
ProFund VP UltraBull
ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
ProFund VP Ultra Mid-Cap
ProFund VP UltraNASDAQ-100
ProFund VP UltraSmall-Cap
Wells Fargo Advantage VT Small-Cap
Growth
-------------------------------------------------------------------------------
ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
GRO/GRO PLUS Access VP High Yield
AST AQR Emerging Markets Equity
Portfolio
AST QMA Emerging Markets Equity
Portfolio
AST Quantitative Modeling Portfolio
AST Western Asset Emerging Markets Debt
Portfolio
Invesco V.I. Technology
ProFund VP Biotechnology
ProFund VP Internet
ProFund VP Semiconductor
ProFund VP Short Mid-Cap
ProFund VP Short Small-Cap
ProFund VP Technology
ProFund VP UltraBull
ProFund VP UltraNASDAQ-100
ProFund VP UltraSmall-Cap
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
** No longer offered.
The following set of tables describes the second category (i.e., Group II
below), under which:
(a) you must allocate at least 20% of your Account Value to certain fixed
income portfolios (currently, the AST BlackRock/Loomis Sayles Bond
Portfolio, the AST Western Asset Core Plus Bond Portfolio, the AST Lord
Abbett Core Fixed Income Portfolio, the AST Neuberger Core Bond Portfolio,
and/or the AST Prudential Core Bond Portfolio).
(b) you may allocate up to 80% in equity and other portfolios listed in the
table below.
(c) on each benefit quarter (or the next Valuation Day, if the quarter-end is
not a Valuation Day), we will automatically re-balance your Account Value,
so that the percentages devoted to each Portfolio remain the same as those
in effect on the immediately preceding quarter-end, subject to the
predetermined mathematical formula inherent in any applicable optional
benefit. Note that on the first quarter-end following your participation in
the Custom Portfolios Program (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials), we will re-balance your Account Value so that the
percentages devoted to each Portfolio remain the same as those in effect
when you began the Custom Portfolios Program.
(d) between quarter-ends, you may re-allocate your Account Value among the
investment options permitted within this category. If you reallocate, the
next quarterly rebalancing will restore the percentages to those of your
most recent reallocation.
(e) if you are already participating in the Custom Portfolios Program (we may
have referred to the "Custom Portfolios Program" as the "Optional
Allocation and Rebalancing Program" in other materials) and add a new
benefit that also participates in this program, your rebalancing date will
continue to be based upon the quarterly anniversary of your initial benefit
election.
27
GROUP II: CUSTOM PORTFOLIOS PROGRAM (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials)
OPTIONAL BENEFIT NAME* PERMITTED PORTFOLIOS
Highest Daily Lifetime Seven AST Academic Strategies Asset
Spousal Highest Daily Lifetime Seven Allocation Portfolio
Highest Daily Lifetime Seven with AST Advanced Strategies Portfolio
Beneficiary Income Option AST Balanced Asset Allocation
Spousal Highest Daily Lifetime Seven Portfolio
with Beneficiary Income Option AST BlackRock Global Strategies
Highest Daily Lifetime Seven with Portfolio
Lifetime Income Accelerator AST BlackRock iShares ETF Portfolio
Highest Daily Lifetime 7 Plus Spousal AST BlackRock/Loomis Sayles Bond
Highest Daily Lifetime 7 Plus Portfolio
Highest Daily Lifetime 7 Plus with AST Boston Partners Large-Cap Value
Beneficiary Income Option Portfolio
Spousal Highest Daily Lifetime 7 Plus AST Capital Growth Asset Allocation
with Beneficiary Income Option Portfolio
Highest Daily Lifetime 7 Plus with AST ClearBridge Dividend Growth
Lifetime Income Accelerator Portfolio
Highest Daily Lifetime 6 Plus AST Cohen & Steers Realty Portfolio
Highest Daily Lifetime 6 Plus with AST Defensive Asset Allocation
Lifetime Income Accelerator Portfolio
Spousal Highest Daily Lifetime 6 Plus AST FI Pyramis(R) Asset Allocation
GRO Plus II Portfolio
Highest Daily GRO II AST FI Pyramis(R) Quantitative
Portfolio Portfolio
AST Franklin Templeton Founding Funds
Allocation Portfolio***
AST Franklin Templeton Founding Funds
Plus Portfolio
AST Global Real Estate Portfolio
AST Goldman Sachs Large-Cap Value
Portfolio
AST Goldman Sachs Mid-Cap Growth
Portfolio
AST Goldman Sachs Multi-Asset
Portfolio
AST Goldman Sachs Small-Cap Value
Portfolio
AST Herndon Large-Cap Value Portfolio
AST High Yield Portfolio
AST International Growth Portfolio
AST International Value Portfolio
AST J.P. Morgan Global Thematic
Portfolio
AST J.P. Morgan International Equity
Portfolio
AST J.P. Morgan Strategic
Opportunities Portfolio
AST Jennison Large-Cap Growth
Portfolio
AST Large-Cap Value Portfolio
AST Loomis Sayles Large-Cap Growth
Portfolio
AST Lord Abbett Core Fixed Income
Portfolio
AST MFS Global Equity Portfolio
PERMITTED PORTFOLIOS
AST MFS Growth Portfolio
AST MFS Large-Cap Value Portfolio
AST Mid-Cap Value Portfolio
AST Money Market Portfolio
AST Neuberger Berman Core Bond
Portfolio
AST Neuberger Berman Mid-Cap Growth
Portfolio
AST Neuberger Berman/LSV Mid-Cap
Value Portfolio
AST New Discovery Asset Allocation
Portfolio
AST Parametric Emerging Markets
Equity Portfolio
AST PIMCO Limited Maturity Bond
Portfolio
AST Preservation Asset Allocation
Portfolio
AST Prudential Core Bond Portfolio
AST Prudential Growth Allocation
Portfolio
AST QMA US Equity Alpha Portfolio
AST RCM World Trends Portfolio
AST Schroders Global Tactical
Portfolio
AST Schroders Multi-Asset World
Strategies Portfolio
AST Small-Cap Growth Portfolio
AST Small-Cap Growth Opportunities
Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation
Portfolio
AST T. Rowe Price Equity Income
Portfolio
AST T. Rowe Price Large-Cap Growth
Portfolio
AST T. Rowe Price Natural Resources
Portfolio
28
OPTIONAL BENEFIT NAME* PERMITTED PORTFOLIOS
AST Templeton Global Bond Portfolio
AST Wellington Management Hedged Equity
Portfolio
AST Western Asset Core Plus Bond
Portfolio
The following additional Portfolios are available subject to certain
restrictions:
PROFUND VP**
Consumer Goods
Consumer Services
Financials
Health Care
Industrials
Large-Cap Growth
Large-Cap Value
Mid-Cap Growth
Mid-Cap Value
Real Estate
Small-Cap Growth
Small-Cap Value
Telecommunications
Utilities
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
** For ASAP III, XT6, and ASL II Annuities issued beginning on May 26, 2008,
we limit the Owner's ability to invest in the ProFund VP Portfolios.
Specifically:
. We will not permit those who acquire an ASAP III, XT6, or ASL II Annuity
on or after May 26, 2008 (including beneficiaries who acquire such an
Annuity under the Beneficiary Continuation Option) to invest in any
ProFund VP Portfolio; and
. Those who acquired an ASAP III, XT6, or ASL II Annuity prior to May 26,
2008 may invest in any ProFund VP Portfolio without being subject to the
above restrictions; and
. Those who currently hold an APEX II Annuity, or who acquired an APEX II
Annuity after May 26, 2008, may invest in any ProFund VP Portfolio
(except that beneficiaries who acquire an APEX II Annuity on or after
May 26, 2008 under the Beneficiary Continuation Option may not invest in
any ProFund VP Portfolio).
*** No longer offered.
Certain optional living benefits (e.g., Highest Daily Lifetime 7 Plus) employ a
predetermined formula, under which money is transferred between your chosen
variable sub-accounts and a bond portfolio (e.g., the AST Investment Grade Bond
Sub-account).
WHETHER OR NOT YOU ELECTED AN OPTIONAL BENEFIT SUBJECT TO THE PREDETERMINED
MATHEMATICAL FORMULA, YOU SHOULD BE AWARE THAT THE OPERATION OF THE FORMULA MAY
RESULT IN LARGE-SCALE ASSET FLOWS INTO AND OUT OF THE SUB-ACCOUNTS. THESE ASSET
FLOWS COULD ADVERSELY IMPACT THE PORTFOLIOS, INCLUDING THEIR RISK PROFILE,
EXPENSES AND PERFORMANCE. These asset flows impact not only the Permitted
Sub-accounts used with the benefits but also the other Sub-accounts, because
the portfolios may be used as investments in certain Permitted Sub-accounts
that are structured as funds-of-funds. Because transfers between the
Sub-accounts and the AST Investment Grade Bond Sub-account can be frequent and
the amount transferred can vary from day to day, any of the portfolios could
experience the following effects, among others:
(a) a portfolio's investment performance could be adversely affected by
requiring a subadvisor to purchase and sell securities at inopportune
times or by otherwise limiting the subadvisor's ability to fully
implement the portfolio's investment strategy;
(b) the subadvisor may be required to hold a larger portion of assets in
highly liquid securities than it otherwise would hold, which could
adversely affect performance if the highly liquid securities
underperform other securities (e.g., equities) that otherwise would
have been held;
(c) a portfolio may experience higher turnover than it would have
experienced without the formula, which could result in higher
operating expense ratios and higher transaction costs for the
portfolio compared to other similar funds.
The asset flows caused by the formula may affect Owners in differing ways. In
particular, because the formula is calculated on an individual basis for each
contract, on any particular day, some Owners' Account Value may be transferred
to the AST Investment Grade Bond Sub-account and others Owners' Account Value
may not be transferred. To the extent that there is a large transfer of Account
Value on a given trading day to the AST Investment Grade Bond Sub-account, and
your Account Value is not so transferred, it is possible that the investment
performance of the Sub-accounts in which your Account Value remains invested
will be negatively affected.
The efficient operation of the asset flows caused by the formula depends on
active and liquid markets. If market liquidity is strained, the asset flows may
not operate as intended. For example, it is possible that illiquid markets or
other market stress could cause delays in the transfer of cash from one
portfolio to another portfolio, which in turn could adversely impact
performance.
Please consult the prospectus for the applicable portfolio for additional
information about these effects.
29
THE FOLLOWING TABLE CONTAINS LIMITED INFORMATION ABOUT THE PORTFOLIOS. BEFORE
SELECTING AN INVESTMENT OPTION, YOU SHOULD CAREFULLY REVIEW THE SUMMARY
PROSPECTUSES AND/OR PROSPECTUSES FOR THE PORTFOLIOS, WHICH CONTAIN DETAILS
ABOUT THE INVESTMENT OBJECTIVES, POLICIES, RISKS, COSTS AND MANAGEMENT OF THE
PORTFOLIOS. YOU CAN OBTAIN THE SUMMARY PROSPECTUSES AND PROSPECTUSES FOR THE
PORTFOLIOS BY CALLING 1-888-PRU-2888 OR AT WWW.PRUDENTIALANNUITIES.COM.
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- -------------------------------------------- -------------------------
Access VP High Yield Fund Seeks to provide investment results that ProFund Advisors LLC
correspond generally to the total return of
the high yield market consistent with
maintaining reasonable liquidity.
AIM Variable Insurance Funds Seeks to provide reasonable current Invesco Advisers, Inc.
(Invesco Variable Insurance income and long-term growth of income
Funds) - Invesco V.I. and capital.
Diversified Dividend Fund -
Series I shares
AIM Variable Insurance Funds Seeks long-term growth of capital. Invesco Advisers, Inc.
(Invesco Variable Insurance
Funds) - Invesco V.I. Global
Health Care Fund - Series I
shares
AIM Variable Insurance Funds Seeks capital growth. Invesco Advisers, Inc.
(Invesco Variable Insurance
Funds) - Invesco V.I. Mid Cap
Growth Fund - Series I shares
AIM Variable Insurance Funds Seeks long-term growth of capital. Invesco Advisers, Inc.
(Invesco Variable Insurance
Funds) - Invesco V.I.
Technology Fund - Series I
shares
AST Academic Strategies Asset Seeks long-term capital appreciation. AlphaSimplex Group, LLC
Allocation Portfolio AQR Capital Management,
LLC and CNH Partners, LLC
CoreCommodity
Management, LLC
First Quadrant, L.P.
Jennison Associates LLC
J.P. Morgan Investment
Management, Inc.
Pacific Investment
Management Company LLC
(PIMCO)
Prudential Investments
LLC
Quantitative Management
Associates LLC
Western Asset Management
Company/ Western Asset
Management Company
Limited
AST Advanced Strategies Seeks a high level of absolute return by Brown Advisory LLC
Portfolio using traditional and non-traditional Loomis, Sayles &
investment strategies and by investing in Company, L.P.
domestic and foreign equity and fixed LSV Asset Management
income securities, derivative instruments Prudential Investment
and other investment companies. Management, Inc.
Quantitative Management
Associates LLC
T. Rowe Price
Associates, Inc.
William Blair & Company,
LLC
AST AQR Emerging Markets Seeks long-term capital appreciation. AQR Capital Management,
Equity Portfolio LLC
AST AQR Large-Cap Portfolio Seeks long-term capital appreciation. AQR Capital Management,
LLC
AST Balanced Asset Allocation Seeks to obtain the highest potential total Prudential Investments
Portfolio return consistent with its specified level LLC
of risk tolerance. Quantitative Management
Associates LLC
AST BlackRock Global Seeks a high total return consistent with a BlackRock Financial
Strategies Portfolio moderate level of risk. Management, Inc.
BlackRock International
Limited
30
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- ------------------------------
AST BlackRock iShares ETF Seeks to maximize total BlackRock Financial
Portfolio return with a moderate level Management, Inc.
of risk.
AST BlackRock/Loomis Sayles Seek to maximize total BlackRock Financial
Bond Portfolio (formerly AST return, consistent with Management, Inc.
PIMCO Total Return Bond preservation of capital and BlackRock International
Portfolio) prudent investment management Limited
BlackRock (Singapore) Limited
Loomis, Sayles & Company, L.P.
AST Bond Portfolio 2015 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2016 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2017 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2018 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2019 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2020 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2021 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2022 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2023 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
31
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- ------------------------------
AST Bond Portfolio 2024 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2025 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Bond Portfolio 2026 Seeks the highest total Prudential Investment
return for a specific period Management, Inc.
of time, consistent with the
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST Boston Partners Large-Cap Seeks capital appreciation. Boston Partners
Value Portfolio (formerly AST
Jennison Large-Cap Value
Portfolio)
AST Capital Growth Asset Seeks to obtain the highest Prudential Investments LLC
Allocation Portfolio potential total return Quantitative Management
consistent with its specified Associates LLC
level of risk tolerance.
AST ClearBridge Dividend Seeks income, capital ClearBridge Investments, LLC
Growth Portfolio preservation, and capital
appreciation.
AST Cohen & Steers Realty Seeks to maximize total Cohen & Steers Capital
Portfolio return through investment in Management, Inc.
real estate securities.
AST Defensive Asset Seeks to obtain the highest Prudential Investments LLC
Allocation Portfolio potential total return Quantitative Management
consistent with its specified Associates LLC
level of risk tolerance.
AST FI Pyramis(R) Asset Seeks to maximize total Pyramis Global Advisors, LLC
Allocation Portfolio return. a Fidelity Investments Company
AST FI Pyramis(R) Seeks long-term capital Pyramis Global Advisors, LLC
Quantitative Portfolio growth balanced by current a Fidelity Investments Company
income.
AST Franklin Templeton Seeks capital appreciation Franklin Advisers, Inc.
Founding Funds Allocation while its secondary Franklin Mutual Advisers, LLC
Portfolio investment objective is to Templeton Global Advisors
seek income. Limited
AST Franklin Templeton Seeks capital appreciation. AST Investment Services, Inc.
Founding Funds Plus Portfolio Prudential Investments LLC
AST Global Real Estate Seeks capital appreciation Prudential Real Estate
Portfolio and income. Investors
AST Goldman Sachs Large-Cap Seeks long-term growth of Goldman Sachs Asset
Value Portfolio capital. Management, L.P.
AST Goldman Sachs Mid-Cap Seeks long-term growth of Goldman Sachs Asset
Growth Portfolio capital. Management, L.P.
AST Goldman Sachs Multi-Asset Seeks to obtain a high level Goldman Sachs Asset
Portfolio of total return consistent Management, L.P.
with its level of risk
tolerance.
AST Goldman Sachs Small-Cap Seeks long-term capital Goldman Sachs Asset
Value Portfolio appreciation. Management, L.P.
32
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ------------------------------ ------------------------------
AST Herndon Large-Cap Value Seeks maximum growth of Herndon Capital Management,
Portfolio capital by investing LLC
primarily in the value stocks
of larger companies.
AST High Yield Portfolio Seeks maximum total return, J.P. Morgan Investment
consistent with preservation Management, Inc.
of capital and prudent Prudential Investment
investment management. Management, Inc.
AST International Growth Seeks long-term capital Jennison Associates LLC
Portfolio growth. Neuberger Berman Management
LLC
William Blair & Company, LLC
AST International Value Seeks capital growth. Lazard Asset Management LLC
Portfolio LSV Asset Management
AST Investment Grade Bond Seeks to maximize total Prudential Investment
Portfolio return, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return
is comprised of current
income and capital
appreciation.
AST J.P. Morgan Global Seeks capital appreciation J.P. Morgan Investment
Thematic Portfolio consistent with its specified Management, Inc./ Security
level of risk tolerance. Capital Research & Management
Incorporated
AST J.P. Morgan International Seeks capital growth. J.P. Morgan Investment
Equity Portfolio Management, Inc.
AST J.P. Morgan Strategic Seeks to maximize return J.P. Morgan Investment
Opportunities Portfolio compared to the benchmark Management, Inc.
through security selection
and tactical asset allocation.
AST Jennison Large-Cap Growth Seeks long-term growth of Jennison Associates LLC
Portfolio capital.
AST Large-Cap Value Portfolio Seeks current income and Hotchkis and Wiley Capital
long-term growth of income, Management, LLC
as well as capital
appreciation.
AST Loomis Sayles Large-Cap Seeks capital growth. Income Loomis, Sayles & Company, L.P.
Growth Portfolio realization is not an
investment objective and any
income realized on the
Portfolio's investments,
therefore, will be incidental
to the Portfolio's objective.
AST Lord Abbett Core Fixed Seeks income and capital Lord, Abbett & Co. LLC
Income Portfolio appreciation to produce a
high total return.
AST MFS Global Equity Seeks capital growth. Massachusetts Financial
Portfolio Services Company
AST MFS Growth Portfolio Seeks long-term capital Massachusetts Financial
growth and future, rather Services Company
than current income.
AST MFS Large-Cap Value Seeks capital appreciation. Massachusetts Financial
Portfolio Services Company
AST Mid-Cap Value Portfolio Seeks to provide capital EARNEST Partners, LLC
growth by investing primarily WEDGE Capital Management
in mid-capitalization stocks L.L.P.
that appear to be undervalued.
AST Money Market Portfolio Seeks high current income and Prudential Investment
maintain high levels of Management, Inc.
liquidity.
AST Neuberger Berman Core Seeks to maximize total Neuberger Berman Fixed Income
Bond Portfolio return consistent with the LLC
preservation of capital.
33
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ------------------------------ ------------------------------
AST Neuberger Berman Mid-Cap Seeks capital growth. Neuberger Berman Management
Growth Portfolio LLC
AST Neuberger Berman/LSV Seeks capital growth. LSV Asset Management
Mid-Cap Value Portfolio Neuberger Berman Management
LLC
AST New Discovery Asset Seeks total return. C.S. McKee, LP
Allocation Portfolio EARNEST Partners, LLC
Epoch Investment Partners,
Inc.
Longfellow Investment
Management Co. LLC
Parametric Portfolio
Associates LLC
Security Investors, LLC
Thompson, Siegel & Walmsley
LLC
Vision Capital Management,
Inc.
AST Parametric Emerging Seeks long-term capital Parametric Portfolio
Markets Equity Portfolio appreciation. Associates LLC
AST PIMCO Limited Maturity Seeks to maximize total Pacific Investment Management
Bond Portfolio return consistent with Company LLC (PIMCO)
preservation of capital and
prudent investment management.
AST Preservation Asset Seeks to obtain the highest Prudential Investments LLC
Allocation Portfolio potential total return Quantitative Management
consistent with its specified Associates LLC
level of risk tolerance.
AST Prudential Core Bond Seeks to maximize total Prudential Investment
Portfolio return consistent with the Management, Inc.
long-term preservation of
capital.
AST Prudential Growth Seeks total return. Prudential Investment
Allocation Portfolio Management, Inc.
Quantitative Management
Associates LLC
AST QMA Emerging Markets Seeks long-term capital Quantitative Management
Equity Portfolio appreciation. Associates LLC
AST QMA Large-Cap Portfolio Seeks long-term capital Quantitative Management
appreciation. Associates LLC
AST QMA US Equity Alpha Seeks long term capital Quantitative Management
Portfolio appreciation. Associates LLC
AST Quantitative Modeling Seeks a high potential return Quantitative Management
Portfolio while attempting to mitigate Associates LLC
downside risk during adverse
market cycles.
AST RCM World Trends Portfolio Seeks highest potential total Allianz Global Investors U.S.
return consistent with its LLC
specified level of risk
tolerance.
AST Schroders Global Tactical Seeks to outperform its Schroder Investment
Portfolio blended performance benchmark. Management North America Inc./
Schroder Investment
Management North America Ltd.
AST Schroders Multi-Asset Seeks long-term capital Schroder Investment
World Strategies Portfolio appreciation. Management North America Inc./
Schroder Investment
Management North America Ltd.
AST Small-Cap Growth Portfolio Seeks long-term capital Eagle Asset Management, Inc.
growth. Emerald Mutual Fund Advisers
Trust
AST Small-Cap Growth Seeks capital growth. RS Investment Management Co.
Opportunities Portfolio LLC
(formerly AST Federated Wellington Management
Aggressive Growth Portfolio): Company, LLP
AST Small-Cap Value Portfolio Seeks to provide long-term ClearBridge Investments, LLC
capital growth by investing J.P. Morgan Investment
primarily in Management, Inc.
small-capitalization stocks LMC Investments, LLC
that appear to be undervalued.
34
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- ------------------------------
AST T. Rowe Price Asset Seeks a high level of total T. Rowe Price Associates, Inc.
Allocation Portfolio return by investing primarily
in a diversified portfolio of
equity and fixed income
securities.
AST T. Rowe Price Equity Seeks to provide substantial T. Rowe Price Associates, Inc.
Income Portfolio dividend income as well as
long-term growth of capital
through investments in the
common stocks of established
companies.
AST T. Rowe Price Large-Cap Seeks long-term growth of T. Rowe Price Associates, Inc.
Growth Portfolio capital by investing
predominantly in the equity
securities of a limited
number of large, carefully
selected, high-quality U.S.
companies that are judged
likely to achieve superior
earnings growth.
AST T. Rowe Price Natural Seeks long-term capital T. Rowe Price Associates, Inc.
Resources Portfolio growth primarily through
investing in the common
stocks of companies that own
or develop natural resources
(such as energy products,
precious metals and forest
products) and other basic
commodities.
AST Templeton Global Bond Seeks to provide current Franklin Advisers, Inc.
Portfolio income with capital
appreciation and growth of
income.
AST Wellington Management Seeks to outperform a mix of Wellington Management Company
Hedged Equity Portfolio 50% Russell 3000(R) Index, LLP
20% MSCI EAFE Index, and 30%
Treasury Bill Index over a
full market cycle by
preserving capital in adverse
markets utilizing an options
strategy while maintaining
equity exposure to benefit
from up markets through
investments in Wellington
Management's equity
investment strategies.
AST Western Asset Core Plus Seeks to maximize total Western Asset Management
Bond Portfolio return, consistent with Company/ Western Asset
prudent investment management Management Company Limited
and liquidity needs, by
investing to obtain the
average duration specified
for the Portfolio.
AST Western Asset Emerging Seeks to maximize total Western Asset Management
Markets Debt Portfolio return. Company/ Western Asset
Management Company Limited
NVIT Developing Markets Fund Seeks long-term capital Nationwide Fund Advisors/The
appreciation, under normal Boston Company Asset
conditions by investing at Management, LLC
least 80% of its net assets
in equity securities of
companies that are tied
economically to emerging
market countries
ProFund VP Asia 30 Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the ProFunds
Asia 30 Index (the "Index").
35
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ------------------------------ -----------------------------
ProFund VP Banks Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. BanksSM Index (the
"Index").
ProFund VP Basic Materials Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Basic MaterialsSM Index
(the "Index").
ProFund VP Bear Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
the inverse (-1x) of the
daily performance of the S&P
500(R) (the "Index").
ProFund VP Biotechnology Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. BiotechnologySM Index
(the "Index").
ProFund VP Bull Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P
500(R)(the "Index").
ProFund VP Consumer Goods Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Consumer GoodsSM Index
(the "Index").
ProFund VP Consumer Services Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Consumer ServicesSM
Index (the "Index").
ProFund VP Europe 30 Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the ProFunds
Europe 30 Index (the "Index").
ProFund VP Financials Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. FinancialsSM Index (the
"Index").
ProFund VP Health Care Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Health Care/SM/ Index
(the "Index").
ProFund VP Industrials Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. IndustrialsSM Index (the
"Index").
ProFund VP Internet Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
InternetSM Composite/SM/
Index.
36
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- -----------------------------
ProFund VP Japan Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Nikkei 225
Stock Average (the "Index").
The Fund seeks to provide a
return consistent with an
investment in the component
equities in the Index hedged
to U.S. Dollars. The Fund
determines its success in
meeting this investment
objective by comparing its
daily return on a given day
with the daily performance of
the dollar denominated Nikkei
225 futures contracts traded
in the United States.
ProFund VP Large-Cap Growth Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P 500(R)
Growth Index (the "Index").
ProFund VP Large-Cap Value Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P 500(R)
Value Index (the "Index").
ProFund VP Mid-Cap Growth Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P MidCap
400(R) Growth Index (the
"Index").
ProFund VP Mid-Cap Value Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P MidCap
400(R) Value Index (the
"Index").
ProFund VP NASDAQ-100 Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the
NASDAQ-100(R) Index (the
"Index").
ProFund VP Oil & Gas Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Oil & Gas/SM/ Index (the
"Index").
ProFund VP Pharmaceuticals Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. PharmaceuticalsSM Index
(the "Index").
ProFund VP Precious Metals Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
Precious MetalsSM Index (the
"Index").
ProFund VP Real Estate Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Real EstateSM Index (the
"Index").
37
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- -----------------------------
ProFund VP Rising Rates Seeks daily investment ProFund Advisors LLC
Opportunity results, before fees and
expenses, that correspond to
one and one-quarter times the
inverse (-1.25x) of the daily
price movement of the most
recently issued 30-year U.S.
Treasury Bond ("Long Bond").
ProFund VP Semiconductor Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. Semiconductors IndexSM
(the "Index").
ProFund VP Short Mid-Cap Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
the inverse (-1x) of the
daily performance of the S&P
MidCap 400(R) (the "Index").
ProFund VP Short NASDAQ-100 Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
the inverse (-1x) of the
daily performance of the
NASDAQ-100(R) Index (the
"Index").
ProFund VP Short Small-Cap Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
the inverse (-1x) of the
daily performance of the
Russell 2000(R) Index (the
"Index").
ProFund VP Small-Cap Growth Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P
SmallCap 600(R) Growth
Index(R) (the "Index").
ProFund VP Small-Cap Value Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the S&P
SmallCap 600(R) Value Index
(the "Index").
ProFund VP Technology Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. TechnologySM Index (the
"Index").
ProFund VP Telecommunications Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. TelecommunicationsSM
Index (the "Index").
ProFund VP U.S. Government Seeks daily investment ProFund Advisors LLC
Plus results, before fees and
expenses, that correspond to
one and one-quarter times
(1.25x) the daily movement of
the most recently issued
30-year U.S. Treasury bond
("Long Bond").
ProFund VP UltraBull Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
two times (2x) the daily
performance of the S&P 500(R)
(the "Index").
38
PORTFOLIO INVESTMENT PORTFOLIO
NAME OBJECTIVES ADVISER(S)/SUBADVISER(S)
--------- ----------------------------- -----------------------------
ProFund VP UltraMid-Cap Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
two times (2x) the daily
performance of the S&P MidCap
400(R) (the "Index").
ProFund VP UltraNASDAQ-100 Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
two times (2x) the daily
performance of the
NASDAQ-100(R) Index (the
"Index").
ProFund VP UltraSmall-Cap Seeks daily investment ProFund Advisors LLC
results, before fees and
expenses, that correspond to
two times (2x) the daily
performance of the Russell
2000(R) Index (the "Index").
ProFund VP Utilities Seeks investment results, ProFund Advisors LLC
before fees and expenses,
that correspond to the
performance of the Dow Jones
U.S. UtilitiesSM Index (the
"Index").
SP International Growth Seeks long-term growth of Jennison Associates LLC
Portfolio capital. Neuberger Berman Management
LLC
William Blair & Company, LLC
Wells Fargo Advantage VT Seeks long-term capital Wells Fargo Funds Management,
International Equity Fund - appreciation. LLC, advisor;
Class 1 Wells Capital Management
Inc., subadvisor
Wells Fargo Advantage VT Seeks long-term capital Wells Fargo Funds Management,
Intrinsic Value Fund - Class 2 appreciation. LLC, advisor;
Metropolitan West Capital
Management, LLC, subadvisor
Wells Fargo Advantage VT Seeks long-term capital Wells Fargo Funds Management,
Omega Growth Fund - Class 1 appreciation. LLC, advisor;
Wells Capital Management
Inc., subadvisor
Wells Fargo Advantage VT Seeks long-term capital Wells Fargo Funds Management,
Small Cap Growth Fund - Class appreciation. LLC, advisor;
1 Wells Capital Management
Inc., subadvisor
Dow Jones has no relationship to the ProFunds VP, other than the licensing of
the Dow Jones sector indices and its service marks for use in connection with
the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted
by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes
any representations regarding the advisability of investing in the ProFunds VP.
Prudential Real Estate Investors is a business unit of Prudential Investment
Management, Inc.
Pyramis Global Advisors, LLC a business unit of Fidelity Investments
Security Capital Research & Management Incorporated is a wholly owned
subsidiary of J.P. Morgan Investment Management Inc.
WHAT ARE THE FIXED ALLOCATIONS?
The Fixed Allocations consist of the MVA Fixed Allocations, the DCA Fixed Rate
Options used with our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12
Month DCA Program"), the Fixed Allocations used with our dollar-cost averaging
program, and (with respect to Highest Daily Lifetime Five only), the Benefit
Fixed Rate Account. We describe the Benefit Fixed Rate Account in the section
of the Prospectus concerning Highest Daily Lifetime Five. We describe the Fixed
Allocations used with our dollar cost averaging program outside of the 6 or 12
Month DCA Program in the section entitled "Do You Offer Dollar Cost Averaging?"
We no longer offer our 6 or 12 Month DCA Program.
MVA FIXED ALLOCATIONS. We offer MVA Fixed Allocations of different durations
during the accumulation period. These "MVA Fixed Allocations" earn a guaranteed
fixed rate of interest as long as you remain invested for a specified period of
time, called the "Guarantee Period." In most states, we offer MVA Fixed
Allocations with Guarantee Periods from 1 to 10 years. We may also offer
special purpose MVA Fixed Allocations for use with certain optional investment
programs. We guarantee the fixed rate as long as you remain invested for the
entire Guarantee Period. However, for MVA Fixed Allocations, if you withdraw or
transfer Account Value before the end of the Guarantee Period, we will adjust
the value of your withdrawal or transfer based on a formula, called a "Market
Value Adjustment." The Market Value Adjustment can either be positive or
negative, depending on the movement of applicable interest rates. Please refer
to the section entitled "How does the Market Value Adjustment
39
Work?" for a description of the formula along with examples of how it is
calculated. You may allocate Account Value to more than one MVA Fixed
Allocation at a time.
MVA Fixed Allocations are not available in Washington, Nevada, North Dakota,
Maryland and Vermont. Availability of MVA Fixed Allocations is subject to
change and may differ by state and by the annuity product you purchase. Please
call Prudential Annuities at 1-888-PRU-2888 to determine availability of MVA
Fixed Allocations in your state and for your annuity product. You may not
allocate Account Value to MVA Fixed Allocations if you have elected the
following Optional Benefits: Lifetime Five Income Benefit, Spousal Lifetime
Five Income Benefit, Highest Daily Lifetime Five Income Benefit, Highest Daily
Lifetime Seven Income Benefit, Spousal Highest Daily Lifetime Seven Income
Benefit, Highest Daily Value Death Benefit, Highest Daily Lifetime Seven with
Beneficiary Income Option, Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option, Highest Daily Lifetime Seven with Lifetime Income
Accelerator, GRO, GRO Plus, GRO Plus 2008, Highest Daily GRO, Highest Daily GRO
II, GRO Plus II, Highest Daily Lifetime 7 Plus Income Benefit, Spousal Highest
Daily Lifetime 7 Plus, Highest Daily Lifetime 7 Plus with Beneficiary Income
Option, Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option,
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator, Highest Daily
Lifetime 6 Plus, Highest Daily Lifetime 6 Plus with Lifetime Income
Accelerator, and Spousal Highest Daily Lifetime 6 Plus. The interest rate that
we credit to the MVA Fixed Allocations may be reduced by an amount that
corresponds to the asset-based charges assessed against the Sub-accounts.
No specific fees or expenses are deducted when determining the rate we credit
to an MVA Fixed Allocation. However, for some of the same reasons that we
deduct the Insurance Charge against Account Value allocated to the
Sub-accounts, we also take into consideration mortality, expense,
administration, profit and other factors in determining the interest rates we
credit to MVA Fixed Allocations, and therefore, we credit lower interest rates
due to the existence of these factors than we otherwise would. Any CDSC or Tax
Charge applies to amounts that are taken from the Sub-accounts or the MVA Fixed
Allocations.
DCA FIXED RATE OPTIONS. In addition to Fixed Allocations that are subject to a
Market Value Adjustment, we offer DCA Fixed Rate Options that are used with our
6 or 12 Month Dollar Cost Averaging Program ("6 or 12 Month DCA Program"), and
are not subject to any MVA. Account Value allocated to the DCA Fixed Rate
Options earns the declared rate of interest while it is transferred over a 6
month or 12 month period into the Sub-accounts that you have designated.
Because the interest we credit is applied against a balance that declines as
transfers are made periodically to the Sub-accounts, you do not earn interest
on the full amount that you allocated initially to the DCA Fixed Rate Options.
A dollar cost averaging program does not assure a profit, or protect against a
loss. We no longer offer our 6 or 12 Month DCA Program.
40
FEES AND CHARGES
The charges under each Annuity are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under each Annuity. They are also designed, in the aggregate, to compensate us
for the risks of loss we assume. If, as we expect, the charges that we collect
from the Annuities exceed our total costs in connection with the Annuities, we
will earn a profit. Otherwise we will incur a loss. For example, Prudential
Annuities may make a profit on the Insurance Charge if, over time, the actual
costs of providing the guaranteed insurance obligations under an Annuity are
less than the amount we deduct for the Insurance Charge. To the extent we make
a profit on the Insurance Charge, such profit may be used for any other
corporate purpose, including payment of other expenses that Prudential
Annuities incurs in promoting, distributing, issuing and administering an
Annuity and, in the case of XT6, ASAP III and APEX II to offset a portion of
the costs associated with offering any Credits which are funded through
Prudential Annuities' general account.
The rates of certain of our charges have been set with reference to estimates
of the amount of specific types of expenses or risks that we will incur. In
most cases, this prospectus identifies such expenses or risks in the name of
the charge; however, the fact that any charge bears the name of, or is designed
primarily to defray a particular expense or risk does not mean that the amount
we collect from that charge will never be more than the amount of such expense
or risk, nor does it mean that we may not also be compensated for such expense
or risk out of any other charges we are permitted to deduct by the terms of the
Annuity. A portion of the proceeds that Prudential Annuities receives from
charges that apply to the Sub-accounts may include amounts based on market
appreciation of the Sub-account values including, for ASAP III, XT6 and APEX
II, appreciation on amounts that represent any Credits.
WHAT ARE THE CONTRACT FEES AND CHARGES?
CONTINGENT DEFERRED SALES CHARGE ("CDSC"): We do not deduct a sales charge from
purchase payments you make to your Annuity. However, we may deduct a CDSC if
you surrender your Annuity or when you make a partial withdrawal. The CDSC
reimburses us for expenses related to sales and distribution of the Annuity,
including commissions, marketing materials and other promotional expenses. The
CDSC is calculated as a percentage of your Purchase Payment being surrendered
or withdrawn during the applicable Annuity Year. For purposes of calculating
the CDSC, we consider the year following the Issue Date of your Annuity as Year
1. The amount of the CDSC decreases over time, measured from the Issue Date of
the Annuity. The CDSC percentages for ASAP III, APEX II and XT6 are shown under
"Summary of Contract Fees and Charges". No CDSC is deducted from ASL II
Annuities. If you purchase XT6 and make a withdrawal that is subject to a CDSC,
we may use part of that CDSC to recoup our costs of providing the Credit.
However, we do not impose any CDSC on your withdrawal of a Credit amount.
With respect to a partial withdrawal, we calculate the CDSC by assuming that
any available free withdrawal amount is taken out first (see How Much Can I
Withdraw as a Free Withdrawal?). If the free withdrawal amount is not
sufficient, we then assume that withdrawals are taken from purchase payments
that have not been previously withdrawn, on a first-in, first-out basis, and
subsequently from any other Account Value in the Annuity.
For purposes of calculating any applicable CDSC on a surrender, the purchase
payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you have
made prior partial withdrawals or if your Account Value has declined in value
due to negative market performance. In that scenario, we would determine the
CDSC amount as the applicable percentage of the purchase payments being
withdrawn, rather than as a percentage of the remaining Account Value or
withdrawal request. Thus, the CDSC would be greater than if it were calculated
as a percentage of remaining Account Value or withdrawal amount.
We may waive any applicable CDSC under certain circumstances including certain
medically-related circumstances or when taking a Minimum Distribution from an
Annuity purchased as a "qualified" investment. Free Withdrawals,
Medically-Related Surrenders and Minimum Distributions are each explained more
fully in the section entitled "Access to Your Account Value".
TRANSFER FEE: Currently, you may make 20 free transfers between investment
options each Annuity Year. We currently charge $10.00 for each transfer after
the 20/th/ in each Annuity Year. The fee will never be more than $15.00 for
each transfer. We do not consider transfers made as part of a Dollar Cost
Averaging, Automatic Rebalancing or asset allocation program when we count the
twenty free transfers. All transfers made on the same day will be treated as
one (1) transfer. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the Transfer
Fee and are not counted toward the twenty free transfers. Similarly, transfers
made under our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12 Month DCA
Program") and transfers made pursuant to a formula used with an optional
benefit are not subject to the Transfer Fee and are not counted toward the 20
free transfers. We may reduce the number of free transfers allowable each
Annuity Year (subject to a minimum of eight) without charging a Transfer Fee
unless you make use of electronic means to transmit your transfer requests. We
may eliminate the Transfer Fee for transfer requests transmitted electronically
or through other means that reduce our processing costs. If you are enrolled in
any program that does not permit transfer requests to be transmitted
electronically, the Transfer Fee will not be waived.
ANNUAL MAINTENANCE FEE: During the accumulation period we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account
Value (including any amount in Fixed Allocations), whichever is less. This fee
will be deducted annually on the anniversary of the Issue Date of your Annuity
or, if you surrender your Annuity during the Annuity Year, the fee is deducted
at the time of surrender. The fee is taken out only from the Sub-accounts. With
respect to ASAP III, APEX II and ASL II, currently, the Annual Maintenance Fee
is only deducted if your Account Value is less than $100,000 on the anniversary
of the Issue Date or at the time of surrender. With respect to XT6, we deduct
the Annual Maintenance Fee regardless of Account Value. We do not impose the
Annual Maintenance Fee upon annuitization, the payment of a
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Death Benefit, or a Medically-Related Surrender. We may increase the Annual
Maintenance Fee. However, any increase will only apply to Annuities issued
after the date of the increase. For beneficiaries that elect the Beneficiary
Continuation Option, the Annual Maintenance Fee is the lesser of $30 or 2% of
Account Value. For a nonqualified Beneficiary Continuation Option, the fee is
only applicable if the Account Value is less than $25,000 at the time the fee
is assessed.
TAX CHARGE: Several states and some municipalities charge premium taxes or
similar taxes on annuities that we are required to pay. The amount of tax will
vary from jurisdiction to jurisdiction and is subject to change. We pay the tax
either when purchase payments are received, upon surrender or when the Account
Value is applied under an annuity option. The tax charge is designed to
approximate the taxes that we are required to pay and is assessed as a
percentage of purchase payments, surrender value, or Account Value as
applicable. The tax charge currently ranges up to 3 1/2%. We reserve the right
to deduct the charge either at the time the tax is imposed, upon a full
surrender of the Annuity, or upon annuitization. We may assess a charge against
the Sub-accounts and the Fixed Allocations equal to any taxes which may be
imposed upon the separate accounts.
We will pay company income taxes on the taxable corporate earnings created by
this separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the Annuity. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets, including
separate account assets, which are treated as company assets under applicable
income tax law. These benefits reduce our overall corporate income tax
liability. Under current law, such benefits may include foreign tax credits and
corporate dividends received deductions. We do not pass these tax benefits
through to holders of the separate account annuity contracts because (i) the
contract owners are not the owners of the assets generating these benefits
under applicable income tax law and (ii) we do not currently include company
income taxes in the tax charges you pay under the contract.
INSURANCE CHARGE: We deduct an Insurance Charge daily. The charge is assessed
against the daily assets allocated to the Sub-accounts and is equal to the
amount indicated under "Summary of Contract Fees and Charges". The Insurance
Charge is the combination of the Mortality & Expense Risk Charge and the
Administration Charge. The Insurance Charge is intended to compensate
Prudential Annuities for providing the insurance benefits under each Annuity,
including each Annuity's basic Death Benefit that may provide guaranteed
benefits to your beneficiaries even if the market declines and the risk that
persons we guarantee annuity payments to will live longer than our assumptions.
The charge also compensates us for administrative costs associated with
providing the Annuity benefits, including preparation of the contract and
prospectus, confirmation statements, annual account statements and annual
reports, legal and accounting fees as well as various related expenses.
Finally, the charge compensates us for the risk that our assumptions about the
mortality risks and expenses under each Annuity are incorrect and that we have
agreed not to increase these charges over time despite our actual costs. We may
increase the portion of the total Insurance Charge that is deducted for
administrative costs; however, any increase will only apply to Annuities issued
after the date of the increase.
The Insurance Charge is not deducted against assets allocated to a Fixed
Allocation. However, for some of the same reasons that we deduct the Insurance
Charge against Account Value allocated to the Sub-accounts, we also take into
consideration mortality, expense, administration, profit and other factors in
determining the interest rates we credit to Fixed Allocations or the DCA Fixed
Rate Option, and therefore, we credit lower interest rates due to the existence
of these factors than we otherwise would.
DISTRIBUTION CHARGE: For ASAP III and XT6, we deduct a Distribution Charge
daily. The charge is assessed against the average assets allocated to the
Sub-accounts and is equal to the amount indicated under "Summary of Contract
Fees and Charges" on an annual basis. The Distribution Charge is intended to
compensate us for a portion of our acquisition expenses under the Annuity,
including promotion and distribution of the Annuity and, with respect to XT6,
the costs associated with offering Credits which are funded through Prudential
Annuities general account. The Distribution Charge is deducted against your
Annuity's Account Value and any increases or decreases in your Account Value
based on market fluctuations of the Sub-accounts will affect the charge.
CHARGES FOR OPTIONAL BENEFITS: If you elect to purchase certain optional
benefits, we will deduct an additional charge. For some optional benefits, the
charge is deducted from your Account Value allocated to the Sub-accounts. This
charge is included in the daily calculation of the Unit Price for each
Sub-account. For certain other optional benefits, such as Highest Daily
Lifetime 6 Plus, the charge is assessed against the greater of Account Value
and Protected Withdrawal Value and taken out of the Sub-accounts and DCA Fixed
Rate Options periodically. Please refer to the section entitled "Summary of
Contract Fees and Charges" for the list of charges for each optional benefit.
SETTLEMENT SERVICE CHARGE: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge,
although the Insurance Charge no longer applies. The charge is assessed daily
against the assets allocated to the Sub-accounts and is equal to an annual
charge of 1.00% for nonqualified Annuities and 1.40% for qualified Annuities.
FEES AND EXPENSES INCURRED BY THE PORTFOLIOS: Each portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. These
fees and expenses are assessed against each portfolio's net assets, and
reflected daily by each portfolio before it provides Prudential Annuities with
the net asset value as of the close of business each Valuation Day. More
detailed information about fees and expenses can be found in the prospectuses
for the portfolios, which can be obtained by calling 1-888-PRU-2888, or at
www.prudentialannuities.com.
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WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
No specific fees or expenses are deducted when determining the rate we credit
to a Fixed Allocation. However, for some of the same reasons that we deduct the
Insurance Charge against Account Value allocated to the Sub-accounts, we also
take into consideration mortality, expense, administration, profit and other
factors in determining the interest rates we credit to Fixed Allocations, and
therefore, we credit lower interest rates due to the existence of these factors
than we otherwise would. Any CDSC or Tax Charge applies to amounts that are
taken from the Sub-accounts or the Fixed Allocations. A Market Value Adjustment
may also apply to transfers, certain withdrawals, surrender or annuitization
from an MVA Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?
If you select a fixed payment option upon Annuitization, the amount of each
fixed payment will depend on the Account Value of your Annuity when you elected
to annuitize. There is no specific charge deducted from these payments;
however, the amount of each annuity payment reflects assumptions about our
insurance expenses. If you select a variable payment option that we may offer,
then the amount of your benefits will reflect changes in the value of your
Annuity and will be subject to charges that apply under the variable immediate
annuity option. Also, a tax charge may apply (see "Tax Charge" above).
Currently, we only offer fixed payment options.
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES
We may reduce or eliminate certain fees and charges or alter the manner in
which the particular fee or charge is deducted. For example, we may reduce the
amount of any CDSC or the length of time it applies, reduce or eliminate the
amount of the Annual Maintenance Fee or reduce the portion of the total
Insurance Charge that is deducted as an Administration Charge. We will not
discriminate unfairly between Annuity purchasers if and when we reduce any fees
and charges.
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PURCHASING YOUR ANNUITY
PLEASE NOTE THAT THESE ANNUITIES ARE NO LONGER AVAILABLE FOR NEW SALES. THE
INFORMATION PROVIDED IN THIS SECTION IS FOR INFORMATIONAL PURPOSES ONLY.
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?
We may apply certain limitations, restrictions, and/or underwriting standards
as a condition of our issuance of an Annuity and/or acceptance of Purchase
Payments. ALL SUCH CONDITIONS ARE DESCRIBED BELOW.
INITIAL PURCHASE PAYMENT: We no longer allow new purchases of these Annuities.
Previously, you must have made a minimum initial Purchase Payment as follows:
$1,000 for ASAP III, $10,000 for XT6 and APEX II and $15,000 for ASL II.
However, if you decided to make payments under a systematic investment or an
electronic funds transfer program, we would have accepted a lower initial
Purchase Payment provided that, within the first Annuity Year, your subsequent
purchase payments plus your initial Purchase Payment totaled the minimum
initial Purchase Payment amount required for the Annuity purchased.
We must approve any initial and additional Purchase Payments where the total
amount of Purchase Payments equal $1,000,000 or more with respect to this
Annuity and any other annuities you are purchasing from us (or that you already
own) and/or our affiliates. To the extent allowed by state law, that required
approval also will apply to a proposed change of owner of the Annuity, if as a
result of the ownership change, total Purchase Payments with respect to this
Annuity and all other annuities owned by the new Owner would equal or exceed
that $1 million threshold. We may limit additional Purchase Payments under
other circumstances, as explained in "Additional Purchase Payments," below.
Applicable laws designed to counter terrorists and prevent money laundering
might, in certain circumstances, require us to block an Annuity Owner's ability
to make certain transactions, and thereby refuse to accept Purchase Payments or
requests for transfers, partial withdrawals, total withdrawals, death benefits,
or income payments until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
and your Annuity to government regulators.
SPECULATIVE INVESTING: Do not purchase this Annuity if you, anyone acting on
your behalf, and/or anyone providing advice to you plan to use it, or any of
its riders, for speculation, arbitrage, viatication or any other type of
collective investment scheme now or at any time prior to termination of the
Annuity. Your Annuity may not be traded on any stock exchange or secondary
market. By purchasing this Annuity, you represent and warrant that you are not
using this Annuity, or any of its riders, for speculation, arbitrage,
viatication or any other type of collective investment scheme.
Currently, we will not issue an Annuity, permit changes in ownership or allow
assignments to certain ownership types, including but not limited to:
corporations, partnerships, endowments and grantor trusts with multiple
grantors. Further, we will only issue an Annuity, allow changes of ownership
and/or permit assignments to certain ownership types if the Annuity is held
exclusively for the benefit of the designated annuitant. These rules are
subject to state law. Additionally, we will not permit election or re-election
of any optional death benefit or optional living benefit by certain ownership
types. We may issue an Annuity in ownership structures where the annuitant is
also the participant in a Qualified or Nonqualified employer sponsored plan and
the Annuity represents his or her segregated interest in such plan. We reserve
the right to further limit, restrict and/or change to whom we will issue an
Annuity in the future, to the extent permitted by state law. Further, please be
aware that we do not provide administration for employer-sponsored plans and
may also limit the number of plan participants that may elect to use our
Annuity as a funding vehicle.
Except as noted below, purchase payments must be submitted by check drawn on a
U.S. bank, in U.S. dollars, and made payable to Prudential Annuities. Purchase
payments may also be submitted via 1035 exchange or direct transfer of funds.
Under certain circumstances, purchase payments may be transmitted to Prudential
Annuities via wiring funds through your Financial Professional's broker-dealer
firm. Additional purchase payments may also be applied to your Annuity under an
electronic funds transfer arrangement where you authorize us to deduct money
directly from your bank account. We may reject any payment if it is received in
an unacceptable form. Our acceptance of a check is subject to our ability to
collect funds.
AGE RESTRICTIONS: Unless we agree otherwise and subject to our rules, the Owner
(or Annuitant if entity owned) must not be older than a maximum issue age as of
the Issue Date of the Annuity as follows: age 80 for ASAP III, age 75 for XT6
and age 85 for APEX II and ASL II. If an Annuity is owned jointly, the oldest
of the Owners must not be older than the maximum issue age on the Issue Date.
You should consider your need to access your Account Value and whether the
Annuity's liquidity features will satisfy that need. Under the Beneficiary
Annuity, the maximum issue age is 70 based on the Key Life. If you take a
distribution prior to age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. The availability and level of
protection of certain optional benefits may vary based on the age of the Owner
on the Issue Date of the Annuity or the date of the Owner's death.
"BENEFICIARY" ANNUITY
If you are a beneficiary of an annuity that was owned by a decedent, subject to
the following requirements, you may transfer the proceeds of the decedent's
annuity into one of the Annuities described in this Prospectus and continue
receiving the distributions that are required by the tax laws. This transfer
option is only available for purchase of an IRA, Roth IRA, or a nonqualified
annuity, for distributions based on lives age 70 or
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under. This transfer option is also not available if the proceeds are being
transferred from an annuity issued by us or one of our affiliates and the
annuity offers a "Beneficiary Continuation Option".
Upon purchase, the Annuity will be issued in the name of the decedent for your
benefit. You must take required distributions at least annually, which we will
calculate based on the applicable life expectancy in the year of the decedent's
death, using Table 1 in IRS Publication 590. These distributions are not
subject to any CDSC.
For IRAs and Roth IRAs, distributions must begin by December 31 of the year
following the year of the decedent's death. If you are the surviving spouse
beneficiary, distributions may be deferred until the decedent would have
attained age 70 1/2. However, if you choose to defer distributions, you are
responsible for complying with the distribution requirements under the Code,
and you must notify us when you would like distributions to begin. For
additional information regarding the tax considerations applicable to
beneficiaries of an IRA or Roth IRA, see "Required Distributions Upon Your
Death for Qualified Annuity Contracts" in the Tax Considerations section of
this Prospectus.
For nonqualified Annuities, distributions must begin within one year of the
decedent's death. For additional information regarding the tax considerations
applicable to beneficiaries of a nonqualified Annuity see "Required
Distributions Upon Your Death for Nonqualified Annuity Contracts" in the Tax
Considerations section of your prospectus.
You may choose to take more than your required distribution. You may take
withdrawals in excess of your required distributions, however your withdrawal
may be subject to the Contingent Deferred Sales Charge. Any withdrawals reduce
the required distribution for the year. All applicable charges will be assessed
against your Annuity, such as the Insurance Charge and the Annual Maintenance
Fee.
The Annuity may provide a basic Death Benefit upon death, and you may name
"successors" who may either receive the Death Benefit as a lump sum or continue
receiving distributions after your death under the Beneficiary Continuation
Option.
Please note the following additional limitations for a Beneficiary Annuity:
.. No additional purchase payments are permitted. You may only make a one-time
initial Purchase Payment transferred to us directly from another annuity or
eligible account. You may not make your Purchase Payment as an indirect
rollover, or combine multiple "Transfer of Assets" or "TOA's" into a single
contract as part of this "Beneficiary" Annuity. You may not elect any
optional living or death benefits. Annuity Rewards is not available.
.. You may not annuitize the Annuity; no annuity options are available.
.. You may participate only in the following programs: Auto-Rebalancing, Dollar
Cost Averaging (but not the 6 or 12 Month Dollar Cost Averaging Program),
Systematic Withdrawals, and Third Party Investment Advisor.
.. You may not assign or change ownership of the Annuity, and you may not
change or designate another life upon which distributions are based. A
"beneficiary annuity" may not be co-owned.
.. If the Annuity is funded by means of transfer from another "Beneficiary
Annuity" with another company, we require that the sending company or the
beneficial owner provide certain information in order to ensure that
applicable required distributions have been made prior to the transfer of
the contract proceeds to us. We further require appropriate information to
enable us to accurately determine future distributions from the Annuity.
Please note we are unable to accept a transfer of another "Beneficiary
Annuity" where taxes are calculated based on an exclusion amount or an
exclusion ratio of earnings to original investment. We are also unable to
accept a transfer of an annuity that has annuitized.
.. The beneficial owner of the Annuity can be an individual, grantor trust, or,
for an IRA or Roth IRA, a qualified trust. In general, a qualified trust
(1) must be valid under state law; (2) must be irrevocable or became
irrevocable by its terms upon the death of the IRA or Roth IRA owner; and
(3) the beneficiaries of the trust who are beneficiaries with respect to the
trust's interest in this Annuity must be identifiable from the trust
instrument and must be individuals. A qualified trust must provide us with a
list of all beneficiaries to the trust (including contingent and remainder
beneficiaries with a description of the conditions on their entitlement),
all of whom must be individuals, as of September 30/th/ of the year
following the year of death of the IRA or Roth IRA owner, or date of Annuity
application if later. The trustee must also provide a copy of the trust
document upon request. If the beneficial owner of the Annuity is a grantor
trust, distributions must be based on the life expectancy of the grantor. If
the beneficial owner of the Annuity is a qualified trust, distributions must
be based on the life expectancy of the oldest beneficiary under the trust.
.. If this Beneficiary Annuity is transferred to another company as a tax-free
exchange with the intention of qualifying as a beneficiary annuity with the
receiving company, we may require certifications from the receiving company
that required distributions will be made as required by law.
.. If you are transferring proceeds as beneficiary of an annuity that is owned
by a decedent, we must receive your transfer request at least 45 days prior
to your first required distribution. If, for any reason, your transfer
request impedes our ability to complete your first distribution by the
required date, we will be unable to accept your transfer request.
OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS: We will ask you to name the
Owner(s), Annuitant and one or more Beneficiaries for your Annuity.
. Owner: The Owner(s) holds all rights under the Annuity. You may name up
to two Owners in which case all ownership rights are held jointly.
Generally, joint owners are required to act jointly; however, if each
owner provides us with an instruction that we find acceptable, we will
permit each owner to act independently on behalf of both owners. All
information and documents that we are
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required to send you will be sent to the first named owner. This Annuity
does not provide a right of survivorship. Refer to the Glossary of Terms
for a complete description of the term "Owner."
. Annuitant: The Annuitant is the person upon whose life we continue to
make annuity payments. You must name an Annuitant who is a natural
person. We do not accept a designation of joint Annuitants during the
accumulation period. In limited circumstances and where allowed by law,
you may name one or more Contingent Annuitants. Generally, a Contingent
Annuitant will become the Annuitant if the Annuitant dies before the
Annuity Date. Please refer to the discussion of "Considerations for
Contingent Annuitants" in the Tax Considerations section of the
Prospectus. For Beneficiary Annuities, instead of an Annuitant there is
a "Key Life" which is used to determine the annual
required distributions.
. Beneficiary: The Beneficiary is the person(s) or entity you name to
receive the Death Benefit. Your Beneficiary Designation should be the
exact name of your beneficiary, not only a reference to the
beneficiary's relationship to you. If you use a designation of
"surviving spouse," we will pay the Death Benefit to the individual that
is your spouse at the time of your death (as defined under the federal
tax laws and regulations). If no beneficiary is named, the Death Benefit
will be paid to you or your estate. For Annuities that designate a
custodian or a plan as Owner, the custodian or plan must also be
designated as the Beneficiary. For Beneficiary Annuities, instead of a
Beneficiary, the term "Successor" is used.
Your right to make certain designations may be limited if your Annuity is to be
used as an IRA, Beneficiary Annuity or other "qualified" investment that is
given beneficial tax treatment under the Code. You should seek competent tax
advice on the income, estate and gift tax implications of your designations.
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MANAGING YOUR ANNUITY
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?
In general, you may change the Owner, Annuitant and Beneficiary Designations by
sending us a request in writing in a form acceptable to us. However, if the
Annuity is held as a Beneficiary Annuity, the Owner may not be changed and you
may not designate another Key Life upon which distributions are based. Upon an
ownership change, including an assignment, any automated investment or
withdrawal programs will be canceled. The new owner must submit the applicable
program enrollment if they wish to participate in such a program. Where allowed
by law, such changes will be subject to our acceptance. Some of the changes we
will not accept include, but are not limited to:
.. a new Owner subsequent to the death of the Owner or the first of any joint
Owners to die, except where a spouse Beneficiary has become the Owner as a
result of an Owner's death;
.. a new Annuitant subsequent to the Annuity Date;
.. for "nonqualified" investments, a new Annuitant prior to the Annuity Date if
the Annuity is owned by an entity;
.. a change in Beneficiary if the Owner had previously made the designation
irrevocable;
.. a new Owner or Annuitant that is a certain ownership type, including but not
limited to corporations, partnerships, endowments, and grantor trusts with
multiple grantors (if allowed by state law); and
.. a new Annuitant for a contract issued to a grantor trust where the new
Annuitant is not the grantor of the trust.
There are also restrictions on designation changes when you have elected
certain optional benefits. See the "Living Benefits" and "Death Benefits"
sections of this Prospectus for any such restrictions.
If you wish to change the Owner and/or Beneficiary under the Annuity, or to
assign the Annuity, you must deliver the request to us in writing at our
Service Office. Generally, any change of Owner and/or Beneficiary, or
assignment of the Annuity, will take effect when accepted and recorded by us
(unless an alternative rule is stipulated by applicable State law). WE WILL
ALLOW CHANGES OF OWNERSHIP AND/OR ASSIGNMENTS ONLY IF THE ANNUITY IS HELD
EXCLUSIVELY FOR THE BENEFIT OF THE DESIGNATED ANNUITANT. WE ARE NOT RESPONSIBLE
FOR ANY TRANSACTIONS PROCESSED BEFORE A CHANGE OF OWNER AND/OR BENEFICIARY, AND
AN ASSIGNMENT OF THE ANNUITY, IS ACCEPTED AND RECORDED BY US. WE ACCEPT
ASSIGNMENTS OF NONQUALIFIED ANNUITIES ONLY.
UNLESS PROHIBITED BY APPLICABLE STATE LAW, WE RESERVE THE RIGHT TO REFUSE A
PROPOSED CHANGE OF OWNER AND/OR BENEFICIARY, AND A PROPOSED ASSIGNMENT OF THE
ANNUITY.
We will reject a proposed change where the proposed Owner, Annuitant,
Beneficiary or assignee is any of the following:
.. a company(ies) that issues or manages viatical or structured settlements;
.. an institutional investment company;
.. an Owner with no insurable relationship to the Annuitant or Contingent
Annuitant (a "Stranger-Owned Annuity" or "STOA"); or
.. a change in designation(s) that does not comply with or that we cannot
administer in compliance with Federal and/or state law.
WE WILL IMPLEMENT THIS RIGHT ON A NON-DISCRIMINATORY BASIS, AND TO THE EXTENT
ALLOWED BY STATE LAW, AND WE ARE NOT OBLIGATED TO PROCESS YOUR REQUEST WITHIN
ANY PARTICULAR TIMEFRAME.
For New York Annuities, a request to change the Owner, Annuitant, Contingent
Annuitant, Beneficiary and contingent Beneficiary designations is effective
when signed, and an assignment is effective upon our receipt. We assume no
responsibility for the validity or tax consequences of any change of Owner
and/or Beneficiary or any assignment of the Annuity, and may be required to
make reports of ownership changes and/or assignments to the appropriate
federal, state and/or local taxing authorities. You should consult with a
qualified tax advisor for complete information and advice prior to any
ownership change or assignment. Once an ownership change or assignment is
processed, the tax reporting cannot be reversed.
DEATH BENEFIT SUSPENSION UPON CHANGE OF OWNER OR ANNUITANT. If there is a
change of Owner or Annuitant, the change may affect the amount of the Death
Benefit. See the Death Benefit section of this prospectus for additional
details.
SPOUSAL DESIGNATIONS
If an Annuity is co-owned by spouses, we will assume that the sole primary
Beneficiary is the surviving spouse that was named as the co-owner unless you
designate a different Beneficiary. Unless you elect an alternative Beneficiary
Designation, upon the death of either spousal Owner, the surviving spouse may
elect to assume ownership of the Annuity instead of taking the Death Benefit
payment. The Death Benefit that would have been payable will be the new Account
Value of the Annuity as of the date of due proof of death and any required
proof of a spousal relationship. As of the date the assumption is effective,
the surviving spouse will have all the rights and benefits that would be
available under the Annuity to a new purchaser of the same attained age. For
purposes of determining any future Death Benefit for the beneficiary of the
surviving spouse, the new Account Value will be considered as the initial
Purchase Payment. No CDSC will apply to the new Account Value. However, any
additional purchase payments applied after the date the assumption is effective
will be subject to all provisions of the Annuity, including the CDSC when
applicable.
Spousal assumption is also permitted, subject to our rules and regulatory
approval, if the Annuity is held by a custodial account established to hold
retirement assets for the benefit of the natural person Annuitant pursuant to
the provisions of Section 408(a) of the Internal Revenue Code
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("Code") (or any successor Code section thereto) ("Custodial Account") and, on
the date of the Annuitant's death, the spouse of the Annuitant is (1) the
Contingent Annuitant under the Annuity and (2) the beneficiary of the Custodial
Account. The ability to continue the Annuity in this manner will result in the
Annuity no longer qualifying for tax deferral under the Code. However, such tax
deferral should result from the ownership of the Annuity by the Custodial
Account. Please consult your tax or legal adviser.
Note that any division of your Annuity due to divorce will be treated as a
withdrawal and the non-owner spouse may then decide whether he or she would
like to use the withdrawn funds to purchase a new Annuity that is then
available to new contract owners. Note that any division of your Annuity due to
divorce will be treated as a withdrawal and CDSC may apply. If CDSC is
applicable, it cannot be divided between the owner and the non-owner
ex-spouses. The non-owner ex-spouse may decide whether he or she would like to
use the withdrawn funds to purchase a new Annuity that is then available to new
contract owners. Depending upon the method used for the division of the
Annuity, the CDSC may be applied to the existing or new Annuity. Please consult
with your tax advisor regarding your personal situation if you will be
transferring or dividing your Annuity pursuant to a divorce.
Prior to a recent Supreme Court decision, and consistent with Section 3 of the
federal Defense of Marriage Act ("DOMA"), same sex marriages under state law
were not recognized as same sex marriages for purposes of federal law. However,
in UNITED STATES V. WINDSOR, the U.S. Supreme Court struck down Section 3 of
DOMA as unconstitutional, thereby recognizing for federal law purposes a valid
same sex marriage. The WINDSOR decision means that the favorable tax benefits
afforded by the federal tax law to an opposite sex spouse under the Internal
Revenue Code (IRC) are now available to a same sex spouse.
On August 29, 2013, the Internal Revenue Service ("IRS") issued guidance on its
position regarding same sex marriages for federal tax purposes. If a couple is
married in a jurisdiction (including a foreign country) that recognizes same
sex marriages, that marriage will be recognized for all federal tax purposes
regardless of the law in the jurisdiction where they reside. However, the IRS
did not recognize civil unions and registered domestic partnerships as
marriages for federal tax purposes. Currently, if a state does not recognize a
civil union or a registered domestic partnership as a marriage, it is not a
marriage for federal tax purposes. Please consult with your tax or legal
advisor before electing the Spousal Benefit for a same sex spouse or civil
union partner. Please see "Tax Considerations" for more information.
CONTINGENT ANNUITANT
Generally, if an Annuity is owned by an entity and the entity has named a
Contingent Annuitant, the Contingent Annuitant will become the Annuitant upon
the death of the Annuitant, and no Death Benefit is payable. Unless we agree
otherwise, the Annuity is only eligible to have a Contingent Annuitant
designation if the entity which owns the Annuity is (1) a plan described in
Internal Revenue Code Section 72(s)(5)(A)(i) (or any successor Code section
thereto); (2) an entity described in Code Section 72(u)(1) (or any successor
Code section thereto); or (3) a Custodial Account, as described in the above
section.
Where the Annuity is held by a Custodial Account, the Contingent Annuitant will
not automatically become the Annuitant upon the death of the Annuitant. Upon
the death of the Annuitant, the Custodial Account will have the choice, subject
to our rules, to either elect to receive the Death Benefit or elect to continue
the Annuity. If the Custodial Account elects to receive the Death Benefit, the
Account Value of the Annuity as of the date of due proof of death of the
Annuitant will reflect the amount that would have been payable had a Death
Benefit been paid. See the section above entitled "Spousal Designations" for
more information about how the Annuity can be continued by a Custodial Account.
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?
If after purchasing your Annuity you change your mind and decide that you do
not want it, you may return it to us within a certain period of time known as a
right to cancel period. This is often referred to as a "free look." Depending
on the state in which you purchased your Annuity and, in some states, if you
purchased the Annuity as a replacement for a prior contract, the right to
cancel period may be ten (10) days, or longer, measured from the time that you
received your Annuity. If you return your Annuity during the applicable period,
we will refund your current Account Value plus any tax charge deducted, less
any applicable federal and state income tax withholding and depending on your
state's requirements, any applicable insurance charges deducted. The amount
returned to you may be higher or lower than the Purchase Payment(s) applied
during the right to cancel period and may be subject to a market value
adjustment if it was allocated to a MVA Fixed Allocation, to the extent allowed
by State law. With respect to XT6, if you return your Annuity, we will not
return any XTra Credits we applied your Annuity based on your purchase payments.
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?
Unless we agree otherwise and subject to our rules, the minimum amount that we
accept as an additional Purchase Payment is $100 unless you participate in our
Systematic Investment Plan or a periodic Purchase Payment program. Purchase
payments made while you participate in an asset allocation program will be
allocated in accordance with such benefit. Additional purchase payments may be
made at any time before the Annuity Date (unless the Annuity is held as a
Beneficiary Annuity), or prior to the Account Value being reduced to zero.
Purchase payments are not permitted if the Annuity is held as a Beneficiary
Annuity. Please see the "Living Benefits" section of this prospectus for
further information on additional Purchase Payments.
Additional Purchase payments may be limited if the total Purchase Payments
under this Annuity and other annuities equals or exceeds $1 million, as
described in more detail in "Purchasing Your Annuity - Initial Purchase
Payment".
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MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?
You can make additional purchase payments to your Annuity by authorizing us to
deduct money directly from your bank account and applying it to your Annuity
(unless your Annuity is being held as a Beneficiary Annuity). We call our
electronic funds transfer program "the Systematic Investment Plan." Purchase
Payments made through electronic funds transfer may only be allocated to the
Sub-accounts when applied. Different allocation requirements may apply in
connection with certain optional benefits. We may allow you to invest in your
Annuity with a lower initial Purchase Payment, as long as you authorize
payments through an electronic funds transfer that will equal at least the
minimum Purchase Payment set forth above during the first 12 months of your
Annuity. We may suspend or cancel electronic funds transfer privileges if
sufficient funds are not available from the applicable financial institution on
any date that a transaction is scheduled to occur. We may also suspend or
cancel electronic funds transfer privileges if we have limited, restricted,
suspended or terminated the ability of Owners to submit additional Purchase
Payments.
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?
These types of programs are only available with certain types of qualified
investments. If your employer sponsors such a program, we may agree to accept
periodic purchase payments through a salary reduction program as long as the
allocations are made only to Sub-accounts and the periodic purchase payments
received in the first year total at least the minimum Purchase Payment set
forth above.
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MANAGING YOUR ACCOUNT VALUE
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?
(See "Valuing Your Investment" for a description of our procedure for pricing
initial and subsequent purchase payments.)
INITIAL PURCHASE PAYMENT: Once we accept your application, we invest your
Purchase Payment in your Annuity according to your instructions for allocating
your Account Value. The Purchase Payment is your initial Purchase Payment minus
any tax charges that may apply. You can allocate purchase payments to one or
more available Sub-accounts or available Fixed Allocations. Investment
restrictions will apply if you elect certain optional benefits.
SUBSEQUENT PURCHASE PAYMENTS: Unless you participate in an asset allocation
program, or unless you have provided us with other specific allocation
instructions for one, more than one, or all subsequent purchase payments, we
will allocate any additional purchase payments you make according to your
initial Purchase Payment allocation instructions. If you so instruct us, we
will allocate subsequent purchase payments according to any new allocation
instructions. Unless you tell us otherwise, purchase payments made while you
participate in an asset allocation program will be allocated in accordance with
such program.
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE ASAP III AND APEX II ANNUITIES?
We apply a Loyalty Credit to your Annuity's Account Value at the end of your
fifth Annuity Year ("fifth Annuity Anniversary"). With respect to ASAP III, for
annuities issued on or after February 13, 2006, the Loyalty Credit is equal to
0.50% of total purchase payments made during the first four Annuity Years less
the cumulative amount of withdrawals made (including the deduction of any CDSC
amounts) through the fifth Annuity Anniversary. With respect to APEX II, for
annuities issued between June 20, 2005 and February 12, 2006, the Loyalty
Credit is equal to 2.25% of total purchase payments made during the first four
Annuity Years less the cumulative amount of withdrawals made (including the
deduction of any CDSC amounts) through the fifth Annuity Anniversary. For APEX
II Annuities issued on or after February 13, 2006, the Loyalty Credit is equal
to 2.75% of total purchase payments made during the first four Annuity Years
less the cumulative amount of withdrawals made (including the deduction of any
CDSC amounts) through the fifth Annuity Anniversary.
If the total purchase payments made during the first four Annuity Years is less
than the cumulative amount of withdrawals made on or before the fifth Annuity
Anniversary, no Loyalty Credit will be applied to your Annuity. Also, no
Loyalty Credit will be applied to your Annuity if your Account Value is zero on
the fifth Annuity Anniversary. This would include any situation where the
Annuity is still in force due to the fact that payments are being made under an
optional benefit such as Lifetime Five, Spousal Lifetime Five, Highest Daily
Lifetime Five, Highest Daily Lifetime Seven, Spousal Highest Daily Lifetime
Seven, Highest Daily Lifetime 7 Plus, Spousal Highest Daily Lifetime 7 Plus,
Guaranteed Minimum Withdrawal Benefit, Highest Daily Lifetime 6 Plus, and
Spousal Highest Daily Lifetime 6 Plus. In addition, no Loyalty Credit will be
applied to your Annuity if before the fifth Annuity Anniversary: (i) you have
surrendered your Annuity; (ii) you have annuitized your Annuity; (iii) your
Beneficiary has elected our Beneficiary Continuation Option; or (iv) we have
received due proof of your death (and there has been no spousal continuation
election made). If your spouse continues the Annuity under our spousal
continuation option, we will apply the Loyalty Credit to your Annuity only on
the fifth Annuity Anniversary measured from the date that we originally issued
you the Annuity. Since the Loyalty Credit is applied to the Account Value only,
any guarantees that are not based on Account Value will not reflect the Loyalty
Credit. Similarly, guarantees that are made against a loss in Account Value
will not be triggered in certain very limited circumstances where they
otherwise would have been, had no Loyalty Credit been applied to the Account
Value.
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE ASAP III AND
APEX II ANNUITIES?
Any Loyalty Credit that is allocated to your Account Value on the fifth Annuity
Anniversary will be allocated to the Fixed Allocations and Sub-accounts
according to the "hierarchy" described in this paragraph. This hierarchy
consists of a priority list of investment options, and the Loyalty Credit is
applied based on which of the items below is applicable and in effect when the
Loyalty Credit is applied. Thus, if a given item in the priority list is
inapplicable to you, we move to the next item. The hierarchy is as follows:
(a) if you participate in the Custom Portfolios Program (we may have referred
to the "Custom Portfolios Program" as the "Optional Allocation and Rebalancing
Program" in other materials), any Loyalty Credit will be invested in accordance
with such Program, (b) if you participate in an asset allocation program (see
Appendix D for a description of such programs), in accordance with that
program, (c) in accordance with your standing allocation instructions (d) if
you participate in the Systematic Investment Plan, in accordance with that
Plan, (e) if you participate in an automatic rebalancing program, in accordance
with that program (f) in accordance with how your most recent purchase payment
was allocated and (g) otherwise in accordance with your instructions, if items
(a) through (f) above are not permitted or applicable.
EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO ASAP III.
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is, subject to state availability,
equal to 0.50% of $15,000 (this represents the $20,000 of purchase payments
made during the first four Annuity Years minus the $5,000 withdrawal made in
the fifth Annuity Year. The computation disregards the additional $10,000
Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit
amount would be equal to $75.00.
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EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO APEX II.
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is, subject to state availability,
equal to 2.75% of $15,000 (this represents the $20,000 of purchase payments
made during the first four Annuity Years minus the $5,000 withdrawal made in
the fifth Annuity Year. The computation disregards the additional $10,000
Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit
amount would be equal to $412.50.
HOW DO I RECEIVE CREDITS UNDER THE XT6 ANNUITY?
We apply a "Credit" to your Annuity's Account Value each time you make a
Purchase Payment during the first six (6) Annuity Years. The amount of the
Credit is payable from our general account. The amount of the Credit depends on
the Annuity Year in which the Purchase Payment(s) is made, according to the
table below:
For annuities issued on or after February 13, 2006 (subject to state
availability):
ANNUITY YEAR CREDIT
------------ ------
1 6.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
For annuities issued prior to February 13, 2006:
ANNUITY YEAR CREDIT
------------ ------
1 6.00%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
CREDITS APPLIED TO PURCHASE PAYMENTS FOR DESIGNATED CLASS OF ANNUITY OWNER
Prior to May 1, 2004, where allowed by state law, Annuities could be purchased
by a member of the class defined below, with a different table of Credits. The
Credit applied to all purchase payments on such Annuities is as follows based
on the Annuity Year in which the Purchase Payment was made: Year 1: 9.0%; Year
2: 9.0%; Year 3: 8.5%; Year 4: 8.0%; Year 5: 7.0%; Year 6: 6.0%; Year 7: 5.0%;
Year 8: 4.0%; Year 9: 3.0%; Year 10: 2%; Year 11+: 0.0%.
The designated class of Annuity Owners included: (a) any parent company,
affiliate or subsidiary of ours; (b) an officer, director, employee, retiree,
sales representative, or in the case of an affiliated broker-dealer, registered
representative of such company; (c) a director, officer or trustee of any
underlying mutual fund; (d) a director, officer or employee of any investment
manager, sub-advisor, transfer agent, custodian, auditing, legal or
administrative services provider that is providing investment management,
advisory, transfer agency, custodian-ship, auditing, legal and/or
administrative services to an underlying mutual fund or any affiliate of such
firm; (e) a director, officer, employee or registered representative of a
broker-dealer or insurance agency that has a then current selling agreement
with us and/or with Prudential Annuities Distributors, Inc., a Prudential
Financial Company; (f) a director, officer, employee or authorized
representative of any firm providing us or our affiliates with regular legal,
actuarial, auditing, underwriting, claims, administrative, computer support,
marketing, office or other services; (g) the then current spouse of any such
person noted in (b) through (f), above; (h) the parents of any such person
noted in (b) through (g), above; (i) the child(ren) or other legal dependent
under the age of 21 of any such person noted in (b) through (h); and (j) the
siblings of any such persons noted in (b) through (h) above.
All other terms and conditions of the Annuity apply to Owners in the designated
class.
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE XT6 ANNUITY?
Each Credit is allocated to your Account Value at the time the Purchase Payment
is applied to your Account Value. The amount of the Credit is allocated to the
investment options in the same ratio as the applicable Purchase Payment is
applied.
EXAMPLES OF APPLYING CREDITS
INITIAL PURCHASE PAYMENT
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. We would apply a 6.5% Credit to your
Purchase Payment and allocate the amount of the Credit ($650 = $10,000 X .065)
to your Account Value in the proportion that your Purchase Payment is allocated.
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ADDITIONAL PURCHASE PAYMENT IN ANNUITY YEAR 2
Assume that you make an additional Purchase Payment of $5,000. We would apply a
5.0% Credit to your Purchase Payment and allocate the amount of the Credit
($250 = $5,000 X .05) to your Account Value.
ADDITIONAL PURCHASE PAYMENT IN ANNUITY YEAR 6
Assume that you make an additional Purchase Payment of $15,000. We would apply
a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit
($150 = $15,000 X .01) to your Account Value.
The amount of any XTra Credits applied to your XT6 Annuity Account Value can be
taken back by Prudential Annuities under certain circumstances:
.. any XTra Credits applied to your Account Value on purchase payments made
within the 12 months before the Owner's (or Annuitant's if entity owned)
date of death will be taken back (to the extent allowed by state law);
.. the amount available under the Medically-Related Surrender portion of the
Annuity will not include the amount of any XTra Credits payable on purchase
payments made within 12 months prior to the date of a request under the
Medically-Related Surrender provision (to the extent allowed by State law);
and
.. if you elect to "free look" your Annuity, the amount returned to you will
not include the amount of any XTra Credits.
The Account Value may be substantially reduced if Prudential Annuities takes
back the XTra Credit amount under these circumstances. The amount we take back
will equal the XTra Credit, without adjustment up or down for investment
performance. Therefore, any gain on the XTra Credit amount will not be taken
back. But if there was a loss on the XTra Credit, the amount we take back will
still equal amount of the XTra Credit. We do not deduct a CDSC in any situation
where we take back the XTra Credit amount. During the first 10 Annuity Years,
the total asset-based charges on this Annuity (including the Insurance Charge
and the Distribution Charge) are higher than many of our other annuities,
including other annuities we offer that apply credits to purchase payments.
GENERAL INFORMATION ABOUT CREDITS
.. We do not consider Credits to be "investment in the contract" for income tax
purposes.
.. You may not withdraw the amount of any Credits under the Free Withdrawal
provision. The Free Withdrawal provision only applies to withdrawals of
purchase payments.
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?
During the accumulation period you may transfer Account Value between
investment options subject to the restrictions outlined below. Transfers are
not subject to taxation on any gain. You may not transfer Account Value to any
Fixed Allocation used with a dollar cost averaging program or any DCA Fixed
Rate Options. You may only allocate purchase payments to Fixed Allocations used
with a dollar cost averaging program or the DCA Fixed Rate Options.
Currently, any transfer involving the ProFunds VP Sub-accounts must be received
by us no later than 3:00 p.m. Eastern time (or one hour prior to any announced
closing of the applicable securities exchange) to be processed on the current
Valuation Day. The "cut-off" time for such financial transactions involving a
ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced
closing (generally, 3:30 p.m. Eastern time) for transactions submitted
electronically, including through Prudential Annuities' Internet website
(www.prudentialannuities.com).
Currently, we charge $10.00 for each transfer after the 20/th/ transfer in each
Annuity Year. Transfers made as part of a Dollar Cost Averaging (including the
6 or 12 Month Dollar Cost Averaging Program), Automatic Rebalancing or asset
allocation program do not count toward the 20 free transfer limit. Renewals or
transfers of Account Value from an MVA Fixed Allocation at the end of its
Guarantee Period are not subject to the transfer charge. We may reduce the
number of free transfers allowable each Annuity Year (subject to a minimum of
eight) without charging a Transfer Fee. We may also increase the Transfer Fee
that we charge to $15.00 for each transfer after the number of free transfers
has been used up. We may eliminate the Transfer Fee for transfer requests
transmitted electronically or through other means that reduce our processing
costs. If enrolled in any program that does not permit transfer requests to be
transmitted electronically, the Transfer Fee will not be waived.
Once you have made 20 transfers among the Sub-accounts during an Annuity Year,
we will accept any additional transfer request during that year only if the
request is submitted to us in writing with an original signature and otherwise
is in good order. For purposes of this 20 transfer limit, we (i) do not view a
facsimile transmission or other electronic transmission as a "writing",
(ii) will treat multiple transfer requests submitted on the same Valuation Day
as a single transfer, and (iii) do not count any transfer that solely involves
Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market
Portfolio or any transfer that involves one of our systematic programs, such as
asset allocation and automated withdrawals.
Frequent transfers among Sub-accounts in response to short-term fluctuations in
markets, sometimes called "market timing," can make it very difficult for a
Portfolio manager to manage a Portfolio's investments. Frequent transfers may
cause the Portfolio to hold more cash than otherwise necessary, disrupt
management strategies, increase transaction costs, or affect performance. Each
Annuity offers Sub-accounts designed for Owners who wish to engage in frequent
transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund
Portfolios and the AST Money Market Portfolio), and we encourage Owners seeking
frequent transfers to utilize those Sub-accounts.
In light of the risks posed to Owners and other investors by frequent
transfers, we reserve the right to limit the number of transfers in any Annuity
Year for all existing or new Owners and to take the other actions discussed
below. We also reserve the right to limit the number of transfers in
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any Annuity Year or to refuse any transfer request for an Owner or certain
Owners if: (a) we believe that excessive transfer activity (as we define it) or
a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the Portfolios; or
(b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager)
that the purchase or redemption of shares in the Portfolio must be restricted
because the Portfolio believes the transfer activity to which such purchase and
redemption relates would have a detrimental effect on the share prices of the
affected Portfolio. Without limiting the above, the most likely scenario where
either of the above could occur would be if the aggregate amount of a trade or
trades represented a relatively large proportion of the total assets of a
particular Portfolio. In furtherance of our general authority to restrict
transfers as described above, and without limiting other actions we may take in
the future, we have adopted the following specific restrictions:
.. With respect to each Sub-account (other than the AST Money Market
Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we
track amounts exceeding a certain dollar threshold that were transferred
into the Sub-account. If you transfer such amount into a particular
Sub-account, and within 30 calendar days thereafter transfer (the "Transfer
Out") all or a portion of that amount into another Sub-account, then upon
the Transfer Out, the former Sub-account becomes restricted (the "Restricted
Sub-account"). Specifically, we will not permit subsequent transfers into
the Restricted Sub-account for 90 calendar days after the Transfer Out if
the Restricted Sub-account invests in a non-international Portfolio, or 180
calendar days after the Transfer Out if the Restricted Sub-account invests
in an international Portfolio. For purposes of this rule, we (i) do not
count transfers made in connection with one of our systematic programs, such
as asset allocation and automated withdrawals;(ii) do not count any transfer
that solely involves Sub-accounts corresponding to any ProFund Portfolio
and/or the AST Money Market Portfolio; and (iii) do not categorize as a
transfer the first transfer that you make after the Issue Date, if you make
that transfer within 30 calendar days after the Issue Date. Even if an
amount becomes restricted under the foregoing rules, you are still free to
redeem the amount from your Annuity at any time.
.. We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving the Sub-accounts on
the Valuation Day subsequent to the Valuation Day on which the exchange
request was received. Before implementing such a practice, we would issue a
separate written notice to Owners that explains the practice in detail.
If we deny one or more transfer requests under the foregoing rules, we will
inform you or your Financial Professional promptly of the circumstances
concerning the denial.
Contract owners in New York who purchased their contracts prior to March 15,
2004 are not subject to the specific restrictions outlined in bulleted
paragraphs immediately above. In addition, there are contract owners of
different variable annuity contracts that are funded through the same Separate
Account that are not subject to the above-referenced transfer restrictions and,
therefore, might make more numerous and frequent transfers than contract owners
who are subject to such limitations. Finally, there are contract owners of
other variable annuity contracts or variable life contracts that are issued by
Prudential Annuities as well as other insurance companies that have the same
underlying mutual fund portfolios available to them. Since some contract owners
are not subject to the same transfer restrictions, unfavorable consequences
associated with such frequent trading within the underlying mutual fund (e.g.,
greater portfolio turnover, higher transaction costs, or performance or tax
issues) may affect all contract owners. Similarly, while contracts managed by a
Financial Professional or third party investment advisor are subject to the
restrictions on transfers between investment options that are discussed above,
if the advisor manages a number of contracts in the same fashion unfavorable
consequences may be associated with management activity since it may involve
the movement of a substantial portion of an underlying mutual fund's assets
which may affect all contract owners invested in the affected options. Apart
from jurisdiction-specific and contract differences in transfer restrictions,
we will apply these rules uniformly (including contracts managed by a Financial
Professional or third party investment advisor), and will not waive a transfer
restriction for any contract owner.
ALTHOUGH OUR TRANSFER RESTRICTIONS ARE DESIGNED TO PREVENT EXCESSIVE TRANSFERS,
THEY ARE NOT CAPABLE OF PREVENTING EVERY POTENTIAL OCCURRENCE OF EXCESSIVE
TRANSFER ACTIVITY. The portfolios have adopted their own policies and
procedures with respect to excessive trading of their respective shares, and we
reserve the right to enforce any such current or future policies and
procedures. The prospectuses for the Portfolios describe any such policies and
procedures, which may be more or less restrictive than the policies and
procedures we have adopted. Under SEC rules, we are required to: (1) enter into
a written agreement with each Portfolio or its principal underwriter or its
transfer agent that obligates us to provide to the Portfolio promptly upon
request certain information about the trading activity of individual contract
owners (including an Annuity Owner's TIN number), and (2) execute instructions
from the Portfolio to restrict or prohibit further purchases or transfers by
specific Owners who violate the excessive trading policies established by the
Portfolio. In addition, you should be aware that some Portfolios may receive
"omnibus" purchase and redemption orders from other insurance companies or
intermediaries such as retirement plans. The omnibus orders reflect the
aggregation and netting of multiple orders from individual owners of variable
insurance contracts and/or individual retirement plan participants. The omnibus
nature of these orders may limit the portfolios in their ability to apply their
excessive trading policies and procedures. In addition, the other insurance
companies and/or retirement plans may have different policies and procedures or
may not have any such policies and procedures because of contractual
limitations. For these reasons, we cannot guarantee that the portfolios (and
thus Annuity Owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the Portfolios.
A Portfolio also may assess a short term trading fee (redemption fee) in
connection with a transfer out of the Sub-account investing in that Portfolio
that occurs within a certain number of days following the date of allocation to
the Sub-account. Each Portfolio determines the amount of the short term trading
fee and when the fee is imposed. The fee is retained by or paid to the
Portfolio and is not retained by us. The fee will be deducted from your Account
Value, to the extent allowed by law. At present, no Portfolio has adopted a
short-term trading fee.
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DO YOU OFFER DOLLAR COST AVERAGING?
Yes. As discussed below, we offer Dollar Cost Averaging programs during the
accumulation period. In general, Dollar Cost Averaging allows you to
systematically transfer an amount periodically from one investment option to
one or more other investment options. You can choose to transfer earnings only,
principal plus earnings or a flat dollar amount. You may elect a Dollar Cost
Averaging program that transfers amounts monthly, quarterly, semi-annually, or
annually from Sub-accounts, or a program that transfers amounts monthly from
Fixed Allocations or DCA Fixed Rate Options. By investing amounts on a regular
basis instead of investing the total amount at one time, Dollar Cost Averaging
may decrease the effect of market fluctuation on the investment of your
Purchase Payment. This may result in a lower average cost of units over time.
However, there is no guarantee that Dollar Cost Averaging will result in a
profit or protect against a loss in a declining market. We do not deduct a
charge for participating in a Dollar Cost Averaging program.
You can Dollar Cost Average from Sub-accounts, the Fixed Allocations or the DCA
Fixed Rate Options. Dollar Cost Averaging from Fixed Allocations is subject to
a number of rules that include, but are not limited to the following:
. You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years (except for the DCA Fixed Rate Options).
. You may only Dollar Cost Average earnings or principal plus earnings. If
transferring principal plus earnings, the program must be designed to
last the entire Guarantee Period for the Fixed Allocation.
. Dollar Cost Averaging transfers from Fixed Allocations are not subject
to a Market Value Adjustment.
NOTE: WHEN A DOLLAR COST AVERAGING PROGRAM IS ESTABLISHED FROM A FIXED
ALLOCATION OR A DCA FIXED RATE OPTION, THE FIXED RATE OF INTEREST WE CREDIT TO
YOUR ACCOUNT VALUE IS APPLIED TO A DECLINING BALANCE DUE TO THE TRANSFERS OF
ACCOUNT VALUE TO THE SUB-ACCOUNTS. THIS WILL REDUCE THE EFFECTIVE RATE OF
RETURN ON THE FIXED ALLOCATION OR A DCA FIXED RATE OPTION OVER THE GUARANTEE
PERIOD OR THE DURATION OF THE PROGRAM, RESPECTIVELY.
The Dollar Cost Averaging programs are not available if you have elected an
automatic rebalancing program or an asset allocation program. Dollar Cost
Averaging from Fixed Allocations also is not available if you elect certain
optional benefits.
Prudential Annuities originally offered specific Fixed Allocations with
Guarantee Periods of 6 months or 12 months exclusively for use with a Dollar
Cost Averaging program on the APEX II product. Those 6 month/12 month Fixed
Allocations were designed to automatically transfer Account Value in either 6
or 12 payments under a Dollar Cost Averaging program. Dollar Cost Averaging
transfers commenced on the date the Fixed Allocation was established, and then
proceeded each month following until the entire principal amount plus earnings
was transferred. Fixed Allocations could only be established with your initial
Purchase Payment or additional purchase payments. You could not transfer
existing Account Value to a Fixed Allocation. We discontinued offering these 6
and 12 month Fixed Allocations beginning on May 1, 2009.
Under our current dollar cost averaging program used with Fixed Allocations,
Account Value allocated to the Fixed Allocations will be transferred to the
Sub-accounts you choose. If you terminate the Dollar Cost Averaging program
before the entire principal amount plus earnings has been transferred to the
Sub-account(s), you must transfer all remaining Account Value to any other
investment option. Unless you provide alternate instructions at the time you
terminate the Dollar Cost Averaging program, Account Value will be transferred
to the AST Money Market Sub-account unless restricted due to benefit election.
Transfers from Fixed Allocations as part of a Dollar Cost Averaging program are
not subject to a Market Value Adjustment. However, a Market Value Adjustment
will apply if you terminate the Dollar Cost Averaging program before the entire
principal amount plus earnings has been transferred to the Sub-account(s).
Please note that under the 6 or 12 Month DCA Program (described immediately
below), no Market Value Adjustment applies.
6 OR 12 MONTH DOLLAR COST AVERAGING PROGRAM (THE "6 OR 12 MONTH DCA PROGRAM").
WE NO LONGER OFFER OUR 6 OR 12 MONTH DCA PROGRAM.
The 6 or 12 Month DCA Program was available for contracts issued between May 1,
2009 and October 31, 2011. The program is subject to our rules at the time of
election and may not be available in conjunction with other programs and
benefits we make available. We may discontinue, modify or amend this program
from time to time. Highest Daily Lifetime 7 Plus, Spousal Highest Daily
Lifetime 7 Plus, Highest Daily Lifetime 6 Plus, and Spousal Highest Daily
Lifetime 6 Plus are the only optional living benefits and the Highest
Anniversary Value death benefit and the Combination 5% Roll-up + HAV death
benefit are the only death benefits you may participate in if you also
participate in the 6 or 12 Month DCA Program, although you do not need to
select any optional benefit to participate in the program. To participate in
the 6 or 12 Month DCA Program, you must allocate at least a $2000 Purchase
Payment to our DCA Fixed Rate Options. These DCA Fixed Rate Options are
distinct from the Fixed Allocations described immediately above. Most notably,
transfers out of a DCA Fixed Rate Option are never subject to a Market Value
Adjustment. Dollar cost averaging does not assure a profit, or protect against
a loss.
THE KEY FEATURES OF THIS PROGRAM ARE AS FOLLOWS:
. You may only allocate purchase payments to these DCA Fixed Rate Options.
You may not transfer Account Value into this program.
. As part of your election to participate in the 6 or 12 Month DCA
Program, you specify whether the monthly transfers under the 6 or 12
Month DCA Program are to be made over a 6 month or 12 month period. We
then set the monthly transfer amount, by dividing the Purchase Payment
(including any associated credit) you have allocated to the DCA Fixed
Rate Options by the number of months. For example, if you allocated
$6000, and selected a 6 month DCA Program, we would transfer $1000 each
month. We will adjust the monthly transfer amount if, during the
transfer period, the amount allocated to the DCA Fixed Rate Options is
reduced (e.g., due to the deduction of the applicable portion of the fee
for an optional benefit, withdrawals or due to a transfer of Account
Value out of the DCA Fixed Rate Options initiated by the mathematical
formula used with Highest Daily Lifetime 7 Plus, Spousal Highest Daily
Lifetime 7 Plus
54
Highest Daily Lifetime 6 Plus, or Spousal Highest Daily Lifetime 6 Plus.
In that event, we will re-calculate the amount of each remaining
transfer by dividing the amount in the DCA Fixed Rate Option by the
number of remaining transfers. If the recalculated transfer amount is
below the minimum transfer required by the program, we will transfer the
remaining amount from the DCA Fixed Rate Option on the next scheduled
transfer and terminate the program.
. Any withdrawals, transfers, or fees deducted from the DCA Fixed Rate
Options will reduce the DCA Fixed Rate Options on a "last-in, first-out"
basis. If you have only one 6 or 12 Month DCA Program in operation,
withdrawals, transfers, or fees may be deducted from the DCA Fixed Rate
Options associated with that Program. You may, however, have more than
one 6 or 12 Month DCA Program operating at the same time (so long as any
such additional 6 or 12 Month DCA Program is of the same duration). For
example, you may have more than one 6 month DCA Program running, but may
not have a 6 month Program running simultaneously with a 12 month
Program. If you have multiple 6 or 12 Month DCA Programs running, then
the above reference to "last-in, first-out" means that amounts will be
deducted first from the DCA Fixed Rate Options associated with the 6 or
12 Month DCA Program that was established most recently.
. The first transfer under the Program occurs on the day you allocate a
Purchase Payment to the DCA Fixed Rate Options (unless modified to
comply with State law) and on each month following until the entire
principal amount plus earnings is transferred.
. We do not count transfers under the 6 or 12 Month DCA Program against
the number of free transfers allowed under your Annuity.
. The minimum transfer amount is $100, although we will not impose that
requirement with respect to the final amount to be transferred under the
Program.
. If you are not participating in Highest Daily Lifetime 7 Plus, Spousal
Highest Daily Lifetime 7 Plus Highest Daily Lifetime 6 Plus, or Spousal
Highest Daily Lifetime 6 Plus, we will make transfers under the 6 or 12
Month DCA Program to the Sub-accounts that you specified upon your
election of the Program. If you are participating in any Highest Daily
Lifetime 7 Plus benefit or Highest Daily Lifetime 6 Plus benefit, we
will allocate amounts transferred out of the DCA Fixed Rate Options in
the following manner: (a) if you are participating in the Custom
Portfolios Program (we may have referred to the "Custom Portfolios
Program" as the "Optional Allocation and Rebalancing Program" in other
materials), we will allocate to the Sub-accounts in accordance with the
rules of that program (b) if you are not participating in the Custom
Portfolios Program, we will make transfers under the Program to the
Sub-accounts that you specified upon your election of the Program,
provided those instructions comply with the allocation requirements for
Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus, Spousal
Highest Daily Lifetime 7 Plus or Spousal Highest Daily Lifetime 6 Plus
(as applicable) and (c) whether or not you participate in the Custom
Portfolios Program, no portion of our monthly transfer under the 6 or 12
Month DCA Program will be directed initially to the AST Investment Grade
Bond Sub-account (although the DCA Fixed Rate Option is treated as a
"Permitted Sub-account" for purposes of transfers to the AST Investment
Grade Bond Sub-account under the pre-determined mathematical formula
under the Highest Daily Lifetime 7 Plus or Highest Daily Lifetime 6 Plus
benefits) (see below).
. If you are participating in Highest Daily Lifetime 7 Plus, Spousal
Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus or Spousal
Highest Daily Lifetime 6 Plus and also are participating in the 6 or 12
Month DCA Program, and the formula under the benefit dictates a transfer
from the Permitted Sub-accounts to the AST Investment Grade Bond
Sub-account, then the amount to be transferred will be taken entirely
from the Sub-accounts, provided there is sufficient Account Value in
those Sub-accounts to meet the required transfer amount. Only if there
is insufficient Account Value in those Sub-accounts will an amount be
withdrawn from the DCA Fixed Rate Options associated with the 6 or 12
Month DCA Program. Amounts withdrawn from the DCA Fixed Rate Options
under the formula will be taken on a last-in, first-out basis.
. If you are participating in one of our automated withdrawal programs
(e.g., Systematic Withdrawals), we may include within that withdrawal
program amounts held within the DCA Fixed Rate Options. If you have
elected any Highest Daily Lifetime 7 Plus or Highest Daily Lifetime 6
Plus benefit, any withdrawals will be taken on a pro-rata basis from
your Sub-accounts and the DCA Fixed Rate Options.
. We impose no fee for your participation in the 6 or 12 Month DCA Program.
. You may cancel the DCA Program at any time. If you do, we will transfer
any remaining amount held within the DCA Fixed Rate Options according to
your instructions. If you do not provide any such instructions, we will
transfer any remaining amount held in the DCA Fixed Rate Options on a
pro rata basis to the Sub-accounts in which you are invested currently.
If any such Sub-account is no longer available, we may allocate the
amount that would have been applied to that Sub-account to the AST Money
Market Sub-account.
. You cannot utilize "rate lock" with the 6 or 12 Month DCA Program. The
interest rate we credit under the program will be the rate on the date
the purchase payment is allocated to the 6 or 12 Month DCA Program.
. We credit interest to amounts held within the DCA Fixed Rate Options at
the applicable declared rates. We credit such interest until the
earliest of the following (a) the date the entire amount in the DCA
Fixed Rate Option has been transferred out (b) the date the entire
amount in the DCA Fixed Rate Option is withdrawn (c) the date as of
which any death benefit payable is determined or (d) the Annuity Date.
. The interest rate earned in a DCA Fixed Rate Option will be no less than
the minimum guaranteed interest rate. We may, from time to time, declare
new interest rates for new purchase payments that are higher than the
minimum guaranteed interest rate. Please note that the interest rate
that we apply under the 6 or 12 Month DCA Program is applied to a
declining balance. Therefore, the amount of interest you receive will
decrease as amounts are systematically transferred from the DCA Fixed
Rate Option to the Sub-accounts, and the effective interest rate earned
will therefore be less than the declared interest rate.
. The 6 or 12 Month DCA Program may be referred to in your Rider and/or
the Application as the "Enhanced Dollar Cost Averaging Program."
55
NOTE: WHEN A 6 OR 12 MONTH DCA PROGRAM IS ESTABLISHED FROM A DCA FIXED RATE
OPTION, THE FIXED RATE OF INTEREST WE CREDIT TO YOUR ACCOUNT VALUE IS APPLIED
TO A DECLINING BALANCE DUE TO THE TRANSFERS OF ACCOUNT VALUE TO THE
SUB-ACCOUNTS (INCLUDING ANY TRANSFERS UNDER AN OPTIONAL BENEFIT FORMULA). THIS
WILL REDUCE THE EFFECTIVE RATE OF RETURN ON THE DCA FIXED RATE OPTION.
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?
Yes. During the accumulation period, we offer Automatic Rebalancing among the
Sub-accounts you choose. You can choose to have your Account Value rebalanced
monthly, quarterly, semi-annually, or annually. On the appropriate date, the
Sub-accounts you chose are rebalanced to the allocation percentages you
requested. With Automatic Rebalancing, we transfer the appropriate amount from
the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return
your allocations to the percentages you request. For example, over time the
performance of the Sub-accounts will differ, causing your percentage
allocations to shift. We also offer the Custom Portfolios Program (we may have
referred to the "Custom Portfolios Program" as the "Optional Allocation and
Rebalancing Program" in other materials), which is available if you have
elected one of the Highest Daily Lifetime Seven, Highest Daily Lifetime 7 Plus,
Highest Daily Lifetime 6 Plus, Highest Daily GRO II, or GRO Plus II benefits.
Any transfer to or from any Sub-account that is not part of your Automatic
Rebalancing program, will be made; however, that Sub-account will not become
part of your rebalancing program unless we receive instructions from you
indicating that you would like such option to become part of the program.
There is no minimum Account Value required to enroll in Automatic Rebalancing.
All rebalancing transfers as part of an Automatic Rebalancing program are not
included when counting the number of transfers each year toward the maximum
number of free transfers. We do not deduct a charge for participating in an
Automatic Rebalancing program. Participation in the Automatic Rebalancing
program may be restricted if you are enrolled in certain other optional
programs. Sub-accounts that are part of a Systematic Withdrawal program or
Dollar Cost Averaging program will be excluded from an Automatic Rebalancing
program.
If you are participating in an optional living benefit (such as Highest Daily
Lifetime 6 Plus) that makes transfers under a pre-determined mathematical
formula, and you have opted for automatic rebalancing; you should be aware
that: (a) the AST bond portfolio used as part of the pre-determined
mathematical formula will not be included as part of automatic rebalancing and
(b) the operation of the formula may result in the rebalancing not conforming
to the percentage allocations that you specified originally as part of your
Automatic Rebalancing Program.
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?
We currently do not offer any asset allocation programs for use with your
Annuity. Prior to December 5, 2005, we made certain asset allocation programs
available. If you enrolled in one of the asset allocation programs prior to
December 5, 2005, see the Appendix D entitled, "Additional Information on the
Asset Allocation Programs" for more information on how the programs
are administered.
WHAT IS THE BALANCED INVESTMENT PROGRAM?
We offer a balanced investment program where a portion of your Account Value is
allocated to a Fixed Allocation and the remaining Account Value is allocated to
the Sub-accounts that you select. When you enroll in the Balanced Investment
Program, you choose the duration that you wish the program to last. This
determines the duration of the Guarantee Period for the Fixed Allocation. Based
on the fixed rate for the Guarantee Period chosen, we calculate the portion of
your Account Value that must be allocated to the Fixed Allocation to grow to a
specific "principal amount" (such as your initial Purchase Payment). We
determine the amount based on the rates then in effect for the Guarantee Period
you choose. If you continue the program until the end of the Guarantee Period
and make no withdrawals or transfers, at the end of the Guarantee Period, the
Fixed Allocation will have grown to equal the "principal amount". Withdrawals
or transfers from the Fixed Allocation before the end of the Guarantee Period
will terminate the program and may be subject to a Market Value Adjustment
(which may be positive or negative). You can transfer the Account Value that is
not allocated to the Fixed Allocation between any of the Sub-accounts available
under your Annuity. Account Value you allocate to the Sub-accounts is subject
to market fluctuations and may increase or decrease in value. We do not deduct
a charge for participating in the Balanced Investment Program. This program is
not available if your Annuity is held as a Beneficiary Annuity.
EXAMPLE
Assume you invest $100,000. You choose a 10-year program and allocate a
portion of your Account Value to a Fixed Allocation with a 10-year Guarantee
Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the
fixed interest rate for the Guarantee Period chosen, the factor is 0.781198
for determining how much of your Account Value will be allocated to the
Fixed Allocation. That means that $78,120 will be allocated to the Fixed
Allocation and the remaining Account Value ($21,880) will be allocated to
the Sub-accounts. Assuming that you do not make any withdrawals or transfers
from the Fixed Allocation, it will grow to $100,000 at the end of the
Guarantee Period. Of course we cannot predict the value of the remaining
Account Value that was allocated to the Sub-accounts.
* The rate in this example is hypothetical and may not reflect the current rate
for Guarantee Periods of this duration.
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION
INSTRUCTIONS?
Yes. Subject to our rules, your Financial Professional may forward instructions
regarding the allocation of your Account Value, and request financial
transactions involving investment options. IF YOUR FINANCIAL PROFESSIONAL HAS
THIS AUTHORITY, WE DEEM THAT ALL TRANSACTIONS THAT ARE DIRECTED BY YOUR
FINANCIAL PROFESSIONAL WITH RESPECT TO YOUR ANNUITY HAVE BEEN AUTHORIZED BY
YOU. You must contact us immediately if and when you revoke such authority. We
will not be responsible for acting on instructions from your Financial
Professional until we receive
56
notification of the revocation of such person's authority. We may also suspend,
cancel or limit these privileges at any time. We will notify you if we do.
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?
Yes. You may engage your own investment advisor to manage your account. These
investment advisors may be firms or persons who also are appointed by us, or
whose affiliated broker-dealers are appointed by us, as authorized sellers of
the Annuities. EVEN IF THIS IS THE CASE, HOWEVER, PLEASE NOTE THAT THE
INVESTMENT ADVISOR YOU ENGAGE TO PROVIDE ADVICE AND/OR MAKE TRANSFERS FOR YOU,
IS NOT ACTING ON OUR BEHALF, BUT RATHER IS ACTING ON YOUR BEHALF. We do not
offer advice about how to allocate your Account Value under any circumstance.
As such, we are not responsible for any recommendations such investment
advisors make, any investment models or asset allocation programs they choose
to follow or any specific transfers they make on your behalf. Please note that
if you have engaged a third-party investment advisor to provide asset
allocation services with respect to your Annuity, we may not allow you to elect
an optional benefit that requires investment in an asset allocation Portfolio
and/or that involves mandatory Account Value transfers (e.g. Highest Daily GRO).
It is your responsibility to arrange for the payment of the advisory fee
charged by your investment advisor. Similarly, it is your responsibility to
understand the advisory services provided by your investment advisor and the
advisory fees charged for the services.
We or an affiliate of ours may provide administrative support to licensed,
registered Financial Professionals or Investment advisors who you authorize to
make financial transactions on your behalf. We may require Financial
Professionals or investment advisors, who are authorized by multiple contract
owners to make financial transactions, to enter into an administrative
agreement with Prudential Annuities as a condition of our accepting
transactions on your behalf. The administrative agreement may impose
limitations on the Financial Professional's or investment advisor's ability to
request financial transactions on your behalf. These limitations are intended
to minimize the detrimental impact of a Financial Professional who is in a
position to transfer large amounts of money for multiple clients in a
particular Portfolio or type of portfolio or to comply with specific
restrictions or limitations imposed by a Portfolio(s) of Prudential Annuities.
PLEASE NOTE: Annuities where your Financial Professional or investment advisor
has the authority to forward instruction on financial transactions are also
subject to the restrictions on transfers between investment options that are
discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON
TRANSFERS BETWEEN INVESTMENT OPTIONS?" Since transfer activity directed by a
Financial Professional or third party investment adviser may result in
unfavorable consequences to all contract owners invested in the affected
options, we reserve the right to limit the investment options available to a
particular Owner where such authority as described above has been given to a
Financial Professional or investment advisor or impose other transfer
restrictions we deem necessary. The administrative agreement may limit the
available investment options, require advance notice of large transactions, or
impose other trading limitations on your Financial Professional. Your Financial
Professional will be informed of all such restrictions on an ongoing basis. We
may also require that your Financial Professional transmit all financial
transactions using the electronic trading functionality available through our
Internet website (www.prudentialannuities.com).
LIMITATIONS THAT WE MAY IMPOSE ON YOUR FINANCIAL PROFESSIONAL OR INVESTMENT
ADVISOR UNDER THE TERMS OF THE ADMINISTRATIVE AGREEMENT DO NOT APPLY TO
FINANCIAL TRANSACTIONS REQUESTED BY AN OWNER ON THEIR OWN BEHALF, EXCEPT AS
OTHERWISE DESCRIBED IN THIS PROSPECTUS.
HOW DO THE FIXED ALLOCATIONS WORK?
We credit a fixed interest rate to the Fixed Allocation so long as you remain
invested for a set period of time called a "Guarantee Period." (Note that the
discussion in this section of Guarantee Periods is not applicable to the
Benefit Fixed Rate Account and the DCA Fixed Rate Options). Fixed Allocations
currently are offered with Guarantee Periods from 1 to 10 years. We may make
Fixed Allocations of different durations available in the future, including
Fixed Allocations offered exclusively for use with certain optional investment
programs. Fixed Allocations may not be available in all states and may not
always be available for all Guarantee Periods depending on market factors and
other considerations.
The interest rate credited to a Fixed Allocation is the rate in effect when the
Guarantee Period begins and does not change so long as you remain invested for
the Guarantee Period. The rates are an effective annual rate of interest. We
determine the interest rates, in our sole discretion, for the various Guarantee
Periods. At the time that we confirm your Fixed Allocation, we will advise you
of the interest rate in effect and the date your Fixed Allocation matures. We
may change the rates we credit new Fixed Allocations at any time. Any change in
interest rate does not affect Fixed Allocations that were in effect before the
date of the change. To inquire as to the current rates for Fixed Allocations,
please call 1-888-PRU-2888.
A Guarantee Period for a Fixed Allocation begins:
. when all or part of a net Purchase Payment is allocated to that
particular Guarantee Period;
. upon transfer of any of your Account Value to a Fixed Allocation for
that particular Guarantee Period; or
. when you "renew" a Fixed Allocation by electing a new Guarantee Period.
To the extent permitted by law, we may establish different interest rates for
Fixed Allocations offered to a class of Owners who choose to participate in
various optional investment programs we make available. This may include, but
is not limited to, Owners who elect to use Fixed Allocations under a dollar
cost averaging program (see "Do You Offer Dollar Cost Averaging?") or the
Balanced Investment Program.
Prudential Annuities may offer Fixed Allocations with Guarantee Periods of 3
months or 6 months exclusively for use as a short-term Fixed Allocation
("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be
established with your initial Purchase Payment or additional purchase payments.
You may not transfer existing Account Value to a Short-term Fixed Allocation.
We reserve the right to terminate offering these special purpose Fixed
Allocations at any time.
57
On the Maturity Date of the Short-term Fixed Allocation, the Account Value will
be transferred to the Sub-account(s) you choose at the inception of the
program. If no instructions are provided, such Account Value will be
transferred to the AST Money Market Sub-account. Short-term Fixed Allocations
may not be renewed on the Maturity Date. If you surrender the Annuity or
transfer any Account Value from the Short-term Fixed Allocation to any other
investment option before the end of the Guarantee Period, a Market Value
Adjustment will apply.
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?
We do not have a specific formula for determining the fixed interest rates for
Fixed Allocations. Generally the interest rates we offer for Fixed Allocations
will reflect the investment returns available on the types of investments we
make to support our fixed rate guarantees. These investment types may include
cash, debt securities guaranteed by the United States government and its
agencies and instrumentalities, money market instruments, corporate debt
obligations of different durations, private placements, asset-backed
obligations and municipal bonds. In determining rates we also consider factors
such as the length of the Guarantee Period for the Fixed Allocation, regulatory
and tax requirements, liquidity of the markets for the type of investments we
make, commissions, administrative and investment expenses, our insurance risks
in relation to the Fixed Allocations, general economic trends and competition.
Some of these considerations are similar to those we consider in determining
the Insurance Charge that we deduct from Account Value allocated to the
Sub-accounts. For some of the same reasons that we deduct the Insurance Charge
against the Account Value allocated to the Sub-accounts, we also take into
consideration mortality, expense, administration, profit and other factors in
determining the interest rates we credit to Fixed Allocations, and therefore,
we credit lower interest rates due to the existence of these factors than we
otherwise would.
We will credit interest on a new Fixed Allocation in an existing Annuity at a
rate not less than the rate we are then crediting to Fixed Allocations for the
same Guarantee Period selected by new Annuity purchasers in the same class.
The interest rate we credit for a Fixed Allocation may be subject to a minimum
rate which may vary by state. Please refer to the Statement of Additional
Information. In certain states, the interest rate may be subject to a minimum
under state law or regulation.
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?
If you transfer or withdraw Account Value from a MVA Fixed Allocation more than
30 days before the end of its Guarantee Period, we will adjust the value of
your investment based on a formula, called a "Market Value Adjustment" or
"MVA". Under certain optional benefits (such as GRO and GRO Plus) a formula
transfers amounts between the MVA Fixed Allocations and the Permitted
Sub-accounts. The amount of any Market Value Adjustment can be either positive
or negative, depending on the movement of a combination of Strip Yields on
Strips and an Option-adjusted Spread (each as defined below) between the time
that you purchase the Fixed Allocation and the time you make a transfer or
withdrawal. The Market Value Adjustment formula compares the combination of
Strip Yields for Strips and the Option-adjusted Spreads as of the date the
Guarantee Period began with the combination of Strip Yields for Strips and the
Option-adjusted Spreads as of the date the MVA is being calculated. Any Market
Value Adjustment that applies will be subject to our rules for complying with
applicable state law.
.. "Strips" are a form of security where ownership of the interest portion of
United States Treasury securities are separated from ownership of the
underlying principal amount or corpus.
.. "Strip Yields" are the yields payable on coupon Strips of United States
Treasury securities.
.. "Option-adjusted Spread" is the difference between the yields on corporate
debt securities (adjusted to disregard options on such securities) and
government debt securities of comparable duration. We currently use the
Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of
Option-adjusted Spreads.
MVA FORMULA
The MVA formula is applied separately to each MVA Fixed Allocation to determine
the Account Value of the MVA Fixed Allocation on a particular date. The formula
is as follows:
[(1+I)/(1+J+0.0010)]^/(N/365)/
where:
I is the Strip Yield as of the start date of the Guarantee Period for
coupon Strips maturing at the end of the applicable Guarantee Period
plus the Option-adjusted Spread. If there are no Strips maturing at that
time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
J is the Strip Yield as of the date the MVA formula is being applied for
coupon Strips maturing at the end of the applicable Guarantee Period
plus the Option-adjusted Spread. If there are no Strips maturing at that
time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
N is the number of days remaining in the original Guarantee Period.
58
The denominator of the MVA formula includes a factor, currently equal to 0.0010
or 0.10%. The factor is an adjustment that is applied when an MVA is assessed
(regardless of whether the MVA is positive or negative) and, relative to when
no factor is applied, will reduce the amount being surrendered or transferred
from the MVA Fixed Allocation.
If you surrender your Annuity under the right to cancel provision, the MVA
formula is:
[(1 + I)/(1 + J)]^/(N/365)/
MVA EXAMPLES
The following hypothetical examples show the effect of the MVA in determining
Account Value. Assume the following:
.. You allocate $50,000 into a MVA Fixed Allocation (we refer to this as the
"Allocation Date" in these examples) with a Guarantee Period of 5 years (we
refer to this as the "Maturity Date" in these examples).
.. The Strip Yields for coupon Strips beginning on Allocation Date and maturing
on Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%).
.. You make no withdrawals or transfers until you decide to withdraw the entire
MVA Fixed Allocation after exactly three (3) years, at which point 730 days
remain before the Maturity Date (N = 730).
EXAMPLE OF POSITIVE MVA
Assume that at the time you request the withdrawal, the Strip Yields for Strips
maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J =
4.00%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]^/(N/365)/ = [1.055/1.041]/2/ = 1.027078
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $59,448.56
EXAMPLE OF NEGATIVE MVA
Assume that at the time you request the withdrawal, the Strip Yields for Strips
maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J =
7.00%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]^/(N/365)/ = [1.055/1.071]/2/ = 0.970345
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $56,164.78.
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a MVA Fixed Allocation is the last day of the Guarantee
Period (note that the discussion in this section of Guarantee Periods is not
applicable to the Fixed Allocations used with a dollar cost averaging program,
the Benefit Fixed Rate Account, and the DCA Fixed Rate options). Before the
Maturity Date, you may choose to renew the MVA Fixed Allocation for a new
Guarantee Period of the same or different length or you may transfer all or
part of that MVA Fixed Allocation's Account Value to another MVA Fixed
Allocation or to one or more Sub-accounts. We will not charge a MVA if you
choose to renew a MVA Fixed Allocation on its Maturity Date or transfer the
Account Value to one or more Sub-accounts. We will notify you before the end of
the Guarantee Period about the fixed interest rates that we are currently
crediting to all MVA Fixed Allocations that are being offered. The rates being
credited to Fixed Allocations may change before the Maturity Date.
IF YOU DO NOT SPECIFY HOW YOU WANT A FIXED ALLOCATION TO BE ALLOCATED ON ITS
MATURITY DATE, WE WILL THEN TRANSFER THE ACCOUNT VALUE IN THE FIXED ALLOCATION
TO THE AST MONEY MARKET SUB-ACCOUNT. You can then elect to allocate the Account
Value to any of the Sub-accounts or to a new Fixed Allocation.
59
ACCESS TO ACCOUNT VALUE
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?
During the accumulation period you can access your Account Value through
partial withdrawals, Systematic Withdrawals, and where required for tax
purposes, Required Minimum Distributions ("RMD"). You can also surrender your
Annuity at any time. Depending on your instructions, we may deduct a portion of
the Account Value being withdrawn or surrendered as a CDSC, if applicable. If
you surrender your Annuity, in addition to any CDSC, we may deduct the Annual
Maintenance Fee, any Tax Charge that applies and the charge for any optional
benefits. We may also apply a Market Value Adjustment to MVA Fixed Allocations
being withdrawn or surrendered. Certain amounts may be available to you each
Annuity Year that are not subject to a CDSC. These are called "Free
Withdrawals." Unless you notify us differently, as permitted, withdrawals are
taken pro-rata based on the Account Value in the investment options at the time
we receive your withdrawal request. Each of these types of distributions is
described more fully below.
If you participate in certain Lifetime Guaranteed Minimum Withdrawal Benefits,
and you take a withdrawal deemed to be Excess Income that brings your Account
Value to zero, both the benefit and the Annuity itself may terminate. See
"Living Benefits" later in this prospectus for more information.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS FROM NONQUALIFIED ANNUITIES?
DURING THE ACCUMULATION PERIOD
For federal income tax purposes, a distribution during the accumulation period
is deemed to come first from any "gain" in your Annuity and second as a return
of your "tax basis", if any. Distributions from your Annuity are generally
subject to ordinary income taxation on the amount of any investment gain unless
the distribution qualifies as a non-taxable exchange or transfer. If you take a
distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10%
penalty in addition to ordinary income taxes on any gain. You may wish to
consult a professional tax advisor for advice before requesting a distribution.
DURING THE ANNUITIZATION PERIOD
During the annuitization period, a portion of each annuity payment is taxed as
ordinary income at the tax rate you are subject to at the time of the payment.
The Code and regulations have "exclusionary rules" that we use to determine
what portion of each annuity payment should be treated as a return of any tax
basis you have in your Annuity. Once the tax basis in your Annuity has been
distributed, the remaining annuity payments are taxable as ordinary income. The
tax basis in your Annuity may be based on the tax-basis from a prior contract
in the case of a 1035 exchange or other qualifying transfer.
There may also be tax implications on distributions from qualified Annuities.
See "Tax Considerations" for information about qualified Annuities and for
additional information about nonqualified Annuities.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation period.
. To meet liquidity needs, you can withdraw a limited amount from your
Annuity during each Annuity Year without application of any CDSC. We
call this the "Free Withdrawal" amount. The Free Withdrawal amount is
not available if you choose to surrender your Annuity. Amounts withdrawn
as a Free Withdrawal do not reduce the amount of CDSC that may apply
upon a subsequent withdrawal or surrender of your Annuity. After any
partial withdrawal, your Annuity must have a Surrender Value of at least
$1,000, or we may treat the partial withdrawal request as a request to
fully surrender your Annuity. The minimum Free Withdrawal you may
request is $100.
. You can also make withdrawals in excess of the Free Withdrawal amount.
The minimum partial withdrawal you may request is $100.
To determine if a CDSC applies to partial withdrawals, we:
1. First determine what, if any, amounts qualify as a Free Withdrawal. These
amounts are not subject to the CDSC.
2. Next determine what, if any, remaining amounts are withdrawals of Purchase
Payments. Amounts in excess of the Free Withdrawal amount will be treated
as withdrawals of Purchase Payments, as described in "Fees, Charges and
Deductions - Contingent Deferred Sales Charge ("CDSC")" earlier in this
prospectus. These amounts may be subject to the CDSC. Purchase Payments are
withdrawn on a first-in, first-out basis. (This step does not apply if all
Purchase Payments have been previously withdrawn.)
3. Withdraw any remaining amounts from any other Account Value. These amounts
are not subject to the CDSC.
You may request a withdrawal for an exact dollar amount after deduction of any
CDSC that applies (called a "net withdrawal") or request a gross withdrawal
from which we will deduct any CDSC that applies, resulting in less money being
payable to you than the amount you requested. If you request a net withdrawal,
the amount deducted from your Account Value to pay the CDSC may also be subject
to a CDSC.
Partial withdrawals may also be available following annuitization but only if
you choose certain annuity payment options. (NOTE, HOWEVER, THAT WE DO NOT
PERMIT COMMUTATION ONCE ANNUITY PAYMENTS HAVE COMMENCED).
To request the forms necessary to make a withdrawal from your Annuity, call
1-888-PRU-2888 or visit our Internet Website at www.prudentialannuities.com.
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HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?
The maximum Free Withdrawal amount during each Annuity Year is equal to 10% of
all purchase payments that are subject to a CDSC. Withdrawals made within an
Annuity Year reduce the Free Withdrawal amount available for the remainder of
the Annuity Year. If you do not make a withdrawal during an Annuity Year, you
are not allowed to carry over the Free Withdrawal amount to the next Annuity
Year.
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?
Yes. Our systematic withdrawal program is an administrative program designed
for you to withdraw a specified amount from your Annuity on an automated basis
at the frequency you select ("systematic withdrawals"). This program is
available to you at no additional charge. We may cease offering this program or
change the administrative rules related to the program at any time on a
non-discriminatory basis.
You may not have a systematic withdrawal program, as described in this section,
if you are receiving substantially equal periodic payments under Sections 72(t)
or 72(q) of the Code or Required Minimum Distributions.
You may terminate your systematic withdrawal program at any time. Ownership
changes to, and assignment of, your Annuity will terminate any systematic
withdrawal program on the Annuity as of the effective date of the change or
assignment. Requesting partial withdrawals while you have a systematic
withdrawal program may also terminate your systematic withdrawal program as
described below.
Systematic withdrawals can be made from your Account Value allocated to the
Sub-accounts or certain MVA Options. Please note that systematic withdrawals
may be subject to any applicable CDSC and/or an MVA. We will determine whether
a CDSC applies and the amount in the same way as we would for a partial
withdrawal.
The minimum amount for each systematic withdrawal is $100. If any scheduled
systematic withdrawal is for less than $100 (which may occur under a program
that provides payment of an amount equal to the earnings in your Annuity for
the period requested), we may postpone the withdrawal and add the expected
amount to the amount that is to be withdrawn on the next scheduled systematic
withdrawal.
If you do not have an optional benefit, we will withdraw systematic withdrawals
from the Investment Options you have designated (your "designated Investment
Options"). If you do not designate Investment Options for systematic
withdrawals, we will withdraw systematic withdrawals pro rata based on the
Account Value in the Investment Options at the time we pay out your withdrawal.
"Pro rata" means that the percentage of each Investment Option withdrawn is the
same percentage that the Investment Option bears to the total Account Value.
For any scheduled systematic withdrawal for which you have elected a specific
dollar amount and have specified percentages to be withdrawn from your
designated Investment Options, if the amounts in your designated Investment
Options cannot satisfy such instructions, we will withdraw systematic
withdrawals pro rata (as described above) based on the Account Value across all
of your Investment Options.
If you have a Guaranteed Lifetime Minimum Withdrawal Benefit or the Guaranteed
Minimum Withdrawal Benefit (GMWB) and elect, or have elected, to receive
withdrawals under the benefit using our systematic withdrawal program, please
be advised of the current administrative rules associated with this program:
.. Excluding Lifetime Five and GMWB, systematic withdrawals must be taken from
your Account Value on a pro rata basis from the Investment Options at the
time we process each withdrawal.
.. If you either have an existing or establish a new systematic withdrawal
program for a) your Annual Income Amount, Annual Withdrawal Amount (only
applicable to Lifetime Five), Protected Annual Withdrawal Amount (only
applicable to GMWB) or LIA Amount (only applicable to a Lifetime Income
Accelerator Benefit) or b) for a designated amount that is less than your
Annual Income Amount, Protected Annual Withdrawal Amount, or LIA Amount, and
we receive a request for a partial withdrawal from your Annuity in Good
Order, we will process your partial withdrawal request and may cancel your
systematic withdrawal program.
GROSS WITHDRAWAL OR NET WITHDRAWAL. Generally, you can request either a gross
withdrawal or a net withdrawal. If, however, you are taking your withdrawal
under your living benefit as described above through our Systematic Withdrawal
program, you will only be permitted to take that withdrawal on a gross basis.
In a gross withdrawal, you request a specific withdrawal amount with the
understanding that the amount you actually receive is reduced by an applicable
CDSC or tax withholding. In a net withdrawal, you request a withdrawal for an
exact dollar amount with the understanding that any applicable deduction for
CDSC or tax withholding is taken from your Account Value. This means that an
amount greater than the amount of your requested withdrawal will be deducted
from your Unadjusted Account Value. To make sure that you receive the full
amount requested, we calculate the entire amount, including the amount
generated due to the CDSC or tax withholding, that will need to be withdrawn.
We then apply the CDSC or tax withholding to that entire amount. As a result,
you will pay a greater CDSC or have more tax withheld if you elect a net
withdrawal.
.. If you either have or establish a new systematic withdrawal program for an
amount greater than your Annual Income Amount, Annual Withdrawal Amount,
Protected Annual Withdrawal Amount or LIA Amount, it is important to note
that these systematic withdrawals may result in Excess Income which will
negatively impact your guaranteed withdrawal amounts available in future
Annuity Years. Taking partial withdrawals in addition to your systematic
withdrawal program will further increase the impact on your future
guaranteed withdrawal amounts.
.. For a discussion of how a withdrawal of Excess Income would impact your
optional living benefits, see "Living Benefits" later in this prospectus.
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DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(T) AND 72(Q) OF THE
INTERNAL REVENUE CODE?
Yes. If your Annuity is used as a funding vehicle for certain retirement plans
that receive special tax treatment under Sections 401, 403(b), 408 or 408A of
the Code, Section 72(t) of the Code may provide an exception to the 10% penalty
tax on distributions made prior to age 59 1/2 if you elect to receive
distributions as a series of "substantially equal periodic payments". For
Annuities issued as Nonqualified Annuities, the Code may provide a similar
exception to the 10% penalty tax under Section 72(q) of the Code. Distributions
received under these provisions in any Annuity Year that exceed the maximum
amount available as a free withdrawal will be subject to any applicable CDSC.
We may apply a Market Value Adjustment to any MVA Fixed Allocations. To request
a program that complies with Section 72(t)/72(q), you must provide us with
certain required information in writing on a form acceptable to us. We may
require advance notice to allow us to calculate the amount of 72(t)/72(q)
withdrawals. The Surrender Value of your Annuity must be at least $20,000
before we will allow you to begin a program for withdrawals under
Section 72(t)/72(q). The minimum amount for any such withdrawal is $100 and
payments may be made monthly, quarterly, semi-annually or annually.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments before age 59 1/2 that are not subject to the 10% penalty.
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?
(See "Tax Considerations" for a further discussion of Required Minimum
Distributions.)
Required Minimum Distributions are a type of Systematic Withdrawal we allow to
meet distribution requirements under Sections 401, 403(b) or 408 of the Code.
Required Minimum Distribution rules do not apply to Roth IRAs during the
Owner's lifetime. Under the Code, you may be required to begin receiving
periodic amounts from your Annuity. In such case, we will allow you to make
Systematic Withdrawals in amounts that satisfy the Required Minimum
Distribution rules under the Code. We do not assess a CDSC on Required Minimum
Distributions from your Annuity if you are required by law to take such
Required Minimum Distributions from your Annuity at the time it is taken,
provided the amount withdrawn is the amount we calculate as the RMD and is paid
out through a program of systematic withdrawals that we make available.
However, a CDSC (if applicable) may be assessed on that portion of a Systematic
Withdrawal that is taken to satisfy the Required Minimum Distribution
provisions in relation to other savings or investment plans under other
qualified retirement plans not maintained with Prudential Annuities. However,
no MVA will be assessed on a withdrawal taken to meet RMD requirements
applicable to your Annuity.
The amount of the Required Minimum Distribution for your particular situation
may depend on other annuities, savings or investments. We will only calculate
the amount of your Required Minimum Distribution based on the value of your
Annuity. We require three (3) days advance written notice to calculate and
process the amount of your payments. You may elect to have Required Minimum
Distributions paid out monthly, quarterly, semi-annually or annually. The $100
minimum amount that applies to Systematic Withdrawals applies to monthly
Required Minimum Distributions but does not apply to Required Minimum
Distributions taken out on a quarterly, semi-annual or annual basis.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments and satisfying the Required Minimum Distribution provisions under the
Code.
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?
Yes. During the accumulation period you can surrender your Annuity at any time.
Upon surrender, you will receive the Surrender Value. Upon surrender of your
Annuity, you will no longer have any rights under the surrendered Annuity.
For purposes of calculating any applicable CDSC on surrender, the purchase
payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you have
made prior withdrawals under the Free Withdrawal provision or if your Account
Value has declined in value due to negative market performance. In that
scenario, we would determine the CDSC amount as the applicable percentage of
the purchase payments being withdrawn, rather than as a percentage of the
remaining Account Value or withdrawal request. Thus, the CDSC would be greater
than if it were calculated as a percentage of remaining Account Value or
withdrawal amount. We may apply a Market Value Adjustment to any MVA Fixed
Allocations.
Under certain annuity payment options, you may be allowed to surrender your
Annuity for its then current value.
To request the forms necessary to surrender your Annuity, call 1-888-PRU-2888
or visit our Internet Website at www.prudentialannuities.com.
We apply as a threshold, in certain circumstances, a minimum Surrender Value of
$1,000. If you purchase an Annuity WITHOUT a lifetime guaranteed minimum
withdrawal benefit, we will not allow you to take any withdrawals that would
cause your Annuity's Account Value, after taking the withdrawal, to fall below
the minimum Surrender Value. Likewise, if you purchase an Annuity WITH certain
lifetime guaranteed minimum withdrawal benefits, we will not allow you to take
a Non-Lifetime Withdrawal (see "Living Benefits") that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the minimum
Surrender Value.
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?
Where permitted by law, you may request to surrender all or part of your
Annuity prior to the Annuity Date without application of any otherwise
applicable CDSC upon occurrence of a medically-related "Contingency Event" as
described below (a "Medically-Related Surrender"). The requirements of such a
surrender and waiver may vary by state. We may apply a Market Value Adjustment
to any MVA Fixed Allocations. If you request a full surrender, the amount
payable will be your Account Value minus, with respect to XT6, (a) the amount
of any XTra Credits applied
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within 12 months prior to your request to surrender your Annuity (or as
otherwise stipulated by applicable State law); and (b) the amount of any XTra
Credits added in conjunction with any purchase payments received after our
receipt of your request for a Medically-Related Surrender (e.g. purchase
payments received at such time pursuant to a salary reduction program). With
respect to partial surrenders, we similarly reserve the right to take back XTra
Credits as described above (if allowed by State law).
This waiver of any applicable CDSC is subject to our rules in place at the time
of your request, which currently include but are not limited to the following:
. The Annuitant must have been named or any change of Annuitant must have
been accepted by us, prior to the "Contingency Event" described below in
order to qualify for a Medically-Related Surrender;
. the Annuitant must be alive as of the date we pay the proceeds of such
surrender request;
. if the Owner is one or more natural persons, all such Owners must also
be alive at such time;
. we must receive satisfactory proof of the Annuitant's confinement in a
Medical Care Facility or Fatal Illness in writing on a form satisfactory
to us; and
. no additional purchase payments can be made to the Annuity.
A "Contingency Event" occurs if the Annuitant is:
. first confined in a "Medical Care Facility" while your Annuity is in
force and remains confined for at least 90 days in a row; or
. first diagnosed as having a "Fatal Illness" while your Annuity is in
force.
The definitions of "Medical Care Facility" and "Fatal Illness," as well as
additional terms and conditions, are provided in your Annuity. Specific details
and definitions in relation to this benefit may differ in certain
jurisdictions. This waiver is not available in Massachusetts.
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?
We currently make available annuity options that provide fixed annuity
payments. Your Annuity provides certain fixed annuity payment options. We do
not guarantee to continue to make available any other option other than the
fixed annuity payment options set forth in your Annuity. Fixed options provide
the same amount with each payment. Adjustable options provide a fixed payment
that is periodically adjusted based on current interest rates. Please refer to
the "Living Benefits" section below for a description of annuity options that
are available when you elect one of the living benefits. For additional
information on annuity payment options you may request a Statement of
Additional Information. You must annuitize your entire Account Value; partial
annuitizations are not allowed.
You have a right to choose your annuity start date, provided that it is no
later than the first day of the calendar month next following the 95th birthday
of the oldest of any Owner and Annuitant whichever occurs first ("Latest
Annuity Date") and no earlier than the earliest permissible Annuity Date. If
you do not request an earlier Annuity Date in writing, then your Annuity Date
will be the Latest Annuity Date. You may choose one of the Annuity Options
described below, and the frequency of annuity payments. Certain annuity options
and/or periods certain may not be available, depending on the age of the
Annuitant. You may change your choices before the Annuity Date.
Certain of these annuity options may be available as "settlement options" to
Beneficiaries who choose to receive the Death Benefit proceeds as a series of
payments instead of a lump sum payment.
Please note, with respect to XT6, you may not annuitize within the first three
Annuity Years and with respect to ASAP III and APEX II, you may not annuitize
within the first Annuity Year. With respect to the ASL II Annuity, you may
annuitize immediately, if you wish.
For Beneficiary Annuities, no annuity payments are available and all references
to an Annuity Date are not applicable.
OPTION 1
PAYMENTS FOR LIFE: Under this option, income is payable periodically until the
death of the "Key Life". The "Key Life" (as used in this section) is the person
or persons upon whose life annuity payments are based. No additional annuity
payments are made after the death of the Key Life. Since no minimum number of
payments is guaranteed, this option offers the largest amount of periodic
payments of the life contingent annuity options. IT IS POSSIBLE THAT ONLY ONE
PAYMENT WILL BE PAYABLE IF THE DEATH OF THE KEY LIFE OCCURS BEFORE THE DATE THE
SECOND PAYMENT WAS DUE, AND NO OTHER PAYMENTS NOR DEATH BENEFITS WOULD BE
PAYABLE. Under this option, you cannot make a partial or full surrender of the
annuity.
OPTION 2
PAYMENTS BASED ON JOINT LIVES: Under this option, income is payable
periodically during the joint lifetime of two key lives, and thereafter during
the remaining lifetime of the survivor, ceasing with the last payment prior to
the survivor's death. No minimum number of payments is guaranteed under this
option. IT IS POSSIBLE THAT ONLY ONE PAYMENT WILL BE PAYABLE IF THE DEATH OF
ALL THE KEY LIVES OCCURS BEFORE THE DATE THE SECOND PAYMENT WAS DUE, AND NO
OTHER PAYMENTS OR DEATH BENEFITS WOULD BE PAYABLE. Under this option, you
cannot make a partial or full surrender of the annuity.
OPTION 3
PAYMENTS FOR LIFE WITH A CERTAIN PERIOD: Under this option, income is payable
until the death of the Key Life. However, if the Key Life dies before the end
of the period selected (5, 10 or 15 years), the remaining payments are paid to
the Beneficiary until the end of such period. Under this option, you cannot
make a partial or full surrender of the annuity. If this Annuity is issued as a
Qualified Annuity contract and annuity payments begin after age 92, then this
Option will be modified to permit a period certain that will end no later than
the life expectancy of the annuitant defined under the IRS Required Minimum
Distribution tables.
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OPTION 4
FIXED PAYMENTS FOR A CERTAIN PERIOD: Under this option, income is payable
periodically for a specified number of years. If the payee dies before the end
of the specified number of years, the remaining payments are paid to the
Beneficiary until the end of such period. Note that under this option, payments
are not based on any assumptions of life expectancy. THEREFORE, THAT PORTION OF
THE INSURANCE CHARGE ASSESSED TO COVER THE RISK THAT KEY LIVES OUTLIVE OUR
EXPECTATIONS PROVIDES NO BENEFIT TO AN OWNER SELECTING THIS OPTION. Under this
option, you cannot make a partial or full surrender of the annuity.
We may make different annuity and settlement options available in the future.
We do not guarantee to continue to make available any other option other than
the fixed annuity payment options set forth in your contract.
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?
Unless prohibited by law, we require that you elect either a life annuity or an
annuity with a certain period of at least 5 years if any CDSC would apply were
you to surrender your Annuity on the Annuity Date. Certain annuity payment
options may not be available if your Annuity Date occurs during the period that
a CDSC would apply.
You have a right to choose your Annuity Date, provided it is no later than the
maximum Annuity Date that may be required by law or under the terms of your
Annuity.
For Annuities issued prior to November 20, 2006:
. if you do not provide us with your Annuity Date, a default date for the
Annuity Date will be the first day of the calendar month following the
later of the Annuitant's 85/th/ birthday or the fifth anniversary of our
receipt of your request to purchase an Annuity; and
. unless you instruct us otherwise, the annuity payments, where allowed by
law, will be calculated on a fixed basis under Option 3, Payments for
Life with 10 years certain.
If you choose to defer the Annuity Date beyond the default date, the IRS may
not consider your contract to be an annuity under the tax law. If that should
occur, all gain in your Annuity at that time will become immediately taxable to
you. Further, each subsequent year's increase in Account Value would be taxable
in that year. By choosing to continue to defer after the default date, you will
assume the risk that your Annuity will not be considered an annuity for federal
income tax purposes.
For Annuities issued on or after November 20, 2006:
. Unless we agree otherwise, the Annuity Date you choose must be no later
than the first day of the calendar month coinciding with or next
following the later of the oldest Owner's or Annuitant's 95/th/
birthday, whichever occurs first, and the fifth anniversary of the Issue
Date.
. If you do not provide us with your Annuity Date, the maximum date as
described above will be the default date; and, unless you instruct us
otherwise, we will pay you the annuity payments and the annuity
payments, where allowed by law, will be calculated on a fixed basis
under Option 3, Payments for Life with 10 years certain.
Please note that annuitization essentially involves converting your Account
Value to an annuity payment stream, the length of which depends on the terms of
the applicable annuity option. Thus, once annuity payments begin, your death
benefit is determined solely under the terms of the applicable annuity payment
option, and you no longer participate in any optional living benefit (unless
you have annuitized under that benefit).
HOW ARE ANNUITY PAYMENTS CALCULATED?
FIXED ANNUITY PAYMENTS
If you choose to receive fixed annuity payments, you will receive equal
fixed-dollar payments throughout the period you select. The amount of the fixed
payment will vary depending on the annuity payment option and payment frequency
you select. Generally, the first annuity payment is determined by multiplying
the Account Value, minus any state premium taxes that may apply, by the factor
determined from our table of annuity rates. The table of annuity rates differs
based on the type of annuity chosen and the frequency of payment selected. Our
rates will not be less than our guaranteed minimum rates. These guaranteed
minimum rates are derived from the a2000 Individual Annuity Mortality Table
with an assumed interest rate of 3% per annum. Where required by law or
regulation, such annuity table will have rates that do not differ according to
the gender of the Key Life. Otherwise, the rates will differ according to the
gender of the Key Life.
ADJUSTABLE ANNUITY PAYMENTS
We may make an adjustable annuity payment option available. Adjustable annuity
payments are calculated similarly to fixed annuity payments except that on
every fifth (5/th/) anniversary of receiving annuity payments, the annuity
payment amount is adjusted upward or downward depending on the rate we are
currently crediting to annuity payments. The adjustment in the annuity payment
amount does not affect the duration of remaining annuity payments, only the
amount of each payment.
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LIVING BENEFITS
DO YOU OFFER BENEFITS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS
WHILE THEY ARE ALIVE?
Prudential Annuities offers different optional benefits, for an additional
charge, that can provide retirement income protection for Owners while they are
alive. Optional benefits are not available if your Annuity is held as a
Beneficiary Annuity. Notwithstanding the additional protection provided under
the optional Living Benefit, the additional cost has the impact of reducing net
performance of the investment options. Each optional benefit offers a distinct
type of guarantee, regardless of the performance of the Sub-accounts, that may
be appropriate for you depending on the manner in which you intend to make use
of your Annuity while you are alive. We reserve the right to cease offering any
of the living benefits. Depending on which optional benefit you choose, you can
have flexibility to invest in the Sub-accounts while:
.. protecting a principal amount from decreases in value as of specified future
dates due to investment performance;
.. taking withdrawals with a guarantee that you will be able to withdraw not
less than a guaranteed benefit base over time;
.. guaranteeing a minimum amount of growth will be applied to your principal,
if it is to be used as the basis for certain types of lifetime income
payments or lifetime withdrawals; or
.. providing spousal continuation of certain benefits.
The "living benefits" are as follows:
Guaranteed Return Option Plus II (GRO Plus II)
Highest Daily Guaranteed Return Option II (HD GRO II)
Guaranteed Return Option (GRO)/1/
Guaranteed Return Option Plus (GRO Plus)/1/
Guaranteed Return Option Plus 2008 (GRO Plus 2008)/1/
Highest Daily Guaranteed Return Option (Highest Daily GRO)/1/
Guaranteed Minimum Withdrawal Benefit (GMWB)/1/
Guaranteed Minimum Income Benefit (GMIB)/1/
Lifetime Five Income Benefit and Spousal Lifetime Five Income Benefit/1/
Highest Daily Lifetime Five Income Benefit/1/
Highest Daily Lifetime Seven Income Benefit/1/
Spousal Highest Daily Lifetime Seven Income Benefit/1/
Highest Daily Lifetime Seven with Beneficiary Income Option Income Benefit/1/
Highest Daily Lifetime Seven with Lifetime Income Accelerator Income Benefit/1/
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option Income
Benefit/1/
Highest Daily Lifetime 7 Plus Income Benefit/1/
Spousal Highest Daily Lifetime 7 Plus Income Benefit/1/
Highest Daily Lifetime 7 Plus with Beneficiary Income Option Benefit/1/
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator Benefit/1/
Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option Benefit/1/
Highest Daily Lifetime 6 Plus Income Benefit/1/
Highest Daily Lifetime 6 Plus with Lifetime Income Accelerator/1/
Spousal Highest Daily Lifetime 6 Plus Income Benefit/1/
(1)No longer available for new elections.
Here is a general description of each kind of living benefit that exists under
this Annuity:
.. GUARANTEED MINIMUM ACCUMULATION BENEFITS. The common characteristic of these
benefits is that a specified amount of your annuity value is guaranteed at
some point in the future. For example, under our Highest Daily GRO II
benefit, we make an initial guarantee that your annuity value on the day you
start the benefit will not be any less ten years later. If your annuity
value is less on that date, we use our own funds to give you the difference.
Because the guarantee inherent in the guaranteed minimum accumulation
benefit does not take effect until a specified number of years into the
future, you should elect such a benefit only if your investment time horizon
is of at least that duration. Please note that these guaranteed minimum
accumulation benefits require your participation in certain predetermined
mathematical formulas that may transfer your Account Value between certain
permitted Sub-accounts and a bond portfolio Sub-account (or MVA Fixed
Allocations, for certain of the benefits). The portfolio restrictions and
the use of each formula may reduce the likelihood that we will be required
to make payments to you under the living benefits.
.. GUARANTEED MINIMUM INCOME BENEFIT OR ("GMIB"). As discussed elsewhere in
this Prospectus, you have the right under your Annuity to ask us to convert
your accumulated annuity value into a series of annuity payments. Generally,
the smaller the amount of your annuity value, the smaller the amount of your
annuity payments. GMIB addresses this risk, by guaranteeing a certain amount
of appreciation in the amount used to produce annuity payments. Thus, even
if your annuity value goes down in value, GMIB guarantees that the amount we
use to determine the amount of the annuity payments will go up in value by
the prescribed amount. You should select GMIB only if you are prepared to
delay your annuity payments for the required waiting period and if you
anticipate needing annuity payments. This benefit is no longer available for
new elections.
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.. GUARANTEED MINIMUM WITHDRAWAL BENEFIT OR ("GMWB"). This benefit is designed
for someone who wants to access the annuity's value through withdrawals over
time, rather than by annuitizing. This benefit guarantees that a specified
amount will be available for withdrawal over time, even if the value of the
annuity itself has declined. Please note that there is a maximum Annuity
Date under your Annuity, by which date annuity payments must commence. This
benefit is no longer available for new elections.
.. LIFETIME GUARANTEED MINIMUM WITHDRAWAL BENEFITS. These benefits also are
designed for someone who wants to access the annuity's value through
withdrawals over time, rather than by annuitizing. These benefits differ
from GMWB, however, in that the withdrawal amounts are guaranteed for life
(or until the second to die of spouses). The way that we establish the
guaranteed amount that, in turn, determines the amount of the annual
lifetime payments varies among these benefits. Under our Highest Daily
Lifetime 6 Plus benefit, for example, the guaranteed amount generally is
equal to your highest daily Account Value, appreciated at six percent
annually. Please note that there is a maximum Annuity Date under your
Annuity, by which date annuity payments must commence. Certain of these
benefits are no longer available for new elections. Under any of the
Guaranteed Lifetime Withdrawal Benefits (e.g., Highest Daily Lifetime 6
Plus), withdrawals in excess of the Annual Income Amount, called "Excess
Income," will result in a permanent reduction in future guaranteed
withdrawal amounts. If you purchased your contract in New York and wish to
withdraw Excess Income but are uncertain how it will impact your future
guaranteed withdrawal amounts, you may contact us prior to requesting the
withdrawal to obtain a personalized, transaction-specific calculation
showing the effect of taking the withdrawal.
FINALLY, PLEASE NOTE THAT CERTAIN OF THESE BENEFITS REQUIRE YOUR PARTICIPATION
IN A PREDETERMINED MATHEMATICAL FORMULA THAT MAY TRANSFER YOUR ACCOUNT VALUE
BETWEEN CERTAIN PERMITTED SUB-ACCOUNTS AND A BOND PORTFOLIO SUB-ACCOUNT (OR THE
GENERAL ACCOUNT, FOR ONE OF THE BENEFITS). ALTHOUGH NOT GUARANTEED, THE
OPTIONAL LIVING BENEFIT INVESTMENT REQUIREMENTS AND THE APPLICABLE FORMULA ARE
DESIGNED TO REDUCE THE DIFFERENCE BETWEEN YOUR ACCOUNT VALUE AND OUR LIABILITY
UNDER THE BENEFIT. MINIMIZING SUCH DIFFERENCE GENERALLY BENEFITS US BY
DECREASING THE RISK THAT WE WILL USE OUR OWN ASSETS TO MAKE BENEFIT PAYMENTS TO
YOU. THOUGH THE INVESTMENT REQUIREMENTS AND FORMULAS ARE DESIGNED TO REDUCE
RISK, THEY DO NOT GUARANTEE ANY APPRECIATION OF YOUR ACCOUNT VALUE. IN FACT,
THEY COULD MEAN THAT YOU MISS APPRECIATION OPPORTUNITIES IN OTHER INVESTMENT
OPTIONS. WE ARE NOT PROVIDING YOU WITH INVESTMENT ADVICE THROUGH THE USE OF ANY
OF THE FORMULAS. IN ADDITION, THE FORMULAS DO NOT CONSTITUTE AN INVESTMENT
STRATEGY THAT WE ARE RECOMMENDING TO YOU.
In general, with respect to our lifetime guaranteed withdrawal benefits (e.g.,
Highest Daily Lifetime 6 Plus), please be aware that although a given
withdrawal may qualify as a free withdrawal for purposes of not incurring a
CDSC, the amount of the withdrawal could exceed the Annual Income Amount under
the benefit and thus be deemed "Excess Income" - thereby reducing your Annual
Income Amount for future years.
PLEASE REFER TO THE BENEFIT DESCRIPTIONS THAT FOLLOW FOR A COMPLETE DESCRIPTION
OF THE TERMS, CONDITIONS AND LIMITATIONS OF EACH OPTIONAL BENEFIT. INVESTMENT
RESTRICTIONS APPLY IF YOU ELECT CERTAIN OPTIONAL LIVING BENEFITS. SEE THE CHART
IN THE "INVESTMENT OPTIONS" SECTION OF THE PROSPECTUS FOR A LIST OF INVESTMENT
OPTIONS AVAILABLE AND PERMITTED WITH EACH BENEFIT. WE RESERVE THE RIGHT TO
TERMINATE THIS BENEFIT IF YOU ALLOCATE FUNDS INTO NON-PERMITTED INVESTMENT
OPTIONS. You should consult with your Financial Professional to determine if
any of these optional benefits may be appropriate for you based on your
financial needs. There are many factors to consider, but we note that among
them you may want to evaluate the tax implications of these different
approaches to meeting your needs, both between these benefits and in comparison
to other potential solutions to your needs (e.g., comparing the tax
implications of the withdrawal benefit and annuity payments and comparing
annuity benefits with benefits of other products).
TERMINATION OF EXISTING BENEFITS AND ELECTION OF NEW BENEFITS
If you currently own an Annuity with an optional living benefit that is
terminable, you may terminate the benefit rider and elect one of the currently
available benefits, subject to availability of the benefit at that time and our
then current rules. There is currently no waiting period to make a new benefit
election (you may elect a new benefit beginning on the next Valuation Day)
provided that the benefit being elected is available for election post-issue.
We reserve the right to waive, change and/or further limit availability and
election frequencies in the future. Check with your Financial Professional
regarding the availability of re-electing or electing a benefit and any waiting
period. The benefit you re-elect or elect may be more expensive than the
benefit you are terminating. NOTE THAT ONCE YOU TERMINATE AN EXISTING BENEFIT,
YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT
AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS
OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. You should carefully consider
whether terminating your existing benefit and electing a new benefit is
appropriate for you. THERE IS NO GUARANTEE THAT ANY BENEFIT WILL BE AVAILABLE
FOR ELECTION AT A LATER DATE.
Certain living benefits involve your participation in a pre-determined
mathematical formula that may transfer your Account Value between the
Sub-accounts you have chosen and certain bond portfolio Sub-accounts of AST
and/or our general account. The formulas may differ among the living benefits
that employ a formula. Such different formulas may result in different
transfers of Account Value over time.
Prior to a recent Supreme Court decision, and consistent with Section 3 of the
federal Defense of Marriage Act ("DOMA"), same sex marriages under state law
were not recognized as same sex marriages for purposes of federal law. However,
in United States v. Windsor, the U.S. Supreme Court struck down Section 3 of
DOMA as unconstitutional, thereby recognizing for federal law purposes a valid
same sex marriage. The Windsor decision means that the favorable tax benefits
afforded by the federal tax law to an opposite sex spouse under the Internal
Revenue Code (the Code) are now available to a same sex spouse.
On August 29, 2013, the Internal Revenue Service ("IRS") issued guidance on its
position regarding same sex marriages for federal tax purposes. If a couple is
married in a jurisdiction (including a foreign country) that recognizes same
sex marriages, that marriage will be recognized for all federal tax purposes
regardless of the law in the jurisdiction where they reside. However, the IRS
did not recognize civil unions
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and registered domestic partnerships as marriages for federal tax purposes. If
a state does not recognize a civil union or a registered domestic partnership
as a marriage, it is not a marriage for federal tax purposes.
Currently, a case is pending with the U.S. Supreme Court that may address
several unanswered questions regarding the application of federal and state tax
law to same sex marriages, civil unions and domestic partnerships. Absent
further guidance from a state to the contrary, we will tax report and withhold
at the state level consistent with the characterization of a given transaction
under federal tax law (for example, a tax free rollover).
Please consult with your tax or legal adviser before electing the Spousal
Benefit for a same sex spouse or civil union partner.
GUARANTEED RETURN OPTION PLUS II (GRO PLUS II)
You can elect this benefit on the Issue Date of your Annuity, or at any time
thereafter if available. In addition, you may cancel GRO Plus II and then
re-elect the benefit beginning on the next Valuation Day if available, provided
that your Account Value is allocated as required by the benefit and you
otherwise meet our eligibility rules. If you cancel the benefit, you lose all
guarantees that you had accumulated under the benefit. The initial guarantee
under the newly-elected benefit will be based on your current Account Value at
the time the new benefit becomes effective on your Annuity. GRO Plus II is not
available if you participate in any other optional living benefit. However, GRO
Plus II may be elected together with any optional death benefit, other than the
Highest Daily Value Death Benefit and the Plus40 Optional Life Insurance Rider.
As detailed below under "Key Feature - Allocation of Account Value", your
participation in this benefit among other things entails your participation in
a program that, as dictated by a predetermined mathematical formula, may
transfer your Account Value between your elected Sub-accounts and an AST bond
portfolio Sub-account.
Under GRO Plus II, we guarantee that the Account Value on the date that the
benefit is added to your Annuity (adjusted for subsequent purchase payments and
withdrawals as detailed below) will not be any less than that original value on
the seventh anniversary of benefit election and each anniversary thereafter. We
refer to this initial guarantee as the "base guarantee." In addition to the
base guarantee, GRO Plus II offers the possibility of an enhanced guarantee.
You may "manually" lock in an enhanced guarantee once per "benefit year" (i.e.,
a year beginning on the date you acquired the benefit and each anniversary
thereafter) if your Account Value on that Valuation Day exceeds the amount of
any outstanding base guarantee or enhanced guarantee. If you elect to manually
lock-in an enhanced guarantee on an anniversary of the effective date of the
benefit, that lock-in will not count toward the one elective manual lock-in you
may make each benefit year. We guarantee that the Account Value locked-in by
that enhanced guarantee will not be any less seven years later, and each
anniversary of that date thereafter. In addition, you may elect an automatic
enhanced guarantee feature under which, if your Account Value on a benefit
anniversary exceeds the highest existing guarantee by 7% or more, we guarantee
that such Account Value will not be any less seven benefit anniversaries later
and each benefit anniversary thereafter. You may maintain only one enhanced
guarantee in addition to your base guarantee. Thus, when a new enhanced
guarantee is created, it cancels any existing enhanced guarantee. However, the
fact that an enhanced guarantee was effected automatically on a benefit
anniversary does not prevent you from "manually" locking-in an enhanced
guarantee during the ensuing benefit year. Conversely, the fact that you
"manually" locked in an enhanced guarantee does not preclude the possibility of
an automatic enhanced guarantee on the subsequent benefit anniversary. Please
note that upon creation of a new enhanced guarantee, an immediate transfer to
an AST bond portfolio Sub-account (which is used as part of this benefit) may
occur depending on the discount rate (as described below) used to determine the
present value of each of your guarantees. You may elect to terminate an
enhanced guarantee without also terminating the base guarantee. If you do, any
amounts held in the AST bond portfolio Sub-account with respect to that
enhanced guarantee will be transferred to your other Sub-accounts in accordance
with your most recent allocation instructions (see below "Key Feature -
Allocation of Account Value"). Amounts held in an AST bond portfolio
Sub-account with respect to the base guarantee will not be transferred as a
result of the termination of an enhanced guarantee. You may not lock in an
enhanced guarantee, either manually or through our optional automatic program,
within seven years of the date by which annuity payments must commence under
the terms of your Annuity (please see "How and When Do I Choose The Annuity
Payment Option?" for further information on your maximum Annuity Date). The
inability to lock in an enhanced guarantee referenced in the immediately
preceding sentence also applies to a new Owner who has acquired the Annuity
from the original Owner.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account Value up to the guaranteed amount. If the
maturity date is not a Valuation Day, then we would contribute such an amount
on the next Valuation Day. We will allocate any such amount to each Sub-account
(other than the AST bond portfolio Sub-account used with this benefit and
described below) in accordance with your most recent allocation instructions.
Regardless of whether we need to contribute funds at the end of a guarantee
period, we will at that time transfer all amounts held within the AST bond
portfolio Sub-account associated with the maturing guarantee to your other
Sub-accounts on a pro rata basis, unless your Account Value is being allocated
according to an asset allocation program, in such case your Account Value will
be transferred according to the program. The guarantees provided by the benefit
exist only on the applicable maturity date(s). However, due to the ongoing
monitoring of your Account Value, and the transfer of Account Value to support
our future guarantees, the benefit may provide some protection from significant
Sub-account losses. For this same reason, the benefit may limit your ability to
benefit from Sub-account increases while it is in effect.
We increase both the base guarantee and any enhanced guarantee by the amount of
each Purchase Payment (including any associated purchase Credits) made
subsequent to the date that the guarantee was established. For example, if the
effective date of the benefit was January 1, 2010 and the Account Value was
$100,000 on that date, then a $30,000 Purchase Payment made on March 30, 2011
would increase the base guarantee amount to $130,000.
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If you make a withdrawal (including any CDSC), we effect a proportional
reduction to each existing guarantee amount. We calculate a proportional
reduction by reducing each existing guarantee amount by the percentage
represented by the ratio of the withdrawal amount (including any CDSC) to your
Account Value immediately prior to the withdrawal.
If you make a withdrawal, we will deduct the withdrawal amount pro rata from
each of your Sub-accounts (including the AST bond portfolio Sub-account used
with this benefit).
Any partial withdrawal for payment of any third party investment advisory
service will be treated as a withdrawal, and will reduce each guarantee amount
proportionally, in the manner indicated above.
EXAMPLE
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of a withdrawal on each guarantee amount
under this benefit.
Assume the following:
.. The Issue Date is December 1, 2010
.. The benefit is elected on December 1, 2010
.. The Account Value on December 1, 2010 is $200,000, which results in a base
guarantee of $200,000
.. An enhanced guarantee amount of $300,000 is locked in on December 1, 2011
.. The Account Value immediately prior to the withdrawal is equal to $300,000
.. For purposes of simplifying these assumptions, we assume hypothetically that
no CDSC is applicable (in general, a CDSC could be inapplicable based on the
Free Withdrawal provision, if the withdrawal was within the CDSC period)
If a withdrawal of $50,000 is taken on December 15, 2011, all guarantee amounts
will be reduced by the ratio the total withdrawal amount represents of the
Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION (FIGURES ARE ROUNDED):
Withdrawal Amount $ 50,000
Divided by Account Value before withdrawal $300,000
Equals ratio 16.67%
All guarantees will be reduced by the above ratio (16.67%)
Base guarantee amount $166,667
Enhanced guarantee amount $250,000
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
We limit the Sub-accounts to which you may allocate Account Value if you elect
GRO Plus II. For purposes of this benefit, we refer to those permitted
investment options (other than the required bond portfolio Sub-accounts
discussed below) as the "Permitted Sub-accounts."
GRO Plus II uses a predetermined mathematical formula to help manage your
guarantees through all market cycles. Because the formula is made part of your
Rider schedule supplement, the formula applicable to you may not be altered
once you elect the benefit. However, subject to regulatory approval, we do
reserve the right to amend the formula for newly-issued Annuities that elect or
re-elect GRO Plus II and for existing Annuities that elect the benefit
post-issue. This required formula helps us manage our financial exposure under
GRO Plus II, by moving assets out of certain Sub-accounts if dictated by the
formula (see below). In essence, we seek to preserve the value of these assets,
by transferring them to a more stable option (i.e., one or more specified bond
portfolios of Advanced Series Trust). We refer to the Sub-accounts
corresponding to these bond portfolios collectively as the "AST bond portfolio
Sub-accounts". The formula also contemplates the transfer of Account Value from
an AST bond portfolio Sub-account to the other Sub-accounts in certain other
scenarios. The formula is set forth in Appendix O of this prospectus, and
applies to both (a) GRO Plus II and (b) elections of HD GRO II made prior to
July 16, 2010. A summary description of each AST bond portfolio Sub-account
appears within the section entitled "What Are The Investment Objectives and
Policies Of The Portfolios?". You can find a copy of the AST bond portfolio
prospectus by going to www.prudentialannuities.com.
For purposes of operating the GRO Plus II formula, we have included within this
Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio is
unique, in that its underlying investments generally mature at different times.
For example, there would be an AST bond portfolio whose underlying investments
generally mature in 2020, an AST bond portfolio whose underlying investments
generally mature in 2021, and so forth. As discussed below, the formula
determines the appropriate AST bond portfolio Sub-Account to which Account
Value is transferred. We will introduce new AST bond portfolio Sub-accounts in
subsequent years, to correspond generally to the length of new guarantee
periods that are created under this benefit (and the Highest Daily GRO
benefits). If you have elected GRO Plus II, you may have Account Value
allocated to an AST bond portfolio Sub-account only by operation of the
predetermined mathematical formula, and thus you may not allocate purchase
payments to or make transfers to or from such a Sub-account. Please see the
prospectus for the Advanced Series Trust for more information about each AST
bond portfolio used with this benefit.
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Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. On any day a transfer into or out of the AST bond portfolio
Sub-account is made the formula may dictate that a transfer out of one AST bond
portfolio Sub-account be made into another AST bond portfolio Sub-account. Any
transfer into an AST bond portfolio Sub-account will be directed to the AST
bond portfolio Sub-account associated with the "current liability", as
described below. As indicated, the AST bond portfolio Sub-accounts are employed
with this benefit to help us mitigate the financial risks under our guarantee.
Thus, in accordance with the formula applicable to you under the benefit, we
determine which AST bond portfolio Sub-account your Account Value is
transferred to, and under what circumstances a transfer is made. Please note
that upon creation of a new enhanced guarantee, an immediate transfer to the
AST Bond Portfolio Sub-account associated with the "current liability" may
occur, depending on the discount rate (as described in the next paragraph) used
to determine the present value of each of your guarantees. As such, a low
discount rate could cause a transfer of Account Value into an AST bond
portfolio Sub-account, despite the fact that your Account Value had increased.
In general, the formula works as follows. On each Valuation Day, the formula
automatically performs an analysis with respect to each guarantee that is
outstanding. For each outstanding guarantee, the formula begins by determining
the present value on that Valuation Day that, if appreciated at the applicable
"discount rate", would equal the applicable guarantee amount on the maturity
date. As detailed in the formula, the discount rate is an interest rate
determined by taking a benchmark index used within the financial services
industry and then reducing that interest rate by a prescribed adjustment. Once
selected, we do not change the applicable benchmark index (although we do
reserve the right to use a new benchmark index if the original benchmark is
discontinued). The greatest of each such present value is referred to as the
"current liability" in the formula. The formula compares the current liability
to the amount of your Account Value held within the AST bond portfolio
Sub-account and to your Account Value held within the Permitted Sub-accounts.
If the current liability, reduced by the amount held within the AST bond
portfolio Sub-account, and divided by the amount held within the Permitted
Sub-accounts, exceeds an upper target value (currently, 85%), then the formula
will make a transfer into the AST bond portfolio Sub-account, in the amount
dictated by the formula (subject to the 90% cap discussed below). If the
current liability, reduced by the amount held within the AST bond portfolio
Sub-account, and divided by the amount within your other Sub-accounts, is less
than a lower target value (currently, 79%), then the formula will transfer
Account Value within the AST bond portfolio Sub-account into the Permitted
Sub-accounts in the amount dictated by the formula.
The formula will not execute a transfer to the AST bond portfolio Sub-account
that results in more than 90% of your Account Value being allocated to the AST
bond portfolio Sub-account ("90% cap"). Thus, on any Valuation Day, if the
formula would require a transfer to the AST bond portfolio Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
bond portfolio Sub-account, only the amount that results in exactly 90% of the
Account Value being allocated to the AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the AST bond portfolio
Sub-account will not be made (regardless of the performance of the AST bond
portfolio Sub-account and the Permitted Sub-accounts) at least until there is
first a transfer out of the AST bond portfolio Sub-account. Once this transfer
occurs out of the AST bond portfolio Sub-account, future amounts may be
transferred to or from the AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the AST bond portfolio Sub-account that results in greater than 90% of your
Account Value being allocated to the AST bond portfolio Sub-account. However,
it is possible that, due to the investment performance of your allocations in
the AST bond portfolio Sub-account and your allocations in the Permitted
Sub-accounts you have elected, your Account Value could be more than 90%
invested in the AST bond portfolio Sub-account. If you make additional purchase
payments to your Annuity while the 90% cap is in effect, the formula will not
transfer any of such additional purchase payments to the AST bond portfolio
Sub-account at least until there is first a transfer out of the AST bond
portfolio Sub-account, regardless of how much of your Account Value is in the
Permitted Sub-accounts. This means that there could be scenarios under which,
because of the additional purchase payments you make, less than 90% of your
entire Account Value is allocated to the AST bond portfolio Sub-account, and
the formula will still not transfer any of your Account Value to the AST bond
portfolio Sub-account (at least until there is first a transfer out of the AST
bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made to the AST bond portfolio Sub-account
that results in the 90% cap being met and now $90,000 is allocated to the
AST bond portfolio Sub-account and $10,000 is allocated to the Permitted
Sub-accounts.
. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST bond portfolio Sub-account to the
Permitted Sub-accounts since the cap went into effect on March 19, 2010.
.. On March 20, 2010 (and at least until first a transfer is made out of the
AST bond portfolio Sub-account under the formula) -the $10,000 payment is
allocated to the Permitted Sub-accounts and on this date you have 82% in the
AST bond portfolio Sub-account and 18% in the Permitted Sub-accounts (such
that $20,000 is allocated to the Permitted Sub-accounts and $90,000 to the
AST bond portfolio Sub-account).
.. Once there is a transfer out of the AST bond portfolio Sub-account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the AST bond portfolio Sub-account
if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and be
removed multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST bond portfolio Sub-account as dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees, as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs to
be transferred into or out of the AST bond portfolio Sub-accounts. Therefore,
at any given time, some, none, or most of your Account Value may be allocated
to the AST bond portfolio Sub-accounts.
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Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant to
the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that determine
the amount and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional purchase payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected. The AST bond portfolio Sub-accounts are available only with
these benefits, and you may not allocate purchase payments to or transfer
Account Value to or from the AST bond portfolio Sub-accounts.
Transfers under the formula do not impact any guarantees under the benefit that
have already been locked-in.
ELECTION/CANCELLATION OF THE BENEFIT
GRO Plus II can be elected on the Issue Date of your Annuity, or on any
Valuation Day thereafter, provided that your Account Value is allocated in a
manner permitted with the benefit and that you otherwise meet our eligibility
rules. You may elect GRO Plus II only if the oldest of the Owner and Annuitant
is 84 or younger on the date of election (80 or younger, in New York). If you
currently participate in a living benefit that may be cancelled, you may
terminate that benefit at any time and elect GRO Plus II. However you will lose
all guarantees that you had accumulated under those benefits. The base
guarantee under GRO Plus II will be based on your current Account Value at the
time the new benefit becomes effective on your Annuity.
GRO Plus II will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract), unless the Annuity is continued by
the surviving spouse; (b) as of the date Account Value is applied to begin
annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
GRO Plus II will no longer provide any guarantees. The charge for the GRO Plus
II benefit will no longer be deducted from your Account Value upon termination
of the benefit.
If you wish, you may cancel the GRO Plus II benefit. You may also cancel an
enhanced guarantee, but leave the base guarantee intact. Upon cancellation, you
may elect any other currently available living benefit beginning on the next
Valuation Day after you have cancelled the GRO Plus II benefit, provided that
your Account Value is allocated in a manner permitted with the benefit and that
you otherwise meet our eligibility rules. Upon cancellation of the GRO Plus II
benefit, any Account Value allocated to the AST bond portfolio Sub-account used
with the formula will be reallocated to the Permitted Sub-Accounts according to
your most recent allocation instructions or, in absence of such instructions,
pro rata (i.e., in direct proportion to your current allocations). Upon your
re-election of GRO Plus II, Account Value may be transferred between the AST
bond portfolio Sub-accounts and the Permitted Sub-accounts according to the
predetermined mathematical formula (see "Key Feature - Allocation of Account
Value" above for more details). It is possible that over time the formula could
transfer some, none, or most of the Account Value to the AST bond portfolio
Sub-accounts under GRO Plus II. YOU ALSO SHOULD BE AWARE THAT UPON CANCELLATION
OF THE GRO PLUS II BENEFIT, YOU WILL LOSE ALL GUARANTEES THAT YOU HAD
ACCUMULATED UNDER THE BENEFIT. THUS, THE GUARANTEES UNDER ANY NEWLY-ELECTED
BENEFIT WILL BE BASED ON YOUR CURRENT ACCOUNT VALUE AT BENEFIT EFFECTIVENESS.
THE BENEFIT YOU ELECT OR RE-ELECT MAY BE MORE EXPENSIVE THAN THE BENEFIT YOU
CANCEL. ONCE THE GRO PLUS II BENEFIT IS CANCELED YOU ARE NOT REQUIRED TO
RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION
MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF
THE GRO PLUS II BENEFIT PROVIDED THAT THE BENEFIT YOU ARE LOOKING TO ELECT IS
AVAILABLE ON A POST-ISSUE BASIS.
THERE IS NO GUARANTEE THAT ANY BENEFIT WILL BE AVAILABLE FOR ELECTION AT A
LATER DATE.
SPECIAL CONSIDERATIONS UNDER GRO PLUS II
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the Permitted Sub-accounts. The Permitted Sub-accounts are those
described in the Investment Options section of this prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the benefit.
.. Transfers to and from your elected Sub-accounts and an AST bond portfolio
Sub-account will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
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.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
.. If you elect this benefit, and in connection with that election you are
required to reallocate to different investment options permitted under this
benefit, then on the Valuation Day on which we receive your request in Good
Order, we will (i) sell units of the non-permitted investment options and
(ii) invest the proceeds of those sales in the permitted investment options
that you have designated. During this reallocation process, your Account
Value allocated to the Sub-accounts will remain exposed to investment risk,
as is the case generally. The protection afforded by the newly-elected
benefit will not arise until the close of business on the following
Valuation Day.
CHARGES UNDER THE BENEFIT
We deduct an annualized charge equal to 0.60% of the daily net assets of the
Sub-accounts (including any AST bond portfolio Sub-account) for participation
in the GRO Plus II benefit. The annual charge is deducted daily. The charge is
deducted to compensate us for: (a) the risk that your Account Value on a
maturity date is less than the amount guaranteed and (b) administration of the
benefit. You will begin paying this charge as of the effective date of the
benefit. We will not refund the charges you have paid even if we never have to
make any payments under the benefit.
HIGHEST DAILY GUARANTEED RETURN OPTION II (HD GRO II)
You can elect this benefit on the Issue Date of your Annuity, or at any time
thereafter if available. In addition, you may cancel HD GRO II and then
re-elect the benefit beginning on the next Valuation Day if available, provided
that your Account Value is allocated as required by the benefit and that you
otherwise meet our eligibility rules. If you cancel the benefit, you lose all
guarantees that you had accumulated under the benefit. The initial guarantee
under the newly-elected benefit will be based on your current Account Value at
the time the new benefit becomes effective on your Annuity. HD GRO II is not
available if you participate in any other living benefit. However, HD GRO II
may be elected together with any optional death benefit, other than the Highest
Daily Value Death Benefit or the Plus40 Optional Life Insurance Rider. As
detailed below under "Key Feature - Allocation of Account Value", your
participation in this benefit among other things entails your participation in
a program that, as dictated by a predetermined mathematical formula, may
transfer your Account Value between your elected Sub-accounts and an AST bond
portfolio Sub-account.
HD GRO II creates a series of separate guarantees, each of which is based on
the highest Account Value attained on a day during the applicable time period.
As each year of your participation in the benefit passes, we create a new
guarantee. Each guarantee then remains in existence until the date on which it
matures (unless the benefit terminates sooner). We refer to each date on which
the specified Account Value is guaranteed as the "maturity date" for that
guarantee. HD GRO II will not create a guarantee if the maturity date of that
guarantee would extend beyond the date by which annuity payments must commence
under the terms of your Annuity. This is true even with respect to a new Owner
who has acquired the Annuity from the original Owner.
The guarantees provided by the benefit exist only on the applicable maturity
date(s). However, due to the ongoing monitoring of your Account Value, and the
transfer of Account Value to support our future guarantees, the benefit may
provide some protection from significant Sub-account losses. For this same
reason, the benefit may limit your ability to benefit from Sub-account
increases while it is in effect.
The initial guarantee is created on the day that the HD GRO II benefit is added
to your Annuity. We guarantee that your Account Value on the tenth anniversary
of that day (we refer to each such anniversary as a "benefit anniversary") will
not be less than your Account Value on the day that the HD GRO II benefit was
added or re-added to your Annuity. Each benefit anniversary thereafter, we
create a new guarantee. With respect to each such subsequent guarantee, we
identify the highest Account Value that occurred between the date of that
benefit anniversary and the date on which HD GRO II was added to your Annuity.
We guarantee that your Account Value ten years after that benefit anniversary
will be no less than the highest daily Account Value that occurred during that
time period. The following example illustrates the time period over which we
identify the highest daily Account Value for purposes of each subsequent
guarantee under the benefit. If the date of benefit election were January 1,
2010, we would create a guarantee on January 1, 2014 based on the highest
Account Value achieved between January 1, 2010 and January 1, 2014, and that
guarantee would mature on January 1, 2024. As described below, we adjust each
of the guarantee amounts for purchase payments and withdrawals.
If the Account Value on the maturity date is less than the guaranteed amount,
we will contribute funds from our general account to bring your Account Value
up to the guaranteed amount. If the maturity date is not a Valuation Day, then
we would contribute such an amount on the next Valuation Day. We will allocate
any such amount to each Sub-account (other than the AST bond portfolio
Sub-account used with this benefit and described below) in accordance with your
most recent allocations instructions. Regardless of whether we need to
contribute funds at the end of a guarantee period, we will at that time
transfer all amounts held within the AST bond portfolio Sub-account associated
with the maturing guarantee to your other Sub-accounts on a pro rata basis,
unless your Account Value is being allocated according to an asset allocation
program, in such case your Account Value will be transferred according to the
program.
We increase the amount of each guarantee that has not yet reached its maturity
date, as well as the highest daily Account Value that we calculate to establish
a guarantee, by the amount of each Purchase Payment (including any associated
purchase Credits) made prior to the applicable maturity date. For example, if
the effective date of the benefit was January 1, 2010, and there was an initial
guaranteed amount that
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was set at $100,000 maturing January 1, 2020, and a second guaranteed amount
that was set at $120,000 maturing January 1, 2021, then a $30,000 Purchase
Payment made on March 30, 2011 would increase the guaranteed amounts to
$130,000 and $150,000, respectively.
If you make a withdrawal (including any CDSC), we effect a proportional
reduction to each existing guarantee amount. We calculate a proportional
reduction by reducing each existing guarantee amount by the percentage
represented by the ratio of the withdrawal amount (including any CDSC) to your
Account Value immediately prior to the withdrawal.
If you make a withdrawal, we will deduct the withdrawal amount pro rata from
each of your Sub-accounts (including the AST bond portfolio Sub-account used
with this benefit).
Any partial withdrawal for payment of any third party investment advisory
service will be treated as a withdrawal, and will reduce each guarantee amount
proportionally, in the manner indicated above.
EXAMPLE
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of a withdrawal on each guarantee amount
under this benefit.
Assume the following:
.. The Issue Date is December 1, 2010
.. The benefit is elected on December 1, 2010
.. The Account Value on December 1, 2010 is $200,000, which results in an
initial guarantee of $200,000
.. An additional guarantee amount of $300,000 is locked in on December 1, 2011
.. The Account Value immediately prior to the withdrawal is equal to $300,000
.. For purposes of simplifying these assumptions, we assume hypothetically that
no CDSC is applicable (in general, a CDSC could be inapplicable based on the
Free Withdrawal provision, if the withdrawal was within the CDSC period)
If a withdrawal of $50,000 is taken on December 15, 2011, all guarantee amounts
will be reduced by the ratio the total withdrawal amount represents of the
Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION (FIGURES ARE ROUNDED):
Withdrawal Amount $ 50,000
Divided by Account Value before withdrawal $300,000
Equals ratio 16.67%
All guarantees will be reduced by the above ratio (16.67%)
Initial guarantee amount $166,667
Additional guarantee amount $250,000
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
We limit the Sub-accounts to which you may allocate Account Value if you elect
HD GRO II. For purposes of this benefit, we refer to those permitted investment
options (other than the AST bond portfolio used with this benefit) as the
"Permitted Sub-accounts".
HD GRO II uses a predetermined mathematical formula to help manage your
guarantees through all market cycles. The formula applicable to you may not be
altered once you elect the benefit. However, subject to regulatory approval, we
do reserve the right to amend the formula for existing Annuities that elect the
benefit post-issue. This required formula helps us manage our financial
exposure under HD GRO II, by moving assets out of certain Sub-accounts if
dictated by the formula (see below). In essence, we seek to preserve Account
Value, by transferring it to a more stable option (i.e., one or more specified
bond portfolios of Advanced Series Trust). We refer to the Sub-accounts
corresponding to these bond portfolios collectively as the "AST bond portfolio
Sub-accounts". The formula also contemplates the transfer of Account Value from
an AST bond portfolio Sub-account to the other Sub-accounts. The formula is set
forth in Appendix Q of this prospectus. A summary description of each AST bond
portfolio Sub-account appears within the prospectus section entitled
"Investment Options". In addition, you can find a copy of the AST bond
portfolio prospectus by going to www.prudentialannuities.com.
For purposes of operating the HD GRO II formula, we have included within each
Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio is
unique, in that its underlying investments generally mature at different times.
For example, there would be an AST bond portfolio whose underlying investments
generally mature in 2020, an AST bond portfolio whose underlying investments
generally mature in 2021, and so forth. As discussed below, the formula
determines the appropriate AST bond portfolio Sub-account to which Account
Value is transferred. We will introduce new AST bond portfolio Sub-accounts in
subsequent years, to correspond generally to the length of new guarantee
periods that are created under this benefit. If you have elected HD GRO II, you
may have Account Value allocated to an AST bond portfolio Sub-account only by
operation of the formula, and thus you may not allocate Purchase Payments to or
make transfers to or from an AST bond portfolio Sub-account.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. The formula determines the appropriate AST bond portfolio Sub-account
to which Account Value is transferred. On any day a transfer into or out of the
AST bond portfolio Sub-account is
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made the formula may dictate that a transfer out of one AST bond portfolio
Sub-account be made into another AST bond portfolio Sub-account. Any transfer
into an AST bond portfolio Sub-account will be directed to the AST bond
portfolio Sub-account associated with the "current liability", as described
below. As indicated, the formula and AST bond portfolio Sub-accounts are
employed with this benefit to help us mitigate the financial risks under our
guarantee. Thus, the applicable formula under the benefit determines which AST
bond portfolio Sub-account your Account Value is transferred to, and under what
circumstances a transfer is made.
In general, the formula works as follows. Under the formula, Account Value
transfers between the "Permitted Sub-accounts" and an AST bond portfolio
Sub-account when dictated. On each Valuation Day, including the effective date
of the benefit, the pre-determined mathematical formula is used to compare your
Account Value to an amount based on the guarantees provided under the
benefit. The formula determines whether a transfer occurs based, among other
things, on an identification of the outstanding guarantee that has the largest
present value. Based on the formula, a determination is made as to whether any
portion of your Account Value is to be transferred to or from the AST bond
portfolio Sub-account. In identifying those guarantees, we consider each
guarantee that already has been set (i.e., on a benefit anniversary), as well
as an amount that we refer to as the "Projected Future Guarantee." The
"Projected Future Guarantee" is an amount equal to the highest Account Value
(adjusted for withdrawals, additional Purchase Payments, and any associated
Credits as described in the section of the prospectus concerning HD GRO II)
within the current benefit year that would result in a new guarantee. For the
Projected Future Guarantee, the assumed guarantee period begins on the current
Valuation Day and ends 10 years from the next anniversary of the effective date
of the benefit. As such, a Projected Future Guarantee could cause a transfer of
Account Value into an AST bond portfolio Sub-account. We only calculate a
Projected Future Guarantee if the assumed guarantee period associated with that
Projected Future Guarantee does not extend beyond the latest Annuity Date
applicable to the Annuity. The amount that is transferred to and from the AST
bond portfolio Sub-accounts pursuant to the formula depends upon the factors
set forth in the seven bullet points below, some of which relate to the
guarantee amount(s), including the Projected Future Guarantee.
For each outstanding guarantee and the Projected Future Guarantee, the formula
begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the Maturity Date. As detailed in the formula, the discount
rate is an interest rate determined by taking a benchmark index used within the
financial services industry and then reducing that interest rate by a
prescribed adjustment. Once selected, we do not change the applicable benchmark
index (although we do reserve the right to use a new benchmark index if the
original benchmark is discontinued). The greatest of each such present value is
referred to as the "current liability" in the formula. The formula compares the
current liability to the amount of your Account Value held within the AST bond
portfolio Sub-account and to your Account Value held within the Permitted
Sub-accounts. If the current liability, reduced by the amount held within the
AST bond portfolio Sub-account, and divided by the amount held within the
Permitted Sub-accounts, exceeds an upper target value (currently, 85%), then
the formula will make a transfer into the AST bond portfolio Sub-account, in
the amount dictated by the formula (subject to the 90% cap feature discussed
below). If the current liability, reduced by the amount held within the AST
bond portfolio Sub-account, and divided by the amount within the Permitted
Sub-accounts, is less than a lower target value (currently, 79%), then the
formula will transfer Account Value from the AST bond portfolio Sub-account
into the Permitted Sub-accounts, in the amount dictated by the formula.
The formula will not execute a transfer to the AST bond portfolio Sub-account
that results in more than 90% of your Account Value being allocated to the AST
bond portfolio Sub-account ("90% cap"). Thus, on any Valuation Day, if the
formula would require a transfer to the AST bond portfolio Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
bond portfolio Sub-account, only the amount that results in exactly 90% of the
Account Value being allocated to the AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the AST bond portfolio
Sub-account will not be made (regardless of the performance of the AST bond
portfolio Sub-account and the Permitted Sub-accounts) at least until there is
first a transfer out of the AST bond portfolio Sub-account. Once this transfer
occurs out of the AST bond portfolio Sub-account, future amounts may be
transferred to or from the AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the AST bond portfolio Sub-account that results in greater than 90% of your
Account Value being allocated to the AST bond portfolio Sub-account. However,
it is possible that, due to the investment performance of your allocations in
the AST bond portfolio Sub-account and your allocations in the Permitted
Sub-accounts you have selected, your Account Value could be more than 90%
invested in the AST bond portfolio Sub-account. If you make additional Purchase
Payments to your Annuity while the 90% cap is in effect, the formula will not
transfer any of such additional Purchase Payments to the AST bond portfolio
Sub-account at least until there is first a transfer out of the AST bond
portfolio Sub-account, regardless of how much of your Account Value is in the
Permitted Sub-accounts. This means that there could be scenarios under which,
because of the additional Purchase Payments you make, less than 90% of your
entire Account Value is allocated to the AST bond portfolio Sub-account, and
the formula will still not transfer any of your Account Value to the AST bond
portfolio Sub-account (at least until there is first a transfer out of the AST
bond portfolio Sub-account).
For example,
.. March 17, 2011 - a transfer is made to the AST bond portfolio Sub-account
that results in the 90% cap being met and now $90,000 is allocated to the
AST bond portfolio Sub-account and $10,000 is allocated to the Permitted
Sub-accounts.
.. March 18, 2011 - you make an additional Purchase Payment of $10,000. No
transfers have been made from the AST bond portfolio Sub-account to the
Permitted Sub-accounts since the cap went into effect on March 17, 2011.
.. On March 18, 2011 (and at least until first a transfer is made out of the
AST bond portfolio Sub-account under the formula) - the $10,000 payment is
allocated to the Permitted Sub-accounts and on this date you have 82% in the
AST bond portfolio Sub-account and 18% in the Permitted Sub-accounts (such
that $20,000 is allocated to the Permitted Sub-accounts and $90,000 to the
AST bond portfolio Sub-account).
.. Once there is a transfer out of the AST bond portfolio Sub-account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the AST bond portfolio Sub-account
if dictated by the formula (subject to the 90% cap).
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Under the operation of the formula, the 90% cap may come into and out of effect
multiple times while you participate in the benefit. We will continue to
monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST bond portfolio Sub-account as dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs to
be transferred into or out of the AST bond portfolio Sub-accounts. Therefore,
at any given time, some, none, or most of your Account Value may be allocated
to the AST bond portfolio Sub-accounts.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant to
the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that determine
the amount and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected.
The AST bond portfolio Sub-accounts are available only with certain optional
living benefits, and you may not allocate Purchase Payments to or transfer
Account Value to or from the AST bond portfolio Sub-accounts.
Transfers under the formula do not impact any guarantees under the benefit that
have already been locked-in.
ELECTION/CANCELLATION OF THE BENEFIT
HD GRO II can be elected on the Issue Date of your Annuity, or on any Valuation
Day thereafter, provided that your Account Value is allocated in a manner
permitted with the benefit and you otherwise meet our eligibility requirements.
You may elect HD GRO II only if the oldest of the Owner and Annuitant is 84 or
younger on the date of election (80 or younger, in New York). If you currently
participate in a living benefit that may be cancelled, you may terminate that
benefit at any time and elect HD GRO II. However you will lose all guarantees
that you had accumulated under the previous benefit. The initial guarantee
under HD GRO II will be based on your current Account Value at the time the new
benefit becomes effective on your Annuity.
HD GRO II will terminate automatically upon: (a) the death of the Owner or the
Annuitant (in an entity owned contract), unless the Annuity is continued by the
surviving spouse; (b) as of the date Account Value is applied to begin annuity
payments; (c) as of the anniversary of benefit election that immediately
precedes the contractually-mandated latest annuity date, or (d) upon full
surrender of the Annuity. If you elect to terminate the benefit, HD GRO II will
no longer provide any guarantees. The charge for the HD GRO II benefit will no
longer be deducted from your Account Value upon termination of the benefit.
If you wish, you may cancel the HD GRO II benefit. You may then elect any other
currently available living benefit beginning on the next Valuation Day after
you have cancelled the HD GRO II benefit, provided that your Account Value is
allocated in the manner permitted with the benefit and you otherwise meet our
eligibility requirements. Upon cancellation of the HD GRO II benefit, any
Account Value allocated to the AST bond portfolio Sub-accounts used with the
formula will be reallocated to the Permitted Sub-Accounts according to your
most recent allocation instructions or, in absence of such instructions,
pro-rata (i.e., in direct proportion to your current allocations). Upon your
re-election of HD GRO II, Account Value may be transferred between the AST bond
portfolio Sub-accounts and the other Sub-accounts according to the
predetermined mathematical formula (see "Key Feature - Allocation of Account
Value" section for more details). It is possible that over time the formula
could transfer some, most, or none of the Account Value to the AST bond
portfolio Sub-accounts under the newly-elected benefit. YOU ALSO SHOULD BE
AWARE THAT UPON CANCELLATION OF THE HD GRO II BENEFIT, YOU WILL LOSE ALL
GUARANTEES THAT YOU HAD ACCUMULATED UNDER THE BENEFIT. THUS, THE GUARANTEES
UNDER YOUR NEWLY-ELECTED BENEFIT WILL BE BASED ON YOUR CURRENT ACCOUNT VALUE AT
THE TIME THE NEW BENEFIT BECOMES EFFECTIVE. THE BENEFIT YOU ELECT OR RE-ELECT
MAY BE MORE EXPENSIVE THAN THE BENEFIT YOU CANCEL.
THERE IS NO GUARANTEE THAT ANY BENEFIT WILL BE AVAILABLE FOR ELECTION AT A
LATER DATE.
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SPECIAL CONSIDERATIONS UNDER HD GRO II
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the Permitted Sub-accounts. The Permitted Sub-accounts are those
described in the Investment Option section of the prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the benefit.
.. Transfers to and from your elected Sub-accounts and an AST bond portfolio
Sub-account will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
.. If you elect this benefit, and in connection with that election you are
required to reallocate to different investment options permitted under this
benefit, then on the Valuation Day on which we receive your request in Good
Order, we will (i) sell units of the non-permitted investment options and
(ii) invest the proceeds of those sales in the permitted investment options
that you have designated. During this reallocation process, your Account
Value allocated to the Sub-accounts will remain exposed to investment risk,
as is the case generally. The newly-elected benefit will commence at the
close of business on the following Valuation Day. The protection afforded by
the newly-elected benefit will not arise until the close of business on the
following Valuation Day.
CHARGES UNDER THE BENEFIT
We deduct an annualized charge equal to 0.60% of the daily net assets of the
Sub-accounts (including any AST bond portfolio Sub-account) for participation
in the HD GRO II benefit. The annual charge is deducted daily. The charge is
deducted to compensate us for: (a) the risk that your Account Value on the
maturity date is less than the amount guaranteed and (b) administration of the
benefit. You will begin paying this charge as of the effective date of the
benefit. We will not refund the charges you have paid even if we never have to
make any payments under the benefit.
GUARANTEED RETURN OPTION PLUS (GRO PLUS)
GRO PLUS IS NO LONGER AVAILABLE FOR ELECTION.
GRO Plus is an optional benefit that, after a seven-year period following
commencement of the benefit (we refer to the end of that period and any
applicable subsequent period as the "maturity date") and on each anniversary of
the maturity date thereafter while the benefit remains in effect, guarantees
your Account Value will not be less than your Account Value on the effective
date of your benefit (called the "Protected Principal Value"). The benefit also
offers you the opportunity to elect a second, enhanced guaranteed amount at a
later date if your Account Value has increased, while preserving the guaranteed
amount established on the effective date of your benefit. The enhanced
guaranteed amount (called the "Enhanced Protected Principal Value") guarantees
that, after a separate period following election of the enhanced guarantee and
on each anniversary thereafter while this enhanced guarantee amount remains in
effect, your Account Value will not be less than your Account Value on the
effective date of your election of the enhanced guarantee. If the maturity date
of any guarantee under GRO Plus is not a Valuation Day, and we are required to
contribute an amount to your Account Value with respect to that maturing
guarantee, we would contribute such an amount on the next Valuation Day.
The benefit monitors your Account Value daily and, if necessary, systematically
transfers amounts between the Sub-accounts you choose and MVA Fixed Allocations
used to support the Protected Principal Value(s). The benefit may be
appropriate if you wish to protect a principal amount against poor Sub-account
performance as of a specific date in the future. There is an additional charge
if you elected the Guaranteed Return Option Plus benefit.
The guarantees provided by the benefit exist only on the applicable maturity
date(s) and on each anniversary of the maturity date(s) thereafter.
KEY FEATURE - PROTECTED PRINCIPAL VALUE/ENHANCED PROTECTED PRINCIPAL VALUE
The Guaranteed Return Option Plus offers a base guarantee as well as the option
of electing an enhanced guarantee at a later date.
. BASE GUARANTEE: Under the base guarantee, Prudential Annuities
guarantees that on the maturity date and on each anniversary of the
maturity date thereafter that the benefit remains in effect, your
Account Value will be no less than the Protected Principal Value. On the
maturity date and on each anniversary after the maturity date that the
benefit remains in effect, if your Account Value is below the Protected
Principal Value, Prudential Annuities will apply additional amounts to
your Annuity from its general account to increase your Account Value to
be equal to the Protected Principal Value. A subsequent Purchase Payment
increases the amount of the base guarantee by the amount of the Purchase
Payment (plus any Credits), and withdrawals reduce the base guarantee
(as discussed below). Any amounts applied to your Account Value by
Prudential Annuities on the maturity date or any anniversary of the
maturity date will first be applied to any MVA Fixed Allocations then
required to support guarantees due on subsequent maturity dates. We will
allocate the remainder to the Sub-accounts pro-rata, based on the
Account Value in the Sub-accounts at that time.
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. ENHANCED GUARANTEE: On any anniversary following commencement of the
benefit, you can establish an enhanced guarantee amount based on your
current Account Value. Under the enhanced guarantee, Prudential
Annuities guarantees that at the end of the specified period following
the election of the enhanced guarantee (also referred to as its
"maturity date"), and on each anniversary of the maturity date
thereafter that the enhanced guaranteed amount remains in effect, your
Account Value will be no less than the Enhanced Protected Principal
Value. YOU CAN ELECT AN ENHANCED GUARANTEE MORE THAN ONCE; HOWEVER, A
SUBSEQUENT ELECTION SUPERSEDES THE PRIOR ELECTION OF AN ENHANCED
GUARANTEE. ELECTION OF AN ENHANCED GUARANTEE DOES NOT IMPACT THE BASE
GUARANTEE. IN ADDITION, YOU MAY ELECT AN "AUTO STEP-UP" FEATURE THAT
WILL AUTOMATICALLY CREATE AN ENHANCED GUARANTEE (OR INCREASE YOUR
ENHANCED GUARANTEE, IF PREVIOUSLY ELECTED) ON EACH ANNIVERSARY OF THE
BENEFIT (AND CREATE A NEW MATURITY PERIOD FOR THE NEW ENHANCED
GUARANTEE) IF THE ACCOUNT VALUE AS OF THAT ANNIVERSARY EXCEEDS THE
PROTECTED PRINCIPAL VALUE AND ENHANCED PROTECTED PRINCIPAL VALUE BY 7%
OR MORE. YOU MAY ALSO ELECT TO TERMINATE AN ENHANCED GUARANTEE. IF YOU
ELECT TO TERMINATE AN ENHANCED GUARANTEE, ANY AMOUNTS HELD IN THE MVA
FIXED ALLOCATIONS FOR THE ENHANCED GUARANTEE WILL BE LIQUIDATED, ON THE
VALUATION DAY THE REQUEST IS PROCESSED, (WHICH MAY RESULT IN A MARKET
VALUE ADJUSTMENT), AND SUCH AMOUNTS WILL BE TRANSFERRED ACCORDING TO THE
RULES DESCRIBED IN "TERMINATION OF THE BENEFIT/ ENHANCED GUARANTEE".
TERMINATION OF AN ENHANCED GUARANTEE WILL NOT RESULT IN TERMINATION OF
THE BASE GUARANTEE. If you have elected the enhanced guarantee, on the
guarantee's maturity date and on each anniversary of the maturity date
thereafter that the enhanced guarantee amount remains in effect, if your
Account Value is below the Enhanced Protected Principal Value,
Prudential Annuities will apply additional amounts to your Annuity from
its general account to increase your Account Value to be equal to the
Enhanced Protected Principal Value. Any amounts applied to your Account
Value by Prudential Annuities on the maturity date or any anniversary of
the maturity date will first be applied to any MVA Fixed Allocations
then required to support guarantees due on subsequent maturity dates. We
will allocate the remainder to the Sub-accounts pro-rata, based on the
Account Value in the Sub-accounts at that time.
If our assumptions are correct and the operations relating to the
administration of the benefit work properly, we do not expect that we will need
to add additional amounts to your Annuity. THE PROTECTED PRINCIPAL VALUE IS
REFERRED TO AS THE "BASE GUARANTEE" AND THE ENHANCED PROTECTED PRINCIPAL VALUE
IS REFERRED TO AS THE "STEP-UP GUARANTEE" IN THE RIDER WE ISSUE FOR THIS
BENEFIT.
WITHDRAWALS UNDER YOUR ANNUITY
Withdrawals from your Annuity, while the benefit is in effect, will reduce the
base guarantee under the benefit as well as any enhanced guarantee. Cumulative
annual withdrawals up to 5% of the Protected Principal Value as of the
effective date of the benefit (adjusted for any subsequent purchase payments
and, with respect to XT6, any Credits applied to such purchase payments) will
reduce the applicable guaranteed amount by the actual amount of the withdrawal
(referred to as the "dollar-for-dollar limit"). If the amount withdrawn is
greater than the dollar-for-dollar limit, the portion of the withdrawal equal
to the dollar-for-dollar limit will be treated as described above, and the
portion of the withdrawal in excess of the dollar-for-dollar limit will reduce
the base guarantee and the enhanced guarantee proportionally, according to the
formula as described in the rider for this benefit (see the examples of this
calculation below). Withdrawals other than Systematic Withdrawals will be taken
pro-rata from the Sub-accounts and any Fixed Allocations. Withdrawals will be
subject to all other provisions of your Annuity, including any Contingent
Deferred Sales Charge and Market Value Adjustment (which may be positive or
negative) that would apply.
Charges for other optional benefits under your Annuity that are deducted as an
annual charge in arrears will not reduce the applicable guaranteed amount under
the Guaranteed Return Option Plus benefit, however, any partial withdrawals in
payment of charges for the Plus40 Optional Life Insurance Rider (not currently
offered for sale) and any third party investment advisory service will be
treated as withdrawals and will reduce the applicable guaranteed amount.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus benefit are
October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes any
Credits under XT6); 3.) a base guarantee amount of $250,000; and 4.) a
dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here
are purely hypothetical and do not reflect the charge for GRO Plus or other
fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year).
No prior withdrawals have been taken. As the amount withdrawn is less than the
Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first Annuity Year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2004 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. The base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
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The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT
A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The
Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As
the amount withdrawn is less than the dollar-for-dollar limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced
by $10,000, from $227,464.79 to $217,464.79)
.. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,500 to $2,500).
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO Plus uses a mathematical formula that we operate to help manage your
guarantees through all market cycles. Each Valuation Day, the formula
determines if any portion of your Account Value needs to be transferred into or
out of the MVA Fixed Allocations, through reference to a "reallocation
trigger". The formula does this by (a) first identifying each guarantee that is
outstanding under GRO Plus (b) then discounting the value of each such
guarantee to a present value, based on crediting rates associated with the MVA
Fixed Allocations, then (c) identifying the largest of such present values.
Then, the formula compares the largest present value to both the Account Value
and the value of assets allocated to the Sub-accounts to determine whether a
transfer into or out of the MVA Fixed Allocations is required. As detailed in
the formula, if that largest present value exceeds the Account Value less a
percentage of the Sub-account value, a transfer into the MVA Fixed Allocations
will occur. Conversely, if the largest present value is less than the Account
Value less a percentage of the Sub-account value, a transfer out of the MVA
Fixed Allocations will occur. This required formula helps us manage our
financial exposure under the benefit, by moving assets to a more stable option
(i.e., the MVA Fixed Allocations). The formula is set forth in Appendix L.
If your Account Value is greater than or equal to the reallocation trigger,
then:
.. your Account Value in the Sub-accounts will remain allocated according to
your most recent instructions; and
.. if a portion of your Account Value is allocated to an MVA Fixed Allocation
to support the applicable guaranteed amount, all or a portion of those
amounts will be transferred from the MVA Fixed Allocation and re-allocated
to the Sub-accounts according to any asset allocation programs (including an
Automatic Rebalancing program) established on your Annuity or in the absence
of such programs, pro-rata, based on the Account Values in such Sub-accounts
at that time;
.. if all of your Account Value is allocated to an MVA Fixed Allocation, then
all or a portion of that amount may be transferred from the MVA Fixed
Allocation and re-allocated to the Sub-accounts, according to the following
hierarchy: (i) first according to any asset allocation program that you may
have in effect (ii) if no such program is in effect, then in accordance with
any automatic rebalancing program that you may have in effect and (iii) if
neither such program is in effect, then to the AST Money Market Sub-account;
and
.. a Market Value Adjustment will apply when we reallocate Account Value from
an MVA Fixed Allocation to the Sub-accounts, which may result in a decrease
or increase in your Account Value.
If your Account Value is less than the reallocation trigger, a portion of your
Account Value in the Sub-accounts will be transferred from the Sub-accounts
pro-rata according to your allocations to a new MVA Fixed Allocation(s) to
support the applicable guaranteed amount. The new MVA Fixed Allocation(s) will
have a Guarantee Period equal to the time remaining until the applicable
maturity date(s). The Account Value allocated to the new MVA Fixed
Allocation(s) will be credited with the fixed interest rate(s) then being
credited to a new MVA Fixed Allocation(s) maturing on the applicable maturity
date(s) (rounded to the next highest yearly duration). The Account Value will
remain invested in each applicable MVA Fixed Allocation until the applicable
maturity date unless, at an earlier date, your Account Value is greater than or
equal to the reallocation trigger and, therefore, amounts can be transferred to
the Sub-accounts while maintaining the guaranteed protection under the program
(as described above).
At any given time, some, none, or all of your Account Value may be allocated to
the MVA Fixed Allocations. With respect to any amounts held within the MVA
Fixed Allocations, we can give no assurance how long the amounts will reside
there or if such amounts will transfer out of the MVA Fixed Allocations. If you
make additional purchase payments to your Annuity, they will be allocated to
the Sub-accounts according to your allocation instructions. Such additional
purchase payments may or may not cause the formula to transfer money in or out
of the MVA Fixed Allocations. Once the purchase payments are allocated to your
Annuity, they will also be subject to the formula, which may result in
immediate transfers to or from the MVA Fixed Allocations, if dictated by the
formula. The amount of such transfers will vary, as dictated by the formula,
and will depend on the factors listed below.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the MVA Fixed Allocations pursuant to the
formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that determine
the amount and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value (including any Market Value
Adjustment) and your Protected Principal Value(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Sub-accounts;
.. The amount invested in, and interest earned within, the MVA Fixed
Allocations;
.. The current crediting rates associated with MVA Fixed Allocations;
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.. Additional purchase payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the MVA Fixed Allocations will affect your ability to
participate in a subsequent recovery within the Sub-accounts. Conversely, the
Account Value may be higher at the beginning of the recovery, e.g. more of the
Account Value may have been protected from decline and volatility than it
otherwise would have been had the benefit not been elected.
While you are not notified when your Account Value reaches a reallocation
trigger, you will receive a confirmation statement indicating the transfer of a
portion of your Account Value either to or from the MVA Fixed Allocations.
You may not allocate purchase payments to or transfer Account Value to or from
the MVA Fixed Allocations.
Separate Fixed Allocations may be established in support of the Protected
Principal Value and the Enhanced Protected Principal Value (if elected). There
may also be circumstances when an MVA Fixed Allocation will be established only
in support of the Protected Principal Value or the Enhanced Protected Principal
Value. If you elect an enhanced guarantee, it is more likely that a portion of
your Account Value may be allocated to MVA Fixed Allocations and will remain
allocated for a longer period of time to support the Enhanced Protected
Principal Value, even during a period of positive Sub-account performance
and/or under circumstances where MVA Fixed Allocations would not be necessary
to support the Protected Principal Value. Further, there may be circumstances
where MVA Fixed Allocations in support of the Protected Principal Value or
Enhanced Protected Principal Value are transferred to the Sub-accounts under
the formula differently than each other because of the different guarantees
they support.
You should be aware of the following potential ramifications of the formula:
.. Transfers of your Account Value can be frequent, and under some scenarios
may occur on a daily basis. As indicated, each such transfer may be subject
to a Market Value Adjustment, which can be positive or negative. Thus, a
Market Value Adjustment will directly increase or reduce your Account Value.
.. As indicated, some or even all, of your Account Value may be maintained in
the MVA Fixed Allocations. The greater the Account Value held in MVA Fixed
Allocations, the larger (in dollar terms) the Market Value Adjustment upon
any transfer of such Account Value to the Sub-accounts.
.. Transfers under the formula do not impact your guarantees under GRO Plus
that have already been locked-in.
ELECTION OF THE BENEFIT
We no longer permit new elections of GRO Plus. If you currently participate in
GRO Plus, your existing guarantees are unaffected by the fact that we no longer
offer GRO Plus. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS GRO
PLUS AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD
ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER
THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES
ACTIVE. WE RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION
FREQUENCY IN THE FUTURE.
TERMINATION OF THE BENEFIT/ENHANCED GUARANTEE
You can elect to terminate the enhanced guarantee but maintain the protection
provided by the base guarantee. You also can terminate the Guaranteed Return
Option Plus benefit entirely, in which case you will lose any existing
guarantees.
Upon termination of the benefit or of the enhanced guarantee, any amounts held
in the MVA Fixed Allocations related to the guarantee(s) being terminated will
be transferred as follows: (a) if only a portion of your Account Value is in
the MVA Fixed Allocations, we will transfer such Account Value (i) to the
Sub-accounts pro-rata, based on your Account Value in such Sub-accounts on the
day of the transfer, unless we receive other prior instructions from you or
(ii) if you are then participating in an asset allocation program for which we
are providing administrative support, we allocate the transferred amount in
accordance with the then current percentages for that asset allocation program
(b) if your entire Account Value is in the MVA Fixed Allocations, we will
transfer your Account Value to the Sub-account corresponding to the AST Money
Market Portfolio, unless we receive prior instructions from you. A Market Value
Adjustment will apply (except that if the benefit has terminated automatically
due to payment of a death benefit, whether an MVA applies depends solely on the
terms of the death benefit - see the Death Benefit section of this prospectus).
In general, you may cancel GRO Plus and then elect another living benefit that
is available post issue, effective on any Valuation Day after your cancellation
of GRO Plus. If you terminate GRO Plus, you will lose all guarantees under that
benefit. Your election of another living benefit is subject to State and firm
availability and our eligibility rules.
The benefit will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of the
Annuity. If you elect to terminate the benefit, the Guaranteed Return Option
Plus will no longer provide any guarantees. The surviving spouse may elect the
benefit at any time, subject to the limitations described above, after the
death of the Annuity Owner. The surviving spouse's election will be effective
on the Valuation Day that we receive the required documentation in good order
at our home office, and the Account Value on that Valuation Day will be the
Protected Principal Value.
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SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION PLUS
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Sub-accounts. No MVA Fixed Allocations may be in effect as
of the date that you elect to participate in the benefit. However, the
formula may transfer Account Value to MVA Fixed Allocations as of the
effective date of the benefit under some circumstances.
.. You cannot allocate any portion of purchase payments (including any Credits
applied to such purchase payments under XT6) or transfer Account Value to or
from a MVA Fixed Allocation while participating in the benefit; however, all
or a portion of any purchase payments (including any Credits applied to such
purchase payments under XT6) may be allocated by us to an MVA Fixed
Allocations to support the amount guaranteed. You cannot participate in any
dollar cost averaging benefit that transfers Account Value from a MVA Fixed
Allocation to a Sub-account.
.. Transfers from MVA Fixed Allocations made as a result of the formula under
the benefit will be subject to the Market Value Adjustment formula under an
Annuity; however, the 0.10% liquidity factor in the formula will not apply.
A Market Value Adjustment may be either positive or negative. Transfer
amounts will be taken from the most recently established MVA
Fixed Allocation.
.. Transfers from the Sub-accounts to MVA Fixed Allocations or from MVA Fixed
Allocations to the Sub-accounts under the benefit will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by Prudential Annuities on the
maturity date or any anniversary of the maturity date will not be treated as
"investment in the contract" for income tax purposes.
.. Low interest rates may require allocation to MVA Fixed Allocations even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually decreases
the benefit will become increasingly sensitive to moves to MVA Fixed
Allocations.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
CHARGES UNDER THE BENEFIT
We currently deduct a charge equal to 0.25% of the daily net assets of the
Sub-accounts for participation in the Guaranteed Return Option Plus benefit.
The annual charge is deducted daily. The charge is deducted to compensate
Prudential Annuities for: (a) the risk that your Account Value on the maturity
date is less than the amount guaranteed; and (b) administration of the benefit.
You will begin paying this charge as of the effective date of the benefit. We
will not refund the charges you have paid even if we never have to make any
payments under the benefit.
If you elect the Enhanced Guarantee under the benefit, and on the date you
elect to step-up, the charges under the benefit have changed for new purchases,
your benefit may be subject to the new charge level. These charges will not
exceed the maximum charges shown in the section of this prospectus entitled
"Your Optional Benefit Fees and Charges."
GUARANTEED RETURN OPTION (GRO)
GRO IS NO LONGER AVAILABLE FOR ELECTION.
GRO is an optional benefit that, after a seven-year period following
commencement of the benefit (we refer to the end of that period as the
"maturity date") guarantees your Account Value will not be less than your
Account Value on the effective date of your benefit (called the "Protected
Principal Value").
The benefit monitors your Account Value daily and, if necessary, systematically
transfers amounts pursuant to a mathematical formula between the Sub-accounts
you choose and the MVA Fixed Allocation used to support the Protected Principal
Value. There is an additional charge if you elect the Guaranteed Return Option
benefit.
The guarantee provided by the benefit exists only on the applicable maturity
date. However, due to the ongoing monitoring of your Account Value and the
transfer of Account Value between the Sub-accounts and the MVA Fixed Allocation
to support our future guarantee, the benefit may provide some protection from
significant Sub-account losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date.
KEY FEATURE - PROTECTED PRINCIPAL VALUE
Under the GRO benefit, Prudential Annuities guarantees that on the maturity
date, your Account Value will be no less than the Protected Principal Value. On
the maturity date if your Account Value is below the Protected Principal Value,
Prudential Annuities will apply additional amounts to your Annuity from its
general account to increase your Account Value to be equal to the Protected
Principal Value. A subsequent Purchase Payment increases the amount of the
Protected Principal Value by the amount of the Purchase Payment (plus any
Credits), and withdrawals reduce the Protected Principal Value (as discussed
below).
We will notify you of any amounts added to your Annuity under the benefit. If
our assumptions are correct and the operations relating to the administration
of the benefit work properly, we do not expect that we will need to add
additional amounts to an Annuity. The Protected Principal Value is generally
referred to as the "Guaranteed Amount" in the rider we issue for this benefit.
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KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO uses a mathematical formula that we operate to help manage your guarantees
through all market cycles. The formula weighs a number of factors, including
the current Account Value, the value in the Sub-accounts, the value in the MVA
Fixed Allocations, the Protected Principal Value, the expected value of the MVA
Fixed Allocations used to support the guarantee, the time remaining until
maturity, and the current crediting rates associated with the MVA Fixed
Allocations. In essence, and as detailed in the formula, the formula will
transfer Account Value into the MVA Fixed Allocations if needed to support an
anticipated guarantee. The formula is set forth in Appendix M. This required
formula thus helps us manage our financial exposure under the benefit, by
moving assets to a more stable option (i.e., the MVA Fixed Allocations).
Each Valuation Day, the formula determines if any portion of your Account Value
needs to be transferred into or out of the MVA Fixed Allocations, through
reference to a "reallocation trigger". At any given time, some, none, or all of
your Account Value may be allocated to the MVA Fixed Allocations. If your
entire Account Value is transferred to the MVA Fixed Allocations, the formula
will not transfer amounts out of the MVA Fixed Allocations to the Sub-accounts
and the entire Account Value would remain in the MVA Fixed Allocations. If you
make additional purchase payments to your Annuity, they will be allocated to
the Sub-accounts according to your allocation instructions. Such additional
purchase payments may or may not cause the formula to transfer money in or out
of the MVA Fixed Allocations. Once the purchase payments are allocated to your
Annuity, they will also be subject to the formula, which may result in
immediate transfers to or from the MVA Fixed Allocations, if dictated by the
formula. The amount of any such transfers will vary, as dictated by the
formula, and will depend on the factors listed below.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the MVA Fixed Allocations pursuant to the
formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that determine
the amount and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value (including any Market Value
Adjustment) and your Protected Principal Value(s);
.. The amount of time until the maturity of your Guarantee(s);
.. The amount invested in, and the performance of, the Sub-accounts;
.. The amount invested in, and interest earned within, the MVA Fixed
Allocations;
.. The current crediting rates associated with MVA Fixed Allocations;
.. Additional purchase payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the MVA Fixed Allocations will affect your ability to
participate in a subsequent recovery within the Sub-accounts. Conversely, the
Account Value may be higher at the beginning of the recovery, e.g. more of the
Account Value may have been protected from decline and volatility than it
otherwise would have been had the benefit not been elected.
While you are not notified when your Account Value reaches a reallocation
trigger, you will receive a confirmation statement indicating the transfer of a
portion of your Account Value either to or from the MVA Fixed Allocation.
You may not allocate purchase payments to or transfer Account Value to or from
the MVA Fixed Allocations.
You should be aware of the following potential ramifications of the formula:
.. A Market Value Adjustment will apply when we reallocate Account Value from
the MVA Fixed Allocation to the Sub-accounts. Transfers of your Account
Value can be frequent, and under some scenarios may occur on a daily basis.
As indicated, each such transfer may be subject to a Market Value
Adjustment, which can be positive or negative. Thus, a Market Value
Adjustment will directly increase or reduce your Account Value.
.. As indicated, some or even all, of your Account Value may be maintained in
the MVA Fixed Allocations. The greater the Account Value held in MVA Fixed
Allocations, the larger (in dollar terms) the Market Value Adjustment upon
any transfer of such Account Value to the Sub-accounts.
.. If your Account Value is less than the reallocation trigger, a portion of
your Account Value in the Sub-accounts will be transferred from the
Sub-accounts pro-rata according to your allocations to a new MVA Fixed
Allocation(s) to support the applicable guaranteed amount. The new MVA Fixed
Allocation(s) will have a Guarantee Period equal to the time remaining until
the applicable maturity date(s). The Account Value allocated to the new MVA
Fixed Allocation(s) will be credited with the fixed interest rate(s) then
being credited to a new MVA Fixed Allocation(s) maturing on the applicable
maturity date(s) (rounded to the next highest yearly duration). The Account
Value will remain invested in each applicable MVA Fixed Allocation until the
applicable maturity date unless, at an earlier date, your Account Value is
greater than or equal to the reallocation trigger and, therefore, amounts
can be transferred to the Sub-accounts while maintaining the guaranteed
protection under the program (as described above).
.. If your Account Value is greater than or equal to the reallocation trigger,
and Account Value must be transferred from the MVA Fixed Allocations to the
Sub-accounts, then those amounts will be transferred from the MVA Fixed
Allocations and re-allocated to the Sub-accounts according to any asset
allocation programs (including an Automatic Rebalancing program) established
on your Annuity or in the absence of such programs, pro-rata, based on the
Account Values in such Sub-accounts at that time. A market value adjustment
will apply upon a transfer out of the MVA Fixed Allocations, which may
result in an increase or decrease in your Account Value.
.. Transfers under the formula do not impact your guarantees under GRO that
have already been locked-in.
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Withdrawals from your Annuity, while the benefit is in effect, will reduce the
Protected Principal Value proportionally. The proportion will be equal to the
proportionate reduction in the Account Value due to the withdrawal as of that
date. Withdrawals will be taken pro rata from the Sub-accounts and any MVA
Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the
Sub-accounts and the MVA Fixed Allocations up to growth in the MVA Fixed
Allocations and thereafter pro-rata solely from the Sub-accounts. The growth in
the MVA Fixed Allocations at any point in time consists of the remaining
earnings since the program of systematic withdrawal began. Withdrawals will be
subject to all other provisions of your Annuity, including any Contingent
Deferred Sales Charge and Market Value Adjustment that would apply.
ELECTION OF THE BENEFIT
We no longer permit new elections of GRO. If you currently participate in GRO,
your existing guarantees are unaffected by the fact that we no longer offer
GRO. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS GRO AND ELECT A
NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER YOUR
EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR
ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE THE
RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
RESTART OF THE BENEFIT
Once each Annuity Year you may request to restart the Benefit. Such a request
is an election by you to terminate the existing Benefit (and all guarantees
under the benefit) and start a new one. Restarts only take effect on
anniversaries of the Issue Date. To make such a request for a restart, you must
notify us in advance in accordance with our administrative requirements. If we
accept your request, we then terminate the existing Benefit as of that
valuation period, if it is an anniversary of the Issue Date, or, if not, as of
the next following anniversary of the Issue Date. The new Benefit starts at
that time. The initial Protected Principal Value for the new Benefit is the
Account Value as of the effective date of the new Benefit. Unless you tell us
otherwise, the duration of the new Benefit will be the same as that for the
existing Benefit. However, if we do not then make that duration available, you
must elect from those we make available at that time. For those who elect to
re-start the benefit, the charge will be assessed according to the current
methodology prior to re-starting the benefit. - see "Charges under the Benefit"
below.
As part of terminating the existing Benefit, we transfer any amounts in MVA
Fixed Allocations, subject to a Market Value Adjustment, to the Sub-accounts on
a pro-rata basis. If your entire Account Value was then in MVA Fixed
Allocations, you must first provide us instructions as to how to allocate the
transferred Account Value among the Sub-accounts.
TERMINATION OF THE BENEFIT
The Annuity Owner also can terminate the Guaranteed Return Option benefit. Upon
termination, any amounts held in the MVA Fixed Allocations will be transferred
as follows: (a) if only a portion of your Account Value is in the MVA Fixed
Allocations, we will transfer such Account Value (i) to the Sub-accounts
pro-rata based on the Account Values in such Sub-accounts on the day of the
transfer, unless we receive at our office other prior instructions from you or
(ii) if you are then participating in an asset allocation program for which we
are providing administrative support, we allocate the transferred amount in
accordance with the then current percentages for that asset allocation program
(b) if your entire Account Value is in MVA Fixed Allocations, we will transfer
your Account Value to the Sub-account corresponding to the AST Money Market
Portfolio, unless we receive at our Office prior instructions from you. A
Market Value Adjustment will apply (except that if the benefit has terminated
automatically due to payment of a death benefit, whether an MVA applies depends
solely on the terms of the death benefit - see the Death Benefit section of
this prospectus).
In general, you may cancel GRO and then elect another living benefit available
post issue, effective on any Valuation Day after your cancellation of GRO. If
you terminate GRO, you will lose all guarantees under that benefit. Your
election of another living benefit is subject to State and firm availability
and our eligibility rules.
The benefit will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of your
Annuity. If you elect to terminate the benefit, the Guaranteed Return Option
will no longer provide any guarantees. If the surviving spouse assumes your
Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date
of the Annuity or, if the deceased Owner had not previously elected the
benefit, may elect the benefit at any time. The surviving spouse's election
will be effective on the Valuation Day that we receive the required
documentation in good order at our home office, and the Account Value on that
Valuation Day will be the Protected Principal Value.
The charge for the Guaranteed Return Option benefit will no longer be deducted
from your Account Value after the benefit has been terminated, although for
those Annuities for which the GRO charge is deducted annually rather than daily
(see Charges Under the Benefit below), we will deduct the final annual charge
upon termination of the benefit.
SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION. This benefit is
subject to certain rules and restrictions, including, but not limited to the
following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Sub-accounts. The MVA Fixed Allocation must not have been
in effect as of the date that you elected to participate in the benefit.
However, the formula may transfer Account Value to the MVA Fixed Allocation
as of the effective date of the benefit under some circumstances.
.. Annuity Owners cannot allocate any portion of purchase payments (including
any Credits applied to such purchase payments under XT6) or transfer Account
Value to or from the MVA Fixed Allocation while participating in the
benefit; however, all or a portion of any purchase payments (including any
Credits applied to such purchase payments under XT6) may be allocated by us
to the MVA Fixed Allocation to
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support the amount guaranteed. You cannot participate in any dollar cost
averaging benefit that transfers Account Value from a MVA Fixed Allocation
to a Sub-account.
.. Transfers from the MVA Fixed Allocation made as a result of the formula
under the benefit will be subject to the Market Value Adjustment formula
under an Annuity; however, the 0.10% liquidity factor in the formula will
not apply. A Market Value Adjustment may be either positive or negative.
Transfer amounts will be taken from the most recently established MVA
Fixed Allocation.
.. Transfers from the Sub-accounts to the MVA Fixed Allocation or from the MVA
Fixed Allocation to the Sub-accounts under the benefit will not count toward
the maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by Prudential Annuities on the
maturity date will not be treated as "investment in the contract" for income
tax purposes.
.. Any amounts that we add to your Annuity to support our guarantee under the
benefit will be applied to the Sub-accounts pro rata, after first
transferring any amounts held in the MVA Fixed Allocations as follows:
(a) if only a portion of your Account Value is in the MVA Fixed Allocations,
we will transfer such Account Value (i) to the Sub-accounts pro-rata based
on the Account Values in such Sub-accounts on the day of the transfer,
unless we receive at our office other prior instructions from you or (ii) if
you are then participating in an asset allocation program for which we are
providing administrative support, we allocate the transferred amount in
accordance with the then current percentages for that asset allocation
program and (b) if your entire Account Value is in the MVA Fixed
Allocations, we will transfer your Account Value to the Sub-account
corresponding to the AST Money Market Portfolio, unless we receive at our
Office prior instructions from you.
.. Low interest rates may require allocation to the MVA Fixed Allocation even
when the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually decreases
the benefit will become increasingly sensitive to moves to the MVA Fixed
Allocation.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct a charge equal to 0.25% of the average daily net assets of the
Sub-accounts for participation in the Guaranteed Return Option benefit. The
annual charge is deducted daily. The charge is deducted to compensate
Prudential Annuities for: (a) the risk that your Account Value on the maturity
date is less than the amount guaranteed; and (b) administration of the benefit.
With respect to XT6 and APEX II, effective November 18, 2002, Prudential
Annuities changed the manner in which the annual charge for the Guaranteed
Return Option is deducted to the method described above. The annual charge for
the Guaranteed Return Option for Owners who elected the benefit between
February 4, 2002 and November 15, 2002 for XT6 and APEX II and subsequent to
November 15, 2002 in those states where the daily deduction of the charge has
not been approved, is deducted annually, in arrears, according to the
prospectus in effect as of the date the benefit was elected.
Owners who purchased an ASAP III Annuity between April 1, 2003 and
September 30, 2003 or an ASL II Annuity between February 4, 2002 and
November 15, 2002 (the "Promotional Period") will not be charged the 0.25%
annual fee for the Guaranteed Return Option benefit (or the fee for GRO Plus,
if that benefit was elected and the Annuity was acquired during the Promotional
Period) if elected at any time while their Annuity is in effect.
.. Prudential Annuities will not charge the 0.25% annual fee for the entire
period that the benefit remains in effect, including any extension of the
benefit's maturity date resulting from the Owner's election to restart the
7-year benefit duration, regardless of when the Owner elects to participate
in the Guaranteed Return Option benefit (or the fee for GRO Plus if that
benefit was elected and the Annuity was during the Promotional Period).
.. Owners who complete the initial 7-year benefit duration OR terminate the
benefit before the benefit's maturity date, will not be charged the 0.25%
annual fee for participating in the benefit if they re-elect the Guaranteed
Return Option benefit (or the fee for GRO Plus if that benefit was elected
and the Annuity was acquired during the Promotional Period).
.. All other terms and conditions of your Annuity and the Guaranteed Return
Option benefit (or the fee for GRO Plus if that benefit was elected and the
Annuity was acquired during the Promotional Period) apply to Owners who
qualify for the waiver of the 0.25% annual fee.
.. Owners who purchase an Annuity after the completion of the Promotional
Period do not qualify for the 0.25% annual fee waiver.
GUARANTEED RETURN OPTION PLUS 2008 (GRO PLUS 2008)
GRO Plus 2008 is no longer available for new elections.
Under GRO Plus 2008, we guarantee that the Account Value on the date that the
benefit is added to your Annuity (adjusted for subsequent purchase payments and
withdrawals as detailed below) will not be any less than that original value on
the seventh anniversary of benefit election and each anniversary thereafter. We
refer to this initial guarantee as the "base guarantee." In addition to the
base guarantee, GRO Plus 2008 offers the possibility of an enhanced guarantee.
You may lock in an enhanced guarantee once per "benefit year" (i.e., a year
beginning on the date you acquired the benefit and each anniversary thereafter)
if your Account Value on the Valuation Day exceeds the amount of any
outstanding base guarantee or enhanced guarantee. We guarantee that the Account
Value locked-in by that enhanced guarantee will not be any less seven years
later, and each anniversary of that date thereafter. In addition, you may elect
an automatic enhanced guarantee feature under which, if Account Value on a
benefit anniversary exceeds the highest existing guarantee by 7% or more, we
guarantee that such Account Value will not be any less seven benefit
anniversaries later and each benefit anniversary thereafter. You may maintain
only one enhanced guarantee in addition to your base guarantee. Thus, when a
new enhanced guarantee is created, it cancels any existing enhanced guarantee.
However, the
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fact that an enhanced guarantee was effected automatically on a benefit
anniversary does not prevent you from "manually" locking-in an enhanced
guarantee during the ensuing benefit year. Please note that upon creation of a
new enhanced guarantee, an immediate transfer to an AST bond portfolio
Sub-account (which is used as part of this benefit) may occur depending on the
discount rate (as described below) used to determine the present value of each
of your guarantees. You may elect to terminate an enhanced guarantee without
also terminating the base guarantee. If you do, any amounts held in the AST
bond portfolio Sub-account with respect to that enhanced guarantee will be
transferred to your other Sub-accounts in accordance with your current
allocation instructions. Amounts held in an AST bond portfolio Sub-account with
respect to the base guarantee will not be transferred as a result of the
termination of an enhanced guarantee. Please note that whenever an enhanced
guarantee is created, we reserve the right to increase your charge for GRO Plus
2008 if we have increased the charge for new elections of the benefit
generally. You may not lock in an enhanced guarantee, either manually or
through our optional automatic program, within seven years of the date by which
annuity payments must commence under the terms of your Annuity (please see "How
and When Do I Choose The Annuity Payment Option?" for further information on
your maximum Annuity Date). The inability to lock in an enhanced guarantee
referenced in the immediately preceding sentence also applies to a new Owner
who has acquired the Annuity from the original Owner.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account Value up to the guaranteed amount. If the
maturity date is not a Valuation Day, then we would contribute such an amount
on the next Valuation Day. We will allocate any such amount to each Sub-account
(other than the "Current AST bond portfolio Sub-account" described below) in
accordance with your current allocations instructions. Regardless of whether we
need to contribute funds at the end of a guarantee period, we will at that time
transfer all amounts held within the Current AST bond portfolio Sub-account
associated with the maturing guarantee to your other Sub-accounts, on a pro
rata basis. If the entire Account Value is invested in an AST bond portfolio
Sub-account, we will allocate according to your current allocation instructions.
We increase both the base guarantee and any enhanced guarantee by the amount of
each Purchase Payment (and associated Credits) made subsequent to the date that
the guarantee was established. For example, if the effective date of the
benefit was January 1, 2009 and the Account Value was $100,000 on that date,
then a $30,000 Purchase Payment made on March 30, 2010 would increase the base
guarantee amount to $130,000. As illustrated in the examples below, additional
purchase payments also increase an amount we refer to as the "dollar-for-dollar
corridor."
The dollar-for-dollar corridor is equal to 5% of the base guarantee amount
(i.e., 5% of the Account Value at benefit election). Thereafter, the
dollar-for-dollar corridor is adjusted only for subsequent purchase payments
(i.e., 5% of the Purchase Payment is added to the corridor amount) and "excess
withdrawals" (as described below). Thus, the creation of any enhanced guarantee
has no impact on the dollar-for-dollar corridor. Each "benefit year",
withdrawals that you make that are equal to or less than the dollar-for-dollar
corridor reduce both the amount of the dollar-for-dollar corridor for that
benefit year plus the base guarantee amount and the amount of any enhanced
guarantee by the exact amount of the withdrawal. However, if you withdraw more
than the dollar-for-dollar corridor in a given benefit year, we use the portion
of the withdrawal that exceeded the dollar-for-dollar corridor to effect a
proportional reduction to both the dollar-for-dollar corridor itself and each
guarantee amount. We calculate a proportional reduction by (i) identifying the
amount of the withdrawal that exceeded the dollar-for-dollar corridor (the
"excess withdrawal") (ii) subtracting the dollar-for-dollar amount from the
Account Value prior to the withdrawal (iii) dividing the excess withdrawal by
the amount in (ii). We then use the resulting proportion to reduce each of the
guaranteed amount and the dollar for dollar corridor itself. See examples of
this calculation below.
Any partial withdrawals in payment of any third party investment advisory
service will be treated as withdrawals, and will reduce each guarantee amount
and the dollar-for-dollar corridor in the manner indicated above.
EXAMPLES
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus 2008 benefit
are October 13, 2008; 2.) an initial Purchase Payment of $250,000 (includes any
Credits); 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar
limit of $12,500 (5% of $250,000). The values set forth here are purely
hypothetical and do not reflect the charge for GRO Plus 2008 or other fees and
charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2008 (in the first Annuity Year).
No prior withdrawals have been taken. As the amount withdrawn is less than the
Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first Annuity Year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2008 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. The base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
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.. The result is then further reduced by the ratio of A to B, where:
. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year. The resulting dollar-for-dollar corridor for the next Annuity Year is
calculated by multiplying the prior dollar-for-dollar corridor by the same
ratio by which we reduce the Guarantee Amount above: $12,500 X (1 - $7,500 /
$177,500), or $11,971.83.
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO Plus 2008 uses a mathematical formula to help manage your guarantees
through all market cycles. Because the formula is made part of your schedule
supplement, the formula applicable to you may not be altered once you elect the
benefit. However, subject to regulatory approval, we do reserve the right to
amend the formula for newly-issued Annuities that elect GRO Plus 2008 and for
existing Annuities that elect the benefit in the future. This required formula
helps us manage our financial exposure under GRO Plus 2008, by moving assets
out of certain Sub-accounts if dictated by the formula (see below). In essence,
we seek to preserve the value of these assets, by transferring them to a more
stable option (i.e., one or more specified bond portfolios of Advanced Series
Trust). We refer to these bond portfolios collectively as the "AST bond
portfolios." The formula described in this section, and which is set forth in
Appendix H to this prospectus, applies to both (a) GRO Plus 2008 and
(b) elections of HD GRO (including HD GRO with the 90% cap feature), where such
an election was made PRIOR to July 16, 2010. The formula applicable to
elections of HD GRO (including HD GRO with the 90% cap feature), where such an
election was made AFTER July 16, 2010, is set forth in Appendix P to this
prospectus. The cap can be referred to as the "the 90% cap" OR "the 90% cap
rule" OR "the 90% cap feature". A summary description of each AST Bond
Portfolio appears within the Prospectus section entitled "What Are The
Investment Objectives and Policies Of The Portfolios?". You can find a copy of
the AST Bond Portfolio prospectus by going to www.prudentialannuities.com.
Each AST bond portfolio is unique, in that its underlying investments generally
mature at different times. For example, there would be an AST bond portfolio
whose underlying investments generally mature in 2015, an AST bond portfolio
whose underlying investments generally mature in 2016, and so forth. We will
introduce new AST bond portfolios in subsequent years, to correspond generally
to the length of new guarantee periods that are created under this benefit (and
the Highest Daily GRO benefit). If you have elected GRO Plus 2008, you may
invest in an AST bond Portfolio only by operation of the formula, and thus you
may not allocate purchase payments to such a Portfolio. Please see this
Prospectus and the prospectus for the Advanced Series Trust for more
information about each AST bond portfolio used with this benefit.
Although we employ several AST bond portfolios for purposes of the benefit, the
formula described in the next paragraph operates so that your Account Value may
be allocated to only one AST bond portfolio Sub-account at one time. In the
description of the formula in the next paragraph, we refer to the AST bond
portfolio Sub-account in which you are invested immediately prior to any
potential asset transfer as the "Current AST bond portfolio Sub-account." The
formula may dictate that a transfer out of the Current AST Bond Portfolio
Sub-account be made, or alternatively may mandate a transfer into another AST
bond portfolio Sub-account. Any transfer into an AST bond portfolio Sub-account
will be directed to the AST bond portfolio Sub-account associated with the
"current liability" (we refer to that Sub-account as the "Transfer AST bond
portfolio Sub-account"). Note that if the Current AST bond portfolio
Sub-account is associated with the current liability, then that Sub-account
would be the Transfer AST bond portfolio Sub-account, and we would simply
transfer additional assets into the Sub-account if such a transfer is dictated
by the formula. As indicated, the AST bond portfolios are employed with this
benefit to help us mitigate the financial risks under our guarantee. Thus, in
accordance with the formula applicable to you under the benefit, we determine
which AST bond portfolio your Account Value is transferred to, and under what
circumstances a transfer is made. Please note that upon creation of a new
enhanced guarantee, an immediate transfer to the Transfer AST Bond Portfolio
Sub-account may occur, depending on the discount rate (as described in the next
paragraph) used to determine the present value of each of your guarantees. As
such, a low discount rate could cause a transfer of Account Value into an AST
bond portfolio Sub-account, despite the fact that your Account Value had
increased.
In general, the formula works as follows (please see Appendix H). On each
Valuation Day, the formula automatically performs an analysis with respect to
each guarantee amount that is outstanding. For each outstanding guarantee, the
formula begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the maturity date. As detailed in the formula, the discount
rate is an interest rate determined by taking a benchmark index used within the
financial services industry and then reducing the rate determined by that index
by a prescribed adjustment. Once selected, we do not change the applicable
benchmark index (although we do reserve the right to use a new benchmark index
if the original benchmark is discontinued). The greatest of each such present
value is referred to as the "current liability" in the formula. The formula
compares the current liability to the amount of your Account Value held within
the Current AST bond portfolio Sub-account and to your Account Value held
within the other Sub-accounts. If the current liability, reduced by the amount
held within the Current AST bond portfolio Sub-account, and divided by the
amount held within your other Sub-accounts, exceeds an upper target value
(currently, 0.85), then the formula will make a transfer into the Transfer AST
bond portfolio Sub-account, in the amount dictated by the formula. If the
current liability, reduced by the amount held within the Current AST bond
portfolio Sub-account, and divided by the amount within your other
Sub-accounts, is less than a lower target value (currently, 0.79), then the
formula will transfer Account Value within the Current AST bond portfolio
Sub-account into the other Sub-accounts (other than the Transfer AST bond
portfolio Sub-account), in the amount dictated by the formula.
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As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees, as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs to
be transferred into or out of the AST bond portfolio Sub-accounts (the "Bond
Portfolios"). Therefore, at any given time, some, none, or all of your Account
Value may be allocated to the Bond Portfolios. If your entire Account Value is
transferred to the Bond Portfolios, then based on the way the formula operates,
the formula will not transfer amounts out of the Bond Portfolios to the
Sub-accounts and the entire Account Value would remain in the Bond Portfolios.
If you make additional purchase payments to your Annuity, they will be
allocated to the Sub-accounts according to your allocation instructions. Such
additional purchase payments may or may not cause the formula to transfer money
in or out of the Bond Portfolios. Once the purchase payments are allocated to
your Annuity, they will also be subject to the formula, which may result in
immediate transfers to or from the Bond Portfolios, if dictated by the formula.
The amounts of any such transfers will vary, as dictated by the formula, and
will depend on the factors listed below.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the Bond Portfolios pursuant to the formula
depend on various factors unique to your Annuity and are not necessarily
directly correlated with the securities markets, bond markets, interest rates
or any other market or index. Some of the factors that determine the amount and
timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your Guarantee Amount(s);
.. The amount of time until the maturity of your Guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the Bond Portfolios;
.. The discount rate used to determine the present value of your Guarantee(s);
.. Additional purchase payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the Bond Portfolios will affect your ability to
participate in a subsequent recovery within the Permitted Sub-accounts.
Conversely, the Account Value may be higher at the beginning of the recovery,
e.g. more of the Account Value may have been protected from decline and
volatility than it otherwise would have been had the benefit not been elected.
The Bond Portfolios are available only with these benefits, and you may not
allocate purchase payments and transfer Account Value to or from the Bond
Portfolios.
Transfers under the formula do not impact any guarantees under the benefit that
have already been locked-in.
ELECTION/CANCELLATION OF THE BENEFIT
GRO Plus 2008 is no longer available for new elections. If you currently
participate in GRO Plus 2008, your existing guarantees are unaffected by the
fact that we no longer offer GRO Plus 2008.
You may cancel the GRO Plus 2008 benefit at any time. You also can cancel an
enhanced guarantee, but leave the base guarantee intact. Upon cancellation of
GRO Plus 2008, if only a portion of your Account Value is allocated to an AST
Bond Portfolio Sub-account, we will transfer any Account Value that is held in
such AST Bond Portfolio Sub-account to your elected Sub-accounts pro rata based
on the Account Values in such Sub-accounts at that time, unless you are
participating in any asset allocation program or automatic rebalancing program
for which we are providing administrative support or unless we receive at our
Service Office other instructions from you at the time you elect to cancel this
benefit. If you are participating in any asset allocation program or automatic
rebalancing program, we will transfer any such Account Value in accordance with
that program. If your entire Account Value is allocated to an AST Bond
Portfolio Sub-account, we will transfer your Account Value in accordance with
your most recent allocation instructions, or, in the absence of such
instructions, we will transfer the Account Value held in the AST Bond Portfolio
to the Money-market Portfolio.
GRO Plus 2008 will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract), unless the Annuity is continued by
the surviving spouse; (b) as of the date Account Value is applied to begin
annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
GRO Plus 2008 will no longer provide any guarantees. The charge for the GRO
Plus 2008 benefit will no longer be deducted from your Account Value upon
termination of the benefit.
If you wish, you may cancel the GRO Plus 2008 benefit. You may then elect any
other currently available living benefit on any Valuation Day after you have
cancelled the GRO Plus 2008 benefit, provided the request is received in good
order (subject to state availability and in accordance with any applicable age
requirements). Upon your election of another living benefit, Account Value may
be transferred between the AST Bond Portfolio Sub-accounts or, depending on the
benefits selected, the AST Investment Grade Bond Portfolio and the Permitted
Sub-accounts according to the formula. It is possible that over time the
formula could transfer some, most, or none of the Account Value to the AST Bond
Portfolio Sub-accounts or, depending on the benefit selected, the AST
Investment Grade Bond Portfolio under the newly-elected benefit. YOU ALSO
SHOULD BE AWARE THAT UPON CANCELLATION OF THE GRO PLUS 2008 BENEFIT, YOU WILL
LOSE ALL GUARANTEES THAT YOU HAD ACCUMULATED UNDER THE BENEFIT. THUS, THE
GUARANTEES UNDER ANY NEWLY-ELECTED BENEFIT WILL BE BASED ON YOUR CURRENT
ACCOUNT VALUE. THE BENEFIT YOU ELECT OR RE-ELECT MAY BE MORE EXPENSIVE THAN THE
BENEFIT YOU CANCEL. ONCE THE GRO PLUS 2008 BENEFIT IS CANCELED YOU ARE NOT
REQUIRED TO
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RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION
MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF
THE GRO PLUS 2008 BENEFIT PROVIDED THAT THE BENEFIT YOU ARE LOOKING TO ELECT IS
AVAILABLE ON A POST-ISSUE BASIS.
SPECIAL CONSIDERATIONS UNDER GRO PLUS 2008
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the permitted Sub-accounts. The permitted Sub-accounts are
those described in the Investment Option section of the prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the benefit.
.. You cannot participate in any dollar cost averaging benefit that transfers
Account Value from a fixed interest rate option to a Sub-account.
.. Transfers between an AST bond portfolio Sub-account and your other
Sub-accounts under the benefit will not count toward the maximum number of
free transfers allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct a charge equal to 0.60% (0.35%, for elections prior to May 1, 2009)
of the average daily net assets of the Sub-accounts for participation in the
GRO Plus 2008 benefit. The annual charge is deducted daily. The charge is
deducted to compensate us for: (a) the risk that your Account Value on a
maturity date is less than the amount guaranteed and (b) administration of the
benefit. We reserve the right to increase this fee for newly-issued contracts
or new elections of the benefit. The charges will not exceed the maximum
charges shown in the section of the prospectus entitled "Summary of Contract
Fees and Charges." You will begin paying this charge as of the effective date
of the benefit. We will not refund the charges you have paid even if we never
have to make any payments under the benefit.
OPTIONAL 90% CAP FEATURE UNDER GRO PLUS 2008
If you currently own an Annuity and have elected the GRO Plus 2008 benefit, you
can elect this optional feature, at no additional cost, which utilizes a new
mathematical formula. The predetermined mathematical formula is described below
and will replace the "Transfer Calculation" portion of the mathematical formula
currently used in connection with your benefit on a prospective basis. This
election may only be made once and may not be revoked once elected. The
mathematical formula appears in Appendix H in this prospectus, and is described
below. Only the election of the 90% cap feature will prevent all of your
Account Value from being allocated to an AST bond portfolio Sub-account. If all
of your Account Value is currently allocated to an AST bond portfolio
Sub-account, it will not transfer back to the Permitted Sub-accounts unless you
elect this 90% cap feature. If you make additional Purchase Payments, they may
result in a transfer of Account Value.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. In the description of the formula in the next paragraph, we refer to
the AST bond portfolio Sub-account in which you are invested immediately prior
to any potential asset transfer as the "Current AST bond portfolio
Sub-account." The formula may dictate that a transfer out of the Current AST
bond portfolio Sub-account be made, or alternatively may mandate a transfer
into an AST bond portfolio Sub-account. Any transfer into an AST bond portfolio
Sub-account will be directed to the AST bond portfolio Sub-account associated
with the "current liability" (we refer to that Sub-account as the "Transfer AST
bond portfolio Sub-account"). Note that if the Current AST bond portfolio
Sub-account is associated with the current liability, then that Sub-account
would be the Transfer AST bond portfolio Sub-account, and we would simply
transfer additional assets into the Sub-account if dictated by the formula.
Under the new formula, the formula will not execute a transfer to the Transfer
AST bond portfolio Sub-account that results in more than 90% of your Account
Value being allocated to the Transfer AST bond portfolio Sub-account ("90% cap
feature"). Thus, on any Valuation Day, if the formula would require a transfer
to the Transfer AST bond portfolio Sub-account that would result in more than
90% of the Account Value being allocated to the Transfer AST bond portfolio
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the Transfer AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the Transfer AST bond
portfolio Sub-account will not be made (regardless of the performance of the
Transfer AST bond portfolio Sub-account and the Permitted Sub-accounts) at
least until there is first a formula-initiated transfer out of the Transfer AST
bond portfolio Sub-account. Once this transfer occurs out of the Transfer AST
bond portfolio Sub-account, future amounts may be transferred to or from the
Transfer AST bond portfolio Sub-account if dictated by the formula (subject to
the 90% cap feature). At no time will the formula make a transfer to the
Transfer AST bond portfolio Sub-account that results in greater than 90% of
your Account Value being allocated to the Transfer AST bond portfolio
Sub-account. However, it is possible that, due to the investment performance of
your allocations in the Transfer AST bond portfolio Sub-account and your
allocations in the Permitted Sub-accounts you have selected, your Account Value
could be more than 90% invested in the Transfer AST bond portfolio Sub-account.
If you make additional purchase payments to your Annuity while the transfer
restriction of the 90% cap feature is in effect, the formula will not transfer
any of such additional purchase payments to the Transfer AST bond portfolio
Sub-account at least until there is first a transfer out of the
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Transfer AST bond portfolio Sub-account, regardless of how much of your Account
Value is in the Permitted Sub-accounts. This means that there could be
scenarios under which, because of the additional purchase payments you make,
less than 90% of your entire Account Value is allocated to the Transfer AST
bond portfolio Sub-account, and the formula will still not transfer any of your
Account Value to the Transfer AST bond portfolio Sub-account (at least until
there is first a transfer out of the Transfer AST bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made that results in the 90% cap feature
being met and now $90,000 is allocated to the Transfer AST bond portfolio
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the Transfer AST bond portfolio Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2010.
.. As of March 20, 2010 (and at least until first a transfer is made out of the
Transfer AST bond portfolio Sub-account under the formula) the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the Transfer AST bond portfolio Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the Transfer AST bond portfolio Sub-account).
.. Once there is a transfer out of the Transfer AST bond portfolio Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the Transfer AST bond
portfolio Sub-account if dictated by the formula (subject to the 90% cap
feature).
If at the time you elect the 90% cap feature, more than 90% of your Account
Value is allocated to an AST bond portfolio Sub-account used with the benefit,
a transfer will be made from the AST bond portfolio Sub-account such that
Account Value will be allocated 90% to the AST bond portfolio Sub-account and
10% will be allocated to your elected Sub-accounts. Amounts to be transferred
from the AST bond portfolio Sub-account to your elected Sub-accounts will be
transferred according to the following "hierarchy" (i.e., if a given item is
inapplicable, we use the next instruction that is applicable): (a) the
percentages dictated by any existing asset allocation program; or (b) the
percentages dictated by any auto-rebalancing program; or (c) pro-rata according
to amounts currently held in your elected Sub-accounts; or (d) according to the
currently-effective allocation instructions used for the allocation of
subsequent Purchase Payments. It is possible that additional transfers might
occur after this initial transfer if dictated by the formula. The amount of
such additional transfer(s) will vary. If, on the date this feature is elected,
100% of your Account Value is allocated to the Transfer AST bond portfolio
Sub-account, a transfer of an amount equal to 10% of your Account Value will be
made to your Permitted Sub-accounts.
It is possible that an additional transfer to the Permitted Sub-accounts could
occur on the following Valuation Day(s), and in some instances (based upon the
formula) the additional transfer(s) could be large. Thereafter, your Account
Value can be transferred between the Transfer AST bond portfolio Sub-account
and your Permitted Sub-accounts as frequently as daily, based on what the
formula prescribes.
Once the transfer restriction of the 90% cap feature is triggered, future
transfers into the Transfer AST bond portfolio Sub-account will not be made
(regardless of the performance of the Transfer AST bond portfolio Sub-account
and the Permitted Sub-accounts) at least until there is first a transfer out of
the Transfer AST bond portfolio Sub-account. Once this transfer occurs out of
the Transfer AST bond portfolio Sub-account, future amounts may be transferred
to or from the Transfer AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap feature).
IMPORTANT CONSIDERATIONS WHEN ELECTING THIS FEATURE:
.. At any given time, some, most or none of your Account Value may be allocated
to the Transfer AST bond portfolio Sub-account.
.. Please be aware that because of the way the 90% cap feature mathematical
formula operates, it is possible that more than or less than 90% of your
Account Value may be allocated to the Transfer AST bond portfolio
Sub-account.
. If this feature is elected, any Account Value transferred to the
Permitted Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending on the
performance of the Permitted Sub-accounts you select.
.. Your election of the 90% cap feature will not result in your losing the
guarantees you had accumulated under your existing GRO Plus 2008 benefit.
HIGHEST DAILY GUARANTEED RETURN OPTION (HD GRO)
We no longer permit new elections of Highest Daily GRO.
Highest Daily GRO creates a series of separate guarantees, each of which is
based on the highest Account Value attained on a day during the applicable time
period. As each year of your participation in the benefit passes, we create a
new guarantee. Each guarantee then remains in existence until the date on which
it matures (unless the benefit terminates sooner). We refer to each date on
which the specified Account Value is guaranteed as the "maturity date" for that
guarantee. Highest Daily GRO will not create a guarantee if the maturity date
of that guarantee would extend beyond the date by which annuity payments must
commence under the terms of your Annuity. This is true even with respect to a
new Owner who has acquired the Annuity from the original Owner.
The guarantees provided by the benefit exist only on the applicable maturity
date(s). However, due to the ongoing monitoring of your Account Value, and the
transfer of Account Value to support our future guarantees, the benefit may
provide some protection from significant Sub-account losses if you choose to
surrender your Annuity or begin receiving annuity payments prior to a maturity
date. For this same reason, the benefit may limit your ability to benefit from
Sub-account increases while it is in effect.
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The initial guarantee is created on the day that the Highest Daily GRO benefit
is added to your Annuity. We guarantee that your Account Value on the tenth
anniversary of that day (we refer to each such anniversary as a "benefit
anniversary") will not be less than your Account Value on the day that the
Highest Daily GRO benefit was added to your Annuity. Each benefit anniversary
thereafter, we create a new guarantee. With respect to each such subsequent
guarantee, we identify the highest Account Value that occurred between the date
of that benefit anniversary and the date on which Highest Daily GRO was added
to your Annuity. We guarantee that your Account Value ten years after that
benefit anniversary will be no less than the highest daily Account Value that
occurred during that time period. The following example illustrates the time
period over which we identify the highest daily Account Value for purposes of
each subsequent guarantee under the benefit. If the date of benefit election
were January 1, 2009, we would create a guarantee on January 1, 2012 based on
the highest Account Value achieved between January 1, 2009 and January 1, 2012,
and that guarantee would mature on January 1, 2022. As described below, we
adjust each of the guarantee amounts for purchase payments and withdrawals.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account Value up to the guaranteed amount. If the
maturity date is not a Valuation Day, then we would contribute such an amount
on the next Valuation Day. We will allocate any such amount to each Sub-account
(other than the "Current AST bond portfolio Sub-account" described below) in
accordance with your current allocations instructions. Regardless of whether we
need to contribute funds at the end of a guarantee period, we will at that time
transfer all amounts held within the AST bond portfolio Sub-account associated
with the maturing guarantee to your other Sub-accounts, on a pro rata basis. If
the entire account value is invested in the AST bond portfolio Sub-account, we
will allocate according to your current allocation instructions.
We increase the amount of each guarantee that has not yet reached its maturity
date, as well as the highest daily Account Value that we calculate to establish
a guarantee, by the amount of each Purchase Payment (and associated Credits)
made prior to the applicable maturity date. For example, if the effective date
of the benefit was January 1, 2009, and there was an initial guaranteed amount
that was set at $100,000 maturing January 1, 2019, and a second guaranteed
amount that was set at $120,000 maturing January 1, 2020, then a $30,000
Purchase Payment made on March 30, 2010 would increase the guaranteed amounts
to $130,000 and $150,000, respectively. As illustrated in the examples below,
additional purchase payments also increase an amount we refer to as the
"dollar-for-dollar corridor."
We reflect the effect of withdrawals by reference to an amount called the
"dollar-for-dollar corridor." The dollar-for-dollar corridor is set initially
to equal 5% of the initial guaranteed amount (i.e., 5% of the Account Value at
benefit election). Each "benefit year" (i.e., a year that begins on the date of
election of Highest Daily GRO and each anniversary thereafter), withdrawals
that you make that are equal to or less than the dollar-for-dollar corridor
reduce (i) the amount of the dollar-for-dollar corridor for that benefit year
(ii) the amount of each outstanding guarantee amount, and (iii) the highest
daily Account Value that we calculate to establish a guarantee, by the exact
amount of the withdrawal. However, if you withdraw more than the
dollar-for-dollar corridor in a given benefit year, we use the portion of the
withdrawal that exceeded the dollar-for-dollar corridor to effect a
proportional reduction to both the dollar-for-dollar corridor itself and each
outstanding guaranteed amount, as well as the highest daily Account Value that
we calculate to establish a guarantee. We calculate a proportional reduction by
(i) identifying the amount of the withdrawal that exceeded the
dollar-for-dollar corridor (the "excess withdrawal") (ii) subtracting the
dollar-for-dollar amount from the Account Value prior to the withdrawal
(iii) dividing the excess withdrawal by the amount in (ii). We then use the
resulting proportion to reduce each of the guaranteed amount, the highest daily
Account Value that we calculate to establish a guarantee, and the dollar for
dollar corridor itself. See examples of this calculation below.
Any partial withdrawals in payment of any third party investment advisory
service will be treated as withdrawals, and will reduce each applicable
guaranteed amount and the dollar-for-dollar corridor in the manner indicated
above.
EXAMPLES
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the Highest Daily GRO
benefit are October 13, 2008; 2.) an initial Purchase Payment of $250,000
(includes any Credits); 3.) an initial guarantee amount of $250,000; and 4.) a
dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here
are purely hypothetical and do not reflect the charge for Highest Daily GRO or
other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2008 (in the first Annuity Year).
No prior withdrawals have been taken. As the amount withdrawn is less than the
Dollar-for-dollar Limit:
.. The initial guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first Annuity Year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2008 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. The initial guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
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. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting initial guarantee amount is: $237,500 X (1 - $7,500 / $177,500),
or $227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
The resulting dollar-for-dollar corridor for the next Annuity Year is
calculated by multiplying the prior dollar-for-dollar corridor by the same
ratio by which we reduce the Guarantee Amount above: $12,500 X (1 - $7,500 /
$177,500), or $11,971.83.
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
HD GRO uses a predetermined mathematical formula to help manage your guarantees
through all market cycles. The formula applicable to you may not be altered
once you elect the benefit. This required formula helps us manage our financial
exposure under HD GRO, by moving assets out of certain Sub-accounts if dictated
by the formula (see below). In essence, we seek to preserve Account Value, by
transferring it to a more stable option (i.e., one or more specified bond
portfolios of Advanced Series Trust). We refer to the Sub-accounts
corresponding to these bond portfolios collectively as the "AST bond portfolio
Sub-accounts". The formula also contemplates the transfer of Account Value from
an AST bond portfolio Sub-account to the other Sub-accounts. The formula is set
forth in Appendix P of this prospectus. A summary description of each AST bond
portfolio Sub-account appears within the prospectus section entitled
"Investment Options." In addition, you can find a copy of the AST bond
portfolio prospectus by going to www.prudentialannuities.com.
For purposes of operating the HD GRO formula, we have included within each
Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio is
unique, in that its underlying investments generally mature at different times.
For example, there would be an AST bond portfolio whose underlying investments
generally mature in 2020, an AST bond portfolio whose underlying investments
generally mature in 2021, and so forth. As discussed below, the formula
determines the appropriate AST bond portfolio Sub-account to which Account
Value is transferred. We will introduce new AST bond portfolio Sub-accounts in
subsequent years, to correspond generally to the length of new guarantee
periods that are created under this benefit. If you have elected HD GRO, you
may have Account Value allocated to an AST bond portfolio Sub-account only by
operation of the formula, and thus you may not allocate Purchase Payments to or
make transfers to or from an AST bond portfolio Sub-account.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. The formula determines the appropriate AST bond portfolio Sub-account
to which Account Value is transferred. On any day a transfer into or out of the
AST bond portfolio Sub-account is made, the formula may dictate that a transfer
out of one AST bond portfolio Sub-account be made into another AST bond
portfolio Sub-account. Any transfer into an AST bond portfolio Sub-account will
be directed to the AST bond portfolio Sub-account associated with the "current
liability", as described below. In the formula, we use the term "Transfer
Account" to refer to the AST bond portfolio Sub-account to which a transfer
would be made. As indicated, the formula and AST bond portfolio Sub-accounts
are employed with this benefit to help us mitigate the financial risks under
our guarantee. Thus, the formula applicable to you under the benefit determines
which AST bond portfolio Sub-account your Account Value is transferred to, and
under what circumstances a transfer is made.
In general, the formula works as follows. Under the formula, Account Value will
transfer between the "Permitted Sub-accounts" and an AST bond portfolio
Sub-account when dictated by the pre-determined mathematical formula. On each
Valuation Day, including the effective date of the benefit, the pre-determined
mathematical formula is used to compare your Account Value to an amount based
on the guarantees provided under the benefit. The formula determines whether a
transfer occurs based, among other things, on an identification of the
outstanding guarantee that has the largest present value. Based on the formula,
a determination is made as to whether any portion of your Account Value is to
be transferred to or from the AST bond portfolio Sub-account. In identifying
those guarantees, we consider each guarantee that already has been set (i.e.,
on a benefit anniversary), as well as an amount that we refer to as the
"Projected Future Guarantee." The "Projected Future Guarantee" is an amount
equal to the highest Account Value (adjusted for withdrawals, additional
Purchase Payments, and any associated Credits as described in the section of
the prospectus concerning HD GRO) within the current benefit year that would
result in a new guarantee. For the Projected Future Guarantee, the assumed
Guarantee Period begins on the current Valuation Day and ends 10 years from the
next anniversary of the effective date of the benefit. As such, a Projected
Future Guarantee could cause a transfer of Account Value into an AST bond
portfolio Sub-account. We only calculate a Projected Future Guarantee if the
assumed Guarantee Period associated with that Projected Future Guarantee does
not extend beyond the latest Annuity Date applicable to the Annuity. The amount
that is transferred to and from the AST bond portfolio Sub-accounts pursuant to
the formula depends upon the factors set forth in the bullet points below, some
of which relate to the guarantee amount(s), including the Projected Future
Guarantee.
For each outstanding guarantee and the Projected Future Guarantee, the formula
begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the Maturity Date. As detailed in the formula, the discount
rate is an interest rate determined by taking a benchmark index used within the
financial services industry and then reducing that interest rate by a
prescribed adjustment. Once selected, we do not change the applicable benchmark
index (although we do reserve the right to use a new benchmark index if the
original benchmark is discontinued). The greatest of each such present value is
referred to as the "current liability" in the formula. The formula compares the
current liability to the amount of your Account Value held within the AST bond
portfolio Sub-account and to your Account Value held within the Permitted
Sub-accounts. If the current liability, reduced by the amount held within the
current AST bond portfolio Sub-account, and divided by the amount held within
the Permitted Sub-accounts, exceeds an upper target value (currently, 85%),
then the formula will make a transfer into the AST bond portfolio Sub-account,
in the amount dictated by the formula (subject to
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the 90% cap feature discussed below). If the current liability, reduced by the
amount held within the AST bond portfolio Sub-account, and divided by the
amount within the Permitted Sub-accounts, is less than a lower target value
(currently, 79%), then the formula will transfer Account Value from the AST
bond portfolio Sub-account into the Permitted Sub-accounts, in the amount
dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs to
be transferred into or out of the AST bond portfolio Sub-accounts. Where you
have not elected the 90% cap feature, at any given time, some, none, or all of
your Account Value may be allocated to an AST bond portfolio Sub-account. For
such elections, if your entire Account Value is transferred to an AST bond
portfolio Sub-account, then based on the way the formula operates, the formula
will not transfer amounts out of the AST bond portfolio Sub-account and the
entire Account Value would remain in the AST bond portfolio Sub-account. If you
make additional Purchase Payments to your Annuity, they will be allocated to
the Sub-accounts according to your allocation instructions. Such additional
Purchase Payments may or may not cause the formula to transfer money into or
out of the AST bond portfolio Sub-account. Once the Purchase Payments are
allocated to your Annuity, they also will be subject to the formula, which may
result in immediate transfers to or from the AST bond portfolio Sub-accounts,
if dictated by the formula. If you have elected the 90% cap feature discussed
below, at any given time, some, none, or most of your Account Value may be
allocated to the AST bond portfolio Sub-accounts.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant to
the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that determine
the amount and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected. The AST bond portfolio Sub-accounts are available only with
certain optional living benefits, and you may not allocate Purchase Payments to
or transfer Account Value to or from the AST bond portfolio Sub-accounts.
ELECTION/CANCELLATION OF THE BENEFIT
We no longer permit new elections of Highest Daily GRO. If you currently
participate in Highest Daily GRO, your existing guarantees are unaffected by
the fact that we no longer offer Highest Daily GRO.
If you wish, you may cancel the Highest Daily GRO benefit. You may then elect
any other currently available living benefit, which is available to be added
post issue on any Valuation Day after you have cancelled the Highest Daily GRO
benefit, provided the request is received in good order (subject to state
availability and in accordance with any applicable age requirements). Upon
cancellation of Highest Daily GRO, if only a portion of your Account Value is
allocated to an AST Bond Portfolio Sub-account, we will transfer any Account
Value that is held in such AST Bond Portfolio Sub-account to your elected
Sub-accounts pro rata based on the Account Values in such Sub-accounts at that
time, unless you are participating in any asset allocation program or automatic
rebalancing program for which we are providing administrative support or unless
we receive at our Service Office other instructions from you at the time you
elect to cancel this benefit. If you are participating in any asset allocation
program or automatic rebalancing program, we will transfer any such Account
Value in accordance with that program. If your entire Account Value is
allocated to an AST Bond Portfolio Sub-account, we will transfer your Account
Value in accordance with your most recent allocation instructions, or, in the
absence of such instructions, we will transfer the Account Value held in the
AST Bond Portfolio to the Money-market Portfolio.
Upon your election of another living benefit, Account Value may be transferred
between the AST Bond Portfolio Sub-accounts or, depending on the benefits
selected, the AST Investment Grade Bond Portfolio, and the Permitted
Sub-accounts according to a pre-determined mathematical formula used with that
benefit. It is possible that over time the formula could transfer some, most,
or none of the Account Value to the AST Bond Portfolio Sub-accounts or,
depending on the benefits selected, the AST Investment Grade Bond Portfolio,
under the newly-elected benefit. YOU ALSO SHOULD BE AWARE THAT UPON
CANCELLATION OF THE HIGHEST DAILY GRO BENEFIT, YOU WILL LOSE ALL GUARANTEES
THAT YOU HAD ACCUMULATED UNDER THE BENEFIT. THUS, THE GUARANTEES UNDER YOUR
NEWLY-ELECTED BENEFIT WILL BE BASED ON YOUR CURRENT ACCOUNT VALUE. THE BENEFIT
YOU ELECT OR RE-ELECT MAY BE MORE EXPENSIVE THAN THE BENEFIT YOU CANCEL. ONCE
THE HIGHEST DAILY GRO BENEFIT IS CANCELED YOU ARE NOT REQUIRED TO RE-ELECT
ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION MAY BE MADE
ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF THE HIGHEST
DAILY GRO BENEFIT PROVIDED THAT THE BENEFIT YOU ARE LOOKING TO ELECT IS
AVAILABLE ON A POST-ISSUE BASIS.
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Highest Daily GRO will terminate automatically upon: (a) the death of the Owner
or the Annuitant (in an entity owned contract), unless the Annuity is continued
by the surviving spouse; (b) as of the date Account Value is applied to begin
annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
Highest Daily GRO will no longer provide any guarantees. The charge for the
Highest Daily GRO benefit will no longer be deducted from your Account Value
upon termination of the benefit.
SPECIAL CONSIDERATIONS UNDER HIGHEST DAILY GRO
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Permitted Sub-accounts. The Permitted Sub-accounts are
those described in the Investment Option section of this prospectus. No
fixed interest rate allocations may be in effect as of the date that you
elect to participate in the benefit.
.. You cannot participate in any dollar cost averaging benefit that transfers
Account Value from a fixed interest rate option to a Sub-account.
.. Transfers from the other Sub-accounts to an AST bond portfolio Sub-account
or from an AST bond portfolio Sub-account to the other Sub-accounts under
the benefit will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct an annual charge equal to 0.60% (0.35%, for elections prior to May 1,
2009) of the average daily net assets of the Sub-accounts (including each AST
bond portfolio Sub-account) for participation in the Highest Daily GRO benefit.
The charge is deducted daily. The charge is deducted to compensate us for:
(a) the risk that your Account Value on the maturity date is less than the
amount guaranteed and (b) administration of the benefit. We reserve the right
to increase this fee for newly-issued contracts or new elections of the
benefit. The charges will not exceed the maximum charges shown in the section
of this prospectus entitled "Summary of Contract Fees and Charges." You will
begin paying this charge as of the effective date of the benefit. We will not
refund the charges you have paid even if we never have to make any payments
under the benefit.
OPTIONAL 90% CAP FEATURE FOR HIGHEST DAILY GRO
If you currently own an Annuity and have elected the Highest Daily GRO benefit,
you can elect this optional feature, at no additional cost, which utilizes a
new mathematical formula. The predetermined mathematical formula is described
below and will replace the "Transfer Calculation" portion of the mathematical
formula currently used in connection with your benefit on a prospective
basis. This election may only be made once and may not be revoked once
elected. The new formula is set forth in Appendix P of this prospectus, and is
described below. Only the election of the 90% cap feature will prevent all of
your Account Value from being allocated to an AST bond portfolio
Sub-account. If all of your Account Value is currently allocated to an AST bond
portfolio Sub-account, it will not transfer back to the Permitted Sub-accounts
unless you elect this 90% cap feature. If you make additional Purchase
Payments, they may result in a transfer of Account Value.
As with the formula that does not include the 90% cap feature, the formula with
the 90% cap feature determines whether a transfer occurs based, among other
things, on an identification of the outstanding guarantee that has the largest
present value. In identifying those guarantees, we consider each guarantee that
already has been set (i.e., on a benefit anniversary), as well as the
"Projected Future Guarantee" (as described above).
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. In the description of the formula in the next paragraph, we refer to
the AST bond portfolio Sub-account in which you are invested immediately prior
to any potential asset transfer as the "Current AST bond portfolio
Sub-account." The formula may dictate that a transfer out of the Current AST
bond portfolio Sub-account be made, or alternatively may mandate a transfer
into an AST bond portfolio Sub-account. Any transfer into an AST bond portfolio
Sub-account will be directed to the AST bond portfolio Sub-account associated
with the "current liability" (we refer to that Sub-account as the "Transfer AST
bond portfolio Sub-account"). Note that if the Current AST bond portfolio
Sub-account is associated with the current liability, then that Sub-account
would be the Transfer AST bond portfolio Sub-account, and we would simply
transfer additional assets into the Sub-account if dictated by the formula.
Under the new formula, the formula will not execute a transfer to the Transfer
AST bond portfolio Sub-account that results in more than 90% of your Account
Value being allocated to the Transfer AST bond portfolio Sub-account ("90% cap
rule"). Thus, on any Valuation Day, if the formula would require a transfer to
the Transfer AST bond portfolio Sub-account that would result in more than 90%
of the Account Value being allocated to the Transfer AST bond portfolio
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the Transfer AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the Transfer AST bond
portfolio Sub-account will not be made (regardless of the performance of the
Transfer AST bond portfolio Sub-account and the Permitted Sub-accounts) at
least until there is first
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a formula-initiated transfer out of the Transfer AST bond portfolio
Sub-account. Once this transfer occurs out of the Transfer AST bond portfolio
Sub-account, future amounts may be transferred to or from the Transfer AST bond
portfolio Sub-account if dictated by the formula (subject to the 90% cap rule).
At no time will the formula make a transfer to the Transfer AST bond portfolio
Sub-account that results in greater than 90% of your Account Value being
allocated to the Transfer AST bond portfolio Sub-account. However, it is
possible that, due to the investment performance of your allocations in the
Transfer AST bond portfolio Sub-account and your allocations in the Permitted
Sub-accounts you have selected, your Account Value could be more than 90%
invested in the Transfer AST bond portfolio Sub-account.
If you make additional purchase payments to your Annuity while the transfer
restriction of the 90% cap feature is in effect, the formula will not transfer
any of such additional purchase payments to the Transfer AST bond portfolio
Sub-account at least until there is first a transfer out of the Transfer AST
bond portfolio Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional purchase payments you make, less than 90% of
your entire Account Value is allocated to the Transfer AST bond portfolio
Sub-account, and the formula will still not transfer any of your Account Value
to the Transfer AST bond portfolio Sub-account (at least until there is first a
transfer out of the Transfer AST bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made that results in the 90% cap rule being
met and now $90,000 is allocated to the Transfer AST bond portfolio
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the Transfer AST bond portfolio Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2010.
.. As of March 20, 2010 (and at least until first a transfer is made out of the
Transfer AST bond portfolio Sub-account under the formula) the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the Transfer AST bond portfolio Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the Transfer AST bond portfolio Sub-account).
.. Once there is a transfer out of the Transfer AST bond portfolio Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the Transfer AST bond
portfolio Sub-account if dictated by the formula (subject to the 90% cap
rule).
If at the time you elect the 90% cap rule, more than 90% of your Account Value
is allocated to an AST bond portfolio Sub-account used with the benefit, a
transfer will be made from the AST bond portfolio Sub-account such that Account
Value will be allocated 90% to the AST bond portfolio Sub-account and 10% will
be allocated to your elected Sub-accounts. Amounts to be transferred from the
AST bond portfolio Sub-account to your elected Sub-accounts will be transferred
according to the following "hierarchy" (i.e., if a given item is inapplicable,
we use the next instruction that is applicable): (a) the percentages dictated
by any existing asset allocation program; or (b) the percentages dictated by
any auto-rebalancing program; or (c) pro-rata according to amounts currently
held in your elected Sub-accounts; or (d) according to the currently-effective
allocation instructions used for the allocation of subsequent Purchase
Payments. It is possible that additional transfers might occur after this
initial transfer if dictated by the formula. The amount of such additional
transfer(s) will vary. If, on the date this feature is elected, 100% of your
Account Value is allocated to the Transfer AST bond portfolio Sub-account, a
transfer of an amount equal to 10% of your Account Value will be made to your
Permitted Sub-accounts.
It is possible that an additional transfer to the Permitted Sub-accounts could
occur the following Valuation Day(s), and in some instances (based upon the
formula) the additional transfer(s) could be large. Thereafter, your Account
Value can be transferred between the Transfer AST bond portfolio Sub-account
and your Permitted Sub-accounts as frequently as daily, based on what the
formula prescribes.
Once the transfer restriction of the 90% cap feature is triggered, future
transfers into the Transfer AST bond portfolio Sub-account will not be made
(regardless of the performance of the Transfer AST bond portfolio Sub-account
and the Permitted Sub-accounts) at least until there is first a transfer out of
the Transfer AST bond portfolio Sub-account. Once this transfer occurs out of
the Transfer AST bond portfolio Sub-account, future amounts may be transferred
to or from the Transfer AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap feature).
IMPORTANT CONSIDERATIONS WHEN ELECTING THIS FEATURE:
.. At any given time, some, most or none of your Account Value may be allocated
to the Transfer AST bond portfolio Sub-account.
.. Please be aware that because of the way the 90% cap feature mathematical
formula operates, it is possible that more than or less than 90% of your
Account Value may be allocated to the Transfer AST bond portfolio
Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those Sub-accounts.
Your Account Value can go up or down depending on the performance of the
Permitted Sub-accounts you select.
Your election of the 90% cap feature will not result in your losing the
guarantees you had accumulated under your existing Highest Daily GRO benefit.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)
The Guaranteed Minimum Withdrawal Benefit is no longer available for new
elections.
The Guaranteed Minimum Withdrawal Benefit guarantees your ability to withdraw
amounts equal to an initial principal value (called the "Protected Value"),
regardless of the impact of Sub-account performance on your Account Value,
subject to our benefit rules regarding the timing and
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amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your Annuity and wish to ensure that Sub-account
performance will not affect your ability to protect your principal. You are not
required to make withdrawals as part of the benefit - the guarantee is not lost
if you withdraw less than the maximum allowable amount of principal each year
under the rules of the benefit. There is an additional charge if you elected
the GMWB benefit; however, the charge may be waived under certain circumstances
described below.
KEY FEATURE - PROTECTED VALUE
The Protected Value is the total amount that we guarantee will be available to
you through withdrawals from your Annuity and/or benefit payments, regardless
of the impact of Sub-account performance on your Account Value. The Protected
Value is reduced with each withdrawal you make until the Protected Value is
reduced to zero. When the Protected Value is reduced to zero due to your
withdrawals, the GMWB benefit terminates. Additionally, the Protected Value is
used to determine the maximum annual amount that you can withdraw from your
Annuity, called the Protected Annual Withdrawal Amount, without triggering an
adjustment in the Protected Value on a proportional basis. The Protected Value
is referred to as the "Benefit Base" in the rider we issue for this benefit.
The Protected Value is determined as of the date you make your first withdrawal
under your Annuity following your election of the GMWB benefit. The initial
Protected Value is equal to the greater of (A) the Account Value on the date
you elect the GMWB benefit, plus any additional purchase payments (plus any
Credits applied to such purchase payments under XT6) before the date of your
first withdrawal; or (B) the Account Value as of the date of the first
withdrawal from your Annuity. The Protected Value may be enhanced by increases
in your Account Value due to market performance during the period between your
election of the GMWB benefit and the date of your first withdrawal.
.. If you elect the GMWB benefit at the time you purchase your Annuity, the
Account Value will be your initial Purchase Payment (plus any Credits
applied to such purchase payments under XT6).
.. If we offer the GMWB benefit to existing Annuity Owners, the Account Value
on the anniversary of the Issue Date of your Annuity following your election
of the GMWB benefit will be used to determine the initial Protected Value.
.. If you make additional purchase payments after your first withdrawal, the
Protected Value will be increased by the amount of the additional Purchase
Payment (plus any Credits applied to such purchase payments under XT6).
You may elect to step-up your Protected Value if, due to positive market
performance, your Account Value is greater than the Protected Value. You are
eligible to step-up the Protected Value on or after the 5th anniversary
following the first withdrawal under the GMWB benefit. The Protected Value can
be stepped up again on or after the 5th anniversary following the preceding
step-up. If you elect to step-up the Protected Value, you may do so during the
30-day period prior to your eligibility date or on any Valuation Day
thereafter. If you elect to step-up the Protected Value under the benefit, and
on the date you elect to step-up, the charges under the GMWB benefit have
changed for new purchasers, your benefit may be subject to the new charge going
forward.
Upon election of the step-up, we reset the Protected Value to be equal to the
then current Account Value. For example, assume your initial Protected Value
was $100,000 and you have made cumulative withdrawals of $40,000, reducing the
Protected Value to $60,000. On the date you are eligible to step-up the
Protected Value, your Account Value is equal to $75,000. You could elect to
step-up the Protected Value to $75,000 on the date you are eligible. Upon
election of the step-up, we also reset the Protected Annual Withdrawal Amount
(discussed immediately below) to be equal to the greater of (A) the Protected
Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the
Protected Value immediately after the reset.
KEY FEATURE - PROTECTED ANNUAL WITHDRAWAL AMOUNT
The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected
Value. Under the GMWB benefit, if your cumulative withdrawals each Annuity Year
are less than or equal to the Protected Annual Withdrawal Amount, your
Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected
Value is reduced by the actual amount of the withdrawal, including any CDSC or
MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the
Protected Annual Withdrawal Amount trigger a proportional adjustment to both
the Protected Value and the Protected Annual Withdrawal Amount, as described in
the rider for this benefit (see the examples of this calculation below). The
Protected Annual Withdrawal Amount is referred to as the "Maximum Annual
Benefit" in the rider we issue for this benefit.
THE GMWB BENEFIT DOES NOT AFFECT YOUR ABILITY TO MAKE WITHDRAWALS UNDER YOUR
ANNUITY OR LIMIT YOUR ABILITY TO REQUEST WITHDRAWALS THAT EXCEED THE PROTECTED
ANNUAL WITHDRAWAL AMOUNT. You are not required to withdraw all or any portion
of the Protected Annual Withdrawal Amount each Annuity Year.
.. If, cumulatively, you withdraw an amount less than the Protected Annual
Withdrawal Amount in any Annuity Year, you cannot carry-over the unused
portion of the Protected Annual Withdrawal Amount to subsequent Annuity
Years. However, because the Protected Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused
Protected Annual Withdrawal Amount may extend the period of time until the
remaining Protected Value is reduced to zero.
.. Additional purchase payments will increase the Protected Annual Withdrawal
Amount by 7% of the applicable Purchase Payment (and any Credits we apply to
such purchase payments under XT6).
.. If the Protected Annual Withdrawal Amount after an adjustment exceeds the
Protected Value, the Protected Annual Withdrawal Amount will be set equal to
the Protected Value.
The following examples of dollar-for dollar and proportional reductions and the
reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the
effective date of the GMWB benefit are October 13, 2005; 2.) an initial
Purchase Payment of $250,000 (includes any Credits in the
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case of XT6); 3.) a Protected Value of $250,000; and 4.) a Protected Annual
Withdrawal Amount of $17,500 (7% of $250,000). The values set forth here are
purely hypothetical and do not reflect the charge for GMWB or any other fees
and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year).
No prior withdrawals have been taken. As the amount withdrawn is less than the
Protected Annual Withdrawal Amount:
.. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000,
from $250,000 to $240,000).
.. The remaining Protected Annual Withdrawal Amount for the balance of the
first Annuity Year is also reduced by the amount withdrawn (from $17,500 to
$7,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$220,000. As the amount withdrawn exceeds the remaining Protected Annual
Withdrawal Amount of $7,500 from Example 1:
.. The Protected Value is first reduced by the remaining Protected Annual
Withdrawal Amount (from $240,000 to $232,500);
.. The result is then further reduced by the ratio of A to B, where:
. A is the amount withdrawn less the remaining Protected Annual Withdrawal
Amount ($10,000 - $7,500, or $2,500).
. B is the Account Value less the remaining Protected Annual Withdrawal
Amount ($220,000 - $7,500, or $212,500).
The resulting Protected Value is: $232,500 X (1 - $2,500 / $212,500), or
$229,764.71.
.. The Protected Annual Withdrawal Amount is also reduced by the ratio of A to
B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 -
$2,500 / $212,500), or $17,294.12.
. The remaining Protected Annual Withdrawal Amount is set to zero (0) for
the balance of the first Annuity Year.
EXAMPLE 3. RESET OF THE MAXIMUM ANNUAL BENEFIT
A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The
remaining Protected Annual Withdrawal Amount has been reset to the Protected
Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn
is less than the remaining Protected Annual Withdrawal Amount:
.. The Protected Value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $229,764.71 to $219,764.71).
.. The remaining Protected Annual Withdrawal Amount for the balance of the
second Annuity Year is also reduced by the amount withdrawn (from $17,294.12
to $7,294.12).
BENEFITS UNDER GMWB
.. In addition to any withdrawals you make under the GMWB benefit, Sub-account
performance may reduce your Account Value. If your Account Value is equal to
zero, and you have not received all of your Protected Value in the form of
withdrawals from your Annuity, we will continue to make payments equal to
the remaining Protected Value in the form of fixed, periodic payments until
the remainder of the Protected Value is paid, at which time the rider
terminates. The fixed, periodic payments will each be equal to the Protected
Annual Withdrawal Amount, except for the last payment which may be equal to
the remaining Protected Value. We will determine the duration for which
periodic payments will continue by dividing the Protected Value by the
Protected Annual Withdrawal Amount. You will not have the right to make
additional purchase payments or receive the remaining Protected Value in a
lump sum. You can elect the frequency of payments, subject to our rules then
in effect.
.. If the death benefit under your Annuity becomes payable before you have
received all of your Protected Value in the form of withdrawals from your
Annuity, your Beneficiary has the option to elect to receive the remaining
Protected Value as an alternate death benefit payout in lieu of the amount
payable under any other death benefit provided under your Annuity. The
remaining Protected Value will be payable in the form of fixed, periodic
payments. Your beneficiary can elect the frequency of payments, subject to
our rules then in effect. We will determine the duration for which periodic
payments will continue by dividing the Protected Value by the Protected
Annual Withdrawal Amount. THE PROTECTED VALUE IS NOT EQUAL TO THE ACCOUNT
VALUE FOR PURPOSES OF THE ANNUITY'S OTHER DEATH BENEFIT OPTIONS. THE GMWB
BENEFIT DOES NOT INCREASE OR DECREASE THE AMOUNT OTHERWISE PAYABLE UNDER THE
ANNUITY'S OTHER DEATH BENEFIT OPTIONS. GENERALLY, THE GMWB BENEFIT WOULD BE
OF VALUE TO YOUR BENEFICIARY ONLY WHEN THE PROTECTED VALUE AT DEATH EXCEEDS
ANY OTHER AMOUNT AVAILABLE AS A DEATH BENEFIT.
.. If you elect to begin receiving annuity payments before you have received
all of your Protected Value in the form of withdrawals from your Annuity, an
additional annuity payment option will be available that makes fixed annuity
payments for a certain period, determined by dividing the Protected Value by
the Protected Annual Withdrawal Amount. If you elect to receive annuity
payments calculated in this manner, the assumed interest rate used to
calculate such payments will be 0%, which is less than the assumed interest
rate on other annuity payment options we offer. This 0% assumed interest
rate results in lower annuity payments than what would have been paid if the
assumed interest rate was higher than 0%. You can also elect to terminate
the GMWB benefit and begin receiving annuity payments based on your then
current Account Value (not the remaining Protected Value) under any of the
available annuity payment options.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the GMWB benefit are subject to all of the terms and
conditions of your Annuity, including any CDSC and MVA that may apply.
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.. Withdrawals made while the GMWB benefit is in effect will be treated, for
tax purposes, in the same way as any other withdrawals under your Annuity.
.. The GMWB benefit does not directly affect your Annuity's Account Value or
Surrender Value, but any withdrawal will decrease the Account Value by the
amount of the withdrawal. If you surrender your Annuity, you will receive
the current Surrender Value, not the Protected Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the GMWB benefit. The GMWB benefit
provides a guarantee that if your Account Value declines due to market
performance, you will be able to receive your Protected Value in the form of
periodic benefit payments.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
.. The Basic Death Benefit will terminate if withdrawals taken under the GMWB
benefit cause your Account Value to reduce to zero. Certain optional Death
Benefits may terminate if withdrawals taken under the GMWB benefit cause
your Account Value to reduce to zero. (See "Death Benefit" for more
information.)
ELECTION OF THE BENEFIT
The GMWB benefit is no longer available. If you currently participate in GMWB,
your existing guarantees are unaffected by the fact that we no longer offer
GMWB.
We reserve the right to restrict the maximum amount of Protected Value that may
be covered under the GMWB benefit under this Annuity or any other annuities
that you own that are issued by Prudential Annuities or its affiliated
companies.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Protected Value reaches zero
based on your withdrawals. You may terminate the benefit at any time by
notifying us. If you terminate the benefit, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The benefit
terminates upon your surrender of your Annuity, upon due proof of death (unless
your surviving spouse elects to continue your Annuity and the GMWB benefit or
your Beneficiary elects to receive the amounts payable under the GMWB benefit
in lieu of the death benefit) or upon your election to begin receiving annuity
payments.
The charge for the GMWB benefit will no longer be deducted from your Account
Value upon termination of the benefit.
PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS GMWB AND ELECT A NEW
LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER YOUR
EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR
ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE THE
RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
CHARGES UNDER THE BENEFIT
.. Currently, we deduct a charge equal to 0.35% of the average daily net assets
of the Sub-accounts per year for the GMWB benefit. The annual charge is
deducted daily.
.. If, during the seven years following the effective date of the benefit, you
do not make any withdrawals, and also during the five years after the
effective date of the benefit you make no purchase payment, we will
thereafter waive the charge for GMWB. If you make a purchase payment after
we have instituted that fee waiver (whether that purchase payment is
directed to a Sub-account or to a Fixed Allocation), we will resume imposing
the GMWB fee (without notifying you of the resumption of the charge).
Withdrawals that you take after the fee waiver has been instituted will not
result in the re-imposition of the GMWB charge.
.. If you elect to step-up the Protected Value under the benefit, and on the
date you elect to step-up, the charges under the benefit have changed for
new purchasers, your benefit may be subject to the new charge level for the
benefit.
ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Protected
Annual Withdrawal Amount, which will cause us to recalculate the Protected
Value and the Protected Annual Withdrawal Amount, resulting in a lower amount
payable in future Annuity Years.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
The Guaranteed Minimum Income Benefit is no longer available for new elections.
The Guaranteed Minimum Income Benefit is an optional benefit that, after a
seven-year waiting period, guarantees your ability to begin receiving income
from your Annuity in the form of annuity payments based on a guaranteed minimum
value (called the "Protected Income Value") that increases after the waiting
period begins, regardless of the impact of Sub-account performance on your
Account Value. The benefit may be appropriate for you if you anticipate using
your Annuity as a future source of periodic fixed income payments for the
remainder of your life and wish to ensure that the basis upon which your income
payments will be calculated will achieve at least a minimum amount despite
fluctuations in market performance. There is an additional charge if you
elected the GMIB benefit.
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KEY FEATURE - PROTECTED INCOME VALUE
The Protected Income Value is the minimum amount that we guarantee will be
available (net of any applicable tax charge), after a waiting period of at
least seven years, as a basis to begin receiving fixed annuity payments. The
Protected Income Value is initially established on the effective date of the
GMIB benefit and is equal to your Account Value on such date. Currently, since
the GMIB benefit may only be elected at issue, the effective date is the Issue
Date of your Annuity. The Protected Income Value is increased daily based on an
annual growth rate of 5%, subject to the limitations described below. The
Protected Income Value is referred to as the "Protected Value" in the rider we
issue for this benefit. The 5% annual growth rate is referred to as the
"Roll-Up Percentage" in the rider we issue for this benefit.
The Protected Income Value is subject to a limit of 200% (2X) of the sum of the
Protected Income Value established on the effective date of the GMIB benefit,
or the effective date of any step-up value, plus any additional purchase
payments (and any Credit that is applied to such purchase payments in the case
of XT6) made after the waiting period begins ("Maximum Protected Income
Value"), minus the impact of any withdrawals (as described below in "IMPACT OF
WITHDRAWALS ON THE PROTECTED INCOME VALUE") you make from your Annuity after
the waiting period begins.
.. Subject to the maximum age/durational limits described immediately below, we
will no longer increase the Protected Income Value by the 5% annual growth
rate once you reach the Maximum Protected Income Value. However, we will
increase the Protected Income Value by the amount of any additional purchase
payments after you reach the Maximum Protected Income Value. Further, if you
make withdrawals after you reach the Maximum Protected Income Value, we will
reduce the Protected Income Value and the Maximum Protected Income Value by
the proportional impact of the withdrawal on your Account Value.
.. Subject to the Maximum Protected Income Value, we will no longer increase
the Protected Income Value by the 5% annual growth rate after the later of
the anniversary date on or immediately following the Annuitant's 80/th/
birthday or the 7/th/ anniversary of the later of the effective date of the
GMIB benefit or the effective date of the most recent step-up. However, we
will increase the Protected Income Value by the amount of any additional
purchase payments (and any Credit that is applied to such purchase payments
in the case of XT6). Further, if you make withdrawals after the Annuitant
reaches the maximum age/duration limits, we will reduce the Protected Income
Value and the Maximum Protected Income Value by the proportional impact of
the withdrawal on your Account Value.
.. Subject to the Maximum Protected Income Value, if you make an additional
Purchase Payment, we will increase the Protected Income Value by the amount
of the Purchase Payment (and any Credit that is applied to such Purchase
Payment in the case of XT6) and will apply the 5% annual growth rate on the
new amount from the date the Purchase Payment is applied.
.. As described below, after the waiting period begins, cumulative withdrawals
each Annuity Year that are up to 5% of the Protected Income Value on the
prior anniversary of your Annuity will reduce the Protected Income Value by
the amount of the withdrawal. Cumulative withdrawals each Annuity Year in
excess of 5% of the Protected Income Value on the prior anniversary of your
Annuity will reduce the Protected Income Value proportionately. All
withdrawals after the Maximum Protected Income Value is reached will reduce
the Protected Income Value proportionately. The 5% annual growth rate will
be applied to the reduced Protected Income Value from the date of the
withdrawal.
STEPPING-UP THE PROTECTED INCOME VALUE - You may elect to "step-up" or "reset"
your Protected Income Value if your Account Value is greater than the current
Protected Income Value. Upon exercise of the step-up provision, your initial
Protected Income Value will be reset equal to your current Account Value. From
the date that you elect to step-up the Protected Income Value, we will apply
the 5% annual growth rate to the stepped-up Protected Income Value, as
described above. You can exercise the step-up provision twice while the GMIB
benefit is in effect, and only while the Annuitant is less than age 76.
.. A new seven-year waiting period will be established upon the effective date
of your election to step-up the Protected Income Value. You cannot exercise
your right to begin receiving annuity payments under the GMIB benefit until
the end of the new waiting period. In light of this waiting period upon
resets, it is not recommended that you reset your GMIB if the required
beginning date under IRS minimum distribution requirements would commence
during the 7 year waiting period. See "Tax Considerations" section in this
prospectus for additional information on IRS requirements.
.. The Maximum Protected Income Value will be reset as of the effective date of
any step-up. The new Maximum Protected Income Value will be equal to 200% of
the sum of the Protected Income Value as of the effective date of the
step-up plus any subsequent purchase payments (and any Credit that is
applied to such purchase payments in the case of XT6), minus the impact of
any withdrawals after the date of the step-up.
.. When determining the guaranteed annuity purchase rates for annuity payments
under the GMIB benefit, we will apply such rates based on the number of
years since the most recent step-up.
.. If you elect to step-up the Protected Income Value under the benefit, and on
the date you elect to step-up, the charges under the GMIB benefit have
changed for new purchasers, your benefit may be subject to the new charge
going forward.
.. A step-up will increase the dollar for dollar limit on the anniversary of
the Issue Date of the Annuity following such step-up.
IMPACT OF WITHDRAWALS ON THE PROTECTED INCOME VALUE - Cumulative withdrawals
each Annuity Year up to 5% of the Protected Income Value will reduce the
Protected Income Value on a "dollar-for-dollar" basis (the Protected Income
Value is reduced by the actual amount of the withdrawal). Cumulative
withdrawals in any Annuity Year in excess of 5% of the Protected Income Value
will reduce the Protected Income Value proportionately (see the examples of
this calculation below). The 5% annual withdrawal amount is determined on each
anniversary of the Issue Date (or on the Issue Date for the first Annuity Year)
and applies to any withdrawals during the Annuity Year. This means that the
amount available for withdrawals each Annuity Year on a "dollar-for-dollar"
basis is adjusted on each Annuity anniversary to reflect changes in the
Protected Income Value during the prior Annuity Year.
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The Maximum Protected Income Value is reduced by the same dollar-for-dollar
amount as the Protected Income Value is reduced and the same proportional
percentage as the Protected Income Value is reduced.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GMIB benefit are
October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any
Credits in the case of XT6); 3.) an initial Protected Income Value of $250,000;
4.) a dollar-for-dollar limit of $12,500 (5% of $250,000); and 5.) a Maximum
Protected Income Value of $500,000 (200% of the initial Protected Income
Value). The values set forth here are purely hypothetical and do not reflect
the charge for GMIB or any other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year).
No prior withdrawals or step-ups have been taken. Immediately prior to the
withdrawal, the Protected Income Value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
.. The Protected Income Value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
. The Maximum Protected Income Value is reduced by the amount withdrawn
(i.e., by $10,000 from $500,000.00 to $490,000.00).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of
the first Annuity Year is also reduced by the amount withdrawn (from $12,500
to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). Immediately before the withdrawal, the Account Value is
$220,000, the Protected Income Value is $242,006.64 and the Maximum Protected
Income Value is $490,000.00. As the amount withdrawn exceeds the Remaining
Limit of $2,500 from Example 1:
.. The Protected Income Value is first reduced by the Remaining Limit (from
$242,006.64 to $239,506.64);
.. The result is then further reduced by the ratio of A to B, where:
. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
. B is the Account Value less the Remaining Limit ($220,000 - $2,500, or
$217,500).
The resulting Protected Income Value is: $239,506.64 X (1 - $7,500 / $217,500),
or $231,247.79.
.. The Maximum Protected Income Value is reduced first by the same dollar
amount as the Protected Income Value ($490,000.00 - $2,500 or $487,500.00)
and by the same proportion as for the Protected Income Value ($487,500.00 X
0.9655 or $470,689.66).
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT
A $10,000 withdrawal is made on the first anniversary of the Issue Date,
October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected
Income Value is $240,838.37 and the Maximum Protected Income Value is
$470,689.66. The Remaining Limit is reset to 5% of the Protected Income Value
amount, or $12,041.92. As the amount withdrawn is less than the
dollar-for-dollar limit:
.. The Protected Income Value is reduced by the amount withdrawn (i.e., reduced
by $10,000, from $240,838.37 to $230,838.37).
.. The Maximum Protected Income Value is also reduced by the amount withdrawn
(i.e., by $10,000 from $470,689.66, to $460,689.66).
.. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,041.92 to $2,041.92).
KEY FEATURE - GMIB ANNUITY PAYMENTS
You can elect to apply the Protected Income Value to one of the available GMIB
Annuity Payment Options on any anniversary date following the initial waiting
period, or any subsequent waiting period established upon your election to
step-up the Protected Income Value. Once you have completed the waiting period,
you will have a 30-day period each year, after the Annuity anniversary, during
which you may elect to begin receiving annuity payments under one of the
available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity
Payment Options by the anniversary of the Annuity's Issue Date on or
immediately following the Annuitant's or your 95/th/ birthday (whichever is
sooner), except for Annuities used as a funding vehicle for an IRA, SEP IRA or
403(b), in which case you must elect one of the GMIB Annuity Payment Options by
the anniversary of the Annuity's Issue Date on or immediately following the
Annuitant's 92/nd/ birthday.
Your Annuity or state law may require you to begin receiving annuity payments
at an earlier date.
The amount of each GMIB Annuity Payment will be determined based on the age
and, where permitted by law, sex of the Annuitant by applying the Protected
Income Value (net of any applicable tax charge that may be due) to the GMIB
Annuity Payment Option you choose. We use special annuity purchase rates to
calculate the amount of each payment due under the GMIB Annuity Payment
Options. These special rates for the GMIB Annuity Payment Options are
calculated using an assumed interest rate factor that provides for lower growth
in the value applied to produce annuity payments than if you elected an annuity
payment option that is not part of the GMIB benefit. These special rates also
are calculated using other factors such as "age setbacks" (use of an age lower
than the Annuitant's actual age) that result in lower payments than would
result if you elected an annuity payment option that is not part of the GMIB
benefit. Use of an age setback entails a longer assumed life for the Annuitant
which in turn results in lower annuity payments.
ON THE DATE THAT YOU ELECT TO BEGIN RECEIVING GMIB ANNUITY PAYMENTS, WE
GUARANTEE THAT YOUR PAYMENTS WILL BE CALCULATED BASED ON YOUR ACCOUNT VALUE AND
OUR THEN CURRENT ANNUITY PURCHASE RATES IF THE PAYMENT AMOUNT CALCULATED ON
THIS BASIS WOULD BE HIGHER THAN IT WOULD BE BASED ON THE PROTECTED INCOME VALUE
AND THE SPECIAL GMIB ANNUITY PURCHASE RATES.
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GMIB ANNUITY PAYMENT OPTION 1 - PAYMENTS FOR LIFE WITH A CERTAIN PERIOD
Under this option, monthly annuity payments will be made until the death of the
Annuitant. If the Annuitant dies before having received 120 monthly annuity
payments, the remainder of the 120 monthly annuity payments will be made to the
Beneficiary.
GMIB ANNUITY PAYMENT OPTION 2 - PAYMENTS FOR JOINT LIVES WITH A CERTAIN PERIOD
Under this option, monthly annuity payments will be made until the death of
both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint
Annuitant die before having received 120 monthly annuity payments, the
remainder of the 120 monthly annuity payments will be made to the Beneficiary
.. If the Annuitant dies first, we will continue to make payments until the
later of the death of the Joint Annuitant and the end of the period certain.
However, if the Joint Annuitant is still receiving annuity payments
following the end of the certain period, we will reduce the amount of each
subsequent payment to 50% of the original payment amount.
.. If the Joint Annuitant dies first, we will continue to make payments until
the later of the death of the Annuitant and the end of the period certain.
You cannot withdraw your Account Value or the Protected Income Value under
either GMIB Annuity Payment Option once annuity payments have begun. We may
make other payout frequencies available, such as quarterly, semi-annually or
annually.
OTHER IMPORTANT CONSIDERATIONS
YOU SHOULD NOTE THAT GMIB IS DESIGNED TO PROVIDE A TYPE OF INSURANCE THAT
SERVES AS A SAFETY NET ONLY IN THE EVENT YOUR ACCOUNT VALUE DECLINES
SIGNIFICANTLY DUE TO NEGATIVE INVESTMENT PERFORMANCE. IF YOUR ACCOUNT VALUE IS
NOT SIGNIFICANTLY AFFECTED BY NEGATIVE INVESTMENT PERFORMANCE, IT IS UNLIKELY
THAT THE PURCHASE OF THE GMIB WILL RESULT IN YOUR RECEIVING LARGER ANNUITY
PAYMENTS THAN IF YOU HAD NOT PURCHASED GMIB. This is because the assumptions
that we use in computing the GMIB, such as the annuity purchase rates, (which
include assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing annuity payout
options outside of GMIB. Therefore, you may generate higher income payments if
you were to annuitize a lower Account Value at the current annuity purchase
rates, than if you were to annuitize under the GMIB with a higher Protected
Value than your Account Value but, at the annuity purchase rates guaranteed
under the GMIB. The GMIB benefit does not directly affect an Annuity's Account
Value, Surrender Value or the amount payable under either the basic Death
Benefit provision of the Annuity or any optional Death Benefit provision. If
you surrender your Annuity, you will receive the current Surrender Value, not
the Protected Income Value. The Protected Income Value is only applicable if
you elect to begin receiving annuity payments under one of the GMIB annuity
options after the waiting period.
.. Each Annuity offers other annuity payment options that you can elect which
do not impose an additional charge, but which do not offer to guarantee a
minimum value on which to make annuity payments.
.. Where allowed by law, we reserve the right to limit subsequent purchase
payments if we determine, at our sole discretion, that based on the timing
of your purchase payments and withdrawals, your Protected Income Value is
increasing in ways we did not intend. In determining whether to limit
purchase payments, we will look at purchase payments which are
disproportionately larger than your initial Purchase Payment and other
actions that may artificially increase the Protected Income Value.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
.. If you change the Annuitant after the effective date of the GMIB benefit,
the period of time during which we will apply the 5% annual growth rate may
be changed based on the age of the new Annuitant. If the new Annuitant would
not be eligible to elect the GMIB benefit based on his or her age at the
time of the change, then the GMIB benefit will terminate.
.. Annuity payments made under the GMIB benefit are subject to the same tax
treatment as any other annuity payment.
.. At the time you elect to begin receiving annuity payments under the GMIB
benefit or under any other annuity payment option we make available, the
protection provided by an Annuity's basic Death Benefit or any optional
Death Benefit provision you elected will no longer apply.
ELECTION OF THE BENEFIT
The GMIB benefit is no longer available. If you currently participate in GMIB,
your existing guarantees are unaffected by the fact that we no longer offer
GMIB.
TERMINATION OF THE BENEFIT
The GMIB benefit cannot be terminated by the Owner once elected. The GMIB
benefit automatically terminates as of the date your Annuity is fully
surrendered, on the date the Death Benefit is payable to your Beneficiary
(unless your surviving spouse elects to continue your Annuity), or on the date
that your Account Value is transferred to begin making annuity payments. The
GMIB benefit may also be terminated if you designate a new Annuitant who would
not be eligible to elect the GMIB benefit based on his or her age at the time
of the change.
Upon termination of the GMIB benefit we will deduct the charge from your
Account Value for the portion of the Annuity Year since the prior anniversary
of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
CHARGES UNDER THE BENEFIT
Currently, we deduct a charge equal to 0.50% per year of the average Protected
Income Value for the period the charge applies. Because the charge is
calculated based on the average Protected Income Value, it does not increase or
decrease based on changes to the Annuity's Account
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Value due to market performance. The dollar amount you pay each year will
increase in any year the Protected Income Value increases, and it will decrease
in any year the Protected Income Value decreases due to withdrawal,
irrespective of whether your Account Value increases or decreases.
The charge is deducted annually in arrears each Annuity Year on the anniversary
of the Issue Date of an Annuity. We deduct the amount of the charge pro-rata
from the Account Value allocated to the Sub-accounts and the Fixed Allocations.
No MVA will apply to Account Value deducted from a Fixed Allocation. If you
surrender your Annuity, begin receiving annuity payments under the GMIB benefit
or any other annuity payment option we make available during an Annuity Year,
or the GMIB benefit terminates, we will deduct the charge for the portion of
the Annuity Year since the prior anniversary of the Annuity's Issue Date (or
the Issue Date if in the first Annuity Year).
No charge applies after the Annuity Date.
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE)
The Lifetime Five Income Benefit is no longer being offered. Lifetime Five
could have been elected only where the Annuitant and the Owner were the same
person or, if the Annuity Owner is an entity, where there was only one
Annuitant. The Annuitant must have been at least 45 years old when the benefit
is elected. The Lifetime Five Income Benefit was not available if you elected
any other optional living benefit. As long as your Lifetime Five Income Benefit
is in effect, you must allocate your Account Value in accordance with the then
permitted and available option(s) with this benefit.
The benefit guarantees your ability to withdraw amounts equal to a percentage
of an initial principal value (called the "Protected Withdrawal Value"),
regardless of the impact of market performance on your Account Value, subject
to our benefit rules regarding the timing and amount of withdrawals. There are
two options - one is designed to provide an annual withdrawal amount for life
(the "Life Income Benefit") and the other is designed to provide a greater
annual withdrawal amount as long as there is Protected Withdrawal Value
(adjusted as described below) (the "Withdrawal Benefit"). If there is no
Protected Withdrawal Value, the withdrawal benefit will be zero. You do not
choose between these two options; each option will continue to be available as
long as your Annuity has an Account Value and the Lifetime Five is in effect.
Certain benefits under Lifetime Five may remain in effect even if the Account
Value of your Annuity is zero. The benefit may be appropriate if you intend to
make periodic withdrawals from your Annuity and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the benefit - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year under
the rules of the benefit. Withdrawals are taken first from your own Account
Value. We are only required to begin making lifetime income payments to you
under our guarantee when and if your Account Value is reduced to zero (unless
the benefit has terminated).
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your Annuity following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greatest of (A) the Account
Value on the date you elect Lifetime Five, plus any additional purchase
payments, as applicable, each growing at 5% per year from the date of your
election of the benefit, or application of the Purchase Payment to your Annuity
until the date of your first withdrawal or the 10/th/ anniversary of the
benefit effective date, if earlier (B) the Account Value on the date of the
first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent purchase
payments prior to the first withdrawal or the 10/th/ anniversary of the benefit
effective date, if earlier. With respect to (A) and (C) above, after the 10/th/
anniversary of the benefit effective date, each value is increased by the
amount of any subsequent purchase payments. With respect to XT6, Credits are
added to purchase payments for purposes of calculating the Protected Withdrawal
Value, the Annual Income Amount and the Annual Withdrawal Amount (see below for
a description of Annual Income Amount and Annual Withdrawal Amount).
.. If you elected the Lifetime Five benefit at the time you purchased your
Annuity, the Account Value was your initial Purchase Payment.
.. If you make additional purchase payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
dollar-for-dollar basis up to the Annual Withdrawal Amount, per Annuity Year,
of the Protected Withdrawal Value and on the greater of a dollar-for-dollar
basis or a pro rata basis for withdrawals in an Annuity Year in excess of that
amount until the Protected Withdrawal Value is reduced to zero. At that point
the Annual Withdrawal Amount will be zero until such time (if any) as the
Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or
additional purchase payments being made into the Annuity).
STEP-UP OF THE PROTECTED WITHDRAWAL VALUE
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Account Value is greater than the Protected Withdrawal
Value.
If you elected the Lifetime Five benefit on or after March 20, 2006:
.. You are eligible to step-up the Protected Withdrawal Value on or after the
1/st/ anniversary of the first withdrawal under the Lifetime Five benefit
.. The Protected Withdrawal Value can be stepped up again on or after the 1/st/
anniversary of the preceding step-up.
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If you elected the Lifetime Five benefit prior to March 20, 2006 and that
original election remains in effect:
.. You are eligible to step-up the Protected Withdrawal Value on or after the
5/th/ anniversary of the first withdrawal under the Lifetime Five benefit
.. The Protected Withdrawal Value can be stepped up again on or after the 5/th/
anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the benefit, and on the
date you elect to step-up, the charges under the Lifetime Five benefit have
changed for new purchasers, your benefit may be subject to the new charge at
the time of step-up. Upon election of the step-up, we increase the Protected
Withdrawal Value to be equal to the then current Account Value. For example,
assume your initial Protected Withdrawal Value was $100,000 and you have made
cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to
$60,000. On the date you are eligible to step-up the Protected Withdrawal
Value, your Account Value is equal to $75,000. You could elect to step-up the
Protected Withdrawal Value to $75,000 on the date you are eligible. If your
current Annual Income Amount and Annual Withdrawal Amount are less than they
would be if we did not reflect the step-up in Protected Withdrawal Value, then
we will increase these amounts to reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected the Lifetime Five benefit on or after March 20, 2006 and have
also elected the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1/st/ Annuity
Anniversary that is at least one year after the later of (1) the date of the
first withdrawal under the Lifetime Five benefit or (2) the most recent
step-up
.. your Protected Withdrawal Value will only be stepped-up if 5% of the Account
Value is greater than the Annual Income Amount by any amount
.. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a
step-up occurs
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1/st/ Annuity Anniversary that is at least one year after the most recent
step-up
If you elected the Lifetime Five benefit prior to March 20, 2006 and have also
elected the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the Annuity Anniversary
that is at least 5 years after the later of (1) the date of the first
withdrawal under the Lifetime Five Benefit or (2) the most recent step-up
.. your Protected Withdrawal Value will only be stepped-up if 5% of the Account
Value is greater than the Annual Income Amount by 5% or more
.. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive Annuity Anniversary until
a step-up occurs
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
Annuity Anniversary that is at least 5 years after the most recent step-up
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active. Under the Lifetime Five benefit, if your cumulative withdrawals in an
Annuity Year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis
in that Annuity Year. If your cumulative withdrawals are in excess of the
Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions) by
the result of the ratio of the Excess Income to the Account Value immediately
prior to such withdrawal (see examples of this calculation below). Reductions
include the actual amount of the withdrawal, including any CDSC that may apply.
A withdrawal can be considered Excess Income under the Life Income Benefit even
though it does not exceed the Annual Withdrawal Amount under the Withdrawal
Benefit. When you elect a step-up (or an auto step-up is effected), your Annual
Income Amount increases to equal 5% of your Account Value after the step-up,
adjusted for withdrawals within the current annuity year, if such amount is
greater than your Annual Income Amount. Your Annual Income Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 5% of any additional purchase payments (and any associated Credit
with respect to XT6). Any increase will be added to your Annual Income Amount
beginning on the day that the step-up is effective or the Purchase Payment is
made. A determination of whether you have exceeded your Annual Income Amount is
made at the time of each withdrawal; therefore a subsequent increase in the
Annual Income Amount will not offset the effect of a withdrawal that exceeded
the Annual Income Amount at the time the withdrawal was made.
KEY FEATURE - ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT The initial
Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal
Value. Under the Lifetime Five benefit, if your cumulative withdrawals each
Annuity Year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If
your cumulative withdrawals are in
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excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual
Withdrawal Amount will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the Excess Withdrawal to the
Account Value immediately prior to such withdrawal (see the examples of this
calculation below). Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. When you elect a step-up (or an auto step-up
is effected), your Annual Withdrawal Amount increases to equal 7% of your
Account Value after the step-up, adjusted for withdrawals within the current
annuity year, if such amount is greater than your Annual Withdrawal Amount.
Your Annual Withdrawal Amount also increases if you make additional purchase
payments. The amount of the increase is equal to 7% of any additional purchase
payments (and any associated Credit with respect to XT6). A determination of
whether you have exceeded your Annual Withdrawal Amount is made at the time of
each withdrawal; therefore, a subsequent increase in the Annual Withdrawal
Amount will not offset the effect of a withdrawal that exceeded the Annual
Withdrawal Amount at the time the withdrawal was made.
The Lifetime Five benefit does not affect your ability to make withdrawals
under your Annuity or limit your ability to request withdrawals that exceed the
Annual Income Amount and the Annual Withdrawal Amount. You are not required to
withdraw all or any portion of the Annual Withdrawal Amount or Annual Income
Amount in each Annuity Year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any Annuity Year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
Annuity Years. However, because the Protected Withdrawal Value is only
reduced by the actual amount of withdrawals you make under these
circumstances, any unused Annual Withdrawal Amount may extend the period of
time until the remaining Protected Withdrawal Value is reduced to zero.
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any Annuity Year, you cannot carry-over the
unused portion of the Annual Income Amount to subsequent Annuity Years.
However, because the Protected Withdrawal Value is only reduced by the
actual amount of withdrawals you make under these circumstances, any unused
Annual Income Amount may extend the period of time until the remaining
Protected Withdrawal Value is reduced to zero.
EXAMPLES OF WITHDRAWALS
The following examples of dollar-for-dollar and proportional reductions of the
Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount
assume: 1.) the Issue Date and the Effective Date of the Lifetime Five benefit
are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the
Account Value on February 1, 2006 is equal to $265,000; and 4.) the first
withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000.
The values set forth here are purely hypothetical, and do not reflect the
charge for Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a) Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/^(393/365)/ = $263,484.33
(b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 -
$10,000 = $8,550. Annual Withdrawal Amount for future Annuity Years remains
at $18,550.
.. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000
= $3,250. Annual Income Amount for future Annuity Years remains at $13,250.
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
(a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 -
$15,000 = $3,550. Annual Withdrawal Amount for future Annuity Years
remains at $18,550
. Remaining Annual Income Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future Annuity Years.
. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157
. Protected Withdrawal Value is reduced by $15,000 from $265,000 to
$250,000
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(b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 =
$6,450) reduces Annual Withdrawal Amount for future Annuity Years.
. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061
. Remaining Annual Income Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future Annuity Years.
. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623.
Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627
. Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
. Proportional reduction = Excess Withdrawal/Account Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450,
$6,503} = $239,947
BENEFITS UNDER THE LIFETIME FIVE BENEFIT
.. If your Account Value is equal to zero, and the cumulative withdrawals in
the current Annuity Year are greater than the Annual Withdrawal Amount, the
Lifetime Five benefit will terminate. To the extent that your Account Value
was reduced to zero as a result of cumulative withdrawals that are equal to
or less than the Annual Income Amount and amounts are still payable under
both the Life Income Benefit and the Withdrawal Benefit, you will be given
the choice of receiving the payments under the Life Income Benefit or under
the Withdrawal Benefit. Thus, in that scenario, the remaining amounts under
the Life Income Benefit and the Withdrawal Benefit would be payable even
though your Account Value was reduced to zero. Once you make this election
we will make an additional payment for that Annuity Year equal to either the
remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity
Year, if any, depending on the option you choose. In subsequent Annuity
Years we make payments that equal either the Annual Income Amount or the
Annual Withdrawal Amount as described in this Prospectus. You will not be
able to change the option after your election and no further purchase
payments will be accepted under your Annuity. If you do not make an
election, we will pay you annually under the Life Income Benefit. To the
extent that cumulative withdrawals in the current Annuity Year that reduced
your Account Value to zero are more than the Annual Income Amount but less
than or equal to the Annual Withdrawal Amount and amounts are still payable
under the Withdrawal Benefit, you will receive the payments under the
Withdrawal Benefit. In the year of a withdrawal that reduced your Account
Value to zero, we will make an additional payment to equal any remaining
Annual Withdrawal Amount and make payments equal to the Annual Withdrawal
Amount in each subsequent year (until the Protected Withdrawal Value is
depleted). Once your Account Value equals zero no further purchase payments
will be accepted under your Annuity.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years or any remaining Protected Withdrawal
Value, you can elect one of the following three options:
(1) apply your Account Value to any annuity option available; or
(2) request that, as of the date annuity payments are to begin, we
make annuity payments each year equal to the Annual Income Amount.
We make such annuity payments until the Annuitant's death; or
(3) request that, as of the date annuity payments are to begin, we pay
out any remaining Protected Withdrawal Value as annuity payments.
Each year such annuity payments will equal the Annual Withdrawal
Amount or the remaining Protected Withdrawal Value if less. We
make such annuity payments until the earlier of the Annuitant's
death or the date the Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your Annuity. The amount that
will be applied to provide such annuity payments will be the greater of:
(1) the present value of future Annual Income Amount payments. Such
present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single
life fixed annuity rates guaranteed in your Annuity; and
(2) the Account Value.
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.. If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount
as if you made your first withdrawal on the date the annuity payments are to
begin.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Lifetime Five benefit are subject to all of the terms
and conditions of your Annuity, including any applicable CDSC.
.. Withdrawals made while the Lifetime Five benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under
your Annuity. The Lifetime Five benefit does not directly affect your
Annuity's Account Value or Surrender Value, but any withdrawal will decrease
the Account Value by the amount of the withdrawal (plus any applicable
CDSC). If you surrender your Annuity, you will receive the current Surrender
Value, not the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Lifetime Five benefit. The Lifetime
Five benefit provides a guarantee that if your Account Value declines due to
market performance, you will be able to receive your Protected Withdrawal
Value or Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. In general, you must allocate your Account Value in accordance with the then
available investment option(s) that we may prescribe in order to maintain
the benefit. If, subsequent to your election of the benefit, we change our
requirements for how Account Value must be allocated under the benefit, we
will not compel you to re-allocate your Account Value in accordance with our
newly-adopted requirements. Subsequent to any change in requirements,
transfers of Account Value and allocation of additional purchase payments
may be subject to the new investment limitations.
.. You will begin paying the charge for this benefit as of the effective date
of the benefit, even if you do not begin taking withdrawals for many years,
or ever. We will not refund the charges you have paid if you choose never to
take any withdrawals and/or if you never receive any lifetime income
payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Lifetime Five benefit cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under the
Lifetime Five benefit cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
.. If you are taking your entire Annual Withdrawal Amount through the
Systematic Withdrawal Program, you must take that withdrawal as a gross
withdrawal, not a net withdrawal.
ELECTION OF THE BENEFIT
We no longer permit elections of Lifetime Five. If you wish, you may cancel the
Lifetime Five benefit. You may then elect any other available living benefit,
on the Valuation Day after you have cancelled the Lifetime Five benefit
provided the request is received in good order (subject to state availability
and in accordance with any applicable age requirements). Once the Lifetime Five
benefit is canceled you are not required to re-elect another optional living
benefit and any subsequent benefit election may be made on or after the first
Valuation Day following the cancellation of the Lifetime Five benefit provided
that the benefit you are looking to elect is available on a post- issue basis.
IF YOU CANCEL LIFETIME FIVE, YOU LOSE ALL GUARANTEES UNDER THE BENEFIT AND WE
WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE
DATE THE NEW BENEFIT BECOMES ACTIVE. ANY SUCH NEW BENEFIT MAY BE MORE EXPENSIVE.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Protected Withdrawal Value and
Annual Income Amount equal zero. You may terminate the benefit at any time by
notifying us. If you terminate the benefit, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The benefit
terminates upon your surrender of your Annuity, upon the death of the
Annuitant, upon a change in ownership of your Annuity that changes the tax
identification number of the Owner, upon change in the Annuitant or upon your
election to begin receiving annuity payments. While you may terminate your
benefit at any time, we may not terminate the benefit other than in the
circumstances listed above.
The charge for the Lifetime Five benefit will no longer be deducted from your
Account Value upon termination of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to increase
the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year
that Required Minimum Distributions due from your Annuity are greater than such
amounts. Any such payments will reduce your Protected Withdrawal Value.
As indicated, withdrawals made while this Benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of this prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this Benefit here.
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SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)
The Spousal Lifetime Five benefit is no longer being offered. Spousal Lifetime
Five must have been elected based on two Designated Lives, as described below.
Each Designated Life must have been at least 55 years old when the benefit was
elected. The Spousal Lifetime Five benefit was not available if you elected any
other optional living benefit or optional death benefit. As long as your
Spousal Lifetime Five Income Benefit is in effect, you must allocate your
Account Value in accordance with the then permitted and available option(s)
with this benefit.
The benefit guarantees until the later death of two natural persons that are
each other's spouses at the time of election of Spousal Lifetime Five and at
the first death of one of them (the "Designated Lives", each a "Designated
Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of market performance on the Account Value,
subject to our benefit rules regarding the timing and amount of withdrawals.
The Spousal Life Income Benefit may remain in effect even if the Account Value
of the Annuity is zero. The benefit may be appropriate if you intend to make
periodic withdrawals from your Annuity, wish to ensure that market performance
will not affect your ability to receive annual payments, and wish either spouse
to be able to continue the Spousal Life Income Benefit after the death of the
first. You are not required to make withdrawals as part of the benefit - the
guarantees are not lost if you withdraw less than the maximum allowable amount
each year under the rules of the benefit. Withdrawals are taken first from your
own Account Value. We are only required to begin making lifetime income
payments to you under the Spousal Life Income Benefit when and if your Account
Value is reduced to zero (unless the benefit has terminated).
KEY FEATURE - INITIAL PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected Withdrawal
Value is determined as of the date you make your first withdrawal under the
Annuity following your election of Spousal Lifetime Five. The initial Protected
Withdrawal Value is equal to the greatest of (A) the Account Value on the date
you elect Spousal Lifetime Five, plus any additional purchase payments as
applicable, each growing at 5% per year from the date of your election of the
benefit, or application of the Purchase Payment to your Annuity, until the date
of your first withdrawal or the 10/th/ anniversary of the benefit effective
date, if earlier (B) the Account Value on the date of the first withdrawal from
your Annuity, prior to the withdrawal, and (C) the highest Account Value on
each Annuity anniversary, plus subsequent purchase payments prior to the first
withdrawal or the 10/th/ anniversary of the benefit effective date, if earlier.
With respect to (A) and (C) above, after the 10/th/ anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
purchase payments. With respect to XT6, Credits are added to purchase payments
for purposes of calculating the Protected Withdrawal Value and the Annual
Income Amount (see below for a description of Annual Income Amount).
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL LIFETIME FIVE INCOME
BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active. Under the Spousal Lifetime Five benefit, if your cumulative withdrawals
in an Annuity Year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent Annuity Years, but any
such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar
basis in that Annuity Year. If, cumulatively, you withdraw an amount less than
the Annual Income Amount under the Spousal Life Income Benefit in any Annuity
Year, you cannot carry-over the unused portion of the Annual Income Amount to
subsequent Annuity Years. If your cumulative withdrawals are in excess of the
Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions) by
the result of the ratio of the Excess Income to the Account Value immediately
prior to such withdrawal (see examples of this calculation below). Reductions
include the actual amount of the withdrawal, including any CDSC that may apply.
The Spousal Lifetime Five benefit does not affect your ability to make
withdrawals under your Annuity or limit your ability to request withdrawals
that exceed the Annual Income Amount.
STEP-UP OF ANNUAL INCOME AMOUNT
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Account Value is greater than the Annual Income Amount.
You are eligible to step-up the Annual Income Amount on or after the 1/st/
anniversary of the first withdrawal under the Spousal Lifetime Five benefit.
The Annual Income Amount can be stepped up again on or after the 1/st/
anniversary of the preceding step-up. If you elect to step-up the Annual Income
Amount under the benefit, and on the date you elect to step-up, the charges
under the Spousal Lifetime Five benefit have changed for new purchasers, your
benefit may be subject to the new charge at the time of such step-up. When you
elect a step-up, your Annual Income Amount increases to equal 5% of your
Account Value after the step-up, adjusted for withdrawals within the current
annuity year. Your Annual Income Amount also increases if you make additional
purchase payments. The amount of the increase is equal to 5% of any additional
purchase payments (plus any Credit with respect to XT6). Any increase will be
added to your Annual Income Amount beginning on the day that the step-up is
effective or the Purchase Payment is made. A determination of whether you have
exceeded your Annual Income Amount is made at the time of each withdrawal;
therefore a subsequent increase in the Annual Income Amount will not offset the
effect of a withdrawal that exceeded the Annual Income Amount at the time the
withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1/st/ Annuity Anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
the Spousal Lifetime Five benefit or (2) the most recent step-up. At this time,
your Annual Income Amount will be stepped-up if 5% of your Account Value is
greater than the Annual Income Amount by any amount. If 5% of the Account Value
does not exceed the Annual Income Amount, then an Auto Step-Up opportunity will
occur on each successive Annuity Anniversary until a step-up occurs. Once a
step-up occurs, the next Auto Step-Up opportunity will occur on the 1/st/
Annuity Anniversary that is at least 1 year after the most recent step-up. If,
on the date that we implement an Auto Step-Up to your Annual Income Amount, the
charge for
104
Spousal Lifetime Five has changed for new purchasers, you may be subject to the
new charge at the time of such step-up. Subject to our rules and restrictions,
you will still be permitted to manually step-up the Annual Income Amount even
if you elect the Auto Step-Up feature.
EXAMPLES OF WITHDRAWALS AND STEP-UP
The following examples of dollar-for-dollar and proportional reductions and the
step-up of the Annual Income Amount assume: 1.) the Issue Date and the
Effective Date of the Spousal Lifetime Five benefit are February 1, 2005; 2.)
an initial Purchase Payment of $250,000; 3.) the Account Value on February 1,
2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006
when the Account Value is equal to $263,000; and 5.) the Account Value on
February 1, 2010 is equal to $280,000. The values set forth here are purely
hypothetical, and do not reflect the charge for the Spousal Lifetime Five or
any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),(b)
and (c):
(a) Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/^(393/365)/ = $263,484.33
(b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006,
then the following values would result
.. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000
= $3,250.
.. Annual Income Amount for future Annuity Years remains at $13,250
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006,
then the following values would result:
.. Remaining Annual Income Amount for current Annuity Year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future Annuity Years.
.. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X $13,250
= $93. Annual Income Amount for future Annuity Years = $13,250 - $93 =
$13,157
EXAMPLE 3. STEP-UP OF THE ANNUAL INCOME AMOUNT
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of the
Account Value, which is $14,000 (5% of $280,000), is greater than the Annual
Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000.
BENEFITS UNDER THE SPOUSAL LIFETIME FIVE BENEFIT
To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income Amount
and amounts are still payable under the Spousal Life Income Benefit, we will
make an additional payment for that Annuity Year equal to the remaining Annual
Income Amount for the Annuity Year, if any. Thus, in that scenario, the
remaining Annual Income Amount would be payable even though your Account Value
was reduced to zero. In subsequent Annuity Years we make payments that equal
the Annual Income Amount as described in this Prospectus. No further purchase
payments will be accepted under your Annuity. We will make payments until the
first of the Designated Lives to die, and will continue to make payments until
the death of the second Designated Life as long as the Designated Lives were
spouses at the time of the first death. To the extent that cumulative
withdrawals in the current Annuity Year that reduced your Account Value to zero
are more than the Annual Income Amount, the Spousal Life Income Benefit
terminates and no additional payments will be made.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1) apply your Account Value to any annuity option available; or
(2) request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated
Life as long as the Designated Lives were spouses at the time of the
first death.
We must receive your request in a form acceptable to us at our office.
105
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The
amount that will be applied to provide such annuity payments will be the
greater of:
(1) the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates then currently available
or the single life fixed annuity rates guaranteed in your Annuity; and
(2) the Account Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Lifetime Five benefit are subject to all of
the terms and conditions of the Annuity, including any CDSC.
.. Withdrawals made while the Spousal Lifetime Five benefit is in effect will
be treated, for tax purposes, in the same way as any other withdrawals under
the Annuity. The Spousal Lifetime Five benefit does not directly affect the
Annuity's Account Value or Surrender Value, but any withdrawal will decrease
the Account Value by the amount of the withdrawal (plus any applicable
CDSC). If you surrender your Annuity, you will receive the current Surrender
Value, not the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Lifetime Five benefit. The
Spousal Lifetime Five benefit provides a guarantee that if your Account
Value declines due to market performance, you will be able to receive your
Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. In general, you must allocate your Account Value in accordance with the then
available investment option(s) that we may prescribe in order to maintain
the benefit. If, subsequent to your election of the benefit, we change our
requirements for how Account Value must be allocated under the benefit, we
will not compel you to re-allocate your Account Value in accordance with our
newly-adopted requirements. Subsequent to any change in requirements,
transfers of Account Value and allocation of additional purchase payments
may be subject to the new investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for the Spousal Lifetime Five benefit even when the benefit is only
providing a guarantee of income based on one life with no survivorship.
.. In order for the Surviving Designated Life to continue the Spousal Lifetime
Five benefit upon the death of an owner, the Designated Life must elect to
assume ownership of the Annuity under the spousal continuation option. When
the Annuity is owned by a Custodial Account, in order for Spousal Lifetime
Five to be continued after the death of the first Designated Life (the
Annuitant), the Custodial Account must elect to continue the Annuity and the
second Designated Life (the Contingent Annuitant) will be named as the new
Annuitant. See "Spousal Designations", and "Spousal Assumption of Annuity"
in this Prospectus.
.. You will begin paying the charge for this benefit as of the effective date
of the benefit, even if you do not begin taking withdrawals for many years,
or ever. We will not refund the charges you have paid if you choose never to
take any withdrawals and/or if you never receive any lifetime income
payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Spousal Lifetime Five benefit cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under the
Spousal Lifetime Five benefit cause your Account Value to reduce to zero.
(See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit elections of Spousal Lifetime Five - whether for those who
currently participate in Spousal Lifetime Five or for those who are buying an
Annuity for the first time. If you wish, you may cancel the Spousal Lifetime
Five benefit. You may then elect any other available living benefit on the
Valuation Day after have you cancelled the Spousal Lifetime Five benefit,
provided the request is received in good order (subject to state availability
and any applicable age requirements). Once the Spousal Lifetime Five benefit is
canceled you are not required to re-elect another optional living benefit and
any subsequent benefit election may be made on or after the first Valuation Day
following the cancellation of the Spousal Lifetime Five benefit provided that
the benefit you are looking to elect is available on a post-issue basis. If you
cancel the benefit, you lose all guarantees under the benefit, and your
guarantee under any new benefit you elect will be based on your Account Value
at that time. Any such new benefit may be more expensive.
106
Spousal Lifetime Five could only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the Designated
Lives to die. Spousal Lifetime Five only could be elected where the Owner,
Annuitant, and Beneficiary designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person and
the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 55 years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be at
least 55 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 55 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b) if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary
designations under this benefit. If the Designated Lives divorce, however,
the Spousal Lifetime Five benefit may not be divided as part of the divorce
settlement or judgment. Nor may the divorcing spouse who retains ownership
of the Annuity appoint a new Designated Life upon re-marriage. Our current
administrative procedure is to treat the division of an Annuity as a
withdrawal from the existing Annuity. The non-owner spouse may then decide
whether he or she wishes to use the withdrawn funds to purchase a new
Annuity, subject to the rules that are current at the time of purchase.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Annual Income Amount equals
zero. The benefit also terminates upon your surrender of the Annuity, upon the
first Designated Life to die if the Annuity is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments. You may terminate the benefit at any time by notifying us. PLEASE
NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS SPOUSAL LIFETIME FIVE AND
ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED
UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW
BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE
RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY
IN THE FUTURE.
The charge for the Spousal Lifetime Five benefit will no longer be deducted
from your Account Value upon termination of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or an
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value.
As indicated, withdrawals made while this Benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this Benefit here.
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT (HD5)
EXCEPT FOR ANNUITIES ISSUED IN THE STATE OF FLORIDA, EFFECTIVE SEPTEMBER 14,
2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS FOR ANNUITIES WITH THE
HIGHEST DAILY LIFETIME FIVE BENEFIT. FOR ANNUITIES ISSUED IN FLORIDA, THIS
RESTRICTION DOES NOT APPLY AND YOU MAY CONTINUE TO MAKE ADDITIONAL PURCHASE
PAYMENTS AT THIS TIME.
The Highest Daily Lifetime Five benefit is no longer offered for new elections.
The income benefit under Highest Daily Lifetime Five is based on a single
"designated life" who is at least 55 years old on the date that the benefit was
acquired. The Highest Daily Lifetime Five Benefit was not available if you
elected any other optional living benefit, although you may elect any optional
death benefit. Any DCA program that transfers Account Value from a Fixed
Allocation is also not available as Fixed Allocations are not permitted with
the benefit. As long as your Highest Daily Lifetime Five Benefit is in effect,
you must allocate your Account Value in accordance with the then-permitted and
available investment option(s) with this benefit.
The benefit that guarantees until the death of the single designated life the
ability to withdraw an annual amount (the "Total Annual Income Amount") equal
to a percentage of an initial principal value (the "Total Protected Withdrawal
Value") regardless of the impact of Sub-account performance on the Account
Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that Sub-account performance
will not affect your ability to receive annual payments. You are not required
to make withdrawals as part of the benefit - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our
pre-determined
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mathematical formula in order to participate in Highest Daily Lifetime Five,
and in Appendix F to this Prospectus, we set forth the formula under which we
make the asset transfers. Withdrawals are taken first from your own Account
Value. We are only required to begin making lifetime income payments to you
under our guarantee when and if your Account Value is reduced to zero (unless
the benefit has terminated).
As discussed below, a key component of Highest Daily Lifetime Five is the Total
Protected Withdrawal Value, which is an amount that is distinct from Account
Value. Because each of the Total Protected Withdrawal Value and Total Annual
Income Amount is determined in a way that is not solely related to Account
Value, it is possible for Account Value to fall to zero, even though the Total
Annual Income Amount remains. You are guaranteed to be able to withdraw the
Total Annual Income Amount for the rest of your life, provided that you have
not made "excess withdrawals." Excess withdrawals, as discussed below, will
reduce your Total Annual Income Amount. Thus, you could experience a scenario
in which your Account Value was zero, and, due to your excess withdrawals, your
Total Annual Income Amount also was reduced to zero. In that scenario, no
further amount would be payable under Highest Daily Lifetime Five.
KEY FEATURE - TOTAL PROTECTED WITHDRAWAL VALUE
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Account Value on the
date that you elect Highest Daily Lifetime Five. On each Valuation Day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the benefit, we recalculate the Protected Withdrawal
Value. Specifically, on each such Valuation Day (the "Current Valuation Day"),
the Protected Withdrawal Value is equal to the greater of:
.. the Protected Withdrawal Value for the immediately preceding Valuation Day
(the "Prior Valuation Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Valuation Day and the
Current Valuation Day (i.e., one day for successive Valuation Days, but more
than one calendar day for Valuation Days that are separated by weekends
and/or holidays), plus the amount of any Purchase Payment (including any
associated credit) made on the Current Valuation Day; and
.. the Account Value.
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Account Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take a
withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If so, then on or after the Tenth Anniversary up
until the date of the first withdrawal, the Enhanced Protected Withdrawal Value
is equal to the sum of:
(a) 200% of the Account Value on the date you elected Highest Daily Lifetime
Five;
(b) 200% of all purchase payments (and any associated Credits) made during the
one-year period after the date you elected Highest Daily Lifetime Five; and
(c) 100% of all purchase payments (and any associated Credits) made more than
one year after the date you elected Highest Daily Lifetime Five, but prior
to the date of your first withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent purchase payments (and any associated Credits) will increase
the Total Annual Income Amount, while "excess" withdrawals (as described below)
may decrease the Total Annual Income Amount.
KEY FEATURE - TOTAL ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME FIVE
BENEFIT
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes active
and does not reduce in subsequent Annuity Years, as described below. For
purposes of the mathematical formula described below, we also calculate a
Highest Daily Annual Income Amount, which is initially equal to 5% of the
Protected Withdrawal Value.
Under the Highest Daily Lifetime Five benefit, if your cumulative withdrawals
in an Annuity Year are less than or equal to the Total Annual Income Amount,
they will not reduce your Total Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Total Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Total Annual Income Amount ("Excess Income"), your Total
Annual Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess Income
to the Account Value immediately prior to such withdrawal (see examples of this
calculation below). Reductions include the actual amount of the withdrawal,
including any CDSC that may apply.
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Any Purchase Payment that you make will increase the then-existing Total Annual
Income Amount and Highest Daily Annual Income Amount by an amount equal to 5%
of the Purchase Payment (including the amount of any associated Credits).
If your Annuity permits additional Purchase Payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Except for
Annuities issued in the state of Florida, effective September 14, 2012, we no
longer accept additional purchase payments to Annuities with the Highest Daily
Lifetime Five benefit. For Annuities issued in Florida, this restriction does
not apply and you may continue to make additional Purchase Payments at this
time.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Total Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin examining
the Account Value for purposes of this feature starting with the anniversary of
the Issue Date of the Annuity (the "Annuity Anniversary") immediately after
your first withdrawal under the benefit. Specifically, upon the first such
Annuity Anniversary, we identify the Account Value on the Valuation Days
corresponding to the end of each quarter that (i) is based on your Annuity
Year, rather than a calendar year; (ii) is subsequent to the first withdrawal;
and (iii) falls within the immediately preceding Annuity Year. If the end of
any such quarter falls on a holiday or a weekend, we use the next Valuation
Day. We multiply each of those quarterly Account Values by 5%, adjust each such
quarterly value for subsequent withdrawals and purchase payments, and then
select the highest of those values. If the highest of those values exceeds the
existing Total Annual Income Amount, we replace the existing amount with the
new, higher amount. Otherwise, we leave the existing Total Annual Income Amount
intact. In later years, (i.e., after the first Annuity Anniversary after the
first withdrawal) we determine whether an automatic step-up should occur on
each Annuity Anniversary, by performing a similar examination of the Account
Values on the end of the four immediately preceding quarters. If, on the date
that we implement a Highest Quarterly Auto Step-Up to your Total Annual Income
Amount, the charge for Highest Daily Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Highest Daily Lifetime Five upon a step-up,
we would notify you, and give you the opportunity to cancel the automatic
step-up feature. If you receive notice of a proposed step-up and accompanying
fee increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
The Highest Daily Lifetime Five benefit does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in an Annuity Year are less than or equal to the
Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Annuity Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Five benefit or any other fees and charges. Assume the following for all three
examples:
.. The Issue Date is December 1, 2006.
.. The Highest Daily Lifetime Five benefit is elected on March 5, 2007.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Annuity on this date, the remaining Total Annual Income
Amount for that Annuity Year (up to and including December 1, 2007) is $3,500.
This is the result of a dollar-for-dollar reduction of the Total Annual Income
Amount - $6,000 less $2,500 = $3,500.
PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Annuity Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Annuity Years on a
proportional basis based on the ratio of the excess withdrawal to the Account
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Annuity Year, each would result in another
proportional reduction to the Total Annual Income Amount).
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HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Total Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Total Annual Income Amount is stepped-up
if 5% of the highest quarterly value since your first withdrawal (or last
Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional purchase payments, is higher than the Total Annual Income Amount,
adjusted for excess withdrawals and additional purchase payments (plus any
Credit with respect to XT6).
Continuing the same example as above, the Total Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces this
amount to $5,915.49 for future years (see above). For the next Annuity Year,
the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Account Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the June 1
value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
HIGHEST QUARTERLY VALUE ADJUSTED TOTAL ANNUAL
(ADJUSTED WITH WITHDRAWAL INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ------------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $110,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Total Annual Income Amount of
$5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this amount
to 5% of the Account Value on September 1. Since the June 1 adjusted Total
Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we
continue to carry $5,644.28 forward to the next and final quarterly anniversary
date of December 1. The Account Value on December 1 is $119,000 and 5% of this
amount is $5,950. Since this is higher than $5,644.28, the adjusted Total
Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Annuity Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual
Income Amount and amounts are still payable under Highest Daily Lifetime
Five, we will make an additional payment, if any, for that Annuity Year
equal to the remaining Total Annual Income Amount for the Annuity Year.
Thus, in that scenario, the remaining Total Annual Income Amount would be
payable even though your Account Value was reduced to zero. In subsequent
Annuity Years we make payments that equal the Total Annual Income Amount as
described in this section. We will make payments until the death of the
single designated life. To the extent that cumulative withdrawals in the
current Annuity Year that reduced your Account Value to zero are more than
the Total Annual Income Amount, the Highest Daily Lifetime Five benefit
terminates, and no additional payments will be made.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Total Annual
Income Amount due in subsequent Annuity Years, you can elect one of the
following two options:
(1) apply your Account Value to any Annuity option available; or
110
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Total Annual Income Amount. We
will make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1) the present value of the future Total Annual Income Amount payments.
Such present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single life
fixed annuity rates guaranteed in your Annuity; and
(2) the Account Value.
.. If no withdrawal was ever taken, we will calculate the Total Annual Income
Amount as if you made your first withdrawal on the date the annuity payments
are to begin.
.. Please note that if your Annuity has a maximum Annuity Date requirement,
payments that we make under this benefit as of that date will be treated as
annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime Five benefit are subject to all
of the terms and conditions of the Annuity, including any CDSC.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Highest Daily Lifetime Five Benefit does not directly
affect the Account Value or surrender value, but any withdrawal will
decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity you will receive the current
surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee that
if your Account Value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic
benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. Upon inception of the benefit, and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
However, the mathematical formula component of the benefit as described
below may transfer Account Value to the Benefit Fixed Rate Account as of the
effective date of the benefit in some circumstances.
.. You cannot allocate purchase payments or transfer Account Value to or from a
Fixed Allocation if you elect this benefit.
.. Transfers to and from the Sub-accounts and the Benefit Fixed Rate Account
triggered by the formula component of the benefit will not count toward the
maximum number of free transfers allowable under an Annuity.
.. In general, you must allocate your Account Value in accordance with the then
available investment option(s) that we may prescribe in order to maintain
the Highest Daily Lifetime Five benefit. If, subsequent to your election of
the benefit, we change our requirements for how Account Value must be
allocated under the benefit, we will not compel you to re-allocate your
Account Value in accordance with our newly-adopted requirements. Subsequent
to any change in requirements, transfers of Account Value and allocation of
additional purchase payments may be subject to the new investment
limitations.
.. The charge for Highest Daily Lifetime Five is 0.60% annually, assessed
against the average daily net assets of the Sub-accounts. This charge is in
addition to any other fees under the annuity. You will begin paying the
charge for this benefit as of the effective date of the benefit, even if you
do not begin taking withdrawals for many years, or ever. We will not refund
the charges you have paid if you choose never to take any withdrawals and/or
if you never receive any lifetime income payments. Also, the cost to us of
providing the benefit is a factor, among many, that we consider when
determining the interest rate credited under the Benefit Fixed Rate Account,
and therefore, we credit lower interest rates due to this factor than we
otherwise would.
.. The basic Death Benefit will terminate if withdrawals taken under the
Highest Daily Lifetime Five benefit cause your Account Value to reduce to
zero. Certain optional Death Benefits may terminate if withdrawals taken
under the Highest Daily Lifetime Five benefit cause your Account Value to
reduce to zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
Highest Daily Lifetime Five is no longer available for new elections. For
Highest Daily Lifetime Five, there must have been either a single Owner who is
the same as the Annuitant, or if the Annuity is entity-owned, there must have
been a single natural person Annuitant. In either case, the Annuitant must have
been at least 55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner,
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(b) ownership is transferred from a custodian or other entity to the Annuitant,
or vice versa or (c) ownership is transferred from one entity to another entity
that satisfies our administrative ownership guidelines.
We no longer permit elections of Highest Daily Lifetime Five. If you wish, you
may cancel the Highest Daily Lifetime Five benefit. You may then elect any
other available living benefit on the Valuation Day after you have cancelled
the Highest Daily Lifetime Five benefit, provided the request is received in
good order (subject to state availability and any applicable age requirements).
Upon cancellation of the Highest Daily Lifetime Five benefit, any Account Value
allocated to the Benefit Fixed Rate Account used with the formula will be
reallocated to the Permitted Sub-Accounts according to your most recent
allocation instructions or, in absence of such instructions, pro-rata. ONCE THE
HIGHEST DAILY LIFETIME FIVE BENEFIT IS CANCELED YOU ARE NOT REQUIRED TO
RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION
MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF
THE HIGHEST DAILY LIFETIME FIVE BENEFIT PROVIDED THAT THE BENEFIT YOU ARE
LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS. IF YOU CANCEL THE BENEFIT,
YOU LOSE ALL GUARANTEES UNDER THE BENEFIT, AND YOUR GUARANTEE UNDER ANY NEW
BENEFIT YOU ELECT WILL BE BASED ON YOUR ACCOUNT VALUE AT THAT TIME. ANY SUCH
NEW BENEFIT MAY BE MORE EXPENSIVE.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (iv) upon the death of the Annuitant (v) if
both the Account Value and Total Annual Income Amount equal zero or (vi) if you
fail to meet our requirements for issuing the benefit. If you terminate the
benefit, you will lose the Protected Withdrawal Value, Annual Income Amount, as
well as any Enhanced Protected Withdrawal Value and Return of Principal
Guarantees.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options). Upon termination, we may limit or prohibit investment in
the Fixed Allocations.
RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Highest Daily Lifetime Five;
and
b) the sum of each Purchase Payment you made (including any Credits with
respect to XT6) during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b), by
contributing funds from our general account. If the sum of (a) and (b) is less
than or equal to your Account Value on the Tenth Anniversary, we make no such
adjustment. The amount that we add to your Account Value under this provision
will be allocated to each of our variable investment options and the Benefit
Fixed Rate Account (described below), in the same proportion that each such
investment option bears to your total Account Value, immediately prior to the
application of the amount.
Any such amount will not be considered a Purchase Payment when calculating your
Total Protected Withdrawal Value, your death benefit, or the amount of any
other or optional benefit that you may have selected, and therefore will have
no direct impact on any such values at the time we add this amount. This
potential addition to Account Value is available only if you have elected
Highest Daily Lifetime Five and if you meet the conditions set forth in this
paragraph. Thus, if you take a withdrawal prior to the Tenth Anniversary, you
are not eligible to receive the Return of Principal Guarantee.
MATHEMATICAL FORMULA COMPONENT OF HIGHEST DAILY LIFETIME FIVE
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you have elected Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our mathematical formula under which
we may transfer Account Value between the Permitted Sub-accounts and a fixed
interest rate account that is part of our general account (the "Benefit Fixed
Rate Account"). This required formula helps us manage our financial exposure
under the benefit, by moving assets to a more stable option (i.e., the Benefit
Fixed Rate Account). We determine whether to make a transfer, and the amount of
any transfer, under a non-discretionary formula, discussed below. The Benefit
Fixed Rate Account is available only with this benefit, and thus you may not
allocate purchase payments to or transfer Account Value to or from the Benefit
Fixed Rate Account. The interest rate that we pay with respect to the Benefit
Fixed Rate Account is reduced by an amount that corresponds generally to the
charge that we assess against your variable Sub-accounts for Highest Daily
Lifetime Five. The Benefit Fixed Rate Account is not subject to the Investment
Company Act of 1940 or the Securities Act of 1933.
Under the formula component of Highest Daily Lifetime Five, we monitor your
Account Value daily and, if necessary, systematically transfer amounts between
the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate Account.
Any transfer would be made in accordance with the formula, which is set forth
in the schedule supplement to the endorsement for this benefit (and also
appears in Appendix F to this
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prospectus). Speaking generally, the formula, which we apply each Valuation
Day, operates as follows. The formula starts by identifying your Protected
Withdrawal Value for that day and then multiplies that figure by 5%, to produce
a projected (i.e., hypothetical) Highest Daily Annual Income Amount. Then,
using our actuarial tables, we produce an estimate of the total amount we would
target in our allocation model, based on the projected Highest Daily Annual
Income Amount each year for the rest of your life. In the formula, we refer to
that value as the "Target Value" or "L". If you have already made a withdrawal,
your projected Annual Income Amount (and thus your Target Value) would take
into account any automatic step-up that was scheduled to occur according to the
step-up formula described above. Next, the formula subtracts from the Target
Value the amount held within the Benefit Fixed Rate Account on that day, and
divides that difference by the amount held within the Permitted Sub-accounts.
That ratio, which essentially isolates the amount of your Target Value that is
not offset by amounts held within the Benefit Fixed Rate Account, is called the
"Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%) it means essentially that too much Target Value is not offset
by assets within the Benefit Fixed Rate Account, and therefore we will transfer
an amount from your Permitted Sub-accounts to the Benefit Fixed Rate Account.
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the Benefit Fixed Rate Account to the Permitted
Sub-accounts would occur. Note that the formula is calculated with reference to
the Highest Daily Annual Income Amount, rather than with reference to the
Annual Income Amount. If you select the new mathematical formula, see the
discussion regarding the 90% cap.
As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the Benefit Fixed Rate Account, because such poor investment performance will
tend to increase the Target Ratio. Moreover, "flat" investment returns of your
Account Value over a period of time also could result in the transfer of your
Account Value to the Benefit Fixed Rate Account. Because the amount allocated
to the Benefit Fixed Rate Account and the amount allocated to the Permitted
Sub-accounts each is a variable in the formula, the investment performance of
each affects whether a transfer occurs for your Annuity. In deciding how much
to transfer, we use another formula, which essentially seeks to re-balance
amounts held in the Permitted Sub-accounts and the Benefit Fixed Rate Account
so that the Target Ratio meets a target, which currently is equal to 80%. Once
elected, the ratios we use will be fixed.
While you are not notified when the formula dictates a transfer, you will
receive a confirmation statement indicating the transfer of a portion of your
Account Value either to or from the Benefit Fixed Rate Account. The formula is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Five.
Depending on the results of the formula calculation we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the Benefit
Fixed Rate Account; or
.. If a portion of your Account Value was previously allocated to the Benefit
Fixed Rate Account, transfer all or a portion of those amounts to the
Permitted Sub-accounts, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e., in the same
proportion as the current balances in your variable investment options).
Amounts taken out of the Benefit Fixed Rate Account will be withdrawn for
this purpose on a last-in, first-out basis (an amount renewed into a new
guarantee period under the Benefit Fixed Rate Account will be deemed a new
investment for purposes of this last-in, first-out rule); or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest that
you earn on such transferred amount will be equal to the annual rate that we
have set for that day, and we will credit the daily equivalent of that
annual interest until the earlier of one year from the date of the transfer
or the date that such amount in the Benefit Fixed Rate Account is
transferred back to the Permitted Sub-accounts.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the Benefit Fixed Rate Account. If your entire Account Value is
transferred to the Benefit Fixed Rate Account, then based on the way the
formula operates, the formula will not transfer amounts out of the Benefit
Fixed Rate Account to the Permitted Sub-accounts and the entire Account Value
would remain in the Benefit Rate Fixed Account. If you make additional purchase
payments to your Annuity, they will be allocated to the Sub-accounts according
to your allocation instructions. Such additional purchase payments may or may
not cause the formula to transfer money in or out of the Benefit Fixed Rate
Account. Once the purchase payments are allocated to your Annuity, they will
also be subject to the formula, which may result in immediate transfers to or
from the Benefit Fixed Rate Account, if dictated by the formula. The amounts of
any such transfer will vary, as dictated by the formula, and will depend on the
factors listed below.
Prior to the first withdrawal, the primary driver of transfers to the Benefit
Fixed Rate Account is the difference between your Account Value and your Total
Protected Withdrawal Value. If none of your Account Value is allocated to the
Benefit Fixed Rate Account, then over time the formula permits an increasing
difference between the Account Value and the Total Protected Withdrawal Value
before a transfer to the Benefit Fixed Rate Account occurs. Therefore, as time
goes on, while none of your Account Value is allocated to the Benefit Fixed
Rate Account, the smaller the difference between the Total Protected Withdrawal
Value and the Account Value, the more the Account Value can decrease prior to a
transfer to the Benefit Fixed Rate Account.
Each market cycle is unique, therefore the performance of your Sub-accounts and
the Benefit Fixed Rate Account, and their impact on your Account Value, will
differ from market cycle to market cycle producing different transfer activity
under the formula. The amount and timing of transfers to and from the Benefit
Fixed Rate Account pursuant to the formula depend on various factors unique to
your Annuity and are not necessarily directly correlated with the securities
markets, bond markets, interest rates or any other market or index. Some of the
factors that determine the amount and timing of transfers (as applicable to
your Annuity), include:
.. The difference between your Account Value and your Total Protected
Withdrawal Value;
.. The amount of time Highest Daily Lifetime Five has been in effect on your
Annuity;
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.. The amount allocated to and the performance of the Permitted Sub-accounts
and the Benefit Fixed Rate Account;
.. Any additional Purchase Payments you make to your Annuity (while the benefit
is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the Benefit Fixed Rate Account and the amount
allocated to the Permitted Sub-accounts each is a variable in the formula, the
investment performance of each affects whether a transfer occurs for your
Annuity. The greater the amounts allocated to either the Benefit Fixed Rate
Account or to the Permitted Sub-accounts, the greater the impact performance of
those investments have on your Account Value and thus the greater the impact on
whether (and how much) your Account Value is transferred to or from the Benefit
Fixed Rate Account. It is possible, under the formula, that if a significant
portion of your Account Value is allocated to the Benefit Fixed Rate Account
and it has positive performance, the formula might transfer a portion of your
Account Value to the Permitted Sub-accounts, even if the performance of your
Permitted Sub-accounts is negative. Conversely, if a significant portion of
your Account Value is allocated to the Benefit Fixed Rate Account and it has
negative performance, the formula may transfer additional amounts from your
Permitted Sub-accounts to the Benefit Fixed Rate Account even if the
performance of your Permitted Sub-accounts is positive.
Any Account Value in the Benefit Fixed Rate Account will not participate in the
positive or negative investment experience of the Permitted Sub-accounts until
it is transferred out of the Benefit Fixed Rate Account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Total
Annual Income Amount, which will cause us to increase the Total Annual Income
Amount in any Annuity Year that Required Minimum Distributions due from your
Annuity that are greater than such amounts. PLEASE NOTE THAT ANY WITHDRAWAL YOU
TAKE PRIOR TO THE TENTH ANNIVERSARY, EVEN IF WITHDRAWN TO SATISFY REQUIRED
MINIMUM DISTRIBUTION RULES, WILL CAUSE YOU TO LOSE THE ABILITY TO RECEIVE
ENHANCED PROTECTED WITHDRAWAL VALUE AND AN AMOUNT UNDER THE RETURN OF PRINCIPAL
GUARANTEE.
As indicated, withdrawals made while this Benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this Benefit here.
However, we do note that if you participate in Highest Daily Lifetime Five
through a nonqualified annuity, and your annuity has received Enhanced
Protected Withdrawal Value and/or an additional amount under the Return of
Principal Guarantee, as with all withdrawals, once all purchase payments are
returned under the Annuity, all subsequent withdrawal amounts will be taxed as
ordinary income.
OPTIONAL 90% CAP FEATURE FOR THE FORMULA UNDER HIGHEST DAILY LIFETIME FIVE
If you currently own an Annuity and have elected the Highest Daily Lifetime
Five Income Benefit, you can elect this feature which utilizes a new
mathematical formula. The new formula is described below and will (if you elect
it) replace the "Transfer Calculation" portion of the mathematical formula
currently used in connection with your benefit on a prospective basis. There is
no cost to adding this feature to your Annuity. This election may only be made
once and may not be revoked once elected. This feature is available subject to
state approval. The new formula is found in Appendix F. Only the election of
the 90% cap will prevent all of your Account Value from being allocated to the
Benefit Fixed Rate Account. If all of your Account Value is currently allocated
to the Benefit Fixed Rate Account, it will not transfer back to the Permitted
Sub-accounts unless you elect the 90% cap feature. If you make additional
Purchase Payments, they may or may not result in a transfer to or from the
Benefit Fixed Rate Account.
Under the new formula, the formula will not execute a transfer to the Benefit
Fixed Rate Account that results in more than 90% of your Account Value being
allocated to the Benefit Fixed Rate Account ("90% cap" or "90% cap rule").
Thus, on any Valuation Day, if the formula would require a transfer into the
Benefit Fixed Rate Account that would result in more than 90% of the Account
Value being allocated to the Benefit Fixed Rate Account, only the amount that
results in exactly 90% of the Account Value being allocated to the Benefit
Fixed Rate Account will be transferred. Additionally, future transfers into the
Benefit Fixed Rate Account will not be made (regardless of the performance of
the Benefit Fixed Rate Account and the Permitted Sub-accounts) at least until
there is first a transfer out of the Benefit Fixed Rate Account. Once this
transfer occurs out of the Benefit Fixed Rate Account, future amounts may be
transferred to or from the Benefit Fixed Rate Account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the Benefit Fixed Rate Account that results in greater than 90% of your
Account Value being allocated to the Benefit Fixed Rate Account. HOWEVER, IT IS
POSSIBLE THAT, DUE TO THE INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE
BENEFIT FIXED RATE ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED SUB-ACCOUNTS
YOU HAVE SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90% INVESTED IN THE
BENEFIT FIXED RATE ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the Benefit Fixed Rate Account at least until there is first a
transfer out of the Benefit Fixed Rate Account, regardless of how much of your
Account Value is in the Permitted Sub-accounts. This means that there could be
scenarios under which, because of the additional purchase payments you make,
less than 90% of your entire Account Value is allocated to the Benefit Fixed
Rate Account, and the
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formula will still not transfer any of your Account Value to the Benefit Fixed
Rate Account (at least until there is first a transfer out of the Benefit Fixed
Rate Account). For example:
.. March 19, 2009 - a transfer is made to the Benefit Fixed Rate Account that
results in the 90% cap being met and now $90,000 is allocated to the Benefit
Fixed Rate Account and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the Benefit Fixed Rate Account to the
Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of the
Benefit Fixed Rate Account under the formula) - the $10,000 payment is
allocated to the Permitted Sub-accounts and now you have 82% in the Benefit
Fixed Rate Account and 18% in the Permitted Sub-accounts (such that $20,000
is allocated to the Permitted Sub-accounts and $90,000 is allocated to the
Benefit Fixed Rate Account).
.. Once there is a transfer out of the Benefit Fixed Rate Account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the Benefit Fixed Rate Account if
dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and may
be removed multiple times while you participate in the benefit. We will
continue to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the Benefit Fixed Rate Account as dictated by the formula. Once you
elect this feature, the new transfer formula described above will be the
formula for your Annuity.
In the event that more than ninety percent (90%) of your Account Value is
allocated to the Benefit Fixed Rate Account and you have elected this feature,
up to ten percent (10%) of your Account Value currently allocated to the
Benefit Fixed Rate Account will be transferred to your Permitted Sub-accounts,
such that after the transfer, 90% of your Account Value on the date of the
transfer is in the Benefit Fixed Rate Account. The transfer to the Permitted
Sub-accounts will be based on your existing allocation instructions or (in the
absence of such existing instructions) pro rata (i.e., in the same proportion
as the current balances in your variable investment options). Amounts taken out
of the Benefit Fixed Rate Account will be withdrawn for this purpose on a
last-in, first-out basis (an amount renewed into a new guarantee period under
the Benefit Fixed Rate Account will be deemed a new investment for purposes of
this last-in, first-out rule).
Once the 90% cap rule is met, future transfers into the Benefit Fixed Rate
Account will not be made (regardless of the performance of the Benefit Fixed
Rate Account and the Permitted Sub-accounts) at least until there is a first
transfer out of the Benefit Fixed Rate Account. Once this transfer occurs out
of the Benefit Fixed Rate Account, future amounts may be transferred to or from
the Benefit Fixed Rate Account if dictated by the formula.
PLEASE BE AWARE THAT AFTER THE INITIAL TRANSFER OUT OF THE BENEFIT FIXED RATE
ACCOUNT UPON ELECTION OF THE 90% CAP, THERE IS NO ASSURANCE THAT FUTURE
TRANSFERS OUT WILL OCCUR, OR THE AMOUNT OF SUCH FUTURE TRANSFERS, AS A RESULT
OF THE ELECTION OF THE 90% CAP. THESE TRANSFERS WILL BE DETERMINED BY THE
MATHEMATICAL FORMULA AND DEPEND ON A NUMBER OF FACTORS UNIQUE TO YOUR ANNUITY.
IMPORTANT CONSIDERATIONS WHEN ELECTING THE NEW FORMULA:
.. At any given time, some, most or none of your Account Value may be allocated
to the Benefit Fixed Rate Account.
.. Please be aware that because of the way the new 90% cap formula operates, it
is possible that more than or less than 90% of your Account Value may be
allocated to the Benefit Fixed Rate Account.
.. Because the charge for Highest Daily Lifetime Five is assessed against the
average daily net assets of the Sub-accounts, that charge will be assessed
against all assets transferred into the Permitted Sub-accounts.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those Sub-accounts.
Your Account Value can go up or down depending of the performance of the
Permitted Sub-accounts you select.
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (HD 7)
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME SEVEN BENEFIT.
Highest Daily Lifetime Seven is no longer available for new elections. The
income benefit under Highest Daily Lifetime Seven currently is based on a
single "designated life" who is at least 55 years old on the date that the
benefit is acquired. The Highest Daily Lifetime Seven Benefit was not available
if you elected any other optional living benefit, although you may have elected
any optional death benefit other than the Highest Daily Value death benefit or
the Plus40 Life Insurance Rider. As long as your Highest Daily Lifetime Seven
Benefit is in effect, you must allocate your Account Value in accordance with
the then permitted and available investment option(s) with this benefit. For a
more detailed description of the permitted investment options, see the
Investment options section of this prospectus. We no longer permit new
elections of Highest Daily Lifetime Seven.
Highest Daily Lifetime Seven guarantees until the death of the single
designated life the ability to withdraw an annual amount (the "Annual Income
Amount") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the benefit - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our
pre-determined mathematical formula in order to participate in Highest Daily
Lifetime Seven, and in Appendix I to this prospectus, we set forth the formula
under
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which we make the asset transfers. Withdrawals are taken first from your own
Account Value. We are only required to begin making lifetime income payments to
you under our guarantee when and if your Account Value is reduced to zero
(unless the benefit has terminated).
As discussed below, a key component of Highest Daily Lifetime Seven is the
Protected Withdrawal Value. Because each of the Protected Withdrawal Value and
Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for the Account Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount for the rest of your life, provided that you
have not made "excess withdrawals." Excess withdrawals, as discussed below,
will reduce your Annual Income Amount. Thus, you could experience a scenario in
which your Account Value was zero, and, due to your excess withdrawals, your
Annual Income Amount also was reduced to zero. In that scenario, no further
amount would be payable under Highest Daily Lifetime Seven.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value is
equal to your Account Value. On each Valuation Day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each Valuation Day (the "Current Valuation Day"), the Periodic Value
is equal to the greater of:
(1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day; and
(2) the Account Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
a) the Account Value; or
b) the Periodic Value on the date of the withdrawal.
If you have not made a withdrawal on or before the Tenth Anniversary Date, your
Protected Withdrawal Value subsequent to the Tenth Anniversary Date is equal to
the greatest of:
(1) the Account Value; or
(2) the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted purchase payments; or
(3) the sum of:
(a) 200% of the Account Value on the effective date of the benefit;
(b) 200% of all adjusted purchase payments made within one year after the
effective date of the benefit; and
(c) all adjusted purchase payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal Value
is increased by the amount of any subsequent purchase payments, is reduced by
withdrawals, including your first withdrawal (as described below), and is
increased if you qualify for a step-up (as described below). Irrespective of
these calculations, your Protected Withdrawal Value will always be at least
equal to your Account Value.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME SEVEN
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes active
and does not reduce in subsequent Annuity Years, as described below. The
percentage depends on the age of the Annuitant on the date of the first
withdrawal after election of the benefit. The percentages are: 5% for ages 74
and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and older.
Under the Highest Daily Lifetime Seven benefit, if your cumulative withdrawals
in an Annuity Year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent Annuity Years, but any
such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar
basis in that Annuity Year. If your cumulative withdrawals are in excess of the
Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions) by
the result of the ratio of the Excess Income to the Account Value immediately
prior to such withdrawal (see examples of this calculation below). Withdrawals
of any amount up to and including the Annual Income Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Withdrawals of
Excess Income will reduce the Protected Withdrawal Value by the same ratio as
the reduction to the Annual Income Amount.
Any Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment
(including the amount of any associated Credits) based on the age of the
Annuitant at the time of the first withdrawal (the
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percentages are: 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages
80-84, and 8% for ages 85 and older) and (ii) increase the Protected Withdrawal
Value by the amount of the Purchase Payment (including the amount of any
associated Credits).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, we no longer accept additional Purchase Payments for
Annuities with the Highest Daily Lifetime Seven benefit.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Annual Income Amount if your Account
Value increases subsequent to your first withdrawal. We begin examining the
Account Value for purposes of the Highest Quarterly Step-Up starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary, we identify the Account Value on the
Valuation Days corresponding to the end of each quarter that (i) is based on
your Annuity Year, rather than a calendar year; (ii) is subsequent to the first
withdrawal; and (iii) falls within the immediately preceding Annuity Year. If
the end of any such quarter falls on a holiday or a weekend, we use the next
Valuation Day. Having identified each of those quarter-end Account Values, we
then multiply each such value by a percentage that varies based on the age of
the Annuitant on the Annuity Anniversary as of which the step-up would occur.
The percentages are 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages
80-84, and 8% for ages 85 and older. Thus, we multiply each quarterly value by
the applicable percentage, adjust each such quarterly value for subsequent
withdrawals and purchase payments, and then select the highest of those values.
If the highest of those values exceeds the existing Annual Income Amount, we
replace the existing amount with the new, higher amount. Otherwise, we leave
the existing Annual Income Amount intact. In later years, (i.e., after the
first Annuity Anniversary after the first withdrawal) we determine whether an
automatic step-up should occur on each Annuity Anniversary, by performing a
similar examination of the Account Values on the end of the four immediately
preceding quarters. At the time that we increase your Annual Income Amount, we
also increase your Protected Withdrawal Value to equal the highest quarterly
value upon which your step-up was based. If, on the date that we implement a
Highest Quarterly Auto Step-Up to your Annual Income Amount, the charge for
Highest Daily Lifetime Seven has changed for new purchasers, you may be subject
to the new charge at the time of such step-up. Prior to increasing your charge
for Highest Daily Lifetime Seven upon a step-up, we would notify you, and give
you the opportunity to cancel the automatic step-up feature. If you receive
notice of a proposed step-up and accompanying fee increase, you should
carefully evaluate whether the amount of the step-up justifies the increased
fee to which you will be subject.
The Highest Daily Lifetime Seven benefit does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime Seven, if
your cumulative withdrawals in an Annuity Year are less than or equal to the
Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Seven benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2007
. The Highest Daily Lifetime Seven benefit is elected on March 5, 2008
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime Seven benefit.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the Annuitant is younger than 75 at the
time of the 1/st/ withdrawal, the Annual Income Amount is 5% of the Protected
Withdrawal Value, in this case 5% of $120,000). Assuming $2,500 is withdrawn
from the Annuity on this date, the remaining Annual Income Amount for that
Annuity Year (up to and including December 1, 2008) is $3,500. This is the
result of a dollar-for-dollar reduction of the Annual Income Amount-$6,000 less
$2,500 = $3,500.
PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that Annuity Year to $0. The remaining withdrawal amount - $1,500 -
reduces the Annual Income Amount in future Annuity Years on a proportional
basis based on the ratio of the excess withdrawal to the Account Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that Annuity Year, each would result in another proportional
reduction to the Annual Income Amount).
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HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional purchase payments, is higher than the Annual Income Amount, adjusted
for excess withdrawals and additional purchase payments (plus any Credits).
Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on August 6 reduces this amount
to $5,915.49 for future years (see above). For the next Annuity Year, the
Annual Income Amount will be stepped-up if 5% (since the youngest Designated
Life is younger than 75 on the date of the potential step-up) of the highest
quarterly Account Value adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the June 1
value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
HIGHEST QUARTERLY VALUE ADJUSTED ANNUAL INCOME
(ADJUSTED WITH WITHDRAWAL AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ------------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter - March 1,
June 1, September 1, and December 1. In this example, we do not use the
March 1 date as the first withdrawal took place after March 1. The Annuity
Anniversary Date of December 1 is considered the fourth and final quarterly
valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
. The adjusted Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Account Value on September 1. Since the June 1
adjusted Annual Income Amount of $5,644.28 is higher than $5,600.00 (5%
of $112,000), we continue to carry $5,644.28 forward to the next and
final quarterly anniversary date of December 1. The Account Value on
December 1 is $119,000 and 5% of this amount is $5,950. Since this is
higher than $5,644.28, the adjusted Annual Income Amount is reset to
$5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2008 and continuing through
December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME SEVEN BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Highest Daily Lifetime
Seven, and amounts are still payable under Highest Daily Lifetime Seven, we
will make an additional payment, if any, for that Annuity Year equal to the
remaining Annual Income Amount for the Annuity Year. Thus, in that scenario,
the remaining Annual Income Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the Annual Income Amount as described in this section. We will make
payments until the death of the single designated life. To the extent that
cumulative withdrawals in the current Annuity Year that reduced your Account
Value to zero are more than the Annual Income Amount, the Highest Daily
Lifetime Seven benefit terminates, and no additional payments will be made.
However, if a withdrawal in the latter scenario was taken to meet required
minimum distribution requirements under the Annuity, then the benefit will
not terminate, and we will continue to pay the Annual Income Amount in the
form of a fixed annuity.
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.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
1) apply your Account Value to any Annuity option available; or
2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
1) the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
2) the Account Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are to
begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the annuitant's 95/th/
birthday will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime Seven benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC that may
apply. Note that if your withdrawal of the Annual Income Amount in a given
Annuity Year exceeds the applicable free withdrawal amount under the Annuity
(but is not considered Excess Income), we will not impose any CDSC on the
amount of that withdrawal. However, we may impose a CDSC on the portion of a
withdrawal that is deemed Excess Income.
.. Withdrawals made while the Highest Daily Lifetime Seven Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Highest Daily Lifetime Seven Benefit does not
directly affect the Account Value or surrender value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity you will receive the current
surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Seven
benefit. The Highest Daily Lifetime Seven benefit provides a guarantee that
if your Account Value declines due to market performance, you will be able
to receive your Annual Income Amount in the form of periodic benefit
payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. Upon inception of the benefit, and to maintain the benefit, 100% of your
Account Value must have been allocated to the permitted Sub-accounts.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (see description below)
if you elect this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears within the Prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and an AST Investment Grade
Bond Portfolio Sub-account triggered by the mathematical formula component
of the benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Highest
Daily Lifetime Seven benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be allocated
under the benefit, we will not compel you to re-allocate your Account Value
in accordance with our newly adopted requirements. Subject to any change in
requirements, transfer of Account Value and allocation of additional
purchase payments may be subject to new investment limitations.
.. The fee for Highest Daily Lifetime Seven is 0.60% annually of the Protected
Withdrawal Value. We deduct this fee at the end of each quarter, where each
such quarter is part of a year that begins on the effective date of the
benefit or an anniversary thereafter. Thus, on each such quarter-end (or the
next Valuation Day, if the quarter-end is not a Valuation Day), we deduct
0.15% of the Protected Withdrawal Value at the end of the quarter. We deduct
the fee pro rata from each of your Sub-accounts including the AST Investment
Grade Bond Portfolio Sub-account. Since this fee is based on the Protected
Withdrawal Value the fee for Highest Daily Lifetime Seven may be greater
than it would have been, had it been based on the Account Value alone. If
the fee to be deducted exceeds the current Account Value, we will reduce the
Account Value to zero, and continue the benefit as described above. You will
begin paying the charge for this benefit as of the
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effective date of the benefit, even if you do not begin taking withdrawals
for many years, or ever. We will not refund the charges you have paid if you
choose never to take any withdrawals and/or if you never receive any
lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Highest Daily Lifetime Seven benefit cause your Account Value to reduce to
zero. Certain optional Death Benefits may terminate if withdrawals taken
under the Highest Daily Lifetime Seven benefit cause your Account Value to
reduce to zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Highest Daily Lifetime Seven.
For Highest Daily Lifetime Seven, there must have been either a single Owner
who was the same as the Annuitant, or if the Annuity is entity owned, there
must be a single natural person Annuitant. In either case, the Annuitant must
have been at least 55 years old. Any change of the Annuitant under the Annuity
will result in cancellation of Highest Daily Lifetime Seven. Similarly, any
change of Owner will result in cancellation of Highest Daily Lifetime Seven,
except if (a) the new Owner has the same taxpayer identification number as the
previous owner (b) ownership is transferred from a custodian or other entity to
the Annuitant, or vice versa or (c) ownership is transferred from one entity to
another entity that satisfies our administrative ownership guidelines.
If you wish, you may cancel any Highest Daily Lifetime Seven benefit. You may
then elect any other available living benefit on the Valuation Day after you
have cancelled the Highest Daily Lifetime Seven benefit, provided the request
is received in good order (subject to state availability and any applicable age
requirements). Upon cancellation of any Highest Daily Lifetime Seven benefit,
any Account Value allocated to the AST Investment Grade Bond Portfolio
Sub-account used with the formula will be reallocated to the Permitted
Sub-Accounts according to your most recent allocation instructions or, in
absence of such instructions, pro rata. You should be aware that upon
termination of Highest Daily Lifetime Seven, you will lose the Protected
Withdrawal Value (including the Tenth Anniversary Date Guarantee), Annual
Income Amount, and the Return of Principal Guarantee that you had accumulated
under the benefit. Thus, the initial guarantees under any newly-elected benefit
will be based on your current Account Value at the time you elect a new
benefit. ONCE THE HIGHEST DAILY LIFETIME SEVEN BENEFIT IS CANCELED YOU ARE NOT
REQUIRED TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT
ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE
CANCELLATION OF THE HIGHEST DAILY LIFETIME SEVEN BENEFIT PROVIDED THAT THE
BENEFIT YOU ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS. IF YOU
CANCEL THE BENEFIT, YOU LOSE ALL GUARANTEES UNDER THE BENEFIT, AND YOUR
GUARANTEE UNDER ANY NEW BENEFIT YOU ELECT WILL BE BASED ON YOUR ACCOUNT VALUE
AT THAT TIME. ANY SUCH NEW BENEFIT MAY BE MORE EXPENSIVE.
RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Highest Daily Lifetime
Seven; and
b) the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b), by
contributing funds from our general account. If the sum of (a) and (b) is less
than or equal to your Account Value on the Tenth Anniversary, we make no such
adjustment. The amount that we add to your Account Value under this provision
will be allocated to each of your variable investment options (including the
bond Sub-account used with this benefit), in the same proportion that each such
Sub-account bears to your total Account Value, immediately before the
application of the amount.
Any such amount will not be considered a Purchase Payment when calculating your
Protected Withdrawal Value, your death benefit, or the amount of any optional
benefit that you may have selected, and therefore will have no direct impact on
any such values at the time we add this amount. This potential addition to
Account Value is available only if you have elected Highest Daily Lifetime
Seven and if you meet the conditions set forth in this paragraph. Thus, if you
take a withdrawal prior to the Tenth Anniversary, you are not eligible to
receive the Return of Principal Guarantee.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (although if you have elected to the Annual
Income Amount in the form of Annuity payments, we will continue to pay the
Annual Income Amount) (iv) upon the death of the Annuitant (v) if both the
Account Value and Annual Income Amount equal zero or (vi) if you cease to meet
our requirements for issuing the benefit (see Elections and Designations under
the Benefit).
Upon termination of Highest Daily Lifetime Seven other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for the
pro-rated portion of the year since the fee was last assessed), and thereafter
we cease deducting the charge for the benefit. With regard to your investment
allocations, upon termination we will: (i) leave intact amounts that are held
in the variable investment options, and (ii) transfer all amounts held in the
AST Investment Grade Bond Portfolio Sub-account to your variable investment
options, based on your existing allocation instructions or (in the absence of
such existing instructions) pro rata (i.e. in the same proportion as the
current balances in your variable investment options).
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MATHEMATICAL FORMULA COMPONENT OF HIGHEST DAILY LIFETIME SEVEN
As indicated above, we limit the Sub-accounts to which you may allocate Account
Value if you have elected Highest Daily Lifetime Seven. For purposes of the
benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Seven, we require that you participate in our specialized program, under which
we may transfer Account Value between the Permitted Sub-accounts and a
specified bond fund within the Advanced Series Trust (the "AST Investment Grade
Bond Sub-account"). We determine whether to make a transfer, and the amount of
any transfer, under a non-discretionary formula, discussed below. The AST
Investment Grade Bond Sub-account is available only with this benefit, and thus
you may not allocate purchase payments to the AST Investment Grade Bond
Sub-account. Under the formula component of Highest Daily Lifetime Seven, we
monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account. Any transfer would be
made in accordance with a formula, which is set forth in Appendix I to this
prospectus.
Speaking generally, the formula, which we apply each Valuation Day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that we use 5% in the formula, irrespective of the
Annuitant's attained age. Then we produce an estimate of the total amount we
would target in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as the
"Target Value" or "L". If you have already made a withdrawal, your projected
income amount (and thus your Target Value) would take into account any
automatic step-up, any subsequent purchase payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts. That ratio,
which essentially isolates the amount of your Target Value that is not offset
by amounts held within the AST Investment Grade Bond Sub-account, is called the
"Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the AST Investment Grade Bond Sub-account, and therefore we
will transfer an amount from your Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account. Conversely, if the Target Ratio falls below a certain
percentage (currently 77%), then a transfer from the AST Investment Grade Bond
Sub-account to the Permitted Sub-accounts would occur.
If you elect the new formula (90% Cap Feature), see discussion regarding that
feature.
As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the AST Investment Grade Bond Sub-account because such poor investment
performance will tend to increase the Target Ratio. Moreover, "flat" investment
returns of your Account Value over a period of time also could result in the
transfer of your Account Value from the Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account. Because the amount allocated to the AST
Investment Grade Bond Sub-account and the amount allocated to the Permitted
Sub-accounts each is a variable in the formula, the investment performance of
each affects whether a transfer occurs for your Annuity. In deciding how much
to transfer, we use another formula, which essentially seeks to re-balance
amounts held in the Permitted Sub-accounts and the AST Investment Grade Bond
Sub-account so that the Target Ratio meets a target, which currently is equal
to 80%. Once you elect Highest Daily Lifetime Seven, the ratios we use will be
fixed. For newly-issued Annuities that elect Highest Daily Lifetime Seven and
existing Annuities that elect Highest Daily Lifetime Seven, however, we reserve
the right, subject to any required regulatory approval, to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is designed
primarily to mitigate the financial risks that we incur in providing the
guarantee under Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
.. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro rata to the AST Investment Grade Bond Sub-account.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account. If your entire Account
Value is transferred to the AST Investment Grade Bond Sub-account, then based
on the way the formula operates, the formula will not transfer amounts out of
the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts and the
entire Account Value would remain in the AST Investment Grade Bond Sub-account.
If you make additional purchase payments to your Annuity, they will be
allocated to the Sub-accounts according to your allocation instructions. Such
additional purchase payments may or may not cause the formula to transfer money
in or out of the AST Investment Grade Bond Sub-account. Once the purchase
payments are allocated to your Annuity, they will also be subject to the
formula, which may result in immediate transfers to or from the AST Investment
Grade Bond Sub-accounts, if dictated by the formula. The amounts of any such
transfers will vary as dictated by the formula, and will depend on the factors
listed below.
Prior to the first withdrawal, the primary driver of transfers to the AST
Investment Grade Bond Sub-account is difference between your Account Value and
your Protected Withdrawal Value. If none of your Account Value is allocated to
the AST
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Investment Grade Bond Sub-account, then over time the formula permits an
increasing difference between the Account Value and the Protected Withdrawal
Value before a transfer to the AST Investment Grade Bond Sub-account occurs.
Therefore, as time goes on, while none of your Account Value is allocated to
the AST Investment Grade Bond Sub-account, the smaller the difference between
the Protected Withdrawal Value and the Account Value, the more the Account
Value can decrease prior to a transfer to the AST Investment Grade Bond
Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Highest Daily Lifetime Seven has been in effect on your
Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the AST Investment Grade Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the benefit
is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the greater
the impact performance of those investments have on your Account Value and thus
the greater the impact on whether (and how much) your Account Value is
transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond Sub-account
and that Sub-account has negative performance, the formula may transfer
additional amounts from your Permitted Sub-accounts to the AST Investment Grade
Bond Sub-account even if the performance of your Permitted Sub-accounts is
positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. PLEASE NOTE THAT ANY WITHDRAWAL YOU TAKE PRIOR TO
THE TENTH ANNIVERSARY, EVEN IF WITHDRAWN TO SATISFY REQUIRED MINIMUM
DISTRIBUTION RULES, WILL CAUSE YOU TO LOSE THE ABILITY TO RECEIVE THE RETURN OF
PRINCIPAL GUARANTEE AND THE GUARANTEED AMOUNT DESCRIBED ABOVE UNDER "KEY
FEATURE - PROTECTED WITHDRAWAL VALUE".
As indicated, withdrawals made while this Benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this Benefit here.
However, we do note that if you participate in Highest Daily Lifetime Seven
through a nonqualified annuity, as with all withdrawals, once all purchase
payments are returned under the Annuity, all subsequent withdrawal amounts will
be taxed as ordinary income.
HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY INCOME OPTION
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY INCOME
OPTION.
There is an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. We refer to this optional death
benefit as the Beneficiary Income Option or ("BIO"). Highest Daily Lifetime
Seven was available without also selecting the Beneficiary Income Option death
benefit. We no longer permit elections of the Highest Daily Lifetime Seven with
Beneficiary Income Option benefit. If you terminate your Highest Daily Lifetime
Seven with BIO benefit to elect any other available living benefit, you will
lose the guarantees that you had accumulated under your Highest Daily Lifetime
Seven with BIO benefit and will begin new guarantees under the newly elected
benefit.
If you have elected this death benefit, you may not elect any other optional
benefit. You may have elected the Beneficiary Income Option death benefit so
long as the Annuitant is no older than age 75 at the time of election. For
purposes of this optional death benefit, we calculate the
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Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Highest Daily Lifetime Seven itself. Because the fee for this benefit
is based on the Protected Withdrawal Value, the fee for Highest Daily Lifetime
Seven with the Beneficiary Income Option may be greater than it would have been
based on the Account Value alone.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic death benefit under
the Annuity (b) the Protected Withdrawal Value and (c) the Annual Income
Amount. If there were no withdrawals prior to the date of death, then we
calculate the Protected Withdrawal Value for purposes of this death benefit as
of the date of death, and we calculate the Annual Income Amount as if there
were a withdrawal on the date of death. If there were withdrawals prior to the
date of death, then we set the Protected Withdrawal Value and Annual Income
Amount for purposes of this death benefit as of the date that we receive due
proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Thus, each beneficiary can choose to take
his/her portion of either (a) the basic death benefit or (b) the Beneficiary
Income Option death benefit. If chosen, for qualified Annuities, the
Beneficiary Income Option death benefit payments must begin no later than
December 31/st/ of the year following the annuity owner's date of death. For
nonqualified Annuities, the Beneficiary Income Option death benefit payments
must begin no later than one year after the owner's date of death. For
nonqualified annuities, if the beneficiary is other than an individual, payment
under the Beneficiary Income Option may be limited to a period not exceeding
five years from the owner's date of death. In order to receive the Beneficiary
Income Option death benefit, each beneficiary's share of the death benefit
proceeds must be allocated as a percentage of the total death benefit to be
paid. We allow a beneficiary who has opted to receive the Annual Income Amount
to designate another beneficiary, who would receive any remaining payments upon
the former beneficiary's death. Note also that the final payment, exhausting
the Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected Withdrawal
Value is $100,000, and the Annual Income Amount is $5,000; (ii) there are
two beneficiaries (the first designated to receive 75% of the death benefit
and the second designated to receive 25% of the death benefit); (iii) the
first beneficiary chooses to receive his/her portion of the death benefit in
the form of the Annual Income Amount, and the second beneficiary chooses to
receive his/her portion of the death benefit with reference to the basic
death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out period
is derived from the $5,000 Annual Income Amount, paid each year until it
exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount, equal to $3,750 annually
(i.e., the first beneficiary's 75% share multiplied by $5000), is then paid
each year for the 20 year period. Payment of $3,750 for 20 years results in
total payments of $75,000 (i.e., the first beneficiary's 75% share of the
$100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit amount (or
$12,500).
If you elect to terminate Highest Daily Lifetime Seven with Beneficiary Income
Option, both Highest Daily Lifetime Seven and that death benefit option will be
terminated. You may not terminate the death benefit option without terminating
the entire benefit. If you terminate Highest Daily Lifetime Seven with
Beneficiary Income Option, your ability to elect other optional living benefits
will be affected as indicated in the "Election and Designations under the
Benefit" section, above.
HIGHEST DAILY LIFETIME SEVEN WITH LIFETIME INCOME ACCELERATOR
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME SEVEN WITH LIFETIME INCOME
ACCELERATOR.
There is another version of Highest Daily Lifetime Seven that we call Highest
Daily Lifetime Seven with Lifetime Income Accelerator ("Highest Daily Lifetime
Seven with LIA"). We no longer permit new elections of Highest Daily Lifetime
Seven with LIA.
If you have elected this benefit, you may not elect any other optional benefit.
The income benefit under Highest Daily Lifetime Seven with LIA currently was
based on a single "designated life" who was between the ages of 55 and 75 on
the date that the benefit was elected. If you terminate your Highest Daily
Lifetime Seven Benefit with LIA to elect any other available living benefit,
you will lose the guarantees that you had accumulated under your Highest Daily
Lifetime Seven benefit with LIA and will begin the new guarantees under the
newly elected benefit based on the account value as of the date the new benefit
becomes active.
Highest Daily Lifetime Seven with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
Highest Daily Lifetime Seven with LIA guarantees, until the death of the single
designated life, the ability to withdraw an amount equal to double the Annual
Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. If you had chosen the Highest Daily Lifetime Seven
with LIA, the maximum charge is 2.00% of Protected Withdrawal Value ("PWV")
annually. We deduct the current charge
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(0.95% of PWV) at the end of each quarter, where each such quarter is part of a
year that begins on the effective date of the benefit or an anniversary
thereafter. Thus, on each such quarter-end (or the next Valuation Day, if the
quarter-end is not a Valuation Day), we deduct 0.2375% of the Protected
Withdrawal Value at the end of the quarter. We deduct the fee pro rata from
each of your Sub-accounts including the AST Investment Grade Bond Portfolio
Sub-account. Since this fee is based on the protected withdrawal value, the fee
for Highest Daily Lifetime Seven with LIA may be greater than it would have
been, had it been based on the Account Value alone. If the fee to be deducted
exceeds the current Account Value, we will reduce the Account Value to zero,
and continue the benefit as described below.
If this benefit was elected within an Annuity held as a 403 (b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403 (b) plan
itself.
You could have chosen Highest Daily Lifetime Seven without also electing LIA,
however you may not have elected LIA without Highest Daily Lifetime Seven. All
terms and conditions of Highest Daily Lifetime Seven apply to this version of
the benefit, except as described herein.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT Both a waiting period of 36 months,
from the benefit effective date, and an elimination period of 120 days, from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. Assuming the 36 month waiting period has been met and we have
received the notification referenced in .the immediately preceding sentence,
the LIA amount would be available for withdrawal on the Valuation Day
immediately after the 120/th/ day. The waiting period and the elimination
period may run concurrently. In addition to satisfying the waiting and
elimination period, either or both of the following requirements ("LIA
conditions") must be met. It is not necessary to meet both conditions:
1) The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
2) The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a
receptacle (such as a plate, cup or table) or by a feeding tube or
intravenously.
ii. Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii. Bathing: Washing oneself by sponge bath; or in either a tub or
shower, including the task of getting into or out of the tub or
shower.
iv. Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi. Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability
to perform personal hygiene (including caring for catheter or
colostomy bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount. If
there are 120 days or less remaining until the end of the waiting period when
we receive notification that the LIA conditions are met, we will determine
eligibility for the LIA Amount through our then current administrative process,
which may include, but is not limited to, documentation verifying the LIA
conditions and/or an assessment by a third party of our choice. Such assessment
may be in person and we will assume any costs associated with the
aforementioned assessment. Once eligibility is determined, the LIA Amount is
equal to double the Annual Income Amount as described in this prospectus under
the Highest Daily Lifetime Seven Benefit.
Additionally, we will reassess your eligibility on an annual basis although
your LIA benefit for the year that immediately precedes our reassessment will
not be affected if it is determined that you are no longer eligible. Your first
reassessment may occur in the same year as your initial assessment. If we
determine that you are no longer eligible to receive the LIA Amount, the Annual
Income Amount would replace the LIA Amount on the next Annuity Anniversary (the
"ineligibility effective date"). However, 1) if you were receiving income
through a systematic withdrawal program that was based on your LIA Amount; 2)
you subsequently become ineligible to receive your LIA Amount, and 3) we do not
receive new withdrawal instructions from you prior to the ineligibility
effective date, we will cancel such systematic withdrawal program on the
ineligibility effective date. You will be notified of your subsequent
ineligibility and the date systematic withdrawal payments will stop before
either occur. If any existing systematic withdrawal program is canceled, you
must enroll in a new systematic withdrawal program if you wish to receive
income on a systematic basis. You may establish a new or make changes to any
existing systematic withdrawal program at any time by contacting our Annuity
Service Office. All "Excess Income" conditions described above in "Key Feature
- Annual Income Amount under the Highest Daily Lifetime Seven Benefit" would
apply. There is no limit on the number of times you can become eligible for the
LIA Amount, however, each time would require the completion of the 120-day
elimination period, notification that the designated life meets the LIA
conditions, and determination, through our then current administrative process,
that you are eligible for the LIA Amount, each as described above.
You should also keep in mind that, at the time you are experiencing the LIA
conditions that would qualify you for the LIA Amount, you may also be
experiencing other disabilities that could impede your ability to conduct your
affairs. You may wish to consult with a legal advisor to determine whether you
should authorize a fiduciary who could notify us if you meet the LIA conditions
and apply for the benefit.
LIA AMOUNT AT THE FIRST WITHDRAWAL. If your first withdrawal subsequent to
election of Highest Daily Lifetime Seven with LIA occurs while you are eligible
for the LIA Amount, the available LIA Amount is equal to double the Annual
Income Amount.
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LIA AMOUNT AFTER THE FIRST WITHDRAWAL. If you become eligible for the LIA
Amount after you have taken your first withdrawal, the available LIA amount for
the current and subsequent Annuity Years is equal to double the then current
Annual Income Amount, however the available LIA amount in the current Annuity
Year is reduced by any withdrawals that have been taken in the current Annuity
Year. Cumulative withdrawals in an Annuity Year which are less than or equal to
the LIA Amount (when eligible for the LIA amount) will not reduce your LIA
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
LIA Amount on a dollar-for-dollar basis in that Annuity Year.
WITHDRAWALS IN EXCESS OF THE LIA AMOUNT. If your cumulative withdrawals in an
Annuity Year are in excess of the LIA Amount when you are eligible ("Excess
Withdrawal"), your LIA Amount in subsequent years will be reduced (except with
regard to required minimum distributions) by the result of the ratio of the
excess portion of the withdrawal to the Account Value immediately prior to the
Excess Withdrawal. Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. Withdrawals of any amount up to and
including the LIA Amount will reduce the Protected Withdrawal Value by the
amount of the withdrawal. Excess Withdrawals will reduce the Protected
Withdrawal Value by the same ratio as the reduction to the LIA Amount. Any
withdrawals that are less than or equal to the LIA amount (when eligible) but
in excess of the free withdrawal amount available under this Annuity will not
incur a CDSC.
Withdrawals are not required. However, subsequent to the first withdrawal, the
LIA Amount is not increased in subsequent Annuity Years if you decide not to
take a withdrawal in an Annuity Year or take withdrawals in an Annuity Year
that in total are less than the LIA Amount.
PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
STEP UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount, or as a
result of the fee that we assess for Highest Daily Lifetime Seven with LIA, and
there is still a LIA Amount available, we will make an additional payment for
that Annuity Year equal to the remaining LIA Amount. Thus, in that scenario,
the remaining LIA Amount would be payable even though your Account Value was
reduced to zero. In subsequent Annuity Years we make payments that equal the
LIA Amount as described in this section. We will make payments until the death
of the single designated life. Should the designated life no longer qualify for
the LIA amount (as described under "Eligibility Requirements for LIA Amount"
above), the Annual Income Amount would continue to be available. Subsequent
eligibility for the LIA Amount would require the completion of the 120 day
elimination period as well as meeting the LIA conditions listed above under
"Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime Seven with LIA terminates, and no
additional payments are permitted.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime Seven Annuity
Options described above, after the 10/th/ benefit anniversary you may also
request that we make annuity payments each year equal to the Annual Income
Amount. In any year that you are eligible for the LIA Amount, we make annuity
payments equal to the LIA Amount. If you would receive a greater payment by
applying your Account Value to receive payments for life under your Annuity, we
will pay the greater amount. Prior to the 10/th/ benefit anniversary this
option is not available.
We will continue to make payments until the death of the Designated Life. If
this option is elected, the Annual Income Amount and LIA Amount will not
increase after annuity payments have begun.
If you elected Highest Daily Lifetime Seven with LIA, and never meet the
eligibility requirements, you will not receive any additional payments based on
the LIA Amount.
OPTIONAL 90% CAP FEATURE FOR FORMULA FOR HIGHEST DAILY LIFETIME SEVEN
If you currently own an Annuity and have elected the Highest Daily Lifetime
Seven Income Benefit (including Highest Daily Lifetime Seven with Beneficiary
Income Option and Highest Daily Lifetime Seven with Lifetime Income
Accelerator) or Spousal Highest Daily Lifetime Seven Income Benefit (including
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option), you can
elect this feature (subject to state approval) which utilizes a new
mathematical formula. The new formula is described below and will replace the
"Transfer Calculation" portion of the mathematical formula currently used in
connection with your benefit on a prospective basis. There is no cost to adding
this feature to your Annuity. This election may only be made once and may not
be revoked once elected. The new mathematical formula is found in Appendix I.
Only the election of the 90% Cap will prevent all of your Account Value from
being allocated to the AST Investment Grade Bond Portfolio Sub-account. If all
of your Account Value is currently allocated to the AST Investment Grade Bond
Portfolio Sub-account, it will not transfer back to the Permitted Sub-accounts
unless you elect the 90% Cap feature. If you make additional Purchase Payments,
they may or may not result in a transfer to or from the AST Investment Grade
Bond Portfolio Sub-account.
Under the new formula, the formula will not execute a transfer to the AST
Investment Grade Bond Sub-account that results in more than 90% of your Account
Value being allocated to the AST Investment Grade Bond Sub-account ("90% cap"
or "90% Cap Rule"). Thus, on any Valuation Day, if the formula would require a
transfer to the AST Investment Grade Bond Sub-account that would result in more
than 90% of the Account Value being allocated to the AST Investment Grade Bond
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the AST Investment Grade Bond Sub-account will be
transferred. Additionally, future transfers into the AST Investment Grade Bond
Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts)
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at least until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap). At
no time will the formula make a transfer to the AST Investment Grade Bond
Sub-account that results in greater than 90% of your Account Value being
allocated to the AST Investment Grade Bond Sub-account. HOWEVER, IT IS POSSIBLE
THAT, DUE TO THE INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE AST
INVESTMENT GRADE BOND SUB-ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED
SUB-ACCOUNTS YOU HAVE SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90%
INVESTED IN THE AST INVESTMENT GRADE BOND SUB-ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Account Value to the AST Investment Grade Bond Sub-account
(at least until there is first a transfer out of the AST Investment Grade Bond
Sub-account). For example,
.. March 19, 2009 - a transfer is made that results in the 90% cap being met
and now $90,000 is allocated to the AST Investment Grade Bond Sub-account
and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of the
AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the AST Investment Grade Bond Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and may
be removed multiple times while you participate in the benefit. We will
continue to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the
formula. Once you elect this feature, the new transfer formula described above
and set forth in Appendix I will be the formula for your Annuity.
In the event that more than ninety percent (90%) of your Account Value is
allocated to the AST Investment Grade Bond Sub-account and you have elected
this feature, up to ten percent (10%) of your Account Value currently allocated
to the AST Investment Grade Bond Sub-account will be transferred to your
Permitted Sub-accounts, such that after the transfer, 90% of your Account Value
on the date of the transfer is in the AST Investment Grade Bond Sub-account.
The transfer to the Permitted Sub-accounts will be based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e., in the same proportion as the current balances in your variable
investment options). It is possible that additional transfers might occur after
this initial transfer if dictated by the formula. The amounts of such
additional transfer(s) will vary. If on the date this feature is elected 100%
of your Account Value is allocated to the AST Investment Grade Bond
Sub-account, a transfer of an amount equal to 10% of your Account Value will be
made to your Permitted Sub-accounts. WHILE THERE ARE NO ASSURANCES THAT FUTURE
TRANSFERS WILL OCCUR, IT IS POSSIBLE THAT AN ADDITIONAL TRANSFER(S) TO THE
PERMITTED SUB-ACCOUNTS COULD OCCUR FOLLOWING THE VALUATION DAY(S), AND IN SOME
INSTANCES (BASED ON THE FORMULA) THE ADDITIONAL TRANSFER(S) COULD BE LARGE.
Once the 90% cap rule is met, future transfers into the AST Investment Grade
Bond Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap).
IMPORTANT CONSIDERATION WHEN ELECTING THE NEW FORMULA
.. At any given time, some, most or none of your Account Value may be allocated
to the AST Investment Grade Bond Sub-account.
.. Please be aware that because of the way the 90% cap formula operates, it is
possible that more than or less than 90% of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
. If this feature is elected, any Account Value transferred to the
Permitted Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (SHD7)
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT.
Spousal Highest Daily Lifetime Seven is the spousal version of Highest Daily
Lifetime Seven. We no longer permit new elections of Spousal Highest Daily
Lifetime Seven. Spousal Highest Daily Lifetime Seven must have been elected
based on two Designated Lives, as described below. Each Designated Life must
have been at least 59 1/2 years old when the benefit was elected. Spousal
Highest Daily Lifetime Seven was not available if you elected any other
optional living benefit or optional death benefit. As long as your Spousal
Highest Daily Lifetime Seven
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Benefit is in effect, you must allocate your Account Value in accordance with
the then permitted and available investment option(s) with this benefit. For a
more detailed description of permitted investment options, see the Investment
Options section of this prospectus.
The benefit that guarantees until the later death of two natural persons who
are each other's spouses at the time of election of the benefit and at the
first death of one of them (the "Designated Lives", and each, a "Designated
Life") the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of Sub-account performance on the Account
Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, wish to ensure that Sub-account performance will
not affect your ability to receive annual payments, and wish either spouse to
be able to continue the Spousal Highest Daily Lifetime Seven benefit after the
death of the first spouse. You are not required to make withdrawals as part of
the benefit - the guarantees are not lost if you withdraw less than the maximum
allowable amount each year under the rules of the benefit. As discussed below,
we require that you participate in our pre-determined mathematical formula in
order to participate in Spousal Highest Daily Lifetime Seven, and in Appendix I
to this prospectus, we set forth the formula under which we make the asset
transfers. Withdrawals are taken first from your own Account Value. We are only
required to begin making lifetime income payments to you under our guarantee
when and if your Account Value is reduced to zero (unless the benefit has
terminated).
As discussed below, a key component of Spousal Highest Daily Lifetime Seven is
the Protected Withdrawal Value. Because each of the Protected Withdrawal Value
and Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for the Account Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount until the death of the second Designated
Life, provided that there have not been "excess withdrawals." Excess
withdrawals, as discussed below, will reduce your Annual Income Amount. Thus,
you could experience a scenario in which your Account Value was zero, and, due
to your excess withdrawals, your Annual Income Amount also was reduced to zero.
In that scenario, no further amount would be payable under Spousal Highest
Daily Lifetime Seven.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value is
equal to your Account Value. On each Valuation Day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter, until the earlier of the
first withdrawal or the Tenth Anniversary Date, we recalculate the Periodic
Value. We stop determining the Periodic Value upon the earlier of your first
withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. On each Valuation Day (the "Current Valuation Day"), the Periodic Value
is equal to the greater of:
1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day; and
2) the Account Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
1) the Account Value; or
2) the Periodic Value on the date of the withdrawal.
If you have not made a withdrawal on or before the Tenth Anniversary Date, your
Protected Withdrawal Value subsequent to the Tenth Anniversary Date is equal to
the greatest of:
1) the Account Value; or
2) the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted purchase payments; or
3) the sum of:
(a) 200% of the Account Value on the effective date of the benefit.
(b) 200% of all adjusted purchase payments made within one year after the
effective date of the benefit; and
(c) all adjusted purchase payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal Value
is increased by the amount of any subsequent purchase payments, is reduced by
withdrawals, including your first withdrawal (as described below), and is
increased if you qualify for a step-up (as described below). Irrespective of
these calculations, your Protected Withdrawal Value will always be at least
equal to your Account Value.
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KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME
SEVEN BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes active
and does not reduce in subsequent Annuity Years, as described below. The
percentage depends on the age of the youngest Designated Life on the date of
the first withdrawal after election of the benefit. The percentages are: 5% for
ages 79 and younger, 6% for ages 80 to 84, 7% for ages 85 to 89, and 8% for
ages 90 and older. We use the age of the youngest Designated Life even if that
Designated Life is no longer a participant under the Annuity due to death or
divorce.
Under the Spousal Highest Daily Lifetime Seven benefit, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual Income
Amount in subsequent years will be reduced (except with regard to required
minimum distributions) by the result of the ratio of the Excess Income to the
Account Value immediately prior to such withdrawal (see examples of this
calculation below). Withdrawals of any amount up to and including the Annual
Income Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Withdrawals of Excess Income will reduce the Protected Withdrawal
Value by the same ratio as the reduction to the Annual Income Amount.
Any Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment
(including the amount of any associated Credits) based on the age of the
Annuitant at the time of the first withdrawal (the percentages are: 5% for ages
79 and younger, 6% for ages 80-84, 7% for ages 85-89, and 8% for ages 90 and
older) and (ii) increase the Protected Withdrawal Value by the amount of the
Purchase Payment (including the amount of any associated Credits).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, we no longer accept additional Purchase Payments for
Annuities with the Spousal Highest Daily Lifetime Seven benefit.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Annual Income Amount if your Account
Value increases subsequent to your first withdrawal. We begin examining the
Account Value for purposes of the Highest Quarterly Step-Up starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary, we identify the Account Value on the
Valuation Days corresponding to the end of each quarter that (i) is based on
your Annuity Year, rather than a calendar year; (ii) is subsequent to the first
withdrawal; and (iii) falls within the immediately preceding Annuity Year. If
the end of any such quarter falls on a holiday or a weekend, we use the next
Valuation Day. Having identified each of those quarter-end Account Values, we
then multiply each such value by a percentage that varies based on the age of
the youngest Designated Life on the Annuity Anniversary as of which the step-up
would occur. The percentages are 5% for ages 79 and younger, 6% for ages 80-84,
7% for ages 85-89, and 8% for ages 90 and older. Thus, we multiply each
quarterly value by the applicable percentage, adjust each such quarterly value
for subsequent withdrawals and purchase payments, and then select the highest
of those values. If the highest of those values exceeds the existing Annual
Income Amount, we replace the existing amount with the new, higher amount.
Otherwise, we leave the existing Annual Income Amount intact. In later years,
(i.e., after the first Annuity Anniversary after the first withdrawal) we
determine whether an automatic step-up should occur on each Annuity
Anniversary, by performing a similar examination of the Account Values on the
end of the four immediately preceding quarters. At the time that we increase
your Annual Income Amount, we also increase your Protected Withdrawal Value to
equal the highest quarterly value upon which your step-up was based. If, on the
date that we implement a Highest Quarterly Auto Step-Up to your Annual Income
Amount, the charge for Spousal Highest Daily Lifetime Seven has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Spousal Highest Daily Lifetime Seven upon a
step-up, we would notify you, and give you the opportunity to cancel the
automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
The Spousal Highest Daily Lifetime Seven benefit does not affect your ability
to make withdrawals under your annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime Seven, if your cumulative withdrawals in an Annuity Year are less than
or equal to the Annual Income Amount, they will not reduce your Annual Income
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
Annual Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime Seven benefit or any other fees and charges. Assume the following for
all three examples:
. The Issue Date is December 1, 2007
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. The Spousal Highest Daily Lifetime Seven benefit is elected on March 5,
2008.
. The youngest Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime Seven benefit.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the youngest Designated Life is younger
than 80 at the time of the 1/st/ withdrawal, the Annual Income Amount is 5% of
the Protected Withdrawal Value, in this case 5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Annual Income Amount
for that Annuity Year (up to and including December 1, 2008) is $3,500. This is
the result of a dollar-for-dollar reduction of the Annual Income Amount -
$6,000 less $2,500 = $3,500.
PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that Annuity Year to $0. The remaining withdrawal amount - $1,500 -
reduces the Annual Income Amount in future Annuity Years on a proportional
basis based on the ratio of the excess withdrawal to the Account Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that Annuity Year, each would result in another proportional
reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the youngest Designated Life's age on the
Annuity Anniversary) of the highest quarterly value since your first withdrawal
(or last Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional purchase payments, is higher than the Annual Income Amount, adjusted
for excess withdrawals and additional purchase payments (plus any Credits).
Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on August 6 reduces this amount
to $5,915.49 for future years (see above). For the next Annuity Year, the
Annual Income Amount will be stepped-up if 5% (since the youngest Designated
Life is younger than 80 on the date of the potential step-up) of the highest
quarterly Account Value adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the June 1
value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
HIGHEST QUARTERLY VALUE ADJUSTED ANNUAL INCOME
(ADJUSTED WITH WITHDRAWAL AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ------------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter - March 1,
June 1, September 1, and December 1. In this example, we do not use the
March 1 date as the first withdrawal took place after March 1. The Annuity
Anniversary Date of December 1 is considered the fourth and final quarterly
valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Account Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Account Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
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In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2008 and continuing through
December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Spousal Highest Daily
Lifetime Seven, and amounts are still payable under Spousal Highest Daily
Lifetime Seven, we will make an additional payment, if any, for that Annuity
Year equal to the remaining Annual Income Amount for the Annuity Year. Thus,
in that scenario, the remaining Annual Income Amount would be payable even
though your Account Value was reduced to zero. In subsequent Annuity Years
we make payments that equal the Annual Income Amount as described in this
section. We will make payments until the death of the first of the
Designated Lives to die, and will continue to make payments until the death
of the second Designated Life as long as the Designated Lives were spouses
at the time of the first death. To the extent that cumulative withdrawals in
the current Annuity Year that reduced your Account Value to zero are more
than the Annual Income Amount, the Spousal Highest Daily Lifetime Seven
benefit terminates, and no additional payments will be made. However, if a
withdrawal in the latter scenario was taken to meet required minimum
distribution requirements under the Annuity, then the benefit will not
terminate, and we will continue to pay the Annual Income Amount in the form
of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
1) apply your Account Value to any Annuity option available; or
2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated
Life as long as the Designated Lives were spouses at the time of the
first death. If, due to death of a Designated Life or divorce prior to
annuitization, only a single Designated Life remains, then Annuity
payments will be made as a life annuity for the lifetime of the
Designated Life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
Annuity payments will be the greater of:
1) the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Annuity; and
2) the Account Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are to
begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the older of the owner or
Annuitant's 95/th/ birthday, will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime Seven benefit are
subject to all of the terms and conditions of the Annuity, including any
CDSC that may apply. Note that if your withdrawal of the Annual Income
Amount in a given Annuity Year exceeds the applicable free withdrawal amount
under the Annuity (but is not considered Excess Income), we will not impose
any CDSC on the amount of that withdrawal. However, we may impose a CDSC on
the portion of a withdrawal that is deemed Excess Income.
.. Withdrawals made while the Spousal Highest Daily Lifetime Seven Benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Spousal Highest Daily Lifetime Seven
Benefit does not directly affect the Account Value or surrender value, but
any withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity you
will receive the current surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime
Seven benefit. The Spousal Highest Daily Lifetime Seven benefit provides a
guarantee that if your Account Value declines due to Sub-account
performance, you will be able to receive your Annual Income Amount in the
form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
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.. Upon inception of the benefit, and to maintain the benefit, 100% of your
Account Value must have been allocated to the permitted Sub-accounts.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (as described below) if
you elect this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the mathematical formula component
of the benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Spousal
Highest Daily Lifetime Seven benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be allocated
under the benefit, we will not compel you to re-allocate your Account Value
in accordance with our newly adopted requirements. Subject to any change in
requirements, transfers of Account Value and allocation of Additional
purchase payments may be subject to new investment limitations.
.. The fee for Spousal Highest Daily Lifetime Seven is 0.75% annually of the
Protected Withdrawal Value. We deduct this fee at the end of each quarter,
where each such quarter is part of a year that begins on the effective date
of the benefit or an anniversary thereafter. Thus, on each such quarter-end
(or the next Valuation Day, if the quarter-end is not a Valuation Day), we
deduct 0.1875% of the Protected Withdrawal Value at the end of the quarter.
We deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Sub-account. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the current Account Value, we will
reduce the Account Value to zero, and continue the benefit as described
above. You will begin paying the charge for this benefit as of the effective
date of the benefit, even if you do not begin taking withdrawals for many
years, or ever. We will not refund the charges you have paid if you choose
never to take any withdrawals and/or if you never receive any lifetime
income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Spousal Highest Daily Lifetime Seven benefit cause your Account Value to
reduce to zero. Certain optional Death Benefits may terminate if withdrawals
taken under the Spousal Highest Daily Lifetime Seven benefit cause your
Account Value to reduce to zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Spousal Highest Daily Lifetime Seven.
Elections of Spousal Highest Daily Lifetime Seven must have been based on two
Designated Lives. Designated Lives must be natural persons who are each other's
spouses at the time of election of the benefit and at the death of the first of
the Designated Lives to die. Spousal Highest Daily Lifetime Seven could only be
elected where the Owner, Annuitant, and Beneficiary designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person and
the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 59 1/2 years old at the time of election;
or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be at
least 59 1/2 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 59 1/2 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
a) if one Owner dies and the surviving spousal Owner assumes the Annuity or
b) if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary
designations under this benefit. If the Designated Lives divorce, however,
the Spousal Highest Daily Lifetime Seven benefit may not be divided as part
of the divorce settlement or judgment. Nor may the divorcing spouse who
retains ownership of the Annuity appoint a new Designated Life upon
re-marriage. Our current administrative procedure is to treat the division
of an Annuity as a withdrawal from the existing Annuity. The non-owner
spouse may then decide whether he or she wishes to use the withdrawn funds
to purchase a new Annuity, subject to the rules that are current at the
time of purchase.
If you wish, you may cancel any Spousal Highest Daily Lifetime Seven benefit.
You may then elect any other available living benefit on any Valuation Day
after you have cancelled the Spousal Highest Daily Lifetime Seven benefit,
provided the request is received in good order (subject to state availability
and any applicable age requirements). Upon cancellation of any Spousal Highest
Daily Lifetime Seven benefit, any Account Value allocated to the AST Investment
Grade Bond Portfolio Sub-account used with the formula will be reallocated to
the Permitted Sub-Accounts according to your most recent allocation instruction
or in absence of such instruction, pro-rata. You should be aware that upon
termination of Spousal Highest Daily Lifetime Seven, you will lose the
Protected Withdrawal Value (including the Tenth Anniversary Date Guarantee),
Annual Income Amount, and the Return of Principal Guarantee that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Account Value. ONCE THE
SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT IS CANCELLED YOU ARE NOT REQUIRED
TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION
MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF
THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT PROVIDED THAT THE BENEFIT YOU
ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS. ANY SUCH NEW BENEFIT
MAY BE MORE EXPENSIVE.
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RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set forth
in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Spousal Highest Daily
Lifetime Seven; and
b) the sum of each Purchase Payment you made (including any Credits) during
the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b), by
contributing funds from our general account. If the sum of (a) and (b) is less
than or equal to your Account Value on the Tenth Anniversary, we make no such
adjustment. The amount that we add to your Account Value under this provision
will be allocated to each of your variable investment options (including the a
bond Sub-account used with this benefit), in the same proportion that each such
Sub-account bears to your total Account Value, immediately before the
application of the amount. Any such amount will not be considered a Purchase
Payment when calculating your Protected Withdrawal Value, your death benefit,
or the amount of any optional benefit that you may have selected, and therefore
will have no direct impact on any such values at the time we add this amount.
This potential addition to Account Value is available only if you have elected
Spousal Highest Daily Lifetime Seven and if you meet the conditions set forth
in this paragraph. Thus, if you take a withdrawal prior to the Tenth
Anniversary, you are not eligible to receive the Return of Principal Guarantee.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. The benefit terminates: (i) if upon the death of the
first Designated Life, the surviving Designated Life opts to take the death
benefit under the Annuity (thus, the benefit does not terminate solely because
of the death of the first Designated Life) (ii) upon the death of the second
Designated Life, (iii) upon your termination of the benefit (although if you
have elected to take annuity payments in the form of the Annual Income Amount,
we will continue to pay the Annual Income Amount) (iv) upon your surrender of
the Annuity (v) upon your election to begin receiving annuity payments (vi) if
both the Account Value and Annual Income Amount equal zero or (vii) if you
cease to meet our requirements for issuing the benefit (see Election of and
Designations under the Benefit).
Upon termination of Spousal Highest Daily Lifetime Seven other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts that
are held in the variable investment options, and (ii) transfer all amounts held
in the AST Investment Grade Bond Portfolio Sub-account (as defined below) to
your variable investment options, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata (i.e.
in the same proportion as the current balances in your variable investment
options).
MATHEMATICAL FORMULA COMPONENT OF SPOUSAL HIGHEST DAILY LIFETIME SEVEN
As indicated above, we limit the Sub-accounts to which you may allocate Account
Value if you have elected Spousal Highest Daily Lifetime Seven. For purposes of
the benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Spousal Highest Daily
Lifetime Seven, we require that you participate in our specialized program,
under which we may transfer Account Value between the Permitted Sub-accounts
and a specified bond fund within the Advanced Series Trust (the "AST Investment
Grade Bond Sub-account"). We determine whether to make a transfer, and the
amount of any transfer, under a non-discretionary formula, discussed below. The
AST Investment Grade Bond Sub-account is available only with this benefit, and
thus you may not allocate purchase payments to the AST Investment Grade Bond
Sub-account. Under the formula component of Spousal Highest Daily Lifetime
Seven, we monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account. Any transfer would be
made in accordance with a formula, which is set forth in Appendix I to this
prospectus.
Speaking generally, the formula, which we apply each Valuation Day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that we use 5% in the formula, irrespective of the
Annuitant's attained age. Then we produce an estimate of the total amount we
would target in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as the
"Target Value" or "L". If you have already made a withdrawal, your projected
income amount (and thus your Target Value) would take into account any
automatic step-up, any subsequent purchase payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts. That ratio,
which essentially isolates the amount of your Target Value that is not offset
by amounts held within the AST Investment Grade Bond Sub-account, is called the
"Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the AST Investment Grade Bond Sub-account, and therefore we
will transfer an amount from your Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account. Conversely, if the Target Ratio falls below a certain
percentage (currently 77%), then a transfer from the AST Investment Grade Bond
Sub-account to the Permitted Sub-accounts would occur.
If you elect the new formula (90% Cap Feature), see discussion regarding that
feature.
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As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the AST Investment Grade Bond Sub-account because such poor investment
performance will tend to increase the Target Ratio. Moreover, "flat" investment
returns of your Account Value over a period of time also could result in the
transfer of your Account Value from the Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account. Because the amount allocated to the AST
Investment Grade Bond Sub-account and the amount allocated to the Permitted
Sub-accounts each is a variable in the formula, the investment performance of
each affects whether a transfer occurs for your Annuity. In deciding how much
to transfer, we use another formula, which essentially seeks to re-balance
amounts held in the Permitted Sub-accounts and the AST Investment Grade Bond
Sub-account so that the Target Ratio meets a target, which currently is equal
to 80%. Once you elect Spousal Highest Daily Lifetime Seven, the ratios we use
will be fixed. For newly-issued Annuities that elect Spousal Highest Daily
Lifetime Seven and existing Annuities that elect Spousal Highest Daily Lifetime
Seven, however, we reserve the right, subject to any required regulatory
approval, to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is designed
primarily to mitigate the financial risks that we incur in providing the
guarantee under Spousal Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
.. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro rata to the AST Investment Grade Bond Sub-account.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account. If your entire Account
Value is transferred to the AST Investment Grade Bond Sub-account, then based
on the way the formula operates, the formula will not transfer amounts out of
the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts and the
entire Account Value would remain in the AST Investment Grade Bond Sub-account.
If you make additional purchase payments to your Annuity, they will be
allocated to the Sub-accounts according to your allocation instructions. Such
additional purchase payments may or may not cause the formula to transfer money
in or out of the AST Investment Grade Bond Sub-account. Once the purchase
payments are allocated to your Annuity, they will also be subject to the
formula, which may result in immediate transfers to or from the AST Investment
Grade Bond Sub-accounts, if dictated by the formula. The amounts of any such
transfers will vary as dictated by the formula, and will depend on the factors
listed below.
Prior to the first withdrawal, the primary driver of transfers to the AST
Investment Grade Bond Sub-account is difference between your Account Value and
your Protected Withdrawal Value. If none of your Account Value is allocated to
the AST Investment Grade Bond Sub-account, then over time the formula permits
an increasing difference between the Account Value and the Protected Withdrawal
Value before a transfer to the AST Investment Grade Bond Sub-account occurs.
Therefore, as time goes on, while none of your Account Value is allocated to
the AST Investment Grade Bond Sub-account, the smaller the difference between
the Protected Withdrawal Value and the Account Value, the more the Account
Value can decrease prior to a transfer to the AST Investment Grade Bond
Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Spousal Highest Daily Lifetime Seven has been in effect
on your Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the AST Investment Grade Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the benefit
is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the greater
the impact performance of those investments have on your Account Value and thus
the greater the impact on whether (and how much) your Account Value is
transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond Sub-account
and that Sub-account has negative performance, the formula may transfer
additional amounts from your Permitted Sub-accounts to the AST Investment Grade
Bond Sub-account even if the performance of your Permitted Sub-accounts is
positive.
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If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. PLEASE NOTE THAT ANY WITHDRAWAL YOU TAKE PRIOR TO
THE TENTH ANNIVERSARY, EVEN IF WITHDRAWN TO SATISFY REQUIRED MINIMUM
DISTRIBUTION RULES, WILL CAUSE YOU TO LOSE THE ABILITY TO RECEIVE THE RETURN OF
PRINCIPAL GUARANTEE AND THE GUARANTEED AMOUNT DESCRIBED ABOVE UNDER "KEY
FEATURE - PROTECTED WITHDRAWAL VALUE".
As indicated, withdrawals made while this benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this benefit here.
However, we do note that if you participate in Spousal Highest Daily Lifetime
Seven through a nonqualified annuity, as with all withdrawals, once all
purchase payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY INCOME OPTION
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY
INCOME OPTION.
There was an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. You may have chosen Spousal
Highest Daily Lifetime Seven without also selecting the Beneficiary Income
Option death benefit ("BIO"). We no longer permit elections of Spousal Highest
Daily Lifetime Seven with BIO. If you terminate your Spousal Highest Daily
Lifetime Seven benefit with BIO to elect any other available living benefit,
you will lose all guarantees under the Spousal Highest Daily Lifetime Seven
benefit with BIO, and will begin new guarantees under the newly elected benefit
based on the Account Value as of the date the new benefit becomes active.
If you elected the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You could elect the Beneficiary Income Option death
benefit so long as each Designated Life was no older than age 75 at the time of
election. This death benefit is not transferable in the event of a divorce, nor
may the benefit be split in accordance with any divorce proceedings or similar
instrument of separation. Since this fee is based on the Protected Withdrawal
Value, the fee for Spousal Highest Daily Lifetime Seven with BIO may be greater
than it would have been, had it been based on the Account Value alone.
For purposes of the Beneficiary Income Option death benefit, we calculate the
Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Spousal Highest Daily Lifetime Seven itself. Upon the first death of a
Designated Life, no amount is payable under the Beneficiary Income Option death
benefit. Upon the second death of a Designated Life, we identify the following
amounts: (a) the amount of the base death benefit under the Annuity (b) the
Protected Withdrawal Value and (c) the Annual Income Amount. If there were no
withdrawals prior to the date of death, then we calculate the Protected
Withdrawal Value for purposes of this death benefit as of the date of death,
and we calculate the Annual Income Amount as if there were a withdrawal on the
date of death. If there were withdrawals prior to the date of death, then we
set the Protected Withdrawal Value and Annual Income Amount for purposes of
this death benefit as of the date that we receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the base
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payment of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her portion
of either (a) the basic death benefit or (b) the Beneficiary Income Option
death benefit. If chosen, for qualified Annuities, the Beneficiary Income
Option death benefit payments must begin no later than December 31/st/ of the
year following the annuity owner's date of death. For nonqualified Annuities,
the Beneficiary Income Option death benefit payments must begin no later than
one year after the owner's date of death. For nonqualified annuities, if the
beneficiary is other than an individual, payment under the Beneficiary Income
Option may be limited to a period not exceeding five years from the owner's
date of death. In order to receive the Beneficiary Income Option death benefit,
each beneficiary's share of the death benefit proceeds must be allocated as a
percentage of the total death benefit to be paid. We allow a beneficiary who
has opted to receive the Annual Income Amount to designate another beneficiary,
who would receive any remaining payments upon the former beneficiary's death.
Note also that the final payment, exhausting the Protected Withdrawal Value,
may be less than the Annual Income Amount.
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Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected Withdrawal
Value is $100,000, and the Annual Income Amount is $5,000; (ii) there are
two beneficiaries (the first designated to receive 75% of the death benefit
and the second designated to receive 25% of the death benefit); (iii) the
first beneficiary chooses to receive his/her portion of the death benefit in
the form of the Annual Income Amount, and the second beneficiary chooses to
receive his/her portion of the death benefit with reference to the basic
death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out period
is derived from the $5,000 Annual Income Amount, paid each year until it
exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount equal to $3,750 (i.e., the
first beneficiary's 75% share multiplied by $5,000) is then paid each year for
the 20 year period. Payment of $3,750 for 20 years results in total payments of
$75,000 (i.e., the first beneficiary's 75% share of the $100,000 Protected
Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit amount (or
$12,500).
If you elect to terminate Spousal Highest Daily Lifetime Seven with Beneficiary
Income Option, both Spousal Highest Daily Lifetime Seven and that death benefit
option will be terminated. You may not terminate the death benefit option
without terminating the entire benefit. If you terminate Spousal Highest Daily
Lifetime Seven with Beneficiary Income Option, your ability to elect other
optional living benefits will be affected as indicated in the "Election of and
Designations under the Benefit" section, above.
OPTIONAL 90% CAP FEATURE FOR SPOUSAL HIGHEST DAILY LIFETIME SEVEN
If you currently own an Annuity and have elected Spousal Highest Daily Lifetime
Seven Income Benefit (including Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option), you can elect this feature which utilizes a new
mathematical formula. The new formula is described below and will replace the
"Transfer Calculation" portion of the formula currently used in connection with
your benefit on a prospective basis. There is no cost to adding this feature to
your Annuity. This election may only be made once and may not be revoked once
elected. The new formula is found in Appendix I of this prospectus (page I-4).
Only the election of the 90% cap will prevent all of your Account Value from
being allocated to the AST Investment Grade Bond Portfolio Sub-account. If all
of your Account Value is currently allocated to the AST Investment Grade Bond
Portfolio Sub-account, it will not transfer back to the Permitted Sub-accounts
unless you elect the 90% Cap feature. If you make additional Purchase Payments,
they may or may not result in a transfer to or from the AST Investment Grade
Bond Portfolio Sub-account.
Under the new formula, the formula will not execute a transfer to the AST
Investment Grade Bond Sub-account that results in more than 90% of your Account
Value being allocated to the AST Investment Grade Bond Sub-account ("90% cap"
or "90% Cap Rule"). Thus, on any Valuation Day, if the formula would require a
transfer to the AST Investment Grade Bond Sub-account that would result in more
than 90% of the Account Value being allocated to the AST Investment Grade Bond
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the AST Investment Grade Bond Sub-account will be
transferred. Additionally, future transfers into the AST Investment Grade Bond
Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap ). At
no time will the formula make a transfer to the AST Investment Grade Bond
Sub-account that results in greater than 90% of your Account Value being
allocated to the AST Investment Grade Bond Sub-account. HOWEVER, IT IS POSSIBLE
THAT, DUE TO THE INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE AST
INVESTMENT GRADE BOND SUB-ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED
SUB-ACCOUNTS YOU HAVE SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90%
INVESTED IN THE AST INVESTMENT GRADE BOND SUB-ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Account Value to the AST Investment Grade Bond Sub-account
(at least until there is first a transfer out of the AST Investment Grade Bond
Sub-account). For example,
.. March 19, 2009 - a transfer is made that results in the 90% cap being met
and now $90,000 is allocated to the AST Investment Grade Bond Sub-account
and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of the
AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the AST Investment Grade Bond Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
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Under the operation of the formula, the 90% cap may come into existence and may
be removed multiple times while you participate in the benefit. We will
continue to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the
formula. Once you elect this feature, the new transfer formula described above
and set forth in Appendix I will be the formula for your Annuity.
In the event that more than ninety percent (90%) of your Account Value is
allocated to the AST Investment Grade Bond Sub-account and you have elected
this feature, up to ten percent (10%) of your Account Value currently allocated
to the AST Investment Grade Bond Sub-account will be transferred to your
Permitted Sub-accounts, such that after the transfer, 90% of your Account Value
on the date of the transfer is in the AST Investment Grade Bond Sub-account.
The transfer to the Permitted Sub-accounts will be based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e., in the same proportion as the current balances in your variable
investment options). It is possible that additional transfers might occur after
this initial transfer if dictated by the formula. The amounts of such
additional transfer(s) will vary. If on the date this feature is elected 100%
of your Account Value is allocated to the AST Investment Grade Bond
Sub-account, a transfer of an amount equal to 10% of your Account Value will be
made to your Permitted Sub-accounts. WHILE THERE ARE NO ASSURANCES THAT FUTURE
TRANSFERS WILL OCCUR, IT IS POSSIBLE THAT AN ADDITIONAL TRANSFER(S) TO THE
PERMITTED SUB-ACCOUNTS COULD OCCUR FOLLOWING THE VALUATION DAY(S), AND IN SOME
INSTANCES (BASED ON THE FORMULA) THE ADDITIONAL TRANSFER(S) COULD BE LARGE.
Once the 90% cap rule is met, future transfers into the AST Investment Grade
Bond Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap).
IMPORTANT CONSIDERATION WHEN ELECTING THE NEW FORMULA:
.. At any given time, some, most or none of your Account Value may be allocated
to the AST Investment Grade Bond Sub-account.
.. Please be aware that because of the way the 90% cap formula operates, it is
possible that more than or less than 90% of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those Sub-accounts.
Your Account Value can go up or down depending of the performance of the
Permitted Sub-accounts you select.
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT (HD 7 PLUS)
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME 7 PLUS BENEFIT.
Highest Daily Lifetime 7 Plus is no longer offered for new elections. If you
elected Highest Daily Lifetime 7 Plus and subsequently terminate the benefit,
you may elect any available living benefit, subject to our current rules. See
"Election of and Designations under the Benefit" and "Termination of Existing
Benefits and Election of New Benefits" below for details. Please note that if
you terminate Highest Daily Lifetime 7 Plus and elect another available living
benefit, you lose the guarantees that you had accumulated under your existing
benefit and we will base any guarantees under the new benefit on your Account
Value as of the date the new benefit becomes active. The income benefit under
Highest Daily Lifetime 7 Plus is based on a single "designated life" who is at
least 45 years old on the date that the benefit was elected. The Highest Daily
Lifetime 7 Plus Benefit was not available if you elected any other optional
living benefit, although you may elect any optional death benefit other than
the Plus 40 life insurance rider and Highest Daily Value death benefit. As long
as your Highest Daily Lifetime 7 Plus Benefit is in effect, you must allocate
your Account Value in accordance with the then permitted and available
investment option(s) with this benefit. For a more detailed description of the
permitted investment options, see the "Investment Options" section in this
prospectus.
Highest Daily Lifetime 7 Plus guarantees until the death of the single
designated life (the Annuitant) the ability to withdraw an annual amount (the
"Annual Income Amount") equal to a percentage of an initial principal value
(the "Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our rules regarding the timing and
amount of withdrawals. You are guaranteed to be able to withdraw the Annual
Income Amount for the rest of your life ("Lifetime Withdrawals"), provided that
you have not made "excess withdrawals" that have resulted in your Account Value
being reduced to zero. We also permit you to make a one-time Non-Lifetime
Withdrawal from your Annuity prior to taking Lifetime Withdrawals under the
benefit. Highest Daily Lifetime 7 Plus may be appropriate if you intend to make
periodic withdrawals from your Annuity, and wish to ensure that Sub-account
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the benefit - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year under
the rules of the benefit. As discussed below, we require that you participate
in our pre-determined mathematical formula in order to participate in Highest
Daily Lifetime 7 Plus. Withdrawals are taken first from your own Account Value.
We are only required to begin making lifetime income payments to you under our
guarantee when and if your Account Value is reduced to zero (unless the benefit
has terminated).
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Account Value falls to zero, if you take an excess
withdrawal that brings your Account Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under the Highest Daily Lifetime 7 Plus benefit.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your
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Account Value. On each Valuation Day thereafter until the date of your first
Lifetime Withdrawal (excluding any Non-Lifetime Withdrawal discussed below),
the Protected Withdrawal Value is equal to the "Periodic Value" described in
the next paragraphs.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the Periodic
Value upon your first Lifetime Withdrawal after the effective date of the
benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
2) the Account Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value on
the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
1) the Periodic Value described above or,
2) the sum of (a), (b) and (c) below (proportionally reduced for any
Non-Lifetime Withdrawals):
(a) 200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Account Value on the effective
date of the benefit;
(b) 200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted purchase payments
made within one year following the effective date of the benefit; and
(c) all adjusted purchase payments made after one year following the
effective date of the benefit.
If you elected Highest Daily Lifetime 7 Plus with Beneficiary Income Option
("BIO") (see below), we will stop determining the Periodic Value (as described
above) on the earlier of your first Lifetime Withdrawal after the effective
date of the benefit or the Tenth Anniversary of the effective date of the
benefit ("Tenth Anniversary"). This means that under the Highest Daily Lifetime
7 Plus with BIO benefit you will not be eligible for the guaranteed minimum
Periodic Values described above on the 20/th/ and 25/th/ Anniversary of the
Benefit Effective Date.
On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent purchase
payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
RETURN OF PRINCIPAL GUARANTEE
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Account Value on that Tenth Anniversary (or the next
Valuation Day, if that anniversary is not a Valuation Day), if the requirements
set forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Highest Daily Lifetime 7
Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal (including the amount of any associated Credits)
you made during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b), by
contributing funds from our general account. If the sum of (a) and (b) is less
than or equal to your Account Value on the Tenth Anniversary, we make no such
adjustment. The amount that we add to your Account Value under this provision
will be allocated to each of your variable investment options (including the
AST Investment Grade Bond Sub-account), in the same proportion that each such
Sub-account bears to your total Account Value, immediately before the
application of the amount. Any such amount will not be considered a Purchase
Payment when calculating your Protected Withdrawal Value, your death benefit,
or the amount of any optional benefit that you may have selected, and therefore
will have no direct impact on any such values at the time we add this amount.
Because the amount is added to Account Value, it will also be subject to each
charge under your Annuity based on Account Value. This potential addition to
Account Value is available only if you have elected Highest Daily Lifetime 7
Plus and if you meet the conditions set forth in this paragraph. Thus, if you
take a withdrawal (other than a Non-Lifetime Withdrawal) prior to the Tenth
Anniversary, you are not eligible to receive the Return of Principal Guarantee.
The Return of Principal Guarantee is referred to as the Guaranteed Minimum
Account Value Credit in the benefit rider.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME 7 PLUS
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the Annuitant on the date of the first Lifetime Withdrawal after
election of the benefit. The percentages are: 4% for ages 45 - less than
59 1/2, 5% for ages 59 1/2-74, 6% for ages 75-79, 7% for ages 80-84, and 8% for
ages 85 and older.
Under the Highest Daily Lifetime 7 Plus benefit, if your cumulative Lifetime
Withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the
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Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions for
this Annuity that comply with our rules) by the result of the ratio of the
Excess Income to the Account Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions are based on the actual amount
of the withdrawal, including any CDSC that may apply. Lifetime Withdrawals of
any amount up to and including the Annual Income Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Withdrawals of
Excess Income will reduce the Protected Withdrawal Value by the same ratio as
the reduction to the Annual Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the Annual
Income Amount. Any systematic withdrawal will be deemed a Lifetime Withdrawal
under this benefit.
Any Purchase Payment that you make subsequent to the election of Highest Daily
Lifetime 7 Plus will (i) increase the then-existing Annual Income Amount by an
amount equal to a percentage of the Purchase Payment (including the amount of
any associated Credits) based on the age of the Annuitant at the time of the
first Lifetime Withdrawal (the percentages are: 4% for ages 45 - less than
59 1/2, 5% for ages 59 1/2-74, 6% for ages 75-79, 7% for ages 80-84, and 8% for
ages 85 and older) and (ii) increase the Protected Withdrawal Value by the
amount of the Purchase Payment (including the amount of any associated Credits).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, we no longer accept additional Purchase Payments for
Annuities with the Highest Daily Lifetime 7 Plus benefit.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of Highest
Daily Lifetime 7 Plus. As detailed in this paragraph, the Highest Daily Auto
Step-Up feature can result in a larger Annual Income Amount subsequent to your
first Lifetime Withdrawal. The Highest Daily Auto Step-Up starts with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first Lifetime Withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on each Valuation Day within the immediately preceding Annuity Year after
your first Lifetime Withdrawal. Having identified the highest daily value
(after all daily values have been adjusted for subsequent purchase payments and
withdrawals), we then multiply that value by a percentage that varies based on
the age of the Annuitant on the Annuity Anniversary as of which the step-up
would occur. The percentages are: 4% for ages 45 - less than 59 1/2 , 5% for
ages 59 1/2-74, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and
older. If that value exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. The Account Value on the Annuity Anniversary is
considered the last daily step-up value of the Annuity Year. All daily
valuations and annual step-ups will only occur on a Valuation Day. In later
years (i.e., after the first Annuity Anniversary after the first Lifetime
Withdrawal), we determine whether an automatic step-up should occur on each
Annuity Anniversary, by performing a similar examination of the Account Values
that occurred on Valuation Days during the year. At the time that we increase
your Annual Income Amount, we also increase your Protected Withdrawal Value to
equal the highest daily value upon which your step-up was based only if that
results in an increase to the Protected Withdrawal Value. Your Protected
Withdrawal Value will never be decreased as a result of an income step-up. If,
on the date that we implement a Highest Daily Auto Step-Up to your Annual
Income Amount, the charge for Highest Daily Lifetime 7 Plus has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Highest Daily Lifetime 7 Plus upon a
step-up, we would notify you, and give you the opportunity to cancel the
automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Highest Daily Lifetime 7 Plus benefit does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime 7 Plus, if
your cumulative Lifetime Withdrawals in an Annuity Year are less than or equal
to the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is possible
for the Account Value to fall to zero, even though the Annual Income Amount
remains.
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Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime 7
Plus benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2008
. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the Annuitant is between the ages of
59 1/2 and 74 at the time of the first Lifetime Withdrawal, the Annual Income
Amount is 5% of the Protected Withdrawal Value, in this case 5% of $120,000).
Assuming $2,500 is withdrawn from the Annuity on this date, the remaining
Annual Income Amount for that Annuity Year (up to and including December 1,
2009) is $3,500. This is the result of a dollar-for-dollar reduction of the
Annual Income Amount ($6,000 less $2,500 = $3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there are other future withdrawals in that Annuity Year, each
would result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest daily value since your first Lifetime Withdrawal
(or last Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional purchase payments, is higher than the Annual Income Amount, adjusted
for excess withdrawals and additional purchase payments (including the amount
of any associated Credits).
Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on November 27 reduces the
amount to $5,921.40 for future years (see above). For the next Annuity Year,
the Annual Income Amount will be stepped up if 5% (since the designated life is
between 59 1/2 and 74 on the date of the potential step-up) of the highest
daily Account Value adjusted for withdrawals and purchase payments (including
the amount of any associated Credits), is higher than $5,921.40. Here are the
calculations for determining the daily values. Only the November 25 value is
being adjusted for excess withdrawals as the November 30 and December 1
Valuation Days occur after the excess withdrawal on November 27.
HIGHEST DAILY VALUE ADJUSTED ANNUAL INCOME
(ADJUSTED WITH WITHDRAWAL AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ------------------------- ----------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio
in the above example which is the excess withdrawal divided by the
Account Value immediately preceding the excess withdrawal) resulting
in a Highest Daily Value of $113,986.95.
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. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Highest Daily Lifetime 7 Plus. It is an optional feature of the benefit
that you can only elect at the time of your first withdrawal. You cannot take a
Non-Lifetime Withdrawal in an amount that would cause your Annuity's Account
Value, after taking the withdrawal, to fall below the minimum Surrender Value
(see "Access to Account Value - Can I Surrender My Annuity for Its Value?").
This Non-Lifetime Withdrawal will not establish your initial Annual Income
Amount and the Periodic Value described above will continue to be calculated.
However, the total amount of the withdrawal will proportionally reduce all
guarantees associated with the Highest Daily Lifetime 7 Plus benefit. You must
tell us if your withdrawal is intended to be the Non-Lifetime Withdrawal and
not the first Lifetime Withdrawal under the Highest Daily Lifetime 7 Plus
benefit. If you don't elect the Non-Lifetime Withdrawal, the first withdrawal
you make will be the first Lifetime Withdrawal that establishes your Protected
Withdrawal Value and Annual Income Amount. Once you elect to take the
Non-Lifetime Withdrawal or Lifetime Withdrawals, no additional Non-Lifetime
Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected Withdrawal
Value and the Return of Principal guarantee. It will also proportionally reduce
the Periodic Value guarantees on the tenth, twentieth and twenty-fifth
anniversaries of the benefit effective date (see description in "Key Feature -
Protected Withdrawal Value," above). It will reduce all three by the percentage
the total withdrawal amount (including any applicable CDSC) represents of the
then current Account Value immediately prior to the withdrawal. As such, you
should carefully consider when it is most appropriate for you to begin taking
withdrawals under the benefit.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
Assume the following:
.. The Issue Date is December 1, 2008
.. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
.. The Account Value at benefit election was $105,000
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
.. No previous withdrawals have been taken under the Highest Daily Lifetime 7
Plus benefit.
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10th benefit
year minimum Periodic Value guarantee is $210,000, the 10th benefit year Return
of Principal guarantee is $105,000, the 20th benefit year minimum Periodic
Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic Value
guarantee is $630,000 and the Account Value is $120,000. Assuming $15,000 is
withdrawn from the Annuity on May 2, 2009 and is designated as a Non-Lifetime
Withdrawal, all guarantees associated with the Highest Daily Lifetime 7 Plus
benefit will be reduced by the ratio the total withdrawal amount represents of
the Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION:
Withdrawal Amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Return of Principal $ 91,875
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
25/th/ benefit year Minimum Periodic Value $551,250
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required to
take as a required minimum distribution for this annuity, will not reduce the
Annual Income Amount for future years. No additional Annual Income Amount will
be available in an Annuity Year due to required minimum distributions unless
the required minimum distribution is greater than the Annual Income Amount. Any
withdrawal you take that exceeds
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the Annual Income Amount in Annuity Years that your required minimum
distribution amount is not greater than the Annual Income Amount will be
treated as an Excess Withdrawal under the benefit. If your required minimum
distribution (as calculated by us for your Annuity and not previously withdrawn
in the current calendar year) is greater than the Annual Income Amount, an
amount equal to the remaining Annual Income Amount plus the difference between
the required minimum distribution amount not previously withdrawn in the
current calendar year and the Annual Income Amount will be available in the
current Annuity Year without it being considered an excess withdrawal.
In the event that a required minimum distribution is calculated in a calendar
year that crosses more than one Annuity Year and you choose to satisfy the
entire required minimum distribution for that calendar year in the next Annuity
Year, the distribution taken in the next Annuity Year will reduce your Annual
Income Amount in that Annuity Year on a dollar by dollar basis. If the required
minimum distribution not taken in the prior Annuity Year is greater than the
Annual Income Amount as guaranteed by the benefit in the current Annuity Year,
the total required minimum distribution amount may be taken without being
treated as an excess withdrawal.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
ANNUAL INCOME AMOUNT = $5,000
REMAINING ANNUAL INCOME AMOUNT = $3,000
REQUIRED MINIMUM DISTRIBUTION = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all of the guarantees associated
with the Highest Daily Lifetime 7 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you choose not to satisfy
the required minimum distribution in the current Annuity Year (assuming the
Annual Income Amount in the subsequent Annuity Year is $5,000), without being
treated as an Excess Withdrawal is $6,000. This withdrawal must comply with all
IRS guidelines in order to satisfy the required minimum distribution for the
current calendar year.
BENEFITS UNDER HIGHEST DAILY LIFETIME 7 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount or as a result of the fee that we assess
for Highest Daily Lifetime 7 Plus, and amounts are still payable under
Highest Daily Lifetime 7 Plus, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Annual Income Amount for the
Annuity Year. If you have not begun taking Lifetime Withdrawals and your
Account Value is reduced to zero as a result of the fee we assess for
Highest Daily Lifetime 7 Plus, we will calculate the Annual Income Amount as
if you made your first Lifetime Withdrawal on the date the Account Value was
reduced to zero and Lifetime Withdrawals will begin on the next Annuity
anniversary. If this were to occur, you are not permitted to make additional
purchase payments to your Annuity. Thus, in these scenarios, the remaining
Annual Income Amount would be payable even though your Account Value was
reduced to zero. In subsequent Annuity Years we make payments that equal the
Annual Income Amount as described in this section. We will make payments
until the death of the single designated life. To the extent that cumulative
withdrawals in the Annuity Year that reduced your Account Value to zero are
more than the Annual Income Amount, the Highest Daily Lifetime 7 Plus
benefit terminates, and no additional payments will be made. However, if a
withdrawal in the latter scenario was taken to satisfy a required minimum
distribution under the Annuity, then the benefit will not terminate, and we
will continue to pay the Annual Income Amount in subsequent Annuity Years
until the death of the Designated Life.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. If this
option is elected, the Annual Income Amount will not increase after
annuity payments have begun. We will make payments until the death of
the single Designated Life. We must receive your request in a form
acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1) the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2) the Account Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
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.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the annuitant's 95/th/
birthday will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime 7 Plus benefit are subject to
all of the terms and conditions of the Annuity, including any applicable
CDSC for the Non-Lifetime Withdrawal as well as withdrawals that exceed the
Annual Income Amount.
.. Withdrawals made while the Highest Daily Lifetime 7 Plus Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime 7 Plus
benefit. The Highest Daily Lifetime 7 Plus benefit provides a guarantee that
if your Account Value is reduced to zero (subject to our rules regarding
time and amount of withdrawals), you will be able to receive your Annual
Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your
Account Value and may limit the potential for increasing your Protected
Withdrawal Value. You should discuss with your Financial Professional when
it may be appropriate for you to begin taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. Upon inception of the benefit, and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (see description below)
if you elect this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Highest Daily Lifetime 7 Plus
mathematical formula will not count toward the maximum number of free
transfers allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Highest
Daily Lifetime 7 Plus benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be allocated
under the benefit, we will not compel you to re-allocate your Account Value
in accordance with our newly adopted requirements. Subject to any change in
requirements, transfer of Account Value and allocation of additional
purchase payments may be subject to new investment limitations.
.. The maximum charge for Highest Daily Lifetime 7 Plus is 1.50% annually of
the greater of Account Value and the Protected Withdrawal Value (PWV). The
current charge is 0.75% annually of the greater of Account Value and the
Protected Withdrawal Value. We deduct this fee on each quarterly anniversary
of the benefit effective date. Thus, on each such quarterly anniversary (or
the next Valuation Day, if the quarterly anniversary is not a Valuation
Day), we deduct 0.1875% of the greater of the prior day's Account Value or
the prior day's Protected Withdrawal Value at the end of the quarter. We
deduct the fee pro rata from each of the Sub-accounts including the AST
Investment Grade Bond Portfolio Sub-account and from the DCA Fixed Rate
Option (if applicable). Since this fee is based on the greater of the
Account Value or the Protected Withdrawal Value, the fee for Highest Daily
Lifetime 7 Plus may be greater than it would have been, had it been based on
the Account Value alone. If the fee to be deducted exceeds the Account Value
at the benefit quarter, we will charge the remainder of the Account Value
for the benefit and continue the benefit as described above. You will begin
paying the charge for this benefit as of the effective date of the benefit,
even if you do not begin taking withdrawals for many years, or ever. We will
not refund the charges you have paid if you choose never to take any
withdrawals and/or if you never receive any lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under Highest
Daily Lifetime 7 Plus cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under Highest
Daily Lifetime 7 Plus cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Highest Daily Lifetime 7 Plus. For Highest
Daily Lifetime 7 Plus, there must have been either a single Owner who is the
same as the Annuitant, or if the Annuity is entity owned, there must have been
a single natural person Annuitant. In either case, the Annuitant must have been
at least 45 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime 7 Plus. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime 7 Plus, except if (a) the new Owner has
the same taxpayer identification number as the previous owner, (b) ownership is
transferred from a custodian or other entity to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that satisfies
our administrative ownership guidelines.
PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS HIGHEST DAILY
LIFETIME 7 PLUS AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT
YOU HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES
UNDER THE NEW BENEFIT ON YOUR
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ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE THE
RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
TERMINATION OF THE BENEFIT
You may terminate Highest Daily Lifetime 7 Plus at any time by notifying us. If
you terminate the benefit, any guarantee provided by the benefit will terminate
as of the date the termination is effective, and certain restrictions on
re-election may apply. The benefit automatically terminates: (i) upon your
termination of the benefit, (ii) upon your surrender of the Annuity, (iii) upon
your election to begin receiving annuity payments (although if you have elected
to receive the Annual Income Amount in the form of Annuity payments, we will
continue to pay the Annual Income Amount), (iv) upon our receipt of due proof
of the death of the Annuitant, (v) if both the Account Value and Annual Income
Amount equal zero, or (vi) if you cease to meet our requirements as described
in "Election of and Designations under the Benefit".
Upon termination of Highest Daily Lifetime 7 Plus other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for the
pro-rated portion of the year since the fee was last assessed), and thereafter
we cease deducting the charge for the benefit. With regard to your investment
allocations, upon termination we will: (i) leave intact amounts that are held
in the variable investment options, and (ii) transfer all amounts held in the
AST Investment Grade Bond Portfolio Sub-account to your variable investment
options, based on your existing allocation instructions or (in the absence of
such existing instructions) pro rata (i.e. in the same proportion as the
current balances in your variable investment options).
If a surviving spouse elects to continue the Annuity, the Highest Daily
Lifetime 7 Plus benefit terminates. The spouse may elect the benefit subject to
the restrictions discussed above.
HOW HIGHEST DAILY LIFETIME 7 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
As indicated above, we limit the Sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime 7 Plus. For purposes of this benefit,
we refer to those permitted investment options as the "Permitted Sub-accounts".
If your annuity was issued on or after May 1, 2009 (subject to regulatory
approval), you may also choose to allocate purchase payments while this program
is in effect to DCA Fixed Rate Options utilized with our 6 or 12 Month Dollar
Cost Averaging Program ("6 or 12 Month DCA Program"). If you are participating
in Highest Daily Lifetime 7 Plus and also are participating in the 6 or 12
Month DCA Program, and the formula under the benefit dictates a transfer from
the Permitted Sub-accounts to the AST Investment Grade Bond Sub-account, then
the amount to be transferred will be taken entirely from the Sub-accounts,
provided there is sufficient Account Value in those Sub-accounts to meet the
required transfer amount. Only if there is insufficient Account Value in those
Sub-accounts will an amount be withdrawn from the DCA Fixed Rate Options.
Amounts withdrawn from the DCA Fixed Rate Options under the formula will be
taken on a last-in, first-out basis. For purposes of the discussion below
concerning transfers from the Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account, amounts held within the DCA Fixed Rate Options are
included within the term "Permitted Sub-Accounts". Thus, amounts may be
transferred from the DCA Fixed Rate Options in the circumstances described
above and in the section of this prospectus entitled 6 or 12 Month Dollar Cost
Averaging Program. Any transfer dictated by the formula out of the AST
Investment Grade Bond Sub-account will be transferred to the Permitted
Sub-accounts, not including the DCA Fixed Rate Options.
An integral part of Highest Daily Lifetime 7 Plus is the pre-determined
mathematical formula used to transfer Account Value between the Permitted
Sub-Accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-Account"). The AST Investment Grade Bond
Sub-account is available only with this benefit, and thus you may not allocate
purchase payments to or make transfers to or from the AST Investment Grade Bond
Sub-account. The formula monitors your Account Value daily and, if dictated by
the formula, systematically transfers amounts between the Permitted
Sub-accounts you have chosen and the AST Investment Grade Bond Sub-account. The
formula is set forth in Appendix J.
Speaking generally, the formula, which is applied each Valuation Day, operates
as follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that 5% is used in the formula, irrespective of the
Annuitant's attained age. Then it produces an estimate of the total amount
targeted in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as the
"Target Value" or "L". If you have already made a withdrawal, your projected
income amount (and thus your Target Value) would take into account any
automatic step-up, any subsequent purchase payments (and associated purchase
credits), and any excess withdrawals. Next, the formula subtracts from the
Target Value the amount held within the AST Investment Grade Bond Sub-account
on that day, and divides that difference by the amount held within the
Permitted Sub-accounts including any amounts allocated to DCA Fixed Rate
Options. That ratio, which essentially isolates the amount of your Target Value
that is not offset by amounts held within the AST Investment Grade Bond
Sub-account, is called the "Target Ratio" or "r". If, on each of three
consecutive Valuation Days, the Target Ratio is greater than 83% but less than
or equal to 84.5%, the formula will, on such third Valuation Day, make a
transfer from the Permitted Sub-accounts in which you are invested (subject to
the 90% cap feature) to the AST Investment Grade Bond Sub-account. As discussed
above, if all or a portion of your Account Value is allocated to one or more
DCA Fixed Rate Options at the time a transfer to the AST Investment Grade Bond
Sub-account is required under the formula, we will first look to process the
transfer from the Permitted Sub-accounts. If the amount allocated to the
Permitted Sub-accounts is insufficient to satisfy the transfer, then any
remaining amounts will be transferred from the DCA Fixed Rate Options on a
"last-in, first-out" basis. Once a transfer is made, the three consecutive
Valuation Days begin again. If, however, on any Valuation Day, the Target Ratio
is above 84.5%, it will make a transfer from the Permitted Sub-accounts
(subject to the 90% cap) to the AST Investment Grade Bond Sub-account (as
described above). If the Target Ratio falls below 78% on any Valuation Day,
then a transfer from the AST Investment Grade Bond Sub-account to the Permitted
Sub-accounts will occur.
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The formula will not execute a transfer to the AST Investment Grade Bond
Sub-account that results in more than 90% of your Account Value being allocated
to the AST Investment Grade Bond Sub-account ("90% cap"). Thus, on any
Valuation Day, if the formula would require a transfer to the AST Investment
Grade Bond Sub-account that would result in more than 90% of the Account Value
being allocated to the AST Investment Grade Bond Sub-account, only the amount
that results in exactly 90% of the Account Value being allocated to the AST
Investment Grade Bond Sub-account will be transferred. Additionally, future
transfers into the AST Investment Grade Bond Sub-account will not be made
(regardless of the performance of the AST Investment Grade Bond Sub-account and
the Permitted Sub-accounts) at least until there is first a transfer out of the
AST Investment Grade Bond Sub-account. Once this transfer occurs out of the AST
Investment Grade Bond Sub-account, future amounts may be transferred to or from
the AST Investment Grade Bond Sub-account if dictated by the formula (subject
to the 90% cap). At no time will the formula make a transfer to the AST
Investment Grade Bond Sub-account that results in greater than 90% of your
Account Value being allocated to the AST Investment Grade Bond Sub-account.
However, it is possible that, due to the investment performance of your
allocations in the AST Investment Grade Bond Sub-account and your allocations
in the permitted sub-accounts you have selected, your Account Value could be
more than 90% invested in the AST Investment Grade Bond Sub-account.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Account Value to the AST Investment Grade Bond Sub-account
(at least until there is first a transfer out of the AST Investment Grade Bond
Sub-account). For example,
.. March 19, 2009 - a transfer is made to the AST Investment Grade Bond
Sub-account that results in the 90% cap being met and now $90,000 is
allocated to the AST Investment Grade Bond Sub-account and $10,000 is
allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. On March 20, 2009 (and at least until first a transfer is made out of the
AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and on this date you have
82% in the AST Investment Grade Bond Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and be
removed multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the formula.
As you can glean from the formula, poor or flat investment performance of your
Account Value may result in a transfer of a portion of your Account Value in
the Permitted Sub-accounts to the AST Investment Grade Bond Sub-account because
such poor investment performance will tend to increase the Target Ratio.
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. In deciding how much to transfer, we use another formula,
which essentially seeks to re-balance amounts held in the Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account so that the Target
Ratio meets a target, which currently is equal to 80%. Once you elect Highest
Daily Lifetime 7 Plus, the values we use to compare to the Target Ratio will be
fixed.
Additionally, on each monthly Annuity Anniversary (if the monthly Annuity
Anniversary does not fall on a Valuation Day, the next Valuation Day will be
used), following all of the above described daily calculations, a transfer may
be made from the AST Investment Grade Bond Sub-account to the Permitted
Sub-accounts. Any such transfer will be based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata (i.e.
in the same proportion as the current balances in your variable investment
options). This transfer will automatically occur provided that the Target
Ratio, as described above, would be less than 83% after the transfer. The
formula will not execute a transfer if the Target Ratio after this transfer
would occur would be greater than or equal to 83%.
The amount of the transfer will be equal to the lesser of:
a) The total value of all your Account Value in the AST Investment Grade Bond
Sub-account, or
b) An amount equal to 5% of your total Account Value.
While you are not notified when your Annuity reaches a transfer trigger under
the formula, you will receive a confirmation statement indicating the transfer
of a portion of your Account Value either to or from the AST Investment Grade
Bond Sub-account. The formula by which the transfer operates is designed
primarily to mitigate some of the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime 7 Plus. Depending on the results of
the calculations of the formula, we may, on any Valuation Day:
. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
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. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
. Transfer a portion of your Account Value in the Permitted Sub-accounts
pro rata to the AST Investment Grade Bond Sub-account.
At any given time, some, most or none of your Account Value will be allocated
to the AST Investment Grade Bond Sub-account, as dictated by the formula.
Prior to the first Lifetime Withdrawal, the primary driver of transfers to the
AST Investment Grade Bond Sub-account is difference between your Account Value
and your Protected Withdrawal Value. If none of your Account Value is allocated
to the AST Investment Grade Bond Sub-account, then over time the formula
permits an increasing difference between the Account Value and the Protected
Withdrawal Value before a transfer to the AST Investment Grade Bond Sub-account
occurs. Therefore, as time goes on, while none of your Account Value is
allocated to the AST Investment Grade Bond Sub-account, the smaller the
difference between the Protected Withdrawal Value and the Account Value, the
more the Account Value can decrease prior to a transfer to the AST Investment
Grade Bond Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
. The difference between your Account Value and your Protected Withdrawal
Value;
. The amount of time Highest Daily Lifetime 7 Plus has been in effect on
your Annuity;
. The amount allocated to and the performance of the Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account;
. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect) and;
. Any withdrawals you take from your Annuity (while the benefit is in
effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the greater
the impact performance of those investments have on your Account Value and thus
the greater the impact on whether (and how much) your Account Value is
transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond Sub-account
and that Sub-account has negative performance, the formula may transfer
additional amounts from your Permitted Sub-accounts to the AST Investment Grade
Bond Sub-account even if the performance of your Permitted Sub-accounts is
positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula and subject
to the 90% cap feature.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. PLEASE NOTE THAT ANY WITHDRAWAL (EXCEPT THE
NON-LIFETIME WITHDRAWAL) YOU TAKE PRIOR TO THE TENTH ANNIVERSARY, EVEN IF
WITHDRAWN TO SATISFY REQUIRED MINIMUM DISTRIBUTION RULES, WILL CAUSE YOU TO
LOSE THE ABILITY TO RECEIVE THE RETURN OF PRINCIPAL GUARANTEE AND THE
GUARANTEED AMOUNT DESCRIBED ABOVE UNDER "KEY FEATURE - PROTECTED WITHDRAWAL
VALUE".
As indicated, withdrawals made while this benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this benefit here.
However, we do note that if you participate in Highest Daily Lifetime 7 Plus
through a nonqualified annuity, as with all withdrawals, once all purchase
payments are returned under the Annuity, all subsequent withdrawal amounts will
be taxed as ordinary income.
If you take a partial withdrawal to satisfy RMD and designate that withdrawal
as a Non-Lifetime Withdrawal, please note all Non-Lifetime Withdrawal
provisions will apply.
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HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME
OPTION.
We previously offered an optional death benefit feature under Highest Daily
Lifetime 7 Plus, the amount of which is linked to your Annual Income Amount. We
refer to this optional death benefit as the Beneficiary Income Option or BIO.
Highest Daily Lifetime 7 Plus with BIO is no longer available for new
elections. Please note that if you terminate Highest Daily Lifetime 7 Plus with
BIO and elect any other available living benefit you lose the guarantees that
you had accumulated under your existing benefit and we will base any guarantees
under the new benefit on your Account Value as of the date the new benefit
becomes active. As long as your Highest Daily Lifetime 7 Plus with Beneficiary
Income Option is in effect, you must allocate your Account Value in accordance
with the then permitted and available investment option(s) with this benefit.
This benefit could be elected, provided that all owners and beneficiaries are
natural persons or an agent acting for a natural person.
If you elected this death benefit, you could not elect any other optional
benefit. You could have elected the Beneficiary Income Option death benefit so
long as the Annuitant was no older than age 75 at the time of election and met
the Highest Daily Lifetime 7 Plus age requirements. For purposes of this
optional death benefit, we calculate the Annual Income Amount and Protected
Withdrawal Value in the same manner that we do under Highest Daily Lifetime 7
Plus itself. However, we will stop determining the Periodic Value (as described
above) on the earlier of your first Lifetime Withdrawal after the effective
date of the benefit or the Tenth Anniversary Date. This means that under the
Highest Daily Lifetime 7 Plus with BIO benefit you will not be eligible for the
guaranteed minimum Periodic Values described above on the 20/th/ and 25/th/
Anniversary of the Benefit Effective Date. If you choose the Highest Daily
Lifetime 7 Plus with BIO, the maximum charge is 2.00% of the greater of Account
Value and the Protected Withdrawal Value ("PWV") annually. The current charge
is 1.10% annually of the greater of the Account Value and the PWV. We deduct
this charge on each quarterly anniversary of the benefit effective date. Thus,
on each such quarterly anniversary (or the next Valuation Day, if the quarterly
anniversary is not a Valuation Day), we deduct 0.275% of the greater of the
prior day's Account Value or the prior day's Protected Withdrawal Value at the
end of the quarter. We deduct the fee pro rata from each of the Sub-accounts
including the AST Investment Grade Bond Sub-account and from the DCA Fixed Rate
Option (if applicable). Because the fee for this benefit is based on the
greater of the Account Value or the Protected Withdrawal Value, the fee for
Highest Daily Lifetime 7 Plus with the Beneficiary Income Option may be greater
than it would have been based on the Account Value alone. If the fee to be
deducted exceeds the current Account Value, we will reduce the Account Value to
zero and, continue the benefit as described below.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic death benefit under
the Annuity, (b) the Protected Withdrawal Value, and (c) the Annual Income
Amount. If there were no Lifetime Withdrawals prior to the date of death, then
we calculate the Protected Withdrawal Value for purposes of this death benefit
as of the date of death, and we calculate the Annual Income Amount as if there
were a withdrawal on the date of death. If there were Lifetime Withdrawals
prior to the date of death, then we set the Protected Withdrawal Value and
Annual Income Amount for purposes of this death benefit as of the date that we
receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Each beneficiary can choose to take his/her
portion of either (a) the basic death benefit, or (b) the Beneficiary Income
Option death benefit. If chosen, for qualified Annuities, the Beneficiary
Income Option death benefit payments must begin no later than December 31/st/
of the year following the annuity owner's date of death. For nonqualified
Annuities, the Beneficiary Income Option death benefit payments must begin no
later than one year after the owner's date of death. For nonqualified
annuities, if the beneficiary is other than an individual, payment under the
Beneficiary Income Option may be limited to a period not exceeding five years
from the owner's date of death. In order to receive the Beneficiary Income
Option death benefit, each beneficiary's share of the death benefit proceeds
must be allocated as a percentage of the total death benefit to be paid. We
allow a beneficiary who has opted to receive the Annual Income Amount to
designate another beneficiary, who would receive any remaining payments upon
the former beneficiary's death. Note also that the final payment, exhausting
the Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected Withdrawal
Value is $100,000, and the Annual Income Amount is $5,000; (ii) there are
two beneficiaries (the first designated to receive 75% of the death benefit
and the second designated to receive 25% of the death benefit); (iii) the
first beneficiary chooses to receive his/her portion of the death benefit in
the form of the Annual Income Amount, and the second beneficiary chooses to
receive his/her portion of the death benefit with reference to the basic
death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out period
is derived from the $5,000 Annual Income Amount, paid each year until it
exhausts the entire $100,000 Protected Withdrawal Value). The pro-rated
portion of the Annual Income Amount, equal to $3,750 annually (i.e., the
first beneficiary's 75% share multiplied by $5,000), is then paid each year
for the 20 year period. Payment of $3,750 for 20 years results in total
payments of $75,000 (i.e., the first beneficiary's 75% share of the $100,000
Protected Withdrawal Value). The second beneficiary would receive 25% of the
basic death benefit amount (or $12,500).
If you elect to terminate Highest Daily Lifetime 7 Plus with Beneficiary Income
Option, both Highest Daily Lifetime 7 Plus and that death benefit option will
be terminated. You may not terminate the death benefit option without
terminating the entire benefit. If you terminate Highest Daily
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Lifetime 7 Plus with Beneficiary Income Option, your ability to elect other
optional living benefits will be affected as indicated in the "Election of and
Designations under the Benefit" section above.
HIGHEST DAILY LIFETIME 7 PLUS WITH LIFETIME INCOME ACCELERATOR/SM/
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME 7 PLUS WITH LIFETIME INCOME
ACCELERATOR.
In the past, we offered a version of Highest Daily Lifetime 7 Plus called
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator ("Highest Daily
Lifetime 7 Plus with LIA"). You could choose Highest Daily Lifetime 7 Plus with
or without also electing LIA, however you could not elect LIA without Highest
Daily Lifetime 7 Plus and you could elect the LIA benefit at the time you elect
Highest Daily Lifetime 7 Plus. Please note that if you terminate Highest Daily
Lifetime 7 Plus with LIA and elect any other available living benefit you lose
the guarantees that you had accumulated under your existing benefit and we will
base any guarantees under the new benefit on your Account Value as of the date
the new benefit becomes active. If you elected this benefit, you may not have
elected any other optional benefit. As long as your Highest Daily Lifetime 7
Plus with LIA benefit is in effect, you must allocate your Account Value in
accordance with the then permitted and available investment option(s) with this
benefit. The income benefit under Highest Daily Lifetime 7 Plus with LIA was
based on a single "designated life" who was between the ages of 45 and 75 on
the date that the benefit is elected. All terms and conditions of Highest Daily
Lifetime 7 Plus apply to this version of the benefit, except as described
herein.
Highest Daily Lifetime 7 Plus with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
Highest Daily Lifetime 7 Plus with LIA guarantees, until the death of the
single designated life, the ability to withdraw an amount equal to double the
Annual Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. If you choose the Highest Daily Lifetime 7 Plus
with LIA, the maximum charge is 2.00% of the greater of Account Value and the
Protected Withdrawal Value ("PWV") annually. The current charge is 1.10%
annually of the greater of Account Value and the PWV. We deduct this charge on
each quarterly anniversary of the benefit effective date. Thus, on each such
quarterly anniversary (or the next Valuation Day, if the quarterly anniversary
is not a Valuation Day), we deduct 0.275% of the greater of the prior day's
Account Value, or the prior day's Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of the Sub-accounts including the
AST Investment Grade Bond Sub-account and the DCA Fixed Rate Option (if
applicable). Since this fee is based on the greater of Account Value or the
Protected Withdrawal Value, the fee for Highest Daily Lifetime 7 Plus with LIA
may be greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the current Account Value, we will
reduce the Account Value to zero, and continue the benefit as described below.
If this benefit is being elected on an Annuity held as a 403(b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403(b) plan
itself.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT. Both a waiting period of 36 months
from the benefit effective date, and an elimination period of 120 days from the
date of notification that one or both of the requirements described immediately
below have been met, apply before you can become eligible for the LIA Amount.
Assuming the 36 month waiting period has been met and we have received the
notification referenced in the immediately preceding sentence, the LIA amount
would be available for withdrawal on the Valuation Day immediately after the
120/th/ day. The waiting period and the elimination period may run
concurrently. In addition to satisfying the waiting and elimination period, at
least one of the following requirements ("LIA conditions") must be met.
(1) The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2) The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a
receptacle (such as a plate, cup or table) or by a feeding tube or
intravenously.
ii. Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii. Bathing: Washing oneself by sponge bath; or in either a tub or
shower, including the task of getting into or out of the tub or
shower.
iv. Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi. Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability
to perform personal hygiene (including caring for catheter or
colostomy bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount. If
there are 120 days or less remaining until the end of the waiting period when
we receive notification that the LIA conditions are met, we will determine
eligibility for the LIA Amount through our then current administrative process,
which may include, but is not limited to, documentation verifying the LIA
conditions and/or an assessment by a third party of our choice. Such assessment
may be in person and we will assume any costs associated with the
aforementioned assessment.
147
Once eligibility is determined, the LIA Amount is equal to double the Annual
Income Amount as described above under the Highest Daily Lifetime 7 Plus
benefit.
Additionally, once eligibility is determined, we will reassess your eligibility
on an annual basis although your LIA benefit for the year that immediately
precedes our reassessment will not be affected if it is determined that you are
no longer eligible. Your first reassessment may occur in the same year as your
initial assessment. If we determine that you are no longer eligible to receive
the LIA Amount, the Annual Income Amount would replace the LIA Amount on the
next Annuity Anniversary (the "ineligibility effective date"). However, 1) if
you were receiving income through a systematic withdrawal program that was
based on your LIA Amount; 2) you subsequently become ineligible to receive your
LIA Amount, and 3) we do not receive new withdrawal instructions from you prior
to the ineligibility effective date, we will cancel such systematic withdrawal
program on the ineligibility effective date. You will be notified of your
subsequent ineligibility and the date systematic withdrawal payments will stop
before either occur. If any existing systematic withdrawal program is canceled,
you must enroll in a new systematic withdrawal program if you wish to receive
income on a systematic basis. You may establish a new or make changes to any
existing systematic withdrawal program at any time by contacting our Annuity
Service Office. All "Excess Income" conditions described above in "Key Feature
- Annual Income Amount under the Highest Daily Lifetime 7 Plus Benefit" would
apply. There is no limit on the number of times you can become eligible for the
LIA Amount, however, each time would require the completion of the 120-day
elimination period, notification that the designated life meets the LIA
conditions, and determination, through our then current administrative process,
that you are eligible for the LIA Amount, each as described above.
LIA AMOUNT AT THE FIRST LIFETIME WITHDRAWAL.
If your first Lifetime Withdrawal subsequent to election of Highest Daily
Lifetime 7 Plus with LIA occurs while you are eligible for the LIA Amount, the
available LIA Amount is equal to double the Annual Income Amount.
LIA AMOUNT AFTER THE FIRST LIFETIME WITHDRAWAL.
If you become eligible for the LIA Amount after you have taken your first
Lifetime Withdrawal, the available LIA amount for the current and subsequent
Annuity Years is equal to double the then current Annual Income Amount, however
the available LIA amount in the current Annuity Year is reduced by any Lifetime
Withdrawals that have been taken in the current Annuity Year. Cumulative
Lifetime Withdrawals in an Annuity Year which are less than or equal to the LIA
Amount (when eligible for the LIA amount) will not reduce your LIA Amount in
subsequent Annuity Years, but any such withdrawals will reduce the LIA Amount
on a dollar-for-dollar basis in that Annuity Year.
WITHDRAWALS IN EXCESS OF THE LIA AMOUNT.
If your cumulative Lifetime Withdrawals in an Annuity Year are in excess of the
LIA Amount when you are eligible ("Excess Withdrawal"), your LIA Amount in
subsequent years will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the excess portion of the
withdrawal to the Account Value immediately prior to the Excess Withdrawal.
Reductions include the actual amount of the withdrawal, including any CDSC that
may apply. Withdrawals of any amount (excluding the Non-Lifetime Withdrawal) up
to and including the LIA Amount will reduce the Protected Withdrawal Value by
the amount of the withdrawal. Excess Withdrawals will reduce the Protected
Withdrawal Value by the same ratio as the reduction to the LIA Amount. Any
withdrawals that are less than or equal to the LIA amount (when eligible) but
in excess of the free withdrawal amount available under this Annuity will not
incur a CDSC.
Withdrawals are not required. However, subsequent to the first Lifetime
Withdrawal, the LIA Amount is not increased in subsequent Annuity Years if you
decide not to take a withdrawal in an Annuity Year or take withdrawals in an
Annuity Year that in total are less than the LIA Amount.
PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
STEP UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount when you
are eligible, or as a result of the fee that we assess for Highest Daily
Lifetime 7 Plus with LIA, and there is still a LIA Amount available, we will
make an additional payment for that Annuity Year equal to the remaining LIA
Amount. If you have not begun taking Lifetime Withdrawals and your Account
Value is reduced to zero as a result of the fee we assess for Highest Daily
Lifetime 7 Plus with LIA, we will calculate the Annual Income Amount and any
LIA amount if you are eligible, as if you made your first Lifetime Withdrawal
on the date the Account Value was reduced to zero and Lifetime Withdrawals will
begin on the next Annuity Anniversary. If this were to occur, you are not
permitted to make additional purchase payments to your Annuity. Thus, in these
scenarios, the remaining LIA Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the LIA Amount as described in this section. We will make payments until
the death of the single designated life. Should the designated life no longer
qualify for the LIA amount (as described under "Eligibility Requirements for
LIA Amount" above), the Annual Income Amount would continue to be available.
Subsequent eligibility for the LIA Amount would require the completion of the
120 day elimination period as well as meeting the LIA conditions listed above
under "Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime 7 Plus with LIA terminates, and no
additional payments are permitted.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime 7 Plus Annuity
Options described above, after the Tenth Anniversary you may also request that
we make annuity payments each year equal to the Annual Income Amount. In any
year that you are eligible for the LIA Amount, we
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make annuity payments equal to the LIA Amount. If you would receive a greater
payment by applying your Account Value to receive payments for life under your
Annuity, we will pay the greater amount. Annuitization prior to the Tenth
Anniversary will forfeit any present or future LIA amounts. We will continue to
make payments until the death of the Designated Life. If this option is
elected, the Annual Income Amount and LIA Amount will not increase after
annuity payments have begun.
If you elect Highest Daily Lifetime 7 Plus with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT (SHD7 PLUS)
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS BENEFIT.
Spousal Highest Daily Lifetime 7 Plus is the spousal version of Highest Daily
Lifetime 7 Plus. We no longer offer Spousal Highest Daily Lifetime 7 Plus. If
you elected Spousal Highest Daily Lifetime 7 Plus and subsequently terminate
the benefit, you may elect another available living benefit, subject to our
current rules. See "Termination of Existing Benefits and Election New
Benefits". Please note that if you terminate Spousal Highest Daily Lifetime 7
Plus and elect another benefit, you lose the guarantees that you had
accumulated under your existing benefit and we will base any guarantees under
the new benefit on your Account Value as of the date the new benefit becomes
active. Spousal Highest Daily Lifetime 7 Plus could have been elected based on
two Designated Lives, as described below. The youngest Designated Life must
have been at least 50 years old and the oldest Designated Life must have been
at least 55 years old when the benefit was elected. Spousal Highest Daily
Lifetime 7 Plus is not available if you elected any other optional benefit. As
long as your Spousal Highest Daily Lifetime 7 Plus Benefit is in effect, you
must allocate your Account Value in accordance with the then permitted and
available investment option(s) with this benefit. For a more detailed
description of permitted investment options, see the "Investment Options"
section in this prospectus.
We previously offered a benefit that guarantees until the later death of two
natural persons who are each other's spouses at the time of election of the
benefit and at the first death of one of them (the "Designated Lives", and
each, a "Designated Life") the ability to withdraw an annual amount (the
"Annual Income Amount") equal to a percentage of an initial principal value
(the "Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our rules regarding the timing and
amount of withdrawals. You are guaranteed to be able to withdraw the Annual
Income Amount for the lives of the Designated Lives ("Lifetime Withdrawals")
provided you have not made "excess withdrawals" that have resulted in your
Account Value being reduced to zero. We also permit a one-time Non-Lifetime
Withdrawal from your Annuity prior to taking Lifetime Withdrawals under the
benefit. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, wish to ensure that Sub-account performance will
not affect your ability to receive annual payments, and wish either spouse to
be able to continue the Spousal Highest Daily Lifetime 7 Plus benefit after the
death of the first spouse. You are not required to make withdrawals as part of
the benefit - the guarantees are not lost if you withdraw less than the maximum
allowable amount each year under the rules of the benefit. As discussed below,
we require that you participate in our pre-determined mathematical formula in
order to participate in Spousal Highest Daily Lifetime 7 Plus. Withdrawals are
taken first from your own Account Value. We are only required to begin making
lifetime income payments to you under our guarantee when and if your Account
Value is reduced to zero (unless the benefit has terminated).
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Account Value falls to zero, if you take an excess
withdrawal that brings your Account Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under Spousal Highest Daily Lifetime 7 Plus.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the Periodic
Value upon your first Lifetime Withdrawal after the effective date of the
benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
(2) the Account Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value on
the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
(1) the Periodic Value described above or,
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(2) the sum of (a), (b) and (c) (proportionally reduced for any Non-Lifetime
Withdrawal):
(a) 200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Account Value on the effective
date of the benefit;
(b) 200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted purchase payments
made within one year following the effective date of the benefit; and
(c) All adjusted purchase payments made after one year following the
effective date of the benefit.
If you elect Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income
Option ("BIO") (see below), we will stop determining the Periodic Value (as
described above) on the earlier of your first Lifetime Withdrawal after the
effective date of the benefit or the Tenth Anniversary of the effective date of
the benefit ("Tenth Anniversary"). This means that under the Spousal Highest
Daily Lifetime 7 Plus with BIO benefit you will not be eligible for the
guaranteed minimum Periodic Values described above on the 20/th/ and 25/th/
Anniversary of the Benefit Effective Date.
On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent purchase
payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
RETURN OF PRINCIPAL GUARANTEE
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Account Value on that Tenth Anniversary (or the next
Valuation Day, if that anniversary is not a Valuation Day), if the requirements
set forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Spousal Highest Daily
Lifetime 7 Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal (including the amount of any associated Credits)
you made during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b), by
contributing funds from our general account. If the sum of (a) and (b) is less
than or equal to your Account Value on the Tenth Anniversary, we make no such
adjustment. The amount that we add to your Account Value under this provision
will be allocated to each of your variable investment options (including the
AST Investment Grade Bond Sub-account used with this benefit), in the same
proportion that each such Sub-account bears to your total Account Value,
immediately before the application of the amount. Any such amount will not be
considered a Purchase Payment when calculating your Protected Withdrawal Value,
your death benefit, or the amount of any optional benefit that you may have
selected, and therefore will have no direct impact on any such values at the
time we add this amount. Because the amount is added to your Account Value, it
will also be subject to each charge under your Annuity based on Account Value.
This potential addition to Account Value is available only if you have elected
Spousal Highest Daily Lifetime 7 Plus and if you meet the conditions set forth
in this paragraph. Thus, if you take a withdrawal, including a required minimum
distribution, (other than a Non-Lifetime Withdrawal) prior to the Tenth
Anniversary, you are not eligible to receive the Return of Principal Guarantee.
The Return of Principal Guarantee is referred to as the Guaranteed Minimum
Account Value Credit in the benefit rider.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME 7
PLUS BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the youngest Designated Life on the date of the first Lifetime
Withdrawal after election of the benefit. The percentages are: 4% for ages 50 -
less than 59 1/2, 5% for ages 59 1/2-79, 6% for ages 80 to 84, 7% for ages 85
to 89, and 8% for ages 90 and older. We use the age of the youngest Designated
Life even if that Designated Life is no longer a participant under the Annuity
due to death or divorce.
Under the Spousal Highest Daily Lifetime 7 Plus benefit, if your cumulative
Lifetime Withdrawals in an Annuity Year are less than or equal to the Annual
Income Amount, they will not reduce your Annual Income Amount in subsequent
Annuity Years, but any such withdrawals will reduce the Annual Income Amount on
a dollar-for-dollar basis in that Annuity Year. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the Annual Income Amount for
any Annuity Year ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions for
this Annuity that comply with our rules) by the result of the ratio of the
Excess Income to the Account Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions are based on the actual amount
of the withdrawal, including any CDSC that may apply. Lifetime Withdrawals of
any amount up to and including the Annual Income Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Withdrawals of
Excess Income will reduce the Protected Withdrawal Value by the same ratio as
the reduction to the Annual Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the Annual
Income Amount. Any systematic withdrawal will be deemed a Lifetime Withdrawal
under this benefit.
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Any Purchase Payment that you make subsequent to the election of Spousal
Highest Daily Lifetime 7 Plus will (i) increase the then-existing Annual Income
Amount by an amount equal to a percentage of the Purchase Payment (including
the amount of any associated Credit) based on the age of the younger Annuitant
at the time of the first Lifetime Withdrawal (the percentages are: 4% for ages
50 - less than 59 1/2, 5% for ages 59 1/2-79, 6% for ages 80-84, 7% for ages
85-89, and 8% for ages 90 and older), and (ii) increase the Protected
Withdrawal Value by the amount of the Purchase Payment (including the amount of
any associated Credit).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, we no longer accept additional Purchase Payments for
Annuities with the Spousal Highest Daily Lifetime 7 Plus benefit.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of this
benefit. As detailed in this paragraph, the Highest Daily Auto Step-Up feature
can result in a larger Annual Income Amount subsequent to your first Lifetime
Withdrawal. The Highest Daily Step-Up starts with the anniversary of the Issue
Date of the Annuity (the "Annuity Anniversary") immediately after your first
Lifetime Withdrawal under the benefit. Specifically, upon the first such
Annuity Anniversary, we identify the Account Value on each Valuation Day within
the immediately preceding Annuity Year after your first Lifetime Withdrawal.
Having identified the highest daily value (after all daily values have been
adjusted for subsequent purchase payments and withdrawals), we then multiply
that value by a percentage that varies based on the age of the youngest
Designated Life on the Annuity Anniversary as of which the step-up would occur.
The percentages are 4% for ages 50 - less than 59 1/2, 5% for ages 59 1/2-79,
6% for ages 80-84, 7% for ages 85-89, and 8% for ages 90 and older. If that
value exceeds the existing Annual Income Amount, we replace the existing amount
with the new, higher amount. Otherwise, we leave the existing Annual Income
Amount intact. The Account Value on the Annuity Anniversary is considered the
last daily step-up value of the Annuity Year. In later years (i.e., after the
first Annuity Anniversary after the first Lifetime Withdrawal), we determine
whether an automatic step-up should occur on each Annuity Anniversary by
performing a similar examination of the Account Values that occurred on
Valuation Days during the year. At the time that we increase your Annual Income
Amount, we also increase your Protected Withdrawal Value to equal the highest
daily value upon which your step-up was based only if that results in an
increase to the Protected Withdrawal Value. Your Protected Withdrawal Value
will never be decreased as a result of an income step-up. If, on the date that
we implement a Highest Daily Auto Step-Up to your Annual Income Amount, the
charge for Spousal Highest Daily Lifetime 7 Plus has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Spousal Highest Daily Lifetime 7 Plus upon
a step-up, we would notify you, and give you the opportunity to cancel the
automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Spousal Highest Daily Lifetime 7 Plus benefit does not affect your ability
to make withdrawals under your Annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 7 Plus, if your cumulative Lifetime Withdrawals in an Annuity Year are
less than or equal to the Annual Income Amount, they will not reduce your
Annual Income Amount in subsequent Annuity Years, but any such withdrawals will
reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity
Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is possible
for the Account Value to fall to zero, even though the Annual Income Amount
remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime 7 Plus benefit or any other fees and charges. Assume the following for
all three examples:
.. The Issue Date is December 1, 2008
.. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
.. The younger Designated Life was 70 years old when he/she elected the Spousal
Highest Daily Lifetime 7 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the youngest designated life is
between the ages of 59 1/2 and 79 at the time of the first Lifetime Withdrawal,
the Annual Income Amount is 5% of the Protected Withdrawal Value, in this case
5% of $120,000). Assuming $2,500 is withdrawn from the Annuity on this date,
the remaining Annual Income Amount for that Annuity Year (up to and including
December 1, 2009) is $3,500. This is the result of a dollar-for-dollar
reduction of the Annual Income Amount ($6,000 less $2,500 = $3,500).
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EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the youngest Designated Life's age on the
Annuity Anniversary) of the highest daily value since your first Lifetime
Withdrawal (or last Annuity Anniversary in subsequent years), adjusted for
withdrawals and additional purchase payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional purchase payments
(including the amount of any associated Credits).
Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on November 27 reduces the
amount to $5,921.40 for future years (see above). For the next Annuity Year,
the Annual Income Amount will be stepped up if 5% (since the youngest
Designated Life is between 59 1/2 and 79 on the date of the potential step-up)
of the highest daily Account Value adjusted for withdrawals and purchase
payments (including credits), is higher than $5921.40. Here are the
calculations for determining the daily values. Only the November 25 value is
being adjusted for excess withdrawals as the November 30 and December 1
Valuation Days occur after the excess withdrawal on November 27.
HIGHEST DAILY VALUE ADJUSTED ANNUAL
(ADJUSTED WITH WITHDRAWAL INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ------------------------- ------------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Spousal Highest Daily Lifetime 7 Plus. It is an optional feature of the
benefit that you can only elect at the time of your first withdrawal. You
cannot take a Non-Lifetime Withdrawal in an amount that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the minimum
Surrender Value (see "Access to Account Value - Can I Surrender My Annuity for
Its Value?"). This Non-Lifetime Withdrawal will not establish your initial
Annual Income Amount and the Periodic Value above will continue to be
calculated. However, the total amount of the withdrawal will proportionally
reduce all guarantees associated with
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the Spousal Highest Daily Lifetime 7 Plus benefit. You must tell us if your
withdrawal is intended to be the Non-Lifetime Withdrawal and not the first
Lifetime Withdrawal under the Spousal Highest Daily Lifetime 7 Plus benefit. If
you don't elect the Non-Lifetime Withdrawal, the first withdrawal you make will
be the first Lifetime Withdrawal that establishes your Protected Withdrawal
Value and Annual Income Amount. Once you elect the Non-Lifetime Withdrawal or
Lifetime Withdrawals, no additional Non-Lifetime Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected Withdrawal
Value and the Return of Principal guarantee. It will also proportionally reduce
the Periodic Value guarantees on the tenth, twentieth and twenty-fifth
anniversaries of the benefit effective date (see description in "Key Feature -
Protected Withdrawal Value," above). It will reduce all three by the percentage
the total withdrawal amount (including any applicable CDSC) represents of the
then current Account Value immediately prior to the time of the withdrawal. As
such, you should carefully consider when it is most appropriate for you to
begin taking withdrawals under the benefit.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
Assume the following:
. The Issue Date is December 1, 2008
. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5,
2009
. The Account Value at benefit election was $105,000
. The younger Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 7 Plus benefit
. No previous withdrawals have been taken under the Spousal Highest Daily
Lifetime 7 Plus benefit
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10/th/ benefit
year minimum Periodic Value guarantee is $210,000, the 10/th/ benefit year
Return of Principal guarantee is $105,000, the 20/th/ benefit year minimum
Periodic Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic
Value guarantee is $630,000 and the Account Value is $120,000. Assuming $15,000
is withdrawn from the Annuity on May 2, 2009 and is designated as a
Non-Lifetime Withdrawal, all guarantees associated with the Spousal Highest
Daily Lifetime 7 Plus benefit will be reduced by the ratio the total withdrawal
amount represents of the Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION:
Withdrawal Amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Return of Principal $ 91,875
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
25/th/ benefit year Minimum Periodic Value $551,250
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required to
take as a required minimum distribution for this Annuity, will not reduce the
Annual Income Amount for future years. No additional Annual Income Amounts will
be available in an Annuity Year due to required minimum distributions unless
the required minimum distribution amount is greater than the Annual Income
Amount. Any withdrawal you take that exceeds the Annual Income Amount in
Annuity Years that your required minimum distribution amount is not greater
than the Annual Income Amount will be treated as an Excess Withdrawal under the
benefit. If the required minimum distribution (as calculated by us for your
Annuity and not previously withdrawn in the current calendar year) is greater
than the Annual Income Amount, an amount equal to the remaining Annual Income
Amount plus the difference between the required minimum distribution amount not
previously withdrawn in the current calendar year and the Annual Income Amount
will be available in the current Annuity Year without it being considered an
excess withdrawal. In the event that a required minimum distribution is
calculated in a calendar year that crosses more than one Annuity Year and you
choose to satisfy the entire required minimum distribution for that calendar
year in the next Annuity Year, the distribution taken in the next Annuity Year
will reduce your Annual Income Amount in that Annuity Year on a dollar for
dollar basis. If the required minimum distribution not taken in the prior
Annuity Year is greater than the Annual Income Amount as guaranteed by the
benefit in the current Annuity Year, the total required minimum distribution
amount may be taken without being treated as an excess withdrawal.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
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Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all guarantees associated with the
Spousal Highest Daily Lifetime 7 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you choose not to satisfy
the required minimum distribution in the current Annuity Year (assuming the
Annual Income Amount in the subsequent Annuity Year is $5,000) without being
treated as an Excess Withdrawal is $6,000. This withdrawal must comply with all
IRS guidelines in order to satisfy the required minimum distribution for the
current calendar year.
BENEFITS UNDER SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are equal to or less
than the Annual Income Amount or as a result of the fee that we assess for
Spousal Highest Daily Lifetime 7 Plus, and amounts are still payable under
Spousal Highest Daily Lifetime 7 Plus, we will make an additional payment,
if any, for that Annuity Year equal to the remaining Annual Income Amount
for the Annuity Year. If you have not begun taking Lifetime Withdrawals and
your Account Value is reduced to zero as a result of the fee we assess for
Spousal Highest Daily Lifetime 7 Plus, we will calculate the Annual Income
Amount as if you made your first Lifetime Withdrawal on the date the Account
Value was reduced to zero and Lifetime Withdrawals will begin on the next
Annuity Anniversary. If this were to occur, you are not permitted to make
additional purchase payments to your Annuity. Thus, in these scenarios, the
remaining Annual Income Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the Annual Income Amount as described in this section. We will make
payments until the death of the first of the Designated Lives to die, and
will continue to make payments until the death of the second Designated Life
as long as the Designated Lives were spouses at the time of the first death.
To the extent that cumulative withdrawals in the Annuity Year that reduced
your Account Value to zero are more than the Annual Income Amount, the
Spousal Highest Daily Lifetime 7 Plus benefit terminates, and no additional
payments will be made. However, if a withdrawal in the latter scenario was
taken to satisfy a required minimum distribution under the Annuity the
benefit will not terminate, and we will continue to pay the Annual Income
Amount in subsequent Annuity Years until the death of the second Designated
Life provided the Designated lives were spouses at the death of the first
Designated Life.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated
Life as long as the Designated Lives were spouses at the time of the
first death. If, due to death of a Designated Life or divorce prior to
annuitization, only a single Designated Life remains, then Annuity
payments will be made as a life annuity for the lifetime of the
Designated Life. We must receive your request in a form acceptable to
us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
Annuity payments will be the greater of:
(1) the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Annuity; and
(2) the Account Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
. Please note that payments that we make under this benefit after the
Annuity Anniversary coinciding with or next following the older of the
owner or Annuitant's 95/th/ birthday will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime 7 Plus benefit are
subject to all of the terms and conditions of the Annuity, including any
applicable CDSC for the Non-Lifetime Withdrawal as well as withdrawals that
exceed the Annual Income Amount.
.. Withdrawals made while the Spousal Highest Daily Lifetime 7 Plus benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
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.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime 7
Plus benefit. The Spousal Highest Daily Lifetime 7 Plus benefit provides a
guarantee that if your Account Value is reduced to zero (subject to program
rules regarding the timing and amount of withdrawals), you will be able to
receive your Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge. On the other hand, you
could limit the value of the benefit if you begin taking withdrawals too
soon. For example, withdrawals reduce your Account Value and may limit the
potential for increasing your Protected Withdrawal Value. You should discuss
with your Financial Professional when it may be appropriate for you to begin
taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. Upon inception of the benefit, and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (as described below) if
you elected this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears in the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Spousal Highest Daily Lifetime 7
Plus pre-determined mathematical formula will not count toward the maximum
number of free transfers allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Spousal
Highest Daily Lifetime 7 Plus benefit. If, subsequent to your election of
the benefit, we change our requirements for how Account Value must be
allocated under the benefit, we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements. Subject to
any change in requirements, transfers of Account Value and allocation of
Additional purchase payments may be subject to new investment limitations.
.. The maximum fee for Spousal Highest Daily Lifetime 7 Plus is 1.50% annually
of the greater of Account Value and the Protected Withdrawal Value. The
current fee for Spousal Highest Daily Lifetime 7 Plus is 0.90% annually of
the greater of Account Value and the Protected Withdrawal Value. We deduct
this fee on each quarterly anniversary of the benefit effective date. Thus,
on each such quarterly anniversary (or the next Valuation Day, if the
quarterly anniversary is not a Valuation Day), we deduct 0.225% of the
greater of the prior day's Account Value, or the prior day's Protected
Withdrawal Value at the end of the quarter. We deduct the fee pro rata from
each of the Sub-accounts including the AST Investment Grade Bond Sub-account
and from the DCA Fixed Rate Option (if applicable). Since this fee is based
on the greater of the Account Value and the Protected Withdrawal Value, the
fee for Spousal Highest Daily Lifetime 7 Plus may be greater than it would
have been, had it been based on the Account Value alone. If the fee to be
deducted exceeds the Account Value, we will reduce the Account Value to
zero, and continue the benefit as described above. You will begin paying the
charge for this benefit as of the effective date of the benefit, even if you
do not begin taking withdrawals for many years, or ever. We will not refund
the charges you have paid if you choose never to take any withdrawals and/or
if you never receive any lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under Spousal
Highest Daily Lifetime 7 Plus cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under
Spousal Highest Daily Lifetime 7 Plus cause your Account Value to reduce to
zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Spousal Highest Daily Lifetime 7 Plus.
Spousal Highest Daily Lifetime 7 Plus could only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each other's
spouses at the time of election of the benefit and at the death of the first of
the Designated Lives to die. Spousal Highest Daily Lifetime 7 Plus only could
be elected where the Owner, Annuitant, and Beneficiary designations are as
follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person and
the beneficiary is the Owner's spouse. The youngest Owner/Annuitant and the
beneficiary must be at least 50 years old and the oldest must be at least 55
years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. The youngest Owner must be
at least 50 years old and the oldest owner must be at least 55 years old at
the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. The youngest of the Annuitant and the Contingent Annuitant must
be at least 50 years old and the oldest must be at least 55 years old at the
time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity, or
(b) if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary
designations under this benefit. If the Designated Lives divorce, however, the
Spousal Highest Daily Lifetime 7 Plus benefit may not be divided as part of the
divorce settlement or judgment. Nor may the divorcing spouse who retains
ownership of the Annuity appoint a new Designated Life upon re-marriage. Our
current administrative procedure is to treat the division of an Annuity as a
withdrawal from the existing
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Annuity. The non-owner spouse may then decide whether he or she wishes to use
the withdrawn funds to purchase a new Annuity, subject to the rules that are
current at the time of purchase.
Spousal Highest Daily Lifetime 7 Plus could have been elected at the time that
you purchased your Annuity or after the Issue Date, subject to our eligibility
rules and restrictions. See "Termination of Existing Benefits and Election of
New Benefits" below for information pertaining to elections, termination and
re-election of benefits. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT AND
ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED
UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW
BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE
RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY
IN THE FUTURE.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election may
apply. The benefit automatically terminates: (i) if upon the death of the first
Designated Life, the surviving Designated Life opts to take the death benefit
under the Annuity (thus, the benefit does not terminate solely because of the
death of the first Designated Life), (ii) upon the death of the second
Designated Life, (iii) upon your termination of the benefit, (iv) upon your
surrender of the Annuity, (v) upon your election to begin receiving annuity
payments (although if you have elected to take annuity payments in the form of
the Annual Income Amount, we will continue to pay the Annual Income Amount),
(vi) if both the Account Value and Annual Income Amount equal zero, or (vii) if
you cease to meet our requirements as described in "Election of and
Designations under the Benefit".
Upon termination of Spousal Highest Daily Lifetime 7 Plus other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts that
are held in the variable investment options, and (ii) transfer all amounts held
in the AST Investment Grade Bond Portfolio Sub-account (as defined below) to
your variable investment options based on your existing allocation instructions
or (in the absence of such instruction) pro rata (i.e. in the same proportion
as the current balances in your variable investment options).
HOW SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
See "How Highest Daily Lifetime 7 Plus Transfers Account Value Between Your
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account" in this
Prospectus for information regarding this component of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2 . For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. PLEASE NOTE THAT ANY WITHDRAWAL (EXCEPT THE
NON-LIFETIME WITHDRAWAL) YOU TAKE PRIOR TO THE TENTH ANNIVERSARY, EVEN IF
WITHDRAWN TO SATISFY REQUIRED MINIMUM DISTRIBUTION RULES, WILL CAUSE YOU TO
LOSE THE ABILITY TO RECEIVE THE RETURN OF PRINCIPAL GUARANTEE AND THE
GUARANTEED AMOUNT DESCRIBED ABOVE UNDER "KEY FEATURE - PROTECTED WITHDRAWAL
VALUE".
As indicated, withdrawals made while this benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this benefit here.
However, we do note that if you participate in Spousal Highest Daily Lifetime 7
Plus through a nonqualified annuity, as with all withdrawals, once all purchase
payments are returned under the Annuity, all subsequent withdrawal amounts will
be taxed as ordinary income.
If you take a partial withdrawal to satisfy RMD and designate that withdrawal
as a Non-Lifetime Withdrawal, please note all Non-Lifetime Withdrawal
provisions will apply.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION
EFFECTIVE SEPTEMBER 14, 2012, WE NO LONGER ACCEPT ADDITIONAL PURCHASE PAYMENTS
FOR ANNUITIES WITH THE SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY
INCOME OPTION.
We previously offered an optional death benefit feature under Spousal Highest
Daily Lifetime 7 Plus, the amount of which is linked to your Annual Income
Amount. We refer to this optional death benefit as the Beneficiary Income
Option or BIO. Spousal Highest Daily Lifetime 7 Plus with BIO is no longer
available for new elections. You could choose Spousal Highest Daily Lifetime 7
Plus with or without also selecting the Beneficiary Income Option death
benefit. However, you could not elect the Beneficiary Income Option without
Spousal Highest Daily Lifetime 7 Plus and you could elect the Beneficiary
Income Option death benefit at the time you elect Spousal Highest Daily
Lifetime 7 Plus. Please note that if you terminate Spousal Highest Daily
Lifetime 7 Plus with BIO and elect any available living benefit you lose the
guarantees that you had accumulated under your existing benefit and we will
base any guarantees under the new benefit on your Account Value as of the date
the new benefit
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becomes active. As long as your Spousal Highest Daily Lifetime 7 Plus with
Beneficiary Income Option is in effect, you must allocate your Account Value in
accordance with the then permitted and available investment option(s) with this
benefit.
If you elected the Beneficiary Income Option death benefit, you could not elect
any other optional benefit. You could elect the Beneficiary Income Option death
benefit so long as each Designated Life is no older than age 75 at the time of
election and the Spousal Highest Daily Lifetime 7 Plus age requirements are
met. This death benefit is not transferable in the event of a divorce, nor may
the benefit be split in accordance with any divorce proceedings or similar
instrument of separation. If you choose the Spousal Highest Daily Lifetime 7
Plus with BIO, the maximum charge is 2.00% of the greater of Account Value and
the Protected Withdrawal Value ("PWV") annually. The current charge is 1.10%
annually of the greater of Account Value and the PWV. We deduct this charge on
each quarterly anniversary of the benefit effective date. Thus, on each such
quarterly anniversary (or the next Valuation Day, if the quarterly anniversary
is not a Valuation Day), we deduct 0.275% of the greater of the prior day's
Account Value or the prior day's Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of the Sub-accounts, including
the AST Investment Grade Bond Sub-account and from the DCA Fixed Rate Option
(if applicable). Because the fee for this benefit is based on the greater of
the Account Value or the Protected Withdrawal Value, the fee for Spousal
Highest Daily Lifetime 7 Plus with the Beneficiary Income Option may be greater
than it would have been based on the Account Value alone. If the fee to be
deducted exceeds the current Account Value, we will reduce the Account Value to
zero, and continue the benefit as described below.
For purposes of this optional death benefit, we calculate the Annual Income
Amount and Protected Withdrawal Value in the same manner that we do under
Spousal Highest Daily Lifetime 7 Plus itself. However, we will stop determining
the Periodic Value (as described above) on the earlier of your first Lifetime
Withdrawal after the effective date of the benefit or the Tenth Anniversary
Date. This means that under the Spousal Highest Daily Lifetime 7 Plus with BIO
benefit you will not be eligible for the guaranteed minimum Periodic Values
described above on the 20/th/ and 25/th/ Anniversary of the Benefit Effective
Date. Upon the first death of a Designated Life, no amount is payable under the
Beneficiary Income Option death benefit. Upon the second death of a Designated
Life, we identify the following amounts: (a) the amount of the basic death
benefit under the Annuity, (b) the Protected Withdrawal Value (less any credits
associated with purchase payments applied within 12 months prior to the date of
death), and (c) the Annual Income Amount. If there were no Lifetime Withdrawals
prior to the date of death of the second Designated Life, then we calculate the
Protected Withdrawal Value for purposes of this death benefit as of the date of
death of the second Designated Life, and we calculate the Annual Income Amount
as if there were a Lifetime Withdrawal on the date of death of the second
Designated Life. If there were Lifetime Withdrawals prior to the date of death
of the second Designated Life, then we set the Protected Withdrawal Value and
Annual Income Amount for purposes of this death benefit as of the date that we
receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payments of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her portion
of either (a) the basic Death Benefit, or (b) the Beneficiary Income Option
death benefit. If chosen, for qualified Annuities, the Beneficiary Income
Option death benefit payments must begin no later than December 31/st/ of the
year following the annuity owner's date of death. For nonqualified Annuities,
the Beneficiary Income Option death benefit payments must begin no later than
one year after the owner's date of death. For nonqualified annuities, if the
beneficiary is other than an individual, payment under the Beneficiary Income
Option may be limited to a period not exceeding five years from the owner's
date of death. In order to receive the Beneficiary Income Option Death Benefit,
each beneficiary's share of the death benefit proceeds must be allocated as a
percentage of the total death benefit to be paid. We allow a beneficiary who
has opted to receive the Annual Income Amount to designate another beneficiary,
who would receive any remaining payments upon the former beneficiary's death.
Note also that the final payment, exhausting the Protected Withdrawal Value,
may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected Withdrawal
Value is $100,000, and the Annual Income Amount is $5,000; (ii) there are
two beneficiaries (the first designated to receive 75% of the death benefit
and the second designated to receive 25% of the death benefit); (iii) the
first beneficiary chooses to receive his/her portion of the death benefit in
the form of the Annual Income Amount, and the second beneficiary chooses to
receive his/her portion of the death benefit with reference to the basic
death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out period
is derived from the $5,000 Annual Income Amount, paid each year until it
exhausts the entire $100,000 Protected Withdrawal Value). The pro-rated
portion of the Annual Income Amount equal to $3,750 (i.e., the first
beneficiary's 75% share multiplied by $5,000) is then paid each year for the
20 year period. Payment of $3,750 for 20 years results in total payments of
$75,000 (i.e., the first beneficiary's 75% share of the $100,000 Protected
Withdrawal Value). The second beneficiary would receive 25% of the basic
death benefit amount (or $12,500).
If you elect to terminate Spousal Highest Daily Lifetime 7 Plus with
Beneficiary Income Option, both Spousal Highest Daily Lifetime 7 Plus and that
death benefit option will be terminated. You may not terminate the death
benefit option without terminating the entire benefit. If you terminate Spousal
Highest Daily Lifetime 7 Plus with Beneficiary Income Option, your ability to
elect other optional living benefits will be affected as indicated in the
"Election of and Designations under the Benefit" section.
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (HD 6 PLUS)
EFFECTIVE SEPTEMBER 14, 2012, HIGHEST DAILY LIFETIME 6 PLUS IS NO LONGER
AVAILABLE FOR NEW ELECTIONS AND WE NO LONGER ACCEPT ADDITIONAL PURCHASE
PAYMENTS FOR ANNUITIES WITH THE HIGHEST DAILY LIFETIME 6 PLUS BENEFIT.
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We offered a benefit that guarantees until the death of the single designated
life (the Annuitant) the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial value (the "Protected
Withdrawal Value") regardless of the impact of Sub-account performance on the
Account Value, subject to our rules regarding the timing and amount of
withdrawals. You are guaranteed to be able to withdraw the Annual Income Amount
for the rest of your life ("Lifetime Withdrawals"), provided that you have not
made withdrawals of excess income that have resulted in your Account Value
being reduced to zero. We also permit you to make a one-time Non-Lifetime
Withdrawal from your Annuity prior to taking Lifetime Withdrawals under the
benefit. Highest Daily Lifetime 6 Plus may be appropriate if you intend to make
periodic withdrawals from your Annuity, and wish to ensure that Sub-account
performance will not affect your ability to receive annual payments. You are
not required to take withdrawals as part of the benefit - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year under
the rules of the benefit. An integral component of Highest Daily Lifetime 6
Plus is the mathematical formula we employ that may periodically transfer your
Account Value to and from the AST Investment Grade Bond Sub-account. See the
section below entitled "How Highest Daily Lifetime 6 Plus Transfers Account
Value Between Your Permitted Sub-accounts and the AST Investment Grade Bond
Sub-account." Withdrawals are taken first from your own Account Value. We are
only required to begin making lifetime income payments to you under our
guarantee when and if your Account Value is reduced to zero (unless the benefit
has terminated).
The income benefit under Highest Daily Lifetime 6 Plus currently is based on a
single "designated life" who is at least 45 years old on the date that the
benefit is acquired. The Highest Daily Lifetime 6 Plus Benefit is not available
if you elect any other optional living benefit or the Plus 40 life insurance
rider or the Highest Daily Value death benefit. As long as your Highest Daily
Lifetime 6 Plus Benefit is in effect, you must allocate your Account Value in
accordance with the permitted Sub-accounts and other investment option(s)
available with this benefit. For a more detailed description of the permitted
investment options, see the "Investment Options" section.
Highest Daily Lifetime 6 Plus also provides for a Death Benefit generally equal
to three times your Annual Income Amount. The Death Benefit is not payable if
your Account Value is reduced to zero as a result of withdrawals or if annuity
payments are being made at the time of the decedent's death. See Death Benefit
Component of Highest Daily Lifetime 6 Plus, below.
ALTHOUGH YOU ARE GUARANTEED THE ABILITY TO WITHDRAW YOUR ANNUAL INCOME AMOUNT
FOR LIFE EVEN IF YOUR ACCOUNT VALUE FALLS TO ZERO, IF YOU TAKE WITHDRAWALS OF
EXCESS INCOME THAT BRING YOUR ACCOUNT VALUE TO ZERO, YOUR ANNUAL INCOME AMOUNT
WOULD ALSO FALL TO ZERO, AND THE BENEFIT WOULD TERMINATE. IN THAT SCENARIO, NO
FURTHER AMOUNT, INCLUDING THE DEATH BENEFIT DESCRIBED BELOW, WOULD BE PAYABLE
UNDER THE HIGHEST DAILY LIFETIME 6 PLUS BENEFIT.
You may also participate in the 6 or 12 Month Dollar Cost Averaging Program if
you elect Highest Daily Lifetime 6 Plus for Annuities issued on or after May 1,
2009, subject to the 6 or 12 Month DCA Program's rules, and subject to State
approvals. The 6 or 12 Month DCA Program is not available in certain states.
Currently, if you elect Highest Daily Lifetime 6 Plus and subsequently
terminate the benefit, you may elect another living benefit, subject to our
current rules. See "Election of and Designations under the Benefit" below and
"Termination of Existing Benefits and Election of New Benefits" for details.
Please note that if you terminate Highest Daily Lifetime 6 Plus and elect
another living benefit, you lose the guarantees that you had accumulated under
your existing benefit and we will base any guarantees under the new benefit on
your Account Value as of the date the new benefit becomes active.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter, until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraphs.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the Periodic
Value upon your first Lifetime Withdrawal after the effective date of the
benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 6% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any purchase payment (including any
associated purchase Credits) made on the Current Valuation Day (the
Periodic Value is proportionally reduced for any Non-Lifetime Withdrawal);
and
(2) the Account Value on the current Valuation Day.
If you have not made a Lifetime Withdrawal on or before the 10th or 20th
Anniversary of the effective date of the benefit, your Periodic Value on the
10th or 20th Anniversary of the benefit effective date is equal to the greater
of:
(1) the Periodic Value described above or,
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(2) the sum of (a), (b) and (c) below (proportionally reduced for any
Non-Lifetime Withdrawals):
(a) 200% (on the 10th anniversary) or 400% (on the 20th anniversary) of
the Account Value on the effective date of the benefit including any
purchase payments (including any associated purchase Credits) made on
that day;
(b) 200% (on the 10th anniversary) or 400% (on the 20th anniversary) of
all purchase payments (including any associated purchase Credits) made
within one year following the effective date of the benefit; and
(c) all purchase payments (including any associated purchase Credits) made
after one year following the effective date of the benefit.
Once the first Lifetime Withdrawal is made, the Protected Withdrawal Value at
any time is equal to the greater of (i) the Protected Withdrawal Value on the
date of the first Lifetime Withdrawal, increased for subsequent purchase
payments (including any associated purchase Credits) and reduced for subsequent
Lifetime Withdrawals, and (ii) the highest daily Account Value upon any
step-up, increased for subsequent purchase payments (including any associated
purchase Credits) and reduced for subsequent Lifetime Withdrawals (see below).
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME 6 PLUS
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the Annuitant on the date of the first Lifetime Withdrawal after
election of the benefit. The percentages are: 4% for ages 45 - less than
59 1/2; 5% for ages 59 1/2-79, and 6% for ages 80 or older. Under the Highest
Daily Lifetime 6 Plus benefit, if your cumulative Lifetime Withdrawals in an
Annuity Year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis
in that Annuity Year. If your cumulative Lifetime Withdrawals in an Annuity
Year are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions for this Annuity that comply with our rules) by
the result of the ratio of the Excess Income to the Account Value immediately
prior to such withdrawal (see examples of this calculation below). If you take
withdrawals of Excess Income, only the portion of the Lifetime Withdrawal that
exceeds the remaining Annual Income Amount will proportionally reduce your
Protected Withdrawal Value and Annual Income Amount in future years. Reductions
are based on the actual amount of the withdrawal, including any Contingent
Deferred Sales Charge (CDSC) that may apply. Lifetime Withdrawals of any amount
up to and including the Annual Income Amount will reduce the Protected
Withdrawal Value by the amount of the withdrawal. Withdrawals of Excess Income
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the Annual Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the Annual
Income Amount. Any systematic withdrawal will be deemed a Lifetime Withdrawal
under this benefit.
Any purchase payment that you make subsequent to the election of Highest Daily
Lifetime 6 Plus and subsequent to the first Lifetime Withdrawal will
(i) increase the then-existing Annual Income Amount by an amount equal to a
percentage of the purchase payment (including any associated purchase Credits)
based on the age of the Annuitant at the time of the first Lifetime Withdrawal
(the percentages are: 4% for ages 45 - less than 59 1/2; 5% for ages 59 1/2-79
and 6% for ages 80 and older) and (ii) increase the Protected Withdrawal Value
by the amount of the Purchase Payment (including any associated purchase
Credits).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, Highest Daily Lifetime 6 Plus is no longer available for
new elections and we no longer accept additional Purchase Payments for
Annuities with the Highest Daily Lifetime 6 Plus benefit.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of Highest
Daily Lifetime 6 Plus. As detailed in this paragraph, the Highest Daily Auto
Step-Up feature can result in a larger Annual Income Amount subsequent to your
first Lifetime Withdrawal. The Highest Daily Auto Step-Up starts with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first Lifetime Withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on each Valuation Day within the immediately preceding Annuity Year after
your first Lifetime Withdrawal. Having identified the highest daily value
(after all daily values have been adjusted for subsequent purchase payments and
withdrawals), we then multiply that value by a percentage that varies based on
the age of the Annuitant on the Annuity Anniversary as of which the step-up
would occur. The percentages are: 4% for ages 45 - less than 59 1/2; 5% for
ages 59 1/2-79, and 6% for ages 80 and older. If that value exceeds the
existing Annual Income Amount, we replace the existing amount with the new,
higher amount. Otherwise, we leave the existing Annual Income Amount intact.
The Account Value on the Annuity Anniversary is considered the last daily
step-up value of the Annuity Year. All daily valuations and annual step-ups
will only occur on a Valuation Day. In later years (i.e., after the first
Annuity Anniversary after the first Lifetime Withdrawal), we determine whether
an automatic step-up should occur on each Annuity Anniversary, by performing a
similar examination of the Account Values that occurred on Valuation Days
during the year. Taking Lifetime
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Withdrawals could produce a greater difference between your Protected
Withdrawal Value and your Account Value, which may make a Highest Daily Auto
Step-up less likely to occur. At the time that we increase your Annual Income
Amount, we also increase your Protected Withdrawal Value to equal the highest
daily value upon which your step-up was based only if that results in an
increase to the Protected Withdrawal Value. Your Protected Withdrawal Value
will never be decreased as a result of an income step-up. If, on the date that
we implement a Highest Daily Auto Step-Up to your Annual Income Amount, the
charge for Highest Daily Lifetime 6 Plus has changed for new purchasers, you
may be subject to the new charge at the time of such step-up. Prior to
increasing your charge for Highest Daily Lifetime 6 Plus upon a step-up, we
would notify you, and give you the opportunity to cancel the automatic step-up
feature. If you receive notice of a proposed step-up and accompanying fee
increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
If you are engaged in a Systematic Withdrawal program, we will not
automatically increase the withdrawal amount when there is an increase to the
Annual Income Amount.
The Highest Daily Lifetime 6 Plus benefit does not affect your ability to take
withdrawals under your Annuity, or limit your ability to take withdrawals that
exceed the Annual Income Amount. Under Highest Daily Lifetime 6 Plus, if your
cumulative Lifetime Withdrawals in an Annuity Year are less than or equal to
the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year. If,
cumulatively, you withdraw an amount less than the Annual Income Amount in any
Annuity Year, you cannot carry over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is possible
for the Account Value to fall to zero, even though the Annual Income Amount
remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime 6
Plus benefit or any other fees and charges under the Annuity. Assume the
following for all three examples:
. The Issue Date is December 1, 2008
. The Highest Daily Lifetime 6 Plus benefit is elected on September 1, 2009
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 6 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the designated life is between the
ages of 59 1/2 and 79 at the time of the first Lifetime Withdrawal, the Annual
Income Amount is 5% of the Protected Withdrawal Value, in this case 5% of
$120,000). Assuming $2,500 is withdrawn from the Annuity on this date, the
remaining Annual Income Amount for that Annuity Year (up to and including
December 1, 2009) is $3,500. This is the result of a dollar-for-dollar
reduction of the Annual Income Amount ($6,000 less $2,500 = $3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there are other future withdrawals in that Annuity Year, each
would result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest daily value since your first Lifetime Withdrawal
(or last Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional purchase payments, is higher than the Annual Income Amount, adjusted
for excess withdrawals and additional purchase payments (including any
associated purchase Credits).
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Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on November 27 reduces the
amount to $5,921.40 for future years (see above). For the next Annuity Year,
the Annual Income Amount will be stepped up if 5% (since the designated life is
between 59 1/2 and 79 on the date of the potential step-up) of the highest
daily Account Value adjusted for withdrawals and purchase payments (including
any associated purchase Credits), is higher than $5,921.40. Here are the
calculations for determining the daily values. Only the November 25 value is
being adjusted for excess withdrawals as the November 30 and December 1
Valuation Days occur after the excess withdrawal on November 27.
HIGHEST DAILY VALUE ADJUSTED ANNUAL INCOME
(ADJUSTED WITH WITHDRAWAL AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ------------------------- ------------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 1, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount of
$5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio
in the above example which is the excess withdrawal divided by the
Account Value immediately preceding the excess withdrawal) resulting
in a Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Highest Daily Lifetime 6 Plus. It is an optional feature of the benefit
that you can only elect at the time of your first withdrawal. You cannot take a
Non-Lifetime Withdrawal in an amount that would cause your Annuity's Account
Value, after taking the withdrawal, to fall below the minimum Surrender Value
(see "Access to Account Value - Can I Surrender My Annuity for Its Value?").
This Non-Lifetime Withdrawal will not establish your initial Annual Income
Amount and the Periodic Value described above will continue to be calculated.
However, the total amount of the withdrawal will proportionally reduce all
guarantees associated with the Highest Daily Lifetime 6 Plus benefit. You must
tell us if your withdrawal is intended to be the Non-Lifetime Withdrawal and
not the first Lifetime Withdrawal under the Highest Daily Lifetime 6 Plus
benefit. If you don't elect the Non-Lifetime Withdrawal, the first withdrawal
you make will be the first Lifetime Withdrawal that establishes your Protected
Withdrawal Value and Annual Income Amount. Once you elect to take the
Non-Lifetime Withdrawal or Lifetime Withdrawals, no additional Non-Lifetime
Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce: the Protected
Withdrawal Value; the Periodic Value guarantees on the tenth and twentieth
anniversaries of the benefit effective date (described above); and the Death
Benefit (described below). It will reduce all three by the percentage the total
withdrawal amount (including any applicable CDSC) represents of the then
current Account Value immediately prior to the withdrawal. As such, you should
carefully consider when it is most appropriate for you to begin taking
withdrawals under the benefit.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of the Non-Lifetime Withdrawal under this
benefit.
Assume the following:
. The Issue Date is December 1, 2008
. The Highest Daily Lifetime 6 Plus benefit is elected on September 1, 2009
. The Account Value at benefit election was $105,000
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 6 Plus benefit
. No previous withdrawals have been taken under the Highest Daily Lifetime
6 Plus benefit
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On October 2, 2009, the Protected Withdrawal Value is $125,000, the 10th
benefit year minimum Periodic Value guarantee is $210,000, and the 20th benefit
year minimum Periodic Value guarantee is $420,000, and the Account Value is
$120,000. Assuming $15,000 is withdrawn from the Annuity on October 2, 2009 and
is designated as a Non-Lifetime Withdrawal, all guarantees associated with the
Highest Daily Lifetime 6 Plus benefit will be reduced by the ratio the total
withdrawal amount represents of the Account Value just prior to the withdrawal
being taken.
HERE IS THE CALCULATION:
Withdrawal amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required to
take as a required minimum distribution for this Annuity, will not reduce the
Annual Income Amount for future years. No additional Annual Income Amounts will
be available in an Annuity Year due to required minimum distributions unless
the required minimum distribution amount is greater than the Annual Income
Amount. Unless designated as a Non-Lifetime Withdrawal, required minimum
distributions are considered Lifetime Withdrawals. If you take a withdrawal in
an Annuity Year in which your required minimum distribution for that year is
not greater than the Annual Income Amount, and the amount of the withdrawal
exceeds the Annual Income Amount for that year, we will treat the withdrawal as
a withdrawal of Excess Income. Such a withdrawal of Excess Income will reduce
the Annual Income Amount available in future years. If the required minimum
distribution (as calculated by us for your Annuity and not previously withdrawn
in the current calendar year) is greater than the Annual Income Amount, an
amount equal to the remaining Annual Income Amount plus the difference between
the required minimum distribution amount not previously withdrawn in the
current calendar year and the Annual Income Amount will be available in the
current Annuity Year without it being considered a withdrawal of Excess Income.
In the event that a required minimum distribution is calculated in a calendar
year that crosses more than one Annuity Year and you choose to satisfy the
entire required minimum distribution for that calendar year in the next Annuity
Year, the distribution taken in the next Annuity Year will reduce your Annual
Income Amount in that Annuity Year on a dollar by dollar basis. If the required
minimum distribution not taken in the prior Annuity Year is greater than the
Annual Income Amount as guaranteed by the benefit in the current Annuity Year,
the total required minimum distribution amount may be taken without being
treated as a withdrawal of Excess Income.
In any year in which the requirement to take required minimum distributions is
suspended by law, we reserve the right, in our sole discretion and regardless
of any position taken on this issue in a prior year, to treat any amount that
would have been considered as a required minimum distribution if not for the
suspension as eligible for treatment as described herein.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000: ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all of the guarantees associated
with the Highest Daily Lifetime 6 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you stop taking withdrawals
in the current Annuity Year and choose not to satisfy the required minimum
distribution in the current Annuity Year (assuming the Annual Income Amount in
the subsequent Annuity Year is $5,000), without being treated as a withdrawal
of Excess Income is $6,000. This withdrawal must comply with all IRS guidelines
in order to satisfy the required minimum distribution for the current calendar
year.
DEATH BENEFIT COMPONENT OF HIGHEST DAILY LIFETIME 6 PLUS
If you elect Highest Daily Lifetime 6 Plus, we include a death benefit (Death
Benefit), at no additional cost that is linked to the Annual Income Amount
under the benefit. If a death benefit is triggered and you currently own
Highest Daily Lifetime 6 Plus, then your Death Benefit will be equal to the
greatest of:
.. the basic death benefit under the Annuity; and
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.. the amount of any optional death benefit you may have elected and remains in
effect; and
.. (a) if no Lifetime Withdrawal had been taken prior to death, 300% of the
Annual Income Amount that would have been determined on the date of death if
a Lifetime Withdrawal had occurred on that date, or (b) if a Lifetime
Withdrawal had been taken prior to death, 300% of the Annual Income Amount
as of our receipt of due proof of death. Under this component of the Death
Benefit, we will not recapture the amount of any purchase Credit applied to
an XT6 Annuity granted within 12 months prior to death.
PLEASE NOTE THAT THE DEATH BENEFIT UNDER HIGHEST DAILY LIFETIME 6 PLUS IS NOT
PAYABLE IF YOUR ACCOUNT VALUE IS REDUCED TO ZERO AS A RESULT OF WITHDRAWALS OR
IF ANNUITY PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH. THIS
DEATH BENEFIT MAY NOT BE AVAILABLE IN ALL STATES.
BENEFITS UNDER HIGHEST DAILY LIFETIME 6 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount, and amounts are still payable under
Highest Daily Lifetime 6 Plus, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Annual Income Amount for the
Annuity Year. Thus, in that scenario, the remaining Annual Income Amount
would be payable even though your Account Value was reduced to zero. In
subsequent Annuity Years we make payments that equal the Annual Income
Amount as described in this section. We will make payments until the death
of the single designated life. If this occurs, you will not be permitted to
make additional purchase payments to your Annuity. To the extent that
cumulative withdrawals in the Annuity Year that reduced your Account Value
to zero are more than the Annual Income Amount, the Highest Daily Lifetime 6
Plus benefit terminates, and no additional payments will be made. However,
if a withdrawal in the latter scenario was taken to satisfy a required
minimum distribution (as described above) under the Annuity, then the
benefit will not terminate, and we will continue to pay the Annual Income
Amount in subsequent Annuity Years until the death of the designated life.
Please note if your Account Value is reduced to zero as result of
withdrawals, the Death Benefit (described above under "Death Benefit
Component of Highest Daily Lifetime 6 Plus") will also be reduced to zero
and the Death Benefit will not be payable.
.. Please note that if your Account Value is reduced to zero, all subsequent
payments will be treated as annuity payments. Further, payments that we make
under this benefit after the first day of the calendar month coinciding with
or next following the annuitant's 95th birthday will be treated as annuity
payments.
.. If annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1) apply your Account Value to any annuity option available; or
(2) request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. If this
option is elected, the Annual Income Amount will not increase after
annuity payments have begun. We will make payments until the death of
the single designated life. We must receive your request in a form
acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such annuity payments
will be the greater of:
(1) the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2) the Account Value.
If no Lifetime Withdrawal was ever taken, we will calculate the Annual Income
Amount as if you made your first Lifetime Withdrawal on the date the annuity
payments are to begin.
PLEASE NOTE THAT A DEATH BENEFIT (AS DESCRIBED ABOVE) IS NOT PAYABLE IF ANNUITY
PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime 6 Plus benefit are subject to
all of the terms and conditions of the Annuity, including any applicable
CDSC for the Non-Lifetime Withdrawal as well as withdrawals that exceed the
Annual Income Amount. If you have an active Systematic Withdrawal program
running at the time you elect this benefit, the first Systematic Withdrawal
that processes after your election of the benefit will be deemed a Lifetime
Withdrawal.
.. Withdrawals made while the Highest Daily Lifetime 6 Plus Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime 6 Plus
benefit. The Highest Daily Lifetime 6 Plus benefit provides a guarantee that
if your Account Value is reduced to zero (subject to our rules regarding
time and amount of withdrawals), you will be able to receive your Annual
Income Amount in the form of withdrawals.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge.
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On the other hand, you could limit the value of the benefit if you begin
taking withdrawals too soon. For example, withdrawals reduce your Account
Value and may limit the potential for increasing your Protected Withdrawal
Value. You should discuss with your Financial Professional when it may be
appropriate for you to begin taking withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
. You cannot allocate purchase payments or transfer Account Value to or
from the AST Investment Grade Bond Sub-account. A summary description of
the AST Investment Grade Bond Portfolio appears within the prospectus
section entitled "What Are The Investment Objectives and Policies of The
Portfolios?". You can find a copy of the AST Investment Grade Bond
Portfolio prospectus by going to www.prudentialannuities.com.
.. Transfers to and from the Sub-accounts, the DCA Fixed Rate Options, and the
AST Investment Grade Bond Sub-account triggered by the Highest Daily
Lifetime 6 Plus mathematical formula will not count toward the maximum
number of free transfers allowable under an Annuity.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must be allocated to the Permitted Sub-accounts (or any DCA
Fixed Rate Options if you elect the 6 or 12 Month DCA Program). If,
subsequent to your election of the benefit, we change our requirements for
how Account Value must be allocated under the benefit, the new requirements
will apply only to new elections of the benefit, and we will not compel you
to reallocate your Account Value in accordance with our newly adopted
requirements. However, you may be required to reallocate due to the merger
of a Portfolio or the closing of a Portfolio. At the time of any change in
requirements, and as applicable only to new elections of the benefit,
transfer of Account Value and allocation of additional purchase payments may
be subject to new investment limitations.
.. If you elect this benefit and in connection with that election, you are
required to reallocate to different Sub-accounts, then on the Valuation Day
we receive your request in good order, we will (i) sell units of the
non-permitted investment options and (ii) invest the proceeds of those sales
in the Sub-accounts that you have designated. During this reallocation
process, your Account Value allocated to the Sub-accounts will remain
exposed to investment risk, as is the case generally. The newly-elected
benefit will commence at the close of business on the following Valuation
Day. Thus, the protection afforded by the newly-elected benefit will not
arise until the close of business on the following Valuation Day.
.. The Basic Death Benefit will terminate if withdrawals taken under Highest
Daily Lifetime 6 Plus cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under Highest
Daily Lifetime 6 Plus cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
.. The maximum charge for Highest Daily Lifetime 6 Plus is 1.50% annually of
the greater of the Account Value and Protected Withdrawal Value. The current
charge is 0.85% annually of the greater of the Account Value and Protected
Withdrawal Value. We deduct this charge on quarterly anniversaries of the
benefit effective date. Thus, we deduct, on a quarterly basis 0.2125% of the
greater of the prior Valuation Day's Account Value and the prior Valuation
Day's Protected Withdrawal Value. We deduct the fee pro rata from each of
your Sub-accounts, including the AST Investment Grade Bond Sub-account, and
the DCA Fixed Rate Options (if applicable). Since this fee is based on the
greater of the Account Value and Protected Withdrawal Value, the fee for
Highest Daily Lifetime 6 Plus may be greater than it would have been, had it
been based on the Account Value alone. You will begin paying the charge for
this benefit as of the effective date of the benefit, even if you do not
begin taking withdrawals for many years, or ever. We will not refund the
charges you have paid if you choose never to take any withdrawals and/or if
you never receive any lifetime income payments. The following example is
hypothetical and is for illustrative purposes only.
Assume a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value)
= $195,000.00. The first benefit charge date would be December 1, 2009 and
the benefit charge amount would be $425.00 ($200,000 X .2125%).
If the deduction of the charge would result in the Account Value falling
below the lesser of $500 or 5% of the sum of the Account Value on the
effective date of the benefit plus all purchase payments made subsequent
thereto (and any associated purchase Credits) (we refer to this as the
"Account Value Floor"), we will only deduct that portion of the charge that
would not cause the Account Value to fall below the Account Value Floor. If
the entire Account Value is less than the Account Value Floor when we would
deduct a charge for the benefit, then no charge will be assessed for that
benefit quarter. If a charge for the Highest Daily Lifetime 6 Plus benefit
would be deducted on the same day we process a withdrawal request, the
charge will be deducted first, then the withdrawal will be processed. The
withdrawal could cause the Account Value to fall below the Account Value
Floor. While the deduction of the charge (other than the final charge) may
not reduce the Account Value to zero, withdrawals may reduce the Account
Value to zero. If this happens and the Annual Income Amount is greater than
zero, we will make payments under the benefit and the Death Benefit
(described above) will not be payable.
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
For Highest Daily Lifetime 6 Plus, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at least
45 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime 6 Plus. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime 6 Plus, except if (a) the new Owner has
the same taxpayer identification number as the previous owner, (b) ownership is
transferred from a custodian or other entity to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that satisfies
our administrative ownership guidelines.
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Highest Daily Lifetime 6 Plus can be elected at the time that you purchase your
Annuity or after the Issue Date, subject to availability, and our eligibility
rules and restrictions. If you elect Highest Daily Lifetime 6 Plus and
terminate it, you can re-elect it or elect any other living benefit, subject to
our current rules and availability. Additionally, if you currently own an
Annuity with a living benefit that is terminable, you may terminate your
existing benefit rider and elect any available benefits subject to our current
rules. See "Termination of Existing Benefits and Election of New Benefits" in
the prospectus for information pertaining to elections, termination and
re-election of benefits. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT AND
ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED
UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW
BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE.
You and your Financial Professional should carefully consider whether
terminating your existing benefit and electing a new benefit is appropriate for
you. We reserve the right to waive, change and/or further limit the election
frequency in the future.
TERMINATION OF THE BENEFIT
You may terminate Highest Daily Lifetime 6 Plus at any time by notifying us. If
you terminate the benefit, any guarantee provided by the benefit will terminate
as of the date the termination is effective, and certain restrictions on
re-election may apply. The benefit automatically terminates:
(i) upon your termination of the benefit, (ii) upon your surrender of the
Annuity, (iii) upon your election to begin receiving annuity payments (although
if you have elected to receive the Annual Income Amount in the form of annuity
payments, we will continue to pay the Annual Income Amount), (iv) upon our
receipt of due proof of the death of the Annuitant (except insofar as paying
the Death Benefit associated with this benefit), (v) if both the Account Value
and Annual Income Amount equal zero, or (vi) if you cease to meet our
requirements as described in "Election of and Designations under the Benefit"
above.
Upon termination of Highest Daily Lifetime 6 Plus other than upon the death of
the Annuitant or annuitization, we impose any accrued fee for the benefit
(i.e., the fee for the pro-rated portion of the year since the fee was last
assessed), and thereafter we cease deducting the charge for the benefit. This
final charge will be deducted even if it results in the Account Value falling
below the Account Value Floor. With regard to your investment allocations, upon
termination we will: (i) leave intact amounts that are held in the Permitted
Sub-accounts (including any amounts in the DCA Fixed Rate Options), and
(ii) unless you are participating in an asset allocation program (i.e., Custom
Portfolios Program (we may have referred to the "Custom Portfolios Program" as
the "Optional Allocation and Rebalancing Program" in other materials),
Automatic Rebalancing Program, or 6 or 12 Month DCA Program for which we are
providing administrative support), transfer all amounts held in the AST
Investment Grade Bond Sub-account to your variable investment options, pro rata
(i.e. in the same proportion as the current balances in your variable
investment options). If, prior to the transfer from the AST Investment Grade
Bond Sub-account, the Account Value in the variable investment options is zero,
we will transfer such amounts according to your most recent allocation
instructions.
If a surviving spouse elects to continue the Annuity, the Highest Daily
Lifetime 6 Plus benefit terminates. The spouse may elect the benefit subject to
the restrictions discussed above.
HOW HIGHEST DAILY LIFETIME 6 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
As indicated above, we limit the Sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime 6 Plus. For purposes of this benefit,
we refer to those permitted investment options as the "Permitted Sub-accounts".
Because these restrictions and the use of the predetermined mathematical
formula lessen the risk that your Account Value will be reduced to zero while
you are still alive, they also reduce the likelihood that we will make any
lifetime income payments under this benefit. They may also limit your upside
potential for growth. If your Annuity was issued on or after May 1, 2009
(subject to regulatory approval), you may also choose to allocate purchase
payments while this program is in effect to DCA Fixed Rate Options utilized
with our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12 Month DCA
Program"). If you are participating in Highest Daily Lifetime 6 Plus and also
are participating in the 6 or 12 Month DCA Program, and the formula under the
benefit dictates a transfer from the Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account (the "Bond Sub-account"), then the amount to
be transferred will be taken entirely from the Sub-accounts, provided there is
sufficient Account Value in those Sub-accounts to meet the required transfer
amount. Only if there is insufficient Account Value in those Sub-accounts will
an amount be withdrawn from the DCA Fixed Rate Options. Amounts withdrawn from
the DCA Fixed Rate Options under the formula will be taken on a last-in,
first-out basis. For purposes of the discussion below concerning transfers from
the Permitted Sub-accounts to the Bond Sub-account, amounts held within the DCA
Fixed Rate Options are included within the term "Permitted Sub-Accounts". Thus,
amounts may be transferred from the DCA Fixed Rate Options in the circumstances
described above and in the section of the prospectus entitled 6 or 12 Month
Dollar Cost Averaging Program. Any transfer dictated by the formula out of the
Bond Sub-account will only be transferred to the Permitted Sub-accounts, not
the DCA Fixed Rate Options.
An integral part of Highest Daily Lifetime 6 Plus (including Highest Daily
Lifetime 6 Plus with LIA and Spousal Highest Daily Lifetime 6 Plus) is the
predetermined mathematical formula used to transfer Account Value between the
Permitted Sub-accounts and the Bond Sub-account. This predetermined
mathematical formula ("formula") runs each Valuation Day that the benefit is in
effect on your Annuity and, as a result, transfers of Account Value between the
Permitted Sub-accounts and the Bond Sub-account can occur on any Valuation Day
subject to the conditions described below. Only the predetermined mathematical
formula can transfer Account Value to and from the Bond Sub-account, and thus
you may not allocate Purchase Payments to or make transfers to or from the Bond
Sub-account. We are not providing you with investment advice through the use of
the formula. The formula by which the transfer operates is designed primarily
to mitigate some of the financial risks that we incur in providing the
guarantee under Highest Daily Lifetime 6 Plus. The formula is not forward
looking and contains no predictive or projective component with respect to the
markets, the Account Value or the Protected Withdrawal Value. The formula is
set forth in Appendix N.
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Generally, the formula, which is applied each Valuation Day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. This amount may be different than the actual Annual Income
Amount currently guaranteed under your benefit. Then it produces an estimate of
the total amount targeted in the formula, based on the projected income amount
and factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a Lifetime Withdrawal, your
projected income amount (and thus your Target Value) would take into account
any automatic step-up, any subsequent Purchase Payments (including any
associated Purchase Credits), and any withdrawals of Excess Income. Next, the
formula subtracts from the Target Value the amount held within the Bond
Sub-account on that day, and divides that difference by the amount held within
the Permitted Sub-accounts including any amounts allocated to DCA Fixed Rate
Options. That ratio, which essentially isolates the amount of your Target Value
that is not offset by amounts held within the Bond Sub-account, is called the
"Target Ratio" or "r". If, on each of three consecutive Valuation Days, the
Target Ratio is greater than 83% but less than or equal to 84.5%, the formula
will, on such third Valuation Day, make a transfer from the Permitted
Sub-accounts in which you are invested (subject to the 90% cap discussed below)
to the Bond Sub-account. As discussed above, if all or a portion of your
Account Value is allocated to one or more DCA Fixed Rate Options at the time a
transfer to the Bond Sub-account is required under the formula, we will first
look to process the transfer from the Permitted Sub-accounts, other than the
DCA Fixed Rate Options. If the amount allocated to the Permitted Sub-accounts
is insufficient to satisfy the transfer, then any remaining amounts will be
transferred from the DCA Fixed Rate Options on a "last-in, first-out" basis.
Once a transfer is made, the Target Ratio must again be greater than 83% but
less than or equal to 84.5% for three consecutive Valuation Days before a
subsequent transfer to the Bond Sub-account will occur. If, however, on any
Valuation Day, the Target Ratio is above 84.5%, the formula will make a
transfer from the Permitted Sub-accounts (subject to the 90% cap) to the Bond
Sub-account (as described above). If the Target Ratio falls below 78% on any
Valuation Day, then a transfer from the Bond Sub-account to the Permitted
Sub-accounts (excluding the DCA Fixed Rate Options) will occur.
The formula will not execute a transfer to the Bond Sub-account that results in
more than 90% of your Account Value being allocated to the Bond Sub-account
("90% cap") on that Valuation Day. Thus, on any Valuation Day, if the formula
would require a transfer to the Bond Sub-account that would result in more than
90% of the Account Value being allocated to the Bond Sub-account, only the
amount that results in exactly 90% of the Account Value being allocated to the
Bond Sub-account will be transferred. Additionally, future transfers into the
Bond Sub-account will not be made (regardless of the performance of the Bond
Sub-account and the Permitted Sub-accounts) at least until there is first a
transfer out of the Bond Sub-account. Once this transfer occurs out of the Bond
Sub-account, future amounts may be transferred to or from the Bond Sub-account
if dictated by the formula (subject to the 90% cap). At no time will the
formula make a transfer to the Bond Sub-account that results in greater than
90% of your Account Value being allocated to the Bond Sub-account. However, it
is possible that, due to the investment performance of your allocations in the
Bond Sub-account and your allocations in the Permitted Sub-accounts you have
selected, your Account Value could be more than 90% invested in the Bond
Sub-account.
If you make additional Purchase Payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional Purchase
Payments to the Bond Sub-account at least until there is first a transfer out
of the Bond Sub-account, regardless of how much of your Account Value is in the
Permitted Sub-accounts. This means that there could be scenarios under which,
because of the additional Purchase Payments you make, less than 90% of your
entire Account Value is allocated to the Bond Sub-account, and the formula will
still not transfer any of your Account Value to the Bond Sub-account (at least
until there is first a transfer out of the Bond Sub-account). For example,
.. September 4, 2012 - a transfer is made to the Bond Sub-account that results
in the 90% cap being met and now $90,000 is allocated to the Bond
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. September 5, 2012 - you make an additional Purchase Payment of $10,000. No
transfers have been made from the Bond Sub-account to the Permitted
Sub-accounts since the cap went into effect on September 4, 2012.
.. On September 5, 2012 - (and at least until first a transfer is made out of
the Bond Sub-account under the formula) - the $10,000 payment is allocated
to the Permitted Sub-accounts and on this date you have 82% in the Bond
Sub-account and 18% in the Permitted Sub-accounts (such that $20,000 is
allocated to the Permitted Sub-accounts and $90,000 to the Bond Sub-account).
.. Once there is a transfer out of the Bond Sub-account (of any amount), the
formula will operate as described above, meaning that the formula could
transfer amounts to or from the Bond Sub-account if dictated by the formula
(subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into and out of effect
multiple times while you participate in the benefit. We will continue to
monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the Bond Sub-account as dictated by the formula.
Under the formula, investment performance of your Account Value that is
negative, flat, or even moderately positive may result in a transfer of a
portion of your Account Value in the Permitted Sub-accounts to the Bond
Sub-account because such investment performance will tend to increase the
Target Ratio. In deciding how much to transfer, we use another formula, which
essentially seeks to reallocate amounts held in the Permitted Sub-accounts and
the Bond Sub-account so that the Target Ratio meets a target, which currently
is equal to 80%. The further the Target Ratio is from 80% when a transfer is
occurring under the formula, the greater the transfer amount will be. Once you
elect Highest Daily Lifetime 6 Plus, the values we use to compare to the Target
Ratio will be fixed. For newly-issued Annuities that elect Highest Daily
Lifetime 6 Plus and existing Annuities that elect Highest Daily Lifetime 6 Plus
in the future, however, we reserve the right to change such values.
Additionally, on each monthly Annuity Anniversary (if the monthly Annuity
Anniversary does not fall on a Valuation Day, the next Valuation Day will be
used), following all of the above described daily calculations, if there is
money allocated to the Bond Sub-account, we will perform an additional monthly
calculation to determine whether or not a transfer will be made from the Bond
Sub-account to the Permitted Sub-accounts.
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This transfer will automatically occur provided that the Target Ratio, as
described above, would be less than 83% after the transfer. The formula will
not execute a transfer if the Target Ratio after this transfer would occur
would be greater than or equal to 83%.
The amount of the transfer will be equal to the lesser of:
a) The total value of all your Account Value in the Bond Sub-account, or
b) An amount equal to 5% of your total Account Value.
While you are not notified when your Annuity reaches a transfer trigger under
the formula, you will receive a confirmation statement indicating the transfer
of a portion of your Account Value either to or from the Bond Sub-account.
Depending on the results of the calculations of the formula, we may, on any
Valuation Day:
.. Not make any transfer between the Permitted Sub-accounts and the Bond
Sub-account; or
.. If a portion of your Account Value was previously allocated to the Bond
Sub-account, transfer all or a portion of those amounts to the Permitted
Sub-accounts (as described above); or
.. Transfer a portion of your Account Value in the Permitted Sub-accounts and
the DCA Fixed Rate Options to the Bond Sub-account.
Prior to the first Lifetime Withdrawal, the primary driver of transfers to the
Bond Sub-account is the difference between your Account Value and your
Protected Withdrawal Value. If none of your Account Value is allocated to the
Bond Sub-account, then over time the formula permits an increasing difference
between the Account Value and the Protected Withdrawal Value before a transfer
to the Bond Sub-account occurs. Therefore, as time goes on, while none of your
Account Value is allocated to the Bond Sub-account, the smaller the difference
between the Protected Withdrawal Value and the Account Value, the more the
Account Value can decrease prior to a transfer to the Bond Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the Bond Sub-account pursuant to the formula
depend on various factors unique to your Annuity and are not necessarily
directly correlated with the securities markets, bond markets, interest rates
or any other market or index. Some of the factors that determine the amount and
timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Highest Daily Lifetime 6 Plus has been in effect on your
Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the benefit
is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
At any given time, some, most or none of your Account Value will be allocated
to the Bond Sub-account, as dictated by the formula.
Because the amount allocated to the Bond Sub-account and the amount allocated
to the Permitted Sub-accounts each is a variable in the formula, the investment
performance of each affects whether a transfer occurs for your Annuity. The
greater the amounts allocated to either the Bond Sub-account or to the
Permitted Sub-accounts, the greater the impact performance of that Sub-account
has on your Account Value and thus the greater the impact on whether (and how
much) your Account Value is transferred to or from the Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the Bond Sub-account and that Sub-account has positive
performance, the formula might transfer a portion of your Account Value to the
Permitted Sub-accounts, even if the performance of your Permitted Sub-accounts
is negative. Conversely, if a significant portion of your Account Value is
allocated to the Bond Sub-account and that Sub-account has negative
performance, the formula may transfer additional amounts from your Permitted
Sub-accounts to the Bond Sub-account even if the performance of your Permitted
Sub-accounts is positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
Bond Sub-account, if dictated by the formula and subject to the 90% cap feature
described above.
Any Account Value in the Bond Sub-account will not participate in the positive
or negative investment experience of the Permitted Sub-accounts until it is
transferred out of the Bond Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts.
As indicated, withdrawals made while this benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section of the prospectus for a detailed
discussion of the tax treatment of withdrawals. We do not address each
potential tax scenario that could arise with respect to this benefit here.
However, we do note that if you participate in Highest Daily
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Lifetime 6 Plus through a nonqualified annuity, as with all withdrawals, once
all purchase payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
If you take a partial withdrawal to satisfy RMD and designate that withdrawal
as a Non-Lifetime Withdrawal, please note all Non-Lifetime Withdrawal
provisions will apply.
HIGHEST DAILY LIFETIME 6 PLUS WITH LIFETIME INCOME ACCELERATOR
EFFECTIVE SEPTEMBER 14, 2012, HIGHEST DAILY LIFETIME 6 PLUS WITH LIFETIME
INCOME ACCELERATOR IS NO LONGER AVAILABLE FOR NEW ELECTIONS AND WE NO LONGER
ACCEPT ADDITIONAL PURCHASE PAYMENTS FOR ANNUITIES WITH THE HIGHEST DAILY
LIFETIME 6 PLUS WITH LIFETIME INCOME ACCELERATOR.
We offer another version of Highest Daily Lifetime 6 Plus that we call Highest
Daily Lifetime 6 Plus with Lifetime Income Accelerator ("Highest Daily Lifetime
6 Plus with LIA"). Highest Daily Lifetime 6 Plus with LIA guarantees, until the
death of the single designated life, the ability to withdraw an amount equal to
double the Annual Income Amount (which we refer to as the "LIA Amount") if you
meet the conditions set forth below. This version is only being offered in
those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory approval
in those jurisdictions. Highest Daily Lifetime 6 Plus with LIA is not available
in New York and certain other states/jurisdictions. You may choose Highest
Daily Lifetime 6 Plus with or without also electing LIA, however you may not
elect LIA without Highest Daily Lifetime 6 Plus and you must elect the LIA
benefit at the time you elect Highest Daily Lifetime 6 Plus. If you elect
Highest Daily Lifetime 6 Plus without LIA and would like to add the feature
later, you must terminate the Highest Daily Lifetime 6 Plus benefit and elect
the Highest Daily Lifetime 6 Plus with LIA (subject to availability and benefit
re-election provisions). Please note that if you terminate Highest Daily
Lifetime 6 Plus and elect the Highest Daily Lifetime 6 Plus with LIA you lose
the guarantees that you had accumulated under your existing benefit and we will
base any guarantees under the new benefit on your Account Value as of the date
the new benefit becomes active. Highest Daily Lifetime 6 Plus with LIA is
offered as an alternative to other lifetime withdrawal options. If you elect
this benefit, it may not be combined with any other optional living benefit or
the Plus 40 life insurance rider or the Highest Daily Value death benefit. As
long as your Highest Daily Lifetime 6 Plus with LIA benefit is in effect, you
must allocate your Account Value in accordance with the permitted and available
investment option(s) with this benefit. The income benefit under Highest Daily
Lifetime 6 Plus with LIA currently is based on a single "designated life" who
is between the ages of 45 and 75 on the date that the benefit is elected and
received in good order. All terms and conditions of Highest Daily Lifetime 6
Plus apply to this version of the benefit, except as described herein.
Highest Daily Lifetime 6 Plus with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
If you elect the Highest Daily Lifetime 6 Plus with LIA, the maximum charge is
2.00% annually of the greater of the Account Value and Protected Withdrawal
Value. The current charge is 1.20% annually of the greater of Account Value and
Protected Withdrawal Value. We deduct this charge on quarterly anniversaries of
the benefit effective date. Thus, we deduct, on a quarterly basis, 0.30% of the
greater of the prior Valuation Day's Account Value and the prior Valuation
Day's Protected Withdrawal Value. We deduct the fee pro rata from each of your
Sub-accounts, including the AST Investment Grade Bond Sub-account, and the DCA
Fixed Rate Options (if applicable). Since this fee is based on the greater of
the Account Value and Protected Withdrawal Value, the fee for Highest Daily
Lifetime 6 Plus with LIA may be greater than it would have been, had it been
based on the Account Value alone. The following example is hypothetical and is
for illustrative purposes only.
Assume a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value) =
$195,000.00. The first benefit charge date would be December 1, 2009 and the
benefit charge amount would be $600.00 ($200,000 X .30%)
If the deduction of the charge would result in the Account Value falling below
the lesser of $500 or 5% of the sum of the Account Value on the effective date
of the benefit plus all purchase payments made subsequent thereto (and any
associated purchase Credits) (we refer to this as the "Account Value Floor"),
we will only deduct that portion of the charge that would not cause the Account
Value to fall below the Account Value Floor. If the entire Account Value is
less than the Account Value Floor when we would deduct a charge for the
benefit, then no charge will be assessed for that benefit quarter. If a charge
for the Highest Daily Lifetime 6 Plus with LIA benefit would be deducted on the
same day we process a withdrawal request, the charge will be deducted first,
then the withdrawal will be processed. The withdrawal could cause the Account
Value to fall below the Account Value Floor. While the deduction of the charge
(other than the final charge) may not reduce the Account Value to zero,
withdrawals may reduce the Account Value to zero. If this happens and the
Annual Income Amount is greater than zero, we will make payments under the
benefit and the Death Benefit (described below) will not be payable.
If this benefit is being elected on an Annuity held as a 403(b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403(b) plan
itself.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT. Both a waiting period of 36 months
from the benefit effective date, and an elimination period of 120 days from the
date of notification that one or both of the requirements described immediately
below have been met, apply before you can become eligible for the LIA Amount.
The 120 day elimination period begins on the date that we receive notification
from you of your eligibility for the LIA Amount. Thus, assuming the 36 month
waiting period has been met and we have received the notification referenced in
the immediately
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preceding sentence, the LIA amount would be available for withdrawal on the
Valuation Day immediately after the 120/th/ day. The waiting period and the
elimination period may run concurrently. In addition to satisfying the waiting
and elimination period, at least one of the following requirements ("LIA
conditions") must be met.
(1) The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2) The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a
receptacle (such as a plate, cup or table) or by a feeding tube or
intravenously.
ii. Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii. Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv. Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi. Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability
to perform personal hygiene (including caring for catheter or
colostomy bag).
You must notify us in writing when the LIA conditions have been met. If, when
we receive such notification, there are more than 120 days remaining until the
end of the waiting period described above, you will not be eligible for the LIA
Amount. If there are 120 days or less remaining until the end of the waiting
period when we receive notification that the LIA conditions are met, we will
determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to, documentation
verifying the LIA conditions and/or an assessment by a third party of our
choice. Such assessment may be in person and we will assume any costs
associated with the aforementioned assessment. The designated life must be
available for any assessment or reassessment pursuant to our administrative
process requirements. Once eligibility is determined, the LIA Amount is equal
to double the Annual Income Amount as described above under the Highest Daily
Lifetime 6 Plus benefit.
Additionally, once eligibility is determined, we will reassess your eligibility
on an annual basis although your LIA benefit for the year that immediately
precedes our reassessment will not be affected if it is determined that you are
no longer eligible. Your first reassessment may occur in the same year as your
initial assessment. If we determine that you are no longer eligible to receive
the LIA Amount, the Annual Income Amount would replace the LIA Amount on the
next Annuity Anniversary (the "ineligibility effective date"). However, 1) if
you were receiving income through a systematic withdrawal program that was
based on your LIA Amount; 2) you subsequently become ineligible to receive your
LIA Amount, and 3) we do not receive new withdrawal instructions from you prior
to the ineligibility effective date, we will cancel such systematic withdrawal
program on the ineligibility effective date. You will be notified of your
subsequent ineligibility and the date systematic withdrawal payments will stop
before either occur. If any existing systematic withdrawal program is canceled,
you must enroll in a new systematic withdrawal program if you wish to receive
income on a systematic basis. You may establish a new or make changes to any
existing systematic withdrawal program at any time by contacting our Annuity
Service Office. All "Excess Income" conditions described above in "Key Feature
- Annual Income Amount under the Highest Daily Lifetime 6 Plus Benefit" would
apply. There is no limit on the number of times you can become eligible for the
LIA Amount, however, each time would require the completion of the 120-day
elimination period, notification that the designated life meets the LIA
conditions, and determination, through our then current administrative process,
that you are eligible for the LIA Amount, each as described above.
LIA AMOUNT AT THE FIRST LIFETIME WITHDRAWAL. If your first Lifetime Withdrawal
subsequent to election of Highest Daily Lifetime 6 Plus with LIA occurs while
you are eligible for the LIA Amount, the available LIA Amount is equal to
double the Annual Income Amount.
LIA AMOUNT AFTER THE FIRST LIFETIME WITHDRAWAL. If you become eligible for the
LIA Amount after you have taken your first Lifetime Withdrawal, the available
LIA amount for the current and subsequent Annuity Years is equal to double the
then current Annual Income Amount, however the available LIA amount in the
current Annuity Year is reduced by any Lifetime Withdrawals that have been
taken in the current Annuity Year. Cumulative Lifetime Withdrawals in an
Annuity Year which are less than or equal to the LIA Amount (when eligible for
the LIA amount) will not reduce your LIA Amount in subsequent Annuity Years,
but any such withdrawals will reduce the LIA Amount on a dollar-for-dollar
basis in that Annuity Year. If you have an active Systematic Withdrawal program
running at the time you elect this benefit, the first Systematic Withdrawal
that processes after your election of the LIA benefit will be deemed a Lifetime
Withdrawal.
WITHDRAWALS IN EXCESS OF THE LIA AMOUNT. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the LIA Amount when you are
eligible ("Excess Withdrawal"), your LIA Amount in subsequent years will be
reduced (except with regard to required minimum distributions) by the result of
the ratio of the excess portion of the withdrawal to the Account Value
immediately prior to the Excess Withdrawal. Reductions include the actual
amount of the withdrawal, including any CDSC that may apply. Withdrawals of any
amount (excluding the Non-Lifetime Withdrawal) up to and including the LIA
Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Excess Withdrawals will reduce the Protected Withdrawal Value by
the same ratio as the reduction to the LIA Amount. Any withdrawals that are
less than or equal to the LIA Amount (when eligible) but in excess of the free
withdrawal amount available under this Annuity will not incur a CDSC.
WITHDRAWALS ARE NOT REQUIRED. However, subsequent to the first Lifetime
Withdrawal, the LIA Amount is not increased in subsequent Annuity Years if you
decide not to take a withdrawal in an Annuity Year or take withdrawals in an
Annuity Year that in total are less than the LIA Amount.
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PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional purchase
payment, the Annual Income Amount is increased by an amount obtained by
applying the applicable percentage (4% for ages 45 - less than 59 1/2; 5% for
ages 59 1/2-79; and 6% for ages 80 and older) to the purchase payment
(including any associated purchase Credits). The applicable percentage is based
on the attained age of the designated life on the date of the first Lifetime
Withdrawal after the benefit effective date. The LIA Amount is increased by
double the Annual Income Amount, if eligibility for LIA has been met. The
Protected Withdrawal Value is increased by the amount of each purchase payment
(including any associated purchase Credits).
If the Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount (or, if eligible for LIA, the LIA Amount) is being increased in
an unintended fashion. Among the factors we will use in making a determination
as to whether an action is designed to increase the Annual Income Amount (or,
if eligible for LIA, the LIA Amount) in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
STEP-UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount when you
are eligible, and there is still a LIA Amount available, we will make an
additional payment for that Annuity Year equal to the remaining LIA Amount. If
this were to occur, you are not permitted to make additional purchase payments
to your Annuity. Thus, in that scenario, the remaining LIA Amount would be
payable even though your Account Value was reduced to zero. In subsequent
Annuity Years we make payments that equal the LIA Amount as described in this
section. We will make payments until the death of the single designated life.
Should the designated life no longer qualify for the LIA amount (as described
under "Eligibility Requirements for LIA Amount" above), the Annual Income
Amount would continue to be available. Subsequent eligibility for the LIA
Amount would require the completion of the 120 day elimination period as well
as meeting the LIA conditions listed above under "Eligibility Requirements for
LIA Amount". TO THE EXTENT THAT CUMULATIVE WITHDRAWALS IN THE CURRENT ANNUITY
YEAR THAT REDUCE YOUR ACCOUNT VALUE TO ZERO ARE MORE THAN THE LIA AMOUNT
(EXCEPT IN THE CASE OF REQUIRED MINIMUM DISTRIBUTIONS), HIGHEST DAILY LIFETIME
6 PLUS WITH LIA TERMINATES, AND NO ADDITIONAL PAYMENTS ARE PERMITTED. A DEATH
BENEFIT UNDER HIGHEST DAILY LIFETIME 6 PLUS WITH LIA IS NOT PAYABLE IF
GUARANTEE PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime 6 Plus annuity
options described above, after the tenth anniversary of the benefit effective
date ("Tenth Anniversary"), you may also request that we make annuity payments
each year equal to the Annual Income Amount. In any year that you are eligible
for the LIA Amount, we make annuity payments equal to the LIA Amount. If you
would receive a greater payment by applying your Account Value to receive
payments for life under your Annuity, we will pay the greater amount.
Annuitization prior to the Tenth Anniversary will forfeit any present or future
LIA amounts. We will continue to make payments until the death of the
designated life. If this option is elected, the Annual Income Amount and LIA
Amount will not increase after annuity payments have begun. A Death Benefit is
not payable if annuity payments are being made at the time of the decedent's
death.
If you elect Highest Daily Lifetime 6 Plus with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
DEATH BENEFIT COMPONENT OF HIGHEST DAILY LIFETIME 6 PLUS WITH LIA. The
provisions of the Death Benefit Component of Highest Daily Lifetime 6 Plus (see
above for information about the Death Benefit) also apply to Highest Daily
Lifetime Plus with LIA. Please note that with respect to Highest Daily Lifetime
6 Plus with LIA, we use the Annual Income Amount for purposes of the Death
Benefit Calculations, not the LIA Amount.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (SHD6 PLUS)
EFFECTIVE SEPTEMBER 14, 2012, SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS IS NO
LONGER AVAILABLE FOR NEW ELECTIONS AND WE NO LONGER ACCEPT ADDITIONAL PURCHASE
PAYMENTS FOR ANNUITIES WITH THE SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS BENEFIT.
Spousal Highest Daily Lifetime 6 Plus is the spousal version of Highest Daily
Lifetime 6 Plus. Spousal Highest Daily Lifetime 6 Plus must have been elected
based on two designated lives, as described below. The youngest designated life
must be at least 50 years old and the oldest designated life must be at least
55 years old when the benefit is elected. Spousal Highest Daily Lifetime 6 Plus
is not available if you elect any other optional benefit. As long as your
Spousal Highest Daily Lifetime 6 Plus Benefit is in effect, you must allocate
your Account Value in accordance with the permitted Sub-accounts and other
investment option(s) available with this benefit. For a more detailed
description of permitted investment options, see the "Investment Options"
section.
We offer a benefit that guarantees until the later death of two natural persons
who are each other's spouses at the time of election of the benefit and at the
first death of one of them (the "designated lives", and each, a "designated
life") the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of Sub-account performance on the Account
Value, subject to our rules regarding the timing and amount of withdrawals. You
are guaranteed to be able to withdraw the Annual Income Amount for the lives of
the designated lives ("Lifetime Withdrawals") provided you have not made
withdrawals of excess income that have resulted in your Account Value being
reduced to zero. We also permit a one-time Non-Lifetime Withdrawal from your
Annuity prior to taking Lifetime Withdrawals under the benefit. The benefit may
be appropriate if you intend to make periodic withdrawals from your Annuity,
wish to ensure that Sub-account performance will not affect your ability to
receive annual payments, and wish either spouse to be
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able to continue the Spousal Highest Daily Lifetime 6 Plus benefit after the
death of the first spouse. You are not required to make withdrawals as part of
the benefit - the guarantees are not lost if you withdraw less than the maximum
allowable amount each year under the rules of the benefit. An integral
component of Spousal Highest Daily Lifetime 6 Plus is the mathematical formula
we employ that may periodically transfer your Account Value to and from the AST
Investment Grade Bond Sub-account. See the section above entitled "How Highest
Daily Lifetime 6 Plus Transfers Account Value Between Your Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account." Withdrawals are
taken first from your own Account Value. We are only required to begin making
lifetime income payments to you under our guarantee when and if your Account
Value is reduced to zero (unless the benefit has terminated).
Spousal Highest Daily Lifetime 6 Plus also provides for a Death Benefit
generally equal to three times your Annual Income Amount. The Death Benefit,
however, is not payable if your Account Value is reduced to zero as a result of
withdrawals or if annuity payments are being made at the time of the decedent's
death. See Death Benefit Component of Spousal Highest Daily Lifetime 6 Plus,
below.
ALTHOUGH YOU ARE GUARANTEED THE ABILITY TO WITHDRAW YOUR ANNUAL INCOME AMOUNT
FOR LIFE EVEN IF YOUR ACCOUNT VALUE FALLS TO ZERO, IF YOU TAKE WITHDRAWALS OF
EXCESS INCOME THAT BRING YOUR ACCOUNT VALUE TO ZERO, YOUR ANNUAL INCOME AMOUNT
WOULD ALSO FALL TO ZERO, AND THE BENEFIT WOULD TERMINATE. IN THAT SCENARIO, NO
FURTHER AMOUNT, INCLUDING THE DEATH BENEFIT DESCRIBED BELOW, WOULD BE PAYABLE
UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS.
You may also participate in the 6 or 12 Month Dollar Cost Averaging Program if
you elect Spousal Highest Daily Lifetime 6 Plus for Annuities issued on or
after May 1, 2009, subject to the 6 or 12 Month DCA Program's rules, and
subject to State approvals. The 6 or 12 Month DCA Program is not available in
certain states.
Currently, if you elect Spousal Highest Daily Lifetime 6 Plus and subsequently
terminate the benefit, you may elect another living benefit, subject to our
current rules. See "Election of and Designations under the Benefit" below and
"Termination of Existing Benefits and Election of New Benefits" for details.
Please note that if you terminate Spousal Highest Daily Lifetime 6 Plus and
elect another benefit, you lose the guarantees that you had accumulated under
your existing benefit and we will base any guarantees under the new benefit on
your Account Value as of the date the new benefit becomes active.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the Periodic
Value upon your first Lifetime Withdrawal after the effective date of the
benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1) the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 6% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any purchase payment (including any
associated purchase Credits) made on the Current Valuation Day (the
Periodic Value is proportionally reduced for any Non-Lifetime Withdrawal);
and
(2) the Account Value on the current Valuation Day.
If you have not made a Lifetime Withdrawal on or before the 10/th/ or 20/th/
Anniversary of the effective date of the benefit, your Periodic Value on the
10/th/ or 20/th/ Anniversary of the benefit effective date is equal to the
greater of:
(1) the Periodic Value described above or,
(2) the sum of (a), (b) and (c) (proportionally reduced for any Non-Lifetime
Withdrawal):
(a) 200% (on the 10/th/ anniversary) or 400% (on the 20/th/ anniversary)
of the Account Value on the effective date of the benefit including
any purchase payments (including any associated purchase Credits) made
on that day;
(b) 200% (on the 10/th/ anniversary) or 400% (on the 20/th/ anniversary)
of all purchase payments (including any associated purchase Credits)
made within one year following the effective date of the benefit; and
(c) all purchase payments (including any associated purchase Credits) made
after one year following the effective date of the benefit.
Once the first Lifetime Withdrawal is made, the Protected Withdrawal Value at
any time is equal to the greater of (i) the Protected Withdrawal Value on the
date of the first Lifetime Withdrawal, increased for subsequent purchase
payments (including any associated purchase Credits) and reduced for subsequent
Lifetime Withdrawals, and (ii) the highest daily Account Value upon any
step-up, increased for subsequent purchase payments (including any associated
purchase Credits) and reduced for subsequent Lifetime Withdrawals (see below).
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME 6
PLUS BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the youngest designated life on the date
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of the first Lifetime Withdrawal after election of the benefit. The percentages
are: 4% for ages 50-64, 5% for ages 65-84, and 6% for ages 85 and older. We use
the age of the youngest designated life even if that designated life is no
longer a participant under the Annuity due to death or divorce. Under the
Spousal Highest Daily Lifetime 6 Plus benefit, if your cumulative Lifetime
Withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the Annual Income Amount for
any Annuity Year ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions for
this Annuity that comply with our rules) by the result of the ratio of the
Excess Income to the Account Value immediately prior to such withdrawal (see
examples of this calculation below). If you take withdrawals of Excess Income,
only the portion of the Lifetime Withdrawal that exceeds the remaining Annual
Income Amount will proportionally reduce your Protected Withdrawal Value and
Annual Income Amount in future years. Reductions are based on the actual amount
of the withdrawal, including any CDSC that may apply. Lifetime Withdrawals of
any amount up to and including the Annual Income Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Withdrawals of
Excess Income will reduce the Protected Withdrawal Value by the same ratio as
the reduction to the Annual Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the Annual
Income Amount. Any systematic withdrawal will be deemed a Lifetime Withdrawal
under this benefit.
Any Purchase Payment that you make subsequent to the election of Spousal
Highest Daily Lifetime 6 Plus and subsequent to the first Lifetime Withdrawal
will (i) increase the then-existing Annual Income Amount by an amount equal to
a percentage of the Purchase Payment (including any associated purchase
Credits) based on the age of the younger designated life at the time of the
first Lifetime Withdrawal (the percentages are: 4% for ages 50-64, 5% for ages
65-84, and 6% for ages 85 and older, and (ii) increase the Protected Withdrawal
Value by the amount of the Purchase Payment (including any associated purchase
Credits).
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors we
will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative size
of additional purchase payment(s). Subject to state law, we reserve the right
to not accept additional purchase payments if we are not then offering this
benefit for new elections. We will exercise such reservation of right for all
annuity purchasers in the same class in a nondiscriminatory manner. Effective
September 14, 2012, Highest Daily Lifetime 6 Plus is no longer available for
new elections and we no longer accept additional Purchase Payments for
Annuities with the Spousal Highest Daily Lifetime 6 Plus benefit.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of this
benefit. As detailed in this paragraph, the Highest Daily Auto Step-Up feature
can result in a larger Annual Income Amount subsequent to your first Lifetime
Withdrawal. The Highest Daily Step-Up starts with the anniversary of the Issue
Date of the Annuity (the "Annuity Anniversary") immediately after your first
Lifetime Withdrawal under the benefit. Specifically, upon the first such
Annuity Anniversary, we identify the Account Value on each Valuation Day within
the immediately preceding Annuity Year after your first Lifetime Withdrawal.
Having identified the highest daily value (after all daily values have been
adjusted for subsequent purchase payments and withdrawals), we then multiply
that value by a percentage that varies based on the age of the youngest
designated life on the Annuity Anniversary as of which the step-up would occur.
The percentages are 4% for ages 50-64, 5% for ages 65-84, and 6% for ages 85
and older. If that value exceeds the existing Annual Income Amount, we replace
the existing amount with the new, higher amount. Otherwise, we leave the
existing Annual Income Amount intact. The Account Value on the Annuity
Anniversary is considered the last daily step-up value of the Annuity Year. In
later years (i.e., after the first Annuity Anniversary after the first Lifetime
Withdrawal), we determine whether an automatic step-up should occur on each
Annuity Anniversary by performing a similar examination of the Account Values
that occurred on Valuation Days during the year. Taking Lifetime Withdrawals
could produce a greater difference between your Protected Withdrawal Value and
your Account Value, which may make a Highest Daily Auto Step-up less likely to
occur. At the time that we increase your Annual Income Amount, we also increase
your Protected Withdrawal Value to equal the highest daily value upon which
your step-up was based only if that results in an increase to the Protected
Withdrawal Value. Your Protected Withdrawal Value will never be decreased as a
result of an income step-up. If, on the date that we implement a Highest Daily
Auto Step-Up to your Annual Income Amount, the charge for Spousal Highest Daily
Lifetime 6 Plus has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for Spousal
Highest Daily Lifetime 6 Plus upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to which
you will be subject.
If you are engaged in a Systematic Withdrawal program, we will not
automatically increase the withdrawal amount when there is an increase to the
Annual Income Amount.
The Spousal Highest Daily Lifetime 6 Plus benefit does not affect your ability
to take withdrawals under your Annuity, or limit your ability to take
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 6 Plus, if your cumulative Lifetime Withdrawals in an
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Annuity Year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis
in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is possible
for the Account Value to fall to zero, even though the Annual Income Amount
remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime 6 Plus benefit or any other fees and charges under the Annuity. Assume
the following for all three examples:
. The Issue Date is December 1, 2008
. The Spousal Highest Daily Lifetime 6 Plus benefit is elected on
September 1, 2009
. The younger designated life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 6 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the youngest designated life is
between the ages of 65 and 84 at the time of the first Lifetime Withdrawal, the
Annual Income Amount is 5% of the Protected Withdrawal Value, in this case 5%
of $120,000). Assuming $2,500 is withdrawn from the Annuity on this date, the
remaining Annual Income Amount for that Annuity Year (up to and including
December 1, 2009) is $3,500. This is the result of a dollar-for-dollar
reduction of the Annual Income Amount ($6,000 less $2,500 = $3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if the
appropriate percentage (based on the youngest designated life's age on the
Annuity Anniversary) of the highest daily value since your first Lifetime
Withdrawal (or last Annuity Anniversary in subsequent years), adjusted for
withdrawals and additional purchase payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional purchase payments
(including any associated purchase Credits).
Continuing the same example as above, the Annual Income Amount for this Annuity
Year is $6,000. However, the excess withdrawal on November 27 reduces the
amount to $5,921.40 for future years (see above). For the next Annuity Year,
the Annual Income Amount will be stepped up if 5% (since the youngest
designated life is between 65 and 84 on the date of the potential step-up) of
the highest daily Account Value adjusted for withdrawals and purchase payments
(including any associated purchase Credits), is higher than $5921.40. Here are
the calculations for determining the daily values. Only the November 25 value
is being adjusted for excess withdrawals as the November 30 and December 1
Valuation Days occur after the excess withdrawal on November 27.
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HIGHEST DAILY VALUE ADJUSTED ANNUAL INCOME
(ADJUSTED WITH WITHDRAWAL AMOUNT (5% OF THE
DATE* ACCOUNT VALUE AND PURCHASE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ------------------------- ----------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount of
$5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Spousal Highest Daily Lifetime 6 Plus. It is an optional feature of the
benefit that you can only elect at the time of your first withdrawal. You
cannot take a Non-Lifetime Withdrawal in an amount that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the minimum
Surrender Value (see "Access to Account Value - Can I Surrender My Annuity for
Its Value?"). This Non-Lifetime Withdrawal will not establish your initial
Annual Income Amount and the Periodic Value above will continue to be
calculated. However, the total amount of the withdrawal will proportionally
reduce all guarantees associated with the Spousal Highest Daily Lifetime 6 Plus
benefit. You must tell us if your withdrawal is intended to be the Non-Lifetime
Withdrawal and not the first Lifetime Withdrawal under the Spousal Highest
Daily Lifetime 6 Plus benefit. If you don't elect the Non-Lifetime Withdrawal,
the first withdrawal you make will be the first Lifetime Withdrawal that
establishes your Protected Withdrawal Value and Annual Income Amount. Once you
elect the Non-Lifetime Withdrawal or Lifetime Withdrawals, no additional
Non-Lifetime Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected Withdrawal
Value; the Periodic Value guarantees on the tenth and twentieth anniversaries
of the benefit effective date (described above); and the Death Benefit
(described below). It will reduce all three by the percentage the total
withdrawal amount (including any applicable CDSC) represents of the then
current Account Value immediately prior to the time of the withdrawal. As such,
you should carefully consider when it is most appropriate for you to begin
taking withdrawals under the benefit.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of the Non-Lifetime Withdrawal under this
benefit.
Assume the following:
. The Issue Date is December 1, 2008
. The Spousal Highest Daily Lifetime 6 Plus benefit is elected on
September 1, 2009
. The Account Value at benefit election was $105,000
. The younger designated life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 6 Plus benefit
. No previous withdrawals have been taken under the Spousal Highest Daily
Lifetime 6 Plus benefit
On October 2, 2009, the Protected Withdrawal Value is $125,000, the 10th
benefit year minimum Periodic Value guarantee is $210,000 and the 20th benefit
year minimum Periodic Value guarantee is $420,000, and the Account Value is
$120,000. Assuming $15,000 is withdrawn from the Annuity on October 2, 2009 and
is designated as a Non-Lifetime Withdrawal, all guarantees associated with the
Spousal Highest Daily Lifetime 6 Plus benefit will be reduced by the ratio the
total withdrawal amount represents of the Account Value just prior to the
withdrawal being taken.
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HERE IS THE CALCULATION:
Withdrawal amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required to
take as a required minimum distribution for this Annuity, will not reduce the
Annual Income Amount for future years. No additional Annual Income Amounts will
be available in an Annuity Year due to required minimum distributions unless
the required minimum distribution amount is greater than the Annual Income
Amount. Unless designated as a Non-Lifetime Withdrawal, required minimum
distributions are considered Lifetime Withdrawals. If you take a withdrawal in
an Annuity Year in which your required minimum distribution for that year is
not greater than the Annual Income Amount, and the amount of the withdrawal
exceeds the Annual Income Amount for that year, we will treat the withdrawal as
a withdrawal of Excess Income. Such a withdrawal of Excess Income will reduce
the Annual Income Amount available in future years. If the required minimum
distribution (as calculated by us for your Annuity and not previously withdrawn
in the current calendar year) is greater than the Annual Income Amount, an
amount equal to the remaining Annual Income Amount plus the difference between
the required minimum distribution amount not previously withdrawn in the
current calendar year and the Annual Income Amount will be available in the
current Annuity Year without it being considered a withdrawal of Excess Income.
In the event that a required minimum distribution is calculated in a calendar
year that crosses more than one Annuity Year and you choose to satisfy the
entire required minimum distribution for that calendar year in the next Annuity
Year, the distribution taken in the next Annuity Year will reduce your Annual
Income Amount in that Annuity Year on a dollar for dollar basis. If the
required minimum distribution not taken in the prior Annuity Year is greater
than the Annual Income Amount as guaranteed by the benefit in the current
Annuity Year, the total required minimum distribution amount may be taken
without being treated as a withdrawal of Excess Income.
In any year in which the requirement to take required minimum distributions is
suspended by law, we reserve the right, in our sole discretion and regardless
of any position taken on this issue in a prior year, to treat any amount that
would have been considered as a required minimum distribution if not for the
suspension as eligible for treatment as described herein.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all guarantees associated with the
Spousal Highest Daily Lifetime 6 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you stop taking withdrawals
in the current Annuity Year and choose not to satisfy the required minimum
distribution in the current Annuity Year (assuming the Annual Income Amount in
the subsequent Annuity Year is $5,000) without being treated as a withdrawal of
Excess Income is $6,000. This withdrawal must comply with all IRS guidelines in
order to satisfy the required minimum distribution for the current calendar
year.
DEATH BENEFIT COMPONENT OF SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
If you elect Spousal Highest Daily Lifetime 6 Plus, we include a death benefit
(Death Benefit), at no additional cost, that is linked to the Annual Income
Amount under the benefit. If a death benefit is triggered and you currently own
Spousal Highest Daily Lifetime 6 Plus benefit, then your Death Benefit will be
equal to the greatest of:
.. the basic death benefit under the Annuity; and
.. the amount of any optional death benefit you may have elected and remains in
effect; and
.. a) if no Lifetime Withdrawal had been taken prior to death, 300% of the
Annual Income Amount that would have been determined on the date of death if
a Lifetime Withdrawal had occurred on that date or (b) if a Lifetime
Withdrawal had been taken prior to death, 300% of the Annual Income Amount
as of our receipt of due proof of death. Under this component of the Death
Benefit, we will not recapture the amount of any purchase Credit applied to
an XT6 Annuity granted within 12 months prior to death.
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Upon the death of the first of the spousal designated lives, if a Death
Benefit, as described above, would otherwise be payable, and the surviving
designated life chooses to continue the Annuity, the Account Value will be
adjusted, as of the date we receive due proof of death, to equal the amount of
that Death Benefit if paid out in a lump sum, and the Spousal Highest Daily
Lifetime 6 Plus benefit remains in force. Upon the death of the second Spousal
designated life, the Death Benefit described above will be payable and the
Spousal Highest Daily Lifetime 6 Plus rider will terminate as of the date we
receive due proof of death.
PLEASE NOTE THAT THE DEATH BENEFIT UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
IS NOT PAYABLE IF YOUR ACCOUNT VALUE IS REDUCED TO ZERO AS A RESULT OF
WITHDRAWALS OR IF ANNUITY PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S
DEATH. THIS DEATH BENEFIT MAY NOT BE AVAILABLE IN ALL STATES.
BENEFITS UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount, and amounts are still payable under
Spousal Highest Daily Lifetime 6 Plus, we will make an additional payment,
if any, for that Annuity Year equal to the remaining Annual Income Amount
for the Annuity Year. Thus, in that scenario, the remaining Annual Income
Amount would be payable even though your Account Value was reduced to zero.
In subsequent Annuity Years we make payments that equal the Annual Income
Amount as described in this section. We will make payments until the death
of the first of the designated lives to die, and will continue to make
payments until the death of the second designated life as long as the
designated lives were spouses at the time of the first death. If this were
to occur, you are not permitted to make additional purchase payments to your
Annuity. To the extent that cumulative withdrawals in the Annuity Year that
reduced your Account Value to zero are more than the Annual Income Amount,
the Spousal Highest Daily Lifetime 6 Plus benefit terminates, and no
additional payments will be made. However, if a withdrawal in the latter
scenario was taken to satisfy a required minimum distribution (as described
above) under the Annuity then the benefit will not terminate, and we will
continue to pay the Annual Income Amount in subsequent Annuity Years until
the death of the second designated life provided the designated lives were
spouses at the death of the first designated life. Please note that if your
Account Value is reduced to zero as a result of withdrawals, the Death
Benefit (described above) will also be reduced to zero and the Death Benefit
will not be payable.
.. Please note that if your Account Value is reduced to zero, all subsequent
payments will be treated as annuity payments. Further, payments that we make
under this benefit after the first day of the calendar month coinciding with
or next following the annuitant's 95/th/ birthday will be treated as annuity
payments.
.. If annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1) apply your Account Value to any annuity option available; or
(2) request that, as of the date annuity payments are to begin, we
make annuity payments each year equal to the Annual Income Amount.
We will make payments until the first of the designated lives to
die, and will continue to make payments until the death of the
second designated life as long as the designated lives were
spouses at the time of the first death. If, due to death of a
designated life or divorce prior to annuitization, only a single
designated life remains, then annuity payments will be made as a
life annuity for the lifetime of the designated life. We must
receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
annuity payments will be the greater of:
(1) the present value of the future Annual Income Amount payments.
Such present value will be calculated using the greater of the
joint and survivor or single (as applicable) life fixed annuity
rates then currently available or the joint and survivor or single
(as applicable) life fixed annuity rates guaranteed in your
Annuity; and
(2) the Account Value.
If no Lifetime Withdrawal was ever taken, we will calculate the Annual Income
Amount as if you made your first Lifetime Withdrawal on the date the annuity
payments are to begin.
PLEASE NOTE THAT THE DEATH BENEFIT (DESCRIBED ABOVE) IS NOT PAYABLE IF ANNUITY
PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime 6 Plus benefit are
subject to all of the terms and conditions of the Annuity, including any
applicable CDSC for the Non-Lifetime Withdrawal as well as withdrawals that
exceed the Annual Income Amount. If you have an active Systematic Withdrawal
program running at the time you elect this benefit, the first Systematic
Withdrawal that processes after your election of the benefit will be deemed
a Lifetime Withdrawal.
.. Withdrawals made while the Spousal Highest Daily Lifetime 6 Plus benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis. As discussed in the
prospectus, you may participate in the 6 or 12 Month Dollar Cost Averaging
Program only if your Annuity was issued on or after May 1, 2009.
.. You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals early, you may maximize the time during which you may
take withdrawals due to longer life expectancy, and you will be using an
optional benefit for which you are paying a charge.
176
On the other hand, you could limit the value of the benefit if you begin
taking withdrawals too soon. For example, withdrawals reduce your Account
Value and may limit the potential for increasing your Protected Withdrawal
Value. You should discuss with your Financial Professional when it may be
appropriate for you to begin taking withdrawals.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime 6
Plus benefit. The Spousal Highest Daily Lifetime 6 Plus benefit provides a
guarantee that if your Account Value is reduced to zero (subject to program
rules regarding the timing and amount of withdrawals), you will be able to
receive your Annual Income Amount in the form of withdrawals.
.. If you are taking your entire Annual Income Amount through the Systematic
Withdrawal program, you must take that withdrawal as a gross withdrawal, not
a net withdrawal.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Sub-account. A summary description of the AST
Investment Grade Bond Portfolio appears in the prospectus section entitled
"What Are The Investment Objectives and Policies of The Portfolios?". You
can find a copy of the AST Investment Grade Bond Portfolio prospectus by
going to www.prudentialannuities.com
.. Transfers to and from the elected Sub-accounts, the DCA Fixed Rate Options,
and the AST Investment Grade Bond Sub-account triggered by the Spousal
Highest Daily Lifetime 6 Plus mathematical formula will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must be allocated to the Permitted Sub-accounts (or any DCA
Fixed Rate Options if you elect the 6 or 12 Month DCA Program). If,
subsequent to your election of the benefit, we change our requirements for
how Account Value must be allocated under the benefit, the new requirement
will apply only to new elections of the benefit, and we will not compel you
to reallocate your Account Value in accordance with our newly adopted
requirements. However, you may be required to reallocate due to the merger
of a Portfolio or the closing of a Portfolio. At the time of any change in
requirements, and as applicable only to new elections of the benefit,
transfers of Account Value and allocation of additional purchase payments
may be subject to new investment limitations.
.. If you elect this benefit and in connection with that election, you are
required to reallocate to different Sub-accounts, then on the Valuation Day
we receive your request in good order, we will (i) sell units of the
non-permitted investment options and (ii) invest the proceeds of those sales
in the Sub-accounts that you have designated. During this reallocation
process, your Account Value allocated to the Sub-accounts will remain
exposed to investment risk, as is the case generally. The newly-elected
benefit will commence at the close of business on the following Valuation
Day. Thus, the protection afforded by the newly-elected benefit will not
arise until the close of business on the following Valuation Day.
.. The Basic Death Benefit will terminate if withdrawals taken under Spousal
Highest Daily Lifetime 6 Plus cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under
Spousal Highest Daily Lifetime 6 Plus cause your Account Value to reduce to
zero. (See "Death Benefit" for more information.)
.. The maximum charge for Spousal Highest Daily Lifetime 6 Plus is 1.50%
annually of the greater of the Account Value and Protected Withdrawal Value.
The current charge is 0.95% annually of the greater of Account Value and
Protected Withdrawal Value. We deduct this charge on quarterly anniversaries
of the benefit effective date. Thus, we deduct, on a quarterly basis,
0.2375% of the greater of the prior Valuation Day's Account Value, or the
prior Valuation Day's Protected Withdrawal Value. We deduct the fee pro rata
from each of your Sub-accounts, including the AST Investment Grade Bond
Sub-account, and the DCA Fixed Rate Options (if applicable). Since this fee
is based on the greater of the Account Value and Protected Withdrawal Value,
the fee for Spousal Highest Daily Lifetime 6 Plus may be greater than it
would have been, had it been based on the Account Value alone. You will
begin paying the charge for this benefit as of the effective date of the
benefit, even if you do not begin taking withdrawals for many years, or
ever. We will not refund the charges you have paid if you choose never to
take any withdrawals and/or if you never receive any lifetime income
payments. The following example is hypothetical and is for illustrative
purposes only.
Assume a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value)
= $195,000.00. The first benefit charge date would be December 1, 2009 and
the benefit charge amount would be $475.00 ($200,000 X .2375%)
If the deduction of the charge would result in the Account Value falling
below the lesser of $500 or 5% of the sum of the Account Value on the
effective date of the benefit plus all purchase payments made subsequent
thereto (and any associated purchase Credits) (we refer to this as the
"Account Value Floor"), we will only deduct that portion of the charge that
would not cause the Account Value to fall below the Account Value Floor. If
the entire Account Value is less than the Account Value Floor when we would
deduct a charge for the benefit, then no charge will be assessed for that
benefit quarter. If a charge for the Spousal Highest Daily Lifetime 6 Plus
benefit would be deducted on the same day we process a withdrawal request,
the charge will be deducted first, then the withdrawal will be processed.
The withdrawal could cause the Account Value to fall below the Account Value
Floor. While the deduction of the charge (other than the final charge) may
not reduce the Account Value to zero, withdrawals may reduce the Account
Value to zero. If this happens and the Annual Income Amount is greater than
zero, we will make payments under the benefit and the Death Benefit
(described above) will not be payable.
177
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
Spousal Highest Daily Lifetime 6 Plus can only be elected based on two
designated lives. Designated lives must be natural persons who are each other's
spouses at the time of election of the benefit and at the death of the first of
the designated lives to die. Currently, Spousal Highest Daily Lifetime 6 Plus
only may be elected where the Owner, Annuitant, and Beneficiary designations
are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person and
the beneficiary is the Owner's spouse. The youngest Owner/Annuitant and the
beneficiary must be at least 50 years old and the oldest must be at least 55
years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. The youngest Owner must be
at least 50 years old and the oldest owner must be at least 55 years old at
the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. The youngest of the Annuitant and the Contingent Annuitant must
be at least 50 years old and the oldest must be at least 55 years old at the
time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity, or
(b) if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary
designations under this benefit. If the Designated Lives divorce, however,
the Spousal Highest Daily Lifetime 6 Plus benefit may not be divided as
part of the divorce settlement or judgment. Nor may the divorcing spouse
who retains ownership of the Annuity appoint a new designated life upon
re-marriage. Our current administrative procedure is to treat the division
of an Annuity as a withdrawal from the existing Annuity. The non-owner
spouse may then decide whether he or she wishes to use the withdrawn funds
to purchase a new Annuity, subject to the rules that are current at the
time of purchase.
Spousal Highest Daily Lifetime 6 Plus can be elected at the time that you
purchase your Annuity or after the Issue Date, subject to availability, and our
eligibility rules and restrictions. If you elect Spousal Highest Daily Lifetime
6 Plus and terminate it, you can re-elect it, subject to our current rules and
availability. Additionally, if you currently own an Annuity with a living
benefit that is terminable, you may terminate your existing benefit rider and
elect any available benefits subject to our current rules. See "Termination of
Existing Benefits and Election of New Benefits" in the prospectus for
information pertaining to elections, termination and re-election of benefits.
PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT AND ELECT A NEW LIVING
BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER YOUR EXISTING
BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT
VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. You and your Financial
Professional should carefully consider whether terminating your existing
benefit and electing a new benefit is appropriate for you. We reserve the right
to waive, change and/or further limit the election frequency in the future.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election may
apply. The benefit automatically terminates: (i) if upon the death of the first
designated life, the surviving designated life opts to take the death benefit
under the Annuity (thus, the benefit does not terminate solely because of the
death of the first designated life), (ii) upon the death of the second
designated life (except as may be needed to pay the Death Benefit associated
with this benefit), (iii) upon your termination of the benefit, (iv) upon your
surrender of the Annuity, (v) upon your election to begin receiving annuity
payments (although if you have elected to take annuity payments in the form of
the Annual Income Amount, we will continue to pay the Annual Income Amount),
(vi) if both the Account Value and Annual Income Amount equal zero, or (vii) if
you cease to meet our requirements as described in "Election of and
Designations under the Benefit".
Upon termination of Spousal Highest Daily Lifetime 6 Plus other than upon death
of a designated life or annuitization, we impose any accrued fee for the
benefit (i.e., the fee for the pro-rated portion of the year since the fee was
last assessed), and thereafter we cease deducting the charge for the benefit.
This final charge will be deducted even if it results in the Account Value
falling below the Account Value Floor. With regard to your investment
allocations, upon termination we will: (i) leave intact amounts that are held
in the Permitted Sub-accounts (including any amounts in the DCA Fixed Rate
Options), and (ii) unless you are participating in an asset allocation program
(i.e., Custom Portfolios Program (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials), Automatic Rebalancing Program, or 6 or 12 Month DCA Program)
for which we are providing administrative support, transfer all amounts held in
the AST Investment Grade Bond Portfolio Sub-account to your variable investment
options, pro rata (i.e. in the same proportion as the current balances in your
variable investment options). If prior to the transfer from the AST Investment
Grade Bond Sub-account the Account Value in the variable investment options is
zero, we will transfer such amounts according to your most recent allocation
instructions.
HOW SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT. See "How
Highest Daily Lifetime 6 Plus Transfers Account Value Between Your Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account" above for
information regarding this component of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than
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five (5) percent owner of the employer, this required beginning date can
generally be deferred to retirement, if later. Roth IRAs are not subject to
these rules during the owner's lifetime. The amount required under the Code may
exceed the Annual Income Amount, which will cause us to increase the Annual
Income Amount in any Annuity Year that required minimum distributions due from
your Annuity are greater than such amounts.
As indicated, withdrawals made while this benefit is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the Annuity.
Please see the Tax Considerations section for a detailed discussion of the tax
treatment of withdrawals. We do not address each potential tax scenario that
could arise with respect to this benefit here. However, we do note that if you
participate in Spousal Highest Daily Lifetime 6 Plus through a nonqualified
annuity, as with all withdrawals, once all purchase payments are returned under
the Annuity, all subsequent withdrawal amounts will be taxed as ordinary income.
If you take a partial withdrawal to satisfy RMD and designate that withdrawal
as a Non-Lifetime Withdrawal, please note all Non-Lifetime Withdrawal
provisions will apply.
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DEATH BENEFIT
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
Each Annuity provides a Death Benefit during its accumulation period. IF AN
ANNUITY IS OWNED BY ONE OR MORE NATURAL PERSONS, THE DEATH BENEFIT IS PAYABLE
UPON THE FIRST DEATH OF AN OWNER. IF AN ANNUITY IS OWNED BY AN ENTITY, THE
DEATH BENEFIT IS PAYABLE UPON THE ANNUITANT'S DEATH, IF THERE IS NO CONTINGENT
ANNUITANT. Please note that if your Annuity is held as a Beneficiary Annuity
and owned by one of the permissible entities, no death benefit will be payable
since the Annuity will continue distributing the required distributions over
the life expectancy of the Key Life until either the Account Value is depleted
or the Annuity is fully surrendered. Generally, if a Contingent Annuitant was
designated before the Annuitant's death and the Annuitant dies, then the
Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid
at that time. The person upon whose death the Death Benefit is paid is referred
to below as the "decedent."
BASIC DEATH BENEFIT
Each Annuity provides a basic Death Benefit at no additional charge. The
Insurance Charge we deduct daily from your Account Value allocated to the
Sub-accounts is used, in part, to pay us for the risk we assume in providing
the basic Death Benefit guarantee under an Annuity. Each Annuity also offers
two different optional Death Benefits that can be purchased for an additional
charge. The additional charge is deducted to compensate Prudential Annuities
for providing increased insurance protection under the optional Death Benefits.
NOTWITHSTANDING THE ADDITIONAL PROTECTION PROVIDED UNDER THE OPTIONAL DEATH
BENEFITS, THE ADDITIONAL COST HAS THE IMPACT OF REDUCING THE NET PERFORMANCE OF
THE INVESTMENT OPTIONS. IN ADDITION, WITH RESPECT TO XT6, UNDER CERTAIN
CIRCUMSTANCES, YOUR DEATH BENEFIT MAY BE REDUCED BY THE AMOUNT OF ANY CREDITS
WE APPLIED TO YOUR PURCHASE PAYMENTS. (SEE "HOW ARE CREDITS APPLIED TO MY
ACCOUNT VALUE".) Also, no basic Death Benefit will be paid if your Annuity
terminates because your Account Value reaches zero (which can happen if, for
example, you are taking withdrawals under an optional living benefit).
CONSIDERATIONS FOR CONTINGENT ANNUITANTS: We may allow the naming of a
contingent annuitant when a Nonqualified Annuity contract is held by a pension
plan or a tax favored retirement plan or held by a Custodial Account (as
defined earlier in this prospectus). In such a situation, the Annuity may no
longer qualify for tax deferral where the Annuity contract continues after the
death of the Annuitant. In some of our Annuities held by these same types of
entities we allow for the naming of a co-annuitant, which also is used to mean
the successor annuitant (and not another life used for measuring the duration
of an annuity payment option). Like in the case of a contingent annuitant, the
Annuity may no longer qualify for tax deferral where the contract continues
after the death of the Annuitant. However, tax deferral should be provided
instead by the pension plan, tax favored retirement plan, or Custodial Account.
We may also allow the naming of a contingent annuitant when a Nonqualified
Annuity contract is held by an entity which is not eligible for tax deferral
benefits under Section 72(u) of the Code. This does not supersede any benefit
language which may restrict the use of the contingent annuitant.
For ASAP III, APEX II and XT6 Annuities, the existing basic Death Benefit (for
all decedent ages) is the greater of:
.. The sum of all purchase payments (not including any Credits) less the sum of
all proportional withdrawals.
.. The sum of your Account Value in the Sub-accounts, your Interim Value in the
MVA Fixed Allocations, and any Account Value in the Benefit Fixed Rate
Account or the DCA Fixed Rate Options (less the amount of any Credits
applied within 12-months prior to the date of death, with respect to XT6, if
allowed by applicable State law).
For ASL II Annuities issued before July 21, 2008, where death occurs before the
decedent's age 85, the basic Death Benefit is the greater of:
.. The sum of all purchase payments less the sum of all proportional
withdrawals.
.. The sum of your Account Value in the Sub-accounts, your Interim Value in the
MVA Fixed Allocations, and any Account Value in the Benefit Fixed Rate
Account or the DCA Fixed Rate Options.
For ASL II Annuities issued before July 21, 2008 where death occurs after the
decedent's age 85, the Death Benefit is (a) your Account Value (for Annuities
other than those issued in New York) or (b) your Account Value in the
Sub-accounts plus your Interim Value in the MVA Fixed Allocations, and any
Account Value in the Benefit Fixed Rate Account or the DCA Fixed Rate Options
(for Annuities issued in New York only).
For ASL II Annuities issued on or after July 21, 2008 the basic Death Benefit
is the greater of:
.. The sum of all purchase payments less the sum of all proportional
withdrawals.
.. The sum of your Account Value in the Sub-accounts, your Interim Value in the
MVA Fixed Allocations, and any Account Value in the Benefit Fixed Rate
Account or the DCA Fixed Rate Options.
"PROPORTIONAL WITHDRAWALS" are determined by calculating the percentage of your
Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in purchase payments for purposes of calculating the basic Death
Benefit.
OPTIONAL DEATH BENEFITS
Two optional Death Benefits are offered for purchase with your Annuity to
provide an enhanced level of protection for your beneficiaries. No optional
Death Benefit is available if your Annuity is held as a Beneficiary Annuity. We
reserve the right to cease offering any optional death benefit.
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CURRENTLY, THESE BENEFITS ARE ONLY OFFERED IN THOSE JURISDICTIONS WHERE WE HAVE
RECEIVED REGULATORY APPROVAL AND MUST BE ELECTED AT THE TIME THAT YOU PURCHASE
YOUR ANNUITY. WE MAY, AT A LATER DATE, ALLOW EXISTING ANNUITY OWNERS TO
PURCHASE AN OPTIONAL DEATH BENEFIT SUBJECT TO OUR RULES AND ANY CHANGES OR
RESTRICTIONS IN THE BENEFITS. THE "COMBINATION 5% ROLL-UP AND HIGHEST
ANNIVERSARY VALUE" DEATH BENEFIT MAY ONLY BE ELECTED INDIVIDUALLY, AND CANNOT
BE ELECTED IN COMBINATION WITH ANY OTHER OPTIONAL DEATH BENEFIT. IF YOU ELECT
SPOUSAL LIFETIME FIVE, SPOUSAL HIGHEST DAILY LIFETIME SEVEN, SPOUSAL HIGHEST
DAILY LIFETIME 7 PLUS, OR THE BIO FEATURE OF HIGHEST DAILY LIFETIME SEVEN OR
THE HIGHEST DAILY LIFETIME 7 PLUS SUITE OF BENEFITS, YOU ARE NOT PERMITTED TO
ELECT AN OPTIONAL DEATH BENEFIT. WITH RESPECT TO XT6, UNDER CERTAIN
CIRCUMSTANCES, EACH OPTIONAL DEATH BENEFIT THAT YOU ELECT MAY BE REDUCED BY THE
AMOUNT OF CREDITS APPLIED TO YOUR PURCHASE PAYMENTS.
INVESTMENT RESTRICTIONS MAY APPLY IF YOU ELECT CERTAIN OPTIONAL DEATH BENEFITS.
SEE THE CHART IN THE "INVESTMENT OPTIONS" SECTION OF THE PROSPECTUS FOR A LIST
OF INVESTMENT OPTIONS AVAILABLE AND PERMITTED WITH EACH BENEFIT.
ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT IS NO LONGER
AVAILABLE FOR NEW ELECTIONS. IT PROVIDES ADDITIONAL AMOUNTS TO YOUR BENEFICIARY
THAT MAY BE USED TO OFFSET FEDERAL AND STATE TAXES PAYABLE ON ANY TAXABLE GAINS
IN YOUR ANNUITY AT THE TIME OF YOUR DEATH. WHETHER THIS BENEFIT IS APPROPRIATE
FOR YOU MAY DEPEND ON YOUR PARTICULAR CIRCUMSTANCES, INCLUDING OTHER FINANCIAL
RESOURCES THAT MAY BE AVAILABLE TO YOUR BENEFICIARY TO PAY TAXES ON YOUR
ANNUITY SHOULD YOU DIE DURING THE ACCUMULATION PERIOD. NO BENEFIT IS PAYABLE IF
DEATH OCCURS ON OR AFTER THE ANNUITY DATE.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT PROVIDED A BENEFIT
PAYABLE IN ADDITION TO THE BASIC DEATH BENEFIT AND CERTAIN OTHER OPTIONAL DEATH
BENEFITS YOU MAY ELECT IN CONJUNCTION WITH THIS BENEFIT. IF THE ANNUITY HAS ONE
OWNER, THE OWNER HAD TO BE AGE 75 OR LESS AT THE TIME THE BENEFIT WAS
PURCHASED. IF AN ANNUITY HAS JOINT OWNERS, THE OLDEST OWNER HAD TO BE AGE 75 OR
LESS. IF AN ANNUITY IS OWNED BY AN ENTITY, THE ANNUITANT HAD TO BE AGE 75 OR
LESS.
CALCULATION OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
If you purchased the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the BASIC DEATH BENEFIT described above;
PLUS
2. 40% of your "GROWTH" under an Annuity, as defined below.
"GROWTH" means the sum of your Account Value in the Sub-accounts and your
Interim Value in the MVA Fixed Allocations, minus the total of all purchase
payments (less the amount of any Credits applied within 12-months prior to the
date of death, with respect to XT6, if allowed by applicable State law) reduced
by the sum of all proportional withdrawals.
"PROPORTIONAL WITHDRAWALS" are determined by calculating the percentage of your
Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in purchase payments.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT IS SUBJECT TO A
MAXIMUM OF 100% OF ALL PURCHASE PAYMENTS APPLIED TO AN ANNUITY AT LEAST 12
MONTHS PRIOR TO THE DEATH OF THE DECEDENT THAT TRIGGERS THE PAYMENT OF THE
DEATH BENEFIT.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT WAS OFFERED IN THOSE
JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. CERTAIN TERMS AND
CONDITIONS MAY DIFFER BETWEEN JURISDICTIONS. WITH RESPECT TO XT6, APEX II AND
ASL II, PLEASE SEE APPENDIX E FOR A DESCRIPTION OF THE ENHANCED BENEFICIARY
PROTECTION OPTIONAL DEATH BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE
JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. PLEASE REFER TO THE
SECTION ENTITLED "TAX CONSIDERATIONS" FOR A DISCUSSION OF SPECIAL TAX
CONSIDERATIONS FOR PURCHASERS OF THIS BENEFIT. THE ENHANCED BENEFICIARY
PROTECTION DEATH BENEFIT WAS NOT AVAILABLE IF YOU ELECTED THE "COMBINATION 5%
ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH BENEFIT, THE SPOUSAL LIFETIME FIVE
INCOME BENEFIT, SPOUSAL HIGHEST DAILY LIFETIME SEVEN OR HIGHEST DAILY LIFETIME
SEVEN WITH BIO.
See Appendix B for examples of how the Enhanced Beneficiary Protection Optional
Death Benefit is calculated.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")
IF AN ANNUITY HAS ONE OWNER, THE OWNER MUST BE AGE 79 OR LESS AT THE TIME THE
HIGHEST ANNIVERSARY VALUE OPTIONAL DEATH BENEFIT IS PURCHASED. IF AN ANNUITY
HAS JOINT OWNERS, THE OLDEST OWNER MUST BE AGE 79 OR LESS. IF AN ANNUITY IS
OWNED BY AN ENTITY, THE ANNUITANT MUST BE AGE 79 OR LESS.
CERTAIN OF THE PORTFOLIOS OFFERED AS SUB-ACCOUNTS UNDER THE ANNUITY ARE NOT
AVAILABLE IF YOU ELECT THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT. IN
ADDITION, WE RESERVE THE RIGHT TO REQUIRE YOU TO USE CERTAIN ASSET ALLOCATION
MODEL(S) IF YOU ELECT THIS DEATH BENEFIT.
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CALCULATION OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
The HAV Death Benefit depends on whether death occurs before or after the Death
Benefit Target Date.
IF THE OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value as of the Owner's date of death.
IF THE OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value on the Death Benefit Target Date plus
the sum of all purchase payments (including any Credits applied to
such purchase payments more than twelve (12) months prior to date of
death in the case of XT6 or as otherwise provided for under
applicable State law) less the sum of all proportional withdrawals
since the Death Benefit Target Date.
THE AMOUNT DETERMINED BY THIS CALCULATION IS INCREASED BY ANY PURCHASE
PAYMENTS RECEIVED AFTER THE OWNER'S DATE OF DEATH AND DECREASED BY ANY
PROPORTIONAL WITHDRAWALS SINCE SUCH DATE.
THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT DESCRIBED ABOVE IS CURRENTLY
BEING OFFERED IN THOSE JURISDICTIONS WHERE WE HAVE RECEIVED REGULATORY
APPROVAL. THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT IS NOT AVAILABLE
IF YOU HAVE ELECTED THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY
VALUE" OR THE "HIGHEST DAILY VALUE" DEATH BENEFIT. IT IS ALSO NOT
AVAILABLE WITH SPOUSAL LIFETIME FIVE, SPOUSAL HIGHEST DAILY LIFETIME
SEVEN, OR THE SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS BENEFIT. WITH
RESPECT TO XT6, APEX II AND ASL II, PLEASE SEE APPENDIX E FOR A
DESCRIPTION OF THE GUARANTEED MINIMUM DEATH BENEFIT OFFERED BEFORE
NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE RECEIVED REGULATORY
APPROVAL.
Please refer to the definition of Death Benefit Target Date below. This death
benefit may not be an appropriate feature where the Owner's age is near the age
specified in the Death Benefit Target Date. This is because the benefit may not
have the same potential for growth as it otherwise would, since there will be
fewer contract anniversaries before the death benefit target date is reached.
The death benefit target date under this death benefit is earlier than the
death benefit target date under the Combination 5% Roll-up and Highest
Anniversary Value Death Benefit for Owners who are age 76 or older when an
Annuity is issued, which may result in a lower value on the death benefit,
since there will be fewer contract anniversaries before the death benefit
target date is reached.
See Appendix B for examples of how the Highest Anniversary Value Death Benefit
is calculated.
COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If an
Annuity has joint Owners, the oldest Owner must be age 79 or less. If the
Annuity is owned by an entity, the Annuitant must be age 79 or less.
CERTAIN OF THE PORTFOLIOS OFFERED AS SUB-ACCOUNTS UNDER AN ANNUITY ARE NOT
AVAILABLE IF YOU ELECT THE COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT. IF YOU
ELECT THIS BENEFIT, YOU MUST ALLOCATE YOUR ACCOUNT VALUE IN ACCORDANCE WITH THE
THEN PERMITTED AND AVAILABLE OPTION(S). IN ADDITION, WE RESERVE THE RIGHT TO
REQUIRE YOU TO USE CERTAIN ASSET ALLOCATION MODEL(S) IF YOU ELECT THIS DEATH
BENEFIT.
CALCULATION OF THE COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH
BENEFIT
THE COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT EQUALS THE GREATEST OF:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value Death Benefit described above; and
3. 5% Roll-up described below.
The calculation of the 5% Roll-up depends on whether death occurs before
or after the Death Benefit Target Date.
IF THE OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE THE 5% ROLL UP IS
EQUAL TO:
. all purchase payments (including any Credits applied to such purchase
payments more than twelve (12) months prior to date of death in the
case of XT6 or as otherwise provided for under applicable State law)
increasing at an annual effective interest rate of 5% starting on the
date that each Purchase Payment is made and ending on the Owner's
date of death;
MINUS
. the sum of all withdrawals, dollar for dollar up to 5% of the Roll-up
value as of the prior contract anniversary (or Issue Date if the
withdrawal is in the first contract year). Any withdrawals in excess
of the 5% dollar for dollar limit are proportional.
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IF THE OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE THE 5%
ROLL-UP IS EQUAL TO:
. the 5% Roll-up value as of the Death Benefit Target Date increased by
total purchase payments (including any Credits applied to such
purchase payments more than twelve (12) months prior to date of death
in the case of XT6 or as otherwise provided for under applicable
State law) made after the Death Benefit Target Date;
MINUS
. the sum of all withdrawals which reduce the 5% Roll-up proportionally.
IN THE CASE OF XT6, AS INDICATED, THE AMOUNTS CALCULATED IN ITEMS 1, 2 AND 3
ABOVE (BEFORE, ON OR AFTER THE DEATH BENEFIT TARGET DATE) MAY BE REDUCED BY ANY
CREDITS UNDER CERTAIN CIRCUMSTANCES, IF ALLOWED UNDER APPLICABLE STATE LAW.
PLEASE REFER TO THE DEFINITIONS OF DEATH BENEFIT TARGET DATE BELOW. THIS DEATH
BENEFIT MAY NOT BE AN APPROPRIATE FEATURE WHERE THE OWNER'S AGE IS NEAR THE AGE
SPECIFIED IN THE DEATH BENEFIT TARGET DATE. THIS IS BECAUSE THE BENEFIT MAY NOT
HAVE THE SAME POTENTIAL FOR GROWTH AS IT OTHERWISE WOULD, SINCE THERE WILL BE
FEWER ANNUITY ANNIVERSARIES BEFORE THE DEATH BENEFIT TARGET DATE IS REACHED.
THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH BENEFIT
DESCRIBED ABOVE IS CURRENTLY BEING OFFERED IN THOSE JURISDICTIONS WHERE WE HAVE
RECEIVED REGULATORY APPROVAL. THE "COMBINATION 5% ROLL-UP AND HIGHEST
ANNIVERSARY VALUE" DEATH BENEFIT IS NOT AVAILABLE IF YOU ELECT ANY OTHER
OPTIONAL DEATH BENEFIT OR ELECT SPOUSAL LIFETIME FIVE, SPOUSAL HIGHEST DAILY
LIFETIME SEVEN OR THE BIO FEATURE OF THE HIGHEST DAILY LIFETIME SEVEN OR THE
HIGHEST DAILY LIFETIME 7 PLUS SUITE OF BENEFITS. IN THE CASE OF XT6, APEX II
AND ASL II, PLEASE SEE APPENDIX E FOR A DESCRIPTION OF THE GUARANTEED MINIMUM
DEATH BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE
RECEIVED REGULATORY APPROVAL.
See Appendix B for examples of how the "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is calculated.
KEY TERMS USED WITH THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT AND THE
COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT:
. The Death Benefit Target Date for the Highest Anniversary Value Death
Benefit is the contract anniversary on or after the 80/th/ birthday of
the current Owner, the oldest of either joint Owner or the Annuitant, if
entity owned.
. The Death Benefit Target Date for the Combination 5% Roll-up and HAV
Death Benefit is the later of the contract anniversary on or after the
80/th/ birthday of the current Owner, the oldest of either joint Owner
or the Annuitant, if entity owned, or five years after the Issue Date of
an Annuity.
. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" less proportional withdrawals since such
anniversary and plus any purchase payments (including any Credits
applied to such purchase payments more than twelve (12) months prior to
the date of death in the case of XT6 or as otherwise provided for under
applicable State law) since such anniversary.
. The Anniversary Value is the Account Value in the Sub-accounts plus the
Interim Value in any MVA Fixed Allocations as of each anniversary of the
Issue Date of an Annuity. The Anniversary Value on the Issue Date is
equal to your Purchase Payment. (including any Credits applied to such
purchase payments more than twelve (12) months prior to the date of
death in the case of XT6 or as otherwise provided for under applicable
State law)
. Proportional Withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when
withdrawn. Proportional withdrawals result in a reduction to the Highest
Anniversary Value or 5% Roll-up value by reducing such value in the same
proportion as the Account Value was reduced by the withdrawal as of the
date the withdrawal occurred. For example, if your Highest Anniversary
Value or 5% Roll-up value is $125,000 and you subsequently withdraw
$10,000 at a time when your Account Value is equal to $100,000 (a 10%
reduction), when calculating the optional Death Benefit we will reduce
your Highest Anniversary Value ($ 125,000) by 10% or $12,500.
HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")
The Highest Daily Value Death Benefit is no longer available for new elections.
If an Annuity has one Owner, the Owner must have been age 79 or less at the
time the Highest Daily Value Death Benefit was elected. If an Annuity has joint
Owners, the older Owner must have been age 79 or less. If there are joint
Owners, death of the Owner refers to the first to die of the joint Owners. If
an Annuity is owned by an entity, the Annuitant must have been age 79 or less
at the time of election and death of the Owner refers to the death of the
Annuitant.
IF YOU ELECTED THIS BENEFIT, YOU MUST ALLOCATE YOUR ACCOUNT VALUE IN ACCORDANCE
WITH THE PERMITTED AND AVAILABLE OPTION(S) WITH THIS BENEFIT.
The HDV Death Benefit depends on whether death occurs before or after
the Death Benefit Target Date (see the definitions below).
IF THE OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
1. the basic Death Benefit described above (including any Credits
applied to such purchase payments more than twelve (12) months prior
to the date of death in the case of XT6 or as otherwise provided for
under applicable State law); and
2. the HDV as of the Owner's date of death.
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IF THE OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
1. the basic Death Benefit described above; and
2. the HDV on the Death Benefit Target Date plus the sum of all purchase
payments (including any Credits applied to such purchase payments
more than twelve (12) months prior to the date of death in the case
of XT6 or as otherwise provided for under applicable State law) less
the sum of all proportional withdrawals since the Death Benefit
Target Date.
The amount determined by this calculation is increased by any purchase
payments received after the Owner's date of death and decreased by any
proportional withdrawals since such date.
The Highest Daily Value Death Benefit described above was offered in
those jurisdictions where we received regulatory approval. The Highest
Daily Value Death Benefit was not available if you elected the
Guaranteed Return Option, Guaranteed Return Option Plus, Guaranteed
Return Option Plus 2008, Highest Daily GRO, Spousal Lifetime Five,
Highest Daily Lifetime Five, Highest Daily Lifetime Seven, Spousal
Highest Daily Lifetime Seven, the Highest Daily Lifetime 7 Plus
benefits, the "Combination 5% Roll-up and Highest Anniversary Value"
Death Benefit, or the Highest Anniversary Value Death Benefit.
KEY TERMS USED WITH THE HIGHEST DAILY VALUE DEATH BENEFIT:
. The DEATH BENEFIT TARGET DATE for the Highest Daily Value Death Benefit
is the later of an Annuity anniversary on or after the 80/th/ birthday
of the current Owner, or the older of either the joint Owner or the
Annuitant, if entity owned, or five years after the Issue Date of an
Annuity.
. The HIGHEST DAILY VALUE equals the highest of all previous "Daily
Values" less proportional withdrawals since such date and plus any
purchase payments (plus associated Credits applied more than twelve
(12) months prior to the date of death in the case of XT6 or as
otherwise provided for under applicable State law) since such date.
. The DAILY VALUE is the Account Value as of the end of each Valuation
Day. The Daily Value on the Issue Date is equal to your Purchase Payment
(plus associated Credits applied more than twelve (12) months prior to
the date of death in the case of XT6 or as otherwise provided for under
applicable State law).
. PROPORTIONAL WITHDRAWALS are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when
withdrawn. Proportional withdrawals result in a reduction to the Highest
Daily Value by reducing such value in the same proportion as the Account
Value was reduced by the withdrawal as of the date the withdrawal
occurred. For example, if your Highest Daily Value is $125,000 and you
subsequently withdraw $10,000 at a time when your Account Value is equal
to $100,000 (a 10% reduction), when calculating the optional Death
Benefit we will reduce your Highest Daily Value ($125,000) by 10% or
$12,500.
Please see Appendix B to this prospectus for a hypothetical example of how the
HDV Death Benefit is calculated.
ANNUITIES WITH JOINT OWNERS
For Annuities with Joint Owners, the Death Benefits are calculated as shown
above except that the age of the oldest of the joint Owners is used to
determine the Death Benefit Target Date. NOTE: If you and your spouse own your
Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole
primary Beneficiary is the surviving spouse, then the surviving spouse can
elect to assume ownership of your Annuity and continue the Annuity instead of
receiving the Death Benefit (unless the Annuity is held as a Beneficiary
Annuity).
ANNUITIES OWNED BY ENTITIES
For Annuities owned by an entity, the Death Benefits are calculated as shown
above except that the age of the Annuitant is used to determine the Death
Benefit Target Date. Payment of the Death Benefit is based on the death of the
Annuitant (or Contingent Annuitant, if applicable). Where a contract is
structured so that it is owned by a grantor trust but the annuitant is not the
grantor, then the contract is required to terminate upon the death of the
grantor if the grantor pre-deceases the annuitant under Section 72(s) of the
Code. Under this circumstance, the contract value will be paid out to the
beneficiary and it is not eligible for the death benefit provided under the
contract
CAN I TERMINATE THE OPTIONAL DEATH BENEFITS? DO THE OPTIONAL DEATH BENEFITS
TERMINATE UNDER OTHER CIRCUMSTANCES?
You can terminate the Enhanced Beneficiary Protection Death Benefit and the
Highest Anniversary Value Death Benefit at any time. The "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated
once elected. The optional Death Benefits will terminate automatically on the
Annuity Date. Also, if you elected one of either the Highest Anniversary Value
or the Combination 5% Roll-up and HAV Death Benefits and, in addition, are
taking withdrawals under a guaranteed minimum withdrawal or a lifetime
guaranteed minimum withdrawal benefit, these optional Death Benefits will
terminate if such withdrawals cause your Account Value to reduce to zero. We
may also terminate any optional Death Benefit if necessary to comply with our
interpretation of the Code and applicable regulations. For jointly owned
Annuities, the optional death benefits are payable upon the first death of
either Owner and therefore terminate and do not continue if a surviving spouse
continues the Annuity. Where an Annuity is structured so that it is owned by a
grantor trust but the annuitant is not the grantor, then the Annuity is
required to terminate upon the death of the grantor if the grantor pre-deceases
the annuitant under Section 72(s) of the Code. Under this circumstance, the
Surrender Value will be paid out to the beneficiary and it is not eligible for
the death benefit provided under the Annuity.
WHAT ARE THE CHARGES FOR THE OPTIONAL DEATH BENEFITS?
For elections of the Highest Anniversary Value Death Benefit and the
Combination 5% Roll-Up and HAV Death Benefit made on or after May 1, 2009, we
impose a charge equal to 0.40% and 0.80%, respectively, per year of the average
daily net assets of the Sub-accounts. For elections of the Highest Anniversary
Value Death Benefit and the Combination 5% Roll-Up and HAV Death Benefit that
were made prior to May 1, 2009, we
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impose a charge equal to 0.25% and 0.50%, respectively, per year of the average
daily net assets of the Sub-accounts. We deduct a charge equal to 0.25% per
year of the average daily net assets of the Sub-accounts for the Enhanced
Beneficiary Protection Death Benefit and 0.50% per year of the average daily
net assets of the Sub-accounts for the HDV Death Benefit. We deduct the charge
for each of these benefits to compensate Prudential Annuities for providing
increased insurance protection under the optional Death Benefits. The
additional annual charge is deducted daily against your Account Value allocated
to the Sub-accounts.
Please refer to the section entitled "Tax Considerations" for additional
considerations in relation to the optional Death Benefit.
PRUDENTIAL ANNUITIES' ANNUITY REWARDS
WHAT IS THE ANNUITY REWARDS BENEFIT IN ASAP III, APEX II AND XT6?
Annuity Rewards is a death benefit enhancement that Owners can elect when the
original CDSC period is over. To be eligible to elect Annuity Rewards, the
Account Value on the date that the Annuity Rewards benefit is effective must be
greater than the amount that would be payable to the Beneficiary under the
Death Benefit (including any amounts payable under any Optional Death Benefit
then in effect). In addition, the effective date must occur before annuity
payments begin. There can only be one effective date for the Annuity Rewards
Death Benefit enhancement. There is no additional charge for electing the
Annuity Rewards Death Benefit enhancement.
Annuity Rewards offers Owners the ability to lock in an amount equal to the
Account Value in the Sub-accounts plus the MVA Fixed Allocations (without the
effect of any MVA) as an enhancement to their current basic Death Benefit, so
their beneficiaries will not receive less than an Annuity's value as of the
effective date of the benefit. Under the Annuity Rewards Benefit, Prudential
Annuities guarantees that the Death Benefit will not be less than:
. your Account Value in the Sub-accounts plus the Interim Value in any
MVA Fixed Allocations as of the effective date of the benefit
. MINUS any proportional withdrawals following the effective date of
the benefit
. PLUS any additional purchase payments applied to your Annuity
following the effective date of the benefit.
The Annuity Rewards Death Benefit enhancement does not affect the calculation
of the basic Death Benefit or any Optional Death Benefits available under an
Annuity. If the Death Benefit amount payable under your Annuity's basic Death
Benefit or any Optional Death Benefits you purchase is greater than the
enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death
Benefit is calculated, your beneficiary will receive the greater amount.
Annuity Rewards is not available under ASL II or if your Annuity is held as a
Beneficiary Annuity.
PAYMENT OF DEATH BENEFITS
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - ANNUITIES OWNED BY INDIVIDUALS (not
associated with Tax-Favored Plans) Except in the case of a spousal assumption
as described below, upon your death, certain distributions must be made under
the Annuity. The required distributions depend on whether you die before you
start taking annuity payments under the Annuity or after you start taking
annuity payments under the Annuity.
If you die on or after the Annuity Date, the remaining portion of the interest
in the Annuity must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
In the event of your death before the Annuity Date, the Death Benefit must be
distributed:
. within five (5) years of the date of death (the "5 Year Deadline"); or
. as a series of payments not extending beyond the life expectancy of the
beneficiary or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death. If the
Beneficiary does not begin installments by such time, then we require
that the Beneficiary take the Death Benefit as a lump sum within the 5
Year Deadline.
Unless you have made an election prior to Death Benefit proceeds becoming due,
a Beneficiary can elect to receive the Death Benefit proceeds under the
Beneficiary Continuation Option as described below in the section entitled
"Beneficiary Continuation Option," as a series of required distributions.
If the Annuity is held as a Beneficiary Annuity, the payment of the Death
Benefit must be distributed:
. as a lump sum payment; or
. Unless you have made an election prior to Death Benefit proceeds
becoming due, a beneficiary can elect to receive the Death Benefit
proceeds under the Beneficiary Continuation Option as described below in
the section entitled "Beneficiary Continuation Option," as a series of
required distributions.
Upon our receipt of proof of death, we will send to the beneficiary materials
that list these payment options.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - ANNUITIES HELD BY TAX-FAVORED PLANS
The Code provides for alternative death benefit payment options when an Annuity
is used as an IRA, 403(b) or other "qualified investment" that requires minimum
distributions. Upon your death under an IRA, 403(b) or other "qualified
investment", the designated Beneficiary may generally
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elect to continue the Annuity and receive Required Minimum Distributions under
the Annuity instead of receiving the death benefit in a single payment. The
available payment options will depend on whether you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the Beneficiary is your surviving
spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life expectancy of the designated beneficiary
(provided such payments begin by December 31/st/ of the year following
the year of death). If the Beneficiary does not begin installments by
such time, then we require that the Beneficiary take the Death Benefit
as a lump sum within the 5 Year Deadline. However, if your surviving
spouse is the beneficiary, the death benefit can be paid out over the
life expectancy of your spouse with such payments beginning no later
than December 31/st/ of the year following the year of death or
December 31/st/ of the year in which you would have reached age 70 1/2,
whichever is later. Additionally, if the contract is solely payable to
(or for the benefit of) your surviving spouse, then the Annuity may be
continued with your spouse as the owner. Note that the Worker, Retiree
and Employer Recovery Act of 2008 suspended Required Minimum
Distributions for 2009. If your beneficiary elects to receive full
distribution by December 31/st/ of the year including the five year
anniversary of the date of death, 2009 shall not be included in the five
year requirement period. This effectively extends this period to
December 31/st/ of the year including the six year anniversary date of
death.
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out by December 31/st/ of the year including the
five year anniversary of the date of death. If the Beneficiary does not
begin installments by such time, then we require that the Beneficiary
take the Death Benefit as a lump sum within the 5 Year Deadline. For
contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and
the account has not been divided into separate accounts by
December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary. For this distribution
requirement also, 2009 shall not be included in the five year
requirement period.
. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death
benefit must be paid out at least as rapidly as under the method then in
effect. For contracts where multiple beneficiaries have been named and
at least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such
contract is deemed to have no designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the Required Minimum Distribution
rules, are subject to tax. You may wish to consult a professional tax advisor
for tax advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this prospectus,
and consult your tax advisor.
BENEFICIARY CONTINUATION OPTION
Instead of receiving the death benefit in a single payment, or under an Annuity
Option, a beneficiary may take the death benefit under an alternative death
benefit payment option, as provided by the Code and described above under the
sections entitled "Payment of Death Benefits" and "Alternative Death Benefit
Payment Options - Annuities Held by Tax-Favored Plans." This "Beneficiary
Continuation Option" is described below and is available for both qualified
Annuities (i.e. annuities sold to an IRA, Roth IRA, SEP IRA, or 403(b)),
Beneficiary Annuities and nonqualified Annuities.
UNDER THE BENEFICIARY CONTINUATION OPTION:
. The beneficiary must apply at least $15,000 to the Beneficiary
Continuation Option. Thus, the death benefit must be at least $15,000.
. The Owner's Annuity will be continued in the Owner's name, for the
benefit of the beneficiary.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur a Settlement Service Charge which is an annual charge assessed on
a daily basis against the average assets allocated to the Sub-accounts.
For nonqualified Annuities the charge is 1.00% per year, and for
qualified Annuities the charge is 1.40% per year.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur an annual maintenance fee equal to the lesser of $30 or 2% of
Account Value. For nonqualified annuities, the fee will only apply if
the Account Value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender
request.
. The initial Account Value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the
beneficiary if the beneficiary had taken a lump sum distribution.
. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
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. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers
in excess of 20 per year will incur a $10 transfer fee.
. No Fixed Allocations or fixed interest rate options will be offered for
the nonqualified Beneficiary Continuation Options. However, for
qualified Annuities, the Fixed Allocations will be those offered at the
time the Beneficiary Continuation Option is elected.
. No additional purchase payments can be applied to the Annuity.
. The basic death benefit and any optional benefits elected by the Owner
will no longer apply to the beneficiary.
. The beneficiary can request a withdrawal of all or a portion of the
Account Value at any time, unless the Beneficiary Continuation Option
was the payout predetermined by the Owner and the Owner restricted the
beneficiary's withdrawal rights.
. Withdrawals are not subject to CDSC.
. Upon the death of the beneficiary, any remaining Account Value will be
paid in a lump sum to the person(s) named by the beneficiary
(successor), unless the successor chooses to continue receiving payments.
. If the beneficiary elects to receive the death benefit proceeds under
the Beneficiary Continuation Option, we must receive the election in
good order at least 14 days prior to the first required distribution.
If, for any reason, the election impedes our ability to complete the
first distribution by the required date, we will be unable to accept the
election.
Currently only Investment Options corresponding to Portfolios of the Advanced
Series Trust and the ProFund VP are available under the Beneficiary
Continuation Option.
In addition to the materials referenced above, the Beneficiary will be provided
with a prospectus and a settlement agreement describing the Beneficiary
Continuation Option. We may pay compensation to the broker-dealer of record on
the Annuity based on amounts held in the Beneficiary Continuation Option.
Please contact us for additional information on the availability, restrictions
and limitations that will apply to a beneficiary under the Beneficiary
Continuation Option.
SPOUSAL ASSUMPTION OF ANNUITY
You may name your spouse as your beneficiary. If you and your spouse own your
Annuity jointly, we assume that the sole primary beneficiary will be the
surviving spouse unless you elect an alternative Beneficiary Designation.
Unless you elect an alternative Beneficiary Designation or the Annuity is held
as a Beneficiary Annuity, (if available under your Annuity) the spouse
beneficiary may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. Any Death Benefit (including any optional Death
Benefits) that would have been payable to the Beneficiary will become the new
Account Value as of the date we receive due proof of death and any required
proof of a spousal relationship. As of the date the assumption is effective,
the surviving spouse will have all the rights and benefits that would be
available under the Annuity to a new purchaser of the same attained age. For
purposes of determining any future Death Benefit for the surviving spouse, the
new Account Value will be considered as the initial Purchase Payment. No CDSC
will apply to the new Account Value. However, any additional purchase payments
applied after the date the assumption is effective will be subject to all
provisions of the Annuity, including any CDSC that may apply to the additional
purchase payments.
A surviving spouse's ability to continue ownership of the Annuity may be
impacted (see "Managing Your Annuity - Spousal Designations"). Please consult
your tax or legal adviser for more information about such impact in your state.
See the section entitled "Managing Your Annuity - Spousal Designations" and
"Contingent Annuitant" for a discussion of the treatment of a spousal
Contingent Annuitant in the case of the death of the Annuitant in an Annuity
owned by a Custodial Account.
WHEN DO YOU DETERMINE THE DEATH BENEFIT?
We determine the amount of the Death Benefit as of the date we receive "due
proof of death" (and in certain limited circumstances as of the date of death),
any instructions we require to determine the method of payment and any other
written representations we require to determine the proper payment of the Death
Benefit. "Due proof of death" may include a certified copy of a death
certificate, a certified copy of a decree of a court of competent jurisdiction
as to the finding of death or other satisfactory proof of death. Upon our
receipt of "due proof of death" we automatically transfer the Death Benefit to
the AST Money Market Sub-account until we further determine the universe of
eligible Beneficiaries. Once the universe of eligible Beneficiaries has been
determined each eligible Beneficiary may allocate his or her eligible share of
the Death Benefit to an eligible annuity payment option.
Each Beneficiary must make an election as to the method they wish to receive
their portion of the Death Benefit. Absent an election of a Death Benefit
payment method, no Death Benefit can be paid to the Beneficiary. We may require
written acknowledgment of all named Beneficiaries before we can pay the Death
Benefit. DURING THE PERIOD FROM THE DATE OF DEATH UNTIL WE RECEIVE ALL REQUIRED
PAPER WORK, THE AMOUNT OF THE DEATH BENEFIT IS IMPACTED BY THE INSURANCE CHARGE
AND MAY BE SUBJECT TO MARKET FLUCTUATIONS.
EXCEPTIONS TO AMOUNT OF DEATH BENEFIT
There are certain exceptions to the amount of the Death Benefit.
SUBMISSION OF DUE PROOF OF DEATH AFTER ONE YEAR. If we receive Due Proof of
Death more than one year after the date of death, we reserve the right to limit
the Death Benefit to the Unadjusted Account Value on the date we receive Due
Proof of Death (i.e., we would not pay the minimum Death Benefit or any
Optional Death Benefit).
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DEATH BENEFIT SUSPENSION PERIOD. You should be aware that there is a Death
Benefit suspension period (unless prohibited by applicable law). If the
decedent was not the Owner or Annuitant as of the Issue Date (or within 60 days
thereafter), and did not become the Owner or Annuitant due to the prior Owner's
or Annuitant's death, any Death Benefit (including any optional Death Benefit)
that applies will be suspended for a two-year period as to that person from the
date he or she first became Owner or Annuitant. While the two year suspension
is in effect, the Death Benefit amount will equal the Account Value plus the
Interim Value in the MVA Fixed Allocations, less (if allowed by applicable
state law) any Purchase Credits (for XT6) granted during the period beginning
12 months prior to decedent's date of death and ending on the date we receive
Due Proof of death. Thus, if you had elected an Optional Death Benefit, and the
suspension were in effect, you would be paying the fee for the Optional Death
Benefit even though during the suspension period your Death Benefit would have
been limited to the Account Value plus the Interim Value in the MVA Fixed
Allocations. After the two year suspension period is completed, the Death
Benefit is the same as if the suspension period had not been in force. See the
section of the prospectus above generally with regard to changes of Owner and
Annuitant that are allowable.
BENEFICIARY ANNUITY. With respect to a Beneficiary Annuity, the Death Benefit
is triggered by the death of the beneficial Owner (or the Key Life, if
entity-owned). However, if the Annuity is held as a Beneficiary Annuity, the
Owner is an entity, and the Key Life is already deceased, then no Death Benefit
is payable upon the death of the beneficial Owner.
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VALUING YOUR INVESTMENT
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, your Annuity has an Account Value. The Account
Value is determined separately for each Sub-account allocation and for each
Fixed Allocation. The Account Value is the sum of the values of each
Sub-account allocation and the value of each Fixed Allocation. For Annuities
with a Highest Daily Lifetime Five election, Account Value also includes the
value of any allocation to the Benefit Fixed Rate Account. See the "Living
Benefits - Highest Daily Lifetime Five" section of the Prospectus for a
description of the Benefit Fixed Rate Account. The Account Value does not
reflect any CDSC that may apply to a withdrawal or surrender. With respect to
ASAP III and APEX II, the Account Value includes any Loyalty Credit we apply.
With respect to XT6, the Account Value includes any Credits we applied to your
purchase payments which we are entitled to take back under certain
circumstances. When determining the Account Value on a day more than 30 days
prior to a MVA Fixed Allocation's Maturity Date, the Account Value may include
any Market Value Adjustment that would apply to a MVA Fixed Allocation (if
withdrawn or transferred) on that day.
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?
The Surrender Value of your Annuity is the value available to you on any day
during the accumulation period. The Surrender Value is defined under "Glossary
of Terms" above.
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?
When you allocate Account Value to a Sub-account, you are purchasing units of
the Sub-account. Each Sub-account invests exclusively in shares of an
underlying Portfolio. The value of the Units fluctuates with the market
fluctuations of the Portfolios. The value of the Units also reflects the daily
accrual for the Insurance Charge, the Distribution Charge (if applicable), and
if you elected one or more optional benefits whose annual charge is deducted
daily, the additional charge made for such benefits. There may be several
different Unit Prices for each Sub-account to reflect the Insurance Charge, any
Distribution Charge and the charges for any optional benefits. The Unit Price
for the Units you purchase will be based on the total charges for the benefits
that apply to your Annuity. See the section entitled "What Happens to My Units
When There is a Change in Daily Asset-Based Charges?" for a detailed discussion
of how Units are purchased and redeemed to reflect changes in the daily charges
that apply to your Annuity.
Each Valuation Day, we determine the price for a Unit of each Sub-account,
called the "Unit Price." The Unit Price is used for determining the value of
transactions involving Units of the Sub-accounts. We determine the number of
Units involved in any transaction by dividing the dollar value of the
transaction by the Unit Price of the Sub-account as of the Valuation Day.
EXAMPLE
Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the
allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the
Sub-account. Assume that later, you wish to transfer $3,000 of your Account
Value out of that Sub-account and into another Sub-account. On the Valuation
Day you request the transfer, the Unit Price of the original Sub-account has
increased to $16.79 and the Unit Price of the new Sub-account is $17.83. To
transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you
158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit
Price of $17.83. You would then have 168.255 Units of the new Sub-account.
HOW DO YOU VALUE FIXED ALLOCATIONS?
During the Guarantee Period, we use the concept of an Interim Value for the MVA
Fixed Allocations. The Interim Value can be calculated on any day and is equal
to the initial value allocated to an MVA Fixed Allocation plus all interest
credited to an MVA Fixed Allocation as of the date calculated. The Interim
Value does not include the impact of any Market Value Adjustment. If you made
any transfers or withdrawals from an MVA Fixed Allocation, the Interim Value
will reflect the withdrawal of those amounts and any interest credited to those
amounts before they were withdrawn. To determine the Account Value of an MVA
Fixed Allocation on any day more than 30 days prior to its Maturity Date, we
multiply the Account Value of the MVA Fixed Allocation times the Market Value
Adjustment factor. In addition to MVA Fixed Allocations that are subject to a
Market Value Adjustment, we offer DCA Fixed Rate Options that are used with our
6 or 12 Month Dollar Cost Averaging Program and are not subject to any MVA.
Account Value allocated to the DCA Fixed Rate Options earns the declared rate
of interest while it is transferred over a 6 month or 12 month period into the
Sub-accounts that you have designated.
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?
Prudential Annuities is generally open to process financial transactions on
those days that the New York Stock Exchange (NYSE) is open for trading. There
may be circumstances where the NYSE does not open on a regularly scheduled date
or time or closes at an earlier time than scheduled (normally 4:00 p.m. Eastern
Time). Generally, financial transactions requested before the close of the NYSE
which meet our requirements will be processed according to the value next
determined following the close of business. Financial transactions requested on
a non-Valuation Day or after the close of the NYSE will be processed based on
the value next computed on the next Valuation Day. There may be circumstances
when the opening or closing time of the NYSE is different than other major
stock exchanges, such as NASDAQ or the American Stock Exchange. Under such
circumstances, the closing time of the NYSE will be used when valuing and
processing transactions.
There may be circumstances where the NYSE is open, however, due to inclement
weather, natural disaster or other circumstances beyond our control, our
offices may be closed or our business processing capabilities may be
restricted. Under those circumstances, your Account Value may fluctuate based
on changes in the Unit Values, but you may not be able to transfer Account
Value, or make a purchase or redemption request. We will not process any
financial transactions involving purchase or redemption orders on days the NYSE
is closed.
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Prudential Annuities will also not process financial transactions involving
purchase or redemption orders or transfers on any day that:
.. trading on the NYSE is restricted;
.. an emergency, as determined by the SEC, exists making redemption or
valuation of securities held in the separate account impractical; or
.. the SEC, by order, permits the suspension or postponement for the protection
of security holders.
If, pursuant to SEC rules, the AST Money Market Portfolio suspends payment of
redemption proceeds in connection with a liquidation of the Portfolio, we will
delay payment of any transfer, full or partial withdrawal, or death
benefit from the AST Money Market Sub-account until the Portfolio is liquidated.
INITIAL PURCHASE PAYMENTS: We are required to allocate your initial Purchase
Payment to the Sub-accounts within two (2) Valuation Days after we receive all
of our requirements at our office to issue an Annuity. If we do not have all
the required information to allow us to issue your Annuity, we may retain the
Purchase Payment while we try to reach you or your representative to obtain all
of our requirements. If we are unable to obtain all of our required information
within five (5) Valuation Days, we are required to return the Purchase Payment
to you at that time, unless you specifically consent to our retaining the
Purchase Payment while we gather the required information. Once we obtain the
required information, we will invest the Purchase Payment (and any associated
Credits with respect to XT6) and issue an Annuity within two (2) Valuation
Days. With respect to both your initial Purchase Payment and any subsequent
Purchase Payment that is pending investment in our separate account, we may
hold the amount temporarily in our general account and may earn interest on
such amount. You will not be credited with interest during that period.
As permitted by applicable law, the broker-dealer firm through which you
purchase your Annuity may forward your initial Purchase Payment to us prior to
approval of your purchase by a registered principal of the firm. These
arrangements are subject to a number of regulatory requirements, including that
until such time that the insurer is notified of the firm's principal approval
and is provided with the application, or is notified of the firm principal's
rejection, customer funds will be held by the insurer in a segregated bank
account. In addition, the insurer must promptly return the customer's funds at
the customer's request prior to the firm's principal approval or upon the
firm's rejection of the application. The monies held in the bank account will
be held in a suspense account within our general account and we may earn
interest on amounts held in that suspense account. Contract owners will not be
credited with any interest earned on amounts held in that suspense account. The
monies in such suspense account may be subject to our general creditors.
Moreover, because the FINRA rule authorizing the use of such accounts is new,
there may be uncertainty as to the segregation and treatment of such insurance
company general account assets under applicable Federal and State laws.
ADDITIONAL PURCHASE PAYMENTS: We will apply any additional purchase payments
(and any associated Credit with respect to XT6) on the Valuation Day that we
receive the Purchase Payment at our office with satisfactory allocation
instructions. We may limit, restrict, suspend or reject any additional purchase
payments at any time, on a non-discriminatory basis. Please see "Living
Benefits" for further information on additional purchase payments.
SCHEDULED TRANSACTIONS: Scheduled transactions include transfers made in
connection with dollar cost averaging, the asset allocation program,
auto-rebalancing, systematic withdrawals, systematic investments, required
minimum distributions, substantially equal periodic payments under
Section 72(t) of the Code, or annuity payments. Scheduled transactions are
processed and valued as of the date they are scheduled, unless the scheduled
day is not a Valuation Day. In that case, the transaction will be processed and
valued on the next Valuation Day, unless (with respect to required minimum
distributions, substantially equal periodic payments under Section 72(t)/72(q)
of the Code systematic withdrawals, and annuity payments only), the next
Valuation Day falls in the subsequent calendar year, in which case the
transaction will be processed and valued on the prior Valuation Day.
In addition, if: you are taking your Annual Income Amount through our
systematic withdrawal program; and the scheduled day is not a Valuation Day;
and the next Valuation Day will occur in a new contract year, the transaction
will be processed and valued on the prior Valuation Day.
UNSCHEDULED TRANSACTIONS: "Unscheduled" transactions include any other
non-scheduled transfers and requests for Partial Withdrawals or Free
Withdrawals or Surrenders. With respect to certain written requests to withdraw
Account Value, we may seek to verify the requesting Owner's signature.
Specifically, we reserve the right to perform a signature verification for
(a) any withdrawal exceeding a certain dollar amount and (b) a withdrawal
exceeding a certain dollar amount if the payee is someone other than the Owner.
In addition, we will not honor a withdrawal request in which the requested
payee is the Financial Professional or agent of record. We reserve the right to
request a signature guarantee with respect to a written withdrawal request. If
we do perform a signature verification, we will pay the withdrawal proceeds
within 7 days after the withdrawal request was received by us in good order,
and will process the transaction in accordance with the discussion in "When Do
You Process And Value Transactions?"
MEDICALLY-RELATED SURRENDERS & DEATH BENEFITS: Medically-Related Surrender
requests and Death Benefit claims require our review and evaluation before
processing. We price such transactions as of the date we receive at our Office
all supporting documentation we require for such transactions and that are
satisfactory to us.
We are generally required by law to pay any surrender request or death benefit
claims from the Separate Account within 7 days of our receipt of your request
in good order.
TRANSACTIONS IN PROFUNDS VP SUB-ACCOUNTS: Generally, purchase or redemption
orders or transfer requests must be received by us by no later than the close
of the NYSE to be processed on the current Valuation Day. However, any purchase
order or transfer request involving the
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ProFunds VP Sub-accounts must be received by us no later than one hour prior to
any announced closing of the applicable securities exchange (generally, 3:00
p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off"
time for such financial transactions involving a ProFunds VP Sub-account will
be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m.
Eastern time) for transactions submitted electronically through Prudential
Annuities' Internet website (www.prudentialannuities.com). You cannot request a
transaction (other than a redemption order) involving the transfer of units in
one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and
4:00 p.m. Eastern Time Owners attempting to process a purchase order or
transfer request between the applicable "cut-off" time and 4:00 p.m. Eastern
Time, are informed that their transactions cannot be processed as requested. We
will not process the trade until we receive further instructions from you.
However, Owners receiving the "cut-off" message may process a purchase order or
transfer request up until 4:00 p.m. Eastern Time on that same day with respect
to any other available investment option under their Annuity, other than
ProFunds. Transactions received after 4:00 p.m. Eastern Time will be treated as
received by us on the next Valuation Day.
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?
DISTRIBUTION CHARGE APPLICABLE TO ASAP III AND XT6: At the end of the Period
during which the Distribution Charge applies, your Annuity will become subject
to a different daily asset-based charge. We will process a transaction where
your Account Value allocated to the Sub-accounts will be used to purchase new
Units of the Sub-accounts that reflect the Insurance Charge (and the charge for
any optional benefits you have elected) but not the Distribution Charge. The
number of Units attributed to your Annuity will be decreased and the Unit Price
of each unit of the Sub-accounts in which you invested will be increased. THE
ADJUSTMENT IN THE NUMBER OF UNITS AND UNIT PRICE WILL NOT AFFECT YOUR ACCOUNT
VALUE. Beginning on that date, your Account Value will be determined based on
the change in the value of Units that reflect the Insurance Charge and any
other optional benefits that you have elected.
TERMINATION OF OPTIONAL BENEFITS: Except for the Guaranteed Minimum Income
Benefit, the "Combination 5% Roll-up and Highest Anniversary Value Death
Benefit" and the Highest Daily Value Death Benefit, which generally cannot be
terminated by the owner once elected, if any optional benefit terminates, we
will no longer deduct the charge we apply to purchase the optional benefit.
Certain optional benefits may be added after you have purchased your Annuity.
On the date a charge no longer applies or a charge for an optional benefit
begins to be deducted, your Annuity will become subject to a different daily
asset-based charge. This change may result in the number of Units attributed to
your Annuity and the value of those Units being different than it was before
the change; however, the adjustment in the number of Units and Unit Price will
not affect your Account Value (although the change in charges that are deducted
will affect your Account Value).
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TAX CONSIDERATIONS
The tax considerations associated with an Annuity vary depending on whether the
Annuity is (i) owned by an individual or non-natural person, and not associated
with a tax-favored retirement plan, or (ii) held under a tax-favored retirement
plan. We discuss the tax considerations for these categories of Annuities
below. The discussion is general in nature and describes only federal income
tax law (not state, local, foreign or other federal tax laws). It is based on
current law and interpretations which may change. The information provided is
not intended as tax advice. You should consult with a qualified tax adviser for
complete information and advice.
Generally, the cost basis in an Annuity not associated with a tax-favored
retirement plan is the amount you pay into your Annuity, or into Annuities
exchanged for your Annuity, on an after-tax basis less any withdrawals of such
payments. Cost basis for a tax-favored retirement plan is provided only in
limited circumstances, such as for contributions to a Roth IRA or nondeductible
contributions to a traditional IRA.
The discussion below generally assumes that the Annuity is issued to the
Annuity Owner. For Annuities issued under the Beneficiary Continuation Option
or as a Beneficiary Annuity, refer to the Taxes Payable by Beneficiaries for a
Nonqualified Annuity and Required Distributions Upon Your Death for Qualified
Annuities sections below.
SAME SEX MARRIAGES, CIVIL UNIONS AND DOMESTIC PARTNERSHIPS
The summary that follows includes a description of certain spousal rights under
the Annuity and our administration of such spousal rights and related tax
reporting. Prior to a recent Supreme Court decision, and consistent with
Section 3 of the federal Defense of Marriage Act ("DOMA"), same sex marriages
under state law were not recognized as same sex marriages for purposes of
federal law. However, in UNITED STATES V. WINDSOR, the U.S. Supreme Court
struck down Section 3 of DOMA as unconstitutional, thereby recognizing for
federal law purposes a valid same sex marriage. The WINDSOR decision means that
the favorable tax benefits afforded by the federal tax law to an opposite sex
spouse under the Internal Revenue Code (the Code) are now available to a same
sex spouse.
On August 29, 2013, the Internal Revenue Service ("IRS") issued guidance on its
position regarding same sex marriages for federal tax purposes. If a couple is
married in a jurisdiction (including a foreign country) that recognizes same
sex marriages, that marriage will be recognized for all federal tax purposes
regardless of the law in the jurisdiction where they reside. However, the IRS
did not recognize civil unions and registered domestic partnerships as
marriages for federal tax purposes. If a state does not recognize a civil union
or a registered domestic partnership as a marriage, it is not a marriage for
federal tax purposes.
Currently, a case is pending with the U.S. Supreme Court that may address
several unanswered questions regarding the application of federal and state tax
law to same sex marriages, civil unions and domestic partnerships. Absent
further guidance from a state to the contrary, we will tax report and withhold
at the state level consistent with the characterization of a given transaction
under federal tax law (for example, a tax free rollover).
Please consult with your tax or legal adviser before electing the Spousal
Benefit for a same sex spouse or civil union partner.
NONQUALIFIED ANNUITIES
IN GENERAL, AS USED IN THIS PROSPECTUS, A NONQUALIFIED ANNUITY IS OWNED BY AN
INDIVIDUAL OR NON-NATURAL PERSON AND IS NOT ASSOCIATED WITH A TAX-FAVORED
RETIREMENT PLAN.
TAXES PAYABLE BY YOU
We believe the Annuity is an Annuity for tax purposes. Accordingly, as a
general rule, you should not pay any tax until you receive money under the
Annuity. Generally, an Annuity issued by the same company (and affiliates) to
you during the same calendar year must be treated as one Annuity for purposes
of determining the amount subject to tax under the rules described below.
Charges for investment advisory fees that are taken from the Annuity are
treated as a partial withdrawal from the Annuity and will be reported as such
to the Annuity Owner.
It is possible that the IRS could assert that some or all of the charges for
the optional living benefits under the Annuity should be treated for federal
income tax purposes as a partial withdrawal from the Annuity. If this were the
case, the charge for this benefit could be deemed a withdrawal and treated as
taxable to the extent there are earnings in the Annuity. Additionally, for
Owners under age 59 1/2, the taxable income attributable to the charge for the
benefit could be subject to a tax penalty. If the IRS determines that the
charges for one or more benefits under the Annuity are taxable withdrawals,
then the sole or surviving Owner will be provided with a notice from us
describing available alternatives regarding these benefits.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your Annuity or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of cost basis, until all gain has been withdrawn. Once all gain
has been withdrawn, payments will be treated as a nontaxable return of cost
basis until all cost basis has been returned. After all cost basis is returned,
all subsequent amounts will be taxed as ordinary income. You will generally be
taxed on any withdrawals from the Annuity while you are alive even if the
withdrawal is paid to someone else. Withdrawals under any of the optional
living benefits or as a systematic payment are taxed under these rules. If you
assign or pledge all or part of your Annuity as collateral for a loan, the part
assigned generally will be treated as a withdrawal and subject to income tax to
the extent of gain. If you transfer your Annuity for less than full
consideration, such as by gift, you will also trigger tax on any gain in the
Annuity. This rule does not apply if you transfer the Annuity to your spouse or
under most circumstances if you transfer the Annuity incident to divorce.
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If you choose to receive payments under an interest payment option, or a
Beneficiary chooses to receive a death benefit under an interest payment
option, that election will be treated, for tax purposes, as surrendering your
Annuity and will immediately subject any gain in the Annuity to income tax.
TAXES ON ANNUITY PAYMENTS
If you select an annuity payment option as described in the Access to Account
Value section earlier in this prospectus, a portion of each annuity payment you
receive will be treated as a partial return of your cost basis 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 cost basis (less any amounts
previously received tax-free) and the denominator of which is the total
expected payments under the Annuity. After the full amount of your cost basis
has 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 cost basis has been recovered, a tax deduction may be
allowed for the unrecovered amount.
If your Account Value is reduced to zero but the Annuity remains in force due
to a benefit provision, further distributions from the Annuity will be reported
as annuity payments, using an exclusion ratio based upon the undistributed cost
basis in the Annuity and the total value of the anticipated future payments
until such time as all cost basis has been recovered.
MAXIMUM ANNUITY DATE
You must commence annuity payments or surrender your Annuity no later than the
first day of the calendar month next following the maximum Annuity Date for
your Annuity. For some of our Annuities, you are able to choose to defer the
Annuity Date beyond the default Annuity Date described in your Annuity.
However, the IRS may not then consider your Annuity to be an Annuity under the
tax law.
Please refer to your Annuity contract for the maximum Annuity Date.
PARTIAL ANNUITIZATION
Individuals may partially annuitize their Nonqualified Annuity if the contract
so permits. The tax law allows for a portion of a Nonqualified Annuity,
endowment or life insurance contract to be annuitized while the balance is not
annuitized. The annuitized portion must be paid out over 10 or more years or
over the lives of one or more individuals. The annuitized portion of the
Annuity is treated as a separate Annuity for purposes of determining taxability
of the payments under section 72 of the Code. We do not currently permit
partial annuitization.
MEDICARE TAX ON NET INVESTMENT INCOME
The Patient Protection and Affordable Care Act, enacted in 2010, included a
Medicare tax on investment income. This tax assesses a 3.8% surtax on the
lesser of (1) net investment income or (2) the excess of "modified adjusted
gross income" over a threshold amount. The "threshold amount" is $250,000 for
married taxpayers filing jointly, $125,000 for married taxpayers filing
separately, $200,000 for single taxpayers, and approximately $12,300 for
trusts. The taxable portion of payments received as a withdrawal, surrender,
annuity payment, death benefit payment or any other actual or deemed
distribution under the Annuity will be considered investment income for
purposes of this surtax.
TAX PENALTY FOR EARLY WITHDRAWAL FROM A NONQUALIFIED ANNUITY
You may owe a 10% tax penalty on the taxable part of distributions received
from your Nonqualified Annuity before you attain age 59 1/2. Amounts are not
subject to this tax penalty if:
. the amount is paid on or after you reach age 59 1/2 or die;
. the amount received is attributable to your becoming disabled;
. generally the amount paid or received is in the form of substantially
equal payments (as defined in the Code) not less frequently than
annually (please note that substantially equal payments must continue
until the later of reaching age 59 1/2 or 5 years and modification of
payments during that time period will result in retroactive application
of the 10% tax penalty); or
. the amount received is paid under an immediate Annuity (in which annuity
payments begin within one year of purchase).
Other exceptions to this tax may apply. You should consult your tax adviser for
further details.
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Code permits certain tax-free exchanges of a life insurance
contract, Annuity or endowment contract for an Annuity, including tax-free
exchanges of annuity death benefits for a Beneficiary Annuity. Partial
exchanges may be treated in the same way as tax-free 1035 exchanges of entire
contracts, therefore avoiding current taxation of the partially exchanged
amount as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. In Revenue
Procedure 2011-38, the IRS has indicated that, for exchanges on or after
October 24, 2011, where there is a surrender or distribution from either the
initial Annuity or receiving Annuity within 180 days of the date on which the
partial exchange was completed, the IRS will apply general tax rules to
determine the substance and treatment of the original transfer. We strongly
urge you to discuss any partial exchange transaction of this type with your tax
adviser before proceeding with the transaction.
If an Annuity is purchased through a tax-free exchange of a life insurance
contract, Annuity or endowment contract that was purchased prior to August 14,
1982, then any Purchase Payments made to the original contract prior to
August 14, 1982 will be treated as made to the new Annuity prior to that date.
Generally, such pre-August 14, 1982 withdrawals are treated as a recovery of
your investment in the Annuity first until Purchase Payments made before
August 14, 1982 are withdrawn. Moreover, income allocable to Purchase Payments
made before August 14, 1982, is not subject to the 10% tax penalty.
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After you elect an annuity payment option, you are not eligible for a tax-free
exchange under Section 1035.
TAXES PAYABLE BY BENEFICIARIES FOR A NONQUALIFIED ANNUITY
The Death Benefit distributions are subject to ordinary income tax to the
extent the distribution exceeds the cost basis in the Annuity. The value of the
Death Benefit, as determined under federal law, is also included in the Owner's
estate for federal estate tax purposes. Generally, the same tax rules described
above would also apply to amounts received by your Beneficiary. Choosing an
option other than a lump sum Death Benefit may defer taxes. Certain minimum
distribution requirements apply upon your death, as discussed further below in
the Annuity Qualification section. Tax consequences to the Beneficiary vary
depending upon the Death Benefit payment option selected. Generally, for
payment of the Death Benefit
.. As a lump sum payment, the Beneficiary is taxed in the year of payment on
gain in the Annuity.
.. Within 5 years of death of Owner, the Beneficiary is taxed as amounts are
withdrawn (with gain treated as being distributed first).
.. Under an Annuity or Annuity settlement option where distributions begin
within one year of the date of death of the Owner, the Beneficiary is taxed
on each payment with part as gain and part as return of cost basis.
CONSIDERATIONS FOR CONTINGENT ANNUITANTS: We may allow the naming of a
contingent Annuitant when a Nonqualified Annuity is held by a pension plan or a
tax favored retirement plan, or held by a Custodial Account (as defined earlier
in this prospectus). In such a situation, the Annuity may no longer qualify for
tax deferral where the Annuity continues after the death of the Annuitant.
However, tax deferral should be provided instead by the pension plan, tax
favored retirement plan, or Custodial Account. We may also allow the naming of
a contingent annuitant when a Nonqualified Annuity is held by an entity owner
when such Annuities do not qualify for tax deferral under the current tax law.
This does not supersede any benefit language which may restrict the use of the
contingent annuitant.
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from an Annuity are subject to federal and state
income tax reporting and withholding. In general, we will withhold federal
income tax from the taxable portion of such distribution based on the type of
distribution. In the case of an Annuity or similar periodic payment, we will
withhold as if you are a married individual with three (3) exemptions unless
you designate a different withholding status. If no U.S. taxpayer
identification number is provided, we will automatically withhold using single
with zero exemptions as the default. In the case of all other distributions, we
will withhold at a 10% rate. You may generally elect not to have tax withheld
from your payments. An election out of withholding must be made on forms that
we provide. If you are a U.S. person (which includes a resident alien), and
your address of record is a non-U.S. address, we are required to withhold
income tax unless you provide us with a U.S. residential address.
State income tax withholding rules vary and we will withhold based on the rules
of your state of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident aliens
at a 30% rate. A different withholding rate may be applicable to a nonresident
alien based on the terms of an existing income tax treaty between the United
States and the nonresident alien's country. Please refer to the discussion
below regarding withholding rules for a Qualified Annuity.
Regardless of the amount withheld by us, you are liable for payment of federal
and state income tax on the taxable portion of annuity distributions. You
should consult with your tax adviser regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ENTITY OWNERS
Where an Annuity is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the Annuity will not be taxed as an Annuity and increases in
the value of the Annuity over its cost basis will be subject to tax annually.
Where an Annuity is issued to a Charitable Remainder Trust (CRT), the Annuity
will not be taxed as an Annuity and increases in the value of the Annuity over
its cost basis will be subject to tax reporting annually. As there are charges
for the optional living benefits described elsewhere in this prospectus, and
such charges reduce the contract value of the Annuity, trustees of the CRT
should discuss with their legal advisers whether election of such optional
living benefits violates their fiduciary duty to the remainder beneficiary.
Where an Annuity is issued to a trust, and such trust is characterized as a
grantor trust under the Code, such Annuity shall not be considered to be held
by a non-natural person and will be subject to the tax reporting and
withholding requirements generally applicable to a Nonqualified Annuity.
At this time, we will not issue an Annuity to grantor trusts with multiple
grantors. Also, we will not issue an Annuity to a grantor trust where the
Grantor is not also the Annuitant. Where a previously issued Annuity was
structured so that it is owned by a grantor trust but the Annuitant is not the
grantor, then the Annuity is required to terminate upon the death of the
grantor of the trust if the grantor pre-deceases the Annuitant under
Section 72(s) of the Code. Under this circumstance, the contract value will be
paid out to the trust and it is not eligible for the death benefit provided
under the contract.
ANNUITY QUALIFICATION
DIVERSIFICATION AND INVESTOR CONTROL. In order to qualify for the tax rules
applicable to Annuities described above, the assets underlying the Sub-accounts
of an Annuity must be diversified, according to certain rules under the Code.
Each Portfolio is required to diversify its investments each quarter so that no
more than 55% of the value of its assets is represented by any one investment,
no more than 70% is represented by any two
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investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. Generally, securities of
a single issuer are treated as one investment and obligations of each U.S.
Government agency and instrumentality (such as the Government National Mortgage
Association) are treated as issued by separate issuers. In addition, any
security issued, guaranteed or insured (to the extent so guaranteed or insured)
by the United States or an instrumentality of the U.S. will be treated as a
security issued by the U.S. Government or its instrumentality, where
applicable. We believe the Portfolios underlying the variable Investment
Options of the Annuity meet these diversification requirements.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the Annuity Owner, must have sufficient
control over the underlying assets to be treated as the Owner of the underlying
assets for tax purposes. While we also believe these investor control rules
will be met, the Treasury Department may promulgate guidelines under which a
variable annuity will not be treated as an Annuity for tax purposes if persons
with ownership rights have excessive control over the investments underlying
such variable Annuity. It is unclear whether such guidelines, if in fact
promulgated, would have retroactive effect. It is also unclear what effect, if
any, such guidelines might have on transfers between the Investment Options
offered pursuant to this prospectus. We reserve the right to take any action,
including modifications to your Annuity or the Investment Options, required to
comply with such guidelines if promulgated. Any such changes will apply
uniformly to affected Owners and will be made with such notice to affected
Owners as is feasible under the circumstances.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH FOR A NONQUALIFIED ANNUITY. Upon your
death, certain distributions must be made under the Annuity. The required
distributions depend on whether you die before you start taking annuity
payments under the Annuity or after you start taking annuity payments under the
Annuity. If you die on or after the Annuity Date, the remaining portion of the
interest in the Annuity 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 Annuity must be distributed within
5 years after the date of death, or as periodic payments over a period not
extending beyond the life or life expectancy of the designated Beneficiary
(provided such payments begin within one year of your death). Your designated
Beneficiary is the person to whom benefit rights under the Annuity pass by
reason of death, and must be a natural person in order to elect a periodic
payment option based on life expectancy or a period exceeding five years.
Additionally, if the Annuity is payable to (or for the benefit of) your
surviving spouse, that portion of the Annuity may be continued with your spouse
as the Owner. For Nonqualified Annuities owned by a non-natural person, the
required distribution rules apply upon the death of the Annuitant. This means
that for an Annuity held by a non-natural person (such as a trust) for which
there is named a co-annuitant, then such required distributions will be
triggered by the death of the first co-annuitants to die.
CHANGES IN YOUR ANNUITY. We reserve the right to make any changes we deem
necessary to assure that your Annuity qualifies as an Annuity for tax purposes.
Any such changes will apply to all Annuity Owners and you will be given notice
to the extent feasible under the circumstances.
QUALIFIED ANNUITIES
IN GENERAL, AS USED IN THIS PROSPECTUS, A QUALIFIED ANNUITY IS AN ANNUITY WITH
APPLICABLE ENDORSEMENTS FOR A TAX-FAVORED PLAN OR A NONQUALIFIED ANNUITY HELD
BY A TAX-FAVORED RETIREMENT PLAN.
The following is a general discussion of the tax considerations for Qualified
Annuites. This Annuity may or may not be available for all types of the
tax-favored retirement plans discussed below. This discussion assumes that you
have satisfied the eligibility requirements for any tax-favored retirement
plan. Please consult your Financial Professional prior to purchase to confirm
if this Annuity is available for a particular type of tax-favored retirement
plan or whether we will accept the type of contribution you intend for this
Annuity.
A Qualified Annuity may typically be purchased for use in connection with:
.. Individual retirement accounts and annuities (IRAs), including inherited
IRAs (which we refer to as a Beneficiary IRA), which are subject to Sections
408(a) and 408(b) of the Code;
.. Roth IRAs, including inherited Roth IRAs (which we refer to as a Beneficiary
Roth IRA) under Section 408A of the Code;
.. A corporate Pension or Profit-sharing plan (subject to 401(a) of the Code);
.. H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code);
.. Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax
Deferred Annuities or TDAs);
.. Section 457 plans (subject to 457 of the Code).
A Nonqualified Annuity may also be purchased by a 401(a) trust, a custodial IRA
or a custodial Roth IRA account, or a Section 457 plan, which can hold other
permissible assets. The terms and administration of the trust or custodial
account or plan in accordance with the laws and regulations for 401(a) plans,
IRAs or Roth IRAs, or a Section 457 plan, as applicable, are the responsibility
of the applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in Annuities. This means
that when a tax favored plan invests in an Annuity, it generally does not
result in any additional tax benefits (such as income tax deferral and income
tax free transfers).
TYPES OF TAX-FAVORED PLANS
IRAS. If you buy an Annuity for use as an IRA, we will provide you a copy of
the prospectus and contract which summarize the material terms. The IRS
requires that you have a "Free Look" after making an initial contribution to
the Annuity. During this time, you can cancel the Annuity by notifying us in
writing, and we will refund the greater of all purchase payments under the
Annuity or the Account Value, less any applicable federal and state income
tax withholding.
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CONTRIBUTIONS LIMITS/ROLLOVERS. Subject to the minimum purchase payment
requirements of an Annuity, you may purchase an Annuity for an IRA in
connection with a "rollover" of amounts from a qualified retirement plan, as a
transfer from another IRA, by making a contribution consisting of your IRA
contributions and catch-up contributions, if applicable, attributable to the
prior year during the period from January 1 to April 15 (or the later
applicable due date of your federal income tax return, without extension), or
as a current year contribution. In 2015 the contribution limit is $5,500. The
contribution amount is indexed for inflation. The tax law also provides for a
catch-up provision for individuals who are age 50 and above, allowing these
individuals an additional $1,000 contribution each year. The catch-up amount is
not indexed for inflation. The "rollover" rules under the Code are fairly
technical; however, an individual (or his or her surviving spouse) may
generally "roll over" certain distributions from tax favored retirement plans
(either directly or within 60 days from the date of these distributions) if he
or she meets the requirements for distribution. Once you buy an Annuity, you
can make regular IRA contributions under the Annuity (to the extent permitted
by law). However, if you make such regular IRA contributions, you should note
that you will not be able to treat the contract as a "conduit IRA", which means
that you will not retain possible favorable tax treatment if you subsequently
"roll over" the contract funds originally derived from a qualified retirement
plan or TDA into another Section 401(a) plan or TDA. For IRA rollovers, an
individual can only make an IRA to IRA rollover if the individual has not made
a rollover involving any IRAs owned by the individual in the prior 12 months.
An IRA transfer is a tax-free trustee-to-trustee "transfer" from one IRA
account to another. IRA transfers are not subject to this 12 month rule.
In some circumstances, non-spouse Beneficiaries may roll over to an IRA amounts
due from qualified plans, 403(b) plans, and governmental 457(b) plans. However,
the rollover rules applicable to non-spouse Beneficiaries under the Code are
more restrictive than the rollover rules applicable to Owner/participants and
spouse Beneficiaries. Generally, non-spouse Beneficiaries may roll over
distributions from tax favored retirement plans only as a direct rollover, and
if permitted by the plan. For plan years beginning after December 31, 2009,
employer retirement plans are required to permit non-spouse Beneficiaries to
roll over funds to an inherited IRA. An inherited IRA must be directly rolled
over from the employer plan or transferred from an IRA and must be titled in
the name of the deceased (i.e., John Doe deceased for the benefit of Jane Doe).
No additional contributions can be made to an inherited IRA. In this
prospectus, an inherited IRA is also referred to as a Beneficiary Annuity.
REQUIRED PROVISIONS. Annuities that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
.. You, as Owner of the Annuity, 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 Annuity;
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
.. The date on which required minimum distributions must begin cannot be later
than April 1/st/ of the calendar year after the calendar year you turn age
70 1/2; and
.. Death and annuity payments must meet Required Minimum Distribution rules
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this Annuity) which is not a transfer or rollover is taxable.
As taxable income, these distributions are subject to the general tax
withholding rules described earlier regarding an Annuity in the Nonqualified
Annuity section. In addition to this normal tax liability, you may also be
liable for the following, depending on your actions:
.. A 10% early withdrawal penalty described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a Required Minimum Distribution, also described below.
SEPS. SEPs are a variation on a standard IRA, and Annuities issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $53,000 in 2015, or (b) 25% of your taxable compensation paid by the
contributing employer (not including the employer's SEP contribution as
compensation for these purposes). However, for these purposes, compensation
in excess of certain limits established by the IRS will not be considered.
In 2015, this limit is $265,000;
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997 may
permit salary deferrals up to $18,000 in 2015 with the employer making these
contributions to the SEP. However, no new "salary reduction" or "SARSEPs"
can be established after 1996. Individuals participating in a SARSEP who are
age 50 or above by the end of the year will be permitted to contribute an
additional $6,000 in 2015. These amounts are indexed for inflation. Not all
Annuities issued by us are available for SARSEPs. You will also be provided
the same information, and have the same "Free Look" period, as you would
have if you purchased the Annuity for a standard IRA.
ROTH IRAS. Like standard IRAs, income within a Roth IRA accumulates tax-free,
and contributions are subject to specific limits. Roth IRAs have, however, the
following differences:
.. Contributions to a Roth IRA cannot be deducted from your gross income;
.. "Qualified distributions" from a Roth IRA are excludable from gross income.
A "qualified distribution" is a distribution that satisfies two
requirements: (1) the distribution must be made (a) after the Owner of the
IRA attains age 59 1/2; (b) after the Owner's death; (c) due to the Owner's
disability; or (d) for a qualified first time homebuyer distribution within
the meaning of Section 72(t)(2)(F) of the Code; and (2) the
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distribution must be made in the year that is at least five tax years after
the first year for which a contribution was made to any Roth IRA established
for the Owner or five years after a rollover, transfer, or conversion was
made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA
that are not qualified distributions will be treated as made first from
contributions and then from earnings and earnings will be taxed generally in
the same manner as distributions from a traditional IRA.
.. If eligible (including meeting income limitations and earnings
requirements), you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Subject to the minimum Purchase Payment requirements of an Annuity, you may
purchase an Annuity for a Roth IRA in connection with a "rollover" of amounts
of another traditional IRA, SEP, SIMPLE-IRA, employer sponsored retirement plan
(under sections 401(a) or 403(b) of the Code) or Roth IRA; or, if you meet
certain income limitations, by making a contribution consisting of your Roth
IRA contributions and catch-up contributions, if applicable, attributable to
the prior year during the period from January 1 to April 15 (or the applicable
due date of your federal income tax return, without extension), or as a current
year contribution. The Code permits persons who receive certain qualifying
distributions from such non-Roth IRAs, to directly rollover or make, within 60
days, a "rollover" of all or any part of the amount of such distribution to a
Roth IRA which they establish. The conversion of non-Roth accounts triggers
current taxation (but is not subject to a 10% early distribution penalty). Once
an Annuity has been purchased, regular Roth IRA contributions will be accepted
to the extent permitted by law. In addition, an individual receiving an
eligible rollover distribution from a designated Roth account under an employer
plan may roll over the distribution to a Roth IRA even if the individual is not
eligible to make regular contributions to a Roth IRA. Non-spouse Beneficiaries
receiving a distribution from an employer sponsored retirement plan under
sections 401(a) or 403(b) of the Code can also directly roll over contributions
to a Roth IRA. However, it is our understanding of the Code that non-spouse
Beneficiaries cannot "rollover" benefits from a traditional IRA to a Roth IRA.
TDAS. In general, you may own a Tax Deferred Annuity (also known as a TDA, Tax
Sheltered Annuity (TSA), 403(b) plan or 403(b) Annuity) if you are an employee
of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a
public educational organization, and you may make contributions to a TDA so
long as your employer maintains such a plan and your rights to the Annuity are
non-forfeitable. 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 $18,000 in 2015. Individuals
participating in a TDA who are age 50 or above by the end of the year will be
permitted to contribute an additional $6,000 in 2015. This amount is indexed
for inflation. Further, you may roll over TDA amounts to another TDA or an IRA.
You may also roll over TDA amounts to a qualified retirement plan, a SEP and a
457 government plan. An Annuity may generally only qualify as a TDA if
distributions of salary deferrals (other than "grandfathered" amounts held as
of December 31, 1988) may be made only on account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
.. Your total and permanent disability; or
.. Hardship (under limited circumstances, and only related to salary deferrals,
not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by April 1st
of the calendar year after the calendar year you turn age 70 1/2 or retire,
whichever is later. These distribution limits do not apply either to transfers
or exchanges of investments under the Annuity, or to any "direct transfer" of
your interest in the Annuity to another employer's TDA plan or 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.
CAUTION: Under IRS regulations we can accept contributions, transfers and
rollovers only if we have entered into an information-sharing agreement, or its
functional equivalent, with the applicable employer or its agent. In addition,
in order to comply with the regulations, we will only process certain
transactions (e.g., transfers, withdrawals, hardship distributions and, if
applicable, loans) with employer approval. This means that if you request one
of these transactions we will not consider your request to be in Good Order,
and will not therefore process the transaction, until we receive the employer's
approval in written or electronic form.
REQUIRED MINIMUM DISTRIBUTIONS AND PAYMENT OPTIONS
If you hold the Annuity under an IRA (or other tax-favored plan), Required
Minimum Distribution rules must be satisfied. This means that generally
payments must start by April 1 of the year after the year you reach age 70 1/2
and must be made for each year thereafter. For a TDA or a 401(a) plan for which
the participant is not a greater than 5% Owner of the employer, this required
beginning date can generally be deferred to retirement, if later. Roth IRAs are
not subject to these rules during the Owner's lifetime. The amount of the
payment must at least equal the minimum required under the IRS rules. Several
choices are available for calculating the minimum amount. More information on
the mechanics of this calculation is available on request. Please contact us at
a reasonable time before the IRS deadline so that a timely distribution is
made. Please note that there is a 50% tax penalty on the amount of any required
minimum distribution not made in a timely manner. Required Minimum
Distributions are calculated based on the sum of the Account Value and the
actuarial value of any additional living and death benefits from optional
riders that you have purchased under the Annuity. As a result, the Required
Minimum Distributions may be larger than if the calculation were based on the
Account Value only, which may in turn result in an earlier (but not before the
required beginning date) distribution of amounts under the Annuity and an
increased amount of taxable income distributed to the Annuity Owner, and a
reduction of payments under the living and death benefit optional riders.
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You can use the Minimum Distribution option to satisfy the Required Minimum
Distribution rules for an Annuity without either beginning annuity payments or
surrendering the Annuity. We will distribute to you the Required Minimum
Distribution amount, less any other partial withdrawals that you made during
the year. Such amount will be based on the value of the Annuity as of
December 31 of the prior year, but is determined without regard to other
Annuities you may own.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you. If
you own more than one IRA, you can choose to satisfy your minimum distribution
requirement for each of your IRAs by withdrawing that amount from any of your
IRAs. If you inherit more than one IRA or more than one Roth IRA from the same
Owner, similar rules apply.
CHARITABLE IRA DISTRIBUTIONS.
Prior law provided a charitable giving incentive permitting tax-free IRA
distributions for charitable purposes. As of the beginning of 2015, this
provision has expired and has not been extended. It is possible that Congress
will extend this provision retroactively to include some or all of
2015.
For distributions in tax years beginning after 2005 and before 2015, these
rules provided an exclusion from gross income, up to $100,000 for otherwise
taxable IRA distributions from a traditional or Roth IRA that are qualified
charitable distributions. To constitute a qualified charitable distribution,
the distribution must be made (1) directly by the IRA trustee to certain
qualified charitable organizations and (2) on or after the date the IRA owner
attains age 70 1/2. Distributions that are excluded from income under this
provision are not taken into account in determining the individual's
deductions, if any, for charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements of
the charitable giving incentive. Per IRS instructions, we report these
distributions as normal IRA distributions on Form 1099-R. Individuals are
responsible for reflecting the distributions as charitable IRA distributions on
their personal tax returns.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH FOR A QUALIFIED ANNUITY
Upon your death under an IRA, Roth IRA, 403(b) or other employer sponsored
plan, the designated Beneficiary may generally elect to continue the Annuity
and receive required minimum distributions under the Annuity instead of
receiving the death benefit in a single payment. The available payment options
will depend on whether you die before the date required minimum distributions
under the Code were to begin, whether you have named a designated Beneficiary
and whether that Beneficiary is your surviving spouse.
. If you die after a designated Beneficiary has been named, the death
benefit must be distributed by December 31st of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life or life expectancy of the designated
Beneficiary (as long as payments begin by December 31st of the year
following the year of death). However, if your surviving spouse is the
Beneficiary, the death benefit can be paid out over the life or life
expectancy of your spouse with such payments beginning no later than
December 31st of the year following the year of death or December 31st
of the year in which you would have reached age 70 1/2, whichever is
later. Additionally, if the Annuity is payable to (or for the benefit
of) your surviving spouse as sole primary beneficiary, the Annuity may
be continued with your spouse as the Owner.
. If you die before a designated Beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out by December 31st of the year including the five
year anniversary of the date of death. For Annuities where multiple
Beneficiaries have been named and at least one of the Beneficiaries does
not qualify as a designated Beneficiary and the account has not been
divided into separate accounts by December 31st of the year following
the year of death, such Annuity is deemed to have no designated
Beneficiary. A designated Beneficiary may elect to apply the rules for
no designated Beneficiary if those would provide a smaller payment
requirement.
. If you die before a designated Beneficiary is named and after the date
required minimum distributions must begin under the Code, the death
benefit must be paid out at least as rapidly as under the method then in
effect. For Annuities where multiple Beneficiaries have been named and
at least one of the Beneficiaries does not qualify as a designated
Beneficiary and the account has not been divided into separate accounts
by December 31st of the year following the year of death, such Annuity
is deemed to have no designated Beneficiary. A designated Beneficiary
may elect to apply the rules for no designated Beneficiary if those
would provide a smaller payment requirement.
A Beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules. Note that in 2014, the U.S.
Supreme Court ruled that Inherited IRAs, other than IRAs inherited by the
owner's spouse, do not qualify as retirement assets for purposes of protection
under the federal bankruptcy laws.
Until withdrawn, amounts in a Qualified Annuity continue to be tax deferred.
Amounts withdrawn each year, including amounts that are required to be
withdrawn under the required minimum distribution rules, are subject to tax.
You may wish to consult a professional tax adviser for tax advice as to your
particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
TAX PENALTY FOR EARLY WITHDRAWALS FROM A QUALIFIED ANNUITY
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain
age 59 1/2. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
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.. the amount received is attributable to your becoming disabled; or
.. generally the amount paid or received is in the form of substantially equal
payments (as defined in the Code) not less frequently than annually. (Please
note that substantially equal payments must continue until the later of
reaching age 59 1/2 or 5 years. Modification of payments or additional
contributions to the Annuity during that time period will result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax adviser for
further details.
WITHHOLDING
We will withhold federal income tax at the rate of 20% for any eligible
rollover distribution paid by us to or for a plan participant, unless such
distribution is "directly" rolled over into another qualified plan, IRA
(including the IRA variations described above), SEP, 457 government plan or
TDA. An eligible rollover distribution is defined under the tax law as a
distribution from an employer plan under 401(a), a TDA or a 457 governmental
plan, excluding any distribution that is part of a series of substantially
equal payments (at least annually) made over the life expectancy of the
employee or the joint life expectancies of the employee and his designated
Beneficiary, any distribution made for a specified period of 10 years or more,
any distribution that is a required minimum distribution and any hardship
distribution. Regulations also specify certain other items which are not
considered eligible rollover distributions. We will not withhold for payments
made from trustee owned Annuities or for payments under a 457 plan. For all
other distributions, unless you elect otherwise, we will withhold federal
income tax from the taxable portion of such distribution at an appropriate
percentage. The rate of withholding on annuity payments where no mandatory
withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will have
taxes withheld by us as if you are a married individual, with 3 exemptions
.. If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax adviser to find out more information on your potential liability if
you fail to pay such taxes. There may be additional state income tax
withholding requirements.
ERISA REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of
the Annuity. 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 Annuity. This information has to do
primarily with the fees, charges, discounts and other costs related to the
Annuity, as well as any commissions paid to any agent selling the Annuity.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found in the applicable sections of this prospectus.
Information about sales representatives and commissions may be found in the
sections of this prospectus addressing distribution of the Annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax adviser if you have any questions about ERISA and
these disclosure requirements.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS - QUALIFIED ANNUITIES
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income to
your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your Beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
DEFINED BENEFIT PLANS AND MONEY PURCHASE PENSION PLANS. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the plan
pay a Death Benefit to your spouse if you are married and die before you begin
receiving your benefit. This benefit must be available in the form of an
Annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
Beneficiaries, you may elect to have a Beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election and
waives his or her right to receive the QPSA. If your spouse consents to the
alternate Beneficiary, your spouse will receive no benefits from the plan upon
your death. Any QPSA waiver prior to your attaining age 35 will become null and
void on the first day of the calendar year in which you attain age 35, if still
employed.
DEFINED CONTRIBUTION PLANS (INCLUDING 401(K) PLANS AND ERISA 403(B) ANNUITIES).
Spousal consent to a distribution is generally not required. Upon your death,
your spouse will receive the entire Death Benefit, even if you designated
someone else as your Beneficiary, unless your spouse
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consents in writing to waive this right. Also, if you are married and elect an
Annuity as a periodic income option, federal law requires that you receive a
QJSA (as described above), unless you and your spouse consent to waive this
right.
IRAS, NON-ERISA 403(B) ANNUITIES, AND 457 PLANS. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated Beneficiary.
GIFTS AND GENERATION-SKIPPING TRANSFERS
If you transfer your Annuity to another person for less than adequate
consideration, there may be gift tax consequences in addition to income tax
consequences. Also, if you transfer your Annuity to a person two or more
generations younger than you (such as a grandchild or grandniece) or to a
person that is more than 37 1/2 years younger than you, there may be
generation-skipping transfer tax consequences.
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GENERAL INFORMATION
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law
or regulation to you through our Internet Website at
www.prudentialannuities.com or any other electronic means, including diskettes
or CD ROMs. We generally send a confirmation statement to you each time a
financial transaction is made affecting Account Value, such as making
additional purchase payments, transfers, exchanges or withdrawals. We may also
send quarterly statements detailing the activity affecting your Annuity during
the calendar quarter. We may confirm regularly scheduled transactions,
including, but not limited to, the Annual Maintenance Fee, Systematic
Withdrawals (including 72(t) and 72(q) payments and required minimum
distributions), electronic funds transfer, Dollar Cost Averaging, and static
rebalancing, in quarterly statements instead of confirming them immediately.
You should review the information in these statements carefully. You may
request additional reports or copies of reports previously sent. We reserve the
right to charge up to $50 for each such additional or previously sent report.
We will also send an annual report and a semi-annual report containing
applicable financial statements for the Portfolios to Owners or, with your
prior consent, make such documents available electronically through our
Internet Website or other electronic means.
WHO IS PRUDENTIAL ANNUITIES?
Prudential Annuities Life Assurance Corporation, a Prudential Financial Company
("Prudential Annuities"), is a stock life insurance company incorporated under
the laws of Arizona as of August 31, 2013, formerly incorporated in
Connecticut, and is domiciled in Arizona, formerly Connecticut, with licenses
in all 50 states, District of Columbia and Puerto Rico. Prudential Annuities
Life Assurance Corporation is a wholly-owned subsidiary of Prudential
Annuities, Inc., whose ultimate parent is Prudential Financial, Inc. Prudential
Annuities markets through and in conjunction with registered broker-dealers.
Prudential Annuities offers a wide array of annuities, including (1) deferred
variable annuities that are registered with the SEC, including fixed interest
rate annuities that are offered as a companion to certain of our variable
annuities and are registered because of their market value adjustment feature
and (2) fixed annuities that are not registered with the SEC. In addition,
Prudential Annuities has in force a relatively small block of variable life
insurance policies and immediate variable annuities, but it no longer actively
sells such policies.
No company other than Prudential Annuities has any legal responsibility to pay
amounts that it owes under its annuity and variable life insurance contracts.
Among other things, this means that where you participate in an optional living
benefit or death benefit and the value of that benefit (e.g., the Protected
Withdrawal for Highest Daily Lifetime 6 Plus) exceeds your current Account
Value, you would rely solely on the ability of the issuing insurance company to
make payments under the benefit out of its own assets. Prudential Financial,
however, exercises significant influence over the operations and capital
structure of Prudential Annuities.
Pursuant to the delivery obligations under Section 5 of the Securities Act of
1933 and Rule 159 thereunder, Prudential Annuities delivers this prospectus to
current contract owners that reside outside of the United States.
SERVICE PROVIDERS
Prudential Annuities conducts the bulk of its operations through staff employed
by it or by affiliated companies within the Prudential Financial family.
Certain discrete functions have been delegated to non-affiliates that could be
deemed "service providers" under the Investment Company Act of 1940. The
entities engaged by Prudential Annuities may change over time. As of December
31, 2014, non-affiliated entities that could be deemed service providers to
Prudential Annuities and/or an affiliated insurer within the Prudential
Annuities business unit consisted of those set forth in the table below.
NAME OF SERVICE PROVIDER SERVICES PROVIDED ADDRESS
------------------------ -------------------------------------- -------------------------------------------
Broadridge Investor Proxy services and regulatory mailings 51 Mercedes Way, Edgewood, NY 11717
Communication Solutions,
Inc.
CT Corporation System UCC filings, corporate filings and 111 Eighth Avenue, New York, NY
annual report filings 10011
Depository Trust & Clearing and settlement services 55 Water Street, 26/th/ Floor, New York,
Clearing Corporation NY 10041
EDM Americas Records management and administration 301 Fayetteville Street, Suite 1500,
of annuity contracts Raleigh, NC 27601
ExlService Holdings, Inc. Administration of annuity contracts 350 Park Avenue, 10/th/ Floor, New York,
NY 10022
National Financial Clearing and settlement services 82 Devonshire Street Boston, MA 02109
Services
NEPS, LLC Composition, printing, and mailing of 12 Manor Parkway, Salem, NH 03079
contracts and benefit documents
Pershing LLC Order-entry systems provider One Pershing Plaza, Jersey City, NJ
07399
Thomson Reuters Tax form printing 3 Times Square New York, NY 10036
Venio Claim related services 4031 University Drive, Suite 100, Fairfax,
VA 22030
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WHAT ARE SEPARATE ACCOUNTS?
The separate accounts are where Prudential Annuities sets aside and invests the
assets of some of our annuities. These separate accounts were established under
the laws of the State of Connecticut. The assets of each separate account are
held in the name of Prudential Annuities, and legally belong to us. Prudential
Annuities Life Assurance Corporation segregates the Separate Account assets
from all of its other assets. Thus, Separate Account assets that are held in
support of the contracts are not chargeable with liabilities arising out of any
other business we may conduct. Thus, income, gains and losses from assets
allocated to a separate account are credited to or charged against each such
separate account, without regard to other income, gains, or losses of
Prudential Annuities or of any other of our separate accounts. The obligations
under the Annuities are those of Prudential Annuities, which is the issuer of
the Annuities and the depositor of the separate accounts. More detailed
information about Prudential Annuities, including its audited consolidated
financial statements, is provided in the Statement of Additional Information.
SEPARATE ACCOUNT B
During the accumulation period, the assets supporting obligations based on
allocations to the Sub-accounts are held in Sub-accounts of Prudential
Annuities Life Assurance Corporation Variable Account B, also referred to as
"Separate Account B".
Separate Account B was established by us pursuant to Connecticut law on
November 25, 1987. Separate Account B also holds assets of other annuities
issued by us with values and benefits that vary according to the investment
performance of Separate Account B.
Effective August 31, 2013, Prudential Annuities Life Assurance Corporation
changed its domicile from Connecticut to Arizona. As a result of this change,
the Arizona Department of Insurance is our principal regulatory authority and
all of our separate accounts, including Separate Account B, will now be
operated in accordance with the laws of Arizona.
Separate Account B consists of multiple Sub-accounts. Each Sub-account invests
only in a single mutual fund or mutual fund portfolio. The name of each
Sub-account generally corresponds to the name of the underlying Portfolio. Each
Sub-account in Separate Account B may have several different Unit Prices to
reflect the Insurance Charge, Distribution Charge (when applicable) and the
charges for any optional benefits that are offered under the Annuities issued
by us through Separate Account B. Separate Account B is registered with the SEC
under the Investment Company Act of 1940 ("Investment Company Act") as a unit
investment trust, which is a type of investment company. The SEC does not
supervise investment policies, management or practices of Separate Account B.
We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts
at our sole discretion. We may also close Sub-accounts to additional purchase
payments on existing Annuities or close Sub-accounts for Annuities purchased on
or after specified dates. We will first notify you and receive any necessary
SEC and/or state approval before making such a change. If an underlying mutual
fund is liquidated, we will ask you to reallocate any amount in the liquidated
fund. If you do not reallocate these amounts, we will reallocate such amounts
only in accordance with SEC pronouncements and only after obtaining an order
from the SEC, if required. If investment in the Portfolios or a particular
Portfolio is no longer possible, in our discretion becomes inappropriate for
purposes the Annuity, or for any other rationale in our sole judgment, we may
substitute another portfolio or investment portfolios without your consent. The
substituted portfolio may have different fees and expenses. Substitution may be
made with respect to existing investments or the investment of future Purchase
Payments, or both. However, we will not make such substitution without any
required approval of the SEC and any applicable state insurance departments. In
addition, we may close Portfolios to allocation of Purchase Payments or Account
Value, or both, at any time in our sole discretion. We do not control the
underlying mutual funds, so we cannot guarantee that any of those funds will
always be available.
If you are enrolled in a Dollar Cost Averaging, Asset Rebalancing, or
comparable programs while an underlying fund merger, substitution or
liquidation takes place, unless otherwise noted in any communication from us,
your Account Value invested in such underlying fund will be transferred
automatically to the designated surviving fund in the case of mergers, the
replacement fund in the case of substitutions, and an available Money Market
Fund in the case of fund liquidations. Your enrollment instructions will be
automatically updated to reflect the surviving fund, the replacement fund or a
Money Market Fund for any continued and future investments.
VALUES AND BENEFITS BASED ON ALLOCATIONS TO THE SUB-ACCOUNTS WILL VARY WITH THE
INVESTMENT PERFORMANCE OF THE UNDERLYING MUTUAL FUNDS OR FUND PORTFOLIOS, AS
APPLICABLE. WE DO NOT GUARANTEE THE INVESTMENT RESULTS OF ANY SUB-ACCOUNT. YOUR
ACCOUNT VALUE ALLOCATED TO THE SUB-ACCOUNTS MAY INCREASE OR DECREASE. YOU BEAR
THE ENTIRE INVESTMENT RISK. THERE IS NO ASSURANCE THAT THE ACCOUNT VALUE OF
YOUR ANNUITY WILL EQUAL OR BE GREATER THAN THE TOTAL OF THE PURCHASE PAYMENTS
YOU MAKE TO US.
SEPARATE ACCOUNT D
During the accumulation period, assets supporting our obligations based on
Fixed Allocations are held in Prudential Annuities Life Assurance Corporation
Separate Account D, also referred to as "Separate Account D". Such obligations
are based on the fixed interest rates we credit to Fixed Allocations and the
terms of the Annuities. These obligations do not depend on the investment
performance of the assets in Separate Account D. Separate Account D was
established by us pursuant to Connecticut law. Based on our redomestication
from Connecticut to Arizona, however, all our Separate Accounts, including
Separate Account D, will be operated in accordance with the laws of Arizona,
effective August 31, 2013.
There are no units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment gain
or loss on assets maintained in Separate Account D. Such gain or loss accrues
solely to us. We retain the risk that the value of the assets in Separate
Account D may drop below the
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reserves and other liabilities we must maintain. Should the value of the assets
in Separate Account D drop below the reserve and other liabilities we must
maintain in relation to the annuities supported by such assets, we will
transfer assets from our general account to Separate Account D to make up the
difference. We have the right to transfer to our general account any assets of
Separate Account D in excess of such reserves and other liabilities. We
maintain assets in Separate Account D supporting a number of annuities we offer.
We may employ investment managers to manage the assets maintained in Separate
Account D. Each manager we employ is responsible for investment management of a
different portion of Separate Account D. From time to time additional
investment managers may be employed or investment managers may cease being
employed. We are under no obligation to employ or continue to employ any
investment manager(s) and have sole discretion over the investment managers we
retain.
We are not obligated to invest according to specific guidelines or strategies
except as may be required by Arizona and other state insurance laws.
CYBER SECURITY RISKS. We provide information about cyber security risks
associated with this Annuity in the Statement of Additional Information.
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?
Each underlying mutual fund is registered as an open-end management investment
company under the Investment Company Act. Shares of the underlying mutual fund
portfolios are sold to separate accounts of life insurance companies offering
variable annuity and variable life insurance products. The shares may also be
sold directly to qualified pension and retirement plans.
VOTING RIGHTS
We are the legal owner of the shares of the underlying mutual funds in which
the Sub-accounts invest. However, under SEC rules, you have voting rights in
relation to Account Value maintained in the Sub-accounts. If an underlying
mutual fund portfolio requests a vote of shareholders, we will vote our shares
based on instructions received from Owners with Account Value allocated to that
Sub-account. Owners have the right to vote an amount equal to the number of
shares attributable to their contracts. If we do not receive voting
instructions in relation to certain shares, we will vote those shares in the
same manner and proportion as the shares for which we have received
instructions. This voting procedure is sometimes referred to as "mirror voting"
because, as indicated in the immediately preceding sentence, we mirror the
votes that are actually cast, rather than decide on our own how to vote. We
will also "mirror vote" shares within the separate account that are owned
directly by us or by an affiliate. In addition, because all the shares of a
given mutual fund held within our separate account are legally owned by us, we
intend to vote all of such shares when that underlying fund seeks a vote of its
shareholders. As such, all such shares will be counted towards whether there is
a quorum at the underlying fund's shareholder meeting and towards the ultimate
outcome of the vote. Thus, under "mirror voting," it is possible that the votes
of a small percentage of contractholders who actually vote will determine the
ultimate outcome. We will furnish those Owners who have Account Value allocated
to a Sub-account whose underlying mutual fund portfolio has requested a "proxy"
vote with proxy materials and the necessary forms to provide us with their
voting instructions. Generally, you will be asked to provide instructions for
us to vote on matters such as changes in a fundamental investment strategy,
adoption of a new investment advisory agreement, or matters relating to the
structure of the underlying mutual fund that require a vote of shareholders.
Advanced Series Trust (the "Trust") has obtained an exemption from the
Securities and Exchange Commission that permits its co-investment advisers, AST
Investment Services, Inc. and Prudential Investments LLC, subject to approval
by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio
and to enter into new sub-advisory agreements, without obtaining shareholder
approval of the changes. This exemption (which is similar to exemptions granted
to other investment companies that are organized in a similar manner as the
Trust) is intended to facilitate the efficient supervision and management of
the sub-advisors by AST Investment Services, Inc., Prudential Investments LLC
and the Trustees. The exemption does not apply to the AST Franklin Templeton
Founding Funds Allocation Portfolio; shareholder approval of new subadvisory
agreements for this Portfolio only is required. The Trust is required, under
the terms of the exemption, to provide certain information to shareholders
following these types of changes. We may add new Sub-accounts that invest in a
series of underlying funds other than the Trust. Such series of funds may have
a similar order from the SEC. You also should review the prospectuses for the
other underlying funds in which various Sub-accounts invest as to whether they
have obtained similar orders from the SEC.
MATERIAL CONFLICTS
It is possible that differences may occur between companies that offer shares
of an underlying mutual fund portfolio to their respective separate accounts
issuing variable annuities and/or variable life insurance products. Differences
may also occur surrounding the offering of an underlying mutual fund portfolio
to variable life insurance policies and variable annuity contracts that we
offer. Under certain circumstances, these differences could be considered
"material conflicts," in which case we would take necessary action to protect
persons with voting rights under our variable annuity contracts and variable
life insurance policies against persons with voting rights under other
insurance companies' variable insurance products. If a "material conflict" were
to arise between owners of variable annuity contracts and variable life
insurance policies issued by us we would take necessary action to treat such
persons equitably in resolving the conflict. "Material conflicts" could arise
due to differences in voting instructions between owners of variable life
insurance and variable annuity contracts of the same or different companies. We
monitor any potential conflicts that may exist.
FEES AND PAYMENTS RECEIVED BY PRUDENTIAL ANNUITIES
As detailed below, Prudential Annuities and our affiliates receive substantial
payments from the underlying Portfolios and/or related entities, such as the
Portfolios' advisers and subadvisers. Because these fees and payments are made
to Prudential Annuities and our affiliates, allocations you make to the
underlying Portfolios benefit us financially. In selecting Portfolios available
under the Annuity, we consider the payments that will be made to us. For more
information on factors we consider when selecting the Portfolios under the
Annuity, see "Variable Investment Options" under "Investment Options" earlier
in this prospectus.
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We receive Rule 12b-1 fees which compensate our affiliate, Prudential Annuities
Distributors, Inc., for distribution and administrative services (including
recordkeeping services and the mailing of prospectuses and reports to Owners
invested in the Portfolios). These fees are paid by the underlying Portfolio
out of each Portfolio's assets and are therefore borne by Owners. We also
receive "revenue sharing" payments from the Portfolios or the advisers of the
underlying Portfolios or their affiliates, which compensate us for
administrative services. The maximum combined 12b-1 fees and revenue sharing
payments we receive with respect to a Portfolio are equal to an annual rate of
0.50% of the average assets allocated to the Portfolio under the Annuity. We
expect to make a profit on these fees and payments and consider them when
selecting the Portfolios available under the Annuity.
In addition, an adviser or subadviser of a Portfolio or a distributor of the
Annuity may also compensate us by providing reimbursement, defraying the costs
of, or paying directly for, among other things, marketing and/or administrative
services and/or other services they provide in connection with the Annuity.
These services may include, but are not limited to: sponsoring or co-sponsoring
various promotional, educational or marketing meetings and seminars attended by
distributors, wholesalers, and/or broker dealer firms' registered
representatives, and creating marketing material discussing the Annuity,
available options, and underlying Portfolios. The amounts paid depend on the
nature of the meetings, the number of meetings attended by the adviser,
subadviser, or distributor, the number of participants and attendees at the
meetings, the costs expected to be incurred, and the level of the adviser's,
subadviser's or distributor's participation. These payments or reimbursements
may not be offered by all advisers, subadvisers, or distributors and the
amounts of such payments may vary between and among each adviser, subadviser,
and distributor depending on their respective participation. We may also
consider these payments and reimbursements when selecting the Portfolios
available under the Annuity. During 2014, with regard to the total amounts that
were paid under the kinds of arrangements described in this paragraph, the
amounts for any particular adviser, subadviser or distributor ranged from
approximately $300.00 to approximately $354,505.58. These amounts relate to all
individual variable annuity contracts issued by Prudential Annuities or its
affiliates, not only the Annuity covered by this prospectus.
WHO DISTRIBUTES ANNUITIES OFFERED BY PRUDENTIAL ANNUITIES?
Prudential Annuities Distributors, Inc. (PAD), a wholly-owned subsidiary of
Prudential Annuities, Inc., is the distributor and principal underwriter of the
Annuities offered through this prospectus. PAD acts as the distributor of a
number of annuity and life insurance products and the AST Portfolios. PAD's
principal business address is One Corporate Drive, Shelton, Connecticut 06484.
PAD is registered as a broker-dealer under the Securities Exchange Act of 1934
(Exchange Act), and is a member of the Financial Industry Regulatory Authority
(FINRA).
Each Annuity is offered on a continuous basis. PAD enters into distribution
agreements with broker-dealers who are registered under the Exchange Act and
with entities that may offer the Annuities but are exempt from registration
("firms"). Applications for each Annuity are solicited by registered
representatives of those firms. In addition, PAD may offer the Annuities
directly to potential purchasers.
Prudential Annuities sells its annuity products through multiple distribution
channels, including (1) independent broker-dealer firms and financial planners;
(2) broker-dealers that are members of the New York Stock Exchange, including
"wirehouse" and regional broker-dealer firms; and (3) broker-dealers affiliated
with banks or that specialize in marketing to customers of banks. Although we
are active in each of those distribution channels, the majority of our sales
have come from the independent broker-dealer firms and financial planners. On
June 1, 2006, The Prudential Insurance Company of America, an affiliate of
Prudential Annuities, acquired the variable annuity business of The Allstate
Corporation ("Allstate"), which included exclusive access to the Allstate
affiliated broker-dealer until May 31, 2009. We began selling variable
annuities through the Allstate affiliated broker-dealer registered
representatives in the third quarter of 2006.
Under the selling agreements, commissions are paid to firms on sales of the
Annuities according to one or more schedules. The registered representative
will receive a portion of the compensation, depending on the practice of his or
her firm. Commissions are generally based on a percentage of purchase payments
made, up to a maximum of 7.0% for ASAP III, 6.0% for XT6, 5.5% for APEX II and
2.0% for ASL II. Alternative compensation schedules are available that
generally provide a lower initial commission plus ongoing quarterly
compensation based on all or a portion of the Account Value. We may also
provide compensation to the distributing firm for providing ongoing service to
you in relation to your Annuity. Commissions and other compensation paid in
relation to your Annuity do not result in any additional charge to you or to
the Separate Account.
In addition, in an effort to promote the sale of our products (which may
include the placement of Prudential Annuities and/or the Annuities on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PAD may enter into compensation arrangements
with certain broker-dealer firms with respect to certain or all registered
representatives of such firms under which such firms may receive separate
compensation or reimbursement for, among other things, training of sales
personnel and/or marketing and/or administrative services and/or other services
they provide. These services may include, but are not limited to: educating
customers of the firm on the Annuity's features; conducting due diligence and
analysis, providing office access, operations and systems support; holding
seminars intended to educate the firm's registered representatives and make
them more knowledgeable about the Annuities; providing a dedicated marketing
coordinator; providing priority sales desk support; and providing expedited
marketing compliance approval. To the extent permitted by FINRA rules and other
applicable laws and regulations, PAD may pay or allow other promotional
incentives or payments in the form of cash or non-cash compensation (e.g.,
gifts, occasional meals and entertainment, sponsorship of training and due
diligence events). These arrangements
204
may not be offered to all firms and the terms of such arrangements may differ
between firms. In addition, we or our affiliates may provide such compensation,
payments and/or incentives to firms arising out of the marketing, sale and/or
servicing of variable annuities or life insurance offered by different
Prudential business units.
A list of the firms to whom Prudential Annuities pays an amount under these
arrangements is provided below. You should note that firms and individual
registered representatives and branch managers within some firms participating
in one of these compensation arrangements might receive greater compensation
for selling the Annuities than for selling a different annuity that is not
eligible for these compensation arrangements. While compensation is generally
taken into account as an expense in considering the charges applicable to an
annuity product, any such compensation will be paid by us or PAD and will not
result in any additional charge to you. Overall compensation paid to the
distributing firm does not exceed, based on actuarial assumptions, 8.5% of the
total purchase payments made. Your registered representative can provide you
with more information about the compensation arrangements that apply upon the
sale of the Annuity. Further information about the firms that are part of these
compensation arrangements appears in the Statement of Additional Information,
which is available without charge upon request.
We or PAD also may compensate third-party vendors, for services that such
vendors render to broker-dealer firms. To the extent permitted by the FINRA
rules and other applicable laws and regulations, PAD may pay or allow other
promotional incentives or payments in the forms of cash or non-cash
compensation. These arrangements may not be offered to all firms and the terms
of such arrangements may differ between firms.
The list below identifies three general types of payments that PAD pays to
registered broker-dealers and firms which are broadly defined as follows:
. Percentage Payments based upon "Assets under Management" or "AUM": This
type of payment is a percentage payment that is based upon assets,
subject to certain criteria, in certain Prudential Annuities products.
. Percentage Payments based upon sales: This type of payment is a
percentage payment that is based upon the total amount of money received
as purchase payments under Prudential Annuities annuity products sold
through the firm.
. Fixed Payments: These types of payments are made directly to or in
sponsorship of the firm.
Examples of arrangements under which such payments may be made currently
include, but are not limited to: sponsorships, conferences (national, regional
and top producer), speaker fees, promotional items and reimbursements to firms
for marketing activities or services paid by the firms and/or their registered
representatives. The amount of these payments varies widely because some
payments may encompass only a single event, such as a conference, and others
have a much broader scope. In addition, we may make payments periodically
during the relationship for systems, operational and other support.
The list below includes the names of the firms that we are aware (as of
December 31, 2014) received payment with respect to our annuity business during
2014 (or as to which a payment amount was accrued during 2014). The firms
listed below include those receiving payments in connection with marketing of
products issued by Prudential Annuities Life Assurance Corporation. Your
registered representative can provide you with more information about the
compensation arrangements that apply upon request. During 2014, the least
amount paid, and greatest amount paid, were $0.38 and $6,711,354.31,
respectively.
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NAME OF FIRM:
Allstate Financial Services, LLC Invest Financial Corporation Sagepoint Financial, Inc.
American Portfolio Financial Services Investacorp Sammons Securities Co., LLC
Inc.
Associated Securities Corporation Investment Centers of America Securian Financial Services, Inc.
AXA Advisors, LLC Investment Professionals Securities America, Inc.
BBVA Compass Investment Solutions, Investors Capital Corporation Securities Service Network
Inc.
BFT Financial Group, LLC Janney Montgomery Scott, LLC. Sigma Financial Corporation
Cadaret, Grant & Co., Inc. Legend Equities Corporation Signator Investors, Inc.
Cambridge Investment Research, Inc. Lincoln Financial Advisors SII Investments, Inc.
Capital One Investment Services, LLC Lincoln Financial Securities Stifel Nicolaus & Co.
Corporation
Centaurus Financial, Inc. Lincoln Investment Planning Summit Brokerage Services, Inc.
Cetera Advisor Network LLC LPL Financial Corporation TFS Securities, Inc.
Cetera Financial Group LLC LPL Financial Corporation (OAP) The Investment Center
Cetera Financial Specialists M Holdings Securities, Inc. TransAmerica Financial Advisors, Inc.
Cetera Investment Services MetLife Triad Advisors, Inc.
CFD Investments, Inc. Mutual Service Corporation UBS Financial Services, Inc.
Commonwealth Financial Network National Planning Corporation United Planners Financial Service
Crown Capital Securities, L.P. Next Financial Group, Inc. Wall Street Financial Group
CUSO Financial Services, L.P. NFP Securities, Inc. Waterstone Financial Group Inc.
Equity Services, Inc. PNC Investments, LLC Wells Fargo Advisors LLC
First Allied Securities Inc. ProEquities Wells Fargo Advisors LLC - Wealth
FSC Securities Corporation Questar Capital Corporation Wells Fargo Investments LLC
Gary Goldberg & Co., Inc. Raymond James & Associates Woodbury Financial Services
Geneos Wealth Management, Inc. Raymond James Financial Services World Group Securities, Inc.
H. Beck, Inc. RBC Capital Markets Corporation WRP Investments, Inc.
Hantz Financial Services, Inc. Robert W. Baird & Co., Inc.
ING Financial Partners, LLC Royal Alliance Associates
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Prudential Annuities Life Assurance Corporation 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 us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act also are incorporated into the prospectus by reference. We 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 888-PRU-2888. We file periodic
reports as required under the Securities Exchange Act of 1934. The public may
read and copy any materials that we file 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 1-202-551-8090. The SEC maintains an Internet site that contains
reports, proxy, and information statements, and other information regarding
issuers that file electronically with the SEC (see http://www.sec.gov). Our
internet address is http://www.prudentialannuities.com.
FINANCIAL STATEMENTS
The financial statements of the Separate Account and Prudential Annuities Life
Assurance Corporation are included in the Statement of Additional Information.
HOW TO CONTACT US
Please communicate with us using the telephone number and addresses below for
the purposes described. Failure to send mail to the proper address may result
in a delay in our receiving and processing your request.
PRUDENTIAL'S CUSTOMER SERVICE TEAM
Call our Customer Service Team at 1-888-PRU-2888 during normal business hours.
INTERNET
Access information about your Annuity through our website:
www.prudentialannuities.com
CORRESPONDENCE SENT BY REGULAR MAIL
Prudential Annuity Service Center
P.O. Box 7960
Philadelphia, PA 19176
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CORRESPONDENCE SENT BY OVERNIGHT*, CERTIFIED OR REGISTERED MAIL
Prudential Annuity Service Center
2101 Welsh Road
Dresher, PA 19025
*Please note that overnight correspondence sent through the United States
Postal Service may be delivered to the P.O. Box listed above, which could delay
receipt of your correspondence at our Service Center. Overnight mail sent
through other methods (e.g. Federal Express, United Parcel Service) will be
delivered to the address listed below.
Correspondence sent by regular mail to our Service Center should be sent to the
address shown above. Your correspondence will be picked up at this address and
then delivered to our Service Center. Your correspondence is not considered
received by us until it is received at our Service Center. Where this
Prospectus refers to the day when we receive a purchase payment, request,
election, notice, transfer or any other transaction request from you, we mean
the day on which that item (or the last requirement needed for us to process
that item) arrives in complete and proper form at our Service Center or via the
appropriate telephone or fax number if the item is a type we accept by those
means. There are two main exceptions: if the item arrives at our Service Center
(1) on a day that is not a business day, or (2) after the close of a business
day, then, in each case, we are deemed to have received that item on the next
business day.
You can obtain account information by calling our automated response system and
at www.prudentialannuities.com, our Internet Website. Our Customer Service
representatives are also available during business hours to provide you with
information about your account. You can request certain transactions through
our telephone voice response system, our Internet Website or through a customer
service representative. You can provide authorization for a third party,
including your attorney-in-fact acting pursuant to a power of attorney or your
Financial Professional, to access your account information and perform certain
transactions on your account. You will need to complete a form provided by us
which identifies those transactions that you wish to authorize via telephonic
and electronic means and whether you wish to authorize a third party to perform
any such transactions. Please note that unless you tell us otherwise, we deem
that all transactions that are directed by your Financial Professional with
respect to your Annuity have been authorized by you. We require that you or
your representative provide proper identification before performing
transactions over the telephone or through our Internet Website. This may
include a Personal Identification Number (PIN) that will be provided to you
upon issue of your Annuity or you may establish or change your PIN by calling
our automated response system and at www.prudentialannuities.com, our Internet
Website. Any third party that you authorize to perform financial transactions
on your account will be assigned a PIN for your account.
Transactions requested via telephone are recorded. To the extent permitted by
law, we will not be responsible for any claims, loss, liability or expense in
connection with a transaction requested by telephone or other electronic means
if we acted on such transaction instructions after following reasonable
procedures to identify those persons authorized to perform transactions on your
Annuity using verification methods which may include a request for your Social
Security number, PIN or other form of electronic identification. We may be
liable for losses due to unauthorized or fraudulent instructions if we did not
follow such procedures.
Prudential Annuities does not guarantee access to telephonic, facsimile,
Internet or any other electronic information or that we will be able to accept
transaction instructions via such means at all times. Regular and/or express
mail will be the only means by which we will accept transaction instructions
when telephonic, facsimile, Internet or any other electronic means are
unavailable or delayed. Prudential Annuities reserves the right to limit,
restrict or terminate telephonic, facsimile, Internet or any other electronic
transaction privileges at any time.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the registrant
has been informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL PROCEEDINGS
LITIGATION AND REGULATORY MATTERS
Prudential Annuities is subject to legal and regulatory actions in the ordinary
course of our business. Pending legal and regulatory actions include
proceedings specific to Prudential Annuities and proceedings generally
applicable to business practices in the industry in which we operate.
Prudential Annuities is subject to class action lawsuits and other litigation
involving a variety of issues and allegations involving sales practices, claims
payments and procedures, premium charges, policy servicing and breach of
fiduciary duty to customers. Prudential Annuities is also subject to litigation
arising out of its general business activities, such as its investments,
contracts, leases and labor and employment relationships, including claims of
discrimination and harassment, and could be exposed to claims or litigation
concerning certain business or process patents. In some of the pending legal
and regulatory actions, plaintiffs are seeking large and/or indeterminate
amounts, including punitive or exemplary damages. In addition, Prudential
Annuities, along with other participants in the businesses in which it engages,
may be subject from time to time to investigations, examinations and inquiries,
in some cases industry-wide, concerning issues or matters upon which such
regulators have determined to focus. In some of Prudential Annuities's pending
legal and regulatory actions, parties are seeking large and/or indeterminate
amounts, including punitive or exemplary damages. The outcome of litigation or
a regulatory matter, and the amount or range of potential loss at any
particular time, is often inherently uncertain.
207
Prudential Annuities establishes accruals for litigation and regulatory matters
when it is probable that a loss has been incurred and the amount of that loss
can be reasonably estimated. For litigation and regulatory matters where a loss
may be reasonably possible, but not probable, or is probable but not reasonably
estimable, no accrual is established, but the matter, if material, is
disclosed. As of December 31, 2014, the aggregate range of reasonably possible
losses in excess of accruals established is not currently estimable. Prudential
Annuities reviews relevant information with respect to its litigation and
regulatory matters on a quarterly and annual basis and updates its accruals,
disclosures and estimates of reasonably possible loss based on such reviews.
Prudential Annuities's litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, their outcome cannot be
predicted. It is possible that Prudential Annuities's results of operations or
cash flow in a particular quarterly or annual period could be materially
affected by an ultimate unfavorable resolution of pending litigation and
regulatory matters depending, in part, upon the results of operations or cash
flow for such period. In light of the unpredictability of Prudential
Annuities's litigation and regulatory matters, it is also possible that in
certain cases an ultimate unfavorable resolution of one or more pending
litigation or regulatory matters could have a material adverse effect on
Prudential Annuities's financial position. Management believes, however, that,
based on information currently known to it, the ultimate outcome of all pending
litigation and regulatory matters, after consideration of applicable reserves
and rights to indemnification, is not likely to have a material adverse effect
on Prudential Annuities's financial position.
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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The following are the contents of the Statement of Additional Information:
General Information about Prudential Annuities
Prudential Annuities Life Assurance Corporation
Prudential Annuities Life Assurance Corporation Variable Account B
Prudential Annuities Life Assurance Corporation Separate Account D
Principal Underwriter/Distributor - Prudential Annuities Distributors, Inc.
How the Unit Price is Determined
Additional Information on Fixed Allocations
How We Calculate the Market Value Adjustment
General Information
Voting Rights
Modification
Deferral of Transactions
Misstatement of Age or Sex
Cyber Security Risk
Annuitization
Experts
Legal Experts
Financial Statements
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B
Separate Account B consists of multiple Sub-accounts that are available as
investment options for the Prudential Annuities Annuities. Each Sub-account
invests only in a single mutual fund or mutual fund portfolio. All or some of
these Sub-accounts are available as investment options for other variable
annuities we offer pursuant to different prospectuses.
Unit Prices And Numbers Of Units. The following tables show for each Annuity:
(a) the historical Unit Price, corresponding to the Annuity features bearing
the highest and lowest combinations of asset-based charges*, as of the dates
shown, for Units in each of the Sub-accounts of Separate Account B that are
being offered pursuant to this Prospectus**; and (b) the number of Units
outstanding for each such Sub-account as of the dates shown. The period for
each year begins on January 1 and ends on December 31. Since November 18,
2002, we have been determining, on a daily basis, multiple Unit Prices for
each Sub-account of Separate Account B. We compute multiple Unit Prices
because several of our variable annuities invest in the same Sub-accounts, and
these annuities deduct varying charges that correspond to each combination of
the applicable Insurance Charge, Distribution Charge (when applicable) and the
charges for each optional benefit. Where an asset-based charge corresponding
to a particular Sub-account within a new annuity product is identical to that
in the same Sub-account within an existing annuity, the Unit Price for the new
annuity will be identical to that of the existing annuity. In such cases, we
will for reference purposes depict, in the condensed financial information for
the new annuity, Unit Prices of the existing annuity. To the extent a
Sub-account commenced operations during a particular calendar year, the Unit
Price as of the end of the period reflects only the partial year results from
the commencement of operations until December 31/st/ of the applicable year.
When a Unit Price was first calculated for a particular Sub-account, we set
the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based
on market performance. Unit Prices and Units are provided for Sub-accounts
that commenced operations prior to January 1, 2015.
* Note: While a unit price is reflected for the maximum combination of asset
based charges for each Sub-account, not all Sub-accounts are available if
you elect certain optional benefits.
** The remaining unit values appear in the Statement of Additional
Information, which you may obtain free of charge by sending in the request
form at the end of the Prospectus or contacting us at 1-888-PRU-2888.
ASAP III
Prudential Annuities Life Assurance Corporation
Prospectus
ACCUMULATION UNIT VALUES: With No Optional Benefits (1.25%)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------------
ACCESS VP High Yield Fund
05/02/2005* to 12/31/2005 $10.00 $10.59 299,885
01/01/2006 to 12/31/2006 $10.59 $11.46 27,550
01/01/2007 to 12/31/2007 $11.46 $11.90 350,487
01/01/2008 to 12/31/2008 $11.90 $11.21 85,000
01/01/2009 to 12/31/2009 $11.21 $12.94 33,068
01/01/2010 to 12/31/2010 $12.94 $14.87 56,428
01/01/2011 to 12/31/2011 $14.87 $15.09 134,154
01/01/2012 to 12/31/2012 $15.09 $17.01 24,740
01/01/2013 to 12/31/2013 $17.01 $18.48 9,020
01/01/2014 to 12/31/2014 $18.48 $18.67 5,986
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AST Academic Strategies Asset Allocation Portfolio
12/05/2005* to 12/31/2005 $10.00 $10.02 405,782
01/01/2006 to 12/31/2006 $10.02 $11.06 3,716,970
01/01/2007 to 12/31/2007 $11.06 $11.93 5,006,440
01/01/2008 to 12/31/2008 $11.93 $8.03 6,104,215
01/01/2009 to 12/31/2009 $8.03 $9.86 26,917,264
01/01/2010 to 12/31/2010 $9.86 $10.90 35,419,588
01/01/2011 to 12/31/2011 $10.90 $10.48 27,867,684
01/01/2012 to 12/31/2012 $10.48 $11.65 31,632,710
01/01/2013 to 12/31/2013 $11.65 $12.65 31,978,989
01/01/2014 to 12/31/2014 $12.65 $12.97 30,105,387
A-1
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
--------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
03/20/2006* to 12/31/2006 $10.00 $10.69 795,953
01/01/2007 to 12/31/2007 $10.69 $11.56 1,509,134
01/01/2008 to 12/31/2008 $11.56 $8.02 2,921,992
01/01/2009 to 12/31/2009 $8.02 $9.99 11,833,477
01/01/2010 to 12/31/2010 $9.99 $11.22 16,518,077
01/01/2011 to 12/31/2011 $11.22 $11.09 13,916,989
01/01/2012 to 12/31/2012 $11.09 $12.44 16,310,593
01/01/2013 to 12/31/2013 $12.44 $14.32 17,307,512
01/01/2014 to 12/31/2014 $14.32 $15.01 17,057,115
--------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth Portfolio
01/01/2005 to 12/02/2005 $6.49 $7.48 0
--------------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value Portfolio
01/01/2005 to 12/02/2005 $9.66 $10.72 0
--------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
01/01/2005 to 12/31/2005 $9.48 $9.79 626,417
01/01/2006 to 12/31/2006 $9.79 $11.30 579,491
01/01/2007 to 12/31/2007 $11.30 $11.15 493,545
01/01/2008 to 12/31/2008 $11.15 $7.18 440,398
01/01/2009 to 12/31/2009 $7.18 $8.35 1,506,808
01/01/2010 to 12/31/2010 $8.35 $9.39 2,225,396
01/01/2011 to 12/31/2011 $9.39 $9.60 1,745,553
01/01/2012 to 05/04/2012 $9.60 $10.45 0
--------------------------------------------------------------------------------------------------------
AST AQR Emerging Markets Equity Portfolio
02/25/2013* to 12/31/2013 $10.00 $10.13 7,363
01/01/2014 to 12/31/2014 $10.13 $9.69 21,879
--------------------------------------------------------------------------------------------------------
AST AQR Large-Cap Portfolio
04/29/2013* to 12/31/2013 $10.00 $11.67 2,950
01/01/2014 to 12/31/2014 $11.67 $13.04 10,911
--------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
12/05/2005* to 12/31/2005 $10.00 $10.03 53,897
01/01/2006 to 12/31/2006 $10.03 $10.95 1,008,771
01/01/2007 to 12/31/2007 $10.95 $11.79 1,635,321
01/01/2008 to 12/31/2008 $11.79 $8.30 3,896,032
01/01/2009 to 12/31/2009 $8.30 $10.11 26,515,475
01/01/2010 to 12/31/2010 $10.11 $11.21 36,140,128
01/01/2011 to 12/31/2011 $11.21 $10.94 30,390,625
01/01/2012 to 12/31/2012 $10.94 $12.15 33,353,854
01/01/2013 to 12/31/2013 $12.15 $14.12 32,580,994
01/01/2014 to 12/31/2014 $14.12 $14.85 31,331,321
--------------------------------------------------------------------------------------------------------
AST BlackRock Global Strategies Portfolio
05/02/2011* to 12/31/2011 $10.00 $9.19 574,642
01/01/2012 to 12/31/2012 $9.19 $10.16 990,484
01/01/2013 to 12/31/2013 $10.16 $11.12 1,435,345
01/01/2014 to 12/31/2014 $11.12 $11.52 1,600,090
--------------------------------------------------------------------------------------------------------
AST BlackRock iShares ETF Portfolio
04/29/2013* to 12/31/2013 $10.00 $10.53 140,647
01/01/2014 to 12/31/2014 $10.53 $10.77 283,388
--------------------------------------------------------------------------------------------------------
AST Boston Partners Large-Cap Value Portfolio
formerly, AST Jennison Large-Cap Value Portfolio
11/16/2009* to 12/31/2009 $10.15 $10.31 12,617
01/01/2010 to 12/31/2010 $10.31 $11.57 232,319
01/01/2011 to 12/31/2011 $11.57 $10.76 231,641
01/01/2012 to 12/31/2012 $10.76 $12.03 245,550
01/01/2013 to 12/31/2013 $12.03 $15.61 326,167
01/01/2014 to 12/31/2014 $15.61 $17.00 367,570
A-2
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
12/05/2005* to 12/31/2005 $10.00 $10.01 403,183
01/01/2006 to 12/31/2006 $10.01 $11.24 4,226,992
01/01/2007 to 12/31/2007 $11.24 $12.18 5,738,690
01/01/2008 to 12/31/2008 $12.18 $7.82 6,696,087
01/01/2009 to 12/31/2009 $7.82 $9.68 31,792,069
01/01/2010 to 12/31/2010 $9.68 $10.84 41,650,794
01/01/2011 to 12/31/2011 $10.84 $10.44 30,125,427
01/01/2012 to 12/31/2012 $10.44 $11.73 36,635,255
01/01/2013 to 12/31/2013 $11.73 $14.21 42,035,241
01/01/2014 to 12/31/2014 $14.21 $15.01 45,541,719
------------------------------------------------------------------------------------------------------------------
AST ClearBridge Dividend Growth Portfolio
02/25/2013* to 12/31/2013 $10.00 $11.70 62,740
01/01/2014 to 12/31/2014 $11.70 $13.13 327,518
------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
01/01/2005 to 12/31/2005 $22.03 $24.98 223,265
01/01/2006 to 12/31/2006 $24.98 $33.72 265,912
01/01/2007 to 12/31/2007 $33.72 $26.66 201,539
01/01/2008 to 12/31/2008 $26.66 $17.10 163,226
01/01/2009 to 12/31/2009 $17.10 $22.28 328,842
01/01/2010 to 12/31/2010 $22.28 $28.31 510,403
01/01/2011 to 12/31/2011 $28.31 $29.80 376,813
01/01/2012 to 12/31/2012 $29.80 $33.94 463,095
01/01/2013 to 12/31/2013 $33.94 $34.57 450,921
01/01/2014 to 12/31/2014 $34.57 $44.69 435,105
------------------------------------------------------------------------------------------------------------------
AST DeAm Small-Cap Value Portfolio
01/01/2005 to 12/31/2005 $13.13 $13.12 187,207
01/01/2006 to 12/31/2006 $13.12 $15.54 201,904
01/01/2007 to 12/31/2007 $15.54 $12.62 180,260
01/01/2008 to 07/18/2008 $12.62 $11.59 0
------------------------------------------------------------------------------------------------------------------
AST Defensive Asset Allocation Portfolio
04/29/2013* to 12/31/2013 $10.00 $9.72 303,073
01/01/2014 to 12/31/2014 $9.72 $10.08 746,488
------------------------------------------------------------------------------------------------------------------
AST FI Pyramis Quantitative Portfolio
formerly, AST First Trust Balanced Target Portfolio
03/20/2006* to 12/31/2006 $10.00 $10.61 563,523
01/01/2007 to 12/31/2007 $10.61 $11.38 1,273,685
01/01/2008 to 12/31/2008 $11.38 $7.36 2,512,483
01/01/2009 to 12/31/2009 $7.36 $9.00 13,285,906
01/01/2010 to 12/31/2010 $9.00 $10.17 18,069,778
01/01/2011 to 12/31/2011 $10.17 $9.89 14,621,843
01/01/2012 to 12/31/2012 $9.89 $10.80 16,149,940
01/01/2013 to 12/31/2013 $10.80 $12.24 16,127,379
01/01/2014 to 12/31/2014 $12.24 $12.47 15,527,345
------------------------------------------------------------------------------------------------------------------
AST FI Pyramis(R) Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.00 7,406
01/01/2008 to 12/31/2008 $10.00 $7.19 357,647
01/01/2009 to 12/31/2009 $7.19 $8.61 4,494,394
01/01/2010 to 12/31/2010 $8.61 $9.64 5,446,761
01/01/2011 to 12/31/2011 $9.64 $9.28 3,985,768
01/01/2012 to 12/31/2012 $9.28 $10.41 5,011,567
01/01/2013 to 12/31/2013 $10.41 $12.26 5,891,470
01/01/2014 to 12/31/2014 $12.26 $12.80 5,891,137
------------------------------------------------------------------------------------------------------------------
AST Focus Four Plus Portfolio
07/21/2008* to 12/31/2008 $10.00 $7.49 330,061
01/01/2009 to 11/13/2009 $7.49 $8.40 0
------------------------------------------------------------------------------------------------------------------
AST Franklin Templeton Founding Funds Allocation Portfolio
04/30/2012* to 12/31/2012 $10.00 $10.78 21,787,715
01/01/2013 to 12/31/2013 $10.78 $13.25 22,443,796
01/01/2014 to 12/31/2014 $13.25 $13.50 20,750,425
A-3
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------
AST Franklin Templeton Founding Funds Plus Portfolio
04/29/2013* to 12/31/2013 $10.00 $10.85 1,176,421
01/01/2014 to 12/31/2014 $10.85 $10.99 1,997,017
------------------------------------------------------------------------------------------------------------
AST Global Real Estate Portfolio
07/21/2008* to 12/31/2008 $10.18 $6.12 18,489
01/01/2009 to 12/31/2009 $6.12 $8.17 392,443
01/01/2010 to 12/31/2010 $8.17 $9.70 703,230
01/01/2011 to 12/31/2011 $9.70 $9.10 496,999
01/01/2012 to 12/31/2012 $9.10 $11.39 678,965
01/01/2013 to 12/31/2013 $11.39 $11.74 726,338
01/01/2014 to 12/31/2014 $11.74 $13.20 640,841
------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
01/01/2005 to 12/31/2005 $4.68 $4.77 657,831
01/01/2006 to 12/31/2006 $4.77 $5.18 791,152
01/01/2007 to 12/31/2007 $5.18 $5.84 1,134,004
01/01/2008 to 12/31/2008 $5.84 $3.44 756,326
01/01/2009 to 12/31/2009 $3.44 $5.08 2,674,512
01/01/2010 to 12/31/2010 $5.08 $5.53 3,127,898
01/01/2011 to 12/31/2011 $5.53 $5.25 2,222,540
01/01/2012 to 12/31/2012 $5.25 $6.20 2,485,564
01/01/2013 to 12/31/2013 $6.20 $7.95 2,301,474
01/01/2014 to 02/07/2014 $7.95 $7.82 0
------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Large-Cap Value Portfolio
01/01/2005 to 12/31/2005 $11.24 $11.63 5,200,125
01/01/2006 to 12/31/2006 $11.63 $13.46 3,863,961
01/01/2007 to 12/31/2007 $13.46 $13.98 3,567,122
01/01/2008 to 12/31/2008 $13.98 $8.19 2,148,857
01/01/2009 to 12/31/2009 $8.19 $9.64 3,356,527
01/01/2010 to 12/31/2010 $9.64 $10.74 3,792,800
01/01/2011 to 12/31/2011 $10.74 $10.02 2,403,875
01/01/2012 to 12/31/2012 $10.02 $11.84 2,347,900
01/01/2013 to 12/31/2013 $11.84 $15.62 3,172,056
01/01/2014 to 12/31/2014 $15.62 $17.45 3,008,724
------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $4.44 $4.60 2,666,931
01/01/2006 to 12/31/2006 $4.60 $4.83 2,231,991
01/01/2007 to 12/31/2007 $4.83 $5.69 2,097,846
01/01/2008 to 12/31/2008 $5.69 $3.32 1,540,597
01/01/2009 to 12/31/2009 $3.32 $5.16 3,511,898
01/01/2010 to 12/31/2010 $5.16 $6.10 4,701,456
01/01/2011 to 12/31/2011 $6.10 $5.85 2,984,433
01/01/2012 to 12/31/2012 $5.85 $6.91 3,543,005
01/01/2013 to 12/31/2013 $6.91 $9.02 3,803,084
01/01/2014 to 12/31/2014 $9.02 $9.93 3,451,022
------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Multi-Asset Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.17 0
01/01/2008 to 12/31/2008 $10.17 $7.62 580,121
01/01/2009 to 12/31/2009 $7.62 $9.28 10,277,818
01/01/2010 to 12/31/2010 $9.28 $10.23 15,177,989
01/01/2011 to 12/31/2011 $10.23 $10.05 13,203,096
01/01/2012 to 12/31/2012 $10.05 $10.93 13,851,569
01/01/2013 to 12/31/2013 $10.93 $11.85 12,668,648
01/01/2014 to 12/31/2014 $11.85 $12.17 11,883,638
------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value Portfolio
05/01/2009* to 12/31/2009 $16.24 $20.94 421,295
01/01/2010 to 12/31/2010 $20.94 $26.21 766,856
01/01/2011 to 12/31/2011 $26.21 $26.22 545,711
01/01/2012 to 12/31/2012 $26.22 $29.96 718,499
01/01/2013 to 12/31/2013 $29.96 $41.07 746,802
01/01/2014 to 12/31/2014 $41.07 $43.47 743,211
A-4
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------
AST Herndon Large-Cap Value Portfolio
01/01/2005 to 12/31/2005 $11.18 $12.07 242,790
01/01/2006 to 12/31/2006 $12.07 $14.51 524,592
01/01/2007 to 12/31/2007 $14.51 $14.50 421,188
01/01/2008 to 12/31/2008 $14.50 $8.98 486,765
01/01/2009 to 12/31/2009 $8.98 $10.49 858,302
01/01/2010 to 12/31/2010 $10.49 $11.64 1,078,324
01/01/2011 to 12/31/2011 $11.64 $11.44 864,374
01/01/2012 to 12/31/2012 $11.44 $12.81 1,095,404
01/01/2013 to 12/31/2013 $12.81 $17.03 1,093,521
01/01/2014 to 12/31/2014 $17.03 $17.08 968,257
-------------------------------------------------------------------------------------------------
AST High Yield Portfolio
01/01/2005 to 12/31/2005 $12.06 $12.04 873,439
01/01/2006 to 12/31/2006 $12.04 $13.12 1,019,726
01/01/2007 to 12/31/2007 $13.12 $13.28 683,986
01/01/2008 to 12/31/2008 $13.28 $9.76 483,533
01/01/2009 to 12/31/2009 $9.76 $13.07 1,798,628
01/01/2010 to 12/31/2010 $13.07 $14.65 1,948,092
01/01/2011 to 12/31/2011 $14.65 $14.93 1,565,537
01/01/2012 to 12/31/2012 $14.93 $16.78 1,557,475
01/01/2013 to 12/31/2013 $16.78 $17.76 1,226,395
01/01/2014 to 12/31/2014 $17.76 $17.99 960,460
-------------------------------------------------------------------------------------------------
AST International Growth Portfolio
01/01/2005 to 12/31/2005 $16.42 $18.90 2,113,594
01/01/2006 to 12/31/2006 $18.90 $22.58 1,664,525
01/01/2007 to 12/31/2007 $22.58 $26.55 1,428,930
01/01/2008 to 12/31/2008 $26.55 $13.05 942,837
01/01/2009 to 12/31/2009 $13.05 $17.43 1,310,930
01/01/2010 to 12/31/2010 $17.43 $19.71 1,459,929
01/01/2011 to 12/31/2011 $19.71 $16.95 915,042
01/01/2012 to 12/31/2012 $16.95 $20.14 876,174
01/01/2013 to 12/31/2013 $20.14 $23.68 1,198,831
01/01/2014 to 12/31/2014 $23.68 $22.09 1,223,949
-------------------------------------------------------------------------------------------------
AST International Value Portfolio
01/01/2005 to 12/31/2005 $7.01 $7.87 402,498
01/01/2006 to 12/31/2006 $7.87 $9.90 593,100
01/01/2007 to 12/31/2007 $9.90 $11.52 794,549
01/01/2008 to 12/31/2008 $11.52 $6.37 641,680
01/01/2009 to 12/31/2009 $6.37 $8.21 1,442,051
01/01/2010 to 12/31/2010 $8.21 $9.01 1,743,754
01/01/2011 to 12/31/2011 $9.01 $7.78 1,310,153
01/01/2012 to 12/31/2012 $7.78 $8.96 1,443,923
01/01/2013 to 12/31/2013 $8.96 $10.57 1,466,476
01/01/2014 to 12/31/2014 $10.57 $9.74 1,498,945
-------------------------------------------------------------------------------------------------
AST J.P. Morgan Global Thematic Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.19 0
01/01/2008 to 12/31/2008 $10.19 $6.98 399,983
01/01/2009 to 12/31/2009 $6.98 $8.73 7,461,975
01/01/2010 to 12/31/2010 $8.73 $9.81 11,413,961
01/01/2011 to 12/31/2011 $9.81 $9.63 9,459,319
01/01/2012 to 12/31/2012 $9.63 $10.80 10,990,212
01/01/2013 to 12/31/2013 $10.80 $12.40 11,236,583
01/01/2014 to 12/31/2014 $12.40 $13.03 10,578,434
A-5
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------------
AST J.P. Morgan International Equity Portfolio
01/01/2005 to 12/31/2005 $8.24 $9.04 1,051,555
01/01/2006 to 12/31/2006 $9.04 $10.96 1,002,727
01/01/2007 to 12/31/2007 $10.96 $11.84 985,495
01/01/2008 to 12/31/2008 $11.84 $6.85 614,606
01/01/2009 to 12/31/2009 $6.85 $9.20 1,827,855
01/01/2010 to 12/31/2010 $9.20 $9.73 2,492,453
01/01/2011 to 12/31/2011 $9.73 $8.73 1,670,674
01/01/2012 to 12/31/2012 $8.73 $10.51 1,947,918
01/01/2013 to 12/31/2013 $10.51 $11.98 2,070,280
01/01/2014 to 12/31/2014 $11.98 $11.07 2,030,830
---------------------------------------------------------------------------------------------------------
AST J.P. Morgan Strategic Opportunities Portfolio
01/01/2005 to 12/31/2005 $9.55 $10.09 80,895
01/01/2006 to 12/31/2006 $10.09 $11.07 97,906
01/01/2007 to 12/31/2007 $11.07 $11.15 378,693
01/01/2008 to 12/31/2008 $11.15 $9.07 2,914,005
01/01/2009 to 12/31/2009 $9.07 $10.93 11,840,797
01/01/2010 to 12/31/2010 $10.93 $11.58 12,820,574
01/01/2011 to 12/31/2011 $11.58 $11.46 10,703,645
01/01/2012 to 12/31/2012 $11.46 $12.53 11,456,895
01/01/2013 to 12/31/2013 $12.53 $13.74 10,732,965
01/01/2014 to 12/31/2014 $13.74 $14.31 9,639,995
---------------------------------------------------------------------------------------------------------
AST Jennison Large-Cap Growth Portfolio
11/16/2009* to 12/31/2009 $10.08 $10.30 8,995
01/01/2010 to 12/31/2010 $10.30 $11.32 127,021
01/01/2011 to 12/31/2011 $11.32 $11.25 177,346
01/01/2012 to 12/31/2012 $11.25 $12.80 291,710
01/01/2013 to 12/31/2013 $12.80 $17.25 337,499
01/01/2014 to 12/31/2014 $17.25 $18.65 400,956
---------------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
01/01/2005 to 12/31/2005 $10.25 $10.77 694,885
01/01/2006 to 12/31/2006 $10.77 $12.60 680,203
01/01/2007 to 12/31/2007 $12.60 $12.07 680,350
01/01/2008 to 12/31/2008 $12.07 $6.97 649,783
01/01/2009 to 12/31/2009 $6.97 $8.23 1,032,590
01/01/2010 to 12/31/2010 $8.23 $9.19 1,205,571
01/01/2011 to 12/31/2011 $9.19 $8.70 860,066
01/01/2012 to 12/31/2012 $8.70 $10.04 942,929
01/01/2013 to 12/31/2013 $10.04 $13.86 1,237,335
01/01/2014 to 12/31/2014 $13.86 $15.57 1,567,637
---------------------------------------------------------------------------------------------------------
AST Loomis Sayles Large-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $9.67 $10.20 7,048,023
01/01/2006 to 12/31/2006 $10.20 $10.80 5,983,458
01/01/2007 to 12/31/2007 $10.80 $12.26 5,638,342
01/01/2008 to 12/31/2008 $12.26 $6.82 3,539,119
01/01/2009 to 12/31/2009 $6.82 $8.74 4,539,651
01/01/2010 to 12/31/2010 $8.74 $10.34 4,594,031
01/01/2011 to 12/31/2011 $10.34 $10.11 3,055,225
01/01/2012 to 12/31/2012 $10.11 $11.21 2,844,826
01/01/2013 to 12/31/2013 $11.21 $15.12 3,397,998
01/01/2014 to 12/31/2014 $15.12 $16.52 3,969,455
A-6
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------
AST Lord Abbett Core Fixed Income Portfolio
01/01/2005 to 12/31/2005 $12.71 $12.69 1,294,706
01/01/2006 to 12/31/2006 $12.69 $13.76 1,196,608
01/01/2007 to 12/31/2007 $13.76 $14.42 1,051,089
01/01/2008 to 12/31/2008 $14.42 $10.93 929,322
01/01/2009 to 12/31/2009 $10.93 $14.52 1,689,546
01/01/2010 to 12/31/2010 $14.52 $16.27 1,430,293
01/01/2011 to 12/31/2011 $16.27 $17.70 1,455,420
01/01/2012 to 12/31/2012 $17.70 $18.51 1,706,809
01/01/2013 to 12/31/2013 $18.51 $17.91 1,893,341
01/01/2014 to 12/31/2014 $17.91 $18.82 1,987,724
---------------------------------------------------------------------------------------------------
AST MFS Global Equity Portfolio
01/01/2005 to 12/31/2005 $10.98 $11.67 218,706
01/01/2006 to 12/31/2006 $11.67 $14.32 349,460
01/01/2007 to 12/31/2007 $14.32 $15.47 339,584
01/01/2008 to 12/31/2008 $15.47 $10.09 263,096
01/01/2009 to 12/31/2009 $10.09 $13.10 807,357
01/01/2010 to 12/31/2010 $13.10 $14.49 1,434,007
01/01/2011 to 12/31/2011 $14.49 $13.86 1,104,093
01/01/2012 to 12/31/2012 $13.86 $16.85 1,340,014
01/01/2013 to 12/31/2013 $16.85 $21.24 1,588,995
01/01/2014 to 12/31/2014 $21.24 $21.73 1,725,316
---------------------------------------------------------------------------------------------------
AST MFS Growth Portfolio
01/01/2005 to 12/31/2005 $7.04 $7.39 1,025,239
01/01/2006 to 12/31/2006 $7.39 $8.01 758,550
01/01/2007 to 12/31/2007 $8.01 $9.10 686,498
01/01/2008 to 12/31/2008 $9.10 $5.72 700,352
01/01/2009 to 12/31/2009 $5.72 $7.03 1,732,194
01/01/2010 to 12/31/2010 $7.03 $7.82 2,119,460
01/01/2011 to 12/31/2011 $7.82 $7.68 1,429,953
01/01/2012 to 12/31/2012 $7.68 $8.88 1,486,414
01/01/2013 to 12/31/2013 $8.88 $11.99 1,613,878
01/01/2014 to 12/31/2014 $11.99 $12.87 1,604,312
---------------------------------------------------------------------------------------------------
AST MFS Large-Cap Value Portfolio
08/20/2012* to 12/31/2012 $10.00 $10.21 14,203
01/01/2013 to 12/31/2013 $10.21 $13.56 157,910
01/01/2014 to 12/31/2014 $13.56 $14.76 253,800
---------------------------------------------------------------------------------------------------
AST Mid-Cap Value Portfolio
01/01/2005 to 12/31/2005 $11.63 $12.11 192,419
01/01/2006 to 12/31/2006 $12.11 $13.66 174,411
01/01/2007 to 12/31/2007 $13.66 $13.86 156,606
01/01/2008 to 12/31/2008 $13.86 $8.47 191,791
01/01/2009 to 12/31/2009 $8.47 $11.62 547,214
01/01/2010 to 12/31/2010 $11.62 $14.18 743,476
01/01/2011 to 12/31/2011 $14.18 $13.52 516,116
01/01/2012 to 12/31/2012 $13.52 $15.81 587,711
01/01/2013 to 12/31/2013 $15.81 $20.67 561,570
01/01/2014 to 12/31/2014 $20.67 $23.47 523,357
---------------------------------------------------------------------------------------------------
AST Money Market Portfolio
01/01/2005 to 12/31/2005 $10.46 $10.62 3,179,375
01/01/2006 to 12/31/2006 $10.62 $10.96 3,505,960
01/01/2007 to 12/31/2007 $10.96 $11.36 4,361,361
01/01/2008 to 12/31/2008 $11.36 $11.50 7,844,009
01/01/2009 to 12/31/2009 $11.50 $11.38 7,658,391
01/01/2010 to 12/31/2010 $11.38 $11.24 6,801,612
01/01/2011 to 12/31/2011 $11.24 $11.10 6,279,406
01/01/2012 to 12/31/2012 $11.10 $10.96 4,601,307
01/01/2013 to 12/31/2013 $10.96 $10.83 3,604,420
01/01/2014 to 12/31/2014 $10.83 $10.69 3,389,920
A-7
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------------
AST Neuberger Berman / LSV Mid-Cap Value Portfolio
01/01/2005 to 12/31/2005 $16.76 $18.55 1,303,740
01/01/2006 to 12/31/2006 $18.55 $20.28 1,086,861
01/01/2007 to 12/31/2007 $20.28 $20.66 975,347
01/01/2008 to 12/31/2008 $20.66 $11.78 570,591
01/01/2009 to 12/31/2009 $11.78 $16.36 867,525
01/01/2010 to 12/31/2010 $16.36 $19.95 1,067,139
01/01/2011 to 12/31/2011 $19.95 $19.21 718,917
01/01/2012 to 12/31/2012 $19.21 $22.22 726,117
01/01/2013 to 12/31/2013 $22.22 $31.16 958,640
01/01/2014 to 12/31/2014 $31.16 $35.15 927,072
----------------------------------------------------------------------------------------------------------
AST Neuberger Berman Core Bond Portfolio
10/31/2011* to 12/31/2011 $10.03 $10.08 42,951
01/01/2012 to 12/31/2012 $10.08 $10.44 158,119
01/01/2013 to 12/31/2013 $10.44 $10.01 172,211
01/01/2014 to 12/31/2014 $10.01 $10.40 356,190
----------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $7.14 $8.00 771,461
01/01/2006 to 12/31/2006 $8.00 $9.01 697,877
01/01/2007 to 12/31/2007 $9.01 $10.88 971,242
01/01/2008 to 12/31/2008 $10.88 $6.10 610,828
01/01/2009 to 12/31/2009 $6.10 $7.82 1,281,862
01/01/2010 to 12/31/2010 $7.82 $9.94 1,796,178
01/01/2011 to 12/31/2011 $9.94 $9.98 1,468,365
01/01/2012 to 12/31/2012 $9.98 $11.08 1,554,762
01/01/2013 to 12/31/2013 $11.08 $14.51 1,582,884
01/01/2014 to 12/31/2014 $14.51 $15.46 1,649,910
----------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $7.41 $7.35 267,925
01/01/2006 to 12/31/2006 $7.35 $7.82 344,893
01/01/2007 to 12/31/2007 $7.82 $9.17 382,635
01/01/2008 to 12/31/2008 $9.17 $5.20 242,993
01/01/2009 to 12/31/2009 $5.20 $6.30 809,394
01/01/2010 to 12/31/2010 $6.30 $7.48 1,201,338
01/01/2011 to 04/29/2011 $7.48 $8.40 0
----------------------------------------------------------------------------------------------------------
AST New Discovery Asset Allocation Portfolio
04/30/2012* to 12/31/2012 $10.00 $10.35 1,899,490
01/01/2013 to 12/31/2013 $10.35 $12.16 2,026,276
01/01/2014 to 12/31/2014 $12.16 $12.62 1,937,576
----------------------------------------------------------------------------------------------------------
AST Parametric Emerging Markets Equity Portfolio
07/21/2008* to 12/31/2008 $10.10 $5.58 25,631
01/01/2009 to 12/31/2009 $5.58 $9.18 1,699,847
01/01/2010 to 12/31/2010 $9.18 $11.09 2,970,397
01/01/2011 to 12/31/2011 $11.09 $8.73 2,098,763
01/01/2012 to 12/31/2012 $8.73 $10.17 2,548,478
01/01/2013 to 12/31/2013 $10.17 $10.06 2,789,183
01/01/2014 to 12/31/2014 $10.06 $9.47 2,532,733
----------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond Portfolio
01/01/2005 to 12/31/2005 $12.18 $12.22 2,996,256
01/01/2006 to 12/31/2006 $12.22 $12.53 2,687,532
01/01/2007 to 12/31/2007 $12.53 $13.21 2,594,813
01/01/2008 to 12/31/2008 $13.21 $13.19 1,654,958
01/01/2009 to 12/31/2009 $13.19 $14.36 2,949,882
01/01/2010 to 12/31/2010 $14.36 $14.74 3,080,140
01/01/2011 to 12/31/2011 $14.74 $14.88 2,600,827
01/01/2012 to 12/31/2012 $14.88 $15.38 2,281,868
01/01/2013 to 12/31/2013 $15.38 $14.86 2,529,324
01/01/2014 to 12/31/2014 $14.86 $14.66 2,269,196
A-8
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond Portfolio
01/01/2005 to 12/31/2005 $13.72 $13.88 1,924,370
01/01/2006 to 12/31/2006 $13.88 $14.22 2,004,498
01/01/2007 to 12/31/2007 $14.22 $15.21 2,344,694
01/01/2008 to 12/31/2008 $15.21 $14.68 2,402,587
01/01/2009 to 12/31/2009 $14.68 $16.90 10,715,121
01/01/2010 to 12/31/2010 $16.90 $17.97 15,065,751
01/01/2011 to 12/31/2011 $17.97 $18.31 11,688,146
01/01/2012 to 12/31/2012 $18.31 $19.77 12,996,719
01/01/2013 to 12/31/2013 $19.77 $19.16 12,953,608
01/01/2014 to 12/31/2014 $19.16 $19.72 11,489,506
---------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
12/05/2005* to 12/31/2005 $10.00 $10.04 215,280
01/01/2006 to 12/31/2006 $10.04 $10.70 443,968
01/01/2007 to 12/31/2007 $10.70 $11.49 649,597
01/01/2008 to 12/31/2008 $11.49 $9.14 3,492,156
01/01/2009 to 12/31/2009 $9.14 $10.83 16,345,435
01/01/2010 to 12/31/2010 $10.83 $11.83 21,296,028
01/01/2011 to 12/31/2011 $11.83 $11.79 20,978,607
01/01/2012 to 12/31/2012 $11.79 $12.85 21,413,601
01/01/2013 to 12/31/2013 $12.85 $13.86 19,382,539
01/01/2014 to 12/31/2014 $13.86 $14.48 18,214,833
---------------------------------------------------------------------------------------------------
AST Prudential Core Bond Portfolio
10/31/2011* to 12/31/2011 $10.02 $10.08 86,299
01/01/2012 to 12/31/2012 $10.08 $10.66 270,512
01/01/2013 to 12/31/2013 $10.66 $10.28 380,485
01/01/2014 to 12/31/2014 $10.28 $10.77 613,579
---------------------------------------------------------------------------------------------------
AST Prudential Growth Allocation Portfolio
03/20/2006* to 12/31/2006 $10.00 $10.52 510,953
01/01/2007 to 12/31/2007 $10.52 $11.57 1,352,476
01/01/2008 to 12/31/2008 $11.57 $6.77 2,352,959
01/01/2009 to 12/31/2009 $6.77 $8.43 21,782,141
01/01/2010 to 12/31/2010 $8.43 $9.90 28,197,221
01/01/2011 to 12/31/2011 $9.90 $9.17 19,004,621
01/01/2012 to 12/31/2012 $9.17 $10.23 23,045,803
01/01/2013 to 12/31/2013 $10.23 $11.82 24,763,025
01/01/2014 to 12/31/2014 $11.82 $12.74 25,431,636
---------------------------------------------------------------------------------------------------
AST QMA Emerging Markets Equity Portfolio
02/25/2013* to 12/31/2013 $10.00 $9.64 5,288
01/01/2014 to 12/31/2014 $9.64 $9.28 4,684
---------------------------------------------------------------------------------------------------
AST QMA Large-Cap Portfolio
04/29/2013* to 12/31/2013 $10.00 $11.71 507
01/01/2014 to 12/31/2014 $11.71 $13.33 7,189
---------------------------------------------------------------------------------------------------
AST QMA US Equity Alpha Portfolio
01/01/2005 to 12/31/2005 $8.99 $9.20 851,019
01/01/2006 to 12/31/2006 $9.20 $10.23 842,745
01/01/2007 to 12/31/2007 $10.23 $10.31 958,429
01/01/2008 to 12/31/2008 $10.31 $6.24 452,522
01/01/2009 to 12/31/2009 $6.24 $7.51 644,194
01/01/2010 to 12/31/2010 $7.51 $8.53 777,947
01/01/2011 to 12/31/2011 $8.53 $8.71 677,195
01/01/2012 to 12/31/2012 $8.71 $10.22 816,572
01/01/2013 to 12/31/2013 $10.22 $13.36 820,238
01/01/2014 to 12/31/2014 $13.36 $15.47 1,195,358
---------------------------------------------------------------------------------------------------
AST Quantitative Modeling Portfolio
05/02/2011* to 12/31/2011 $10.00 $8.92 66,424
01/01/2012 to 12/31/2012 $8.92 $9.97 290,810
01/01/2013 to 12/31/2013 $9.97 $12.05 2,668,831
01/01/2014 to 12/31/2014 $12.05 $12.68 3,053,418
A-9
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------
AST RCM World Trends Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.04 0
01/01/2008 to 12/31/2008 $10.04 $7.19 1,187,445
01/01/2009 to 12/31/2009 $7.19 $8.76 11,457,091
01/01/2010 to 12/31/2010 $8.76 $9.68 16,850,087
01/01/2011 to 12/31/2011 $9.68 $9.38 14,386,818
01/01/2012 to 12/31/2012 $9.38 $10.22 15,668,930
01/01/2013 to 12/31/2013 $10.22 $11.34 14,696,813
01/01/2014 to 12/31/2014 $11.34 $11.78 13,705,628
------------------------------------------------------------------------------------------------------------
AST Schroders Global Tactical Portfolio
11/19/2007* to 12/31/2007 $10.00 $11.51 31,450
01/01/2008 to 12/31/2008 $11.51 $7.37 468,660
01/01/2009 to 12/31/2009 $7.37 $9.23 7,963,536
01/01/2010 to 12/31/2010 $9.23 $10.42 13,249,095
01/01/2011 to 12/31/2011 $10.42 $10.04 9,509,858
01/01/2012 to 12/31/2012 $10.04 $11.49 12,073,527
01/01/2013 to 12/31/2013 $11.49 $13.40 12,983,577
01/01/2014 to 12/31/2014 $13.40 $13.95 12,556,866
------------------------------------------------------------------------------------------------------------
AST Schroders Multi-Asset World Strategies Portfolio
01/01/2005 to 12/31/2005 $10.56 $10.91 173,191
01/01/2006 to 12/31/2006 $10.91 $11.82 174,226
01/01/2007 to 12/31/2007 $11.82 $12.71 214,498
01/01/2008 to 12/31/2008 $12.71 $8.76 613,791
01/01/2009 to 12/31/2009 $8.76 $11.02 9,604,813
01/01/2010 to 12/31/2010 $11.02 $12.17 16,692,964
01/01/2011 to 12/31/2011 $12.17 $11.61 13,447,730
01/01/2012 to 12/31/2012 $11.61 $12.74 14,684,084
01/01/2013 to 12/31/2013 $12.74 $14.40 13,958,016
01/01/2014 to 12/31/2014 $14.40 $14.65 12,728,753
------------------------------------------------------------------------------------------------------------
AST Small-Cap Growth Opportunities Portfolio
formerly, AST Federated Aggressive Growth Portfolio
01/01/2005 to 12/31/2005 $10.12 $10.94 1,386,930
01/01/2006 to 12/31/2006 $10.94 $12.20 1,165,926
01/01/2007 to 12/31/2007 $12.20 $13.39 1,078,773
01/01/2008 to 12/31/2008 $13.39 $7.39 767,197
01/01/2009 to 12/31/2009 $7.39 $9.69 1,308,983
01/01/2010 to 12/31/2010 $9.69 $12.68 1,500,026
01/01/2011 to 12/31/2011 $12.68 $10.88 1,440,412
01/01/2012 to 12/31/2012 $10.88 $12.90 1,624,583
01/01/2013 to 12/31/2013 $12.90 $17.94 1,692,703
01/01/2014 to 12/31/2014 $17.94 $18.59 1,505,947
------------------------------------------------------------------------------------------------------------
AST Small-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $15.97 $16.00 126,824
01/01/2006 to 12/31/2006 $16.00 $17.80 111,114
01/01/2007 to 12/31/2007 $17.80 $18.83 118,021
01/01/2008 to 12/31/2008 $18.83 $12.09 187,342
01/01/2009 to 12/31/2009 $12.09 $15.98 375,867
01/01/2010 to 12/31/2010 $15.98 $21.53 527,269
01/01/2011 to 12/31/2011 $21.53 $21.05 412,276
01/01/2012 to 12/31/2012 $21.05 $23.32 475,113
01/01/2013 to 12/31/2013 $23.32 $31.13 525,441
01/01/2014 to 12/31/2014 $31.13 $31.92 468,074
A-10
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-----------------------------------------------------------------------------------------------------
AST Small-Cap Value Portfolio
01/01/2005 to 12/31/2005 $16.64 $17.52 1,484,713
01/01/2006 to 12/31/2006 $17.52 $20.77 1,198,255
01/01/2007 to 12/31/2007 $20.77 $19.36 1,176,566
01/01/2008 to 12/31/2008 $19.36 $13.44 760,721
01/01/2009 to 12/31/2009 $13.44 $16.85 971,333
01/01/2010 to 12/31/2010 $16.85 $20.96 983,045
01/01/2011 to 12/31/2011 $20.96 $19.47 633,878
01/01/2012 to 12/31/2012 $19.47 $22.71 589,246
01/01/2013 to 12/31/2013 $22.71 $30.82 725,986
01/01/2014 to 12/31/2014 $30.82 $32.03 663,097
-----------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation Portfolio
01/01/2005 to 12/31/2005 $11.39 $11.77 558,394
01/01/2006 to 12/31/2006 $11.77 $13.08 665,726
01/01/2007 to 12/31/2007 $13.08 $13.73 949,867
01/01/2008 to 12/31/2008 $13.73 $10.04 2,067,659
01/01/2009 to 12/31/2009 $10.04 $12.31 13,701,662
01/01/2010 to 12/31/2010 $12.31 $13.56 19,352,932
01/01/2011 to 12/31/2011 $13.56 $13.65 16,991,612
01/01/2012 to 12/31/2012 $13.65 $15.30 19,880,313
01/01/2013 to 12/31/2013 $15.30 $17.66 20,439,261
01/01/2014 to 12/31/2014 $17.66 $18.46 20,317,384
-----------------------------------------------------------------------------------------------------
AST T. Rowe Price Equity Income Portfolio
01/01/2005 to 12/31/2005 $12.28 $12.79 635,233
01/01/2006 to 12/31/2006 $12.79 $15.33 815,109
01/01/2007 to 12/31/2007 $15.33 $14.60 776,427
01/01/2008 to 12/31/2008 $14.60 $8.38 424,531
01/01/2009 to 12/31/2009 $8.38 $10.24 788,524
01/01/2010 to 12/31/2010 $10.24 $11.45 1,004,584
01/01/2011 to 12/31/2011 $11.45 $11.12 741,548
01/01/2012 to 12/31/2012 $11.12 $12.88 986,090
01/01/2013 to 12/31/2013 $12.88 $16.50 1,240,563
01/01/2014 to 12/31/2014 $16.50 $17.51 1,307,147
-----------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth Portfolio
01/01/2005 to 12/31/2005 $6.19 $7.12 512,014
01/01/2006 to 12/31/2006 $7.12 $7.43 608,747
01/01/2007 to 12/31/2007 $7.43 $7.94 919,355
01/01/2008 to 12/31/2008 $7.94 $4.66 1,074,328
01/01/2009 to 12/31/2009 $4.66 $7.06 3,806,238
01/01/2010 to 12/31/2010 $7.06 $8.07 5,578,264
01/01/2011 to 12/31/2011 $8.07 $7.84 3,909,559
01/01/2012 to 12/31/2012 $7.84 $9.10 4,988,062
01/01/2013 to 12/31/2013 $9.10 $12.94 5,503,342
01/01/2014 to 12/31/2014 $12.94 $13.84 5,405,579
-----------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources Portfolio
01/01/2005 to 12/31/2005 $17.81 $23.11 254,041
01/01/2006 to 12/31/2006 $23.11 $26.44 291,510
01/01/2007 to 12/31/2007 $26.44 $36.68 378,258
01/01/2008 to 12/31/2008 $36.68 $18.12 317,719
01/01/2009 to 12/31/2009 $18.12 $26.72 995,022
01/01/2010 to 12/31/2010 $26.72 $31.78 1,431,376
01/01/2011 to 12/31/2011 $31.78 $26.70 1,050,814
01/01/2012 to 12/31/2012 $26.70 $27.32 1,265,297
01/01/2013 to 12/31/2013 $27.32 $31.13 1,137,103
01/01/2014 to 12/31/2014 $31.13 $28.17 1,041,403
A-11
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------------
AST Templeton Global Bond Portfolio
01/01/2005 to 12/31/2005 $14.73 $13.89 938,587
01/01/2006 to 12/31/2006 $13.89 $14.58 836,914
01/01/2007 to 12/31/2007 $14.58 $15.79 874,210
01/01/2008 to 12/31/2008 $15.79 $15.21 536,127
01/01/2009 to 12/31/2009 $15.21 $16.84 1,081,396
01/01/2010 to 12/31/2010 $16.84 $17.58 1,391,312
01/01/2011 to 12/31/2011 $17.58 $18.08 1,078,586
01/01/2012 to 12/31/2012 $18.08 $18.79 1,116,940
01/01/2013 to 12/31/2013 $18.79 $17.85 1,226,981
01/01/2014 to 12/31/2014 $17.85 $17.73 1,116,770
---------------------------------------------------------------------------------------------------------
AST Wellington Management Hedged Equity Portfolio
12/05/2005* to 12/31/2005 $10.00 $10.00 171,403
01/01/2006 to 12/31/2006 $10.00 $11.42 1,094,157
01/01/2007 to 12/31/2007 $11.42 $12.36 1,458,079
01/01/2008 to 12/31/2008 $12.36 $7.04 1,329,693
01/01/2009 to 12/31/2009 $7.04 $8.93 2,519,429
01/01/2010 to 12/31/2010 $8.93 $10.11 2,581,966
01/01/2011 to 12/31/2011 $10.11 $9.63 2,323,329
01/01/2012 to 12/31/2012 $9.63 $10.56 2,476,015
01/01/2013 to 12/31/2013 $10.56 $12.57 3,362,021
01/01/2014 to 12/31/2014 $12.57 $13.09 4,086,066
---------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $10.00 $9.98 48,832
01/01/2008 to 12/31/2008 $9.98 $9.35 677,200
01/01/2009 to 12/31/2009 $9.35 $10.30 2,726,911
01/01/2010 to 12/31/2010 $10.30 $10.97 3,801,379
01/01/2011 to 12/31/2011 $10.97 $11.48 3,277,047
01/01/2012 to 12/31/2012 $11.48 $12.23 3,417,319
01/01/2013 to 12/31/2013 $12.23 $11.90 3,858,415
01/01/2014 to 12/31/2014 $11.90 $12.59 4,617,743
---------------------------------------------------------------------------------------------------------
AST Western Asset Emerging Markets Debt Portfolio
08/20/2012* to 12/31/2012 $10.00 $10.40 13,099
01/01/2013 to 12/31/2013 $10.40 $9.44 17,245
01/01/2014 to 12/31/2014 $9.44 $9.44 23,236
---------------------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
04/15/2005* to 12/31/2005 $9.82 $11.47 64,775
01/01/2006 to 12/31/2006 $11.47 $12.58 72,371
01/01/2007 to 12/31/2007 $12.58 $13.79 85,135
01/01/2008 to 12/31/2008 $13.79 $8.02 66,604
01/01/2009 to 12/31/2009 $8.02 $11.07 93,737
01/01/2010 to 07/16/2010 $11.07 $10.86 0
---------------------------------------------------------------------------------------------------------
Evergreen VA International Equity Fund
01/01/2005 to 12/31/2005 $12.31 $14.10 130,749
01/01/2006 to 12/31/2006 $14.10 $17.15 182,002
01/01/2007 to 12/31/2007 $17.15 $19.47 167,896
01/01/2008 to 12/31/2008 $19.47 $11.25 150,691
01/01/2009 to 12/31/2009 $11.25 $12.88 146,213
01/01/2010 to 07/16/2010 $12.88 $12.26 0
---------------------------------------------------------------------------------------------------------
Evergreen VA Omega Fund
01/01/2005 to 12/31/2005 $9.75 $10.00 18,356
01/01/2006 to 12/31/2006 $10.00 $10.47 19,700
01/01/2007 to 12/31/2007 $10.47 $11.58 38,907
01/01/2008 to 12/31/2008 $11.58 $8.32 68,712
01/01/2009 to 12/31/2009 $8.32 $11.83 117,760
01/01/2010 to 07/16/2010 $11.83 $11.08 0
A-12
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------------
First Trust Target Focus Four Portfolio
01/01/2005 to 12/31/2005 $4.38 $4.35 14,496
01/01/2006 to 12/31/2006 $4.35 $4.47 19,492
01/01/2007 to 12/31/2007 $4.47 $4.67 73,318
01/01/2008 to 12/31/2008 $4.67 $2.59 70,049
01/01/2009 to 12/31/2009 $2.59 $3.29 131,587
01/01/2010 to 12/31/2010 $3.29 $3.87 132,842
01/01/2011 to 12/31/2011 $3.87 $3.40 102,394
01/01/2012 to 12/31/2012 $3.40 $3.83 68,721
01/01/2013 to 12/31/2013 $3.83 $4.95 72,953
01/01/2014 to 04/25/2014 $4.95 $5.11 0
-------------------------------------------------------------------------------------------------------------
Franklin Templeton VIP Founding Funds Allocation Fund
05/01/2008* to 12/31/2008 $10.08 $6.66 1,369,089
01/01/2009 to 12/31/2009 $6.66 $8.56 16,250,197
01/01/2010 to 12/31/2010 $8.56 $9.31 26,361,883
01/01/2011 to 12/31/2011 $9.31 $9.04 18,981,983
01/01/2012 to 09/21/2012 $9.04 $10.16 0
-------------------------------------------------------------------------------------------------------------
Global Dividend Target 15 Portfolio
01/01/2005 to 12/31/2005 $16.05 $17.46 52,338
01/01/2006 to 12/31/2006 $17.46 $23.87 152,515
01/01/2007 to 12/31/2007 $23.87 $26.71 239,619
01/01/2008 to 12/31/2008 $26.71 $15.09 114,200
01/01/2009 to 12/31/2009 $15.09 $21.03 106,503
01/01/2010 to 12/31/2010 $21.03 $22.78 80,881
01/01/2011 to 12/31/2011 $22.78 $20.81 65,179
01/01/2012 to 12/31/2012 $20.81 $25.77 60,373
01/01/2013 to 12/31/2013 $25.77 $29.09 52,406
01/01/2014 to 04/25/2014 $29.09 $28.51 0
-------------------------------------------------------------------------------------------------------------
Invesco V.I. Capital Development Fund - Series I
04/29/2011* to 12/31/2011 $10.03 $8.19 44,314
01/01/2012 to 04/27/2012 $8.19 $9.30 0
-------------------------------------------------------------------------------------------------------------
Invesco V.I. Diversified Dividend Fund - Series I
04/29/2011* to 12/31/2011 $9.99 $9.15 47,399
01/01/2012 to 12/31/2012 $9.15 $10.72 40,329
01/01/2013 to 12/31/2013 $10.72 $13.88 47,261
01/01/2014 to 12/31/2014 $13.88 $15.46 44,532
-------------------------------------------------------------------------------------------------------------
Invesco V.I. Dynamics Fund - Series I
01/01/2005 to 12/31/2005 $6.96 $7.61 135,001
01/01/2006 to 12/31/2006 $7.61 $8.73 124,196
01/01/2007 to 12/31/2007 $8.73 $9.67 132,861
01/01/2008 to 12/31/2008 $9.67 $4.96 78,078
01/01/2009 to 12/31/2009 $4.96 $6.97 90,078
01/01/2010 to 12/31/2010 $6.97 $8.53 75,642
01/01/2011 to 04/29/2011 $8.53 $9.51 0
-------------------------------------------------------------------------------------------------------------
Invesco V.I. Financial Services Fund - Series I
01/01/2005 to 12/31/2005 $12.72 $13.30 48,007
01/01/2006 to 12/31/2006 $13.30 $15.30 89,614
01/01/2007 to 12/31/2007 $15.30 $11.75 53,310
01/01/2008 to 12/31/2008 $11.75 $4.70 91,978
01/01/2009 to 12/31/2009 $4.70 $5.92 87,326
01/01/2010 to 12/31/2010 $5.92 $6.45 81,632
01/01/2011 to 04/29/2011 $6.45 $6.81 0
A-13
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------
Invesco V.I. Global Health Care Fund - Series I
01/01/2005 to 12/31/2005 $11.34 $12.12 106,295
01/01/2006 to 12/31/2006 $12.12 $12.59 110,470
01/01/2007 to 12/31/2007 $12.59 $13.91 109,826
01/01/2008 to 12/31/2008 $13.91 $9.80 81,377
01/01/2009 to 12/31/2009 $9.80 $12.36 81,357
01/01/2010 to 12/31/2010 $12.36 $12.85 74,735
01/01/2011 to 12/31/2011 $12.85 $13.19 67,482
01/01/2012 to 12/31/2012 $13.19 $15.75 46,919
01/01/2013 to 12/31/2013 $15.75 $21.86 41,655
01/01/2014 to 12/31/2014 $21.86 $25.83 44,574
-------------------------------------------------------------------------------------------------------
Invesco V.I. Mid Cap Growth Portfolio, Series I
04/27/2012* to 12/31/2012 $10.05 $9.79 22,049
01/01/2013 to 12/31/2013 $9.79 $13.25 24,453
01/01/2014 to 12/31/2014 $13.25 $14.14 25,473
-------------------------------------------------------------------------------------------------------
Invesco V.I. Technology Fund - Series I
01/01/2005 to 12/31/2005 $3.32 $3.35 77,942
01/01/2006 to 12/31/2006 $3.35 $3.65 254,798
01/01/2007 to 12/31/2007 $3.65 $3.89 126,039
01/01/2008 to 12/31/2008 $3.89 $2.13 95,405
01/01/2009 to 12/31/2009 $2.13 $3.31 166,230
01/01/2010 to 12/31/2010 $3.31 $3.97 298,028
01/01/2011 to 12/31/2011 $3.97 $3.72 145,369
01/01/2012 to 12/31/2012 $3.72 $4.09 133,777
01/01/2013 to 12/31/2013 $4.09 $5.05 113,570
01/01/2014 to 12/31/2014 $5.05 $5.54 109,125
-------------------------------------------------------------------------------------------------------
NASDAQ Target 15 Portfolio
01/01/2005 to 12/31/2005 $12.54 $12.79 10,385
01/01/2006 to 12/31/2006 $12.79 $13.76 15,488
01/01/2007 to 12/31/2007 $13.76 $16.54 27,898
01/01/2008 to 12/31/2008 $16.54 $8.02 34,032
01/01/2009 to 12/31/2009 $8.02 $9.26 28,094
01/01/2010 to 12/31/2010 $9.26 $11.92 29,023
01/01/2011 to 12/31/2011 $11.92 $11.93 19,317
01/01/2012 to 12/31/2012 $11.93 $13.31 12,247
01/01/2013 to 12/31/2013 $13.31 $19.56 14,409
01/01/2014 to 04/25/2014 $19.56 $19.51 0
-------------------------------------------------------------------------------------------------------
NVIT Developing Markets Fund
01/01/2005 to 12/31/2005 $12.52 $16.26 351,335
01/01/2006 to 12/31/2006 $16.26 $21.61 316,324
01/01/2007 to 12/31/2007 $21.61 $30.63 435,146
01/01/2008 to 12/31/2008 $30.63 $12.74 289,778
01/01/2009 to 12/31/2009 $12.74 $20.42 332,583
01/01/2010 to 12/31/2010 $20.42 $23.42 323,539
01/01/2011 to 12/31/2011 $23.42 $17.94 198,299
01/01/2012 to 12/31/2012 $17.94 $20.69 150,414
01/01/2013 to 12/31/2013 $20.69 $20.44 105,018
01/01/2014 to 12/31/2014 $20.44 $19.00 65,733
-------------------------------------------------------------------------------------------------------
ProFund VP Asia 30
01/01/2005 to 12/31/2005 $12.43 $14.67 83,233
01/01/2006 to 12/31/2006 $14.67 $20.18 235,779
01/01/2007 to 12/31/2007 $20.18 $29.44 204,415
01/01/2008 to 12/31/2008 $29.44 $14.30 109,480
01/01/2009 to 12/31/2009 $14.30 $21.77 143,857
01/01/2010 to 12/31/2010 $21.77 $24.49 124,035
01/01/2011 to 12/31/2011 $24.49 $17.65 40,910
01/01/2012 to 12/31/2012 $17.65 $20.13 35,115
01/01/2013 to 12/31/2013 $20.13 $22.85 23,327
01/01/2014 to 12/31/2014 $22.85 $22.21 7,118
A-14
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------
ProFund VP Banks
01/01/2005 to 12/31/2005 $12.11 $11.94 44,665
01/01/2006 to 12/31/2006 $11.94 $13.61 35,707
01/01/2007 to 12/31/2007 $13.61 $9.77 12,962
01/01/2008 to 12/31/2008 $9.77 $5.12 71,458
01/01/2009 to 12/31/2009 $5.12 $4.84 19,936
01/01/2010 to 12/31/2010 $4.84 $5.18 19,494
01/01/2011 to 12/31/2011 $5.18 $3.75 9,774
01/01/2012 to 12/31/2012 $3.75 $4.94 12,044
01/01/2013 to 12/31/2013 $4.94 $6.51 8,941
01/01/2014 to 12/31/2014 $6.51 $7.09 1,524
-------------------------------------------------------------------------------------
ProFund VP Basic Materials
01/01/2005 to 12/31/2005 $12.00 $12.13 53,592
01/01/2006 to 12/31/2006 $12.13 $13.84 67,645
01/01/2007 to 12/31/2007 $13.84 $17.86 199,608
01/01/2008 to 12/31/2008 $17.86 $8.57 114,858
01/01/2009 to 12/31/2009 $8.57 $13.74 145,393
01/01/2010 to 12/31/2010 $13.74 $17.59 122,575
01/01/2011 to 12/31/2011 $17.59 $14.57 39,084
01/01/2012 to 12/31/2012 $14.57 $15.61 25,470
01/01/2013 to 12/31/2013 $15.61 $18.25 18,333
01/01/2014 to 12/31/2014 $18.25 $18.33 10,506
-------------------------------------------------------------------------------------
ProFund VP Bear
01/01/2005 to 12/31/2005 $9.09 $8.86 35,611
01/01/2006 to 12/31/2006 $8.86 $8.09 56,286
01/01/2007 to 12/31/2007 $8.09 $8.04 56,088
01/01/2008 to 12/31/2008 $8.04 $11.10 157,817
01/01/2009 to 12/31/2009 $11.10 $7.91 138,663
01/01/2010 to 12/31/2010 $7.91 $6.42 145,694
01/01/2011 to 12/31/2011 $6.42 $5.78 65,795
01/01/2012 to 12/31/2012 $5.78 $4.76 52,785
01/01/2013 to 12/31/2013 $4.76 $3.45 30,178
01/01/2014 to 12/31/2014 $3.45 $2.92 27,169
-------------------------------------------------------------------------------------
ProFund VP Biotechnology
01/01/2005 to 12/31/2005 $7.73 $9.11 73,804
01/01/2006 to 12/31/2006 $9.11 $8.63 56,416
01/01/2007 to 12/31/2007 $8.63 $8.42 165,309
01/01/2008 to 12/31/2008 $8.42 $8.47 117,598
01/01/2009 to 12/31/2009 $8.47 $8.67 40,735
01/01/2010 to 12/31/2010 $8.67 $9.00 38,083
01/01/2011 to 12/31/2011 $9.00 $9.47 22,275
01/01/2012 to 12/31/2012 $9.47 $13.16 20,018
01/01/2013 to 12/31/2013 $13.16 $21.89 24,007
01/01/2014 to 12/31/2014 $21.89 $28.04 17,515
-------------------------------------------------------------------------------------
ProFund VP Bull
01/01/2005 to 12/31/2005 $10.65 $10.80 384,501
01/01/2006 to 12/31/2006 $10.80 $12.12 306,353
01/01/2007 to 12/31/2007 $12.12 $12.40 217,866
01/01/2008 to 12/31/2008 $12.40 $7.63 184,775
01/01/2009 to 12/31/2009 $7.63 $9.37 436,640
01/01/2010 to 12/31/2010 $9.37 $10.42 358,651
01/01/2011 to 12/31/2011 $10.42 $10.29 252,508
01/01/2012 to 12/31/2012 $10.29 $11.57 116,185
01/01/2013 to 12/31/2013 $11.57 $14.82 73,816
01/01/2014 to 12/31/2014 $14.82 $16.32 72,219
A-15
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------
ProFund VP Consumer Goods Portfolio
01/01/2005 to 12/31/2005 $10.47 $10.31 6,876
01/01/2006 to 12/31/2006 $10.31 $11.46 39,408
01/01/2007 to 12/31/2007 $11.46 $12.18 150,560
01/01/2008 to 12/31/2008 $12.18 $8.81 19,941
01/01/2009 to 12/31/2009 $8.81 $10.58 17,782
01/01/2010 to 12/31/2010 $10.58 $12.26 26,562
01/01/2011 to 12/31/2011 $12.26 $12.95 25,754
01/01/2012 to 12/31/2012 $12.95 $14.18 13,002
01/01/2013 to 12/31/2013 $14.18 $17.98 15,729
01/01/2014 to 12/31/2014 $17.98 $19.57 5,871
-------------------------------------------------------------------------------------------
ProFund VP Consumer Services
01/01/2005 to 12/31/2005 $9.67 $9.10 3,866
01/01/2006 to 12/31/2006 $9.10 $10.06 15,819
01/01/2007 to 12/31/2007 $10.06 $9.12 5,165
01/01/2008 to 12/31/2008 $9.12 $6.18 16,093
01/01/2009 to 12/31/2009 $6.18 $7.98 19,670
01/01/2010 to 12/31/2010 $7.98 $9.57 28,520
01/01/2011 to 12/31/2011 $9.57 $9.97 21,528
01/01/2012 to 12/31/2012 $9.97 $12.02 16,814
01/01/2013 to 12/31/2013 $12.02 $16.60 9,044
01/01/2014 to 12/31/2014 $16.60 $18.43 2,640
-------------------------------------------------------------------------------------------
ProFund VP Europe 30
01/01/2005 to 12/31/2005 $7.90 $8.43 76,381
01/01/2006 to 12/31/2006 $8.43 $9.79 370,628
01/01/2007 to 12/31/2007 $9.79 $11.07 331,218
01/01/2008 to 12/31/2008 $11.07 $6.12 126,269
01/01/2009 to 12/31/2009 $6.12 $8.00 313,143
01/01/2010 to 12/31/2010 $8.00 $8.11 272,463
01/01/2011 to 12/31/2011 $8.11 $7.29 52,358
01/01/2012 to 12/31/2012 $7.29 $8.40 55,477
01/01/2013 to 12/31/2013 $8.40 $10.09 46,769
01/01/2014 to 12/31/2014 $10.09 $9.10 7,134
-------------------------------------------------------------------------------------------
ProFund VP Financials
01/01/2005 to 12/31/2005 $10.77 $11.06 43,105
01/01/2006 to 12/31/2006 $11.06 $12.81 108,064
01/01/2007 to 12/31/2007 $12.81 $10.23 27,930
01/01/2008 to 12/31/2008 $10.23 $5.00 52,097
01/01/2009 to 12/31/2009 $5.00 $5.68 140,784
01/01/2010 to 12/31/2010 $5.68 $6.22 44,908
01/01/2011 to 12/31/2011 $6.22 $5.29 23,822
01/01/2012 to 12/31/2012 $5.29 $6.52 22,703
01/01/2013 to 12/31/2013 $6.52 $8.50 46,043
01/01/2014 to 12/31/2014 $8.50 $9.48 8,474
-------------------------------------------------------------------------------------------
ProFund VP Health Care
01/01/2005 to 12/31/2005 $8.38 $8.77 83,943
01/01/2006 to 12/31/2006 $8.77 $9.12 179,877
01/01/2007 to 12/31/2007 $9.12 $9.60 255,222
01/01/2008 to 12/31/2008 $9.60 $7.17 79,165
01/01/2009 to 12/31/2009 $7.17 $8.47 73,901
01/01/2010 to 12/31/2010 $8.47 $8.60 65,780
01/01/2011 to 12/31/2011 $8.60 $9.35 84,331
01/01/2012 to 12/31/2012 $9.35 $10.85 82,149
01/01/2013 to 12/31/2013 $10.85 $14.97 53,151
01/01/2014 to 12/31/2014 $14.97 $18.28 52,418
A-16
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------
ProFund VP Industrials
01/01/2005 to 12/31/2005 $11.27 $11.40 9,851
01/01/2006 to 12/31/2006 $11.40 $12.57 21,635
01/01/2007 to 12/31/2007 $12.57 $13.87 15,320
01/01/2008 to 12/31/2008 $13.87 $8.15 39,857
01/01/2009 to 12/31/2009 $8.15 $9.99 27,311
01/01/2010 to 12/31/2010 $9.99 $12.20 21,347
01/01/2011 to 12/31/2011 $12.20 $11.84 16,683
01/01/2012 to 12/31/2012 $11.84 $13.53 8,126
01/01/2013 to 12/31/2013 $13.53 $18.47 7,284
01/01/2014 to 12/31/2014 $18.47 $19.26 7,788
-------------------------------------------------------------------------------------
ProFund VP Internet
01/01/2005 to 12/31/2005 $18.08 $19.18 46,724
01/01/2006 to 12/31/2006 $19.18 $19.20 6,326
01/01/2007 to 12/31/2007 $19.20 $20.89 16,744
01/01/2008 to 12/31/2008 $20.89 $11.38 7,505
01/01/2009 to 12/31/2009 $11.38 $19.93 16,747
01/01/2010 to 12/31/2010 $19.93 $26.62 31,261
01/01/2011 to 12/31/2011 $26.62 $24.47 3,751
01/01/2012 to 12/31/2012 $24.47 $28.94 2,884
01/01/2013 to 12/31/2013 $28.94 $43.35 7,173
01/01/2014 to 12/31/2014 $43.35 $43.29 1,698
-------------------------------------------------------------------------------------
ProFund VP Japan
01/01/2005 to 12/31/2005 $9.65 $13.51 165,707
01/01/2006 to 12/31/2006 $13.51 $14.79 117,156
01/01/2007 to 12/31/2007 $14.79 $13.14 54,211
01/01/2008 to 12/31/2008 $13.14 $7.68 67,522
01/01/2009 to 12/31/2009 $7.68 $8.37 84,572
01/01/2010 to 12/31/2010 $8.37 $7.72 72,550
01/01/2011 to 12/31/2011 $7.72 $6.21 38,109
01/01/2012 to 12/31/2012 $6.21 $7.54 35,371
01/01/2013 to 12/31/2013 $7.54 $11.04 20,262
01/01/2014 to 12/31/2014 $11.04 $11.25 507
-------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
01/01/2005 to 12/31/2005 $10.38 $10.35 98,334
01/01/2006 to 12/31/2006 $10.35 $11.14 87,853
01/01/2007 to 12/31/2007 $11.14 $11.77 111,093
01/01/2008 to 12/31/2008 $11.77 $7.49 123,085
01/01/2009 to 12/31/2009 $7.49 $9.60 134,716
01/01/2010 to 12/31/2010 $9.60 $10.73 89,108
01/01/2011 to 12/31/2011 $10.73 $10.93 120,030
01/01/2012 to 12/31/2012 $10.93 $12.16 63,603
01/01/2013 to 12/31/2013 $12.16 $15.70 72,486
01/01/2014 to 12/31/2014 $15.70 $17.50 57,882
-------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
01/01/2005 to 12/31/2005 $10.37 $10.55 131,174
01/01/2006 to 12/31/2006 $10.55 $12.37 296,094
01/01/2007 to 12/31/2007 $12.37 $12.23 172,527
01/01/2008 to 12/31/2008 $12.23 $7.19 138,391
01/01/2009 to 12/31/2009 $7.19 $8.48 83,232
01/01/2010 to 12/31/2010 $8.48 $9.46 89,765
01/01/2011 to 12/31/2011 $9.46 $9.22 42,710
01/01/2012 to 12/31/2012 $9.22 $10.51 26,138
01/01/2013 to 12/31/2013 $10.51 $13.48 56,359
01/01/2014 to 12/31/2014 $13.48 $14.70 66,994
A-17
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------
ProFund VP Mid-Cap Growth
01/01/2005 to 12/31/2005 $10.70 $11.75 181,173
01/01/2006 to 12/31/2006 $11.75 $12.06 55,706
01/01/2007 to 12/31/2007 $12.06 $13.31 89,654
01/01/2008 to 12/31/2008 $13.31 $8.04 62,780
01/01/2009 to 12/31/2009 $8.04 $10.99 83,374
01/01/2010 to 12/31/2010 $10.99 $13.93 205,337
01/01/2011 to 12/31/2011 $13.93 $13.36 64,733
01/01/2012 to 12/31/2012 $13.36 $15.22 52,836
01/01/2013 to 12/31/2013 $15.22 $19.62 41,531
01/01/2014 to 12/31/2014 $19.62 $20.52 3,575
-------------------------------------------------------------------------------------
ProFund VP Mid-Cap Value
01/01/2005 to 12/31/2005 $11.80 $12.68 86,401
01/01/2006 to 12/31/2006 $12.68 $14.06 216,242
01/01/2007 to 12/31/2007 $14.06 $14.02 130,141
01/01/2008 to 12/31/2008 $14.02 $8.82 68,810
01/01/2009 to 12/31/2009 $8.82 $11.40 58,665
01/01/2010 to 12/31/2010 $11.40 $13.56 63,526
01/01/2011 to 12/31/2011 $13.56 $12.86 58,692
01/01/2012 to 12/31/2012 $12.86 $14.80 40,665
01/01/2013 to 12/31/2013 $14.80 $19.32 35,724
01/01/2014 to 12/31/2014 $19.32 $21.02 6,232
-------------------------------------------------------------------------------------
ProFund VP NASDAQ-100
01/01/2005 to 12/31/2005 $5.44 $5.38 234,957
01/01/2006 to 12/31/2006 $5.38 $5.60 266,020
01/01/2007 to 12/31/2007 $5.60 $6.50 383,014
01/01/2008 to 12/31/2008 $6.50 $3.69 318,742
01/01/2009 to 12/31/2009 $3.69 $5.55 327,797
01/01/2010 to 12/31/2010 $5.55 $6.48 316,781
01/01/2011 to 12/31/2011 $6.48 $6.49 232,290
01/01/2012 to 12/31/2012 $6.49 $7.45 217,667
01/01/2013 to 12/31/2013 $7.45 $9.87 162,863
01/01/2014 to 12/31/2014 $9.87 $11.41 53,447
-------------------------------------------------------------------------------------
ProFund VP Oil & Gas
01/01/2005 to 12/31/2005 $11.62 $15.07 278,771
01/01/2006 to 12/31/2006 $15.07 $17.96 226,319
01/01/2007 to 12/31/2007 $17.96 $23.49 230,618
01/01/2008 to 12/31/2008 $23.49 $14.62 186,825
01/01/2009 to 12/31/2009 $14.62 $16.68 156,252
01/01/2010 to 12/31/2010 $16.68 $19.40 135,958
01/01/2011 to 12/31/2011 $19.40 $19.59 76,432
01/01/2012 to 12/31/2012 $19.59 $19.90 53,849
01/01/2013 to 12/31/2013 $19.90 $24.38 38,076
01/01/2014 to 12/31/2014 $24.38 $21.46 22,287
-------------------------------------------------------------------------------------
ProFund VP Pharmaceuticals
01/01/2005 to 12/31/2005 $8.02 $7.62 36,753
01/01/2006 to 12/31/2006 $7.62 $8.44 116,086
01/01/2007 to 12/31/2007 $8.44 $8.53 85,082
01/01/2008 to 12/31/2008 $8.53 $6.78 76,505
01/01/2009 to 12/31/2009 $6.78 $7.82 74,314
01/01/2010 to 12/31/2010 $7.82 $7.76 31,364
01/01/2011 to 12/31/2011 $7.76 $8.90 38,921
01/01/2012 to 12/31/2012 $8.90 $9.83 24,365
01/01/2013 to 12/31/2013 $9.83 $12.78 14,760
01/01/2014 to 12/31/2014 $12.78 $15.07 4,043
A-18
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------
ProFund VP Precious Metals
01/01/2005 to 12/31/2005 $11.90 $14.84 200,314
01/01/2006 to 12/31/2006 $14.84 $15.74 233,772
01/01/2007 to 12/31/2007 $15.74 $19.03 203,953
01/01/2008 to 12/31/2008 $19.03 $13.01 256,815
01/01/2009 to 12/31/2009 $13.01 $17.39 237,439
01/01/2010 to 12/31/2010 $17.39 $22.83 247,308
01/01/2011 to 12/31/2011 $22.83 $18.21 173,485
01/01/2012 to 12/31/2012 $18.21 $15.37 113,803
01/01/2013 to 12/31/2013 $15.37 $9.42 59,192
01/01/2014 to 12/31/2014 $9.42 $7.08 32,404
-------------------------------------------------------------------------------------------
ProFund VP Real Estate
01/01/2005 to 12/31/2005 $17.58 $18.54 31,980
01/01/2006 to 12/31/2006 $18.54 $24.25 61,873
01/01/2007 to 12/31/2007 $24.25 $19.25 39,817
01/01/2008 to 12/31/2008 $19.25 $11.17 46,281
01/01/2009 to 12/31/2009 $11.17 $14.10 52,257
01/01/2010 to 12/31/2010 $14.10 $17.37 29,823
01/01/2011 to 12/31/2011 $17.37 $17.96 20,201
01/01/2012 to 12/31/2012 $17.96 $20.79 16,035
01/01/2013 to 12/31/2013 $20.79 $20.54 8,707
01/01/2014 to 12/31/2014 $20.54 $25.36 6,792
-------------------------------------------------------------------------------------------
ProFund VP Rising Rates Opportunity
01/01/2005 to 12/31/2005 $6.70 $6.09 302,979
01/01/2006 to 12/31/2006 $6.09 $6.63 268,688
01/01/2007 to 12/31/2007 $6.63 $6.20 268,294
01/01/2008 to 12/31/2008 $6.20 $3.80 202,541
01/01/2009 to 12/31/2009 $3.80 $4.96 266,088
01/01/2010 to 12/31/2010 $4.96 $4.11 219,463
01/01/2011 to 12/31/2011 $4.11 $2.54 212,763
01/01/2012 to 12/31/2012 $2.54 $2.33 82,640
01/01/2013 to 12/31/2013 $2.33 $2.68 63,720
01/01/2014 to 12/31/2014 $2.68 $1.85 20,069
-------------------------------------------------------------------------------------------
ProFund VP Semiconductor
01/01/2005 to 12/31/2005 $7.23 $7.76 68,309
01/01/2006 to 12/31/2006 $7.76 $7.12 9,658
01/01/2007 to 12/31/2007 $7.12 $7.53 18,356
01/01/2008 to 12/31/2008 $7.53 $3.73 21,594
01/01/2009 to 12/31/2009 $3.73 $6.04 68,094
01/01/2010 to 12/31/2010 $6.04 $6.71 23,685
01/01/2011 to 12/31/2011 $6.71 $6.36 13,072
01/01/2012 to 12/31/2012 $6.36 $6.02 4,765
01/01/2013 to 12/31/2013 $6.02 $7.94 3,787
01/01/2014 to 12/31/2014 $7.94 $10.55 3,513
-------------------------------------------------------------------------------------------
ProFund VP Short Mid-Cap
01/01/2005 to 12/31/2005 $9.70 $8.67 975
01/01/2006 to 12/31/2006 $8.67 $8.26 4,948
01/01/2007 to 12/31/2007 $8.26 $7.92 17,295
01/01/2008 to 12/31/2008 $7.92 $10.31 19,300
01/01/2009 to 12/31/2009 $10.31 $6.58 57,877
01/01/2010 to 12/31/2010 $6.58 $4.82 47,099
01/01/2011 to 12/31/2011 $4.82 $4.37 43,108
01/01/2012 to 12/31/2012 $4.37 $3.49 32,090
01/01/2013 to 12/31/2013 $3.49 $2.49 29,274
01/01/2014 to 12/31/2014 $2.49 $2.16 13,424
A-19
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------
ProFund VP Short NASDAQ-100
01/01/2005 to 12/31/2005 $5.99 $5.97 77,758
01/01/2006 to 12/31/2006 $5.97 $5.81 53,401
01/01/2007 to 12/31/2007 $5.81 $5.08 37,820
01/01/2008 to 12/31/2008 $5.08 $7.43 61,822
01/01/2009 to 12/31/2009 $7.43 $4.35 83,247
01/01/2010 to 12/31/2010 $4.35 $3.39 75,845
01/01/2011 to 12/31/2011 $3.39 $2.99 92,806
01/01/2012 to 12/31/2012 $2.99 $2.40 55,833
01/01/2013 to 12/31/2013 $2.40 $1.67 23,914
01/01/2014 to 12/31/2014 $1.67 $1.33 339
-------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
01/01/2005 to 12/31/2005 $9.55 $9.15 11,578
01/01/2006 to 12/31/2006 $9.15 $7.97 6,984
01/01/2007 to 12/31/2007 $7.97 $8.23 35,184
01/01/2008 to 12/31/2008 $8.23 $10.08 25,904
01/01/2009 to 12/31/2009 $10.08 $6.73 32,810
01/01/2010 to 12/31/2010 $6.73 $4.72 38,078
01/01/2011 to 12/31/2011 $4.72 $4.24 53,572
01/01/2012 to 12/31/2012 $4.24 $3.39 25,569
01/01/2013 to 12/31/2013 $3.39 $2.30 16,724
01/01/2014 to 12/31/2014 $2.30 $2.07 375
-------------------------------------------------------------------------------------
ProFund VP Small-Cap Growth
01/01/2005 to 12/31/2005 $12.11 $12.86 341,834
01/01/2006 to 12/31/2006 $12.86 $13.79 103,542
01/01/2007 to 12/31/2007 $13.79 $14.17 70,944
01/01/2008 to 12/31/2008 $14.17 $9.23 89,300
01/01/2009 to 12/31/2009 $9.23 $11.50 80,525
01/01/2010 to 12/31/2010 $11.50 $14.28 164,711
01/01/2011 to 12/31/2011 $14.28 $14.29 44,095
01/01/2012 to 12/31/2012 $14.29 $15.87 27,995
01/01/2013 to 12/31/2013 $15.87 $22.00 55,364
01/01/2014 to 12/31/2014 $22.00 $22.20 8,956
-------------------------------------------------------------------------------------
ProFund VP Small-Cap Value
01/01/2005 to 12/31/2005 $11.22 $11.52 53,564
01/01/2006 to 12/31/2006 $11.52 $13.36 181,265
01/01/2007 to 12/31/2007 $13.36 $12.24 56,109
01/01/2008 to 12/31/2008 $12.24 $8.38 63,921
01/01/2009 to 12/31/2009 $8.38 $9.96 41,964
01/01/2010 to 12/31/2010 $9.96 $12.01 57,571
01/01/2011 to 12/31/2011 $12.01 $11.37 67,448
01/01/2012 to 12/31/2012 $11.37 $13.05 34,099
01/01/2013 to 12/31/2013 $13.05 $17.74 40,932
01/01/2014 to 12/31/2014 $17.74 $18.53 6,476
-------------------------------------------------------------------------------------
ProFund VP Technology
01/01/2005 to 12/31/2005 $4.91 $4.91 109,697
01/01/2006 to 12/31/2006 $4.91 $5.24 74,232
01/01/2007 to 12/31/2007 $5.24 $5.92 199,048
01/01/2008 to 12/31/2008 $5.92 $3.25 78,353
01/01/2009 to 12/31/2009 $3.25 $5.19 138,365
01/01/2010 to 12/31/2010 $5.19 $5.67 108,312
01/01/2011 to 12/31/2011 $5.67 $5.53 131,824
01/01/2012 to 12/31/2012 $5.53 $6.02 43,220
01/01/2013 to 12/31/2013 $6.02 $7.44 29,687
01/01/2014 to 12/31/2014 $7.44 $8.68 24,076
A-20
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
ProFund VP Telecommunications
01/01/2005 to 12/31/2005 $5.04 $4.64 45,277
01/01/2006 to 12/31/2006 $4.64 $6.16 207,252
01/01/2007 to 12/31/2007 $6.16 $6.59 120,262
01/01/2008 to 12/31/2008 $6.59 $4.27 89,358
01/01/2009 to 12/31/2009 $4.27 $4.52 80,465
01/01/2010 to 12/31/2010 $4.52 $5.17 83,526
01/01/2011 to 12/31/2011 $5.17 $5.20 36,580
01/01/2012 to 12/31/2012 $5.20 $5.98 22,687
01/01/2013 to 12/31/2013 $5.98 $6.62 13,136
01/01/2014 to 12/31/2014 $6.62 $6.57 9,188
---------------------------------------------------------------------------------------
ProFund VP U.S. Government Plus
01/01/2005 to 12/31/2005 $11.91 $12.83 119,421
01/01/2006 to 12/31/2006 $12.83 $12.09 50,469
01/01/2007 to 12/31/2007 $12.09 $13.15 250,069
01/01/2008 to 12/31/2008 $13.15 $19.44 169,486
01/01/2009 to 12/31/2009 $19.44 $12.93 80,750
01/01/2010 to 12/31/2010 $12.93 $14.06 70,483
01/01/2011 to 12/31/2011 $14.06 $19.93 41,695
01/01/2012 to 12/31/2012 $19.93 $19.87 22,641
01/01/2013 to 12/31/2013 $19.87 $15.87 6,603
01/01/2014 to 12/31/2014 $15.87 $21.38 8,857
---------------------------------------------------------------------------------------
ProFund VP UltraBull
01/01/2005 to 12/31/2005 $8.25 $8.36 82,031
01/01/2006 to 12/31/2006 $8.36 $10.16 91,153
01/01/2007 to 12/31/2007 $10.16 $10.11 117,940
01/01/2008 to 12/31/2008 $10.11 $3.26 201,842
01/01/2009 to 12/31/2009 $3.26 $4.65 187,230
01/01/2010 to 12/31/2010 $4.65 $5.61 134,141
01/01/2011 to 12/31/2011 $5.61 $5.27 92,855
01/01/2012 to 12/31/2012 $5.27 $6.71 49,626
01/01/2013 to 12/31/2013 $6.71 $11.14 34,632
01/01/2014 to 12/31/2014 $11.14 $13.56 25,593
---------------------------------------------------------------------------------------
ProFund VP UltraMid-Cap
01/01/2005 to 12/31/2005 $12.13 $14.12 150,869
01/01/2006 to 12/31/2006 $14.12 $15.42 133,297
01/01/2007 to 12/31/2007 $15.42 $16.14 93,025
01/01/2008 to 12/31/2008 $16.14 $5.18 149,958
01/01/2009 to 12/31/2009 $5.18 $8.49 113,659
01/01/2010 to 12/31/2010 $8.49 $12.54 116,062
01/01/2011 to 12/31/2011 $12.54 $10.70 53,860
01/01/2012 to 12/31/2012 $10.70 $13.99 45,039
01/01/2013 to 12/31/2013 $13.99 $23.58 37,444
01/01/2014 to 12/31/2014 $23.58 $26.85 31,570
---------------------------------------------------------------------------------------
ProFund VP UltraNASDAQ-100
01/01/2005 to 12/31/2005 $0.87 $0.82 7,044,313
01/01/2006 to 12/31/2006 $0.82 $0.85 6,941,343
01/01/2007 to 12/31/2007 $0.85 $1.08 6,538,979
01/01/2008 to 12/31/2008 $1.08 $0.29 2,231,878
01/01/2009 to 12/31/2009 $0.29 $0.63 3,119,054
01/01/2010 to 12/31/2010 $0.63 $0.84 2,867,144
01/01/2011 to 12/31/2011 $0.84 $0.82 2,037,370
01/01/2012 to 12/31/2012 $0.82 $1.09 712,083
01/01/2013 to 12/31/2013 $1.09 $1.92 244,843
01/01/2014 to 12/31/2014 $1.92 $2.58 152,464
A-21
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------
ProFund VP UltraSmall-Cap
01/01/2005 to 12/31/2005 $12.28 $12.10 52,922
01/01/2006 to 12/31/2006 $12.10 $15.06 56,197
01/01/2007 to 12/31/2007 $15.06 $12.91 55,859
01/01/2008 to 12/31/2008 $12.91 $4.31 126,179
01/01/2009 to 12/31/2009 $4.31 $5.97 128,561
01/01/2010 to 12/31/2010 $5.97 $8.75 82,740
01/01/2011 to 12/31/2011 $8.75 $7.01 71,070
01/01/2012 to 12/31/2012 $7.01 $8.97 39,554
01/01/2013 to 12/31/2013 $8.97 $16.53 33,774
01/01/2014 to 12/31/2014 $16.53 $17.20 24,615
----------------------------------------------------------------------------------------------------
ProFund VP Utilities
01/01/2005 to 12/31/2005 $8.75 $9.77 213,814
01/01/2006 to 12/31/2006 $9.77 $11.51 237,712
01/01/2007 to 12/31/2007 $11.51 $13.16 338,965
01/01/2008 to 12/31/2008 $13.16 $9.00 105,879
01/01/2009 to 12/31/2009 $9.00 $9.85 95,836
01/01/2010 to 12/31/2010 $9.85 $10.30 65,508
01/01/2011 to 12/31/2011 $10.30 $11.96 79,104
01/01/2012 to 12/31/2012 $11.96 $11.82 38,438
01/01/2013 to 12/31/2013 $11.82 $13.23 35,829
01/01/2014 to 12/31/2014 $13.23 $16.44 21,724
----------------------------------------------------------------------------------------------------
Prudential SP International Growth Portfolio
01/01/2005 to 12/31/2005 $10.53 $12.10 32,119
01/01/2006 to 12/31/2006 $12.10 $14.47 100,114
01/01/2007 to 12/31/2007 $14.47 $17.08 109,207
01/01/2008 to 12/31/2008 $17.08 $8.38 53,085
01/01/2009 to 12/31/2009 $8.38 $11.35 39,038
01/01/2010 to 12/31/2010 $11.35 $12.78 37,153
01/01/2011 to 12/31/2011 $12.78 $10.74 22,812
01/01/2012 to 12/31/2012 $10.74 $12.98 15,184
01/01/2013 to 12/31/2013 $12.98 $15.24 17,838
01/01/2014 to 12/31/2014 $15.24 $14.19 9,703
----------------------------------------------------------------------------------------------------
S&P Target 24 Portfolio
01/01/2005 to 12/31/2005 $13.34 $13.72 46,537
01/01/2006 to 12/31/2006 $13.72 $13.94 45,207
01/01/2007 to 12/31/2007 $13.94 $14.35 57,244
01/01/2008 to 12/31/2008 $14.35 $10.21 32,217
01/01/2009 to 12/31/2009 $10.21 $11.47 38,613
01/01/2010 to 12/31/2010 $11.47 $13.51 20,090
01/01/2011 to 12/31/2011 $13.51 $14.49 15,815
01/01/2012 to 12/31/2012 $14.49 $15.66 15,930
01/01/2013 to 12/31/2013 $15.66 $21.98 21,990
01/01/2014 to 04/25/2014 $21.98 $21.72 0
----------------------------------------------------------------------------------------------------
Target Managed VIP Portfolio
01/01/2005 to 12/31/2005 $14.64 $15.50 732,183
01/01/2006 to 12/31/2006 $15.50 $17.07 751,781
01/01/2007 to 12/31/2007 $17.07 $18.45 676,438
01/01/2008 to 12/31/2008 $18.45 $10.05 229,477
01/01/2009 to 12/31/2009 $10.05 $11.22 142,533
01/01/2010 to 12/31/2010 $11.22 $13.20 110,909
01/01/2011 to 12/31/2011 $13.20 $12.81 88,019
01/01/2012 to 12/31/2012 $12.81 $14.30 83,048
01/01/2013 to 12/31/2013 $14.30 $19.18 47,324
01/01/2014 to 04/25/2014 $19.18 $19.08 0
A-22
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-----------------------------------------------------------------------------------------------------------------------------
The DOW DART 10 Portfolio
01/01/2005 to 12/31/2005 $12.35 $11.81 25,001
01/01/2006 to 12/31/2006 $11.81 $14.64 50,230
01/01/2007 to 12/31/2007 $14.64 $14.55 42,707
01/01/2008 to 12/31/2008 $14.55 $10.27 13,353
01/01/2009 to 12/31/2009 $10.27 $11.56 10,232
01/01/2010 to 12/31/2010 $11.56 $13.33 15,522
01/01/2011 to 12/31/2011 $13.33 $14.17 12,267
01/01/2012 to 12/31/2012 $14.17 $15.50 11,871
01/01/2013 to 12/31/2013 $15.50 $20.03 11,910
01/01/2014 to 04/25/2014 $20.03 $19.74 0
-----------------------------------------------------------------------------------------------------------------------------
The DOW Target Dividend Portfolio
05/02/2005* to 12/31/2005 $10.00 $9.79 290,983
01/01/2006 to 12/31/2006 $9.79 $11.42 415,893
01/01/2007 to 12/31/2007 $11.42 $11.40 397,672
01/01/2008 to 12/31/2008 $11.40 $6.69 263,193
01/01/2009 to 12/31/2009 $6.69 $7.54 233,259
01/01/2010 to 12/31/2010 $7.54 $8.68 192,557
01/01/2011 to 12/31/2011 $8.68 $9.08 156,556
01/01/2012 to 12/31/2012 $9.08 $9.47 120,219
01/01/2013 to 12/31/2013 $9.47 $11.99 102,535
01/01/2014 to 04/25/2014 $11.99 $12.41 0
-----------------------------------------------------------------------------------------------------------------------------
Value Line Target 25 Portfolio
01/01/2005 to 12/31/2005 $16.61 $19.64 130,528
01/01/2006 to 12/31/2006 $19.64 $19.95 178,140
01/01/2007 to 12/31/2007 $19.95 $23.28 204,229
01/01/2008 to 12/31/2008 $23.28 $10.39 181,230
01/01/2009 to 12/31/2009 $10.39 $10.99 158,950
01/01/2010 to 12/31/2010 $10.99 $14.15 124,480
01/01/2011 to 12/31/2011 $14.15 $10.53 101,101
01/01/2012 to 12/31/2012 $10.53 $12.61 71,786
01/01/2013 to 12/31/2013 $12.61 $16.37 49,260
01/01/2014 to 04/25/2014 $16.37 $17.50 0
-----------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Equity Income
01/01/2005 to 12/31/2005 $17.32 $18.02 23,574
01/01/2006 to 12/31/2006 $18.02 $21.10 23,739
01/01/2007 to 12/31/2007 $21.10 $21.42 20,467
01/01/2008 to 12/31/2008 $21.42 $13.44 55,757
01/01/2009 to 12/31/2009 $13.44 $15.51 30,734
01/01/2010 to 07/16/2010 $15.51 $14.93 0
-----------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT International Equity Portfolio Share Class 1
07/16/2010* to 12/31/2010 $12.28 $14.87 173,563
01/01/2011 to 12/31/2011 $14.87 $12.81 149,767
01/01/2012 to 12/31/2012 $12.81 $14.38 122,892
01/01/2013 to 12/31/2013 $14.38 $17.03 100,597
01/01/2014 to 12/31/2014 $17.03 $15.93 76,194
-----------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Intrinsic Value Portfolio Share Class 2
07/16/2010* to 12/31/2010 $14.93 $17.43 37,256
01/01/2011 to 12/31/2011 $17.43 $16.84 22,159
01/01/2012 to 12/31/2012 $16.84 $19.87 20,199
01/01/2013 to 12/31/2013 $19.87 $25.57 15,181
01/01/2014 to 12/31/2014 $25.57 $27.85 15,043
-----------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Omega Growth Portfolio Share Class 1
07/16/2010* to 12/31/2010 $11.08 $14.00 129,477
01/01/2011 to 12/31/2011 $14.00 $13.08 90,859
01/01/2012 to 12/31/2012 $13.08 $15.60 50,798
01/01/2013 to 12/31/2013 $15.60 $21.60 38,150
01/01/2014 to 12/31/2014 $21.60 $22.20 22,509
A-23
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------------------------
Wells Fargo Advantage VT Small Cap Growth Portfolio Share Class 1
07/16/2010* to 12/31/2010 $9.59 $12.27 116,451
01/01/2011 to 12/31/2011 $12.27 $11.59 69,975
01/01/2012 to 12/31/2012 $11.59 $12.38 43,174
01/01/2013 to 12/31/2013 $12.38 $18.40 36,856
01/01/2014 to 12/31/2014 $18.40 $17.87 29,817
* Denotes the start date of these sub-accounts
ASAP III
Prudential Annuities Life Assurance Corporation
Prospectus
ACCUMULATION UNIT VALUES: With HD GRO 60 bps and Combo 5%/HAV 80 bps OR GRO
Plus 2008 60 bps and Combo 5%/HAV 80 bps (2.65%)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------------
ACCESS VP High Yield Fund
05/01/2009 to 12/31/2009 $9.85 $12.11 0
01/01/2010 to 12/31/2010 $12.11 $13.72 0
01/01/2011 to 12/31/2011 $13.72 $13.72 0
01/01/2012 to 12/31/2012 $13.72 $15.24 0
01/01/2013 to 12/31/2013 $15.24 $16.32 0
01/01/2014 to 12/31/2014 $16.32 $16.26 0
----------------------------------------------------------------------------------------------------------
AST Academic Strategies Asset Allocation Portfolio
05/01/2009 to 12/31/2009 $7.66 $9.30 159,301
01/01/2010 to 12/31/2010 $9.30 $10.14 212,391
01/01/2011 to 12/31/2011 $10.14 $9.61 105,066
01/01/2012 to 12/31/2012 $9.61 $10.53 134,457
01/01/2013 to 12/31/2013 $10.53 $11.27 66,527
01/01/2014 to 12/31/2014 $11.27 $11.39 69,109
----------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
05/01/2009 to 12/31/2009 $7.68 $9.46 108,658
01/01/2010 to 12/31/2010 $9.46 $10.47 131,942
01/01/2011 to 12/31/2011 $10.47 $10.21 48,552
01/01/2012 to 12/31/2012 $10.21 $11.29 57,706
01/01/2013 to 12/31/2013 $11.29 $12.82 25,222
01/01/2014 to 12/31/2014 $12.82 $13.24 28,188
----------------------------------------------------------------------------------------------------------
AST American Century Income & Growth Portfolio
05/01/2009 to 12/31/2009 $6.70 $8.26 53,149
01/01/2010 to 12/31/2010 $8.26 $9.15 55,133
01/01/2011 to 12/31/2011 $9.15 $9.23 13,061
01/01/2012 to 05/04/2012 $9.23 $9.99 0
----------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
05/01/2009 to 12/31/2009 $7.97 $9.54 676,115
01/01/2010 to 12/31/2010 $9.54 $10.43 803,521
01/01/2011 to 12/31/2011 $10.43 $10.03 368,297
01/01/2012 to 12/31/2012 $10.03 $10.98 447,452
01/01/2013 to 12/31/2013 $10.98 $12.58 326,622
01/01/2014 to 12/31/2014 $12.58 $13.04 360,939
----------------------------------------------------------------------------------------------------------
AST BlackRock Global Strategies Portfolio
05/02/2011* to 12/31/2011 $10.00 $9.10 6,280
01/01/2012 to 12/31/2012 $9.10 $9.92 23,922
01/01/2013 to 12/31/2013 $9.92 $10.70 18,253
01/01/2014 to 12/31/2014 $10.70 $10.93 8,630
A-24
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------
AST BlackRock iShares ETF Portfolio
04/29/2013* to 12/31/2013 $10.00 $10.43 0
01/01/2014 to 12/31/2014 $10.43 $10.51 387
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2015
05/01/2009 to 12/31/2009 $9.96 $9.95 0
01/01/2010 to 12/31/2010 $9.95 $10.59 0
01/01/2011 to 12/31/2011 $10.59 $10.97 0
01/01/2012 to 12/31/2012 $10.97 $11.01 0
01/01/2013 to 12/31/2013 $11.01 $10.68 0
01/01/2014 to 12/31/2014 $10.68 $10.38 0
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2016
05/01/2009 to 12/31/2009 $9.94 $9.57 5,603
01/01/2010 to 12/31/2010 $9.57 $10.30 156,943
01/01/2011 to 12/31/2011 $10.30 $11.00 575,620
01/01/2012 to 12/31/2012 $11.00 $11.15 307,580
01/01/2013 to 12/31/2013 $11.15 $10.78 65,976
01/01/2014 to 12/31/2014 $10.78 $10.54 48,868
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2017
01/04/2010* to 12/31/2010 $10.00 $10.67 310,356
01/01/2011 to 12/31/2011 $10.67 $11.57 645,073
01/01/2012 to 12/31/2012 $11.57 $11.84 401,438
01/01/2013 to 12/31/2013 $11.84 $11.29 152,935
01/01/2014 to 12/31/2014 $11.29 $11.15 98,153
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2018
05/01/2009 to 12/31/2009 $9.92 $9.64 0
01/01/2010 to 12/31/2010 $9.64 $10.43 0
01/01/2011 to 12/31/2011 $10.43 $11.53 794,107
01/01/2012 to 12/31/2012 $11.53 $11.87 526,285
01/01/2013 to 12/31/2013 $11.87 $11.19 279,656
01/01/2014 to 12/31/2014 $11.19 $11.18 103,650
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2019
05/01/2009 to 12/31/2009 $9.91 $9.54 0
01/01/2010 to 12/31/2010 $9.54 $10.34 6,929
01/01/2011 to 12/31/2011 $10.34 $11.67 0
01/01/2012 to 12/31/2012 $11.67 $12.03 305,082
01/01/2013 to 12/31/2013 $12.03 $11.15 288,796
01/01/2014 to 12/31/2014 $11.15 $11.31 135,552
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2020
05/01/2009 to 12/31/2009 $9.88 $9.21 0
01/01/2010 to 12/31/2010 $9.21 $10.03 100,282
01/01/2011 to 12/31/2011 $10.03 $11.59 8,944
01/01/2012 to 12/31/2012 $11.59 $12.00 7,256
01/01/2013 to 12/31/2013 $12.00 $10.92 685,862
01/01/2014 to 12/31/2014 $10.92 $11.28 352,471
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2021
01/04/2010* to 12/31/2010 $10.00 $10.91 64,449
01/01/2011 to 12/31/2011 $10.91 $12.78 706,219
01/01/2012 to 12/31/2012 $12.78 $13.29 323,557
01/01/2013 to 12/31/2013 $13.29 $12.03 15,261
01/01/2014 to 12/31/2014 $12.03 $12.61 444,243
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2022
01/03/2011* to 12/31/2011 $10.00 $11.92 329,141
01/01/2012 to 12/31/2012 $11.92 $12.28 414,448
01/01/2013 to 12/31/2013 $12.28 $10.79 45,625
01/01/2014 to 12/31/2014 $10.79 $11.59 42,773
-------------------------------------------------------------------------------------------
AST Bond Portfolio 2023
01/03/2012* to 12/31/2012 $10.00 $10.31 155,312
01/01/2013 to 12/31/2013 $10.31 $9.01 1,001,752
01/01/2014 to 12/31/2014 $9.01 $9.88 492,219
A-25
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------------
AST Bond Portfolio 2024
01/02/2013* to 12/31/2013 $10.00 $8.67 405,665
01/01/2014 to 12/31/2014 $8.67 $9.68 251,870
------------------------------------------------------------------------------------------------------------------
AST Bond Portfolio 2025
01/02/2014* to 12/31/2014 $10.00 $11.21 52,018
------------------------------------------------------------------------------------------------------------------
AST Boston Partners Large-Cap Value Portfolio
formerly, AST Jennison Large-Cap Value Portfolio
11/16/2009* to 12/31/2009 $10.14 $10.29 0
01/01/2010 to 12/31/2010 $10.29 $11.39 6,807
01/01/2011 to 12/31/2011 $11.39 $10.44 549
01/01/2012 to 12/31/2012 $10.44 $11.50 554
01/01/2013 to 12/31/2013 $11.50 $14.72 11
01/01/2014 to 12/31/2014 $14.72 $15.80 69
------------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
05/01/2009 to 12/31/2009 $7.48 $9.13 708,219
01/01/2010 to 12/31/2010 $9.13 $10.08 749,579
01/01/2011 to 12/31/2011 $10.08 $9.58 281,330
01/01/2012 to 12/31/2012 $9.58 $10.60 358,749
01/01/2013 to 12/31/2013 $10.60 $12.66 307,488
01/01/2014 to 12/31/2014 $12.66 $13.19 309,371
------------------------------------------------------------------------------------------------------------------
AST ClearBridge Dividend Growth Portfolio
02/25/2013* to 12/31/2013 $10.00 $11.56 0
01/01/2014 to 12/31/2014 $11.56 $12.79 109
------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Realty Portfolio
05/01/2009 to 12/31/2009 $6.68 $10.04 39,209
01/01/2010 to 12/31/2010 $10.04 $12.58 51,647
01/01/2011 to 12/31/2011 $12.58 $13.05 12,690
01/01/2012 to 12/31/2012 $13.05 $14.65 15,675
01/01/2013 to 12/31/2013 $14.65 $14.71 10,375
01/01/2014 to 12/31/2014 $14.71 $18.75 11,401
------------------------------------------------------------------------------------------------------------------
AST Defensive Asset Allocation Portfolio
04/29/2013* to 12/31/2013 $10.00 $9.62 0
01/01/2014 to 12/31/2014 $9.62 $9.85 0
------------------------------------------------------------------------------------------------------------------
AST FI Pyramis Quantitative Portfolio
formerly, AST First Trust Balanced Target Portfolio
05/01/2009 to 12/31/2009 $6.97 $8.53 137,785
01/01/2010 to 12/31/2010 $8.53 $9.49 188,595
01/01/2011 to 12/31/2011 $9.49 $9.10 91,985
01/01/2012 to 12/31/2012 $9.10 $9.80 102,678
01/01/2013 to 12/31/2013 $9.80 $10.95 41,823
01/01/2014 to 12/31/2014 $10.95 $11.00 53,089
------------------------------------------------------------------------------------------------------------------
AST FI Pyramis(R) Asset Allocation Portfolio
05/01/2009 to 12/31/2009 $7.02 $8.35 30,995
01/01/2010 to 12/31/2010 $8.35 $9.22 58,869
01/01/2011 to 12/31/2011 $9.22 $8.75 19,800
01/01/2012 to 12/31/2012 $8.75 $9.68 22,329
01/01/2013 to 12/31/2013 $9.68 $11.23 25,652
01/01/2014 to 12/31/2014 $11.23 $11.56 24,522
------------------------------------------------------------------------------------------------------------------
AST Franklin Templeton Founding Funds Allocation Portfolio
04/30/2012* to 12/31/2012 $10.00 $10.67 120,659
01/01/2013 to 12/31/2013 $10.67 $12.93 69,377
01/01/2014 to 12/31/2014 $12.93 $12.99 73,181
------------------------------------------------------------------------------------------------------------------
AST Franklin Templeton Founding Funds Plus Portfolio
04/29/2013* to 12/31/2013 $10.00 $10.74 0
01/01/2014 to 12/31/2014 $10.74 $10.72 994
A-26
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------
AST Global Real Estate Portfolio
05/01/2009 to 12/31/2009 $5.68 $8.00 45,530
01/01/2010 to 12/31/2010 $8.00 $9.37 52,578
01/01/2011 to 12/31/2011 $9.37 $8.66 13,704
01/01/2012 to 12/31/2012 $8.66 $10.69 16,463
01/01/2013 to 12/31/2013 $10.69 $10.86 8,942
01/01/2014 to 12/31/2014 $10.86 $12.04 10,387
-------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth Portfolio
05/01/2009 to 12/31/2009 $8.42 $10.72 11,362
01/01/2010 to 12/31/2010 $10.72 $11.51 26,337
01/01/2011 to 12/31/2011 $11.51 $10.76 8,661
01/01/2012 to 12/31/2012 $10.76 $12.55 9,618
01/01/2013 to 12/31/2013 $12.55 $15.85 6,547
01/01/2014 to 02/07/2014 $15.85 $15.57 0
-------------------------------------------------------------------------------------------------------
AST Goldman Sachs Large-Cap Value Portfolio
05/01/2009 to 12/31/2009 $6.64 $7.97 6,997
01/01/2010 to 12/31/2010 $7.97 $8.76 13,269
01/01/2011 to 12/31/2011 $8.76 $8.05 4,169
01/01/2012 to 12/31/2012 $8.05 $9.38 4,513
01/01/2013 to 12/31/2013 $9.38 $12.20 2,530
01/01/2014 to 12/31/2014 $12.20 $13.43 6,298
-------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth Portfolio
05/01/2009 to 12/31/2009 $8.32 $11.11 17,908
01/01/2010 to 12/31/2010 $11.11 $12.96 39,965
01/01/2011 to 12/31/2011 $12.96 $12.25 10,818
01/01/2012 to 12/31/2012 $12.25 $14.26 13,842
01/01/2013 to 12/31/2013 $14.26 $18.35 17,574
01/01/2014 to 12/31/2014 $18.35 $19.92 17,554
-------------------------------------------------------------------------------------------------------
AST Goldman Sachs Multi-Asset Portfolio
05/01/2009 to 12/31/2009 $7.64 $9.00 91,733
01/01/2010 to 12/31/2010 $9.00 $9.78 111,962
01/01/2011 to 12/31/2011 $9.78 $9.47 37,760
01/01/2012 to 12/31/2012 $9.47 $10.16 41,636
01/01/2013 to 12/31/2013 $10.16 $10.86 29,512
01/01/2014 to 12/31/2014 $10.86 $11.00 19,617
-------------------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value Portfolio
05/01/2009 to 12/31/2009 $7.62 $9.73 7,376
01/01/2010 to 12/31/2010 $9.73 $12.01 32,918
01/01/2011 to 12/31/2011 $12.01 $11.84 10,130
01/01/2012 to 12/31/2012 $11.84 $13.34 12,406
01/01/2013 to 12/31/2013 $13.34 $18.03 9,636
01/01/2014 to 12/31/2014 $18.03 $18.81 8,718
-------------------------------------------------------------------------------------------------------
AST Herndon Large-Cap Value Portfolio
05/01/2009 to 12/31/2009 $6.93 $8.71 23,375
01/01/2010 to 12/31/2010 $8.71 $9.54 49,989
01/01/2011 to 12/31/2011 $9.54 $9.24 18,206
01/01/2012 to 12/31/2012 $9.24 $10.20 15,220
01/01/2013 to 12/31/2013 $10.20 $13.37 1,249
01/01/2014 to 12/31/2014 $13.37 $13.22 881
-------------------------------------------------------------------------------------------------------
AST High Yield Portfolio
05/01/2009 to 12/31/2009 $8.05 $10.02 34,468
01/01/2010 to 12/31/2010 $10.02 $11.07 56,851
01/01/2011 to 12/31/2011 $11.07 $11.12 18,231
01/01/2012 to 12/31/2012 $11.12 $12.33 31,773
01/01/2013 to 12/31/2013 $12.33 $12.86 11,852
01/01/2014 to 12/31/2014 $12.86 $12.84 18,616
A-27
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------------
AST International Growth Portfolio
05/01/2009 to 12/31/2009 $7.48 $9.75 27,547
01/01/2010 to 12/31/2010 $9.75 $10.86 42,682
01/01/2011 to 12/31/2011 $10.86 $9.21 14,523
01/01/2012 to 12/31/2012 $9.21 $10.79 13,807
01/01/2013 to 12/31/2013 $10.79 $12.51 28,143
01/01/2014 to 12/31/2014 $12.51 $11.50 24,466
---------------------------------------------------------------------------------------------------------
AST International Value Portfolio
05/01/2009 to 12/31/2009 $8.11 $10.46 44,606
01/01/2010 to 12/31/2010 $10.46 $11.31 49,149
01/01/2011 to 12/31/2011 $11.31 $9.63 11,615
01/01/2012 to 12/31/2012 $9.63 $10.94 25,404
01/01/2013 to 12/31/2013 $10.94 $12.72 12,457
01/01/2014 to 12/31/2014 $12.72 $11.56 6,767
---------------------------------------------------------------------------------------------------------
AST J.P. Morgan Global Thematic Portfolio
05/01/2009 to 12/31/2009 $6.97 $8.47 147,100
01/01/2010 to 12/31/2010 $8.47 $9.38 204,130
01/01/2011 to 12/31/2011 $9.38 $9.08 79,044
01/01/2012 to 12/31/2012 $9.08 $10.04 86,248
01/01/2013 to 12/31/2013 $10.04 $11.36 52,088
01/01/2014 to 12/31/2014 $11.36 $11.77 71,138
---------------------------------------------------------------------------------------------------------
AST J.P. Morgan International Equity Portfolio
05/01/2009 to 12/31/2009 $7.60 $10.15 9,545
01/01/2010 to 12/31/2010 $10.15 $10.59 37,715
01/01/2011 to 12/31/2011 $10.59 $9.37 12,895
01/01/2012 to 12/31/2012 $9.37 $11.12 15,160
01/01/2013 to 12/31/2013 $11.12 $12.49 9,996
01/01/2014 to 12/31/2014 $12.49 $11.38 11,150
---------------------------------------------------------------------------------------------------------
AST J.P. Morgan Strategic Opportunities Portfolio
05/01/2009 to 12/31/2009 $9.35 $10.77 81,132
01/01/2010 to 12/31/2010 $10.77 $11.26 55,706
01/01/2011 to 12/31/2011 $11.26 $10.99 32,627
01/01/2012 to 12/31/2012 $10.99 $11.84 45,485
01/01/2013 to 12/31/2013 $11.84 $12.80 26,599
01/01/2014 to 12/31/2014 $12.80 $13.14 28,919
---------------------------------------------------------------------------------------------------------
AST Jennison Large-Cap Growth Portfolio
11/16/2009* to 12/31/2009 $10.08 $10.28 0
01/01/2010 to 12/31/2010 $10.28 $11.14 5,980
01/01/2011 to 12/31/2011 $11.14 $10.91 1,722
01/01/2012 to 12/31/2012 $10.91 $12.24 2,198
01/01/2013 to 12/31/2013 $12.24 $16.26 777
01/01/2014 to 12/31/2014 $16.26 $17.33 3,190
---------------------------------------------------------------------------------------------------------
AST Large-Cap Value Portfolio
05/01/2009 to 12/31/2009 $5.99 $7.55 12,659
01/01/2010 to 12/31/2010 $7.55 $8.32 4,760
01/01/2011 to 12/31/2011 $8.32 $7.76 3,241
01/01/2012 to 12/31/2012 $7.76 $8.83 12,829
01/01/2013 to 12/31/2013 $8.83 $12.02 34,651
01/01/2014 to 12/31/2014 $12.02 $13.31 26,370
---------------------------------------------------------------------------------------------------------
AST Loomis Sayles Large-Cap Growth Portfolio
05/01/2009 to 12/31/2009 $6.91 $8.75 37,494
01/01/2010 to 12/31/2010 $8.75 $10.20 63,578
01/01/2011 to 12/31/2011 $10.20 $9.84 22,561
01/01/2012 to 12/31/2012 $9.84 $10.76 21,520
01/01/2013 to 12/31/2013 $10.76 $14.30 4,048
01/01/2014 to 12/31/2014 $14.30 $15.40 11,540
A-28
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period