AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 2009
REGISTRATION NO. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
(Exact Name of Registrant)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
06-1241288
(I.R.S. Employer Identification Number)
C/O PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE
SHELTON, CT 06484
(203) 926-1888
(Address and telephone number of principal executive offices)
JOSEPH D. EMANUEL, CHIEF LEGAL OFFICER
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE
SHELTON, CT 06484
(203) 944-7504
(Name, address and telephone number of agent for service)
Copies to:
CHRISTOPHER SPRAGUE
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NJ 07102-2992
(973) 802-6997
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box:. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a registration statement pursuant to General Instruction I.D.
or a post-effective amendment thereto that shall become effective upon filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [_]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [_]
Indicate by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [X] Smaller reporting company [_]
Calculation of Registration fee
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Proposed Proposed
Title of each class of Amount maximum maximum
securities to be to be offering price aggregate Amount of
registered registered* per unit* offering price registration fee**
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Market-value adjustment
annuity contracts (or
modified guaranteed
annuity contracts) $50,000,000 $2,790
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* Securities are not issued in predetermined units
** In this filing, Prudential Annuities Life Assurance Corporation is
registering $50,000,000 ($50 million) of Securities and paying a fee of
$2,790 therefor.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission may determine.
This filing is being made under the Securities Act of 1933 to register an
additional $50,000,000 ($50 million) of interests in market value-adjusted
annuity contracts. As permitted by rule 457(o) under the Securities Act of 1933
the filing fee set forth above was calculated based on the maximum aggregate
offering price of $50,000,000 ($50 million). The market value adjusted
securities are sold according to dollar value, and are not denominated in
either shares or units. Finally, to the extent any of Registrant's securities
from the April 11, 1997 filing, Form S-3 registration number 333-24989, remain
unsold, Registrant intends to add those unsold securities to the $50,000,000
($50 million) of securities being registered herewith (thus, Registrant has not
reduced the filing fee paid herewith on account of the filing fee associated
with securities that remain unsold from the prior offering).
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CHOICE
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
A Prudential Financial Company
One Corporate Drive, Shelton, Connecticut 06484
ADVANCED SERIES
ADVISORS CHOICE(R) 2000
(marketed by some firms as "Advisors Select 2000")
Flexible Premium Deferred Annuity
PROSPECTUS: MAY 1, 2008
This Prospectus describes Advisors Choice(R) 2000, a flexible premium deferred
annuity (the "Annuity") offered by Prudential Annuities Life Assurance
Corporation ("Prudential Annuities", "we", "our" or "us"). The Annuity may be
offered as an individual annuity contract or as an interest in a group
annuity. This Prospectus describes the important features of the Annuity and
what you should consider before purchasing the Annuity. The Annuity or certain
of its investment options and/or features may not be available in all states.
Various rights, benefits and certain fees may differ among states to meet
applicable laws and/or regulations. For more information about these
variations, consult the terms of your particular Annuity. For some of the
variations specific to Annuities approved for sale by the New York State
Insurance Department, see Appendix I. 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.
Prudential Annuities offers several different annuities which your Financial
Professional may be authorized to offer to you. Each Annuity has different
features and benefits that may be appropriate for you based on your financial
situation, your age and how you intend to use the annuity. Firms through which
the Annuity is sold may decline to make available to their customers certain
of the optional features and investment options offered generally under the
Annuity. The different features and benefits include variations in death
benefit protection and the ability to access your Annuity's Account Value and
the charges that you will be subject to if you choose to surrender the
annuity, make withdrawals, or transfer all or a portion of Account Value among
available investment options. The fees and charges you pay and compensation
paid to your Financial Professional may also be different between each
annuity. Differences in compensation among different annuity products could
influence a Financial Professional's decision as to which annuity to recommend
to you.
THE SUB-ACCOUNTS
Each Sub-account of Prudential Annuities Life Assurance Corporation Variable
Account B, invests in an underlying mutual fund portfolio. Currently,
portfolios of the following underlying mutual funds are being offered: INVESCO
AIM Advisors, Inc., Advanced Series Trust, Evergreen Variable Annuity Trust,
First Defined Portfolio Fund LLC, Nationwide Variable Insurance Trust, ProFund
VP, The Prudential Series Fund, Rydex Variable Trust, Franklin Templeton
Variable Insurance Products Trust and Wells Fargo Variable Trust. See the
following page for a complete list of Sub-accounts.
PLEASE READ THIS PROSPECTUS
Please read this prospectus and the current prospectus for the underlying
mutual funds. Keep them for future reference. If you are purchasing the
Annuity as a replacement for existing variable annuity or variable life
coverage, you should consider any surrender or penalty charges you may incur
when replacing your existing coverage.
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.
This annuity is NOT a deposit or obligation of, or issued, guaranteed or
endorsed by, any bank, is 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 this annuity involves investment risks,
including possible loss of value, even with respect to amounts allocated to
the AST Money Market sub-account.
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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 ADVISORS CHOICE(R) 2000 IS A SERVICE MARK OR REGISTERED
TRADEMARK OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND IS USED UNDER
LICENSE BY ITS AFFILIATES.
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FOR FURTHER INFORMATION CALL: 1-800-752-6342
Prospectus Dated: Statement of Additional
May 1, 2008 Information Dated:
CH2PROS May 1, 2008 CHOICE2000
PLEASE SEE OUR PRIVACY POLICY AND OUR IRA, ROTH IRA AND FINANCIAL DISCLOSURE
STATEMENTS ATTACHED TO THE BACK COVER OF THIS PROSPECTUS.
INVESTMENT OPTIONS
Advanced Series Trust
AST Advanced Strategies
AST Aggressive Asset Allocation
AST AllianceBernstein Core Value
AST AllianceBernstein Growth & Income
AST American Century Income & Growth
AST American Century Strategic Allocation
AST Balanced Asset Allocation
AST Bond Portfolio 2015
AST Bond Portfolio 2018
AST Bond Portfolio 2019
AST Capital Growth Asset Allocation
AST Cohen & Steers Realty
AST Conservative Asset Allocation
AST CLS Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST DeAM Large-Cap Value
AST DeAM Small-Cap Value
AST Federated Aggressive Growth
AST First Trust Balanced Target
AST First Trust Capital Appreciation Target
AST Goldman Sachs Concentrated Growth
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset Allocation
AST Horizon Moderate Asset Allocation
AST International Growth
AST International Value
AST Investment Grade Bond
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond Debenture
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman Mid-Cap Value
AST Neuberger Berman Small-Cap Growth
AST Nieman Capital Growth Asset Allocation
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST QMA US Equity Alpha
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural Resources
AST UBS Dynamic Alpha Strategy
AST Western Asset Core Plus Bond
INVESCO AIM Variable Insurance Funds
AIM V.I. Dynamics Fund -- Series I shares
AIM V.I. Financial Services Fund -- Series I shares
AIM V.I. Global Health Care Fund -- Series I shares
AIM V.I. Technology Fund -- Series I shares
Evergreen Variable Annuity Trust
Growth
International Equity
Omega
First Defined Portfolio Fund, LLC
First Trust Target Focus Four
Global Dividend Target 15
NASDAQ(R) Target 15
S&P(R) Target 24
Target Managed VIP
The Dow(R) Target Dividend
The Dow(R) DART 10
Value Line(R) Target 25
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton VIP Founding Funds Allocation Fund
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets Fund
ProFund VP
Access VP High Yield
Asia 30
Banks
Basic Materials
Bear
Biotechnology
Bull
Consumer Goods
Consumer Services
Europe 30
Financials
Health Care
Industrials
Internet
Japan
Large-Cap Growth
Large-Cap Value
Mid-Cap Growth
Mid-Cap Value
Oil & Gas
NASDAQ-100
Pharmaceuticals
Precious Metals
Real Estate
Rising Rates Opportunity
Semiconductor
Short Mid-Cap
Short NASDAQ-100
Short Small-Cap
Small-Cap Growth
Small-Cap Value
Technology
Telecommunications
U.S. Government Plus
UltraBull
UltraMid-Cap
UltraNASDAQ-100
UltraSmall-Cap
Utilities
Rydex Variable Trust
Nova
NASDAQ-100(R)
Inverse S&P 500 Strategy
The Prudential Series Fund
SP International Growth
Wells Fargo Variable Trust
Wells Fargo Advantage VT Equity Income
Wells Fargo Advantage VT C&B Large Cap Value
CONTENTS
INTRODUCTION.............................................................................. 1
WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY?............................................. 1
WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY?....................................... 1
HOW DO I PURCHASE THIS ANNUITY?.......................................................... 2
GLOSSARY OF TERMS......................................................................... 3
SUMMARY OF CONTRACT FEES AND CHARGES...................................................... 6
EXPENSE EXAMPLES.......................................................................... 12
INVESTMENT OPTIONS........................................................................ 13
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?....................... 13
WHAT ARE THE FIXED ALLOCATIONS?.......................................................... 33
FEES AND CHARGES.......................................................................... 34
WHAT ARE THE CONTRACT FEES AND CHARGES?.................................................. 34
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?............................................. 35
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?................................ 35
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES................................................ 35
PURCHASING YOUR ANNUITY................................................................... 36
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?.................................... 36
MANAGING YOUR ANNUITY..................................................................... 37
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?.......................... 37
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?............................................. 37
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?................................................. 38
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?............................. 38
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?......................... 38
MANAGING YOUR ACCOUNT VALUE............................................................... 39
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?............................................. 39
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?............... 39
DO YOU OFFER DOLLAR COST AVERAGING?...................................................... 40
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?......................................... 41
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?............................................. 41
WHAT IS THE BALANCED INVESTMENT PROGRAM?................................................. 41
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS?..... 42
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?.................. 42
HOW DO THE FIXED ALLOCATIONS WORK?....................................................... 42
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?........................................ 43
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?............................................... 43
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?........................................... 44
ACCESS TO ACCOUNT VALUE................................................................... 45
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?......................................... 45
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?............................................ 45
CAN I WITHDRAW A PORTION OF MY ANNUITY?.................................................. 45
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?......... 45
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE?. 45
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?.............. 46
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?................................................ 46
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?............................................. 46
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?..................................... 47
HOW ARE ANNUITY PAYMENTS CALCULATED?..................................................... 47
LIVING BENEFIT PROGRAMS................................................................... 49
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY
ARE ALIVE?............................................................................. 49
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)......................................... 50
(iii)
GUARANTEED RETURN OPTION (GRO)................................................................ 54
GUARANTEED RETURN OPTION PLUS 2008 (GRO PLUS 2008)............................................ 56
HIGHEST DAILY GUARANTEED RETURN OPTION (HD GRO)............................................... 59
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB).................................................. 62
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)...................................................... 66
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE).................................................. 70
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT (SPOUSAL LIFETIME FIVE).............................. 75
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE).................. 79
HIGHEST DAILY LIFETIME SEVEN INCOME SEVEN (HIGHEST DAILY LIFETIME SEVEN)
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (SPOUSAL HIGHEST DAILY LIFETIME SEVEN).... 85
DEATH BENEFIT................................................................................... 99
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?................................................. 99
BASIC DEATH BENEFIT........................................................................... 99
OPTIONAL DEATH BENEFITS....................................................................... 99
PAYMENT OF DEATH BENEFITS..................................................................... 103
VALUING YOUR INVESTMENT......................................................................... 106
HOW IS MY ACCOUNT VALUE DETERMINED?........................................................... 106
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?.................................................... 106
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?................................................... 106
HOW DO YOU VALUE FIXED ALLOCATIONS?........................................................... 106
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?................................................... 106
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?................. 107
TAX CONSIDERATIONS.............................................................................. 108
GENERAL INFORMATION............................................................................. 116
HOW WILL I RECEIVE STATEMENTS AND REPORTS?.................................................... 116
WHO IS PRUDENTIAL ANNUITIES?.................................................................. 116
WHAT ARE SEPARATE ACCOUNTS?................................................................... 117
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?.......................................... 118
WHO DISTRIBUTES ANNUITIES OFFERED BY PRUDENTIAL ANNUITIES?.................................... 119
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................... 121
FINANCIAL STATEMENTS.......................................................................... 121
HOW TO CONTACT US............................................................................. 122
INDEMNIFICATION............................................................................... 122
LEGAL PROCEEDINGS............................................................................. 122
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........................................... 123
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B........................... A-1
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS............................................. B-1
APPENDIX C-1 - ADVISOR'S CHOICE PRIOR CONTRACT.................................................. C-1
APPENDIX C-2 - ADVISOR'S DESIGN PRIOR CONTRACT.................................................. C-1
APPENDIX D - PERFORMANCE ADVANTAGE.............................................................. D-1
APPENDIX E - PLUS40/TM/ OPTIONAL LIFE INSURANCE RIDER........................................... E-1
APPENDIX F - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL DEATH BENEFITS.......... F-1
APPENDIX G - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS................................ G-1
APPENDIX H - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT............ H-1
APPENDIX I - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE DEPARTMENT............. I-1
APPENDIX J - ASSET TRANSFER FORMULA UNDER GRO PLUS 2008 AND HIGHEST DAILY GRO................... J-1
APPENDIX K - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN AND SPOUSAL HIGHEST
DAILY LIFETIME SEVEN.......................................................................... K-1
(iv)
INTRODUCTION
WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY?
This Annuity is frequently used for retirement planning because it allows you
to accumulate retirement savings and also offers annuity payment options when
you are ready to begin receiving income. The Annuity also offers a choice of
different optional benefits, for an additional charge, that can provide
principal protection or guaranteed minimum income protection for Owners while
they are alive and one or more Death Benefits that can protect your retirement
savings if you die during a period of declining markets. It may be used as an
investment vehicle for "qualified" investments, including an IRA, SEP-IRA,
Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution
plans such as 401(k), profit sharing and money purchase plans) or Tax
Sheltered annuities (or 403(b)). It may also be used as an investment vehicle
for "non-qualified" investments. The Annuity allows you to invest your money
in a number of Sub-accounts as well as in one or more Fixed Allocations.
When an Annuity is purchased as a "non-qualified" investment, you generally
are not taxed on any investment gains the Annuity earns until you make a
withdrawal or begin to receive annuity payments. This feature, referred to as
"tax-deferral", can be beneficial to the growth of your Account Value because
money that would otherwise be needed to pay taxes on investment gains each
year remains invested and can earn additional money. However, because the
Annuity is designed for long-term retirement savings, a 10% penalty tax may be
applied on withdrawals you make before you reach age 59 1/2. Annuities
purchased as a non-qualified investment are not subject to the maximum
contribution limits that may apply to a qualified investment, and are not
subject to required minimum distributions after age 70 1/2.
When an Annuity is purchased as a "qualified" investment, you should consider
that the Annuity does not provide any tax advantages in addition to the
preferential treatment already available through your retirement plan under
the Internal Revenue Code. In other words, you need not invest in an Annuity
to gain the preferential tax treatment provided by your retirement plan. An
Annuity, however, may offer features and benefits in addition to providing tax
deferral that other investment vehicles may not offer, including Death Benefit
protection for your beneficiaries, lifetime income options, and the ability to
make transfers between numerous variable investment options offered under the
Annuity. You should consult with your Financial Professional as to whether the
overall benefits and costs of the Annuity are appropriate considering your
overall financial plan.
WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY?
.. This Annuity is a "flexible premium deferred annuity." It is called
"flexible premium" because you have considerable flexibility in the timing
and amount of Purchase Payments. Generally, investors "defer" receiving
annuity payments until after an accumulation period (as described later in
this prospectus).
.. This Annuity offers both Sub-accounts and Fixed Allocations. If you
allocate your Account Value to Sub-accounts, the value of your Annuity will
vary daily to reflect the investment performance of the underlying
investment options. Fixed Allocations of different durations are offered
that are guaranteed by us, but may have a Market Value Adjustment if you
withdraw or transfer your Account Value before the Maturity Date.
.. The Annuity features two distinct periods - the accumulation period and the
payout period. During the accumulation period your Account Value is
allocated to one or more investment options.
.. During the payout period, commonly called "annuitization," you can elect to
receive annuity payments (1) for life; (2) for life with a guaranteed
minimum number of payments; (3) based on joint lives; or (4) for a
guaranteed number of payments. We currently make annuity payments available
on a fixed basis only.
.. This Annuity offers optional income benefits, for an additional charge,
that can provide principal protection or guaranteed minimum income or
withdrawal protection for Owners while they are alive.
.. This Annuity offers a basic Death Benefit. It also offers optional Death
Benefits that provide an enhanced level of protection for your
beneficiary(ies) for an additional charge.
.. There is no contingent deferred sales charge on surrenders, transfers of
all or a portion of Account Value among available investment options, or
withdrawals. You can withdraw Account Value from your Annuity free of any
such charges although the value of any optional benefit you elect may be
reduced. You will be subject to taxes on most withdrawals.
.. Transfers between investment options are tax-free. Currently, you may make
twenty transfers each year free of charge. We also offer several programs
that enable you to manage your Account Value as your financial needs and
investment performance change.
5
HOW DO I PURCHASE THIS ANNUITY?
We sell the Annuity through licensed, registered Financial Professionals. This
Annuity is designed for sale solely in connection with investment advisory
services provided by an Advisor. Unless we agree otherwise, and subject to our
rules, the Annuity has a minimum initial Purchase Payment of $5,000. We may
allow you to make a lower initial Purchase Payment provided you establish an
electronic funds transfer under which Purchase Payments received in the first
Annuity Year total at least $5,000. There is no age restriction to purchase
the Annuity. However, the basic Death Benefit provides greater protection for
Owners under age 85 as of the Issue Date of this Annuity. The availability and
level of protection of certain optional benefits may 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.
6
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 "variable
investment option") or a Fixed Allocation prior to the Annuity Date, plus any
earnings, and/or less any losses, distributions and charges. Other than on the
Annuity anniversary, the Account Value is calculated before we assess 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 Fixed Allocation on other than its Maturity Date may be
calculated using a market value adjustment. 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.
Advisor
A person or entity which:
. is registered under the Investment Advisers Act of 1940, as amended, or,
where applicable, under equivalent state law or regulation regarding the
registration of investment advisors; or
. may provide investment advisory services but is exempt from such
registration.
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, (90/th/ birthday in New York) whichever occurs first, and (b) the
fifth anniversary of the Issue Date.
Annuity Year
A 12-month period commencing on the Issue Date of the Annuity and each
successive 12-month period thereafter.
Benefit Fixed Rate Account
An investment option offered as part of this Annuity 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 the
Benefit Fixed Rate Account only under the asset transfer feature 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.
Enhanced Beneficiary Protection 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 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.
Fixed Allocation
An investment option that offers a fixed rate of interest for a specified
Guarantee Period during the accumulation period.
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. Check your Annuity for more details
about your free look right.
Guarantee Period
A period of time during the accumulation period where we credit a fixed rate
of interest on a Fixed Allocation.
7
Guaranteed Minimum Income Benefit (GMIB)
We offer 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.
Guaranteed Minimum Withdrawal Benefit (GMWB)
We offer 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.
Guaranteed Return Option Plus/SM/ (GRO Plus)/SM//Guaranteed Return Option
(GRO)(R)/Highest Daily Guaranteed Return Option/SM/ (Highest Daily GRO)/SM/
Each of GRO Plus, GRO, and Highest Daily GRO 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 an asset transfer
program. Beginning in 2008, we introduced a new version of GRO Plus, called
GRO Plus 2008 that we offer for new elections.
Highest Anniversary Value Death Benefit ("HAV")
We offer 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/SM/ Income Benefit
We offer an optional benefit that, for an additional cost, guarantees your
ability to withdraw amounts equal to a percentage of a principal value 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.
Highest Daily Lifetime Seven/SM/ Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of a principal value called
the Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your 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 to how the lifetime withdrawals
are calculated.
Highest Daily Value Death Benefit ("HDV")
We offer 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.
Interim Value
The value of a Fixed Allocation on any date other than the Maturity Date. The
Interim Value is equal to the initial value allocated to the Fixed Allocation
plus all interest credited to the Fixed Allocation as of the date calculated,
less any transfers or withdrawals from the Fixed Allocation.
Issue Date
The effective date of your Annuity.
Lifetime Five/SM/ Income Benefit
We offer 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.
MVA
A market value adjustment used in the determination of Account Value of each
Fixed Allocation on any day prior to the Maturity Date of such 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.
8
Spousal Highest Daily Lifetime Seven/SM/ Income Benefit
The spousal version of the Highest Daily Lifetime Seven Income Benefit.
Spousal Highest Daily Lifetime Seven is the same class of optional benefit as
our Spousal Lifetime Five Income Benefit, but differs (among other things)
with respect to how the Protected Withdrawal Value is calculated and to how
the lifetime withdrawals are calculated.
Spousal Lifetime Five/SM/ Income Benefit
We offer 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.
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 the
Annual Maintenance Fee, Tax Charge, 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. There is no Contingent
Deferred Sales Charge upon surrender or partial withdrawal. The surrender
value may be calculated using a Market Value Adjustment with respect to
amounts in any Fixed Allocation.
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.
9
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and charges for the Annuity. Some fees and
charges are assessed against your Annuity while others are assessed against
assets allocated to the Sub-accounts. The fees and charges that are assessed
against the Annuity include the 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, 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 table provides a summary of the fees and charges you will pay if
you surrender the Annuity or transfer Account Value among investment options.
These fees and charges are described in more detail within this Prospectus.
- ---------------------------------------------------------------------------------------------
OTHER TRANSACTION FEES AND CHARGES
(assessed against the Annuity)
- ---------------------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
- ---------------------------------------------------------------------------------------------
Contingent Deferred Sales Charge There is no Contingent Deferred Sales Charge deducted upon
surrender or partial withdrawal.
- ---------------------------------------------------------------------------------------------
Transfer Fee /1/ $10.00
- ---------------------------------------------------------------------------------------------
Tax Charge /2/ 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 12.
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.
- -----------------------------------------------------------------------------------
PERIODIC FEES AND CHARGES
(assessed against the annuity)
- -----------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
Annual Maintenance Fee /1/ Lesser of $35 or 2% of Account Value
-----------------------------------------
Beneficiary Continuation Option Only Lesser of $30 or 2%
- -----------------------------------------------------------------------------------
ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS /2/
(assessed as a percentage of the average daily net assets of the Sub-accounts)
- -----------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
Mortality & Expense Risk Charge /3/ 0.50%
- -----------------------------------------------------------------------------------
Administration Charge /3/ 0.15%
- -----------------------------------------------------------------------------------
Settlement Service Charge /4/ 1.40% (qualified); 1.00% (non-qualified)
- -----------------------------------------------------------------------------------
Total Annual Charges of the Sub-accounts 0.65%
(excluding settlement service charge)
- -----------------------------------------------------------------------------------
1 Assessed annually on the Annuity's anniversary date or upon surrender. Only
applicable if Account Value is under $50,000. Fee may differ in certain
States. For beneficiaries who elect the non-qualified Beneficiary
Continuation Option, the fee is only applicable if Account Value is less
than $25,000.
2 These charges are deducted daily and apply to Sub-accounts only.
3 The combination of the Mortality and Expense Risk Charge and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this
Prospectus. Prior to July 1, 1994, total annual expenses under the Annuity
were 1.90%, including an investment allocation service charge of 1.00% and
0.90% for what we now refer to as the "Insurance Charge." Effective July 1,
1994, we no longer deducted the investment allocation service charge; total
annual expenses were then 0.90%. Effective May 1, 1998, the Insurance
Charge was further reduced to 0.65%.
4 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. The 1.00% and 1.40% charges set forth above are annual charges that
are assessed against the Account Value in the Sub-accounts.
10
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.
- ---------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES
/1/
- ---------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL
BENEFIT/FEE ANNUAL
CHARGE CHARGE /3/
- ---------------------------------------------------------------------------------
GUARANTEED RETURN OPTION/SM//GRO Plus (0.75% maximum) /2/ 0.90%
0.25% current charge
- ---------------------------------------------------------------------------------
GRO Plus 2008 (0.75% maximum charge) /2/ 1.00%
0.35% current charge
- ---------------------------------------------------------------------------------
HIGHEST DAILY GUARANTEED RETURN (0.75% maximum charge) /2/ 1.00%
OPTION (Highest Daily GRO) 0.35% current charge
- ---------------------------------------------------------------------------------
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (1.00% maximum) /2/ 1.00%
(GMWB) 0.35% current charge
- ---------------------------------------------------------------------------------
GUARANTEED MINIMUM INCOME BENEFIT (1.00%) maximum) /2/ 0.65%
(GMIB) 0.50% per year of the +0.50% of PIV
average Protected Income
Value during each year.
- ---------------------------------------------------------------------------------
LIFETIME FIVE/SM /INCOME BENEFIT (1.50% maximum) /2/ 1.25%
0.60% current charge
- ---------------------------------------------------------------------------------
SPOUSAL LIFETIME FIVE/SM /INCOME (1.50% maximum) /2/ 1.40%
BENEFIT 0.75% current charge
- ---------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME FIVE INCOME (1.50% maximum) /2/ 1.25%
BENEFIT 0.60% current charge
- ---------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME SEVEN INCOME (1.50% maximum) /2/ 0.65%
BENEFIT 0.60% current charge +0.60% of PWV
- ---------------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME SEVEN (1.50% maximum) /2/ 0.65%
INCOME BENEFIT 0.75% current charge +0.75% of PWV
- ---------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION DEATH 0.25% 0.90%
BENEFIT
- ---------------------------------------------------------------------------------
HIGHEST ANNIVERSARY VALUE DEATH 0.25% 0.90%
BENEFIT ("HAV")
- ---------------------------------------------------------------------------------
COMBINATION 5% ROLL-UP AND HAV DEATH (1.00% maximum) /2/ 1.15%
BENEFIT 0.50% current charge
- ---------------------------------------------------------------------------------
HIGHEST DAILY VALUE DEATH BENEFIT (1.50% maximum) /2/ 1.15%
("HDV") 0.50% current charge
- ---------------------------------------------------------------------------------
HOW CHARGE IS DETERMINED
1 Guaranteed Return Option Plus/ Guaranteed Return option: Charge for each
benefit is assessed against the average daily net assets of the
Sub-accounts. 0.90% total annual charge applies in all Annuity years.
GRO PLUS 2008: Charge for this benefit is assessed against the average
daily net assets of the Sub-accounts. 1.00% total annual charge applies in
all Annuity years.
Highest Daily GRO: Charge for this benefit is assessed against the average
daily net assets of the Sub-accounts. 1.00% total annual charge applies in
all Annuity years.
Guaranteed Minimum Withdrawal Benefit: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.00% total
annual charge applies in all Annuity years.
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. 0.50% of PIV for GMIB is in addition to 0.65% annual
charge.
Lifetime Five Income Benefit: Charge for this benefit is assessed against
the average daily net assets of the Sub-accounts. 1.25% total annual charge
applies in all Annuity years.
Spousal Lifetime Five Income Benefit: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.40% total
annual charge applies in all Annuity years.
Highest Daily Lifetime Five Income Benefit: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 1.25%
total annual charge applies in all Annuity years.
Highest Daily Lifetime Seven Income Benefit: 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. 0.60% of PWV is in addition to 0.65% annual charge.
Spousal Highest Daily Lifetime Seven Income Benefit: 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. 0.75% of PWV is in addition to 0.65% annual charge.
Enhanced Beneficiary Protection Death Benefit: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 0.90%
total annual charge applies in all Annuity years.
11
Highest Anniversary Value Death Benefit: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 0.90%
total annual charge applies in all Annuity years.
Combination 5% roll-up and HAV Death Benefit: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 1.15%
total annual charge applies in all Annuity years.
Highest Daily Value Death Benefit: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.15% total
annual charge applies in all Annuity years.
2 We have the right to increase the charge for each benefit up to the
indicated maximum charge upon a step-up or for a new election of the
benefit, or upon a reset of the benefit, if permitted. However, we have no
present intention of increasing the charge to that maximum level.
3 The Total Annual Charge includes the Insurance Charge 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 only,
the 0.50% current charge is assessed against the GMIB Protected Income
Value. With respect to Highest Daily Lifetime Seven and Spousal Highest
Daily Lifetime Seven, the 0.60% and 0.75% charges, respectively, are
assessed in quarterly installments against the Protected Withdrawal Value.
These optional benefits are not available under the Beneficiary
Continuation Option.
The following table provides the range (minimum and maximum) of the total
annual expenses for the underlying mutual funds ("Portfolios") as of
December 31, 2007. 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 0.59% 2.11%
----------------------------------------------------
The following are the total annual expenses for each underlying mutual fund
("Portfolio") as of December 31, 2007, except as noted. The "Total Annual
Portfolio Operating Expenses" reflect the combination of the underlying
Portfolio's investment management fee, other expenses and any 12b-1 fees. Each
figure is stated as a percentage of the underlying Portfolio's average daily
net assets. There is no guarantee that actual expenses will be the same as
those shown in the table. For certain of the underlying Portfolios, a portion
of the management fee has been waived and/or other expenses have been
partially reimbursed. The existence of any such fee waivers and/or
reimbursements have been reflected in the footnotes. 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 1-800-752-6342.
- --------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
---------------------------------------------------
UNDERLYING PORTFOLIO Acquired Total
Portfolio Annual
Management Other Fees & Portfolio
Fee /4/ Expenses 12b-1 Fee Expenses /6/ Expenses
- --------------------------------------------------------------------------------------------------
Advanced Series Trust/ 1,3/
AST Advanced Strategies 0.85% 0.15% 0.00% 0.04% 1.04%
AST Aggressive Asset Allocation /2/ 0.15% 0.03% 0.00% 0.96% 1.14%
AST AllianceBernstein Core Value 0.75% 0.11% 0.00% 0.00% 0.86%
AST AllianceBernstein Growth & Income 0.75% 0.08% 0.00% 0.00% 0.83%
AST American Century Income & Growth 0.75% 0.11% 0.00% 0.00% 0.86%
AST American Century Strategic Allocation 0.85% 0.25% 0.00% 0.00% 1.10%
AST Balanced Asset Allocation /2/ 0.15% 0.01% 0.00% 0.90% 1.06%
AST Bond Portfolio 2015 /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST Bond Portfolio 2018 /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST Bond Portfolio 2019 /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST Capital Growth Asset Allocation /2/ 0.15% 0.01% 0.00% 0.93% 1.09%
AST CLS Growth Asset Allocation /2,5/ 0.30% 0.36% 0.00% 0.99% 1.65%
AST CLS Moderate Asset Allocation /2,5/ 0.30% 0.36% 0.00% 0.91% 1.57%
AST Cohen & Steers Realty Portfolio 1.00% 0.12% 0.00% 0.00% 1.12%
AST Conservative Asset Allocation /2/ 0.15% 0.02% 0.00% 0.87% 1.04%
AST DeAM Large-Cap Value 0.85% 0.11% 0.00% 0.00% 0.96%
AST DeAM Small-Cap Value 0.95% 0.18% 0.00% 0.00% 1.13%
AST Federated Aggressive Growth 0.95% 0.11% 0.00% 0.00% 1.06%
AST First Trust Balanced Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST First Trust Capital Appreciation Target 0.85% 0.11% 0.00% 0.00% 0.96%
AST Goldman Sachs Concentrated Growth 0.90% 0.10% 0.00% 0.00% 1.00%
12
- ---------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- ---------------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
---------------------------------------------------
UNDERLYING PORTFOLIO Acquired Total
Portfolio Annual
Management Other Fees & Portfolio
Fee /4/ Expenses 12b-1 Fee Expenses /6/ Expenses
- ---------------------------------------------------------------------------------------------------------
Advanced Series Trust continued
AST Goldman Sachs Mid-Cap Growth 1.00% 0.12% 0.00% 0.00% 1.12%
AST Goldman Sachs Small-Cap Value 0.95% 0.13% 0.00% 0.00% 1.08%
AST High Yield 0.75% 0.12% 0.00% 0.00% 0.87%
AST Horizon Growth Asset Allocation /2,5/ 0.30% 0.84% 0.00% 0.97% 2.11%
AST Horizon Moderate Asset Allocation /2,5/ 0.30% 0.57% 0.00% 0.90% 1.77%
AST International Growth 1.00% 0.11% 0.00% 0.00% 1.11%
AST International Value 1.00% 0.12% 0.00% 0.00% 1.12%
AST Investment Grade Bond /5/ 0.65% 0.99% 0.00% 0.00% 1.64%
AST JPMorgan International Equity 0.87% 0.13% 0.00% 0.00% 1.00%
AST Large-Cap Value 0.75% 0.08% 0.00% 0.00% 0.83%
AST Lord Abbett Bond-Debenture 0.80% 0.11% 0.00% 0.00% 0.91%
AST Marsico Capital Growth 0.90% 0.08% 0.00% 0.00% 0.98%
AST MFS Global Equity 1.00% 0.21% 0.00% 0.00% 1.21%
AST MFS Growth 0.90% 0.12% 0.00% 0.00% 1.02%
AST Mid-Cap Value 0.95% 0.14% 0.00% 0.00% 1.09%
AST Money Market 0.50% 0.09% 0.00% 0.00% 0.59%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.10% 0.00% 0.00% 1.00%
AST Neuberger Berman Mid-Cap Value 0.89% 0.10% 0.00% 0.00% 0.99%
AST Neuberger Berman Small-Cap Growth 0.95% 0.12% 0.00% 0.00% 1.07%
AST Niemann Capital Growth Asset Allocation /2,5/ 0.30% 0.50% 0.00% 0.96% 1.76%
AST PIMCO Limited Maturity Bond 0.65% 0.11% 0.00% 0.00% 0.76%
AST PIMCO Total Return Bond 0.65% 0.09% 0.00% 0.00% 0.74%
AST Preservation Asset Allocation/ 2/ 0.15% 0.03% 0.00% 0.82% 1.00%
AST QMA US Equity Alpha 1.00% 0.63% 0.00% 0.00% 1.63%
AST Small-Cap Growth 0.90% 0.15% 0.00% 0.00% 1.05%
AST Small-Cap Value 0.90% 0.10% 0.00% 0.00% 1.00%
AST T. Rowe Price Asset Allocation 0.85% 0.12% 0.00% 0.00% 0.97%
AST T. Rowe Price Global Bond 0.80% 0.13% 0.00% 0.00% 0.93%
AST T. Rowe Price Large-Cap Growth 0.88% 0.08% 0.00% 0.00% 0.96%
AST T. Rowe Price Natural Resources 0.90% 0.10% 0.00% 0.00% 1.00%
AST UBS Dynamic Alpha Strategy 1.00% 0.13% 0.00% 0.02% 1.15%
AST Western Asset Core Plus Bond /5/ 0.70% 0.10% 0.00% 0.02% 0.82%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds /7,8,9/
AIM V.I. Dynamics Fund - Series I shares 0.75% 0.36% 0.00% 0.00% 1.11%
AIM V.I. Financial Services Fund - Series I shares 0.75% 0.36% 0.00% 0.00% 1.11%
AIM V.I. Global Health Care Fund - Series I shares 0.75% 0.32% 0.00% 0.01% 1.08%
AIM V.I. Technology Fund - Series I shares 0.75% 0.35% 0.00% 0.01% 1.11%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Evergreen Variable Annuity Trust /10/
Growth 0.70% 0.20% 0.00% 0.01% 0.91%
International Equity 0.39% 0.24% 0.00% 0.00% 0.63%
Omega 0.52% 0.19% 0.00% 0.00% 0.71%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
First Defined Portfolio Fund, LLC
First Trust(R) Target Focus Four /11/ 0.60% 1.07% 0.25% 0.00% 1.92%
Global Dividend Target 15 0.60% 0.54% 0.25% 0.00% 1.39%
NASDAQ(R) Target 15 0.60% 0.91% 0.25% 0.00% 1.76%
S&P(R) Target 24 0.60% 0.70% 0.25% 0.00% 1.55%
Target Managed VIP 0.60% 0.50% 0.25% 0.00% 1.35%
The Dow(R) DART 10 0.60% 0.71% 0.25% 0.00% 1.56%
The Dow(R) Target Dividend 0.60% 0.51% 0.25% 0.00% 1.36%
Value Line(R) Target 25 0.60% 0.56% 0.25% 0.00% 1.41%
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, 2007
---------------------------------------------------
UNDERLYING PORTFOLIO Acquired Total
Portfolio Annual
Management Other Fees & Portfolio
Fee /4/ Expenses 12b-1 Fee Expenses /6/ Expenses
- -------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton VIP Founding Funds Allocation
Fund /12/ 0.00% 0.41% 0.35% 0.65% 1.41%
Management and administration fee waivers/
reductions: 0.28%
Net expenses after fee reimbursement/expense
waiver: 1.13%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Nationwide Variable Insurance Trust
Gartmore NVIT Developing Markets Fund /13/ 1.05% 0.35% 0.25% N/A 1.65%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ProFund VP /14/
Access VP High Yield 0.75% 0.88% 0.25% 0.00% 1.88%
Asia 30 0.75% 0.64% 0.25% 0.00% 1.64%
Banks 0.75% 0.91% 0.25% 0.00% 1.91%
Basic Materials 0.75% 0.71% 0.25% 0.00% 1.71%
Bear 0.75% 0.70% 0.25% 0.00% 1.70%
Biotechnology 0.75% 0.76% 0.25% 0.00% 1.76%
Bull 0.75% 0.67% 0.25% 0.00% 1.67%
Consumer Goods 0.75% 0.82% 0.25% 0.00% 1.82%
Consumer Services 0.75% 1.07% 0.25% 0.00% 2.07%
Europe 30 0.75% 0.66% 0.25% 0.00% 1.66%
Financials 0.75% 0.74% 0.25% 0.00% 1.74%
Health Care 0.75% 0.72% 0.25% 0.00% 1.72%
Industrials 0.75% 0.84% 0.25% 0.00% 1.84%
Internet 0.75% 0.75% 0.25% 0.00% 1.75%
Japan 0.75% 0.68% 0.25% 0.00% 1.68%
Large-Cap Growth 0.75% 0.70% 0.25% 0.00% 1.70%
Large-Cap Value 0.75% 0.72% 0.25% 0.00% 1.72%
Mid-Cap Growth 0.75% 0.70% 0.25% 0.00% 1.70%
Mid-Cap Value 0.75% 0.72% 0.25% 0.00% 1.72%
NASDAQ-100 0.75% 0.69% 0.25% 0.00% 1.69%
Oil & Gas 0.75% 0.71% 0.25% 0.00% 1.71%
Pharmaceuticals 0.75% 0.73% 0.25% 0.00% 1.73%
Precious Metals 0.75% 0.70% 0.25% 0.00% 1.70%
Real Estate 0.75% 0.73% 0.25% 0.00% 1.73%
Rising Rates Opportunity 0.75% 0.62% 0.25% 0.00% 1.62%
Semiconductor 0.75% 0.83% 0.25% 0.00% 1.83%
Short Mid-Cap 0.75% 0.78% 0.25% 0.00% 1.78%
Short NASDAQ-100 0.75% 0.71% 0.25% 0.00% 1.71%
Short Small-Cap 0.75% 0.66% 0.25% 0.00% 1.66%
Small-Cap Growth 0.75% 0.69% 0.25% 0.00% 1.69%
Small-Cap Value 0.75% 0.76% 0.25% 0.00% 1.76%
Technology 0.75% 0.72% 0.25% 0.00% 1.72%
Telecommunications 0.75% 0.72% 0.25% 0.00% 1.72%
U.S. Government Plus 0.50% 0.68% 0.25% 0.00% 1.43%
UltraBull 0.75% 0.68% 0.25% 0.00% 1.68%
UltraMid-Cap 0.75% 0.69% 0.25% 0.00% 1.69%
UltraNASDAQ-100 0.75% 0.69% 0.25% 0.00% 1.69%
UltraSmall-Cap 0.75% 0.73% 0.25% 0.00% 1.73%
Utilities 0.75% 0.72% 0.25% 0.00% 1.72%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Rydex Variable Trust
NASDAQ-100(R) 0.75% 0.76% 0.00% 0.00% 1.51%
Nova 0.75% 0.71% 0.00% 0.00% 1.46%
Rydex Inverse S&P 500 Strategy (formerly Rydex Inverse
S&P 500) 0.90% 0.73% 0.00% 0.00% 1.63%
14
- --------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------
For the year ended December 31, 2007
---------------------------------------------------
UNDERLYING PORTFOLIO Acquired Total
Portfolio Annual
Management Other Fees & Portfolio
Fee /4/ Expenses 12b-1 Fee Expenses /6/ Expenses
- --------------------------------------------------------------------------------------------------
The Prudential Series Fund
SP International Growth Portfolio 0.85% 0.09% 0.00% 0.00% 0.94%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Wells Fargo Variable Trust
Wells Fargo Advantage VT Equity Income Fund 0.55% 0.24% 0.25% 0.00% 1.04%
1 The Fund has entered into arrangements with the issuers of the variable
insurance products offering the Portfolios under which the Fund compensates
the issuers 0.10% for providing ongoing services to Portfolio shareholders
in lieu of the Fund providing such services directly to
shareholders. Amounts paid under these arrangements are included in "Other
Expenses." Subject to the expense limitations set forth below, for each
Portfolio of the Fund other than the Dynamic and Tactical Asset Allocation
Portfolios, 0.03% of the 0.10% administrative services fee is voluntarily
waived. The Dynamic and Tactical Asset Allocation Portfolios do not
directly pay any portion of the 0.10% administrative service fee. The
Acquired Portfolios in which the Dynamic and Tactical Asset Allocation
Portfolios invest, however, are subject to the administrative services
fee. With respect to the AST QMA US Equity Alpha Portfolio, "Other
Expenses" includes dividend expenses on short sales and interest expenses
on short sales. Our reference above to the Dynamic Asset Allocation
Portfolios refers to these portfolios: AST Aggressive Asset Allocation, AST
Balanced Asset Allocation, AST Capital Growth Asset Allocation, AST
Conservative Asset Allocation, and AST Preservation Asset Allocation. Our
reference to the Tactical Asset Allocation Portfolios refers to these
portfolios: AST CLS Growth Asset Allocation, AST CLS Moderate Asset
Allocation, AST Horizon Growth Asset Allocation, AST Horizon Moderate Asset
Allocation, and AST Niemann Capital Growth Asset Allocation.
2 Some of the Portfolios invest in other investment companies (the Acquired
Portfolios). For example, each Dynamic Asset Allocation Portfolio and
Tactical Asset Allocation Portfolio invests primarily in shares of other
Portfolios of Advanced Series Trust. Investors in a Portfolio indirectly
bear the fees and expenses of the Acquired Portfolios. The expenses shown
under "Acquired Portfolio Fees and Expenses" represent a weighted average
of the expense ratios of the Acquired Portfolios in which each Portfolio
invested during the year ended December 31, 2007. The Dynamic Asset
Allocation Portfolios and Tactical Asset Allocation Portfolios do not pay
any transaction fees when purchasing or redeeming shares of the Acquired
Portfolios. Our reference above to the Dynamic Asset Allocation Portfolios
refers to these portfolios: AST Aggressive Asset Allocation, AST Balanced
Asset Allocation, AST Capital Growth Asset Allocation, AST Conservative
Asset Allocation, and AST Preservation Asset Allocation. Our reference to
the Tactical Asset Allocation Portfolios refers to these portfolios: AST
CLS Growth Asset Allocation, AST CLS Moderate Asset Allocation, AST Horizon
Growth Asset Allocation, AST Horizon Moderate Asset Allocation, and AST
Niemann Capital Growth Asset Allocation.
3 Prudential Investments LLC and AST Investment Services, Inc. have
voluntarily agreed to waive a portion of their management fee and/or limit
total expenses (expressed as an annual percentage of average daily
net assets) for certain Portfolios of the Fund. These arrangements, which
are set forth as follows, may be discontinued or otherwise modified at any
time. AST American Century Strategic Allocation: 1.25%; AST Cohen & Steers
Realty: 1.45%; AST DeAM Small-Cap Value: 1.14%; AST Goldman Sachs
Concentrated Growth: 0.86%; AST Goldman Sachs Mid-Cap Growth: 1.12%; AST
High Yield: 0.88%; AST JPMorgan International Equity: 1.01%; AST
International Value: 1.50%; AST Large-Cap Value: 1.20%; AST Lord Abbett
Bond-Debenture: 0.88%; AST MFS Global Equity: 1.18%; AST MFS Growth: 1.35%;
AST Marsico Capital Growth: 1.35%; AST Mid-Cap Value: 1.45%; AST Money
Market: 0.56%; AST Neuberger Berman Mid-Cap Growth: 1.25%; AST Neuberger
Berman Mid-Cap Value: 1.25%; AST PIMCO Total Return Bond: contractual
Portfolio expense limit 1.05%, which can be discontinued or modified only
by amending the contract; AST PIMCO Limited Maturity Bond: 1.05%; AST T.
Rowe Price Asset Allocation: 1.25%; AST T. Rowe Price Natural
Resources: 1.35%; AST International Growth: 1.75%.
4 The management fee rate shown in the "management fees" column represents
the actual fee rate paid by the indicated Portfolio for the fiscal year
ended December 31, 2007, except that the fee rate shown does not reflect
the impact of any voluntary management fee waivers that may be applicable
and which would result in a reduction in the fee rate paid by the
Portfolio. The management fee rate for certain Portfolios may include
"breakpoints" which are reduced fee rates that are applicable at specified
levels of Portfolio assets; the effective fee rates shown in the table
reflect and incorporate any fee "breakpoints" which may be applicable.
5 The Tactical Asset Allocation Portfolios and Western Asset Core Plus Bond
Portfolio are based on estimated expenses for 2008 and current period
average daily net assets. The AST Bond Portfolio 2015, AST Bond Portfolio
2018, AST Bond Portfolio 2019 and the AST Investment Grade Bond Portfolio
are based on estimated expenses for 2008 at an estimated asset level.
6 Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Total Annual Portfolio Operating Expenses listed above may
exceed the expense limit numbers. The impact of the acquired fund fees and
expenses are included in the total returns of the Fund.
7 The Fund's advisor has contractually agreed to waive advisory fees and/or
reimburse expenses of Series I shares to the extent necessary to limit
Total Annual Portfolio Operating Expenses (subject to certain exclusions)
of Series I shares to 1.30% of average daily net assets. The expense
limitation agreement is in effect through at least April 30, 2009.
8 Except as otherwise noted, figures shown in the table are for the year
ended December 31, 2007 and are expressed as a percentage of the Fund's
average daily net assets. There is no guarantee that actual expenses will
be the same as those shown in the table.
9 Effective July 1, 2007, AIM contractually agreed to waive 100% of the
advisory fee AIM receives from affiliated money market funds on investments
by the fund in such affiliated money market funds. The fee waivers reflect
this agreement. This waiver agreement is in effect through at least
April 30, 2009.
10 The Total Annual Portfolio Operating Expenses excludes expense reductions.
11 Effective on or about November 19, 2007, the Portfolio changed its name
from First Trust 10 Uncommon Values Portfolio to First Trust Target Focus
Four Portfolio. The Portfolio's investment strategy was also changed. The
above fees and expenses include the Portfolio's fees and expenses prior to
the name change and change in investment strategy.
12 Operating expenses are estimates based on Class 1 expenses for fiscal year
ended December 31, 2007, except for 12b-1 fees which are based on the Class
4 maximum contractual amounts. The Fund does not pay management fees but
will indirectly bear its proportionate share of any management fees and
other expenses paid by the underlying funds (or "acquired funds") in which
it will invest. Acquired funds' estimated fees and expenses are based on
the acquired funds' expenses for the fiscal year ended December 31, 2007.
Effective December 1, 2007, the administrator has contractually agreed to
waive or limit its fee to assume as its own expense certain expenses
otherwise payable by the Portfolio, excluding the portfolios' fees and
expenses, so that direct operating expenses of the Portfolio do not exceed
0.13% (other than certain non-routine expenses or costs, including those
relating to litigation, indemnification, reorganizations, and liquidations)
until April 30, 2009.
13 The Trust and the Adviser have entered into a written contract limiting
operating expenses to 1.40% for all share classes until May 1, 2009.
14 ProFund Advisors LLC has contractually agreed to waive Investment Advisory
and Management Services Fees and to reimburse other expenses to the extent
Total Annual Portfolio Operating Expenses, as a percentage of average daily
net assets, exceed 1.63% (1.33% for ProFund VP U.S. Government Plus and
1.30% for ProFund VP Money Market) through April 30, 2009. After such date,
any of the expense limitations may be terminated or revised. Amounts waived
or reimbursed in a particular fiscal year may be repaid to ProFund Advisors
LLC within three years of the waiver or reimbursement to the extent that
recoupment will not cause the Portfolio's expenses to exceed any expense
limitation in place at that time. A waiver or reimbursement lowers the
expense ratio and increases overall returns to investors.
15
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in the
Annuity with the cost of investing in other variable annuities. Below are
examples 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 following fees and charges for the
Annuity as described in "Summary of Contract Fees and Charges":
. Insurance Charge
. 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 total annual operating expenses, 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 Lifetime Five Income Benefit, the Highest Daily Value
Death Benefit and the Enhanced Beneficiary Protection Death Benefit
(which are the maximum combination of optional benefit charges)
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 IF YOU ELECT
A DIFFERENT COMBINATION OF OPTIONAL BENEFITS THAN INDICATED IN THE EXAMPLES OR
IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS.
Expense Examples are provided as follows: 1) if you surrender the Annuity at
the end of the stated time period; 2) if you annuitize at the end of the
stated time period; and 3) if you do not surrender your Annuity. A table of
accumulation values appears in Appendix A to this Prospectus.
If you surrender your annuity at the end of the applicable time period:
1 year 3 years 5 years 10 years
--------------------------------
$632 $1,869 $3,074 $5,944
--------------------------------
If you annuitize your annuity at the end of the applicable time period:
1 year 3 years 5 years 10 years
--------------------------------
$632 $1,869 $3,074 $5,944
--------------------------------
If you do not surrender your annuity:
1 year 3 years 5 years 10 years
--------------------------------
$632 $1,869 $3,074 $5,944
--------------------------------
16
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 following chart classifies each of the Portfolios
based on our assessment of their investment style (as of the date of this
Prospectus). The chart also provides a description of each Portfolio's
investment objective (in italics) and a short, summary description of their
key policies to assist you in determining which Portfolios may be of interest
to you. There is no guarantee that any 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. Please see the General Information section of this prospectus,
under the heading concerning "service fees" 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 Annuity are managed by the same
portfolio advisor or sub-advisor as a retail mutual fund of the same or
similar name that the Portfolio may have been modeled after at its inception.
Certain retail mutual funds may also have been modeled after a Portfolio.
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 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 underlying mutual funds. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-800-752-6342.
Effective March 16, 2001, the Nova, Inverse S&P 500 Strategy (f/k/a Inverse
S&P 500) and NASDAQ-100(R) (f/k/a OTC) portfolios of Rydex Variable Trust are
no longer offered as Sub-accounts under the Annuity. Owners of Annuities
issued on or after March 16, 2001 will not be allowed to allocate Account
Value to the Rydex Nova, Rydex Inverse S&P 500 Strategy or Rydex NASDAQ-100(R)
Sub-accounts. Except as noted below, Owners of Annuities issued before
March 16, 2001, and/or their authorized investment professionals, will no
longer be able to allocate additional Account Value or make transfers into the
Rydex Nova, Rydex Inverse S&P 500 Strategy or Rydex NASDAQ-100(R)
Sub-accounts. Annuity Owners and/or their authorized Financial Professionals
who elect to transfer Account Value out of the Rydex Sub-accounts on or after
March 16, 2001 will not be allowed to transfer Account Value into the Rydex
Sub-accounts at a later date. Electronic funds transfer, dollar cost
averaging, asset allocation and rebalancing programs that were effective
before March 16, 2001 and included one or more of the Rydex Sub-accounts will
be allowed to continue. However, no changes involving the Rydex Sub-accounts
may be made to such programs.
Effective as of the close of business June 28, 2002, the AST Goldman Sachs
Small-Cap Value Portfolio is no longer offered as a Sub-account under the
Annuity, except as follows: if at any time on or prior to June 28, 2002 you
had any portion of your Account Value allocated to the AST Goldman Sachs
Small-Cap Value Sub-account, you may continue to allocate Account Value and
make transfers into and/or out of the AST Goldman Sachs Small-Cap Value
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 Goldman Sachs Small-Cap Value Sub-account
on or prior to June 28, 2002 or if you purchase your Annuity after June 28,
2002, you cannot allocate Account Value to the AST Goldman Sachs Small-Cap
Value Sub-Account.
Effective May 1, 2004, the SP William Blair International Growth Portfolio
(formerly the SP Jennison International Growth Portfolio) is no longer offered
as a Sub-account under the Annuity, except as follows: if at any time prior to
May 1, 2004 you had any portion of your Account Value allocated to the SP
William Blair International Growth Sub-account, you may continue to allocate
Account Value and make transfers into and/or out of the SP William Blair
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 William Blair
International Growth Sub-account prior to May 1, 2004 or if you purchase your
Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP
William Blair International Growth Sub-Account.
Beginning on May 26, 2008, beneficiaries who continue the Annuity under the
Beneficiary Continuation Option will not be allowed to hold Account Value in
any ProFund VP Portfolio.
17
The above referenced Sub-accounts may be offered to new Owners at some future
date; however, at the present time, there is no intention to do so. We also
reserve the right to offer or close each of the above Sub-accounts to all
Owners that owned the Annuity prior to the respective close dates.
The following chart lists the currently available and permitted investment
options when you choose certain optional benefits:
Optional Benefit Name* Permitted Portfolios:
Lifetime Five Income Benefit AST Capital Growth Asset Allocation
Spousal Lifetime Five Income Benefit AST Balanced Asset Allocation
Highest Daily Lifetime Five Income Benefit AST Conservative Asset Allocation
Highest Daily Lifetime Seven Income Benefit AST Preservation Asset Allocation
Spousal Highest Daily Lifetime Seven Income Benefit AST First Trust Balanced Target
Highest Daily Value Death Benefit AST First Trust Capital Appreciation Target
AST Advanced Strategies
AST T. Rowe Price Asset Allocation
AST UBS Dynamic Alpha Strategy
AST American Century Strategic Allocation
AST CLS Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST Horizon Growth Asset Allocation
AST Horizon Moderate Asset Allocation
AST Niemann Capital Growth Asset Allocation
Franklin Templeton VIP Founding Funds Allocation Fund
- --------------------------------------------------------------------------------------------------------------------
Optional Benefit Name* All Investment Options Permitted EXCEPT for the following:
Combo 5% Rollup & HAV Death Benefit Access VP High Yield Fund
Guaranteed Minimum Income Benefit AIM V.I. Technology
Guaranteed Minimum Withdrawal Benefit NASDAQ Target 15
GRO/GRO PLUS/GRO PLUS 2008 ProFund VP Biotechnology
Highest Anniversary Value Death Benefit ProFund VP Internet
Highest Daily GRO ProFund VP Semiconductor
ProFund VP Short Mid-Cap
ProFund VP Short Small-Cap
ProFund VP Technology
ProFund VP Ultra NASDAQ-100
ProFund VP Ultra Small Cap
ProFund VP UltraBull
Value Line Target 25
Evergreen VA Growth Fund
- --------------------------------------------------------------------------------------------------------------------
Additional 5 investment options NOT permitted with GRO
Plus 2008 & Highest Daily GRO
ProFund VP Ultra Mid-Cap
ProFund VP Precious Metals
GRO PLUS 2008 ProFund VP NASDAQ-100
Highest Daily GRO ProFund VP Asia 30
ProFund VP Short NASDAQ-100
- --------------------------------------------------------------------------------------------------------------------
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
18
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
ADVANCED SERIES TRUST
-------------------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management, LLC;
of equity and fixed income Pacific Investment
securities across different Management
investment categories and investment Company LLC
managers. The Portfolio pursues a (PIMCO); T. Rowe
combination of traditional and Price Associates,
non-traditional investment Inc.; William Blair
strategies. & Company, LLC
-------------------------------------------------------------------------
ASSET AST Aggressive Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc.
TION/ potential total return consistent & Prudential
BALANCED with its specified level of risk Investments
tolerance. The Portfolio will invest LLC/Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
100% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
92.5% to 100%) and the remainder of
its net assets to underlying
portfolios investing primarily in
debt securities and money market
instruments (with a range of 0% -
7.5%).
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The subadviser
expects that the majority of the
Portfolio's assets will be invested
in the common stocks of large
companies that appear to be
undervalued. Among other things, the
Portfolio seeks to identify
compelling buying opportunities
created when companies are
undervalued on the basis of investor
reactions to near-term problems or
circumstances even though their
long-term prospects remain sound.
The subadviser seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
-------------------------------------------------------------------------
LARGE AST AllianceBernstein Growth & AllianceBernstein
CAP Income Portfolio: seeks long-term L.P.
VALUE growth of capital and income while
attempting to avoid excessive
fluctuations in market value. The
Portfolio normally will invest in
common stocks (and securities
convertible into common stocks). The
subadviser will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects.
-------------------------------------------------------------------------
LARGE AST American Century Income & Growth American
CAP Portfolio: seeks capital growth with Century
VALUE current income as a secondary Investment
objective. The Portfolio invests Management, Inc.
primarily in common stocks that
offer potential for capital growth,
and may, consistent with its
investment objective, invest in
stocks that offer potential for
current income. The subadviser
utilizes a quantitative management
technique with a goal of building an
equity portfolio that provides
better returns than the S&P 500
Index without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-------------------------------------------------------------------------
ASSET AST American Century Strategic American
ALLOCA Allocation Portfolio: seeks Century
TION/ long-term capital growth with some Investment
BALANCED regular income. The Portfolio will Management, Inc.
invest, under normal circumstances,
in any type of U.S. or foreign
equity security that meets certain
fundamental and technical standards.
The portfolio managers will draw on
growth, value and quantitative
investment techniques in managing
the equity portion of the Portfolio
and diversify the Portfolio's
investments among small, medium and
large companies.
-------------------------------------------------------------------------
19
----------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------------
ASSET AST Balanced Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
75% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
67.5% to 80%), and 25% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 20.0%
to 32.5%).
----------------------------------------------------------------------
FIXED AST Bond Portfolio 2015: seeks the Prudential
INCOME highest potential total return Investment
consistent with its specified level Management, Inc.
of risk tolerance to meet the
parameters established to support
the GRO benefits and maintain
liquidity to support changes in
market conditions for a fixed
maturity of 2015. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
----------------------------------------------------------------------
FIXED AST Bond Portfolio 2018: seeks the Prudential
INCOME highest potential total return Investment
consistent with its specified level Management, Inc.
of risk tolerance to meet the
parameters established to support
the GRO benefits and maintain
liquidity to support changes in
market conditions for a fixed
maturity of 2018. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
----------------------------------------------------------------------
FIXED AST Bond Portfolio 2019: seeks the Prudential
INCOME highest potential total return Investment
consistent with its specified level Management, Inc.
of risk tolerance to meet the
parameters established to support
the GRO benefits and maintain
liquidity to support changes in
market conditions for a fixed
maturity of 2019. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
----------------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
65% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
57.5% to 72.5%, and 35% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 27.5%
to 42.5%).
----------------------------------------------------------------------
ASSET AST CLS Growth Asset Allocation CLS Investment
ALLOCA Portfolio: seeks the highest Firm, LLC
TION/ potential total return consistent
GROWTH with its specified level of risk
tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
----------------------------------------------------------------------
ASSET AST CLS Moderate Asset Allocation CLS Investment
ALLOCA Portfolio: seeks the highest Firm, LLC
TION/ potential total return consistent
GROWTH with its specified level of risk
tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 40% to 60% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 40% to 60% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
----------------------------------------------------------------------
20
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues
its investment objective by
investing, under normal
circumstances, at least 80% of its
net assets in common stocks and
other equity securities issued by
real estate companies, such as real
estate investment trusts (REITs)..
Under normal circumstances, the
Portfolio will invest substantially
all of its assets in the equity
securities of real estate companies,
i.e., a company that derives at
least 50% of its revenues from the
ownership, construction, financing,
management or sale of real estate or
that has at least 50% of its assets
in real estate. Real estate
companies may include real estate
investment trusts (REITs).
------------------------------------------------------------------------
ASSET AST Conservative Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
55% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
47.5% to 62.5%), and 45% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 37.5%
to 52.5%.
------------------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the
equity securities of large-sized
companies included in the Russell
1000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 1000(R)
Value Index, but which attempts to
outperform the Russell 1000(R) Value
Index through active stock selection.
------------------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in Management
the value stocks of smaller Americas, Inc.
companies. The Portfolio pursues its
objective, under normal market
conditions, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000(R) Value Index. The subadviser
employs an investment strategy
designed to maintain a portfolio of
equity securities which approximates
the market risk of those stocks
included in the Russell 2000(R)
Value Index, but which attempts to
outperform the Russell 2000(R) Value
Index.
------------------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management
the over- the-counter-market. Small Corp.; Federated
companies will be defined as MDTA LLC
companies with market
capitalizations similar to companies
in the Russell 2000 Growth Index.
------------------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust
ALLOCA Portfolio: seeks long-term capital Advisors L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and
approximately 35% in fixed income
securities. The Portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - The Dow(R) Target
Dividend, the Value Line(R) Target
25, the Global Dividend Target 15,
the NYSE(R) International Target 25,
and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index.
------------------------------------------------------------------------
21
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust
ALLOCA Target Portfolio: seeks long-term Advisors L.P.
TION/ capital growth. The Portfolio seeks
BALANCED to achieve its objective by
investing approximately 80% in
common stocks and 20% in fixed
income securities. The portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Value
Line(R) Target 25, the Global
Dividend Target 15, the Target Small
Cap, the Nasdaq(R) Target 15, and
the NYSE(R) International Target 25.
Each strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using
a multi-factor scoring system to
select the common stocks. The fixed
income allocation is determined by
the Dow Jones Income strategy which
utilizes certain screens to select
bonds from the Dow Jones Corporate
Bond Index or like-bonds not in the
index..
------------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Goldman Sachs
CAP Growth Portfolio: seeks long-term Asset
GROWTH growth of capital. The Portfolio Management, L.P.
will pursue its objective by
investing primarily in equity
securities of companies that the
subadviser believes have the
potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the subadviser to
be positioned for long-term growth.
------------------------------------------------------------------------
MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset
growth. The Portfolio pursues its Management, L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the
time of investment) fall within the
range of companies in the Russell
Mid-cap Growth Index. The subadviser
seeks to identify individual
companies with earnings growth
potential that may not be recognized
by the market at large.
------------------------------------------------------------------------
SMALL AST Goldman Sachs Small-Cap Value Goldman Sachs
CAP Portfolio: seeks long-term capital Asset
VALUE appreciation. The Portfolio will Management, L.P.
seek its objective through
investments primarily in equity
securities that are believed to be
undervalued in the marketplace. The
Portfolio will invest, under normal
circumstances, at least 80% of the
value of its assets plus any
borrowings for investment purposes
in small capitalization companies.
The 80% investment requirement
applies at the time the Portfolio
invests its assets. The Portfolio
generally defines small
capitalization companies as
companies with market
capitalizations that are within the
range of the Russell 2000 Value
Index at the time of purchase.
------------------------------------------------------------------------
FIXED AST High Yield Portfolio: seeks Pacific Investment
INCOME maximum total return, consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio invests, under normal
circumstances, at least 80% of its
net assets plus any borrowings for
investment purposes (measured at
time of purchase) in high yield,
fixed-income securities that, at the
time of purchase, are non-investment
grade securities. Such securities
are commonly referred to as "junk
bonds".
------------------------------------------------------------------------
ASSET AST Horizon Growth Asset Allocation Horizon
ALLOCA Portfolio: seeks the highest Investments, LLC
TION/ potential total return consistent
GROWTH with its specified level of risk
tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
ASSET AST Horizon Moderate Asset Horizon
ALLOCA Allocation Portfolio: seeks the Investments, LLC
TION/ highest potential total return
GROWTH consistent with its specified level
of risk tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 40% to 60% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 40% to 60% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
22
-----------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------------
INTER AST International Growth Portfolio: Marsico Capital
NATIONAL seeks long-term capital growth. Management, LLC;
EQUITY Under normal circumstances, the William Blair &
Portfolio invests at least 80% of Company, LLC
the value of its assets in
securities of issuers that are
economically tied to countries other
than the United States. Although the
Portfolio intends to invest at least
80% of its assets in the securities
of issuers located outside the
United States, it may at times
invest in U.S. issuers and it may
invest all of its assets in fewer
than five countries or even a single
country. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth..
-----------------------------------------------------------------------
INTER AST International Value Portfolio: LSV Asset
NATIONAL seeks long-term capital Management;
EQUITY appreciation. The Portfolio normally Thornburg
invests at least 80% of the Investment
Portfolio's assets in equity Management, Inc.
securities. The Portfolio will
invest at least 65% of its net
assets in the equity securities of
companies in at least three
different countries, without limit
as to the amount of assets that may
be invested in a single country.
-----------------------------------------------------------------------
FIXED AST Investment Grade Bond Portfolio: Prudential
INCOME seeks the highest potential total Investment
return consistent with its specified Management, Inc.
level of risk tolerance to meet the
parameters established to support
the Highest Daily Lifetime Seven
benefits and maintain liquidity to
support changes in market conditions
for a fixed duration (weighted
average maturity) of about 6 years.
Please note that you may not make
purchase payments to this Portfolio,
and that this Portfolio is available
only with certain living benefits.
-----------------------------------------------------------------------
INTER AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management, Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of
the world. The equity securities
will ordinarily be traded on a
recognized foreign securities
exchange or traded in a foreign
over-the-counter market in the
country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
-----------------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management
VALUE of income, as well as capital LLC; Hotchkis
appreciation. The Portfolio invests, and Wiley Capital
under normal circumstances, at least Management
80% of its net assets in common LLC; J.P. Morgan
stocks of large capitalization Investment
companies. Large capitalization Management, Inc.
companies are those companies with
market capitalizations within the
market capitalization range of the
Russell 1000 Value Index.
-----------------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett &
INCOME Portfolio: seeks high current income Co. LLC
and the opportunity for capital
appreciation to produce a high total
return. The Portfolio invests, under
normal circumstances, at least 80%
of the value of its assets in fixed
income securities. The Portfolio
allocates its assets principally
among fixed income securities in
four market sectors: U.S. investment
grade securities, U.S. high yield
securities, foreign securities
(including emerging market
securities) and convertible
securities. Under normal
circumstances, the Portfolio invests
in each of the four sectors
described above. However, the
Portfolio may invest substantially
all of its assets in any one sector
at any time, subject to the
limitation that at least 20% of the
Portfolio's net assets must be
invested in any combination of
investment grade debt securities,
U.S. Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in
equity securities.
-----------------------------------------------------------------------
23
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
LARGE AST Marsico Capital Growth Marsico Capital
CAP Portfolio: seeks capital growth. Management, LLC
GROWTH Income realization is not an
investment objective and any income
realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in common stocks of large companies
that are selected for their growth
potential. Large capitalization
companies are companies with market
capitalizations within the market
capitalization range of the Russell
1000 Growth Index. In selecting
investments for the Portfolio, the
subadviser uses an approach that
combines "top down" macroeconomic
analysis with "bottom up" stock
selection. The "top down" approach
identifies sectors, industries and
companies that may benefit from the
trends the subadviser has observed.
The subadviser then looks for
individual companies with earnings
growth potential that may not be
recognized by the market at large,
utilizing a "bottom up" stock
selection process. The Portfolio
will normally hold a core position
of between 35 and 50 common stocks.
The Portfolio may hold a limited
number of additional common stocks
at times when the Portfolio manager
is accumulating new positions,
phasing out existing or responding
to exceptional market conditions.
-------------------------------------------------------------------------
INTER AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities. The Portfolio will
invest in the securities of U.S. and
foreign issuers (including issuers
in emerging market countries). While
the portfolio may invest its assets
in companies of any size, the
Portfolio generally focuses on
companies with relatively large
market capitalizations relative to
the markets in which they are traded.
-------------------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future, Financial Services
GROWTH rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of
its net assets in common stocks and
related securities, such as
preferred stocks, convertible
securities and depositary receipts,
of companies that the subadviser
believes offer better than average
prospects for long-term growth. The
subadviser uses a "bottom up" as
opposed to a "top down" investment
style in managing the Portfolio.
-------------------------------------------------------------------------
MID CAP AST Mid Cap Value Portfolio: seeks EARNEST
VALUE to provide capital growth by Partners LLC;
investing primarily in WEDGE Capital
mid-capitalization stocks that Management,
appear to be undervalued. The LLP
Portfolio generally invests, under
normal circumstances, at least 80%
of the value of its net assets in
mid- capitalization companies.
Mid-capitalization companies are
generally those that have market
capitalizations, at the time of
purchase, within the market
capitalization range of companies
included in the Russell Midcap Value
Index during the previous 12-months
based on month-end data.
-------------------------------------------------------------------------
FIXED AST Money Market Portfolio: seeks Prudential
INCOME high current income while Investment
maintaining high levels of Management, Inc.
liquidity. The Portfolio invests in
high-quality, short-term, U.S.
dollar denominated corporate, bank
and government obligations. The
Portfolio will invest in securities
which have effective maturities of
not more than 397 days.
-------------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger
GROWTH Portfolio: seeks capital growth. Berman
Under normal market conditions, the Management Inc.
Portfolio invests at least 80% of
its net assets in the common stocks
of mid-capitalization companies.
Mid-capitalization companies are
those companies whose market
capitalization is within the range
of market capitalizations of
companies in the Russell Midcap(R)
Growth Index. Using fundamental
research and quantitative analysis,
the subadviser looks for
fast-growing companies that are in
new or rapidly evolving industries.
-------------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger
VALUE Portfolio: seeks capital growth. Berman
Under normal market conditions, the Management Inc.
Portfolio invests at least 80% of
its net assets in the common stocks
of medium capitalization companies.
For purposes of the Portfolio,
companies with market
capitalizations that fall within the
range of the Russell Midcap(R) Index
at the time of investment are
considered medium capitalization
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
-------------------------------------------------------------------------
24
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Neuberger
CAP Growth Portfolio: seeks maximum Berman
GROWTH growth of investors' capital from a Management Inc.
portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily
investing at least 80% of its total
assets in the equity securities of
small-sized companies included in
the Russell 2000 Growth(R) Index.
------------------------------------------------------------------------
ASSET AST Niemann Capital Growth Asset Neimann Capital
ALLOCA Allocation Portfolio: seeks the Management Inc.
TION/ highest potential total return
GROWTH consistent with its specified level
of risk tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a one- to
three- year time frame based on the
subadviser's forecast for interest
rates.
------------------------------------------------------------------------
FIXED AST PIMCO Total Return Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest in a portfolio of
fixed-income investment instruments
of varying maturities.
------------------------------------------------------------------------
ASSET AST Preservation Asset Allocation AST Investment
ALLOCA Portfolio: seeks the highest Services, Inc. &
TION/ potential total return consistent Prudential
BALANCED with its specified level of risk Investments LLC/
tolerance. The Portfolio will invest Prudential
its assets in several other Advanced Investments LLC
Series Trust Portfolios. Under
normal market conditions, the
Portfolio will devote approximately
35% of its net assets to underlying
portfolios investing primarily in
equity securities (with a range of
27.5% to 42.5%), and 65% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments (with a range of 57.5%
to 72.5%.
------------------------------------------------------------------------
LARGE AST QMA US Equity Portfolio Quantitative
CAP (formerly known as AST Management
BLEND AllianceBernstein Managed Index 500 Associates LLC
Portfolio): seeks to produce returns
that exceed those of the benchmark.
The portfolio utilizes a long/short
investment strategy and will
normally invest at least 80% of its
net assets plus borrowings in equity
and equity related securities of
issuers traded on a securities
exchange or market in the US. The
benchmark index is the Russell
1000(R) which is comprised of stocks
representing more than 90% of the
market cap of the US market and
includes the largest 1000 securities
in the Russell 3000(R) index.
------------------------------------------------------------------------
SMALL AST Small-Cap Growth Portfolio: Eagle Asset
CAP seeks long-term capital growth. The Management;
GROWTH Portfolio pursues its objective by Neuberger Berman
investing, under normal Management Inc.
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000(R) Index at the time of
the Portfolio's investment.
------------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC;
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC;
appear to be undervalued. The J.P. Morgan
Portfolio invests, under normal Investment
circumstances, at least 80% of the Management, Inc.;
value of its net assets in small Lee Munder
capitalization stocks. Small Investments, Ltd
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000(R) Value Index.
------------------------------------------------------------------------
25
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total
assets in equity securities and 40%
in fixed income securities. This mix
may vary depending on the
subadviser's outlook for the
markets. The subadviser concentrates
common stock investments in larger,
more established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
--------------------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign
and U.S. dollar-denominated bonds.
The Portfolio will invest at least
80% of its total assets in fixed
income securities. The Portfolio
invests in all types of bonds,
including those issued or guaranteed
by U.S. or foreign governments or
their agencies and by foreign
authorities, provinces and
municipalities as well as investment
grade corporate bonds, mortgage and
asset-backed securities, and
high-yield bonds of U.S. and foreign
issuers. The Portfolio generally
invests in countries where the
combination of fixed-income returns
and currency exchange rates appears
attractive, or, if the currency
trend is unfavorable, where the
subadviser believes that the
currency risk can be minimized
through hedging. The Portfolio may
also invest up to 20% of its assets
in the aggregate in below
investment-grade, high-risk bonds
("junk bonds"). In addition, the
Portfolio may invest up to 30% of
its assets in mortgage- related
(including mortgage dollar rolls and
derivatives, such as collateralized
mortgage obligations and stripped
mortgage securities) and
asset-backed securities.
--------------------------------------------------------------------------
LARGE AST T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term growth of Associates, Inc.
GROWTH capital by investing predominantly
in the equity securities of a
limited number of large, carefully
selected, high-quality U.S.
companies that are judged likely to
achieve superior earnings growth.
The Portfolio takes a growth
approach to investment selection and
normally invests at least 80% of its
net assets in the common stocks of
large companies. Large companies are
defined as those whose market cap is
larger than the median market cap of
companies in the Russell 1000 Growth
Index as of the time of purchase.
--------------------------------------------------------------------------
SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio invests,
under normal circumstances, at least
80% of the value of its assts in
natural resource companies. The
Portfolio may also invest in
non-resource companies with the
potential for growth. The Portfolio
looks for companies that have the
ability to expand production, to
maintain superior exploration
programs and production facilities,
and the potential to accumulate new
resources. Although at least 50% of
Portfolio assets will be invested in
U.S. securities, up to 50% of total
assets also may be invested in
foreign securities.
--------------------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio: UBS Global Asset
ALLOCA seeks to maximize total return, Management
TION/ consisting of capital appreciation (Americas) Inc.
BALANCED and current income. The Portfolio
invests in securities and financial
instruments to gain exposure to
global equity, global fixed income
and cash equivalent markets,
including global currencies. The
Portfolio may invest in equity and
fixed income securities of issuers
located within and outside the
United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's subadviser, to
gain exposure to certain global
equity and global fixed income
markets.
--------------------------------------------------------------------------
FIXED AST Western Asset Core Plus Bond Western Asset
INCOME Portfolio: seeks to maximize total Management
return, consistent with prudent Company
investment management and liquidity
needs, by investing to obtain its
average specified duration. The
Portfolio's current target average
duration is generally 2.5 to 7
years. The Portfolio pursues this
objective by investing in all major
fixed income sectors with a bias
towards non-Treasuries.
--------------------------------------------------------------------------
26
-------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
-------------------------------------------------------------------------
MID CAP AIM Variable Insurance Funds - AIM Advisor: Invesco
GROWTH V.I. Dynamics Fund - Series I Aim Advisors,
shares: The investment objective is Inc.
long-term capital growth. The
Portfolio pursues its objective by Sub-advisor:
normally investing at least 65% of Advisory entities
its assets in equity securities of affiliated with
mid-sized companies that are Invesco Aim
included in the Russell Midcap(R) Advisors, Inc.
Growth Index at the time of purchase.
-------------------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM Advisor: Invesco
V.I. Financial Services Fund - Aim Advisors,
Series I shares: The investment Inc.
objective is capital growth. The
Portfolio normally invests at least Sub-advisor:
80% of its net assets, plus the Advisory entities
amount of any borrowings for affiliated with
investment purposes, in equity Invesco Aim
securities of issuers engaged Advisors, Inc.
primarily in financial
services-related industries.
-------------------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM Advisor: Invesco
V.I. Global Health Care Fund - Aim Advisors,
Series I shares: The investment Inc.
objective is capital growth. The
Portfolio normally invests at least Sub-advisor:
80% of its net assets in securities Advisory entities
of health care industry companies. affiliated with
Invesco Aim
Advisors, Inc.
-------------------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM Advisor: Invesco
V.I. Technology Fund - Series I Aim Advisors,
shares: The investment objective is Inc.
capital growth. The Portfolio
normally invests at least 80% of its
net assets, plus the amount of any
borrowings for investment purposes,
in equity securities and
equity-related instruments of
companies engaged in
technology-related industries.
Companies in technology-related
industries include, but are not
limited to, those involved in the
design, manufacture, distribution,
licensing, or provision of various
applied technologies, hardware,
software, semiconductors,
telecommunications equipment and
services and service-related
companies in information technology.
-------------------------------------------------------------------------
Evergreen Variable Annuity Trust
-------------------------------------------------------------------------
SMALL Evergreen VA Growth: seeks long-term Evergreen
CAP capital growth. The Portfolio Investment
GROWTH invests at least 75% of its assets Management
in common stocks of small- and Company, LLC
medium-sized companies (i.e.,
companies whose market
capitalizations fall within the
market capitalization range of the
companies tracked by the Russell
2000(R) Growth Index, measured at
the time of purchase). The remaining
portion of the Portfolio's assets
may be invested in companies of any
size. The Portfolio's managers
employ a growth-style of equity
management and will generally seek
to purchase stocks of companies that
have demonstrated earnings growth
potential which they believe is not
yet reflected in the stock's market
price. The Portfolio's managers
consider potential earnings growth
above the average earnings growth of
companies included in the Russell
2000(R) Growth Index as a key factor
in selecting investments.
-------------------------------------------------------------------------
27
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
INTER Evergreen VA International Equity: Evergreen
NATIONAL seeks long-term capital growth and Investment
EQUITY secondarily, modest income. The Management
Portfolio will normally invest at Company, LLC
least 80% of its assets in equity
securities issued by, in the
manager's opinion, established and
quality non-U.S. companies located
in countries with developed markets.
The Portfolio may purchase
securities across all market
capitalizations. The Portfolio
normally invests at least 65% of its
assets in securities of companies in
at least three countries (other than
the U.S.). The Portfolio may also
invest in emerging markets. The
Portfolio's managers seek both
growth and value opportunities For
growth investments, the Portfolio's
manager seeks, among other things,
good business models, good
management and growth in cash flows.
For value investments, the
Portfolio's manager seeks, among
other things, companies that are
undervalued in the marketplace
compared to their assets. The
Portfolio normally intends to seek
modest income from dividends paid by
its equity holdings. Other than cash
and cash equivalents, the Portfolio
intends to invest substantially all
of its assets in the securities of
non-U.S. issuers.
------------------------------------------------------------------------
SPECIALTY Evergreen VA Omega: seeks long-term Evergreen
capital growth. The Portfolio Investment
invests primarily, and under normal Management
conditions substantially all of its Company, LLC
assets, in common stocks of U.S.
companies across any market
capitalizations. The Portfolio's
manager employs a growth style of
equity management that seeks to
emphasizes companies with cash flow
growth, sustainable competitive
advantages, returns on invested
capital above their cost of capital
and the ability to manage for
profitable growth that can create
long-term value for shareholders.
------------------------------------------------------------------------
Franklin Templeton Variable
Insurance Products Trust
------------------------------------------------------------------------
MODERATE Franklin Templeton Founding Funds Franklin
ALLOCA Allocation Fund: Seeks capital Templeton
TION appreciation, with income as a Services, LLC
secondary goal. The Fund normally
invests equal portions in Class 1
shares of Franklin Income Securities
Fund; Mutual Shares Securities Fund;
and Templeton Growth Securities Fund.
------------------------------------------------------------------------
NATIONWIDE VARIABLE INSURANCE TRUST
------------------------------------------------------------------------
INTER Gartmore NVIT Developing Markets NWD
NATIONAL Fund: seeks long-term capital Management &
EQUITY appreciation, under normal Research Trust/
conditions by investing at least 80% Gartmore Global
of the value of its net assets in Partners
equity securities of companies of
any size based in the world's
developing market countries. Under
normal market conditions,
investments are maintained in at
least six countries at all times
with no more than 35% of the value
of its net assets invested in
securities of any one country.
------------------------------------------------------------------------
PROFUND VP
------------------------------------------------------------------------
Each ProFund VP portfolio described below pursues an investment
strategy that seeks to provide daily investment results, before fees
and expenses, that match a widely followed index, increased by a
specified factor relative to the index, or that match the inverse of
the index or the inverse of the index multiplied by a specified
factor. The investment strategy of some of the portfolios may
magnify (both positively and negatively) the daily investment
results of the applicable index. It is recommended that only those
Annuity Owners who engage a financial advisor to allocate their
account value using a strategic or tactical asset allocation
strategy invest in these portfolios. The Portfolios are arranged
based on the index on which its investment strategy is based.
------------------------------------------------------------------------
SPECIALTY ProFund VP Bull: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the S&P 500(R)
Index.
------------------------------------------------------------------------
SPECIALTY ProFund VP Bear: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
inverse (opposite) of the daily
performance of the S&P 500(R) Index.
If ProFund VP Bear is successful in
meeting its objective, its net asset
value should gain approximately the
same amount, on a percentage basis,
as any decrease in the S&P 500(R)
Index when the Index declines on a
given day. Conversely, its net asset
value should lose approximately the
same amount, on a percentage basis,
as any increase in the Index when
the Index rises on a given day.
------------------------------------------------------------------------
28
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SPECIALTY ProFund VP UltraBull: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(200%) the daily performance of the
S&P 500(R) Index. If ProFund VP
UltraBull is successful in meeting
its objective, its net asset value
should gain approximately twice as
much, on a percentage basis, as the
S&P 500(R) Index when the Index
rises on a given day. Conversely,
its net asset value should lose
approximately twice as much, on a
percentage basis, as the Index when
the Index declines on a given day.
--------------------------------------------------------------------------
The S&P 500(R) Index is a measure of large-cap U.S. stock market
performance. It is a float-adjusted market capitalization weighted
index of 500 U.S. operating companies and REITS selected by an S&P
U.S. Index Committee through a non-mechanical process that factors
criteria such as liquidity, price, market capitalization and
financial viability. Reconstitution occurs both on a quarterly and
ongoing basis.
--------------------------------------------------------------------------
SPECIALTY ProFund VP NASDAQ-100 (formerly ProFund Advisors
known as ProFund VP OTC): seeks LLC
daily investment results, before
fees and expenses, that correspond
to the daily performance of the
NASDAQ-100 Index(R).
--------------------------------------------------------------------------
SPECIALTY ProFund VP Short NASDAQ-100 ProFund Advisors
(formerly known as ProFund VP Short LLC
OTC): seeks daily investment
results, before fees and expenses,
that correspond to the inverse
(opposite) of the daily performance
of the NASDAQ-100 Index(R). If
ProFund VP Short OTC is successful
in meeting its objective, its net
asset value should gain
approximately the same amount, on a
percentage basis, as any decrease in
the NASDAQ-100 Index(R) when the
Index declines on a given day.
Conversely, its net asset value
should lose approximately the same
amount, on a percentage basis, as
any increase in the Index when the
Index rises on a given day.
--------------------------------------------------------------------------
SPECIALTY ProFund VP UltraNASDAQ-100 (formerly ProFund Advisors
known as ProFund VP UltraOTC): seeks LLC
daily investment results, before
fees and expenses, that correspond
to twice (200%) the daily
performance of the NASDAQ-100
Index(R). If ProFund VP UltraOTC is
successful in meeting its objective,
its net asset value should gain
approximately twice as much, on a
percentage basis, as the NASDAQ-100
Index(R) when the Index rises on a
given day. Conversely, its net asset
value should lose approximately
twice as much, on a percentage
basis, as the Index when the Index
declines on a given day.
--------------------------------------------------------------------------
The NASDAQ-100 Index(R) includes 100 of the largest non-financial
domestic and international issues listed on the NASDAQ Stock Market.
To be eligible for inclusion companies cannot be in bankruptcy
proceedings and must meet certain additional criteria including
minimum trading volume and "seasoning" requirements. The Index is
calculated under a modified capitalization-weighted methodology.
Reconstitution and rebalancing occurs on an annual, quarterly and
ongoing basis.
--------------------------------------------------------------------------
SPECIALTY ProFund VP UltraSmall-Cap: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to twice (200%) the daily
performance of the Russell 2000(R)
Index. If ProFund VP UltraSmall-Cap
is successful in meeting its
objective, its net asset value
should gain approximately twice as
much, on a percentage basis, as the
Russell 2000 Index(R) when the Index
rises on a given day. Conversely,
its net asset value should lose
approximately twice as much, on a
percentage basis, as the Index when
the Index declines on a given day.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Short Small-Cap: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the inverse (opposite) of the
daily performance of the Russell
2000(R) Index. If ProFund VP Short
Small-Cap is successful in meeting
its objective, its net asset value
should gain approximately the same
amount, on a percentage basis, as
any decrease in the Russell 2000
Index when the Index declines on a
given day. Conversely, its net asset
value should lose approximately the
same amount, on a percentage basis,
as any increase in the Index when
the Index rises on a given day.
--------------------------------------------------------------------------
The Russell 2000 Index is a measure of small-cap U.S. stock market
performance. It is an adjusted market capitalization weighted index
containing approximately 2000 of the smallest companies in the
Russell 3000 Index or approximately 8% of the total market
capitalization of the Russell 3000 Index, which in turn represents
approximately 98% of the investable U.S. equity market. All U.S.
companies listed on the NYSE, AMEX or NASDAQ meeting an initial
minimum ($1) price are considered for inclusion. Reconstitution
occurs annually. Securities are not replaced if they leave the index,
however, new issue securities meeting other membership requirements
may be added on a quarterly basis.
--------------------------------------------------------------------------
29
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SPECIALTY ProFund VP UltraMid-Cap: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(200%) the daily performance of the
S&P MidCap 400 Index(R). If ProFund
VP UltraMid-Cap is successful in
meeting its objective, its net asset
value should gain approximately
twice as much, on a percentage
basis, as the S&P MidCap 400 Index
when the Index rises on a given day.
Conversely, its net asset value
should lose approximately twice as
much, on a percentage basis, as the
Index when the Index declines on a
given day.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Short Mid-Cap: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the inverse (opposite) of the
daily performance of the S&P MidCap
400 Index(R). If ProFund VP Short
Mid-Cap is successful in meeting its
objective, its net asset value
should gain approximately the same
amount, on a percentage basis, as
any decrease in the S&P MidCap 400
Index when the Index declines on a
given day. Conversely, its net asset
value should lose approximately the
same amount, on a percentage basis,
as any increase in the Index when
the Index rises on a given day.
--------------------------------------------------------------------------
The S&P MidCap 400 Index is a measure of mid-size company U.S. stock
market performance. It is a float-adjusted market capitalization
weighted index of 400 U.S. operating companies and REITs. Securities
are selected for inclusion in the index by the S&P U.S. Index
Committee through a non-mechanical process that factors criteria such
as liquidity, price, market capitalization and financial viability.
Reconstitution occurs both on a quarterly and ongoing basis.
--------------------------------------------------------------------------
SMALL ProFund VP Small-Cap Value: seeks ProFund Advisors
CAP daily investment results, before LLC
VALUE fees and expenses, that correspond
to the daily performance of the S&P
SmallCap 600/Citigroup Value
Index(R). The S&P SmallCap
600/Citigroup Value Index is
designed to provide a comprehensive
measure of small-cap U.S. equity
"value" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P SmallCap
600 Index that have been identified
as being on the value end of the
growth-value spectrum. (Note: The
S&P SmallCap 600 Index is a measure
of small-cap company U.S. stock
market performance. It is a float
adjusted market capitalization
weighted index of 600 U.S. operating
companies. Securities are selected
for inclusion in the index by an S&P
committee through a nonmechanical
process that factors criteria such
as liquidity, price, market
capitalization, financial viability,
and public float.)
--------------------------------------------------------------------------
SMALL ProFund VP Small-Cap Growth: seeks ProFund Advisors
CAP daily investment results, before LLC
GROWTH fees and expenses, that correspond
to the daily performance of the S&P
SmallCap 600/Citigroup Growth
Index(R). The S&P SmallCap
600/Citigroup Growth Index is
designed to provide a comprehensive
measure of small-cap U.S. equity
"growth" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P SmallCap
600 Index that have been identified
as being on the growth end of the
growth-value spectrum. (Note: The
S&P SmallCap 600 Index is a measure
of small-cap company U.S. stock
market performance. It is a float
adjusted market capitalization
weighted index of 600 U.S. operating
companies. Securities are selected
for inclusion in the index by an S&P
committee through a nonmechanical
process that factors criteria such
as liquidity, price, market
capitalization, financial viability,
and public float.)
--------------------------------------------------------------------------
The S&P SmallCap 600 Index is a measure of small-cap company U.S.
stock market performance. It is a float adjusted market
capitalization weighted index of 600 U.S. operating companies.
Securities are selected for inclusion in the index by an S&P
committee through a nonmechanical process that factors criteria such
as liquidity, price, market capitalization, financial viability, and
public float.
--------------------------------------------------------------------------
LARGE ProFund VP Large-Cap Value: seeks ProFund Advisors
CAP daily investment results, before LLC
VALUE fees and expenses, that correspond
to the daily performance of the S&P
500/Citigroup Value Index(R). The
S&P 500/Citigroup Value Index is
designed to provide a comprehensive
measure of large-cap U.S. equity
"value" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P 500 Index
that have been identified as being
on the value end of the growth value
spectrum.
--------------------------------------------------------------------------
30
-----------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------------
LARGE ProFund VP Large-Cap Growth: seeks ProFund Advisors
CAP daily investment results, before LLC
GROWTH fees and expenses, that correspond
to the daily performance of the S&P
500/Citigroup Growth Index(R). The
S&P 500/Citigroup Growth Index is
designed to provide a comprehensive
measure of large-cap U.S. equity
"growth" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P 500 Index
that have been identified as being
on the growth end of the
growth-value spectrum.
-----------------------------------------------------------------------
The S&P 500/Citigroup Growth Index is designed to provide a
comprehensive measure of large-cap U.S. equity "growth" performance.
It is an unmanaged float adjusted market capitalization weighted
index comprised of stocks representing approximately half the market
capitalization of the S&P 500 Index that have been identified as
being on the growth end of the growth-value spectrum.
-----------------------------------------------------------------------
MID CAP ProFund VP Mid-Cap Value: seeks ProFund Advisors
VALUE daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
MidCap 400/Citigroup Value Index(R).
The S&P MidCap 400/Citigroup Value
Index is designed to provide a
comprehensive measure of mid-cap
U.S. equity "value" performance. It
is an unmanaged float adjusted
market capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P MidCap 400
Index that have been identified as
being on the value end of the
growth-value spectrum.
-----------------------------------------------------------------------
MID CAP ProFund VP Mid-Cap Growth: seeks ProFund Advisors
GROWTH daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
MidCap 400/Citigroup Growth
Index(R). The S&P MidCap
400/Citigroup Growth Index is
designed to provide a comprehensive
measure of mid-cap U.S. equity
"growth" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P MidCap 400
Index that have been identified as
being on the growth end of the
growth-value spectrum.
-----------------------------------------------------------------------
The S&P MidCap 400/Citigroup Value Index is designed to provide a
comprehensive measure of mid-cap U.S. equity "value" performance. It
is an unmanaged float adjusted market capitalization weighted index
comprised of stocks representing approximately half the market
capitalization of the S&P MidCap 400 Index that have been identified
as being on the value end of the growth-value spectrum.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Asia 30: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the ProFunds
Asia 30 Index. The ProFunds Asia 30
Index, created by ProFund Advisors,
is composed of 30 companies whose
principal offices are located in the
Asia/Pacific region, excluding
Japan, and whose securities are
traded on U.S. exchanges or on the
NASDAQ as depository receipts or
ordinary shares. The component
companies in the ProFunds Asia 30
Index are determined annually based
upon their U.S. dollar-traded
volume. Their relative weights are
determined based on the modified
market capitalization method.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Europe 30: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the ProFunds
Europe 30 Index. The ProFunds Europe
30 Index, created by ProFund
Advisors, is composed of companies
whose principal offices are located
in Europe and whose securities are
traded on U.S. exchanges or on the
NASDAQ as depositary receipts or
ordinary shares. The component
companies in the ProFunds Europe 30
Index are determined annually based
upon their U.S. dollar- traded
volume. Their relative weights are
determined based on a modified
market capitalization method.
-----------------------------------------------------------------------
31
--------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------------
SPECIALTY ProFund VP Japan: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Nikkei 225
Stock Average. 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. The Fund seeks to
provide a return consistent with an
investment in the component equities
in the Nikkei 225 Stock Average
hedged to U.S. dollars.
--------------------------------------------------------------------------
The Nikkei 225 Stock Average ("Nikkei" ) is a modified price-weighted
index of the 225 most actively traded and liquid Japanese companies
listed in the First Section of the Tokyo Stock Exchange (TSE). The
Nikkei is calculated from the prices of the 225 TSE First Section
stocks selected to represent a broad cross-section of Japanese
industries and the overall performance of the Japanese equity market.
Nihon Keizai Shimbun, Inc. is the sponsor of the Index. Companies in
the Nikkei are reviewed annually. Emphasis is placed on maintaining
the Index's historical continuity while keeping the Index composed of
stocks with high market liquidity. The sponsor consults with various
market experts, considers company specific information and the
overall composition of the Index.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Banks: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Banks Index. The Dow Jones U.S.
Banks Index measures the performance
of the banking sector of the U.S.
equity market. Component companies
include regional and major U.S.
domiciled banks engaged in a wide
range of financial services,
including retail banking, loans and
money transmissions.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Basic Materials: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Basic Materials Index.
The Dow Jones U.S. Basic Materials
Index measures the performance of
the basic materials industry of the
U.S. equity market. Component
companies are involved in the
production of aluminum, steel, non
ferrous metals, commodity chemicals,
specialty chemicals, forest
products, paper products, as well as
the mining of precious metals and
coal.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Biotechnology: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Biotechnology Index. The
Dow Jones U.S. Biotechnology Index
measures the performance of the
biotechnology subsector of the U.S.
equity market. Component companies
engage in research and development
of biological substances for drug
discovery and diagnostic
development. These companies derive
most of their revenue from the sale
of licensing of drugs and diagnostic
tools.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Consumer Goods: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Consumer Goods Index. The
Dow Jones U.S. Consumer Goods Index
measures the performance of consumer
spending in the goods industry of
the U.S. equity market. Component
companies include automobiles and
auto parts and tires, brewers and
distillers, farming and fishing,
durable and non-durable household
product manufacturers, cosmetic
companies, food and tobacco
products, clothing, accessories and
footwear.
--------------------------------------------------------------------------
SPECIALTY ProFund VP Consumer Services: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Consumer Services Index.
The Dow Jones U.S. Consumer Services
Index measures the performance of
consumer spending in the services
industry of the U.S. equity market.
Component companies include
airlines, broadcasting and
entertainment, apparel and broadline
retailers, food and drug retailers,
media agencies, publishing,
gambling, hotels, restaurants and
bars, and travel and tourism.
--------------------------------------------------------------------------
32
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
SPECIALTY ProFund VP Financials: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Financials Index. The Dow Jones
U.S. Financials Index measures the
performance of the financial
services industry of the U.S. equity
market. Component companies include
regional banks; major U.S. domiciled
international banks; full line,
life, and property and casualty
insurance companies; companies that
invest, directly or indirectly in
real estate; diversified financial
companies such as Fannie Mae, credit
card issuers, check cashing
companies, mortgage lenders and
investment advisers; securities
brokers and dealers, including
investment banks, merchant banks and
online brokers; and publicly traded
stock exchanges.
------------------------------------------------------------------------
SPECIALTY ProFund VP Health Care: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Health Care Index. The Dow
Jones U.S. Health Care Index
measures the performance of the
healthcare industry of the U.S.
equity market. Component companies
include health care providers,
biotechnology companies, medical
supplies, advanced medical devices
and pharmaceuticals.
------------------------------------------------------------------------
SPECIALTY ProFund VP Industrials: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Industrials Index. The Dow
Jones U.S. Industrials Index
measures the performance of the
industrial industry of the U.S.
equity market. Component companies
include building materials, heavy
construction, factory equipment,
heavy machinery, industrial
services, pollution control,
containers and packaging, industrial
diversified, air freight, marine
transportation, railroads, trucking,
land-transportation equipment,
shipbuilding, transportation
services, advanced industrial
equipment, electric components and
equipment, and aerospace.
------------------------------------------------------------------------
SPECIALTY ProFund VP Internet: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
Composite Internet Index. The Dow
Jones Composite Internet Index
measures the performance of stocks
in the U.S. equity markets that
generate the majority of their
revenues from the Internet. The
Index is composed of two sub-groups:
Internet Commerce - companies that
derive the majority of their
revenues from providing goods and/or
services through an open network,
such as a web site. Internet
Services - companies that derive the
majority of their revenues from
providing access to the Internet or
providing services to people using
the Internet.
------------------------------------------------------------------------
SPECIALTY ProFund VP Oil & Gas: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Oil & Gas Index. The Dow Jones
U.S. Oil & Gas Index measures the
performance of the oil and gas
industry of the U.S. equity market.
Component companies include oil
drilling equipment and services, oil
companies-major, oil
companies-secondary, pipelines,
liquid, solid or gaseous fossil fuel
producers and service companies.
------------------------------------------------------------------------
SPECIALTY ProFund VP Pharmaceuticals: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Pharmaceuticals Index.
The Dow Jones U.S. Pharmaceuticals
Index measures the performance of
the pharmaceuticals subsector of the
U.S. equity market. Component
companies include the makers of
prescription and over-the-counter
drugs such as birth control pills,
vaccines, aspirin and cold remedies.
------------------------------------------------------------------------
SPECIALTY ProFund VP Precious Metals: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones Precious Metals Index. The Dow
Jones Precious Metals Index measures
the performance of the precious
metals mining industry. Component
companies include leading miners and
producers of gold, silver and
platinum-group metals whose
securities are available to U.S.
investors during U.S. trading hours.
It is a float-adjusted
market-capitalization weighted index.
------------------------------------------------------------------------
SPECIALTY ProFund VP Real Estate: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Real Estate Index. The Dow
Jones U.S. Real Estate Index
measures the performance of the real
estate sector of the U.S. equity
market. Component companies include
those that invest directly or
indirectly through development,
management or ownership of shopping
malls, apartment buildings and
housing developments; and real
estate investment trusts ("REITs")
that invest in apartments, office
and retail properties. REITs are
passive investment vehicles that
invest primarily in income-producing
real estate or real estate related
loans or interests.
------------------------------------------------------------------------
33
-----------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------------
SPECIALTY ProFund VP Semiconductor: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Semiconductosr Index. The
Dow Jones U.S. Semiconductors Index
measures the performance of the
semiconductor subsector of the U.S.
equity market. Component companies
are engaged in the production of
semiconductors and other integrated
chips, as well as other related
products such as semiconductor
capital equipment and mother-boards.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Technology: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Technology Index. The Dow Jones
U.S. Technology Index measures the
performance of the technology
industry of the U.S. equity market.
Component companies include those
involved in computers and office
equipment, software, communications
technology, semiconductors,
diversified technology services and
Internet services.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Telecommunications: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Telecommunications Index.
The Dow Jones U.S.
Telecommunications Index measures
the performance of the
telecommunications industry of the
U.S. equity market. Component
companies include fixed-line
communications and wireless
communications companies.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Utilities: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Utilities Sector Index. The Dow
Jones U.S. Utilities Sector Index
measures the performance of the
utilities industry of the U.S.
equity market. Component companies
include electric utilities, gas
utilities and water utilities.
-----------------------------------------------------------------------
SPECIALTY ProFund VP U.S. Government Plus: ProFund Advisors
seeks daily investment results, LLC
before fees and expenses, that
correspond to one and one-quarter
times (125%) the daily price
movement of the most recently issued
30-year U.S. Treasury bond ("Long
Bond"). In accordance with its
stated objective, the net asset
value of ProFund VP U.S. Government
Plus generally should decrease as
interest rates rise. If ProFund VP
U.S. Government Plus is successful
in meeting its objective, its net
asset value should gain
approximately one and one-quarter
times (125%) as much, on a
percentage basis, as any daily
increase in the price of the Long
Bond on a given day. Conversely, it
value should lose approximately one
and one-quarter as much, on a
percentage basis, as any daily
decrease in the price of the Long
Bond on a given day.
-----------------------------------------------------------------------
SPECIALTY ProFund VP Rising Rates Opportunity: ProFund Advisors
seeks daily investment results, LLC
before fees and expenses, that
correspond to one and one-quarter
times (125%) the inverse (opposite)
of the daily price movement of the
most recently issued 30-year U.S.
Treasury bond ("Long Bond"). In
accordance with its stated
objective, the net asset value of
ProFund VP Rising Rates Opportunity
generally should decrease as
interest rates fall. If ProFund VP
Rising Rates Opportunity is
successful in meeting its objective,
its net asset value should gain
approximately one and one-quarter
times as much, on a percentage
basis, as any daily decrease in the
Long Bond on a given day.
Conversely, its net asset value
should lose approximately one and
one-quarter times as much, on a
percentage basis, as any daily
increase in the price of the Long
Bond on a given day.
-----------------------------------------------------------------------
SPECIALTY Access VP High Yield Fund: seeks to ProFund Advisors
provide investment results that LLC
correspond generally to the total
return of the high yield market
consistent with maintaining
reasonable liquidity. The Fund will
achieve its high yield exposure
primarily through credit default
swaps (CDSs) but may invest in high
yield debt instruments ("junk
bonds"), interest rate swap
agreements and futures contracts,
and other debt and money market
instruments without limitation,
consistent with applicable
regulations. Under normal market
conditions, the Fund will invest at
least 80% of its net assets in CDSs
and other financial instruments that
in combination have economic
characteristics similar to the high
yield debt market and/or in high
yield debt securities. The Fund
seeks to maintain exposure to the
high yield bond markets regardless
of market conditions and without
taking defensive positions in cash
or other instruments in anticipation
of an adverse climate for the high
yield bond markets. ProFund Advisors
does not conduct fundamental
analysis in managing the Fund.
-----------------------------------------------------------------------
34
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
RYDEX VARIABLE TRUST
------------------------------------------------------------------------
SPECIALTY Rydex Variable Trust - Nova: seeks Rydex Investments
to provide investment results that
match the performance of a specific
benchmark on a daily basis. The
fund's current benchmark is 150% of
the performance of the S&P 500(R)
Index (the "underlying index"). If
the Fund meets its objective, the
value of the Fund's shares will tend
to increase on a daily basis by 150%
of the value of any increase in the
underlying index. When the value of
the underlying index declines, the
value of the Fund's shares should
also decrease on a daily basis by
150% of the value of any decrease in
the underlying index (e.g., if the
underlying index goes down by 5%,
the value of the Fund's shares
should go down by 7.5% on that day).
Unlike a traditional index fund, as
its primary investment strategy, the
Fund invests to a significant extent
in leveraged instruments, such as
swap agreements, futures contracts
and options on securities, futures
contracts, and stock indices, as
well as equity securities.
------------------------------------------------------------------------
SPECIALTY Rydex Variable Trust - Inverse S&P Rydex Investments
500 Strategy (formerly Rydex
Variable Trust - Inverse S&P 500):
seeks to provide investment results
that will inversely correlate to the
performance of the S&P 500(R) Index
(the "underlying index"). If the
Fund meets its objective, the value
of the Fund's shares will tend to
increase during times when the value
of the underlying index is
decreasing. When the value of the
underlying index is increasing,
however, the value of the Fund's
shares should decrease on a daily
basis by an inversely proportionate
amount (e.g., if the underlying
index goes up by 5%, the value of
the Fund's shares should go down by
5% on that day). Unlike a
traditional index fund, the Fund's
benchmark is to perform exactly
opposite the underlying index, and
the Inverse S&P 500 Fund will not
own the securities included in the
underlying index. Instead, as its
primary investment strategy, the
Fund invests to a significant extent
in short sales of securities or
futures contracts and in options on
securities, futures contracts, and
stock indices.
------------------------------------------------------------------------
SPECIALTY Rydex Variable Trust - NASDAQ-100(R) Rydex Investments
(formerly Rydex Variable Trust -
OTC): seeks to provide investment
results that correspond to a
benchmark for over-the-counter
securities. The Fund's current
benchmark is the NASDAQ 100 Index(R)
(the "underlying index"). If the
Fund meets its objective, the value
of the Fund's shares should increase
on a daily basis by the amount of
any increase in the value of the
underlying index. However, when the
value of the underlying index
declines, the value of the Fund's
shares should also decrease on a
daily basis by the amount of the
decrease in value of the underlying
index. The Fund invests principally
in securities of companies included
in the underlying index. It also may
invest in other instruments whose
performance is expected to
correspond to that of the underlying
index, and may engage in futures and
options transactions and enter into
swap agreements. The Fund may also
purchase U.S. Government securities.
------------------------------------------------------------------------
FIRST DEFINED PORTFOLIO FUND, LLC
------------------------------------------------------------------------
SPECIALTY First Trust Target Focus Four First Trust
Portfolio (formerly, First Trust 10 Advisors L.P.
Uncommon Values Portfolio): seeks to
provide above-average capital
appreciation. The Portfolio seeks to
achieve its objective by investing
in the common stocks of companies
which are selected by applying four
separate uniquely specialized
strategies. (the "Focus Four
Strategy"). The Focus Four Strategy
adheres to a disciplined investment
process that targets the following
four strategies: The Dow(R) Target
Dividend Strategy, Value Line(R)
Target 25 Strategy, S&P Target SMid
60 Strategy, and NYSE(R)
International Target 25 Strategy.
------------------------------------------------------------------------
SPECIALTY Global Dividend Target 15 Portfolio: First Trust
seeks to provide above-average total Advisors L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks issued by companies
that are expected to provide income
and to have the potential for
capital appreciation. The Portfolio
invests primarily in the common
stocks of the companies which are
components of the Dow Jones
Industrial Average/sm/ ("DJIA/sm/"),
the Financial Times Industrial
Ordinary Share Index ("FT Index")
and the Hang Seng Index. The
Portfolio primarily consists of
common stocks of the five companies
with the lowest per share stock
prices of the ten companies in each
of the DJIA/sm/, FT Index and Hang
Seng Index, respectively, that have
the highest dividend yields in the
respective index on or about the
applicable stock selection date.
Each security is initially equally
weighted in the portfolio.
------------------------------------------------------------------------
35
------------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------------
SPECIALTY NASDAQ(R) Target 15 Portfolio: seeks First Trust
to provide above-average total Advisors L.P.
return. Beginning with the stocks in
the NASDAQ-100 Index(R) on or about
the applicable stock selection date,
the Portfolio selects fifteen stocks
based on a multi-factor model. A
modified market capitalization
approach is used to weight each
security in the portfolio.
------------------------------------------------------------------------
SPECIALTY S&P(R) Target 24 Portfolio: seeks to First Trust
provide above-average total return. Advisors L.P.
Beginning with the stocks in the
Standard & Poor's 500 Index ("S&P
500 Index"), on or about the
applicable stock selection date, the
Portfolio selects three stocks from
each of the eight largest economic
sectors of the S&P 500 Index. The
twenty four stocks are selected
based on a multi-factor model and a
modified market capitalization
approach is used to weight each
security in the portfolio.
------------------------------------------------------------------------
SPECIALTY Target Managed VIP Portfolio: seeks First Trust
to provide above-average total Advisors L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks of the companies
that are identified based on six
uniquely specialized strategies -
The Dow(R) DART 5, the European
Target 20, the NASDAQ(R) Target 15,
the S&P(R) Target 24, the Target
Small- Cap and the Value Line(R)
Target 25. Each strategy employs a
quantitative approach by screening
common stocks for certain attributes
and/or using a multi-factor scoring
system to select the common stocks.
------------------------------------------------------------------------
SPECIALTY The Dow(R) Target Dividend First Trust
Portfolio: seeks to provide Advisors L.P.
above-average total return. The
Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to provide income and to
have the potential for capital
appreciation. Beginning with the
stocks in The Dow Jones Select
Dividend Index/sm/, on or about the
applicable stock selection date, the
Portfolio selects twenty common
stocks based on a multi-factor
model. Each security is initially
equally weighted in the portfolio.
------------------------------------------------------------------------
SPECIALTY The Dow(R) DART 10 Portfolio: seeks First Trust
to provide above-average total Advisors L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks issued by companies
that are expected to provide income
and to have the potential for
capital appreciation. The Portfolio
invests primarily in the common
stocks of the ten companies in the
DJIA that have the highest combined
dividend yields and buyback ratios
on or about the applicable stock
selection date. . Each security is
initially equally weighted in the
portfolio.
------------------------------------------------------------------------
SPECIALTY Value Line(R) Target 25 Portfolio: First Trust
seeks to provide above-average Advisors L.P.
capital appreciation. The Portfolio
seeks to achieve its objective by
investing in 25 of the 100 common
stocks that Value Line(R) gives a #1
ranking for Timelines(TM) which have
recently exhibited certain positive
financial attributes. Value Line(R)
ranks approximately 1,700 stocks of
which 100 are given their #1 ranking
for Timeliness(TM) which measures
Value Line's view of their probable
price performance during the next
six to 12 months relative to the
others. Beginning with the 100
stocks that Value Line(R) ranks #1
for Timeliness(TM), on or about the
applicable stock selection date, the
Portfolio selects twenty five stocks
based on a multi-factor model. A
modified market capitalization
approach is used to weight each
security in the portfolio.
------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
------------------------------------------------------------------------
INTER The Prudential Series Fund - SP Prudential
NATIONAL International Growth Portfolio: Investments LLC;
EQUITY Seeks long-term capital William Blair &
appreciation. The Portfolio invests Company, LLC
primarily in stocks of large and
medium-sized companies located in
countries included in the Morgan
Stanley Capital International All
Country World Ex-U.S. Index. Under
normal market conditions, the
portfolio invests at least 80% of
its net assets in equity
securities. The Portfolio's assets
normally will be allocated among not
fewer than six different countries
and will not concentrate investments
in any particular industry. The
Portfolio seeks companies that
historically have had superior
growth, profitability and quality
relative to local markets and
relative to companies within the
same industry worldwide, and that
are expected to continue such
performance. (see information above
regarding limited availability of
this option.)
------------------------------------------------------------------------
WELLS FARGO
------------------------------------------------------------------------
LARGE Wells Fargo Advantage VT Equity Wells Fargo Funds
CAP Income Fund: Seeks long-term capital Management, LLC,
VALUE appreciation and dividend income. adviser;
The Portfolio invests principally in Wells Capital
equity securities of large- Management
capitalization companies, which they Incorporated,
define as companies with market subadviser
capitalizations of $3 billion or
more.
------------------------------------------------------------------------
36
"Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Industrials/SM/", "The
Dow/SM/", and "The Dow 10/SM/", are service marks of Dow Jones & Company, Inc.
("Dow Jones") and have been licensed for use for certain purposes by First
Trust Advisors L.P. ("First Trust"). The portfolios, including, and in
particular the Target Managed VIP portfolio The DowSM DART 10 portfolio, and
The Dow SM Target Dividend Portfolio are not endorsed, sold or promoted by Dow
Jones, and Dow Jones makes no representation regarding the advisability of
investing in such products.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed
VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Portfolio.
"The Nasdaq 100(R)", "Nasdaq-100 Index(R)", "Nasdaq Stock Market(R)", and
"Nasdaq(R)" are trade or service marks of The Nasdaq Stock Market, Inc. (which
with its affiliates are the "Corporations") and have been licensed for use by
First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio
have not been passed on by the Corporations as to its legality or suitability.
The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not
issued, endorsed, sponsored, managed, sold or promoted by the Corporations.
The Corporations make no warranties and bear no liability with respect to the
Nasdaq Target 15 Portfolio or the Target Managed VIP Portfolio.
"Value Line(R)," "The Value Line Investment Survey," and "Value Line
Timeliness/TM/ Ranking System" are registered trademarks of Value Line
Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP(R)
Portfolio and Value Line Target 25 Portfolio are not sponsored, recommended,
sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value
Line Securities, Inc. ("Value Line"). Value Line makes no representation
regarding the advisability of investing in the Portfolio.
"Value Line Publishing, Inc.'s ("VLPI") only relationship to First Trust
Advisors L.P. or the Portfolio is VLPI's licensing to First Trust Advisors
L.P. of certain VLPI trademarks and trade names and the Value Line Timeliness
Ranking System (the "System"), which is composed by VLPI without regard to
First Trust Advisors L.P., the Portfolio or any investor. First Trust
Advisors, L.P. has sub-licensed certain VLPI trademarks and trade names to
Prudential Investments LLC. VLPI has no obligation to take the needs of First
Trust Advisors L.P., Prudential Investments LLC or any investor in the
Portfolio into consideration in composing the System. The Portfolio's results
may differ from the hypothetical or published results of the Value Line
Timeliness Ranking System. VLPI is not responsible for, and has not
participated in, the determination of the prices and composition of the
Portfolio or the timing of the issuance for sale of the Portfolio or in the
calculation of the equations by which the Portfolio is to be converted into
cash. VLPI MAKES NO WARRANTY CONCERNING THE SYSTEM, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES ARISING FROM USAGE
OF TRADE, COURSE OF DEALING OR COURSE OF PERFORMANCE, AND VLPI MAKES NO
WARRANTY AS TO THE POTENTIAL PROFITS OR ANY OTHER BENEFITS THAT MAY BE
ACHIEVED BY USING THE SYSTEM OR ANY INFORMATION OR MATERIALS GENERATED
THEREFROM. VLPI DOES NOT WARRANT THAT THE SYSTEM WILL MEET ANY REQUIREMENTS OR
THAT IT WILL BE ACCURATE OR ERROR-FREE. VLPI ALSO DOES NOT GUARANTEE ANY USES,
INFORMATION, DATA OR OTHER RESULTS GENERATED FROM THE SYSTEM. VLPI HAS NO
OBLIGATION OR LIABILITY (I) IN CONNECTION WITH THE ADMINISTRATION, MARKETING
OR TRADING OF THE PORTFOLIO; OR (II) FOR ANY LOSS, DAMAGE, COST OR EXPENSE
SUFFERED OR INCURRED BY ANY INVESTOR OR OTHER PERSON OR ENTITY IN CONNECTION
WITH THE PORTFOLIO, AND IN NO EVENT SHALL VLPI BE LIABLE FOR ANY LOST PROFITS
OR OTHER CONSEQUENTIAL, SPECIAL, PUNITIVE, INCIDENTAL, INDIRECT OR EXEMPLARY
DAMAGES IN CONNECTION WITH THE PORTFOLIO."
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.
WHAT ARE THE FIXED ALLOCATIONS?
We offer Fixed Allocations of different durations during the accumulation
period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for
a specified period of time, called the "Guarantee Period." In most states, we
offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also
offer special purpose Fixed Allocations for use with certain optional
investment programs. We guarantee the fixed rate for the entire Guarantee
Period. However, 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 rates that are
currently being credited on Fixed Allocations. Please refer to the section
entitled "How does the Market Value Adjustment Work?" for a description of the
formula along with examples of how it is calculated. You may allocate Account
Value to more than one Fixed Allocation at a time.
Fixed Allocations may not be available in all states. Availability of Fixed
Allocations is subject to change and may differ by state and by the annuity
product you purchase. Please call Prudential Annuities at 1-800-752-6342 to
determine availability of Fixed Allocations in your state and for your annuity
product. We may restrict your ability to allocate Account Value to Fixed
Allocations if you elect certain optional benefits. The interest rate that we
credit to the Fixed Allocations may be reduced by an amount that corresponds
to the asset-based charges assessed against the Sub-accounts.
37
FEES AND CHARGES
The charges under the Annuity is designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under the 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 Annuity exceeds our total costs in connection with the Annuity, 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 the 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 the
Annuity.
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.
WHAT ARE THE CONTRACT FEES AND CHARGES?
There is no contingent deferred sales charge applied if you surrender your
Annuity or make a partial withdrawal.
Transfer Fee: Currently, you may make twenty (20) free transfers between
investment options each Annuity Year. We will charge $10.00 for each transfer
after the twentieth in each Annuity Year. 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. We may reduce the number of free transfers allowable each Annuity
Year (subject to a minimum of twelve) 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 ($30 in New York) or 2%
of your Account Value invested in the Sub-accounts 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. Currently, the Annual Maintenance Fee is only
deducted if your Account Value is less than $50,000 on the anniversary of the
Issue Date or at the time of surrender. We do not impose the Annual
Maintenance Fee upon annuitization or the payment of a Death Benefit. 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 non-Qualified 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. The tax
charge currently ranges up to 3 1/2% of your Purchase Payment and is designed
to approximate the taxes that we are required to pay. 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 & Charges". The Insurance
Charge is the
38
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 the Annuity, including the
Annuity's basic Death Benefit that provides 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 covers 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 covers the risk
that our assumptions about the mortality risks and expenses under this 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, the amount we credit to Fixed Allocations may also
reflect similar assumptions about the insurance guarantees provided under the
Annuity and the administrative costs associated with providing the Annuity
benefits.
Optional Benefits for which we assess a charge: Generally, if you elect to
purchase certain optional benefits, we will deduct an additional charge on a
daily basis from your Account Value allocated to the Sub-accounts. The
additional charge is included in the daily calculation of the Unit Price for
each Sub-account. We may assess charges for other optional benefits on a
different basis. 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. The
charge is assessed daily against the average assets allocated to the
Sub-accounts and is equal to an annual charge of 1.00% for non-qualified
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 reflected daily by each Portfolio before it provides
Prudential Annuities with the net asset value as of the close of business each
day. More detailed information about fees and expenses can be found in the
prospectuses for the Portfolios.
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. Any 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 a
Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?
If you select a fixed payment option, 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 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.
Generally, these types of changes will be based on a reduction to our sales,
maintenance or administrative expenses due to the nature of the individual or
group purchasing the Annuity. Some of the factors we might consider in making
such a decision are: (a) the size and type of group; (b) the number of
Annuities purchased by an Owner; (c) the amount of Purchase Payments or
likelihood of additional Purchase Payments; (d) whether an annuity is
reinstated pursuant to our rules; and/or (e) other transactions where sales,
maintenance or administrative expenses are likely to be reduced. We will not
discriminate unfairly between Annuity purchasers if and when we reduce any
fees and charges.
39
PURCHASING YOUR ANNUITY
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?
This Annuity is designed for sale solely in connection with investment
advisory services provided by an Advisor.
Initial Purchase Payment: Unless we agree otherwise and subject to our rules,
you must make a minimum initial Purchase Payment of $5,000. However, if you
decide to make payments under a systematic investment or an electronic funds
transfer program, we may accept a lower initial Purchase Payment provided
that, within the first Annuity Year, your subsequent Purchase Payments plus
your initial Purchase Payment total the minimum initial Purchase Payment
amount required for the Annuity purchase.
Where allowed by law, we must approve any initial and additional Purchase
Payments of $1,000,000 or more. We may apply certain limitations and/or
restrictions on the Annuity as a condition of our acceptance, including
limiting the liquidity features or the Death Benefit protection provided under
the Annuity, limiting the right to make additional Purchase Payments, changing
the number of transfers allowable under the Annuity or restricting the
Sub-accounts or Fixed Allocations that are available. Other limitations and/or
restrictions may apply. Applicable laws designed to counter terrorists and
prevent money laundering might, in certain circumstances, require us to block
a contract owner's ability to make certain transactions, and thereby refuse to
accept Purchase Payments or requests for transfers, partial withdrawals, total
withdrawals, death benefits, or income payments until instructions are
received from the appropriate regulator. We also may be required to provide
additional information about you and your Annuity to government regulators.
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: There is no age restriction to purchase the Annuity.
However, the basic Death Benefit provides greater protection for persons under
age 85. There is no Contingent Deferred Sales Charge deducted upon surrender
or partial withdrawal. However, 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 as of the Issue Date
of the Annuity or the date of the Owner's death.
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 separately. All information and documents that
we are 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.
. 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.
Your right to make certain designations may be limited if your Annuity is to
be used as an IRA 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?
You may change the Owner, Annuitant and Beneficiary Designations by sending us
a request in writing in a form acceptable to us. Upon an ownership change, 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 "non-qualified" investments, a new Annuitant prior to the Annuity
Date if the Annuity is owned by an entity; and
. a change in Beneficiary if the Owner had previously made the designation
irrevocable.
There are also restrictions on designation changes when you have elected
certain optional benefits. See the "Living Benefit Programs" and "Death
Benefits" sections of this Prospectus for any such restrictions.
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
elect an alternative Beneficiary Designation. 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. However, any additional Purchase Payments applied
after the date the assumption is effective will be subject to all provisions
of the Annuity.
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 ("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 Internal Revenue Code. However,
such tax deferral should result from the ownership of the Annuity by the
Custodial Account. Please consult your tax or legal adviser.
We define a spouse the same as under federal tax laws and regulations.
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. Where required by law,
we will return your Purchase Payment(s), or the greater of your current
Account Value and the amount of your Purchase Payment(s) applied during the
right to cancel period, less any applicable federal and state income tax
withholding.
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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
Prudential Annuities 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 program. Additional Purchase
Payments may be made at any time before the Annuity Date. Additional Purchase
Payments are not permitted in certain states.
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.
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.
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 $5,000.
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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 the 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 Account Value to one or
more Sub-accounts or 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.
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. We may require a minimum of $500 in each
Sub-account you allocate Account Value to at the time of any allocation or
transfer. If you request a transfer and, as a result of the transfer, there
would be less than $500 in the Sub-account, we may transfer the remaining
Account Value in the Sub-account pro rata to the other investment options to
which you transferred.
Currently, any transfer involving the Rydex or 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 Rydex or 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 twentieth
(20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar
Cost Averaging, Automatic Rebalancing or asset allocation program do not count
toward the twenty free transfer limit. Renewals or transfers of Account Value
from a 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 twelve) without charging a Transfer Fee.
We may also increase the Transfer Fee that we charge to $20.00 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 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 Rydex 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. The
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, the Rydex 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
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
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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 or a
Rydex 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 Rydex 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, and
(2) execute instructions from the Portfolio to restrict or prohibit further
purchases or transfers by specific contract owners who violate the excessive
trading policies established by the Portfolio. In addition, you should be
aware that some Portfolios may receive "omnibus" purchase and redemption
orders from other insurance companies or intermediaries such as retirement
plans. The omnibus orders reflect the aggregation and netting of multiple
orders from individual owners of variable insurance contracts and/or
individual retirement plan participants. The omnibus nature of these orders
may limit the Portfolios in their ability to apply their excessive trading
policies and procedures. In addition, the other insurance companies and/or
retirement plans may have different policies and procedures or may not have
any such policies and procedures because of contractual limitations. For these
reasons, we cannot guarantee that the Portfolios (and thus contract owners)
will not be harmed by transfer activity relating to other insurance companies
and/or retirement plans that may invest in the Portfolios.
A Portfolio also may assess a short term trading fee in connection with a
transfer out of the 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.
DO YOU OFFER DOLLAR COST AVERAGING?
Yes. We offer Dollar Cost Averaging during the accumulation period. 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,
44
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. 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. There is no minimum Account Value
required to enroll in a Dollar Cost Averaging program and we do not deduct a
charge for participating in a Dollar Cost Averaging Program. You can Dollar
Cost Average from Sub-accounts or Fixed Allocations. 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.
. 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, 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 during the Guarantee Period. This will reduce the effective rate
of return on the Fixed Allocation over the Guarantee Period.
The Dollar Cost Averaging program is 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.
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. 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 a part of a Systematic
Withdrawal program or Dollar Cost Averaging program will be excluded from an
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 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. You can transfer the Account Value that is not allocated to
the Fixed Allocation between any of the Sub-accounts available under the
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.
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.
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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 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 Annuity. 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 do 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).
Any fee that is charged by your investment advisor is in addition to the fees
and expenses that apply under your Annuity. If you authorize your investment
advisor to withdraw amounts from your Annuity to pay for the investment
advisor's fee, as with any other withdrawal from your Annuity, you may incur
adverse tax consequences, and/or a Market Value Adjustment. Withdrawals to pay
your investment advisor (to the extent permitted) generally will also reduce
the level of various living and death benefit guarantees provided (e.g. the
withdrawals will reduce proportionately the Annuity's guaranteed minimum death
benefit.) We are not a party to the agreement you have with your investment
advisor and do not verify that amounts withdrawn from your annuity, including
amounts withdrawn to pay for the investment advisor's fee, are within the
terms of your agreement with your investment advisor. You will, however,
receive confirmations of transactions that affect your Annuity. 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 those 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) on 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 the fixed interest rate to the Fixed Allocation throughout a set
period of time called a "Guarantee Period". 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.
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The interest rate credited to a Fixed Allocation is the rate in effect when
the Guarantee Period begins and does not change during the Guarantee Period.
The rates are an effective annual rate of interest. We determine the interest
rates 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
1-800-752-6342.
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.
The interest rate credited to Fixed Allocations offered to this class of
purchasers may be different than those offered to other purchasers who choose
the same Guarantee Period but who do not participate in an optional investment
program. Any such program is at our sole discretion.
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.
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.
The interest rate that we credit to the Fixed Allocations may be reduced by an
amount that corresponds to the asset-based charges assessed against the
Sub-accounts.
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 is subject to a minimum.
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 Fixed Allocation any day
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".
The Market Value Adjustment formula compares the interest rates credited for
Fixed Allocations at the time you invested, to interest rates being credited
when you make a transfer or withdrawal. The amount of any Market Value
Adjustment can be either positive or negative, depending on the rates that are
currently being credited on Fixed Allocations. In certain states the amount of
any Market Value Adjustment may be limited under state law or regulation. If
your Annuity is governed by the laws of that state, any Market Value
Adjustment that applies will be subject to our rules for complying with such
law or regulation.
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MVA Formula
The MVA formula is applied separately to each Fixed Allocation to determine
the Account Value of the Fixed Allocation on a particular date. The formula is
as follows:
[(1+I) / (1+J+0.0010)]/(N/12)/
where:
I is the fixed interest rate we guaranteed to credit to the Fixed
Allocation as of its starting date;
J is the fixed interest rate for your class of annuities at the time of
the withdrawal for a new Fixed Allocation with a Guarantee Period equal
to the remaining number of years in your original Guarantee Period;
N is the number of months remaining in the original Guarantee Period.
If you surrender your Annuity under the right to cancel provision, the MVA
formula is:
[(1 + I)/(1 + J)]/(N/12)/
If the transfer or withdrawal does not occur on the yearly or monthly
anniversary of the beginning of the Fixed Allocation, the numbers used in 'J'
and 'N' will be rounded to the next highest integer.
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 Fixed Allocation with a Guarantee Period of
5 years.
. The interest rate for your Fixed Allocation is 5.0% (I = 5.0%).
. You make no withdrawals or transfers until you decide to withdraw the
entire Fixed Allocation after exactly three (3) years, at which point 24
months remain before the Maturity Date (N = 24).
Example of Positive MVA
Assume that at the time you request the withdrawal, the fixed interest rate
for a new Fixed Allocation with a Guarantee Period of 24 months is 3.5% (J =
3.5%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(I+J+0.0010)]/(N/12)/ = [1.05/1.036]/(2)/ = 1.027210
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $59,456.20.
Example of Negative MVA
Assume that at the time you request the withdrawal, the fixed interest rate
for a new Fixed Allocation with a Guarantee Period of 24 months is 6.0% (J =
6.0%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]/(N/12)/ = [1.05/1.061]/(2)/ = 0.979372
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $56,687.28.
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee
Period. Before the Maturity Date, you may choose to renew the Fixed Allocation
for a new Guarantee Period of the same or different length or you may transfer
all or part of that Fixed Allocation's Account Value to another Fixed
Allocation or to one or more Sub-accounts. We will not charge a MVA if you
choose to renew a Fixed Allocation on its Maturity Date or transfer the
Account Value to one or more variable investment options. We will notify you
before the end of the Guarantee Period about the fixed interest rates that we
are currently crediting to all 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, it will be renewed for a Fixed Allocation of the same duration
if then available. If a Fixed Allocation of the same duration is not
available, it will be renewed to the next shortest Guarantee Period then
currently available for new allocations and renewals.
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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, Minimum Distributions. You can also surrender your Annuity at any
time. There is no Contingent Deferred Sales Charge applied upon surrender or
partial withdrawal. However, if you surrender your Annuity, 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 any Fixed
Allocations being withdrawn or surrendered. Unless you notify us differently,
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.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?
(For more information, see "Tax Considerations".)
During the Accumulation Period
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.
Special Rules for Distributions to Pay Advisory Fees
We treat partial withdrawals to pay advisory fees as taxable distributions
unless:
. your Annuity is being used in conjunction with a "qualified" retirement
plan (plans meeting the requirements of Sections 401, 403 or 408 of the
Code); and
. in relation to Section 403 or 408 plans, you and your Advisor provide
acceptable proof to us, limiting the source of the Advisor's
compensation to the assets of an applicable qualified retirement plan,
and making certain other representations.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation period.
We call this a "partial withdrawal." The minimum partial withdrawal you may
request is $100. We may apply a Market Value Adjustment to any Fixed
Allocations. 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.
Partial withdrawals may also be available following annuitization but only if
you choose certain annuity payment options. Note, however, that we do not
permit communication once annuity payments have commenced.
To request the forms necessary to make a withdrawal from your Annuity, call
1-800-752-6342 or visit our Internet Website at www.prudentialannuities.com.
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION
PERIOD?
Yes. We call these "Systematic Withdrawals." You can receive Systematic
Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals
can be made from Account Value allocated to the Sub-accounts or Fixed
Allocations. Systematic Withdrawals are available on a monthly, quarterly,
semi-annual or annual basis.
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.
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) 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) or 408 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". We may
apply a Market
49
Value Adjustment to any Fixed Allocations. To request a program that complies
with Sections 72(t), 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) 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 Sections 72(t). 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.
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. We may apply a
Market Value Adjustment to any Fixed Allocations. Upon surrender of your
Annuity, you will no longer have any rights under the surrendered Annuity.
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 1-800-752-6342
or visit our Internet Website at www.prudentialannuities.com.
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?
We currently make available annuity options that provide fixed annuity
payments or adjustable annuity payments. Your Annuity provides certain fixed
annuity payment options. We do not guarantee to continue to make available or
any other option other than the fixed annuity payment options set forth in
your contract. 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 may choose an Annuity Date, an annuity option and the frequency of annuity
payments. You may change your choices before the Annuity Date under the terms
of your contract. A maximum Annuity Date may be required by law or under the
terms of your Annuity. The Annuity Date may depend on the annuity option you
choose. Certain annuity options may not be available depending on the age of
the Annuitant. See section below entitled "How and When Do I Choose the
Annuity Payment Option?"
Certain of these annuity options may be available to Beneficiaries who choose
to receive the Death Benefit proceeds as a series of payments instead of a
lump sum payment.
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. Under this option, you cannot make a partial or full
surrender of the annuity.
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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.
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 payment options available in the future. We do
not guarantee to continue to make available or 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?
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 Annuity 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: (a) the oldest Owner's or Annuitant's 95/th/
birthday, whichever occurs first, and (b) the fifth anniversary of the
Issue Date. Certain states may have different requirements based on
applicable laws.
. 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 1983a 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.
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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 BENEFIT PROGRAMS
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS
WHILE THEY ARE ALIVE?
Prudential Annuities offers different optional benefits, for an additional
charge, that can provide investment protection for Owners while they are
alive. Notwithstanding the additional protection provided under the optional
Living Benefit Programs, 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. 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 principal amount over time; or
.. 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" that Prudential Annuities offers are the Guaranteed
Return Option (GRO), Guaranteed Return Option Plus (GRO Plus), Guaranteed
Return Option Plus 2008 (GRO Plus 2008), Highest Daily Guaranteed Return
Option (HD GRO), the Guaranteed Minimum Withdrawal Benefit (GMWB), the
Guaranteed Minimum Income Benefit (GMIB), the Lifetime Five Income Benefit,
the Spousal Lifetime Five Income Benefit, the Highest Daily Lifetime Five
Income Benefit, the Highest Daily Lifetime Seven Income Benefit and the
Spousal Highest Daily Lifetime Seven Income Benefit. In general, these
benefits fall into four basic categories:
Here is a general description of each kind of living benefit that we offer
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 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.
. 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.
. Guaranteed Minimum Withdrawal Benefit. 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.
. 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, 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 Seven benefit, for example, the guaranteed amount generally is
equal to your annuity value, appreciated at seven percent annually.
Please refer to the benefit descriptions that follow for a complete
description of the terms, conditions and limitations of each optional benefit.
See the chart in the "Investment Options" section of the Prospectus for a list
of investment options available and permitted with each benefit. 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).
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GUARANTEED RETURN OPTION Plus/sm/ (GRO Plus/sm/)
The Guaranteed Return Option Plus described below is only being offered in
those jurisdictions where we have received regulatory approval, and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. The program can be elected by new
purchasers on the Issue Date of their Annuity, and can be elected by existing
Annuity Owners on either the anniversary of the Issue Date of their Annuity or
on a date other than that anniversary, as described below under "Election of
the Program". The Guaranteed Return Option Plus is not available if you elect
any other optional living benefit, the Highest Daily Value Death Benefit, or
the Dollar Cost Averaging program if it involves transfers out of the Fixed
Allocations.
We offer a program that, after a seven-year period following commencement of
the program (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 program remains in effect, guarantees your Account Value
will not be less than your Account Value on the effective date of your program
(called the "Protected Principal Value"). The program 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 program. 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.
The program monitors your Account Value daily and, if necessary,
systematically transfers amounts between variable investment options you
choose and Fixed Allocations used to support the Protected Principal Value(s).
The program may be appropriate if you wish to protect a principal amount
against market downturns as of a specific date in the future, but also wish to
invest in the Sub-accounts to participate in market performance. There is an
additional charge if you elect the Guaranteed Return Option Plus program.
The guarantees provided by the program exist only on the applicable maturity
date(s) and on each anniversary of the maturity date(s) thereafter. However,
due to the ongoing monitoring of your Account Value and the transfer of
Account Value between the Sub-accounts and the Fixed Allocations to support
our future guarantees, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
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 program 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 program 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.
. Enhanced Guarantee: On any anniversary following commencement of the
program, you can establish an enhanced guaranteed amount based on
your current Account Value. Under the enhanced guarantee, Prudential
Annuities guarantees that at the end of a 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 program (and create a new
maturity period for the new enhanced guarantee) if the Account Value
as of that anniversary exceeds the protected principal value or
enhanced protected principal value by 7% or more. You may also elect
to terminate an enhanced guarantee. If you elect to terminate the
enhanced guarantee, the base guarantee will remain in effect. 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.
54
Any amounts added to your Annuity to support our guarantee under the program
will be applied on a pro rata basis to the Sub-accounts (after first
transferring any amounts held in the Fixed Allocations pro rata to the
Sub-accounts and then, if necessary, reallocating those assets according to
our asset allocation mechanism). If our assumptions are correct and the
operations relating to the administration of the program 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 program is in effect, will reduce the
base guarantee under the program as well as any enhanced guarantee. Cumulative
annual withdrawals up to 5% of the Protected Principal Value as of the
effective date of the program (adjusted for any subsequent 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. Systematic Withdrawals will be taken pro-rata from the
Sub-accounts and any Fixed Allocations up to growth attributable to the Fixed
Allocations and thereafter pro-rata solely from the Sub-accounts. Withdrawals
will be subject to all other provisions of your Annuity, including any Market
Value Adjustment 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 program, however, any partial
withdrawals in payment of charges for the Plus40/TM/ 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/SM/ program are
October 13, 2004; 2) an initial Purchase Payment of $250,000; 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 any 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).
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
Account Value is transferred to and maintained in Fixed Allocations to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee(s) under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rates on Fixed
Allocations, the remaining duration(s) until the applicable maturity date(s)
and the amount of
55
Account Value allocated to Fixed Allocation(s) relative to a "reallocation
trigger", which determines whether Account Value must be transferred to or
from Fixed Allocation(s). 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
Fixed Allocation(s).
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain
allocated according to your most recent instructions. If a portion
of Account Value was previously allocated to a Fixed Allocation to
support the applicable guaranteed amount, all or a portion of those
amounts may be transferred from the Fixed Allocation and
re-allocated to the Sub-accounts pro-rata according to your most
recent allocation instructions (including the model allocations
under any asset allocation program you may have elected). A Market
Value Adjustment will apply when we reallocate Account Value from a
Fixed Allocation to the variable investment options, 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 your Sub-accounts pro-rata according to your
allocations to a new Fixed Allocation(s) to support the applicable
guaranteed amount. The new 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 Fixed Allocation(s)
will be credited with the fixed interest rate(s) then being credited
to a new 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 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 a significant amount of your Account Value is systematically transferred to
Fixed Allocations to support the Protected Principal Value and/or the Enhanced
Protected Principal Value during periods of market declines, low interest
rates, and/or as the program nears its maturity date, less of your Account
Value may be available to participate in the investment experience of the
Sub-accounts if there is a subsequent market recovery. During periods closer
to the maturity date of the base guarantee or any enhanced guarantee, or any
anniversary of such maturity date(s), a significant portion of your Account
Value may be allocated to Fixed Allocations to support any applicable
guaranteed amount(s). If your Account Value is less than the reallocation
trigger and new Fixed Allocations must be established during periods where the
interest rate(s) being credited to such Fixed Allocations is low, a larger
portion of your Account Value may need to be transferred to Fixed Allocations
to support the applicable guaranteed amount(s), causing less of your Account
Value to be available to participate in the investment experience of the
Sub-accounts.
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 a 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 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 market performance and/or
under circumstances where Fixed Allocations would not be necessary to support
the Protected Principal Value. Further, there may be circumstances where Fixed
Allocations in support of the Protected Principal Value or Enhanced Protected
Principal Value are transferred to the Sub-accounts differently than each
other because of the different guarantees they support.
Prudential Annuities uses an allocation mechanism based on assumptions of
expected and maximum market volatility, interest rates and time left to the
maturity of the program to determine the reallocation trigger. The allocation
mechanism is used to determine the allocation of Account Value between Fixed
Allocations and the Sub-accounts you choose. Prudential Annuities reserves the
right to change the allocation mechanism and the reallocation trigger at its
discretion, subject to regulatory approval where required. Changes to the
allocation mechanism and/or the reallocation trigger may be applied to
existing programs where allowed by law.
Election of the Program
The Guaranteed Return Option Plus program can be elected at the time that you
purchase your Annuity, or on any Valuation Day thereafter (prior to
annuitization). If you elect the program after the Issue Date of your Annuity,
the program will be effective as of the Valuation Day that we receive the
required documentation in good order at our home office, and the guaranteed
amount will be based on your Account Value as of that date. If you previously
elected the Guaranteed Return Option program and wish to elect the Guaranteed
Return Option Plus program, your prior Guaranteed Return Option program will
be terminated. Termination of the Guaranteed Return Option for the purpose of
electing the Guaranteed Return Option Plus, will be treated as any other
termination of the Guaranteed Return Option (see below), including the
termination of any guaranteed amount, and application of any applicable Market
Value Adjustment when amounts are transferred to the Sub-accounts as a result
of the termination. The Guaranteed Return Option Plus program will then be
added to your Annuity based on the current Account Value.
56
Termination of the Program
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 program entirely. If you terminate the program entirely, you can
subsequently elect to participate in the program again (based on the Account
Value on that date) by furnishing the documentation we require. In a rising
market, you could, for example, terminate the program on a given Valuation Day
and two weeks later reinstate the program with a higher base guarantee (and a
new maturity date). However, your ability to reinstate the program is limited
by the following: (A) in any Annuity Year, we do not permit more than two
program elections (including any election made effective on the Annuity issue
date and any election made by a surviving spouse) and (B) a program
reinstatement cannot be effected on the same Valuation Day on which a program
termination was effected. Upon termination, any Account Value in the Fixed
Allocations will be transferred to the Sub-accounts pro-rata based on the
Account Values in such Sub-accounts, or in accordance with any effective asset
allocation program. A Market Value Adjustment will apply.
The program 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 program, 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. The charge for GRO Plus will no longer be deducted
once the benefit has terminated.
Special Considerations under the Guaranteed Return Option Plus
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 100% of your Account Value must be allocated
to the Sub-accounts. No Fixed Allocations may be in effect as of the date
that you elect to participate in the program. However, the reallocation
trigger may transfer Account Value to Fixed Allocations as of the effective
date of the program under some circumstances.
.. You cannot allocate any portion of Purchase Payments or transfer Account
Value to or from a Fixed Allocation while participating in the program;
however, all or a portion of any Purchase Payments may be allocated by us
to Fixed Allocations to support the amount guaranteed. You cannot
participate in any dollar cost averaging program that transfers Account
Value from a Fixed Allocation to a Sub-account.
.. Transfers from Fixed Allocations made as a result of the allocation
mechanism under the program will be subject to the Market Value Adjustment
formula under the 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
Fixed Allocation.
.. Transfers from the Sub-accounts to Fixed Allocations or from Fixed
Allocations to the Sub-accounts under the program will not count toward the
maximum number of free transfers allowable under the 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 Fixed Allocations even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to Fixed
Allocations.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. 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.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We currently deduct a charge equal to 0.25% of the average daily net assets of
the Sub-accounts for participation in the Guaranteed Return Option Plus
program. The annual charge is deducted daily. Account Value allocated to Fixed
Allocations under the program is not subject to the charge. 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 program.
If you elect the Enhanced Guarantee under the program, and on the date you
elect to step-up, the charges under the program have changed for new
purchases, your program may be subject to the new charge level.
57
GUARANTEED RETURN OPTION (GRO)(R)
The Guaranteed Return Option described below is offered only in those
jurisdictions where we have not yet received regulatory approval for the
Guaranteed Return Option Plus as of the date the election of the option is
made. Certain terms and conditions may differ between jurisdictions. The
program can be elected by new purchasers on the Issue Date of their Annuity,
and can be elected by existing Annuity Owners on either the anniversary of the
Issue Date of their Annuity or on a date other than that anniversary, as
described below under "Election of the Program". The Guaranteed Return Option
is not available if you elect any other living benefit or the Dollar Cost
Averaging program if it involves transfers out of the Fixed Allocations.
We offer a program that, after a seven-year period following commencement of
the program (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 program (called the "Protected Principal Value").
The program monitors your Account Value daily and, if necessary,
systematically transfers amounts between the Sub-accounts you choose and the
Fixed Allocation used to support the Protected Principal Value. The program
may be appropriate if you wish to protect a principal amount against market
downturns as of a specific date in the future, but also wish to invest in the
Sub-accounts to participate in market performance. There is an additional
charge if you elect the Guaranteed Return Option program.
The guarantee provided by the program 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 Fixed Allocation to
support our future guarantee, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
Key Feature - Protected Principal Value
Under the GRO option, 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.
Any amounts added to your Annuity to support our guarantee under the program
will be applied to the Sub-accounts pro rata, after first transferring any
amounts held in the Fixed Accounts pro rata to the Sub-accounts, based on your
most recent allocation instructions in accordance with the allocation
mechanism we use under the program. We will notify you of any amounts added to
your Annuity under the program. However, if when we add such an amount to your
Annuity, all of your Account Value is allocated to the Fixed Allocations, then
we will add the amount to the AST Money Market Portfolio Sub-account. If our
assumptions are correct and the operations relating to the administration of
the program work properly, we do not expect that we will need to add
additional amounts to the Annuity. The Protected Principal Value is generally
referred to as the "Guaranteed Amount" in the rider we issue for this benefit.
Withdrawals from your Annuity, while the program 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 Fixed
Allocations. Systematic withdrawals will be taken pro rata from the
Sub-accounts and any Fixed Allocations up to growth attributable to the Fixed
Allocations and thereafter pro rata solely from the Sub-accounts. Withdrawals
will be subject to all other provisions of your Annuity, including any Market
Value Adjustment that would apply.
Key Feature - Allocation of Account Value
Account Value is transferred to and maintained in a Fixed Allocation to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rate on the Fixed
Allocation, the remaining duration until the applicable maturity date and the
amount of Account Value allocated to the Fixed Allocation relative to a
"reallocation trigger", which determines whether Account Value must be
transferred to or from the Fixed Allocation. 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 Fixed Allocation.
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain
allocated according to your most recent instructions. If a portion
of Account Value was previously allocated to the Fixed Allocation to
support the guaranteed amount, all or a portion of those amounts may
be transferred from the Fixed Allocation and re-allocated to the
Sub-accounts pro-rata according to your most recent allocation
instructions (including the model allocations under any asset
allocation program you may have elected). A
58
Market Value Adjustment will apply when we reallocate Account Value
from the 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 your Sub-accounts pro rata according to your
allocations to a new Fixed Allocation to support the guaranteed
amount. The new Fixed Allocation will have a Guarantee Period equal
to the time remaining until the applicable maturity date. The
Account Value allocated to the new Fixed Allocation will be credited
with the fixed interest rate then being credited to a new Fixed
Allocation maturing on the applicable maturity date (rounded to the
next highest yearly duration). The Account Value will remain
invested in the Fixed Allocation until the 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 a significant amount of your Account Value is systematically transferred to
the Fixed Allocation to support the Protected Principal Value during periods
of market declines, low interest rates, and/or as the program nears its
maturity date, less of your Account Value may be available to participate in
the investment experience of the Sub-accounts if there is a subsequent market
recovery. During periods closer to the maturity date of the guarantee a
significant portion of your Account Value may be allocated to the Fixed
Allocation to support any applicable guaranteed amount. If your Account Value
is less than the reallocation trigger and a new Fixed Allocation must be
established during periods where the interest rate being credited to such
Fixed Allocation is low, a larger portion of your Account Value may need to be
transferred to the Fixed Allocation to support the guaranteed amount, causing
less of your Account Value to be available to participate in the investment
experience of the Sub-accounts.
Prudential Annuities uses an allocation mechanism based on assumptions of
expected and maximum market volatility, interest rates and time left to the
maturity of the program to determine the reallocation trigger. The allocation
mechanism is used to determine the allocation of Account Value between the
Fixed Allocation and the Sub-accounts you choose. Prudential Annuities
reserves the right to change the allocation mechanism and the reallocation
trigger at its discretion, subject to regulatory approval where required.
Changes to the allocation mechanism and/or the reallocation trigger may be
applied to existing programs where allowed by law.
Restart of the Program
Once each Annuity Year you may request to restart the Program. Such a request
is an election by you to terminate the existing Program 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. If we accept your request, we then
terminate the existing Program 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 Program starts at that time. The
initial Protected Principal Value for the new Program is the Account Value as
of the effective date of the new Program. Unless you tell us otherwise, the
duration of the new Program will be the same as that for the existing Program.
However, if we do not then make that duration available, you must elect from
those we make available at that time. As part of terminating the existing
Program, we transfer any amounts in 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 Fixed Allocations, you must first provide us
instructions as to how to allocate the transferred Account Value among the
Sub-accounts.
Election of the Program
The Guaranteed Return Option can be elected at the time that you purchase your
Annuity, or on any Valuation Day thereafter (prior to annuitization). If you
elect the program after the Issue Date of your Annuity, the program will be
effective as of the Valuation Day that we receive the required documentation
in good order at our home office, and the guaranteed amount will be based on
your Account Value as of that date.
Termination of the Program
The Annuity Owner also can terminate the Guaranteed Return Option program.
Upon termination, any Account Value in the Fixed Allocation will be
transferred to the Sub-accounts pro-rata based on the Account Values in such
Sub-accounts, or in accordance with any effective asset allocation program. A
Market Value Adjustment will apply.
The program 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 program, the Guaranteed Return Option
will no longer provide any guarantees. If the surviving spouse assumes the
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.
59
Special Considerations under the Guaranteed Return Option
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 100% of your Account Value must be allocated
to the Sub-accounts. The Fixed Allocation may not be in effect as of the
date that you elect to participate in the program. However, the
reallocation trigger may transfer Account Value to the Fixed Allocation as
of the effective date of the program under some circumstances.
.. Annuity Owners cannot allocate any portion of Purchase Payments or transfer
Account Value to or from the Fixed Allocation while participating in the
program; however, all or a portion of any Purchase Payments may be
allocated by us to the Fixed Allocation to support the amount guaranteed.
You cannot participate in any dollar cost averaging program that transfers
Account Value from the Fixed Allocation to a Sub-account.
.. Transfers from the Fixed Allocation made as a result of the allocation
mechanism under the program will be subject to the Market Value Adjustment
formula under the 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
Fixed Allocation.
.. Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed
Allocation to the Sub-accounts under the program will not count toward the
maximum number of free transfers allowable under the 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.
.. Low interest rates may require allocation to the Fixed Allocation even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to the
Fixed Allocation.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. 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.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We deduct a charge equal to 0.25% of your Account Value allocated to the
Sub-accounts for participation in the Guaranteed Return Option program. 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 program.
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 January 23, 2002 and November 15, 2002 and
subsequent to November 19, 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 program was elected. Owners who
terminate and then re-elect the Guaranteed Return Option or elect to restart
the Guaranteed Return Option at any time after November 15, 2002 will be
subject to the charge method described above.
GUARANTEED RETURN OPTION Plus 2008/SM/ (GRO Plus 2008)/SM/
The GRO Plus 2008 benefit described below is only being offered in those
jurisdictions where we have received regulatory approval, and will be offered
subsequently in other jurisdictions when we receive regulatory approval in
those jurisdictions. Upon our receipt of approval in a given State, we will
offer only GRO Plus 2008 for new elections, rather than the existing versions
of GRO. Certain terms and conditions may differ between jurisdictions once
approved. You can elect this benefit on the Issue Date of your Annuity, or at
any time thereafter (unless you previously participated in either this benefit
or Highest Daily GRO, in which case your election must be on an Annuity
Anniversary). GRO Plus 2008 is not available if you participate in any other
optional living benefit. However, GRO Plus 2008 may be elected together with
any optional death benefit, other than the Highest Daily Value Death Benefit
and the Plus40 Optional Life Insurance Rider.
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 fact that an enhanced guarantee was
effected automatically on a benefit anniversary does not prevent you from
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"manually" locking-in an enhanced guarantee during the ensuing benefit year.
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).
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 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), and (iv) reducing
each guarantee amount, and the dollar-for-dollar corridor itself, by the
percentage derived in (iii). 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/SM/ 2008
program 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);
.. 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. 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 * (1 - $7,500
/ $177,500), or $11,971.83.
Key Feature - Allocation of Account Value
To allow us to make these guarantees, we monitor your Account Value according
to the formula that is set forth in the schedule supplement to the rider.
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, 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 allocation mechanism helps us manage our financial
exposure under GRO Plus 2008, by moving assets out of certain Sub-accounts in
the event of securities market declines. In essence, we seek to preserve the
value of these assets, by transferring them to a more stable 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 also
contemplates the transfer of assets from an AST bond portfolio to the other
Sub-accounts in certain other scenarios. The formula itself is the same as
that used for our Highest Daily GRO benefit, and is set forth in Appendix J to
this prospectus. A summary description of each AST Bond Portfolio appears
within the prospectus section entitled "What Are The Investment Objectives and
Policies Of The Portfolios? Upon the initial transfer of your Account Value
into an AST Bond Portfolio, we will send a prospectus for that Portfolio to
you along with your confirmation. In addition, you can find a copy of the AST
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 asset
transfer 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.
In general, the asset transfer formula works as follows (please see Appendix
J). 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.
If a significant amount of your Account Value is systematically transferred to
an AST bond portfolio Sub-account to support the guarantee amounts during
periods of market declines, low interest rates, and/or as the guarantee nears
its maturity date, less of your Account Value may be available to participate
in the investment experience of the other
62
Sub-accounts if there is a subsequent market recovery. During periods closer
to the maturity date of the guarantee, a significant portion of your Account
Value may be allocated to an AST bond portfolio Sub-account to support any
applicable guaranteed amount(s).
Election/Cancellation of the Program
GRO Plus 2008 can be elected on the Issue Date of your Annuity, or at any time
thereafter (unless you previously participated in either this benefit or
Highest Daily GRO, in which case your election must be on an Annuity
Anniversary). If you elect the benefit after the Issue Date of your Annuity,
the benefit will be effective as of the Valuation Day that we receive the
required documentation in good order at our home office, and the base
guarantee amount will equal the Account Value on that day. You may elect GRO
Plus 2008 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 one of the original versions of GRO, you may terminate that
benefit at any time and elect GRO Plus 2008.
You may cancel the GRO Plus 2008 benefit at any time. Upon cancellation, we
will transfer any Account Value that is held in an AST bond portfolio
Sub-account to the other Sub-accounts, according to your current allocation
instructions. 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
program, GRO Plus 2008 will no longer provide any guarantees. The charge for
the GRO Plus 2008 program will no longer be deducted from your Account Value
upon termination of the program.
Special Considerations under GRO Plus 2008
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 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 program.
.. You cannot participate in any dollar cost averaging program 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 program 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 program 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 program. 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. We may also require that you allocate your Account Value
according to an asset allocation model.
Charges under the Program
We deduct a charge equal to 0.35% of the average daily net assets of the
Sub-accounts for participation in the GRO Plus 2008 program. 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 program. We reserve the right to increase this
fee for newly-issued contracts or new elections of the benefit.
HIGHEST DAILY GUARANTEED RETURN OPTION/SM /(HD GRO/SM/)
The Highest Daily Guaranteed Return Option described below is only being
offered in those jurisdictions where we have received regulatory approval, and
will be offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. You can elect this benefit on the Issue
Date of your Annuity, or at any time thereafter (unless you previously
participated in this benefit, in which case your election must be on an
Annuity Anniversary). Highest Daily GRO is not available if you participate in
any other living benefit. However, Highest Daily GRO may be elected together
with any optional death benefit, other than the Highest Daily Value Death
Benefit or the Plus40 Optional Life Insurance Rider.
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.
63
The guarantees provided by the program 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 program may
provide some protection from significant market losses if you choose to
surrender your Annuity or begin receiving annuity payments prior to a maturity
date. For this same reason, the program may limit your ability to benefit from
market increases while it is in effect.
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 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), and (iv) reducing
each guaranteed amount, as well as the highest daily Account Value that we
calculate to establish a guarantee and the dollar for dollar corridor itself,
by the percentage derived in (iii). 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
program 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).
64
.. 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).
-- 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 * (1 - $7,500
/ $177,500), or $11,971.83.
Key Feature - Allocation of Account Value
To allow us to make these guarantees, we monitor your Account Value according
to the formula that is set forth in the schedule supplement to the rider.
Because the formula is made part of your schedule supplement, the formula may
not be altered. However, we do reserve the right to amend the formula for
newly-issued annuity contracts that elect Highest Daily GRO and for existing
contracts that elect the benefit post-issue. This required allocation
mechanism helps us manage our financial exposure under Highest Daily GRO, by
moving assets out of certain Sub-accounts in certain scenarios. In essence, we
seek to preserve the value of these assets, by transferring them to a more
stable option (i.e., one of a specified group of bond portfolios within
Advanced Series Trust) (collectively, the "AST Bond Portfolios"). The formula
also contemplates the transfer of assets from the AST Bond Portfolios to the
other Sub-accounts in other scenarios.
For purposes of operating the Highest Daily GRO formula, we have included as
investment options within this Annuity several AST bond portfolios. Each AST
bond portfolio is unique, in that its underlying investments generally mature
at the same time as each outstanding maturity date that exists under the
benefit. For example, there would be an AST bond portfolio whose underlying
investments generally mature in 2018 (corresponding to all guarantees that
mature in 2018), an AST Bond Portfolio whose underlying investments generally
mature in 2019 (corresponding to all guarantees that mature in 2019), 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. If you have elected Highest Daily GRO, you may invest in
an AST bond portfolio only by operation of the asset transfer 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. A summary
description of each AST Bond Portfolio appears within the prospectus section
entitled "What Are The Investment Objectives and Policies Of The Portfolios?"
Upon the initial transfer of your Account Value into an AST Bond Portfolio, we
will send a prospectus for that Portfolio to you along with your confirmation.
In addition, you can find a copy of the AST Bond Portfolio prospectus by going
to www.prudentialannuities.com
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 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.
In general, the asset transfer 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 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
65
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.
If a significant amount of your Account Value is systematically transferred to
an AST bond portfolio Sub-account to support the guarantee amounts during
periods of market declines, low interest rates, and/or as the guarantee nears
its maturity date, less of your Account Value may be available to participate
in the investment experience of the other Sub-accounts if there is a
subsequent market recovery. During periods closer to the maturity date of the
guarantee, a significant portion of your Account Value may be allocated to an
AST bond portfolio Sub-account to support any applicable guaranteed amount(s).
Election/Cancellation of the Program
Highest Daily GRO can be elected on the Issue Date of your Annuity, or at any
time thereafter (unless you previously participated in either this benefit or
GRO Plus 2008, in which case your election must be on an Annuity Anniversary).
If you elect the benefit after the Issue Date of your Annuity, the benefit
will be effective as of the Valuation Day that we receive the required
documentation in good order at our home office, and the initial guaranteed
amount will equal the Account Value on that day. You may elect Highest Daily
GRO 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 one
of the original versions of GRO, you may terminate that benefit at any time
and elect Highest Daily GRO.
You may cancel Highest Daily GRO at any time. Upon cancellation, we will
transfer any Account Value that is held in an AST bond portfolio Sub-account
to the other Sub-accounts, according to your current allocation instructions.
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 program,
Highest Daily GRO will no longer provide any guarantees. The charge for the
Highest Daily GRO program will no longer be deducted from your Account Value
upon termination of the program.
Special Considerations under Highest Daily GRO
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 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 this prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the program.
.. You cannot participate in any dollar cost averaging program 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 program 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 program 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 program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. 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.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We deduct an annual charge equal to 0.35% of the average daily net assets of
the Sub-accounts (including each AST bond portfolio Sub-account) for
participation in the Highest Daily GRO program. 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 program. We reserve the right to increase this fee
for newly-issued contracts or new elections of the benefit.
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GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)
The Guaranteed Minimum Withdrawal Benefit program described below is only
being offered in those jurisdictions where we have received regulatory
approval and will be offered subsequently in other jurisdictions when we
receive regulatory approval in those jurisdictions. Certain terms and
conditions may differ between jurisdictions once approved. Currently, the
program can only be elected by new purchasers on the Issue Date of their
Annuity. We may offer the program to existing Annuity Owners in the future,
subject to our eligibility rules and restrictions. The Guaranteed Minimum
Withdrawal Benefit program is not available if you elect any other optional
living benefit.
We offer a program that guarantees your ability to withdraw amounts equal to
an initial principal value (called the "Protected Value"), regardless of the
impact of market performance on your Account Value, subject to our program
rules regarding the timing and amount of withdrawals. The program 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 protect
your principal. You are not required to make withdrawals as part of the
program - the guarantee is not lost if you withdraw less than the maximum
allowable amount of principal each year under the rules of the program. There
is an additional charge if you elect the GMWB program; 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 market 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 program 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. 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 program. The
initial Protected Value is equal to the greater of (A) the Account Value on
the date you elect the GMWB program, plus any additional Purchase Payments
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 program and the date of your
first withdrawal.
.. If you elect the GMWB program at the time you purchase your Annuity, the
Account Value will be your initial Purchase Payment plus any Credit applied
to such Purchase Payment.
.. If we offer the GMWB program to existing Annuity Owners, the Account Value
on the anniversary of the Issue Date of your Annuity following your
election of the GMWB program 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 and any Credits that we apply to the Purchase Payment.
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 5/th/ Annuity
anniversary following the first withdrawal under the GMWB program. The
Protected Value can be stepped up again on or after the 5/th/ Annuity
anniversary following the preceding step-up. If you elect to step-up the
Protected Value, you must do so during the 30-day period prior to your
eligibility date. If you elect to step-up the Protected Value under the
program, and on the date you elect to step-up, the charges under the GMWB
program have changed for new purchasers, your program 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 program, 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 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.
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The GMWB program 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 Payment).
.. 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 program are October 13,
2005; 2) an initial Purchase Payment of $250,000; 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 THE GMWB PROGRAM
. In addition to any withdrawals you make under the GMWB program, market
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.
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. 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 program does not increase or
decrease the amount otherwise payable under the Annuity's other death
benefit options. Generally, the GMWB program 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 program 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 program are subject to all of the terms and
conditions of your Annuity, including any MVA that may apply.
.. Withdrawals made while the GMWB program is in effect will be treated, for
tax purposes, in the same way as any other withdrawals under your Annuity.
.. The GMWB program 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 program. The GMWB program
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 program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. 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.
We may also require that you allocate your Account Value according to an
asset allocation model.
Election of the Program
Currently, the GMWB program can only be elected at the time that you purchase
your Annuity. In the future, we may offer existing Annuity Owners the option
to elect the GMWB program after the Issue Date of their Annuity, subject to
our eligibility rules and restrictions. If you elect the GMWB program after
the Issue Date of your Annuity, the program will be effective as of the next
anniversary date. Your Account Value as of such anniversary date will be used
to calculate the initial Protected Value and the initial Protected Annual
Withdrawal Amount.
We reserve the right to restrict the maximum amount of Protected Value that
may be covered under the GMWB program under this Annuity or any other
annuities that you own that are issued by Prudential Annuities or its
affiliated companies.
Termination of the Program
The program terminates automatically when your Protected Value reaches zero
based on your withdrawals. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The
program terminates upon your surrender of the Annuity, upon due proof of death
(unless your surviving spouse elects to continue your Annuity and the GMWB
program or your Beneficiary elects to receive the amounts payable under the
GMWB program in lieu of the death benefit) or upon your election to begin
receiving annuity payments.
The charge for the GMWB program will no longer be deducted from your Account
Value upon termination of the program.
Charges under the Program
Currently, we deduct a charge equal to 0.35% of the average daily net assets
of the Sub-accounts per year to purchase the GMWB program. The annual charge
is deducted daily.
.. If, during the seven years following the effective date of the program, you
do not make any withdrawals, and do not make any additional Purchase
Payments after a five-year period following the effective date of the
program, the program will remain in effect; however, we will waive the
annual charge going forward. If you make an additional Purchase Payment
following the
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waiver of the annual charge, we will begin charging for the program. After
year seven (7) following the effective date of the program, withdrawals
will not cause a charge to be re-imposed.
.. If you elect to step-up the Protected Value under the program, and on the
date you elect to step-up, the charges under the program have changed for
new purchasers, your program 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. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be
adjusted so that the payments do not trigger any penalty or excise taxes due
to tax considerations such as required minimum distribution provisions under
the tax law.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
The Guaranteed Minimum Income Benefit program described below is only being
offered in those jurisdictions where we have received regulatory approval, and
will be offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Currently, the program can only be
elected by new purchasers on the Issue Date of their Annuity. We may offer the
program to existing Annuity Owners in the future, subject to our eligibility
rules and restrictions. The Guaranteed Minimum Income Benefit program is not
available if you elect any other optional living benefit.
We offer a program 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 market performance on your Account Value. The program 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 elect the GMIB program.
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 program and is equal to your Account Value on such date. Currently, since
the GMIB program 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
program, or the effective date of any step-up value, plus any additional
Purchase Payments made after the waiting period begins ("Maximum Protected
Income Value"), minus the sum of any reductions in the Protected Income Value
due to withdrawals 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 program 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. 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 will apply the 5%
annual growth rate on the new amount from the date the Purchase
Payment is applied.
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. 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
program 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 program 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, 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 program, 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 program, and
on the date you elect to step-up, the charges under the GMIB program have
changed for new purchasers, your program 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.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1) the Issue Date and the effective date of the GMIB program are
October 13, 2005; 2) an initial Purchase Payment of $250,000; 3) an initial
Protected Income Value 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 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 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 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 and the Protected Income Value is $242,006.64. 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 Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
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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. The Remaining Limit is reset to 5% of this
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 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, prior to 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 your95/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 program. 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 program. 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.
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 program does not
directly affect the Annuity's Account Value,
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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.
.. The 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 program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. 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.
We may also require that you allocate your Account Value according to an
asset allocation model.
.. If you change the Annuitant after the effective date of the GMIB program,
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 program based on his or her age at
the time of the change, then the GMIB program will terminate.
.. Annuity payments made under the GMIB program 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
program or under any other annuity payment option we make available, the
protection provided by the Annuity's basic Death Benefit or any optional
Death Benefit provision you elected will no longer apply.
Election of the Program
Currently, the GMIB program can only be elected at the time that you purchase
your Annuity. The Annuitant must be age 75 or less as of the effective date of
the GMIB program. In the future, we may offer existing Annuity Owners the
option to elect the GMIB program after the Issue Date of their Annuity,
subject to our eligibility rules and restrictions. If you elect the GMIB
program after the Issue Date of your Annuity, the program will be effective as
of the date of election. Your Account Value as of the that date will be used
to calculate the Protected Income Value as of the effective date of the
program.
Termination of the Program
The GMIB program cannot be terminated by the Owner once elected. The GMIB
program 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 program may also be terminated if you designate a new Annuitant who would
not be eligible to elect the GMIB program based on his or her age at the time
of the change.
Upon termination of the GMIB program 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 Program
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 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 the 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 program or any other annuity payment option we make available
during an Annuity Year, or the GMIB program 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.
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LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)/SM/
The Lifetime Five Income Benefit program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Lifetime Five can be elected only where
the Annuitant and the Owner are the same person or, if the Annuity Owner is an
entity, where there is only one Annuitant. Currently, if you elect Lifetime
Five and subsequently terminate the benefit, there will be a restriction on
your ability to re-elect Lifetime Five and elect another of our lifetime
withdrawal benefits. The Annuitant must be at least 45 years old when the
program is elected. The Lifetime Five Income Benefit program is not available
if you elect 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 program.
We offer a program that guarantees your ability to withdraw amounts equal to a
percentage of an initial principal value (called the "Protected Withdrawal
Value"), regardless of the impact of market performance on your Account Value,
subject to our program 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 program 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 program - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the program.
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 greater 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 program, 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.
.. If you elect the Lifetime Five program at the time you purchase your
Annuity, the Account Value will be your initial Purchase Payment.
.. For existing Owners who are electing the Lifetime Five benefit, the Account
Value on the date of your election of the Lifetime Five program will be
used to determine the initial Protected Withdrawal Value.
.. If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
dollar-for-dollar basis up to 7% 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 program on or after March 20, 2006:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
1st anniversary of the first withdrawal under the Lifetime Five program
.. the Protected Withdrawal Value can be stepped up again on or after the 1st
anniversary of the preceding step-up
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If you elected the Lifetime Five program prior to March 20, 2006 and that
original election remains in effect:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
5th anniversary of the first withdrawal under the Lifetime Five program
.. the Protected Withdrawal Value can be stepped up again on or after the 5th
anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the program, and on the
date you elect to step-up, the charges under the Lifetime Five program have
changed for new purchasers, your program 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 program on or after March 20, 2006 and have
also elected the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1st Annuity
Anniversary that is at least one year after the later of (1) the date of
the first withdrawal under the Lifetime Five program 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
1st Annuity Anniversary that is at least one year after the most recent
step-up
If you elected the Lifetime Five program 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 Program 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. Under the Lifetime Five program, 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. 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 if such amount is greater than your Annual Income Amount. Your
Annual Income Amount also increases if you make additional Purchase Payments.
The amount of the increase is equal to 5% of any additional Purchase Payments.
Any increase will be added to your Annual Income Amount beginning on the day
that the step-up is effective or the Purchase Payment is made. A determination
of whether you have exceeded your Annual Income Amount is made at the time of
each withdrawal; therefore a subsequent increase in the Annual Income Amount
will not offset the effect of a withdrawal that exceeded the Annual Income
Amount at the time the withdrawal was made.
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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 program, 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 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. 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 if such amount is greater than your
Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you
make additional Purchase Payments. The amount of the increase is equal to 7%
of any additional Purchase Payments. A determination of whether you have
exceeded your Annual Withdrawal Amount is made at the time of each withdrawal;
therefore, a subsequent increase in the Annual Withdrawal Amount will not
offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount
at the time the withdrawal was made. The Lifetime Five program does not affect
your ability to make withdrawals under your Annuity or limit your ability to
request withdrawals that exceed the Annual Income Amount 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 program
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
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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
(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 PROGRAM
. 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 program 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.
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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.
. 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 program are subject to all of the
terms and conditions of your Annuity.
. Withdrawals made while the Lifetime Five program is in effect will be
treated, for tax purposes, in the same way as any other withdrawals
under your Annuity. The Lifetime Five program 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 Withdrawal Value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Lifetime Five program. The
Lifetime Five program 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.
. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
elect and maintain the benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly-adopted requirements.
Subsequent to any change in requirements, transfers of Account Value and
allocation of additional Purchase Payments may be subject to the new
investment limitations.
Election of the Program
The Lifetime Five program can be elected at the time that you purchase your
Annuity. We also offer existing Owners the option to elect the Lifetime Five
program after the Issue Date of their Annuity, subject to our eligibility
rules and restrictions. Your Account Value as the date of election will be
used as a basis to calculate the initial Protected Withdrawal Value, the
initial Protected Annual Withdrawal Amount, and the Annual Income Amount.
Currently, if you terminate the program, you generally will only be permitted
to re-elect Lifetime Five or elect another lifetime withdrawal benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the benefit was last terminated.
If you elected Lifetime Five prior to March 20, 2006, and you terminate the
program, there will be no waiting period before you can re-elect Lifetime Five
or elect another lifetime withdrawal benefit provided that you had not
previously elected Lifetime Five after the Issue Date and within the same
Annuity Year that you terminated Lifetime Five. If you had previously elected
Lifetime Five after the Issue Date and within the same Annuity Year that you
terminate Lifetime Five, you will be able to re-elect the program or elect
another lifetime withdrawal benefit on any date on or after the next
anniversary of the Annuity Date. However, once you choose to re-elect/elect,
the waiting period described above will apply to subsequent re-elections. We
reserve the right to limit the re-election/election frequency in the future.
Before making any such change to the re-election/election frequency, we will
provide prior notice to Owners who have an effective Lifetime Five Income
Benefit.
Termination of the Program
The program terminates automatically when your Protected Withdrawal Value and
Annual Income Amount equal zero. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. The
program terminates upon your surrender of your Annuity, upon the death of the
Annuitant (but your surviving spouse may elect a new Lifetime Five if your
spouse elects the spousal continuance option and your spouse would then be
eligible to elect the benefit if he or she was a new purchaser), 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 program at any time, we may not
terminate the program other than in the circumstances listed above. However,
we may stop offering the program for new elections or re-elections at any time
in the future.
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The charge for the Lifetime Five program will no longer be deducted from your
Account Value upon termination of the program.
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. In addition, the amount and duration of payments under the
annuity payment and Death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as Required Minimum Distribution provisions under the tax law.
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.
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT (SPOUSAL LIFETIME FIVE)/SM/
The Spousal Lifetime Five program described below is only being offered in
those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Currently, if you elect Spousal Lifetime
Five and subsequently terminate the benefit, there may be a restriction on
your ability to re-elect Spousal Lifetime Five or elect another lifetime
withdrawal benefit (See "Election of and Designations under the Program" below
for details). Spousal Lifetime Five must be elected based on two Designated
Lives, as described below. Each Designated Life must be at least 55 years old
when the benefit is elected. The Spousal Lifetime Five program is not
available if you elect 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 program.
We offer a program that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount ("Spousal
Life Income Benefit") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Account Value, subject to our program 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 program 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 program - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the program.
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 greater 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 program, or application of the Purchase Payment to your
Annuity, until the date of your first withdrawal or the 10th 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 10th anniversary of the benefit
effective date, if earlier. With respect to (A) and (C) above, after the 10th
anniversary of the benefit effective date, each value is increased by the
amount of any subsequent Purchase Payments.
.. If you elect the Spousal Lifetime Five program at the time you purchase
your Annuity, the Account Value will be your initial Purchase Payment.
.. For existing Owners who are electing the Spousal Lifetime Five benefit, the
Account Value on the date of your election of the Spousal Lifetime Five
program will be used to determine the initial Protected Withdrawal Value.
Key Feature - Annual Income Amount Under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not
79
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. The Spousal
Lifetime Five program does not affect your ability to make withdrawals under
your Annuity or limit your ability to request withdrawals that exceed the
Annual Income Amount.
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
1st anniversary of the first withdrawal under the Spousal Lifetime Five
program. The Annual Income Amount can be stepped up again on or after the 1st
anniversary of the preceding step-up. If you elect to step-up the Annual
Income Amount under the program, and on the date you elect to step-up, the
charges under the Spousal Lifetime Five program have changed for new
purchasers, your program 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. Your Annual Income Amount
also increases if you make additional Purchase Payments. The amount of the
increase is equal to 5% of any additional Purchase Payments. Any increase will
be added to your Annual Income Amount beginning on the day that the step-up is
effective or the Purchase Payment is made. A determination of whether you have
exceeded your Annual Income Amount is made at the time of each withdrawal;
therefore a subsequent increase in the Annual Income Amount will not offset
the effect of a withdrawal that exceeded the Annual Income Amount at the time
the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
the Spousal Lifetime Five program 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 1st 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 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 program 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
80
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 PROGRAM
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.
.. 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 program are subject to all of
the terms and conditions of the Annuity.
.. Withdrawals made while the Spousal Lifetime Five program is in effect will
be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Spousal Lifetime Five program 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. 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 program. The
Spousal Lifetime Five program 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.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the benefit. If, subsequent to your election of the benefit,
we change our requirements for how Account Value must be allocated under
the benefit, the new requirement will apply only to new elections of the
benefit, and we will not compel you to re-allocate your Account Value in
accordance with our newly-adopted requirements. Subsequent to any change in
requirements, transfers of Account Value and allocation of additional
Purchase Payments may be subject to the new investment limitations.
81
.. There may be circumstances where you will continue to be charged the full
amount for the Spousal Lifetime Five program 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 program 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.
Election of and Designations under the Program
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the program and at the death of the first of the
Designated Lives to die. Currently, the program may 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 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. The first named Owner
must be the Annuitant. Both Owners 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 Contingent Annuitant must each be at
least 55 years old at the time of election.
No Ownership changes or Annuitant changes will be permitted once this program
is elected. However, if the Annuity is co-owned, the Owner that is not the
Annuitant may be removed without affecting the benefit.
The Spousal Lifetime Five program can be elected at the time that you purchase
your Annuity. We also offer existing Owners the option to elect the Spousal
Lifetime Five program after the Issue Date of their Annuity, subject to our
eligibility rules and restrictions. Your Account Value as the date of election
will be used as a basis to calculate the initial Protected Withdrawal Value
and the Annual Income Amount.
Currently, if you terminate the program, you may, for certain optional
benefits be permitted to elect a lifetime withdrawal benefit only on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to Owners who have an effective Spousal Lifetime Five Income Benefit.
Termination of the Program
The program terminates automatically when your Annual Income Amount equals
zero. You may terminate the program at any time by notifying us. If you
terminate the program, any guarantee provided by the benefit will terminate as
of the date the termination is effective and certain restrictions on
re-election of the benefit will apply as described above. We reserve the right
to further limit the frequency election in the future. The program 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. The charge for the Spousal
Lifetime Five program will no longer be deducted from your Account Value upon
termination of the program.
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 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. In addition, the amount and duration of payments
under the annuity payment and Death Benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under
state law.
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.
82
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HD5)/SM/
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Highest Daily Lifetime Five is offered as
an alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you
elect Highest Daily Lifetime Five and subsequently terminate the benefit, you
may not be able to re-elect Highest Daily Lifetime Five, and will have a
waiting period until you can elect another lifetime withdrawal benefit. See
"Election of and Designations under the Program" for details. The income
benefit under Highest Daily Lifetime Five currently is based on a single
"designated life" who is at least 55 years old on the date that the benefit is
acquired. The Highest Daily Lifetime Five Benefit is not available if you
elect any other optional living benefit, although you may elect any optional
death benefit (other than the Highest Daily Value Death Benefit or the Plus 40
optional life insurance rider). 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 program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Total Annual Income
Amount") equal to a percentage of an initial principal value (the "Total
Protected Withdrawal Value") regardless of the impact of market performance on
the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your 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 program - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the benefit. As discussed below, we require that you
participate in our asset transfer program in order to participate in Highest
Daily Lifetime Five, and in the Appendices to this prospectus, we set forth
the formula under which we make those asset transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
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 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;
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(b)200% of all Purchase Payments made during the one-year period after the
date you elected Highest Daily Lifetime Five; and
(c)100% of all Purchase Payments made more than one year after the date you
elected Highest Daily Lifetime Five, but prior to the date of your first
withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments will increase the Total Annual Income
Amount, while "excess" withdrawals (as described below) may decrease the Total
Annual Income Amount.
Key Feature - Total Annual Income Amount under the Highest Daily Lifetime Five
Benefit
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value. For purposes of the asset transfer formula described below,
we also calculate a Highest Daily Annual Income Amount, which is initially
equal to 5% of the Protected Withdrawal Value. Under the Highest Daily
Lifetime Five benefit, if your cumulative withdrawals in 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. A
Purchase Payment that you make will increase the then-existing Total Annual
Income Amount and Highest Daily Annual Income Amount by an amount equal to 5%
of the Purchase Payment.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
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 program 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.
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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).
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.
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 with Adjusted Total Annual
withdrawal and Purchase Income Amount (5% of the
Date* Account value Payments)** Highest Quarterly Value)
- ----- ------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $110,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the 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 Program
.. 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
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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
(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.
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the permitted sub-accounts. However, the asset transfer 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 a Fixed
Allocation if you elect this benefit.
.. Transfers to and from the Sub-accounts and the Benefit Fixed Rate Option
triggered by the asset transfer 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 elect
and 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, the new requirement will apply
only to new elections of the benefit, and we will not compel you to
re-allocate your Account Value in accordance with our newly-adopted
requirements. 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 on a
daily basis against the sub-accounts and as a reduction to the interest
rate credited under the Benefit Fixed Rate Account. This charge is in
addition to any other fees under the annuity.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the 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 (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
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Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. We also offer existing owners (i.e., those who have already acquired
their Annuity) the option to elect Highest Daily Lifetime Five after the Issue
Date, subject to our eligibility rules and restrictions.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you
(a) will not be permitted to re-elect the benefit and (b) may be allowed to
elect another lifetime withdrawal benefit on any anniversary of the Issue Date
that is at least 90 calendar days from the date the Highest Daily Lifetime
Five Benefit was terminated. We reserve the right to further limit the
election frequency in the future. Before making any such change to the
election frequency, we will provide prior notice to Owners who have an
effective Highest Daily Lifetime Five Benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the 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.
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) 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 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.
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer 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"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The Benefit Fixed Rate Account is available only with this
benefit, and thus you may not allocate Purchase Payments to that Account. The
interest rate that we pay with respect to the Benefit Fixed Rate Account is
reduced by an amount that corresponds generally to the charge that we assess
against your variable Sub-accounts for Highest Daily Lifetime Five. The
Benefit Fixed Rate Account is not subject to the Investment Company Act of
1940 or the Securities Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your 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 a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the
formula, which we apply each 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
87
Income Amount each year for the rest of your life. In the formula, we refer to
that value as the "Target Value" or "L". If you have already made a
withdrawal, your projected Highest Daily Annual Income Amount (and thus your
Target Value) would take into account any automatic step-up that was scheduled
to occur according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds
a certain percentage (currently 83%), it means essentially that too much
Target Value is not offset by assets within the Benefit Fixed Rate Account,
and therefore we will transfer an amount from your Permitted Sub-accounts to
the Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed
Rate Account to the Permitted Sub-accounts would occur. Note that the formula
is calculated with reference to the Highest Daily Annual Income Amount, rather
than with reference to the Annual Income Amount.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Target Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For newly issued annuities that elect Highest
Daily Lifetime Five and existing annuities that elect Highest Daily Lifetime
Five, however, we reserve the right to change the ratios.
While you are not notified when your 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 Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer; or
. If a portion of your 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.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that over time a significant portion, and under certain
circumstances all, of your Account Value may be allocated to the Benefit Fixed
Rate Account. Note that if your entire Account Value is transferred to the
Benefit Fixed Rate Account, then based on the way the formula operates, that
value would remain in the Benefit Fixed Rate Account unless you made
additional Purchase Payments to the Permitted Sub-Accounts, which could cause
Account Value to transfer 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. In addition, the amount and
duration of payments under the annuity payment and death benefit provisions
may be adjusted so that the payments do not trigger any penalty or excise
taxes due to tax considerations such as Required Minimum Distribution
provisions under the tax law. Please note, however, that any withdrawal you
take prior to the Tenth Anniversary, even if withdrawn to satisfy required
minimum distribution rules, will cause you to lose the ability to receive
Enhanced Protected Withdrawal Value and an amount under the Return of
Principal Guarantee.
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As indicated, withdrawals made while the Highest Daily Lifetime Five Benefit
is in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the 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 non-qualified annuity, and your annuity has
received Enhanced Protected Withdrawal Value and/or an additional amount under
the Return of Principal Guarantee, as with all withdrawals, once all Purchase
Payments are returned under the Annuity, all subsequent withdrawal amounts
will be taxed as ordinary income.
HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (HD7)/SM/
Highest Daily Lifetime Seven is offered as an alternative to Lifetime Five,
Spousal Lifetime Five, and Highest Daily Lifetime Five. Currently, if you
elect Highest Daily Lifetime Seven and subsequently terminate the benefit, you
may have a waiting period until you can elect another lifetime withdrawal
benefit. See "Election of and Designations under the Program" below for
details. The income benefit under Highest Daily Lifetime Seven currently is
based on a single "designated life" who is at least 55 years old on the date
that the benefit is acquired. The Highest Daily Lifetime Seven Benefit is not
available if you elect any other optional living benefit, although you may
elect any optional death benefit, other than the Highest Daily Value Death
Benefit or the Plus40 Optional 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 program. For a more detailed description of the permitted investment
options, see the Investment options section of this prospectus.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of market performance on the Account Value,
subject to our program rules regarding the timing and amount of withdrawals.
The benefit may be appropriate if you intend to make periodic withdrawals from
your 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 program - the guarantees are not lost if you withdraw less than
the maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Seven, and in Appendix K to
this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Seven is the
Protected Withdrawal Value. Because each of the Protected Withdrawal Value and
Annual Income Amount is determined in a way that is not solely related to
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.
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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. 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). Reductions include the actual amount of the
withdrawal. Withdrawals of any amount up to and including the Annual Income
Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Withdrawals of Excess Income will reduce the Protected Withdrawal
Value by the same ratio as the reduction to the Annual Income Amount.
A Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment based
on the age of the Annuitant at the time of the first withdrawal (the
percentages are: 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages
80-84, and 8% for ages 85 and older) and (ii) increase the Protected
Withdrawal Value by the amount of the Purchase Payment.
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 program does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under 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.
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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 1st 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 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.
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 with Adjusted Annual Income
withdrawal and Purchase Amount (5% of the
Date* Account Value Payments)** Highest Quarterly Value)
- ----- ------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the 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.
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** 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 PROGRAM
.. 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
are made. However, if a withdrawal in the latter scenario was taken to meet
required minimum distribution requirements under the Annuity, then the
benefit will not terminate, and we will continue to pay the Annual Income
Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent 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 95th birthday
will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Seven benefit are subject to
all of the terms and conditions of the Annuity.
.. 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.
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.
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the permitted Sub-accounts.
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.. You cannot allocate Purchase Payments or transfer Account Value to the AST
Investment Grade Bond Portfolio Sub-account (see description below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". Upon the initial
transfer of your Account Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation. In addition, you can find a copy of the AST Investment
Grade Bond Portfolio prospectus by going to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and an AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Highest Daily Lifetime Seven benefit. If, subsequent to your election
of the benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements.
.. 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.
Election of and Designations under the Program
For Highest Daily Lifetime Seven, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the 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 to the Annuitant, or vice versa or (c) ownership
is transferred from one entity to another entity.
Highest Daily Lifetime Seven can be elected at the time that you purchase your
Annuity or after the Issue Date, subject to our eligibility rules and
restrictions.
Currently, if you terminate the Highest Daily Lifetime Seven benefit, you
generally will only be allowed to re-elect the benefit or elect the Spousal
Lifetime Five Benefit, the Lifetime Five Income Benefit, the Highest Daily
Lifetime Five Benefit or the Spousal Highest Daily Lifetime Seven Income
Benefit on any anniversary of the Issue Date that is at least 90 calendar days
from the date the Highest Daily Lifetime Seven Benefit was terminated. We
reserve the right to further limit the election frequency in the future. We
also reserve the right to waive that requirement.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your 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 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 (other
than 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 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.
93
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the 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 Program).
Upon termination of Highest Daily Lifetime Seven other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
Asset Transfer Component of Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Seven. For purposes of this
benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer 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 asset transfer 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
the Appendices 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.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime Seven, the ratios we use will be fixed. For
newly-issued Annuities that elect Highest Daily Lifetime Seven and existing
Annuities that elect Highest Daily Lifetime Seven, however, we reserve the
right 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; 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
94
such existing instructions) pro rata (i.e., in the same proportion as the
current balances in your variable investment options). Amounts taken out of
the AST Investment Grade Bond Sub-account will be withdrawn for this
purpose on a last-in, first-out basis; or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Account Value is systematically transferred to
the AST Investment Grade Bond Sub-account during periods of market declines or
low interest rates, less of your Account Value may be available to participate
in the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. If your entire Account Value is transferred to the
AST Investment Grade Bond Sub-account then based on the way the formula
operates, that value would remain in the AST Investment Grade Bond Sub-account
unless you made additional Purchase Payments to the Permitted Sub-accounts,
which could cause Account Value to transfer out of the AST Investment Grade
Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
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 non-qualified 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/SM/ INCOME BENEFIT (SHD)/SM/
Spousal Highest Daily Lifetime Seven is the spousal version of Highest Daily
Lifetime Seven. Currently, if you elect Spousal Highest Daily Lifetime Seven
and subsequently terminate the benefit, you will have a waiting period until
you can elect another lifetime withdrawal benefit. See "Election of and
Designations under the Program" below for details. Spousal Highest Daily
Lifetime Seven must be elected based on two Designated Lives, as described
below. Each Designated Life must be at least 59 1/2 years old when the benefit
is elected. Spousal Highest Daily Lifetime Seven is not available if you elect
any other optional living benefit or optional death benefit. As long as your
Spousal 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 program. For a more detailed description of
permitted investment options, see the Investment options section of this
prospectus.
We offer a benefit that guarantees until the later death of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them (the "Designated Lives", and each, a
"Designated Life") the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The benefit may be appropriate if you intend to make
periodic withdrawals from your 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 Highest Daily Lifetime Seven benefit
after the death of the first spouse. You are not required to make withdrawals
as part of the program - the guarantees are not lost if you withdraw less than
the maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Spousal Highest Daily Lifetime Seven, and in
Appendix K to this prospectus, we set forth the formula under which we make
those asset transfers.
As discussed below, a key component of Spousal Highest Daily Lifetime Seven is
the Protected Withdrawal Value. Because each of the Protected Withdrawal Value
and Annual Income Amount is determined in a way that is not solely related to
Account Value,
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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 greater 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 Spousal Highest Daily Lifetime
Seven Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage depends on the age of the youngest Designated
Life on the date of the first withdrawal after election of the benefit. The
percentages are: 5% for ages 79 and younger, 6% for ages 80 to 84, 7% for ages
85 to 89, and 8% for ages 90 and older. We use the age of the youngest
Designated Life even if that Designated Life is no longer a participant under
the 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). Reductions include the
actual amount of the withdrawal. Withdrawals of any amount up to and including
the Annual Income Amount will reduce the Protected Withdrawal Value by the
amount of the withdrawal. Withdrawals of Excess Income will reduce the
Protected Withdrawal Value by the same ratio as the reduction to the Annual
Income Amount. A Purchase Payment that you make will (i) increase the then-
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existing Annual Income Amount by an amount equal to a percentage of the
Purchase Payment 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.
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 program does not affect your ability
to make withdrawals under your annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime Seven, if your cumulative withdrawals in 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
. 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 1st 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 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.
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 with Adjusted Annual
withdrawal and Purchase Income Amount (5% of the
Date* Account Value Payments)** Highest Quarterly Value)
- ----- ------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the 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 SPOUSAL HIGHEST DAILY LIFETIME SEVEN PROGRAM
.. 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
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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 95th birthday, will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Spousal Highest Daily Lifetime Seven benefit are
subject to all of the terms and conditions of the Annuity.
.. 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. 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 market performance,
you will be able to receive your Annual Income Amount in the form of
periodic benefit payments.
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Account Value to the AST
Investment Grade Bond Portfolio Sub-account (as described below) if you
elect this benefit. A summary description of the AST Investment Grade Bond
Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". Upon the initial
transfer of your Account Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation. In addition, you can find a copy of the AST Investment
Grade Bond Portfolio prospectus by going to www.prudentialannuities.com.
.. You can make withdrawals from your Annuity 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 market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the asset transfer component of the
benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to elect and maintain
the Spousal Highest Daily Lifetime Seven benefit. If, subsequent to your
election of the benefit, we change our requirements for how Account Value
must be allocated under the benefit, the new requirement will apply only to
new elections of the benefit, and we will not compel you to re-allocate
your Account Value in accordance with our newly adopted requirements.
.. 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),
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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.
Election of and Designations under the Program
Spousal Highest Daily Lifetime Seven can only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the program and at the death of the
first of the Designated Lives to die. Currently, Spousal Highest Daily
Lifetime Seven only may be elected where the Owner, Annuitant, and Beneficiary
designations are as follows:
. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 59 1/2 years old at the time of
election; or
. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses
named equally. One of the owners must be the Annuitant. Each Owner must
each be at least 59 1/2 years old at the time of election; or
. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any
successor Code section thereto) ("Custodial Account"), the beneficiary
is the Custodial Account, and the spouse of the Annuitant is the
Contingent Annuitant. Both the Annuitant and the Contingent Annuitant
each must be at least 59 1/2 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a) if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b) if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under this
benefit. If the Designated Lives divorce, the Spousal Highest Daily Lifetime
Seven benefit may not be divided as part of the divorce settlement or
judgment. Nor may the divorcing spouse who retains ownership of the Annuity
appoint a new Designated Life upon re-marriage.
Spousal Highest Daily Lifetime Seven can be elected at the time that you
purchase your Annuity or after the Issue Date, subject to our eligibility
rules and restrictions.
Currently, if you terminate the Spousal Highest Daily Lifetime Seven benefit,
you generally will only be allowed to re-elect the benefit or to elect the
Lifetime Five Benefit, the Spousal Lifetime Five Benefit, the Highest Daily
Lifetime Five Benefit, or the Highest Daily Lifetime Seven Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Spousal Highest Daily Lifetime Seven Benefit was terminated. We reserve
the right to further limit the election frequency in the future. We also
reserve the right to waive that requirement.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your 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 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 (other
than 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 Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) if upon the death
of the first Designated Life, the surviving Designated Life opts to take the
death benefit under the Annuity (thus, the benefit does not terminate solely
because of the death of the first Designated Life) (ii) upon the death
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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 Program).
Upon termination of Spousal Highest Daily Lifetime Seven other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account (as
defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Spousal Highest Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you elect Spousal Highest Daily Lifetime Seven. For purposes
of this benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Spousal Highest Daily
Lifetime Seven, we require that you participate in our specialized asset
transfer program, under which we may transfer 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 asset
transfer 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 the Appendix K 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)
Highest Daily annual income amount. Note that we use 5% in the formula,
irrespective of the youngest Designated Life's attained age. Then we produce
an estimate of the total amount we would target in our allocation model, based
on the projected income amount and factors set forth in the formula. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected income amount (and thus your Target
Value) would take into account any automatic step-up, any subsequent purchase
payments, and any excess withdrawals. Next, the formula subtracts from the
Target Value the amount held within the AST Investment Grade Bond Sub-account
on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the AST Investment
Grade Bond Sub-account, is called the "Target Ratio" or "r". If the Target
Ratio exceeds a certain percentage (currently 83%), it means essentially that
too much Target Value is not offset by assets within the AST Investment Grade
Bond Sub-account, and therefore we will transfer an amount from your Permitted
Sub-accounts to the AST Investment Grade Bond Sub-account. Conversely, if the
Target Ratio falls below a certain percentage (currently 77%), then a transfer
from the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts
would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the AST Investment Grade
Bond Sub-account, because such a reduction will tend to increase the Target
Ratio. Moreover, certain market return scenarios involving "flat" returns over
a period of time also could result in the transfer of money to the AST
Investment Grade Bond Sub-account. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Spousal Highest Daily Lifetime Seven, the ratios we use will be fixed.
For newly-issued Annuities that elect Spousal Highest Daily Lifetime Seven and
existing Annuities that elect Spousal Highest Daily Lifetime Seven, however,
we reserve the right to change the ratios.
While you are not notified when your 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; 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).
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Amounts taken out of the AST Investment Grade Bond Sub-account will be
withdrawn for this purpose on a last-in, first-out basis; or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
If a significant amount of your Account Value is systematically transferred to
the AST Investment Grade Bond Sub-account during periods of market declines or
low interest rates, less of your Account Value may be available to participate
in the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. If your entire Account Value is transferred to the
AST Investment Grade Bond Sub-account then based on the way the formula
operates, that value would remain in the AST Investment Grade Bond Sub-account
unless you made additional Purchase Payments to the Permitted Sub-accounts,
which could cause Account Value to transfer out of the AST Investment Grade
Bond Sub-account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "KEY FEATURE -
Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
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 non-qualified annuity, as with all withdrawals, once
all Purchase Payments are returned under the Annuity, all subsequent
withdrawal amounts will be taxed as ordinary income.
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DEATH BENEFIT
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
The Annuity provides a Death Benefit during its accumulation period. If the
Annuity is owned by one or more natural persons, the Death Benefit is payable
upon the first death of an Owner. If the Annuity is owned by an entity, the
Death Benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. 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
The 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 the Annuity. The Annuity also offers
four 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.
The basic Death Benefit depends on the decedent's age on the date of death:
If death occurs before the decedent's age 85: The Death Benefit is the greater
of:
.. The sum of all Purchase Payments less the sum of all withdrawals; and
.. The sum of your Account Value in the Sub-accounts and your Interim Value in
the Fixed Allocations.
If death occurs when the decedent is age 85 or older: The Death Benefit is
your Account Value.
OPTIONAL DEATH BENEFITS
Four optional Death Benefits are offered for purchase with your Annuity to
provide an enhanced level of protection for your beneficiaries.
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. Certain terms and conditions may differ between
jurisdictions once approved and if you purchase your Annuity as part of an
exchange, replacement or transfer, in whole or in part, from any other Annuity
we issue. 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 or
Spousal Highest Daily Lifetime Seven, you are not permitted to elect an
optional Death Benefit.
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 can provide
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 provides a benefit
that is 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 must be age 75 or less at the time the
benefit is purchased. If the Annuity has joint Owners, the oldest Owner must
be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be
age 75 or less.
Calculation of Enhanced Beneficiary Protection Optional Death Benefit
If you purchase the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the basic Death Benefit described above;
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PLUS
2. 40% of your "Growth" under the Annuity, as defined below.
"Growth" means the sum of your Account Value in the Sub-accounts and your
Interim Value in the Fixed Allocations, minus the total of all Purchase
Payments 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 the 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 described above is
currently being offered in those jurisdictions where we have received
regulatory approval. Certain terms and conditions may differ between
jurisdictions once approved. Please see Appendix F 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 is not available if you elect
the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit or
the Spousal Lifetime Five Income Benefit.
See Appendix B for examples of how the Enhanced Beneficiary Protection
Optional Death Benefit is calculated.
Highest Anniversary Value Death Benefit ("HAV")
If the 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 the 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 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.
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 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. Certain terms and conditions may differ between jurisdictions
once approved. The Highest Anniversary Value Death Benefit is not
available if you elect the "Combination 5% Roll-up and Highest
Anniversary Value" or the "Highest Daily Value" Death Benefit. It also
is not available with Spousal Lifetime Five or Spousal Highest Daily
Lifetime Seven. Please see Appendix F 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.
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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 the
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 the 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 the
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 the 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 investment options. 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 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 Death
Benefit's 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.
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 made after the Death Benefit Target Date;
MINUS
. the sum of all withdrawals which reduce the 5% Roll-up
proportionally.
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 contract 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. Certain terms and conditions may
differ between jurisdictions once approved. 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 or
Spousal Highest Daily Lifetime Seven. Please see Appendix F 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.
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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
the Annuity.
. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" less proportional withdrawals since such
anniversary and plus any Purchase Payments since such anniversary.
. The Anniversary Value is the Account Value as of each anniversary of the
Issue Date of the Annuity. The Anniversary Value on the Issue Date is
equal to your Purchase Payment.
. 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")
If the Annuity has one Owner, the Owner must be age 79 or less at the time the
Highest Daily Value Death Benefit is elected. If the Annuity has joint Owners,
the older Owner must be age 79 or less. If there are Joint Owners, death of
the Owner refers to the first to die of the Joint Owners. If the Annuity is
owned by an entity, the Annuitant must be age 79 or less and death of the
Owner refers to the death of the Annuitant.
If you elect this benefit, you must allocate your Account Value in accordance
with the then permitted and available option(s) with this benefit. If,
subsequent to your election of the benefit, we change our requirements for how
Account Value must be allocated under the benefit, the new requirement will
apply only to new elections of the benefit, and we will not compel you to
re-allocate your Account Value in accordance with our newly-adopted
requirements. 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 HDV 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 HDV 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 HDV on the Death Benefit Target Date plus the sum of all Purchase
Payments less the sum of all proportional withdrawals since the Death
Benefit Target Date.
The amount determined by this calculation is increased by any Purchase
Payments received after the Owner's date of death and decreased by any
proportional withdrawals since such date.
The Highest Daily Value Death Benefit described above is currently being
offered in those jurisdictions where we have received regulatory approval.
Certain terms and conditions may differ between jurisdictions once approved.
The Highest Daily Value Death Benefit is not available if you elect the
Guaranteed Return Option, Guaranteed Return Option Plus, Highest Daily GRO,
Guaranteed Return Option Plus 2008 Spousal Lifetime Five, Highest Daily
Lifetime Five, Highest Daily Lifetime Seven, Spousal Highest Daily Lifetime
Seven, 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 the 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 the Annuity.
.. The Highest Daily Value equals the highest of all previous "Daily Values"
less proportional withdrawals since such date and plus any Purchase
Payments since such date.
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.. 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.
.. 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.
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).
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. We may also terminate any optional Death Benefit if necessary to
comply with our interpretation of the Code and applicable regulations.
What are the Charges for the Optional Death Benefits?
We deduct a charge equal to 0.25% per year of the average daily net assets of
the Sub-accounts for each of the Highest Anniversary Value Death Benefit and
the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the
average daily net assets of the Sub-accounts for each of the "Combination 5%
Roll-up and HAV Death Benefit" and 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.
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 contract. The required
distributions depend on whether you die before you start taking annuity
payments under the contract or after you start taking annuity payments under
the contract.
If you die on or after the Annuity Date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
In the event of your death before the annuity start date, the Death Benefit
must be distributed:
. within five (5) years of the date of death; or
. as a series of payments not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary. Payments under this
option must begin within one year of the date of death.
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 annuity payments.
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
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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 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). 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,
which ever is later. Additionally, if the contract is payable to (or for
the benefit of) your surviving spouse, that portion of the contract may
be continued with your spouse as the owner.
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out within five years from the date of death. For
contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and
the account has not been divided into separate accounts by
December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary.
. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death
benefit must be paid out at least as rapidly as under the method then in
effect. For contracts where multiple beneficiaries have been named and
at least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 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)) and non-qualified Annuities.
Under the Beneficiary Continuation Option:
.. 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
non-qualified 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 non-qualified 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.
.. 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
non-qualified Beneficiary Continuation Options. However, for qualified
Annuities, the Fixed Allocations will be those offered at the time the
Beneficiary Continuation Option is elected.
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.. 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
withdrawal rights.
.. 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.
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, 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. Any
additional Purchase Payments applied after the date the assumption is
effective will be subject to all provisions of the Annuity.
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.
Are there any Exceptions to these Rules for Paying the Death Benefit?
Yes, there are exceptions that apply no matter how your Death Benefit is
calculated. There are exceptions to the Death Benefit 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 from the date he or she first became
Owner or Annuitant. After the two-year suspension period is completed, the
Death Benefit is the same as if this person had been an Owner or Annuitant on
the Issue Date.
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 to all Beneficiaries. "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 may be subject to
market fluctuations.
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VALUING YOUR INVESTMENT
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, the 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
Benefit Programs -- Highest Daily Lifetime Five" section of the Prospectus for
a description of the Benefit Fixed Rate Account. When determining the Account
Value on any day other than a Fixed Allocation's Maturity Date, the Account
Value may include any Market Value Adjustment that would apply to a 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 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 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. The
Interim Value can be calculated on any day and is equal to the initial value
allocated to a Fixed Allocation plus all interest credited to a 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 a 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 a Fixed Allocation on
any day other than its Maturity Date, we multiply the Account Value of the
Fixed Allocation times the Market Value Adjustment factor.
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.
EST). 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.
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The NYSE is closed on the following nationally recognized holidays: New Year's
Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates,
we will not process any financial transactions involving purchase or
redemption orders. 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 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.
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 the 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
issue the 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.
Additional Purchase Payments: We will apply any additional Purchase Payments
on the Valuation Day that we receive the Purchase Payment at our office with
satisfactory allocation instructions.
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) 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.
Unscheduled Transactions: "Unscheduled" transactions include any other
non-scheduled transfers and requests for Partial Withdrawals or Surrenders.
Unscheduled transactions are processed and valued as of the Valuation Day we
receive the request at our Office and have all of the required information.
Death Benefits: 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.
Transactions in Rydex and 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 transfer request involving the Rydex or 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 Rydex or 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 involving the transfer of units in one of the Rydex or ProFunds VP
Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions
received after 4:00 p.m. 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?
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 contract is (i) owned by an individual or non-natural person, and not
associated with a tax-favored retirement plan, or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. The information
provided is not intended as tax advice. You should consult with a qualified
tax advisor for complete information and advice. References to purchase
payments below relate to your cost basis in your contract. Generally, your
cost basis in a contract not associated with a tax-favored retirement plan is
the amount you pay into your contract, or into annuities exchanged for your
contract, on an after-tax basis less any withdrawals of such payments. Cost
basis for a tax-favored retirement plan is provided only in limited
circumstances, such as for contributions to a Roth IRA or nondeductible IRA
contributions. The discussion includes a description of certain spousal rights
under the contract, and our administration of such spousal rights and related
tax reporting accords with our understanding of the Defense of Marriage Act
(which defines a "marriage" as a legal union between a man and a woman and a
"spouse" as a person of the opposite sex). Depending on the state in which
your annuity is issued, we may offer certain spousal benefits to civil union
couples. You should be aware, however, that federal tax law does not recognize
civil unions. Therefore, we cannot permit a civil union partner to continue
the annuity upon the death of the first partner under the annuity's "spousal
continuance" provision. Civil union couples should consider that limitation
before selecting a spousal benefit under the annuity.
NONQUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Nonqualified Annuity is owned by an
individual or non-natural person and is not associated with a tax-favored
retirement plan.
TAXES PAYABLE BY YOU
We believe the Annuity is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under
the contract. Generally, annuity contracts issued by the same company (and
affiliates) to you during the same calendar year must be treated as one
annuity contract for purposes of determining the amount subject to tax under
the rules described below. Charges for investment advisory fees that are taken
from the contract are treated as a partial withdrawal from the contract and
will be reported as such to the contract owner.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract should be
treated for federal income tax purposes as a partial withdrawal from the
contract. If this were the case, the charge for this benefit could be deemed a
withdrawal and treated as taxable to the extent there are earnings in the
contract. Additionally, for owners under age 59 1/2, the taxable income
attributable to the charge for the benefit could be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding
these benefits.
You must commence annuity payments no later than the first day of the calendar
month next following the maximum Annuity date for your Contract. Please refer
to your Annuity Contract for the applicable maximum Annuity date. For some of
our contracts, you are able to choose to defer the Annuity Date beyond the
default Annuity date described in your Contract. However, the IRS may not then
consider your contract to be an annuity under the tax law.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been withdrawn.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of purchase payments until all purchase payments have been returned.
After all purchase payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefit programs or as a
systematic payment are taxed under these rules. If you assign or pledge all or
part of your contract as collateral for a loan, the part assigned generally
will be treated as a withdrawal. If you transfer your contract for less than
full consideration, such as by gift, you will also trigger tax on any gain in
the contract. This rule does not apply if you transfer the contract to your
spouse or under most circumstances if you transfer the contract incident to
divorce.
If you choose to receive payments under an interest payment option, or a
beneficiary chooses to receive a death benefit under an interest payment
option, that election will be treated, for tax purposes, as surrendering your
Annuity and will immediately subject any gain in the contract to income tax.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
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received tax-free) and the denominator of which is the total expected payments
under the contract. After the full amount of your purchase payments have been
recovered tax-free, the full amount of the annuity payments will be taxable.
If annuity payments stop due to the death of the annuitant before the full
amount of your purchase payments have been recovered, a tax deduction may be
allowed for the unrecovered amount.
TAX PENALTY FOR EARLY WITHDRAWAL FROM A NONQUALIFIED ANNUITY CONTRACT
You may owe a 10% tax penalty on the taxable part of distributions received
from your Nonqualified Annuity contract before you attain age 59 1/2. Amounts
are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. generally the amount paid or received is in the form of substantially equal
payments not less frequently than annually (please note that substantially
equal payments must continue until the later of reaching age 59 1/2 or 5
years and modification of payments during that time period will result in
retroactive application of the 10% tax penalty); or
.. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code), permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. Partial surrenders may be treated in the same way as tax-free
1035 exchanges of entire contracts, therefore avoiding current taxation of any
gains in the contract as well as the 10% tax penalty on pre-age 59 1/2
withdrawals. The IRS has reserved the right to treat transactions it considers
abusive as ineligible for this favorable partial 1035 exchange treatment. In
Revenue Procedure 2008-24, the IRS has indicated that where there is a
surrender or distribution from either the initial annuity contract or
receiving annuity contract within 12 months of the date on which the partial
exchange was completed, the transfer will retroactively be treated as a
taxable distribution from the initial annuity contract and a contribution to
the receiving annuity contract. Tax free exchange treatment will be retained
if the subsequent surrender or distribution would be eligible for an exception
to the 10% federal income tax penalty, other than the exceptions for
substantially equal periodic payments or distributions under an immediate
annuity. It is unclear how the IRS will treat a partial exchange from a life
insurance, endowment, or annuity contract into an immediate annuity. As of the
date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting
and withholding agent, believe that we would be expected to deem the
transaction to be abusive. However, some insurance companies may not recognize
these partial surrenders as tax-free exchanges and may report them as taxable
distributions to the extent of any gain distributed as well as subjecting the
taxable portion of the distribution to the 10% tax penalty. We strongly urge
you to discuss any transaction of this type with your tax advisor before
proceeding with the transaction.
If an Annuity is purchased through a tax-free exchange of a life insurance,
annuity or endowment contract that was purchased prior to August 14, 1982,
then any purchase payments made to the original contract prior to August 14,
1982 will be treated as made to the new contract prior to that date.
Generally, such pre-August 14, 1982 withdrawals are treated as a recovery of
your investment in the contract first until purchase payments made before
August 14, 1982 are withdrawn. Moreover, any income allocable to purchase
payments made before August 14, 1982, is not subject to the 10% tax penalty.
TAXES PAYABLE BY BENEFICIARIES
The Death Benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the Death
Benefit, as determined under federal law, is also included in the owner's
estate. Generally, the same tax rules described above would also apply to
amounts received by your beneficiary. Choosing any option other than a lump
sum Death Benefit may defer taxes. Certain minimum distribution requirements
apply upon your death, as discussed further below in the Annuity Qualification
section. Tax consequences to the beneficiary vary depending upon the Death
Benefit payment option selected. Generally, for payment of the Death Benefit
.. As a lump sum payment: the beneficiary is taxed on gain in the contract.
.. Within 5 years of death of owner: the beneficiary is taxed as amounts are
withdrawn (in this case gain is treated as being distributed first).
.. Under an annuity or annuity settlement option with distribution beginning
within one year of the date of death of the owner: the beneficiary is taxed
on each payment (part will be treated as gain and part as return of
purchase payments).
Considerations for Contingent Annuitants: We may allow the naming of a
contingent annuitant when a Nonqualified Annuity contract is held by a pension
plan or a tax favored retirement plan. In such a situation, the Annuity may no
longer qualify for tax deferral where the Annuity contract continues after the
death of the Annuitant.
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REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from an Annuity are subject to federal and state
income tax reporting and withholding. In general, we will withhold federal
income tax from the taxable portion of such distribution based on the type of
distribution. In the case of an annuity or similar periodic payment, we will
withhold as if you are a married individual with three (3) exemptions unless
you designate a different withholding status. If no U.S. taxpayer
identification number is provided, we will automatically withhold using single
with zero exemptions as the default. In the case of all other distributions,
we will withhold at a 10% rate. You may generally elect not to have tax
withheld from your payments. An election out of withholding must be made on
forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident
aliens at a 30% rate. A different withholding rate may be applicable to a
nonresident alien based on the terms of an existing income tax treaty between
the United States and the nonresident alien's country. Please refer to the
discussion below regarding withholding rules for a Qualified Annuity.
Regardless of the amount withheld by us, you are liable for payment of federal
and state income tax on the taxable portion of annuity distributions. You
should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
Entity Owners
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract over its cost basis will be subject to tax annually.
Where a contract is structured so that it is owned by a grantor trust but the
annuitant is not the grantor, then the contract is required to terminate upon
the death of the grantor if the grantor pre-deceases the annuitant under
Section 72(s) of the Code. Under this circumstance, the contract value will be
paid out to the beneficiary and it is not eligible for the death benefit
provided under the contract.
ANNUITY QUALIFICATION
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an Annuity must be diversified, according to certain rules
under the Internal Revenue Code. Each portfolio is required to diversify its
investments each quarter so that no more than 55% of the value of its assets
is represented by any one investment, no more than 70% is represented by any
two investments, no more than 80% is represented by any three investments, and
no more than 90% is represented by any four investments. Generally, securities
of a single issuer are treated as one investment and obligations of each U.S.
Government agency and instrumentality (such as the Government National
Mortgage Association) are treated as issued by separate issuers. In addition,
any security issued, guaranteed or insured (to the extent so guaranteed or
insured) by the United States or an instrumentality of the U.S. will be
treated as a security issued by the U.S. Government or its instrumentality,
where applicable. We believe the portfolios underlying the variable investment
options of the Annuity meet these diversification requirements.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract owner, must have sufficient
control over the underlying assets to be treated as the owner of the
underlying assets for tax purposes. While we also believe these investor
control rules will be met, the Treasury Department may promulgate guidelines
under which a variable annuity will not be treated as an annuity for tax
purposes if persons with ownership rights have excessive control over the
investments underlying such variable annuity. It is unclear whether such
guidelines, if in fact promulgated, would have retroactive effect. It is also
unclear what effect, if any, such guidelines might have on transfers between
the investment options offered pursuant to this Prospectus. We reserve the
right to take any action, including modifications to your Annuity or the
investment options, required to comply with such guidelines if promulgated.
Any such changes will apply uniformly to affected owners and will be made with
such notice to affected owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Nonqualified Annuity Contracts.
Upon your death, certain distributions must be made under the contract. The
required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract. If you die on or after the Annuity Date, the remaining
portion of the interest in the contract must be distributed at least as
rapidly as under the method of distribution being used as of the date of
death. If you die before the Annuity Date, the entire interest in the contract
must be distributed within 5 years after the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of
such designated beneficiary (provided such payments begin within one year of
your death). Your designated beneficiary is the person to whom benefit rights
under the contract pass by reason of death, and must be a natural person in
order to elect a periodic payment option based on life expectancy or a period
exceeding five years. Additionally, if the Annuity is payable to (or for the
benefit of) your surviving spouse, that portion of the contract may be
continued with your spouse as the owner. For Nonqualified annuity contracts
owned by a non-natural person, the required distribution rules apply upon the
death of the annuitant. This means that for a contract held by a non-natural
person (such as a trust) for which there is named a co-annuitant, then such
required distributions will be triggered by the death of the first
co-annuitants to die.
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Changes In Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your Annuity qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
QUALIFIED ANNUITY CONTRACTS
In general, as used in this prospectus, a Qualified Annuity is an Annuity
contract with applicable endorsements for a tax-favored plan or a Nonqualified
Annuity contract held by a tax-favored retirement plan.
The following is a general discussion of the tax considerations for Qualified
Annuity contracts. This Annuity may or may not be available for all types of
the tax-favored retirement plans discussed below. This discussion assumes that
you have satisfied the eligibility requirements for any tax-favored retirement
plan. Please consult your Financial Professional prior to purchase to confirm
if this contract is available for a particular type of tax-favored retirement
plan or whether we will accept the type of contribution you intend for this
contract.
A Qualified annuity may typically be purchased for use in connection with:
.. Individual retirement accounts and annuities (IRAs) which are subject to
Sections 408(a) and 408(b) of the Code;
.. Roth IRAs under Section 408A of the Code;
.. A corporate Pension or Profit-sharing plan (subject to 401(a) of the Code);
.. H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code);
.. Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax
Deferred Annuities or TDAs);
.. Section 457 plans (subject to 457 of the Code).
A Nonqualified annuity may also be purchased by a 401(a) trust or custodial
IRA or Roth IRA account, or a Section 457 plan, which can hold other
permissible assets. The terms and administration of the trust or custodial
account or plan in accordance with the laws and regulations for 401(a) plans,
IRAs or Roth IRAs, or a Section 457 plan, as applicable, are the
responsibility of the applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in annuity contracts.
This means that when a tax favored plan invests in an annuity contract, it
generally does not result in any additional tax benefits (such as income tax
deferral and income tax free transfers).
TYPES OF TAX-FAVORED PLANS
IRAs. If you buy an Annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" and "Roth IRA
Disclosure Statement" which accompany the prospectus contain information about
eligibility, contribution limits, tax particulars, and other IRA information.
In addition to this information (some of which is summarized below), the IRS
requires that you have a "free look" after making an initial contribution to
the contract. During this time, you can cancel the Annuity by notifying us in
writing, and we will refund all of the purchase payments under the Annuity
(or, if provided by applicable state law, the amount credited under the
Annuity, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers. Subject to the minimum purchase payment
requirements of an Annuity, you may purchase an Annuity for an IRA in
connection with a "rollover" of amounts from a qualified retirement plan, as a
transfer from another IRA, by making a single contribution consisting of your
IRA contributions and catch-up contributions, if applicable, attributable to
the prior year and the current year during the period from January 1 to
April 15, or as a current year contribution. In 2008 the contribution limit is
$5,000. After 2008 the contribution amount will be indexed for inflation. The
tax law also provides for a catch-up provision for individuals who are age 50
and above, allowing these individuals an additional $1,000 contribution each
year. The catch-up amount is not indexed for inflation.
The "rollover" rules under the Code are fairly technical; however, an
individual (or his or her surviving spouse) may generally "roll over" certain
distributions from tax favored retirement plans (either directly or within 60
days from the date of these distributions) if he or she meets the requirements
for distribution. Once you buy an Annuity, you can make regular IRA
contributions under the Annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA. In some circumstances, non-spouse
beneficiaries may directly roll over to an IRA amounts due from qualified
plans, 403(b) plans, and governmental 457(b) plans.
Required Provisions. Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
.. You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
.. Your rights as owner are non-forfeitable;
.. You cannot sell, assign or pledge the contract;
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
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.. The date on which required minimum distributions must begin cannot be later
than April 1st of the calendar year after the calendar year you turn age
70 1/2; and
.. Death and annuity payments must meet "required minimum distribution" rules
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier regarding a Nonqualified Annuity. In addition to this
normal tax liability, you may also be liable for the following, depending on
your actions:
.. A 10% early withdrawal penalty described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a required minimum distribution, also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $46,000 in 2008 ($45,000 in 2007) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as compensation for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2008, this limit is $230,000 ($225,000
for 2007);
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $15,500 in 2008 with the employer making
these contributions to the SEP. However, no new "salary reduction" or
"SARSEPs" can be established after 1996. Individuals participating in a
SARSEP who are age 50 or above by the end of the year will be permitted to
contribute an additional $5,000 in 2008. These amounts are indexed for
inflation. These Annuities are not available for SARSEPs. You will also be
provided the same information, and have the same "free look" period, as you
would have if you purchased the contract for a standard IRA.
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. Like standard IRAs, income within a Roth IRA accumulates
tax-free, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
.. Contributions to a Roth IRA cannot be deducted from your gross income;
.. "Qualified distributions" from a Roth IRA are excludable from gross income.
A "qualified distribution" is a distribution that satisfies two
requirements: (1) the distribution must be made (a) after the owner of the
IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's
disability; or (d) for a qualified first time homebuyer distribution within
the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution
must be made in the year that is at least five tax years after the first
year for which a contribution was made to any Roth IRA established for the
owner or five years after a rollover, transfer, or conversion was made from
a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not
qualified distributions will be treated as made first from contributions
and then from earnings and earnings will be taxed generally in the same
manner as distributions from a traditional IRA.
.. If eligible (including meeting income limitations and earnings
requirements), you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Subject to the minimum purchase payment requirements of an Annuity, if you
meet certain income limitations you may purchase an Annuity for a Roth IRA in
connection with a "rollover" of amounts of another traditional IRA, conduit
IRA, SEP, SIMPLE-IRA or Roth IRA by making a single contribution consisting of
your Roth IRA contributions and catch-up contributions, if applicable,
attributable to the prior year and the current year during the period from
January 1 to April 15 of the current year, or with a current contribution. The
Code permits persons who meet certain income limitations (generally, adjusted
gross income under $100,000) who are not married filing a separate return and
who receive certain qualifying distributions from such non-Roth IRAs, to
directly rollover or make, within 60 days, a "rollover" of all or any part of
the amount of such distribution to a Roth IRA which they establish. Beginning
January 2008, an individual receiving an eligible rollover distribution from
an employer sponsored retirement plan under sections 401(a) or 403(b) of the
Code can directly roll over contributions to a Roth IRA, subject to the same
income limits. This conversion triggers current taxation (but is not subject
to a 10% early distribution penalty). Once an Annuity has been purchased,
regular Roth IRA contributions will be accepted to the extent permitted by
law. In addition, an individual receiving an eligible rollover distribution
from a designated Roth account under an employer plan may roll over the
distribution to a Roth IRA even if the individual is not eligible to make
regular contributions to a Roth IRA. Until 2010, participants with an adjusted
gross income greater than $100,000 are not permitted to roll over funds from
an employer plan, including a Roth 401(k) distribution, to a Roth IRA.
TDAs. You may own a Tax Deferred Annuity (also known as a TDA, Tax Sheltered
Annuity (TSA), 403(b) plan or 403(b) annuity) generally if you are either an
employer or employee of a tax-exempt organization (as defined under Code
Section 501(c)(3)) or a public educational organization, and you may make
contributions to a TDA so long as your rights (or your employee's rights) to
the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are
not taxable until distribution. You may also make contributions to a TDA under
a salary reduction agreement, generally up to a maximum of $15,500 in 2008.
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Individuals participating in a TDA who are age 50 or above by the end of the
year will be permitted to contribute an additional $5,000 in 2008. This amount
is indexed for inflation. Further, you may roll over TDA amounts to another
TDA or an IRA. You may also roll over TDA amounts to a qualified retirement
plan, a SEP and a 457 government plan. A contract may generally only qualify
as a TDA if distributions of salary deferrals (other than "grandfathered"
amounts held as of December 31, 1988) may be made only on account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
.. Your total and permanent disability; or
.. Hardship (under limited circumstances, and only related to salary
deferrals, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1st of the calendar year after the calendar year you turn age 70 1/2 or
retire, whichever is later. These distribution limits do not apply either to
transfers or exchanges of investments under the contract, or to any "direct
transfer" of your interest in the contract to another TDA or to a mutual fund
"custodial account" described under Code Section 403(b)(7). Employer
contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Final regulations related to 403(b) contracts were issued in 2007. Under these
final regulations, certain contract exchanges may be accepted only if the
employer and the issuer have entered into the required information-sharing
agreements. Such agreements must be in place by January 1, 2009. We do not
currently accept transfers of funds under 403(b) contracts. Funds can only be
added to the contract as a current salary deferral under an agreement with
your employer or as a direct rollover from another employer plan. We intend to
begin accepting such transfers in the future when we can comply with the new
regulations.
REQUIRED MINIMUM DISTRIBUTIONS AND PAYMENT OPTIONS
If you hold the contract under an IRA (or other tax-favored plan), required
minimum distribution rules must be satisfied. This means that generally
payments must start by April 1 of the year after the year you reach age 70 1/2
and must be made for each year thereafter. For a TDA or a 401(a) plan for
which the participant is not a greater than 5% owner of the employer, this
required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the Owner's lifetime. The
amount of the payment must at least equal the minimum required under the IRS
rules. Several choices are available for calculating the minimum amount. More
information on the mechanics of this calculation is available on request.
Please contact us at a reasonable time before the IRS deadline so that a
timely distribution is made. Please note that there is a 50% tax penalty on
the amount of any required minimum distribution not made in a timely manner.
Required minimum distributions are calculated based on the sum of the Account
Value and the actuarial value of any additional death benefits and benefits
from optional riders that you have purchased under the contract. As a result,
the required minimum distributions may be larger than if the calculation were
based on the Account Value only, which may in turn result in an earlier (but
not before the required beginning date) distribution of amounts under the
Annuity and an increased amount of taxable income distributed to the Annuity
owner, and a reduction of death benefits and the benefits of any optional
riders.
You can use the Minimum Distribution option to satisfy the required minimum
distribution rules for an Annuity without either beginning annuity payments or
surrendering the Annuity. We will distribute to you the required minimum
distribution amount, less any other partial withdrawals that you made during
the year. Such amount will be based on the value of the contract as of
December 31 of the prior year, but is determined without regard to other
contracts you may own.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you.
If you own more than one IRA, you can choose to satisfy your minimum
distribution requirement for each of your IRAs by withdrawing that amount from
any of your IRAs. If you inherit more than one IRA or more than one Roth IRA
from the same owner, similar rules apply.
Required Distributions Upon Your Death for Qualified Annuity Contracts
Upon your death under an IRA, Roth IRA, 403(b) or other employer sponsored
plan, the designated beneficiary may generally elect to continue the contract
and receive required minimum distributions under the contract instead of
receiving the death benefit in a single payment. The available payment options
will depend on whether you die before the date required minimum distributions
under the Code were to begin, whether you have named a designated beneficiary
and whether that beneficiary is your surviving spouse.
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by December 31/st/ of the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated beneficiary (as long
as payments begin by December 31/st/ of the year following the year of
death). However, if your surviving spouse is the beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31/st/ of the year
following the year of death or December 31/st/ of the year in which you
would have reached age 70 1/2, which ever is later. Additionally, if the
contract is payable to (or for the benefit of) your surviving spouse, that
portion of the contract may be continued with your spouse as the owner.
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.. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out by December 31/st/ of the year including the five year
anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following the
year of death, such contract is deemed to have no designated beneficiary. A
designated beneficiary may elect to apply the rules for no designated
beneficiary if those would provide a smaller payment requirement.
.. If you die before a designated beneficiary is named and after the date
required minimum distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31/st/ of
the year following the year of death, such contract is deemed to have no
designated beneficiary. A designated beneficiary may elect to apply the
rules for no designated beneficiary if those would provide a smaller
payment requirement.
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in a Qualified Annuity contract continue to be tax
deferred. Amounts withdrawn each year, including amounts that are required to
be withdrawn under the required minimum distribution rules, are subject to
tax. You may wish to consult a professional tax advisor for tax advice as to
your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
TAX PENALTY FOR EARLY WITHDRAWALS FROM QUALIFIED ANNUITY CONTRACTS
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain
age 59 1/2. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled; or
.. generally the amount paid or received is in the form of substantially equal
payments not less frequently than annually. (Please note that substantially
equal payments must continue until the later of reaching age 59 1/2 or 5
years. Modification of payments during that time period will result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
We will withhold federal income tax at the rate of 20% for any eligible
rollover distribution paid by us to or for a plan participant, unless such
distribution is "directly" rolled over into another qualified plan, IRA
(including the IRA variations described above), SEP, 457 government plan or
TDA. An eligible rollover distribution is defined under the tax law as a
distribution from an employer plan under 401(a), a TDA or a 457 governmental
plan, excluding any distribution that is part of a series of substantially
equal payments (at least annually) made over the life expectancy of the
employee or the joint life expectancies of the employee and his designated
beneficiary, any distribution made for a specified period of 10 years or more,
any distribution that is a required minimum distribution and any hardship
distribution. Regulations also specify certain other items which are not
considered eligible rollover distributions. For all other distributions,
unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of the withholding certificate that you file with us.
If you do not file a certificate, we will automatically withhold federal taxes
on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions;
.. If no U.S. taxpayer identification number is provided, we will
automatically withhold using single with zero exemptions as the default; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if
you fail to pay such taxes. There may be additional state income tax
withholding requirements.
ERISA REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from
receiving any benefit from any party dealing with the plan, as a result of the
sale of the contract. Administrative exemptions under ERISA generally permit
the sale of insurance/annuity products to plans, provided that certain
information is disclosed to the person purchasing the contract. This
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information has to do primarily with the fees, charges, discounts and other
costs related to the contract, as well as any commissions paid to any agent
selling the contract. Information about any applicable fees, charges,
discounts, penalties or adjustments may be found in the applicable sections of
this Prospectus. Information about sales representatives and commissions may
be found in the sections of this Prospectus addressing distribution of the
Annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS - QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a Death Benefit to your spouse if you are married and die before you
begin receiving your benefit. This benefit must be available in the form of an
annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
beneficiaries, you may elect to have a beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election
and waives his or her right to receive the QPSA. If your spouse consents to
the alternate beneficiary, your spouse will receive no benefits from the plan
upon your death. Any QPSA waiver prior to your attaining age 35 will become
null and void on the first day of the calendar year in which you attain age
35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated beneficiary.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the IRA Disclosure Statement or Roth IRA Disclosure
Statement, as applicable.
GENERATION-SKIPPING TRANSFERS
If you transfer your contract to a person two or more generations younger than
you (such as a grandchild or grandniece) or to a person that is more than
37 1/2 years younger than you, there may be generation-skipping transfer tax
consequences.
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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 http://www.
prudentialannuities.com or any other electronic means, including diskettes or
CD ROMs. We send a confirmation statement to you each time a 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) 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. We reserve the right
to charge up to $50 for each such additional report. We may also send an
annual report and a semi-annual report containing applicable financial
statements for the Separate Account and the Portfolios, as of December 31 and
June 30, respectively, 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 domiciled
in Connecticut with licenses in all 50 states, the District of Columbia and
Puerto Rico. Prudential Annuities is a wholly-owned subsidiary of Prudential
Annuities, Inc., whose ultimate parent is Prudential Financial, Inc.
Prudential Annuities markets its products to broker-dealers and financial
planners through an internal field marketing staff. In addition, Prudential
Annuities markets through and in conjunction with financial institutions such
as banks that are permitted directly, or through affiliates, to sell annuities.
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.
However, Prudential Financial exercises significant influence over the
operations and capital structure of Prudential Annuities.
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, 2007, non-affiliated entities that could be deemed service
providers to Prudential Annuities and/or another insurer within the Prudential
Annuities business unit consisted of the following: ADP (proxy tabulation
services) located at 100 Burma Road Jersey City, New Jersey 07305,
Alliance-One Services Inc. (administration of variable life policies) located
at 55 Hartland Street East Hartford CT 06108, BISYS Retirement Services
(qualified plan administrator) located at 200 Dryden Road Dresher, PA 19025,
Blue Frog Solutions, Inc. (order entry systems provider) located at 555 SW
12/th/ Ave, Suite 202 Pompano Beach, FL 33069, EBIX Inc. (order-entry system)
located at 5 Concourse Parkway Suite 3200 Atlanta, GA 30328, Diversified
Information Technologies Inc. (records management) located at 123 Wyoming Ave
Scranton, PA 18503, Fosdick Fulfillment Corp. (fulfillment of prospectuses and
marketing materials) located at 26 Barnes Industrial Park Road North
Wallingford, CT 06492, Insurance Technologies (annuity illustrations) located
at Two South Cascade Avenue, Suite 200 Colorado Springs, CO 80903, Lason
Systems Inc. (contract printing and mailing) located at 1305 Stephenson
Highway Troy, MI 48083, Morningstar Associates LLC (asset allocation
recommendations) located at 225 West Wacker Drive Chicago, IL 60606, Pershing
LLC (order-entry systems provider) located at One Pershing Plaza Jersey City,
NJ 07399, Personix (printing and fulfillment of confirmations and client
statements) located at 13100 North Promenade Boulevard Stafford, TX 77477, RR
Donnelley Receivables Inc. (printing annual reports and prospectuses) located
at 111 South Wacker Drive Chicago, IL 60606-4301, Stanton Group (qualified
plan administrator) located at Two Pine Tree Drive Suite 400 Arden Hills, MN
55112 Attention: Alerus Retirement Solutions, State Street (accumulation unit
value calculations) located at State Street Financial Center One Lincoln
Street Boston, Massachusetts 02111, The Harty Press, Inc. (printing and
fulfillment of marketing materials) located at 25 James Street New Haven, CT
06513, VG Reed & Sons Inc. (printing and fulfillment of annual reports)
located at 1002 South 12/th/ Street Louisville, KY 40210, William B. Meyer
(printing and fulfillment of prospectuses and marketing materials) located at
255 Long Beach Boulevard Stratford, CT 06615 .
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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. In the accumulation period, assets
supporting Account Values of the Annuities are held in a separate account
established under the laws of the State of Connecticut. We are the legal owner
of assets in the separate accounts. In the payout period, assets supporting
fixed annuity payments and any adjustable annuity payments we make available
are held in our general account. Assets supporting variable annuity payment
options may be invested in our separate accounts. Income, gains and losses
from assets allocated to these separate accounts 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. These
assets may only be charged with liabilities which arise from the Annuities
issued by Prudential Annuities. The amount of our obligation in relation to
allocations to the Sub-accounts is based on the investment performance of such
Sub-accounts. However, the obligations themselves are our general corporate
obligations.
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.
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 and the charges for any optional benefits that
are offered under this Annuity and other annuities issued by us through
Separate Account B. From November 16, 1993, the date the Annuity was first
available, until June 30, 1994 the annualized expenses charged against the
Sub-accounts under the Annuity totaled 1.90%. This included 1.00% as an
investment allocation services charge and 0.90% for the combination of
mortality and expense risk, as well as administration charges (we refer to
this as the "Insurance Charge"). Starting on July 1, 1994, the 1.00%
investment allocation services charge was no longer assessed, so that the
total annualized charges under the Annuity were 0.90%. As of May 1, 1998 the
total annualized charges were further reduced to 0.65%. 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 reserve the right to make changes to the Sub-accounts available under the
Annuity as we determine appropriate. 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 may
also substitute an underlying mutual fund or portfolio of an underlying mutual
fund for another underlying mutual fund or portfolio of an underlying mutual
fund, subject to our receipt of any exemptive relief that we are required to
obtain under the Investment Company Act. We will notify Owners of changes we
make to the Sub-accounts available under the Annuity.
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.
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 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.
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We are not obligated to invest according to specific guidelines or strategies
except as may be required by Connecticut and other state insurance laws.
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.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend to vote all of such shares
when that underlying fund seeks a vote of its shareholders. As such, all such
shares will be counted towards whether there is a quorum at the underlying
fund's shareholder meeting and towards the ultimate outcome of the vote. Thus,
under "mirror voting", it is possible that the votes of a small percentage of
contract holders 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 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 that is
managed by an affiliate. 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.
Service Fees Payable to Prudential Annuities
Prudential Annuities or our affiliates have entered into agreements with the
investment adviser or distributor of the underlying Portfolios. Under the
terms of these agreements, Prudential Annuities, or our affiliates may provide
administrative and support services to the Portfolios for which it receives a
fee of up to 0.75% (currently) of the average assets allocated to the
Portfolios under the Annuity from the investment advisor, distributor and/or
the fund. These agreements may be different for each underlying mutual fund
whose portfolios are offered as Sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying Portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the 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 contract, available options, and
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underlying Portfolios. The amounts paid depend on the nature of the meetings,
the number of meetings attended by the adviser, sub-adviser, or distributor,
the number of participants and attendees at the meetings, the costs expected
to be incurred, and the level of the adviser's, sub-adviser's or distributor's
participation. These payments or reimbursements may not be offered by all
advisers, sub-advisers, or distributor and the amounts of such payments may
vary between and among each adviser, sub-adviser and distributor depending on
their respective participation.
During 2007, with regard to amounts that were paid under these kinds of
arrangements, the amounts ranged from approximately $750 to approximately
$981,102. These amounts may have been paid to one or more
Prudential-affiliated insurers issuing individual variable annuities.
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 is the co-distributor of
the Advanced Series Trust. PAD's principal business address is One Corporate
Drive, Shelton, Connecticut 06484. PAD is registered as a broker-dealer under
the Securities Exchange Act of 1934 (Exchange Act), and is a member of the
Financial Industry Regulatory Authority (FINRA).
The 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 Annuity but are exempt from registration
("firms"). Applications for the Annuity are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, PAD may
offer the Annuity 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. We began selling variable annuities through
the Allstate affiliated broker-dealer registered representatives in the third
quarter of 2006.
Commissions may be paid based on Account Value. The maximum commission to be
paid in connection with the sale is 0.30% per year of the Account Value. We
may also provide compensation to the distributing firm for providing ongoing
service to you in relation to the Annuity. Commissions and other compensation
paid in relation to the 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 Annuity 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, 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 Annuity; providing a dedicated marketing
coordinator; providing priority sales desk support; and providing expedited
marketing compliance approval and preferred programs to PAD. To the extent
permitted by FINRA rules and other applicable laws and regulations, PAD may
pay or allow other promotional incentives or payments in the form of cash or
non-cash compensation. These arrangements may not be offered to all firms and
the terms of such arrangements may differ between firms. A list of the firms
to whom Prudential Annuities pays an amount for 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
Annuity 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.
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The list below identifies three general types of payments that PAD pays which
are broadly defined as follows:
.. Percentage Payments based upon "Assets under Management" or "AUM": This
type of payment is a percentage payment that is based upon the total amount
held in all Prudential Annuities products that were sold through the firm.
.. 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 (or its affiliated broker-dealers). Examples of
arrangements under which such payments may be made currently include, but
are not limited to: sponsorships, conferences (national, regional and top
producer), speaker fees, promotional items and reimbursements to firms for
marketing activities or services paid by the firms and/or their individual
representatives. The amount of these payments varies widely because some
payments may encompass only a single event, such as a conference, and
others have a much broader scope. In addition, we may make payments upon
the initiation of a relationship for systems, operational and other support.
The list below includes the names of the firms (or their affiliated
broker/dealers) that we are aware (as of December 31, 2007) received payment
with respect to annuity business during 2007 (or as to which a payment amount
was accrued during 2007). The firms listed below include payments in
connection with products issued by Prudential Annuities Life Assurance
Corporation. Your registered representative can provide you with more
information about the compensation arrangements that apply upon the sale of
the contract. During 2007, the least amount paid, and greatest amount paid,
were $46 and $8,664,735, respectively.
1717 Capital Management Co. Citigroup Global Markets Inc H. Beck, Inc.
1st Global Capital Corporation City Securities Corporation Hantz Financial Services, Inc.
A.G. Edwards & Sons Commonwealth Financial Group Harbour Investments, Inc.
Advantage Capital Corporation Commonwealth Financial Network Hazard & Siegel, Inc.
AICPA Contemporary Fin'l Solutions HBW Securities
AIG Financial Advisors Inc Crown Capital Securities, L.P. Hornor, Townsend & Kent
Allegheny Investments LTD. Cumberland Brokerage Corporation Huntington Investment Services
Allegiant Securities LLC CUNA Brokerage ICC
Alliance Bernstein CUSO Financial Services, L.P. IFMG Securities, Inc.
Alliance Financial Group, Inc. Deutsche IMS Securities, Inc.
Allianz EDI Financial Independent Financial Group, LLC
Allstate Financial Srvcs, LLC ePlanning Securities, Inc. Infinex Investments Inc.
Almax Financial Solutions, LLC Equity Services, Inc. ING Financial Advisors, LLC
Alternative Wealth Strategies Ferris Baker Watts, Inc ING Financial Partners, LLC
American General Securities, Inc. FFP Securities, Inc. Institutional Securities Corp.
AMERICAN PORTFOLIO FIN SVCS Financial Network Investments Corp. InterSecurities, Inc.
INC Financial Planning Consultants Invest Financial Corporation
Ameritas Investment Corp Financial West Group Investacorp
Arrowhead Investment Center Fintegra, LLC Investment Centers of America
Associated Securities First Allied Securities, Inc. Investment Management Corp
AXA Advisors First Financial Services Investment Planners, Inc.
BancorpSouth Investment Services, First Heartland Capital, Inc. Investment Professionals
Inc. First Montauk Securities Corp. Investors Capital Corporation
BB&T Investments First Trust Portfolios Investors Security Co, Inc.
BCG Securities, Inc. First Western Advisors ISG Equity Sales
Benefit Funding Services Group Foothill Securities, Inc. J.W. Cole Financial, Inc.
Berthel Fisher & Company Fortune Financial Services, Inc. Janney Montgomery Scott, LLC.
Brecek & Young Advisors, Inc. Founders Financial Securities JB Hanauer
Broker Dealer Financial Fox & Co. Investments, Inc. Jefferson Pilot Securities Co.
Brookstone Securities, Inc. Freedom Investors Corp. JJB Hilliard Lyons
Brookstreet Securities Corp. FSC Securities Corp Key Investment Services LLC
Butler Freeman Tally Fn Gp LLC FSIC KMS FINANCIAL SERVICES, INC
Cadaret, Grant & Co., Inc. Garden State Securities, Inc. Kovack Securities, Inc
Calton & Associates, Inc Gary Goldberg & Co. Leaders Group Inc.
Cambridge Investment Research, Inc. Geneos Wealth Management, Inc. Legacy Advisors, LLC
Cantella & Co., Inc Genworth Financial Securities Legacy Financial Services, Inc.
Capital Analysts Corporation Legend Equities Corporation
Capital Financial Services Girard Securities, Inc. Legend Securities, Inc.
Capital Investment Group Goldman Sachs Asset Management Leonard & Company
Capital One Investments Great American Advisors, Inc. Lewis Financial Group, L.C.
Capital Securities Management, GunnAllen Financial, Inc. Lincoln Financial Advisors
Centaurus Financial, Inc. GWN Securities, Inc. Lincoln Investment Planning
CFD Investments, Inc. H&R Block Financial Advisors, Inc. Linsco Private Ledger Corp
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Lombard Securities Inc. Prudential Financial Synergy Investment Group, LLC
M Holdings Securities, Inc Prudential Securities Incorporated T. Rowe Price Associates
Main Street Securities, LLC QA3 Financial Corp. TFS Securities, Inc.
MarketMax Questar Capital Corporation The Investment Center, Inc.
Medallion Investment Services R. Seelaus & Co., Inc. Tower Square Securities Inc
MFS Rampart Financial Services Inc Transamerica Financial Advisors
Michigan Securities, Inc. Raymond James & Associates Triad Advisors, Inc.
MML Investors Services, Inc. Raymond James Financial Services Trustmont Financial Group, Inc.
Money Concepts Capital Corp. RBC Dain Rauscher UBS Financial Services, Inc.
Moors & Cabot, Inc Resource Horizon Group, LLC United Planners Financial Services of
Morgan Keegan Resource Marketing America
MTL Equity Products, Inc. Rhodes Securities, Inc. United Securities Alliance, Inc.
Multi Financial Securities Corp. RNR Securities, L.L.C. USA Financial Securities Corporation
Mutual Service Corporation Robert W. Baird & Co., Inc. UVEST Financial Services Group, Inc.
Mutual Trust Co. of America Sec Royal Alliance Valley National Investments, Inc.
National Planning Corporation Ryan Beck & Co, Inc. Veritrust Financial LLC
Neuberger/Berman Rydex Distributors Inc VSR Financial Services, Inc.
New England Securities SAIC Wachovia Bank
Next Financial Group, Inc. Sammons Securities Wachovia Wirehouse
NFP Securities, Inc. Saunders Discount Brokerage Wall Street Financial Group
North Ridge Securities Corp. Scottsdale Capital Advisors Walnut Street Securities
Oppenheimer & Co, Inc. Securian Financial Services, Inc. Waterstone Financial Group Inc
Pacific West Securities, Inc. Securities America, Inc. Waterstone Investor Services
Packerland Brokerage Svcs, Inc Securities Service Network Webster Investment Services, Inc.
Partnervest Securities, Inc. Sentra/Spelman Wellstone Securities, LLC
Paulson Investment Company, Inc. Sigma Financial Corporation Westcom Financial Services
Planmember Securities Corporation Signator Investor, Inc Wilbanks Securities, Inc.
PNC Investment SII Investments, Inc. Williams Financial Group
Preferred Financial Group Silver Oaks Securities Woodbury Financial Services, Inc.
Presidential Brokerage Stanford Group Company World Choice Securities, Inc.
PrimeVest Financial Services Stifel Nicolaus & Co., Inc. World Equity Group, Inc.
Principal Financial Group Summit Brokerage Services, Inc World Group Securities, Inc.
ProEquities, Inc Summit Equities, Incorporated Worth Financial Group, Inc.
Prospera Financial Svcs, Inc. SunAmerica Securities WRP Investments, Inc.
Pruco Securities Sunset Financial Services, Inc Your Money Matters Brokerage
Prudential Annuities SWS Financial Services, Inc
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On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia") and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. Wachovia is the majority
owner and Prudential Financial, indirectly through subsidiaries, is a minority
owner of Wachovia Securities.
Wachovia and Wachovia Securities are key distribution partners for certain
products of Prudential Financial affiliates, including mutual funds and
individual annuities that are distributed through their financial advisors,
bank channel and independent channel. In addition, Prudential Financial is a
service provider to the managed account platform and certain wrap-fee programs
offered by Wachovia Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Prudential Annuities publishes annual and quarterly reports that are filed
with the SEC. These reports contain financial information about Prudential
Annuities that is annually audited by an independent registered public
accounting firm. Prudential Annuities' annual report for the year ended
December 31, 2007, together with subsequent periodic reports that Prudential
Annuities files with the SEC, are incorporated by reference into this
prospectus. You can obtain copies, at no cost, of any and all of this
information, including the Prudential Annuities annual report that is not
ordinarily mailed to contract owners, the more current reports and any
subsequently filed documents at no cost by contacting us at Prudential
Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888).
The SEC file number for Prudential Annuities is 33-44202. You may read and
copy any filings made by Prudential Annuities with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E. Washington, D.C. 20549. You can obtain
information on the operation of the Public Reference Room by calling
(202) 551-8090. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC at http://www.sec.gov.
FINANCIAL STATEMENTS
The financial statements of the separate account and Prudential Annuities Life
Assurance Corporation are included in the Statement of Additional Information.
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HOW TO CONTACT US
You can contact us by:
.. calling our Customer Service Team at 1-800-752-6342 during our normal
business hours, Monday through Friday, or our telephone automated response
system at 1-800-766-4530.
.. writing to us via regular mail at Prudential Annuities, P.O. Box 7960,
Philadelphia, PA 19176 OR for express mail Prudential Annuities, 2101 Welsh
Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address
may result in a delay in our receiving and processing your request.
.. accessing information about your Annuity through our Internet Website at
www.prudentialannuities.com.
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, 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
We are subject to legal and regulatory actions in the ordinary course of our
businesses, including class action lawsuits. Our pending legal and regulatory
actions include proceedings specific to us and proceedings generally
applicable to business practices in the industry in which we operate. We are
subject to class action lawsuits and other litigation alleging, among other
things, that we made improper or inadequate disclosures in connection with the
sale of annuity products or charged excessive or impermissible fees on these
products, recommended unsuitable products to customers, mishandled customer
accounts or breached fiduciary duties to customers. We are also subject to
litigation arising out of our general business activities, such as our
investments and contracts, and could be exposed to claims or litigation
concerning certain business or process patents. Regulatory authorities from
time to time make inquiries and conduct investigations and examinations
relating particularly to us and our products. In addition, we, along with
other participants in the business in which we engage, may be subject from
time to time to investigations, examinations and inquiries, in some cases
industry-wide, concerning issues or matters upon which such regulators have
determined to focus. In some of our pending legal and regulatory actions,
parties are seeking large and/or indeterminate amounts, including punitive or
exemplary damages. The outcome of a litigation or regulatory matter, and the
amount or range of potential loss at any particular time, is inherently
uncertain. The following is a summary of certain pending proceedings.
We have commenced a remediation program to correct errors in the
administration of approximately 11,000 annuity contracts issued by us. The
owners of these contracts did not receive notification that the contracts were
approaching or past their designated annuitization date or default
annuitization date (both dates referred to as the "contractual annuity date")
and the contracts were not annuitized at their contractual annuity dates. Some
of these contracts also were affected by data integrity errors resulting in
incorrect contractual annuity dates. The lack of notice and the data integrity
errors, as reflected on the annuities administrative
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system, all occurred before the acquisition of Prudential Annuities by
Prudential Financial, Inc. (the "Acquisition"). The remediation and
administrative costs of the remediation program are subject to the
indemnification provisions of the agreement (the "Acquisition Agreement")
pursuant to which Prudential Financial, Inc. acquired Prudential Annuities
from Skandia Insurance Company Ltd. (publ) ("Skandia").
Commencing in 2003, we received formal requests for information from the SEC
and the New York Attorney General ("NYAG") relating to market timing in
variable annuities by us and certain affiliated companies. In connection with
these investigations, with the approval of Skandia an offer was made by us to
the authorities investigating our companies, the SEC and NYAG, to settle these
matters by paying restitution and a civil penalty of $95 million in the
aggregate. While not assured, we believe these discussions are likely to lead
to settlements with these authorities by us or our affiliates. Any regulatory
settlement involving us and certain affiliates would be subject to the
indemnification provisions of the Acquisition Agreement pursuant to which
Prudential Financial, Inc. purchased Prudential Annuities and certain
affiliates in May 2003 from Skandia. If achieved, settlement of the matters
relating to us and certain affiliates also could involve continuing
monitoring, changes to and/or supervision of business practices, findings that
may adversely affect existing or cause additional litigation, adverse
publicity and other adverse impacts to our businesses.
During the third quarter of 2004, we identified a system-generated calculation
error in our annuity contract administration system that existed prior to the
Acquisition. This error related to the calculation of amounts due to customers
for certain transactions subject to a market value adjustment upon the
surrender or transfer of monies out of their annuity contract's fixed
allocation options. The error resulted in an underpayment to policyholders, as
well as additional anticipated costs to us associated with remediation,
breakage and other costs. Our consultants have developed the systems
functionality to compute remediation amounts and are in the process of running
the computations on affected contracts. We contacted state insurance
regulators and commenced Phase I of our outreach to customers on November 12,
2007. We have advised Skandia that a portion of the remediation and related
administrative costs are subject to the indemnification provisions of the
Acquisition Agreement.
From January 2006 to May 2007, thirty complaints were filed in 17th Judicial
Circuit Court, Broward County, Florida alleging misrepresentations in the sale
of annuities against us and in certain of the cases, the two brokers who sold
the annuities. The complaints allege that the brokers represented that any
losses in the annuities would be insured or paid by a state guaranty fund and
purport to state claims of breach of fiduciary duty, negligence, fraud,
fraudulent inducement, negligent misrepresentation and seek damages in
unspecified amounts but in excess of $15,000 per case. The matter is subject
to the indemnification provisions of the Acquisition Agreement.
Our litigation and regulatory matters are subject to many uncertainties, and
given their complexity and scope, the outcomes cannot be predicted. It is
possible that the results of operations or the cash flow of Prudential
Annuities 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 our 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 our 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 our financial position.
It should be noted that the judgments, settlements and expenses associated
with many of these lawsuits, administrative and regulatory matters, and
contingencies, including certain claims described above, may, in whole or in
part, after satisfaction of certain retention requirements, fall within
Skandia's indemnification obligations to Prudential Financial and its
subsidiaries under the terms of the Acquisition Agreement. Those obligations
of Skandia provide for indemnification of certain judgments, settlements, and
costs and expenses associated with lawsuits and other claims against
Prudential Annuities ("matters"), and apply only to matters, or groups of
related matters, for which the costs and expenses exceed $25,000 individually.
Additionally, those obligations only apply to such otherwise indemnifiable
losses that exceed $10 million in the aggregate, subject to reduction for
insurance proceeds, certain accruals and any realized tax benefit applicable
to such amounts, and those obligations do not apply to the extent that such
aggregate exceeds $1 billion. We are in discussions with Skandia regarding the
satisfaction of the $10 million deductible.
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.
127
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
.. Ending the Offer
Annuitization
Experts
Legal Experts
Financial Statements
128
AMERICAN SKANDIA ADVISORS CHOICE(R) 2000 PROSPECTUS
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. 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 table shows for the 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 31st 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, 2008.
* 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 1-800-752-6342.
Advisors Choice 2000
Prudential Annuities Life Assurance Corporation
Prospectus
ACCUMULATION UNIT VALUES: With LT5, HDV and EBP
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.90 411,852
1/1/2006 to 12/31/2006 $15.90 $19.14 412,527
1/1/2007 to 12/31/2007 $19.14 $20.53 452,611
- ----------------------------------------------------------------------------------------------------
AST International Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $17.34 2,117,272
1/1/2006 to 12/31/2006 $17.34 $20.56 1,505,204
1/1/2007 to 12/31/2007 $20.56 $23.99 1,246,698
A-129
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ---------------------------------------------------------------------------------------------
AST International Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.98 151,571
1/1/2006 to 12/31/2006 $16.98 $21.21 275,386
1/1/2007 to 12/31/2007 $21.21 $24.49 415,333
- ---------------------------------------------------------------------------------------------
AST MFS Global Equity
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.04 185,240
1/1/2006 to 12/31/2006 $15.04 $18.32 190,286
1/1/2007 to 12/31/2007 $18.32 $19.64 145,391
- ---------------------------------------------------------------------------------------------
AST Small Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.23 105,281
1/1/2006 to 12/31/2006 $12.23 $13.50 116,763
1/1/2007 to 12/31/2007 $13.50 $14.18 168,599
- ---------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.82 76,370
1/1/2006 to 12/31/2006 $14.82 $15.65 81,269
1/1/2007 to 12/31/2007 $15.65 $18.20 105,233
- ---------------------------------------------------------------------------------------------
AST Federated Aggressive Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $21.18 675,624
1/1/2006 to 12/31/2006 $21.18 $23.44 555,919
1/1/2007 to 12/31/2007 $23.44 $25.55 471,679
- ---------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.91 0
1/1/2006 to 12/31/2006 $16.91 $19.43 0
1/1/2007 to 12/31/2007 $19.43 $18.06 0
- ---------------------------------------------------------------------------------------------
AST Small-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.00 1,367,354
1/1/2006 to 12/31/2006 $16.00 $18.82 1,007,185
1/1/2007 to 12/31/2007 $18.82 $17.41 986,053
A-130
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------
AST DeAM Small-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.82 245,002
1/1/2006 to 12/31/2006 $16.82 $19.77 203,936
1/1/2007 to 12/31/2007 $19.77 $15.93 230,960
- -------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.91 701,854
1/1/2006 to 12/31/2006 $14.91 $15.53 516,950
1/1/2007 to 12/31/2007 $15.53 $18.16 440,329
- -------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.40 330,873
1/1/2006 to 12/31/2006 $15.40 $17.21 308,969
1/1/2007 to 12/31/2007 $17.21 $20.61 409,243
- -------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $17.62 1,232,726
1/1/2006 to 12/31/2006 $17.62 $19.12 959,021
1/1/2007 to 12/31/2007 $19.12 $19.33 859,161
- -------------------------------------------------------------------------------------------
AST Alger All-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/2/2005 -- $15.12 0
- -------------------------------------------------------------------------------------------
AST Mid-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.61 156,240
1/1/2006 to 12/31/2006 $15.61 $17.48 128,923
1/1/2007 to 12/31/2007 $17.48 $17.60 135,453
- -------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $22.61 291,124
1/1/2006 to 12/31/2006 $22.61 $25.68 307,012
1/1/2007 to 12/31/2007 $25.68 $35.36 389,732
- -------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.39 179,576
1/1/2006 to 12/31/2006 $13.39 $13.86 424,274
1/1/2007 to 12/31/2007 $13.86 $14.70 670,101
A-131
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------
AST MFS Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.89 553,235
1/1/2006 to 12/31/2006 $12.89 $13.85 418,858
1/1/2007 to 12/31/2007 $13.85 $15.62 401,782
- ------------------------------------------------------------------------------------------------
AST Marsico Capital Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.58 4,378,768
1/1/2006 to 12/31/2006 $14.58 $15.32 3,475,065
1/1/2007 to 12/31/2007 $15.32 $17.26 3,049,331
- ------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.95 143,016
1/1/2006 to 12/31/2006 $11.95 $12.88 143,727
1/1/2007 to 12/31/2007 $12.88 $14.39 168,462
- ------------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.36 278,564
1/1/2006 to 12/31/2006 $15.36 $18.32 539,030
1/1/2007 to 12/31/2007 $18.32 $18.16 417,115
- ------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/2/2005 -- $14.38 0
- ------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.63 256,525
1/1/2006 to 12/31/2006 $14.63 $17.40 446,357
1/1/2007 to 12/31/2007 $17.40 $16.44 422,432
- ------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $21.16 199,018
1/1/2006 to 12/31/2006 $21.16 $28.35 318,743
1/1/2007 to 12/31/2007 $28.35 $22.24 246,476
- ------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.38 463,127
1/1/2006 to 12/31/2006 $13.38 $14.77 411,412
1/1/2007 to 12/31/2007 $14.77 $14.78 293,752
A-132
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------------
AST American Century Income & Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.12 238,151
1/1/2006 to 12/31/2006 $14.12 $16.18 278,461
1/1/2007 to 12/31/2007 $16.18 $15.83 367,074
- ----------------------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.25 4,265,750
1/1/2006 to 12/31/2006 $14.25 $16.38 2,911,174
1/1/2007 to 12/31/2007 $16.38 $16.87 2,485,922
- ----------------------------------------------------------------------------------------------------------
AST Large Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.73 405,887
1/1/2006 to 12/31/2006 $13.73 $15.94 464,393
1/1/2007 to 12/31/2007 $15.94 $15.16 520,419
- ----------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.28 96,396
1/1/2006 to 12/31/2006 $13.28 $14.46 103,991
1/1/2007 to 12/31/2007 $14.46 $14.45 457,631
- ----------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic Balanced
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.71 219,955
1/1/2006 to 12/31/2006 $12.71 $13.66 187,318
1/1/2007 to 12/31/2007 $13.66 $14.58 170,010
- ----------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.53 401,044
1/1/2006 to 12/31/2006 $13.53 $14.92 549,051
1/1/2007 to 12/31/2007 $14.92 $15.54 1,003,846
- ----------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.37 1,035,774
1/1/2006 to 12/31/2006 $11.37 $11.84 798,214
1/1/2007 to 12/31/2007 $11.84 $12.72 851,066
A-133
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------
AST High Yield
formerly, AST High Yield Bond
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.19 582,997
1/1/2006 to 12/31/2006 $13.19 $14.27 694,301
1/1/2007 to 12/31/2007 $14.27 $14.33 558,873
- --------------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.42 1,672,135
1/1/2006 to 12/31/2006 $12.42 $13.37 1,365,237
1/1/2007 to 12/31/2007 $13.37 $13.90 1,124,709
- --------------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.84 2,236,621
1/1/2006 to 12/31/2006 $10.84 $11.02 2,081,850
1/1/2007 to 12/31/2007 $11.02 $11.70 2,256,466
- --------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.17 4,545,782
1/1/2006 to 12/31/2006 $10.17 $10.35 3,593,391
1/1/2007 to 12/31/2007 $10.35 $10.83 3,257,914
- --------------------------------------------------------------------------------------------------------
AST Money Market
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.80 2,581,451
1/1/2006 to 12/31/2006 $9.80 $10.04 1,916,776
1/1/2007 to 12/31/2007 $10.04 $10.33 4,181,059
- --------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $23.52 224,533
1/1/2006 to 12/31/2006 $23.52 $31.02 274,947
1/1/2007 to 12/31/2007 $31.02 $43.62 484,276
- --------------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.77 39,457
1/1/2006 to 12/31/2006 $13.77 $16.00 77,725
1/1/2007 to 12/31/2007 $16.00 $16.12 40,362
A-134
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------
AIM V.I.--Dynamics
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.80 54,814
1/1/2006 to 12/31/2006 $15.80 $17.98 59,124
1/1/2007 to 12/31/2007 $17.98 $19.76 54,429
- ------------------------------------------------------------------------------------------
AIM V.I.--Technology
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ------------------------------------------------------------------------------------------
AIM V.I.--Health Sciences
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.31 122,355
1/1/2006 to 12/31/2006 $13.31 $13.73 130,283
1/1/2007 to 12/31/2007 $13.73 $15.05 108,427
- ------------------------------------------------------------------------------------------
AIM V.I.--Financial Services
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.92 170,808
1/1/2006 to 12/31/2006 $13.92 $15.89 91,327
1/1/2007 to 12/31/2007 $15.89 $12.11 50,770
- ------------------------------------------------------------------------------------------
Evergreen VA--International Equity
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.88 164,045
1/1/2006 to 12/31/2006 $13.88 $16.75 160,932
1/1/2007 to 12/31/2007 $16.75 $18.88 219,534
- ------------------------------------------------------------------------------------------
Evergreen VA--Special Equity
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 4/15/2005 -- $13.54 0
- ------------------------------------------------------------------------------------------
Evergreen VA--Omega
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.10 31,596
1/1/2006 to 12/31/2006 $14.10 $14.65 15,185
1/1/2007 to 12/31/2007 $14.65 $16.08 15,093
- ------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.41 120,154
1/1/2006 to 12/31/2006 $11.41 $12.42 49,463
1/1/2007 to 12/31/2007 $12.42 $13.51 80,806
A-135
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Europe 30
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $15.65 374,171
1/1/2006 to 12/31/2006 $15.65 $18.02 508,415
1/1/2007 to 12/31/2007 $18.02 $20.23 151,796
- -------------------------------------------------------------------------------------
ProFund VP--Asia 30
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $18.20 98,832
1/1/2006 to 12/31/2006 $18.20 $24.84 227,691
1/1/2007 to 12/31/2007 $24.84 $35.97 247,412
- -------------------------------------------------------------------------------------
ProFund VP--Japan
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $18.59 107,391
1/1/2006 to 12/31/2006 $18.59 $20.19 63,570
1/1/2007 to 12/31/2007 $20.19 $17.80 23,531
- -------------------------------------------------------------------------------------
ProFund VP--Banks
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.77 7,375
1/1/2006 to 12/31/2006 $13.77 $15.58 11,704
1/1/2007 to 12/31/2007 $15.58 $11.10 8,235
- -------------------------------------------------------------------------------------
ProFund VP--Basic Materials
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.46 45,735
1/1/2006 to 12/31/2006 $14.46 $16.36 43,606
1/1/2007 to 12/31/2007 $16.36 $20.96 85,213
- -------------------------------------------------------------------------------------
ProFund VP--Biotechnology
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- -------------------------------------------------------------------------------------
ProFund VP--Consumer Services
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.47 8,192
1/1/2006 to 12/31/2006 $11.47 $12.59 12,510
1/1/2007 to 12/31/2007 $12.59 $11.32 10,149
A-136
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Consumer Goods
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.02 9,786
1/1/2006 to 12/31/2006 $12.02 $13.26 26,778
1/1/2007 to 12/31/2007 $13.26 $13.98 131,891
- -------------------------------------------------------------------------------------
ProFund VP--Oil & Gas
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $19.77 137,222
1/1/2006 to 12/31/2006 $19.77 $23.38 112,400
1/1/2007 to 12/31/2007 $23.38 $30.35 124,434
- -------------------------------------------------------------------------------------
ProFund VP--Financial
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.71 36,201
1/1/2006 to 12/31/2006 $13.71 $15.76 57,563
1/1/2007 to 12/31/2007 $15.76 $12.49 47,802
- -------------------------------------------------------------------------------------
ProFund VP--Healthcare
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.50 64,175
1/1/2006 to 12/31/2006 $11.50 $11.87 65,217
1/1/2007 to 12/31/2007 $11.87 $12.39 165,073
- -------------------------------------------------------------------------------------
ProFund VP--Industrial
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.30 6,749
1/1/2006 to 12/31/2006 $14.30 $15.65 2,765
1/1/2007 to 12/31/2007 $15.65 $17.13 48,821
- -------------------------------------------------------------------------------------
ProFund VP--Internet
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- -------------------------------------------------------------------------------------
ProFund VP--Pharmaceuticals
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $8.35 14,623
1/1/2006 to 12/31/2006 $8.35 $9.18 131,883
1/1/2007 to 12/31/2007 $9.18 $9.21 43,535
A-137
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------
ProFund VP--Precious Metals
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.85 129,263
1/1/2006 to 12/31/2006 $16.85 $17.73 260,007
1/1/2007 to 12/31/2007 $17.73 $21.27 337,030
- --------------------------------------------------------------------------------------
ProFund VP--Real Estate
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $17.36 41,820
1/1/2006 to 12/31/2006 $17.36 $22.55 109,436
1/1/2007 to 12/31/2007 $22.55 $17.76 46,436
- --------------------------------------------------------------------------------------
ProFund VP--Semiconductor
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- --------------------------------------------------------------------------------------
ProFund VP--Technology
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- --------------------------------------------------------------------------------------
ProFund VP--Telecommunications
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.43 11,185
1/1/2006 to 12/31/2006 $10.43 $13.73 76,146
1/1/2007 to 12/31/2007 $13.73 $14.58 86,034
- --------------------------------------------------------------------------------------
ProFund VP--Utilities
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.59 65,915
1/1/2006 to 12/31/2006 $16.59 $19.38 160,549
1/1/2007 to 12/31/2007 $19.38 $22.00 259,803
- --------------------------------------------------------------------------------------
ProFund VP--Bull
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.88 482,071
1/1/2006 to 12/31/2006 $12.88 $14.35 338,211
1/1/2007 to 12/31/2007 $14.35 $14.56 203,530
A-138
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------
ProFund VP--Bear
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $6.36 481,337
1/1/2006 to 12/31/2006 $6.36 $5.77 113,831
1/1/2007 to 12/31/2007 $5.77 $5.68 186,155
- ----------------------------------------------------------------------------------------
ProFund VP--Ultra Bull
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------
ProFund VP NASDAQ-100
formerly, ProFund VP--OTC
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.05 151,639
1/1/2006 to 12/31/2006 $14.05 $14.53 85,525
1/1/2007 to 12/31/2007 $14.53 $16.74 200,264
- ----------------------------------------------------------------------------------------
ProFund VP Short NASDAQ-100
formerly, ProFund VP--Short OTC
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $5.52 144,312
1/1/2006 to 12/31/2006 $5.52 $5.33 198,868
1/1/2007 to 12/31/2007 $5.33 $4.62 64,998
- ----------------------------------------------------------------------------------------
ProFund VP UltraNASDAQ-100
formerly, ProFund VP--UltraOTC
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------
ProFund VP--Mid-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.23 101,182
1/1/2006 to 12/31/2006 $16.23 $17.86 98,979
1/1/2007 to 12/31/2007 $17.86 $17.67 72,375
- ----------------------------------------------------------------------------------------
ProFund VP--Mid-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.60 396,894
1/1/2006 to 12/31/2006 $14.60 $14.88 271,685
1/1/2007 to 12/31/2007 $14.88 $16.29 86,246
A-139
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------
ProFund VP--UltraMid-Cap
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $23.77 132,000
1/1/2006 to 12/31/2006 $23.77 $25.78 158,772
1/1/2007 to 12/31/2007 $25.78 $26.76 114,155
- --------------------------------------------------------------------------------------------
ProFund VP--Small-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.07 79,114
1/1/2006 to 12/31/2006 $16.07 $18.49 107,760
1/1/2007 to 12/31/2007 $18.49 $16.81 41,638
- --------------------------------------------------------------------------------------------
ProFund VP--Small-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $16.13 456,506
1/1/2006 to 12/31/2006 $16.13 $17.18 462,614
1/1/2007 to 12/31/2007 $17.18 $17.52 63,774
- --------------------------------------------------------------------------------------------
ProFund VP--UltraSmall-Cap
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- --------------------------------------------------------------------------------------------
ProFund VP--U.S. Government Plus
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.03 250,769
1/1/2006 to 12/31/2006 $11.03 $10.31 50,931
1/1/2007 to 12/31/2007 $10.31 $11.13 348,555
- --------------------------------------------------------------------------------------------
ProFund VP--Rising Rates Opportunity
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $7.18 354,909
1/1/2006 to 12/31/2006 $7.18 $7.75 471,789
1/1/2007 to 12/31/2007 $7.75 $7.20 160,197
- --------------------------------------------------------------------------------------------
Access VP High Yield
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.54 0
1/1/2006 to 12/31/2006 $10.54 $11.32 0
1/1/2007 to 12/31/2007 $11.32 $11.66 0
A-140
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------
First Trust Target Focus Four Portfolio
formerly, First Trust(R) 10 Uncommon Values
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.76 179,027
1/1/2006 to 12/31/2006 $12.76 $17.32 390,251
1/1/2007 to 12/31/2007 $17.32 $19.23 383,026
- ----------------------------------------------------------------------------------------------------
First Trust Managed VIP
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.87 2,270,636
1/1/2006 to 12/31/2006 $11.87 $12.98 1,547,684
1/1/2007 to 12/31/2007 $12.98 $13.92 908,064
- ----------------------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------------------
First Trust S&P Target 24
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.94 100,938
1/1/2006 to 12/31/2006 $10.94 $11.04 93,918
1/1/2007 to 12/31/2007 $11.04 $11.27 68,322
- ----------------------------------------------------------------------------------------------------
First Trust The Dow Target 10
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.92 133,119
1/1/2006 to 12/31/2006 $9.92 $12.20 182,794
1/1/2007 to 12/31/2007 $12.20 $12.04 183,748
- ----------------------------------------------------------------------------------------------------
First Trust Dow Target Dividend
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.74 1,008,759
1/1/2006 to 12/31/2006 $9.74 $11.27 602,702
1/1/2007 to 12/31/2007 $11.27 $11.17 380,133
A-141
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------
First Trust Value Line Target 25
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.26 82,641
1/1/2006 to 12/31/2006 $10.26 $10.96 451,172
1/1/2007 to 12/31/2007 $10.96 $11.49 181,009
- ----------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.46 48,990
1/1/2006 to 12/31/2006 $10.46 $12.17 382,210
1/1/2007 to 12/31/2007 $12.17 $11.94 126,309
- ----------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- -- --
1/1/2006 to 12/31/2006 -- -- --
1/1/2007 to 12/31/2007 -- -- --
- ----------------------------------------------------------------------------------------
Rydex Nova
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.97 0
1/1/2006 to 12/31/2006 $14.97 $17.50 0
1/1/2007 to 12/31/2007 $17.50 $17.34 0
- ----------------------------------------------------------------------------------------
Rydex OTC
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $14.16 0
1/1/2006 to 12/31/2006 $14.16 $14.68 0
1/1/2007 to 12/31/2007 $14.68 $16.94 0
A-142
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------
Rydex Inverse S&P 500 Strategy Fund
formerly, Rydex Inverse S&P 500
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $6.49 0
1/1/2006 to 12/31/2006 $6.49 $5.88 0
1/1/2007 to 12/31/2007 $5.88 $5.81 0
- --------------------------------------------------------------------------------------------------------
SP International Growth
formerly, SP William Blair International Growth
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $12.01 84,098
1/1/2006 to 12/31/2006 $12.01 $14.24 116,491
1/1/2007 to 12/31/2007 $14.24 $16.69 188,920
- --------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.99 111,044
1/1/2006 to 12/31/2006 $9.99 $11.33 744,811
1/1/2007 to 12/31/2007 $11.33 $12.17 906,776
- --------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.00 383,419
1/1/2006 to 12/31/2006 $10.00 $11.15 6,613,267
1/1/2007 to 12/31/2007 $11.15 $11.98 8,926,725
- --------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.01 312,604
1/1/2006 to 12/31/2006 $10.01 $10.97 5,065,695
1/1/2007 to 12/31/2007 $10.97 $11.74 8,136,541
- --------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.02 159,724
1/1/2006 to 12/31/2006 $10.02 $10.86 1,685,657
1/1/2007 to 12/31/2007 $10.86 $11.61 2,790,774
- --------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.03 5,527
1/1/2006 to 12/31/2006 $10.03 $10.62 632,804
1/1/2007 to 12/31/2007 $10.62 $11.31 1,601,195
A-143
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.63 1,290,825
1/1/2007 to 12/31/2007 $10.63 $11.41 2,559,214
- -------------------------------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.45 1,651,620
1/1/2007 to 12/31/2007 $10.45 $11.41 2,784,630
- -------------------------------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.55 2,113,521
1/1/2007 to 12/31/2007 $10.55 $11.22 2,818,505
- -------------------------------------------------------------------------------------------------------------
WFVT Advantage C&B Large Cap Value
1/1/2002 to 12/31/2002 -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $13.51 930
1/1/2006 to 12/31/2006 $13.51 $16.17 929
1/1/2007 to 12/31/2007 $16.17 $15.66 928
- -------------------------------------------------------------------------------------------------------------
AST CLS Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $11.50 12,898
- -------------------------------------------------------------------------------------------------------------
AST CLS Moderate Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.03 9,410
- -------------------------------------------------------------------------------------------------------------
AST Horizon Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.18 261
- -------------------------------------------------------------------------------------------------------------
AST Horizon Moderate Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.16 11,680
- -------------------------------------------------------------------------------------------------------------
AST Niemann Capital Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.00 1,495
- -------------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $10.00 $9.98 207,560
* Denotes the start date of these sub-accounts.
Advisors Choice 2000
Prudential Annuities Life Assurance Corporation
Prospectus
ACCUMULATION UNIT VALUES: With No Optional Benefits
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
1/1/1994 to 12/31/1994 $10.36 199,313
1/1/1995 to 12/31/1995 $10.36 $11.29 452,589
1/1/1996 to 12/31/1996 $11.29 $12.27 408,066
1/1/1997 to 12/31/1997 $12.27 $14.38 477,264
1/1/1998 to 12/31/1998 $14.38 $17.16 485,513
1/1/1999 to 12/31/1999 $17.16 $27.98 425,100
1/1/2000 to 12/31/2000 $27.98 $20.44 481,172
1/1/2001 to 12/31/2001 $20.44 $15.68 332,333
1/1/2002 to 12/31/2002 $15.68 $12.71 254,902
1/1/2003 to 12/31/2003 $12.71 $16.49 219,979
1/1/2004 to 12/31/2004 $16.49 $19.19 239,273
1/1/2005 to 12/31/2005 $19.19 $21.17 307,973
1/1/2006 to 12/31/2006 $21.17 $25.82 277,002
1/1/2007 to 12/31/2007 $25.82 $28.08 241,370
A-144
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
AST International Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- $11.78 235,801
1/1/1998 to 12/31/1998 $11.78 $13.60 729,573
1/1/1999 to 12/31/1999 $13.60 $24.68 962,018
1/1/2000 to 12/31/2000 $24.68 $18.48 792,703
1/1/2001 to 12/31/2001 $18.48 $14.04 539,241
1/1/2002 to 12/31/2002 $14.04 $10.37 371,174
1/1/2003 to 12/31/2003 $10.37 $14.43 536,475
1/1/2004 to 12/31/2004 $14.43 $16.65 1,259,678
1/1/2005 to 12/31/2005 $16.65 $19.28 1,305,988
1/1/2006 to 12/31/2006 $19.28 $23.18 1,047,521
1/1/2007 to 12/31/2007 $23.18 $27.41 871,674
- -------------------------------------------------------------------------------------
AST International Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- $10.27 137,991
1/1/1996 to 12/31/1996 $10.27 $11.49 278,460
1/1/1997 to 12/31/1997 $11.49 $11.63 203,237
1/1/1998 to 12/31/1998 $11.63 $12.82 230,548
1/1/1999 to 12/31/1999 $12.82 $24.16 274,671
1/1/2000 to 12/31/2000 $24.16 $16.73 344,664
1/1/2001 to 12/31/2001 $16.73 $11.27 232,142
1/1/2002 to 12/31/2002 $11.27 $9.29 200,531
1/1/2003 to 12/31/2003 $9.29 $12.36 283,809
1/1/2004 to 12/31/2004 $12.36 $14.86 275,575
1/1/2005 to 12/31/2005 $14.86 $16.79 245,299
1/1/2006 to 12/31/2006 $16.79 $21.26 305,421
1/1/2007 to 12/31/2007 $21.26 $24.88 328,815
- -------------------------------------------------------------------------------------
AST MFS Global Equity
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $11.03 213
1/1/2000 to 12/31/2000 $11.03 $10.17 11,623
1/1/2001 to 12/31/2001 $10.17 $9.09 47,989
1/1/2002 to 12/31/2002 $9.09 $7.93 114,507
1/1/2003 to 12/31/2003 $7.93 $10.01 126,748
1/1/2004 to 12/31/2004 $10.01 $11.78 392,469
1/1/2005 to 12/31/2005 $11.78 $12.59 277,405
1/1/2006 to 12/31/2006 $12.59 $15.54 367,076
1/1/2007 to 12/31/2007 $15.54 $16.90 293,745
A-145
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ---------------------------------------------------------------------------------------------
AST Small Cap Growth
1/1/1994 to 12/31/1994 $10.69 96,278
1/1/1995 to 12/31/1995 $10.69 $14.04 221,840
1/1/1996 to 12/31/1996 $14.04 $16.71 271,845
1/1/1997 to 12/31/1997 $16.71 $17.57 399,262
1/1/1998 to 12/31/1998 $17.57 $18.07 506,384
1/1/1999 to 12/31/1999 $18.07 $43.43 690,331
1/1/2000 to 12/31/2000 $43.43 $22.37 369,812
1/1/2001 to 12/31/2001 $22.37 $20.79 337,538
1/1/2002 to 12/31/2002 $20.79 $13.55 242,006
1/1/2003 to 12/31/2003 $13.55 $19.55 208,990
1/1/2004 to 12/31/2004 $19.55 $18.07 150,542
1/1/2005 to 12/31/2005 $18.07 $18.22 162,829
1/1/2006 to 12/31/2006 $18.22 $20.39 112,216
1/1/2007 to 12/31/2007 $20.39 $21.70 104,978
- ---------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $15.49 608,042
1/1/2000 to 12/31/2000 $15.49 $12.16 727,887
1/1/2001 to 12/31/2001 $12.16 $8.65 711,997
1/1/2002 to 12/31/2002 $8.65 $6.32 493,736
1/1/2003 to 12/31/2003 $6.32 $9.27 574,817
1/1/2004 to 12/31/2004 $9.27 $10.07 411,807
1/1/2005 to 12/31/2005 $10.07 $10.05 346,229
1/1/2006 to 12/31/2006 $10.05 $10.75 242,350
1/1/2007 to 12/31/2007 $10.75 $12.68 290,952
- ---------------------------------------------------------------------------------------------
AST Federated Aggressive Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $9.09 8,370
1/1/2001 to 12/31/2001 $9.09 $7.17 212,523
1/1/2002 to 12/31/2002 $7.17 $5.04 276,968
1/1/2003 to 12/31/2003 $5.04 $8.49 322,365
1/1/2004 to 12/31/2004 $8.49 $10.38 477,568
1/1/2005 to 12/31/2005 $10.38 $11.29 451,208
1/1/2006 to 12/31/2006 $11.29 $12.66 493,437
1/1/2007 to 12/31/2007 $12.66 $13.99 353,469
A-146
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -----------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- $9.93 65,255
1/1/1999 to 12/31/1999 $9.93 $10.73 133,145
1/1/2000 to 12/31/2000 $10.73 $14.27 362,487
1/1/2001 to 12/31/2001 $14.27 $15.58 943,242
1/1/2002 to 12/31/2002 $15.58 $14.25 572,355
1/1/2003 to 12/31/2003 $14.25 $19.98 396,816
1/1/2004 to 12/31/2004 $19.98 $23.85 276,076
1/1/2005 to 12/31/2005 $23.85 $24.88 201,121
1/1/2006 to 12/31/2006 $24.88 $28.97 153,674
1/1/2007 to 12/31/2007 $28.97 $27.31 116,213
- -----------------------------------------------------------------------------------------
AST Small-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- $12.78 771,770
1/1/1998 to 12/31/1998 $12.78 $11.36 895,422
1/1/1999 to 12/31/1999 $11.36 $11.35 570,268
1/1/2000 to 12/31/2000 $11.35 $13.74 594,074
1/1/2001 to 12/31/2001 $13.74 $14.61 979,765
1/1/2002 to 12/31/2002 $14.61 $13.15 680,968
1/1/2003 to 12/31/2003 $13.15 $17.74 730,928
1/1/2004 to 12/31/2004 $17.74 $20.52 607,239
1/1/2005 to 12/31/2005 $20.52 $21.74 509,489
1/1/2006 to 12/31/2006 $21.74 $25.93 436,915
1/1/2007 to 12/31/2007 $25.93 $24.32 347,488
- -----------------------------------------------------------------------------------------
AST DeAM Small-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.72 22,404
1/1/2003 to 12/31/2003 $7.72 $11.00 110,748
1/1/2004 to 12/31/2004 $11.00 $13.34 118,424
1/1/2005 to 12/31/2005 $13.34 $13.41 120,339
1/1/2006 to 12/31/2006 $13.41 $15.98 127,465
1/1/2007 to 12/31/2007 $15.98 $13.06 93,823
A-147
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $6.61 159,879
1/1/2001 to 12/31/2001 $6.61 $3.93 373,853
1/1/2002 to 12/31/2002 $3.93 $2.83 162,029
1/1/2003 to 12/31/2003 $2.83 $3.70 408,709
1/1/2004 to 12/31/2004 $3.70 $4.28 585,234
1/1/2005 to 12/31/2005 $4.28 $4.46 640,026
1/1/2006 to 12/31/2006 $4.46 $4.70 535,222
1/1/2007 to 12/31/2007 $4.70 $5.58 530,702
- -------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth
1/1/1994 to 12/31/1994 $9.95 3,419
1/1/1995 to 12/31/1995 $9.95 $12.27 89,474
1/1/1996 to 12/31/1996 $12.27 $14.15 100,758
1/1/1997 to 12/31/1997 $14.15 $16.38 104,340
1/1/1998 to 12/31/1998 $16.38 $19.63 94,905
1/1/1999 to 12/31/1999 $19.63 $29.53 91,314
1/1/2000 to 12/31/2000 $29.53 $26.97 301,210
1/1/2001 to 12/31/2001 $26.97 $19.88 477,410
1/1/2002 to 12/31/2002 $19.88 $13.59 323,369
1/1/2003 to 12/31/2003 $13.59 $17.62 273,193
1/1/2004 to 12/31/2004 $17.62 $20.32 340,048
1/1/2005 to 12/31/2005 $20.32 $22.92 532,541
1/1/2006 to 12/31/2006 $22.92 $25.97 332,998
1/1/2007 to 12/31/2007 $25.97 $31.53 366,101
- -------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value
1/1/1994 to 12/31/1994 $9.27 86,555
1/1/1995 to 12/31/1995 $9.27 $11.59 164,976
1/1/1996 to 12/31/1996 $11.59 $12.81 103,416
1/1/1997 to 12/31/1997 $12.81 $16.07 260,929
1/1/1998 to 12/31/1998 $16.07 $15.59 218,024
1/1/1999 to 12/31/1999 $15.59 $16.37 385,591
1/1/2000 to 12/31/2000 $16.37 $20.73 619,565
1/1/2001 to 12/31/2001 $20.73 $19.97 778,257
1/1/2002 to 12/31/2002 $19.97 $17.75 765,716
1/1/2003 to 12/31/2003 $17.75 $24.04 653,342
1/1/2004 to 12/31/2004 $24.04 $29.33 726,167
1/1/2005 to 12/31/2005 $29.33 $32.66 669,160
1/1/2006 to 12/31/2006 $32.66 $35.93 518,563
1/1/2007 to 12/31/2007 $35.93 $36.83 370,556
A-148
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------
AST Alger All-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $6.80 168,813
1/1/2001 to 12/31/2001 $6.80 $5.63 1,351,204
1/1/2002 to 12/31/2002 $5.63 $3.59 624,243
1/1/2003 to 12/31/2003 $3.59 $4.83 564,609
1/1/2004 to 12/31/2004 $4.83 $5.21 487,430
1/1/2005 to 12/2/2005 $5.21 $6.03 0
- -------------------------------------------------------------------------------------------
AST Mid-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $10.08 54,033
1/1/2001 to 12/31/2001 $10.08 $9.79 267,724
1/1/2002 to 12/31/2002 $9.79 $7.71 201,049
1/1/2003 to 12/31/2003 $7.71 $10.41 268,077
1/1/2004 to 12/31/2004 $10.41 $11.93 214,855
1/1/2005 to 12/31/2005 $11.93 $12.50 128,929
1/1/2006 to 12/31/2006 $12.50 $14.18 104,222
1/1/2007 to 12/31/2007 $14.18 $14.48 76,177
- -------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- $11.04 27,379
1/1/1996 to 12/31/1996 $11.04 $14.31 140,275
1/1/1997 to 12/31/1997 $14.31 $14.68 114,880
1/1/1998 to 12/31/1998 $14.68 $12.86 109,887
1/1/1999 to 12/31/1999 $12.86 $16.37 106,822
1/1/2000 to 12/31/2000 $16.37 $20.61 108,081
1/1/2001 to 12/31/2001 $20.61 $20.62 113,440
1/1/2002 to 12/31/2002 $20.62 $19.36 108,448
1/1/2003 to 12/31/2003 $19.36 $25.68 203,866
1/1/2004 to 12/31/2004 $25.68 $33.46 203,341
1/1/2005 to 12/31/2005 $33.46 $43.69 299,506
1/1/2006 to 12/31/2006 $43.69 $50.29 233,412
1/1/2007 to 12/31/2007 $50.29 $70.20 197,973
A-149
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- $10.92 119,830
1/1/1997 to 12/31/1997 $10.92 $12.45 199,511
1/1/1998 to 12/31/1998 $12.45 $15.75 193,822
1/1/1999 to 12/31/1999 $15.75 $20.95 183,376
1/1/2000 to 12/31/2000 $20.95 $17.95 218,749
1/1/2001 to 12/31/2001 $17.95 $15.21 300,536
1/1/2002 to 12/31/2002 $15.21 $10.43 210,924
1/1/2003 to 12/31/2003 $10.43 $12.82 108,170
1/1/2004 to 12/31/2004 $12.82 $13.47 90,747
1/1/2005 to 12/31/2005 $13.47 $15.58 274,763
1/1/2006 to 12/31/2006 $15.58 $16.35 187,054
1/1/2007 to 12/31/2007 $16.35 $17.58 243,724
- ------------------------------------------------------------------------------------------
AST MFS Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $11.29 10,558
1/1/2000 to 12/31/2000 $11.29 $10.48 93,890
1/1/2001 to 12/31/2001 $10.48 $8.15 892,954
1/1/2002 to 12/31/2002 $8.15 $5.82 643,644
1/1/2003 to 12/31/2003 $5.82 $7.10 596,050
1/1/2004 to 12/31/2004 $7.10 $7.81 601,222
1/1/2005 to 12/31/2005 $7.81 $8.25 623,371
1/1/2006 to 12/31/2006 $8.25 $8.99 352,548
1/1/2007 to 12/31/2007 $8.99 $10.28 323,164
- ------------------------------------------------------------------------------------------
AST Marsico Capital Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- $10.03 12,993
1/1/1998 to 12/31/1998 $10.03 $14.11 739,559
1/1/1999 to 12/31/1999 $14.11 $21.39 935,502
1/1/2000 to 12/31/2000 $21.39 $18.22 1,258,964
1/1/2001 to 12/31/2001 $18.22 $14.17 1,151,083
1/1/2002 to 12/31/2002 $14.17 $11.89 1,177,309
1/1/2003 to 12/31/2003 $11.89 $15.56 1,583,309
1/1/2004 to 12/31/2004 $15.56 $17.88 1,855,254
1/1/2005 to 12/31/2005 $17.88 $18.98 1,948,183
1/1/2006 to 12/31/2006 $18.98 $20.22 1,691,127
1/1/2007 to 12/31/2007 $20.22 $23.09 1,626,729
A-150
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ---------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth
1/1/1994 to 12/31/1994 $9.54 187,924
1/1/1995 to 12/31/1995 $9.54 $13.04 384,701
1/1/1996 to 12/31/1996 $13.04 $16.59 574,520
1/1/1997 to 12/31/1997 $16.59 $21.18 666,835
1/1/1998 to 12/31/1998 $21.18 $35.40 823,116
1/1/1999 to 12/31/1999 $35.40 $54.52 853,471
1/1/2000 to 12/31/2000 $54.52 $37.39 853,950
1/1/2001 to 12/31/2001 $37.39 $25.38 760,500
1/1/2002 to 12/31/2002 $25.38 $17.69 397,460
1/1/2003 to 12/31/2003 $17.69 $22.02 282,942
1/1/2004 to 12/31/2004 $22.02 $22.68 225,304
1/1/2005 to 12/31/2005 $22.68 $23.28 186,688
1/1/2006 to 12/31/2006 $23.28 $25.44 159,473
1/1/2007 to 12/31/2007 $25.44 $28.81 169,007
- ---------------------------------------------------------------------------------------------
AST DeAm Large-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $9.84 50,761
1/1/2001 to 12/31/2001 $9.84 $9.23 63,553
1/1/2002 to 12/31/2002 $9.23 $7.77 80,618
1/1/2003 to 12/31/2003 $7.77 $9.77 139,126
1/1/2004 to 12/31/2004 $9.77 $11.47 188,892
1/1/2005 to 12/31/2005 $11.47 $12.46 330,757
1/1/2006 to 12/31/2006 $12.46 $15.07 500,736
1/1/2007 to 12/31/2007 $15.07 $15.15 351,045
- ---------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $9.68 24,134
1/1/2002 to 12/31/2002 $9.68 $7.21 24,048
1/1/2003 to 12/31/2003 $7.21 $9.03 42,479
1/1/2004 to 12/31/2004 $9.03 $9.88 115,998
1/1/2005 to 12/2/2005 $9.88 $11.03 0
A-151
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------
AST Alliance Bernstein Core Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $10.10 54,784
1/1/2002 to 12/31/2002 $10.10 $8.70 305,648
1/1/2003 to 12/31/2003 $8.70 $11.09 387,468
1/1/2004 to 12/31/2004 $11.09 $12.55 461,239
1/1/2005 to 12/31/2005 $12.55 $13.16 393,974
1/1/2006 to 12/31/2006 $13.16 $15.87 631,031
1/1/2007 to 12/31/2007 $15.87 $15.20 433,808
- ------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- $8.35 91,685
1/1/1999 to 12/31/1999 $8.35 $8.48 232,305
1/1/2000 to 12/31/2000 $8.48 $10.63 335,316
1/1/2001 to 12/31/2001 $10.63 $10.86 345,833
1/1/2002 to 12/31/2002 $10.86 $11.08 317,670
1/1/2003 to 12/31/2003 $11.08 $15.12 507,911
1/1/2004 to 12/31/2004 $15.12 $20.73 481,197
1/1/2005 to 12/31/2005 $20.73 $23.65 363,492
1/1/2006 to 12/31/2006 $23.65 $32.12 399,562
1/1/2007 to 12/31/2007 $32.12 $25.55 207,198
- ------------------------------------------------------------------------------------------------
AST Alliance Bernstein Managed Index 500
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- $12.71 222,115
1/1/1999 to 12/31/1999 $12.71 $15.31 262,088
1/1/2000 to 12/31/2000 $15.31 $13.86 523,132
1/1/2001 to 12/31/2001 $13.86 $12.40 691,458
1/1/2002 to 12/31/2002 $12.40 $9.77 711,077
1/1/2003 to 12/31/2003 $9.77 $12.36 907,807
1/1/2004 to 12/31/2004 $12.36 $13.51 1,028,912
1/1/2005 to 12/31/2005 $13.51 $13.90 797,385
1/1/2006 to 12/31/2006 $13.90 $15.54 773,988
1/1/2007 to 12/31/2007 $15.54 $15.77 575,877
A-152
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------
AST American Century Income & Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- $12.14 104,567
1/1/1998 to 12/31/1998 $12.14 $13.54 158,481
1/1/1999 to 12/31/1999 $13.54 $16.54 212,826
1/1/2000 to 12/31/2000 $16.54 $14.66 386,882
1/1/2001 to 12/31/2001 $14.66 $13.34 361,018
1/1/2002 to 12/31/2002 $13.34 $10.62 278,381
1/1/2003 to 12/31/2003 $10.62 $13.59 247,785
1/1/2004 to 12/31/2004 $13.59 $15.20 524,434
1/1/2005 to 12/31/2005 $15.20 $15.80 404,601
1/1/2006 to 12/31/2006 $15.80 $18.35 317,435
1/1/2007 to 12/31/2007 $18.35 $18.21 243,704
- ----------------------------------------------------------------------------------------------
AST Alliance Bernstein Growth & Income
1/1/1994 to 12/31/1994 $10.21 238,128
1/1/1995 to 12/31/1995 $10.21 $13.04 498,080
1/1/1996 to 12/31/1996 $13.04 $15.32 671,510
1/1/1997 to 12/31/1997 $15.32 $18.84 700,150
1/1/1998 to 12/31/1998 $18.84 $21.05 666,925
1/1/1999 to 12/31/1999 $21.05 $24.28 771,705
1/1/2000 to 12/31/2000 $24.28 $25.45 824,148
1/1/2001 to 12/31/2001 $25.45 $25.17 1,063,471
1/1/2002 to 12/31/2002 $25.17 $19.18 781,774
1/1/2003 to 12/31/2003 $19.18 $25.23 772,571
1/1/2004 to 12/31/2004 $25.23 $27.83 881,766
1/1/2005 to 12/31/2005 $27.83 $28.97 769,120
1/1/2006 to 12/31/2006 $28.97 $33.75 654,696
1/1/2007 to 12/31/2007 $33.75 $35.25 488,085
- ----------------------------------------------------------------------------------------------
AST Large Cap Value
1/1/1994 to 12/31/1994 $9.62 150,719
1/1/1995 to 12/31/1995 $9.62 $12.39 293,340
1/1/1996 to 12/31/1996 $12.39 $14.38 283,889
1/1/1997 to 12/31/1997 $14.38 $17.60 287,286
1/1/1998 to 12/31/1998 $17.60 $19.82 317,432
1/1/1999 to 12/31/1999 $19.82 $22.00 291,589
1/1/2000 to 12/31/2000 $22.00 $22.89 458,422
1/1/2001 to 12/31/2001 $22.89 $20.79 421,855
1/1/2002 to 12/31/2002 $20.79 $17.04 274,957
1/1/2003 to 12/31/2003 $17.04 $20.31 244,888
1/1/2004 to 12/31/2004 $20.31 $23.29 269,303
1/1/2005 to 12/31/2005 $23.29 $24.64 466,854
1/1/2006 to 12/31/2006 $24.64 $28.99 449,189
1/1/2007 to 12/31/2007 $28.99 $27.94 341,897
A-153
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation
1/1/1994 to 12/31/1994 $9.91 114,927
1/1/1995 to 12/31/1995 $9.91 $12.04 239,737
1/1/1996 to 12/31/1996 $12.04 $13.27 186,453
1/1/1997 to 12/31/1997 $13.27 $15.57 211,541
1/1/1998 to 12/31/1998 $15.57 $17.46 223,039
1/1/1999 to 12/31/1999 $17.46 $20.97 203,969
1/1/2000 to 12/31/2000 $20.97 $19.92 172,245
1/1/2001 to 12/31/2001 $19.92 $17.47 149,042
1/1/2002 to 12/31/2002 $17.47 $14.68 100,537
1/1/2003 to 12/31/2003 $14.68 $17.43 87,241
1/1/2004 to 12/31/2004 $17.43 $19.24 64,342
1/1/2005 to 12/31/2005 $19.24 $20.44 76,214
1/1/2006 to 12/31/2006 $20.44 $22.57 76,805
1/1/2007 to 12/31/2007 $22.57 $22.85 146,030
- ----------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic Balanced
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- $11.25 3,720
1/1/1998 to 12/31/1998 $11.25 $13.56 22,252
1/1/1999 to 12/31/1999 $13.56 $15.22 52,889
1/1/2000 to 12/31/2000 $15.22 $14.65 106,849
1/1/2001 to 12/31/2001 $14.65 $14.00 182,487
1/1/2002 to 12/31/2002 $14.00 $12.56 128,128
1/1/2003 to 12/31/2003 $12.56 $14.83 191,980
1/1/2004 to 12/31/2004 $14.83 $16.05 121,891
1/1/2005 to 12/31/2005 $16.05 $16.69 86,619
1/1/2006 to 12/31/2006 $16.69 $18.18 63,280
1/1/2007 to 12/31/2007 $18.18 $19.67 53,282
- ----------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation
1/1/1994 to 12/31/1994 $9.80 74,058
1/1/1995 to 12/31/1995 $9.80 $11.98 89,787
1/1/1996 to 12/31/1996 $11.98 $13.44 82,655
1/1/1997 to 12/31/1997 $13.44 $15.78 99,319
1/1/1998 to 12/31/1998 $15.78 $18.56 136,200
1/1/1999 to 12/31/1999 $18.56 $20.34 134,685
1/1/2000 to 12/31/2000 $20.34 $20.11 114,244
1/1/2001 to 12/31/2001 $20.11 $19.02 109,469
1/1/2002 to 12/31/2002 $19.02 $17.03 155,933
1/1/2003 to 12/31/2003 $17.03 $20.98 146,224
1/1/2004 to 12/31/2004 $20.98 $23.17 187,867
1/1/2005 to 12/31/2005 $23.17 $24.10 220,129
1/1/2006 to 12/31/2006 $24.10 $26.93 215,085
1/1/2007 to 12/31/2007 $26.93 $28.45 189,265
A-154
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond
1/1/1994 to 12/31/1994 $9.61 25,171
1/1/1995 to 12/31/1995 $9.61 $10.58 127,373
1/1/1996 to 12/31/1996 $10.58 $11.11 213,216
1/1/1997 to 12/31/1997 $11.11 $10.65 266,136
1/1/1998 to 12/31/1998 $10.65 $12.13 335,544
1/1/1999 to 12/31/1999 $12.13 $11.05 222,268
1/1/2000 to 12/31/2000 $11.05 $10.93 211,010
1/1/2001 to 12/31/2001 $10.93 $11.15 192,368
1/1/2002 to 12/31/2002 $11.15 $12.74 585,072
1/1/2003 to 12/31/2003 $12.74 $14.28 465,034
1/1/2004 to 12/31/2004 $14.28 $15.42 590,587
1/1/2005 to 12/31/2005 $15.42 $14.63 664,641
1/1/2006 to 12/31/2006 $14.63 $15.44 739,981
1/1/2007 to 12/31/2007 $15.44 $16.82 753,697
- --------------------------------------------------------------------------------------
AST High Yield
1/1/1994 to 12/31/1994 $9.56 122,508
1/1/1995 to 12/31/1995 $9.56 $11.32 300,107
1/1/1996 to 12/31/1996 $11.32 $12.75 433,739
1/1/1997 to 12/31/1997 $12.75 $14.37 595,692
1/1/1998 to 12/31/1998 $14.37 $14.64 626,368
1/1/1999 to 12/31/1999 $14.64 $14.84 557,915
1/1/2000 to 12/31/2000 $14.84 $13.31 652,586
1/1/2001 to 12/31/2001 $13.31 $13.25 786,689
1/1/2002 to 12/31/2002 $13.25 $13.17 1,347,832
1/1/2003 to 12/31/2003 $13.17 $15.90 2,292,230
1/1/2004 to 12/31/2004 $15.90 $17.55 1,530,847
1/1/2005 to 12/31/2005 $17.55 $17.63 912,214
1/1/2006 to 12/31/2006 $17.63 $19.33 1,010,388
1/1/2007 to 12/31/2007 $19.33 $19.68 555,621
- --------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $10.14 1,858
1/1/2001 to 12/31/2001 $10.14 $10.38 149,890
1/1/2002 to 12/31/2002 $10.38 $10.35 590,060
1/1/2003 to 12/31/2003 $10.35 $12.21 707,957
1/1/2004 to 12/31/2004 $12.21 $13.03 791,466
1/1/2005 to 12/31/2005 $13.03 $13.10 468,856
1/1/2006 to 12/31/2006 $13.10 $14.29 469,306
1/1/2007 to 12/31/2007 $14.29 $15.06 276,055
A-155
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ---------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
1/1/1994 to 12/31/1994 $9.62 256,950
1/1/1995 to 12/31/1995 $9.62 $11.32 846,356
1/1/1996 to 12/31/1996 $11.32 $11.60 1,203,159
1/1/1997 to 12/31/1997 $11.60 $12.65 1,523,587
1/1/1998 to 12/31/1998 $12.65 $13.75 1,703,920
1/1/1999 to 12/31/1999 $13.75 $13.51 1,509,966
1/1/2000 to 12/31/2000 $13.51 $14.98 2,219,006
1/1/2001 to 12/31/2001 $14.98 $16.20 2,171,814
1/1/2002 to 12/31/2002 $16.20 $17.58 2,496,607
1/1/2003 to 12/31/2003 $17.58 $18.39 1,896,238
1/1/2004 to 12/31/2004 $18.39 $19.18 1,862,830
1/1/2005 to 12/31/2005 $19.18 $19.53 1,765,635
1/1/2006 to 12/31/2006 $19.53 $20.13 1,820,967
1/1/2007 to 12/31/2007 $20.13 $21.66 1,940,862
- ---------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- $10.41 399,158
1/1/1996 to 12/31/1996 $10.41 $10.71 424,713
1/1/1997 to 12/31/1997 $10.71 $11.42 469,686
1/1/1998 to 12/31/1998 $11.42 $12.00 593,352
1/1/1999 to 12/31/1999 $12.00 $12.32 807,789
1/1/2000 to 12/31/2000 $12.32 $13.28 862,868
1/1/2001 to 12/31/2001 $13.28 $14.24 1,002,458
1/1/2002 to 12/31/2002 $14.24 $15.03 1,605,101
1/1/2003 to 12/31/2003 $15.03 $15.42 1,309,374
1/1/2004 to 12/31/2004 $15.42 $15.64 1,681,588
1/1/2005 to 12/31/2005 $15.64 $15.79 1,881,200
1/1/2006 to 12/31/2006 $15.79 $16.28 1,638,686
1/1/2007 to 12/31/2007 $16.28 $17.28 1,418,200
- ---------------------------------------------------------------------------------------
AST Money Market
1/1/1994 to 12/31/1994 $10.23 880,903
1/1/1995 to 12/31/1995 $10.23 $10.70 968,666
1/1/1996 to 12/31/1996 $10.70 $11.14 1,292,931
1/1/1997 to 12/31/1997 $11.14 $11.63 1,518,310
1/1/1998 to 12/31/1998 $11.63 $12.15 1,757,232
1/1/1999 to 12/31/1999 $12.15 $12.63 3,950,988
1/1/2000 to 12/31/2000 $12.63 $13.31 7,219,151
1/1/2001 to 12/31/2001 $13.31 $13.72 7,694,667
1/1/2002 to 12/31/2002 $13.72 $13.81 8,322,994
1/1/2003 to 12/31/2003 $13.81 $13.80 5,253,119
1/1/2004 to 12/31/2004 $13.80 $13.83 4,248,368
1/1/2005 to 12/31/2005 $13.83 $14.11 6,016,530
1/1/2006 to 12/31/2006 $14.11 $14.66 4,838,370
1/1/2007 to 12/31/2007 $14.66 $15.28 5,852,766
A-156
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------------------
Gartmore NVIT Developing Markets Fund
formerly, Gartmore GVIT Developing Markets Fund
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- $10.29 39,355
1/1/1997 to 12/31/1997 $10.29 $10.15 305,775
1/1/1998 to 12/31/1998 $10.15 $6.30 250,465
1/1/1999 to 12/31/1999 $6.30 $10.31 210,007
1/1/2000 to 12/31/2000 $10.31 $7.32 220,596
1/1/2001 to 12/31/2001 $7.32 $6.77 235,357
1/1/2002 to 12/31/2002 $6.77 $6.07 337,154
1/1/2003 to 12/31/2003 $6.07 $9.63 979,994
1/1/2004 to 12/31/2004 $9.63 $11.46 714,218
1/1/2005 to 12/31/2005 $11.46 $14.98 823,016
1/1/2006 to 12/31/2006 $14.98 $20.03 651,495
1/1/2007 to 12/31/2007 $20.03 $28.55 451,444
- --------------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $17.03 7,400
1/1/2001 to 12/31/2001 $17.03 $16.01 14,888
1/1/2002 to 12/31/2002 $16.01 $12.84 15,148
1/1/2003 to 12/31/2003 $12.84 $16.10 16,761
1/1/2004 to 12/31/2004 $16.10 $17.77 11,464
1/1/2005 to 12/31/2005 $17.77 $18.60 11,773
1/1/2006 to 12/31/2006 $18.60 $21.91 22,180
1/1/2007 to 12/31/2007 $21.91 $22.38 25,013
- --------------------------------------------------------------------------------------------------------
AIM V.I.--Dynamics
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $13.93 9,545
1/1/2000 to 12/31/2000 $13.93 $13.35 210,494
1/1/2001 to 12/31/2001 $13.35 $9.13 267,417
1/1/2002 to 12/31/2002 $9.13 $6.18 135,486
1/1/2003 to 12/31/2003 $6.18 $8.46 159,239
1/1/2004 to 12/31/2004 $8.46 $9.53 88,195
1/1/2005 to 12/31/2005 $9.53 $10.48 96,278
1/1/2006 to 12/31/2006 $10.48 $12.09 107,342
1/1/2007 to 12/31/2007 $12.09 $13.48 107,103
A-157
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
AIM V.I.--Technology
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $16.55 127,037
1/1/2000 to 12/31/2000 $16.55 $12.59 381,493
1/1/2001 to 12/31/2001 $12.59 $6.78 409,546
1/1/2002 to 12/31/2002 $6.78 $3.58 265,726
1/1/2003 to 12/31/2003 $3.58 $5.17 226,147
1/1/2004 to 12/31/2004 $5.17 $5.37 283,479
1/1/2005 to 12/31/2005 $5.37 $5.45 241,082
1/1/2006 to 12/31/2006 $5.45 $5.98 129,711
1/1/2007 to 12/31/2007 $5.98 $6.40 158,698
- -------------------------------------------------------------------------------------
AIM V.I.--Health Sciences
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $11.36 4,966
1/1/2000 to 12/31/2000 $11.36 $14.73 386,673
1/1/2001 to 12/31/2001 $14.73 $12.79 322,329
1/1/2002 to 12/31/2002 $12.79 $9.60 238,488
1/1/2003 to 12/31/2003 $9.60 $12.19 194,661
1/1/2004 to 12/31/2004 $12.19 $13.03 171,635
1/1/2005 to 12/31/2005 $13.03 $14.00 175,051
1/1/2006 to 12/31/2006 $14.00 $14.63 174,695
1/1/2007 to 12/31/2007 $14.63 $16.26 114,917
- -------------------------------------------------------------------------------------
AIM V.I.--Financial Services
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $11.43 3,896
1/1/2000 to 12/31/2000 $11.43 $14.17 414,091
1/1/2001 to 12/31/2001 $14.17 $12.69 282,129
1/1/2002 to 12/31/2002 $12.69 $10.73 137,142
1/1/2003 to 12/31/2003 $10.73 $13.81 153,732
1/1/2004 to 12/31/2004 $13.81 $14.91 89,216
1/1/2005 to 12/31/2005 $14.91 $15.69 71,884
1/1/2006 to 12/31/2006 $15.69 $18.15 56,423
1/1/2007 to 12/31/2007 $18.15 $14.02 47,002
A-158
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------
Evergreen VA--International Equity
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $10.64 18,481
1/1/2001 to 12/31/2001 $10.64 $9.16 28,265
1/1/2002 to 12/31/2002 $9.16 $7.25 15,780
1/1/2003 to 12/31/2003 $7.25 $10.46 38,062
1/1/2004 to 12/31/2004 $10.46 $12.39 50,975
1/1/2005 to 12/31/2005 $12.39 $14.28 132,883
1/1/2006 to 12/31/2006 $14.28 $17.47 147,897
1/1/2007 to 12/31/2007 $17.47 $19.96 124,848
- ------------------------------------------------------------------------------------------
Evergreen VA--Special Equity
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $11.11 33,699
1/1/2001 to 12/31/2001 $11.11 $10.14 114,085
1/1/2002 to 12/31/2002 $10.14 $7.34 86,011
1/1/2003 to 12/31/2003 $7.34 $11.08 179,911
1/1/2004 to 12/31/2004 $11.08 $11.65 181,036
1/1/2005 to 4/15/2005 $11.65 $10.41 0
- ------------------------------------------------------------------------------------------
Evergreen VA--Omega
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $9.08 28,442
1/1/2002 to 12/31/2002 $9.08 $6.73 1,695
1/1/2003 to 12/31/2003 $6.73 $9.36 34,638
1/1/2004 to 12/31/2004 $9.36 $9.97 57,316
1/1/2005 to 12/31/2005 $9.97 $10.29 41,101
1/1/2006 to 12/31/2006 $10.29 $10.84 12,285
1/1/2007 to 12/31/2007 $10.84 $12.05 13,637
A-159
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
Evergreen VA Growth Fund
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $11.52 168,369
1/1/2006 to 12/31/2006 $11.52 $12.71 120,112
1/1/2007 to 12/31/2007 $12.71 $14.02 92,906
- -------------------------------------------------------------------------------------
ProFund VP--Europe 30
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $12.26 134
1/1/2000 to 12/31/2000 $12.26 $10.62 33,488
1/1/2001 to 12/31/2001 $10.62 $8.01 74,072
1/1/2002 to 12/31/2002 $8.01 $5.91 26,656
1/1/2003 to 12/31/2003 $5.91 $8.14 413,959
1/1/2004 to 12/31/2004 $8.14 $9.24 328,575
1/1/2005 to 12/31/2005 $9.24 $9.93 249,352
1/1/2006 to 12/31/2006 $9.93 $11.59 333,482
1/1/2007 to 12/31/2007 $11.59 $13.19 238,121
- -------------------------------------------------------------------------------------
ProFund VP--Asia 30
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.80 18,518
1/1/2003 to 12/31/2003 $7.80 $12.78 160,378
1/1/2004 to 12/31/2004 $12.78 $12.63 124,486
1/1/2005 to 12/31/2005 $12.63 $15.00 195,168
1/1/2006 to 12/31/2006 $15.00 $20.76 420,714
1/1/2007 to 12/31/2007 $20.76 $30.47 216,739
A-160
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Japan
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.29 3,411
1/1/2003 to 12/31/2003 $7.29 $9.18 64,887
1/1/2004 to 12/31/2004 $9.18 $9.81 333,037
1/1/2005 to 12/31/2005 $9.81 $13.82 762,072
1/1/2006 to 12/31/2006 $13.82 $15.21 143,153
1/1/2007 to 12/31/2007 $15.21 $13.60 114,157
- -------------------------------------------------------------------------------------
ProFund VP--Banks
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.62 6,455
1/1/2003 to 12/31/2003 $8.62 $11.08 20,188
1/1/2004 to 12/31/2004 $11.08 $12.31 165,023
1/1/2005 to 12/31/2005 $12.31 $12.21 41,059
1/1/2006 to 12/31/2006 $12.21 $14.00 31,140
1/1/2007 to 12/31/2007 $14.00 $10.11 77,170
- -------------------------------------------------------------------------------------
ProFund VP--Basic Materials
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.52 11,440
1/1/2003 to 12/31/2003 $8.52 $11.13 253,494
1/1/2004 to 12/31/2004 $11.13 $12.19 167,864
1/1/2005 to 12/31/2005 $12.19 $12.41 122,654
1/1/2006 to 12/31/2006 $12.41 $14.23 48,875
1/1/2007 to 12/31/2007 $14.23 $18.48 144,781
A-161
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Biotechnology
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $8.43 47,974
1/1/2002 to 12/31/2002 $8.43 $5.23 111,468
1/1/2003 to 12/31/2003 $5.23 $7.27 49,177
1/1/2004 to 12/31/2004 $7.27 $7.92 133,501
1/1/2005 to 12/31/2005 $7.92 $9.38 118,020
1/1/2006 to 12/31/2006 $9.38 $8.94 44,623
1/1/2007 to 12/31/2007 $8.94 $8.78 90,864
- -------------------------------------------------------------------------------------
ProFund VP--Consumer Services
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.29 14,792
1/1/2003 to 12/31/2003 $7.29 $9.19 24,982
1/1/2004 to 12/31/2004 $9.19 $9.82 195,868
1/1/2005 to 12/31/2005 $9.82 $9.30 3,605
1/1/2006 to 12/31/2006 $9.30 $10.35 45,532
1/1/2007 to 12/31/2007 $10.35 $9.44 3,176
- -------------------------------------------------------------------------------------
ProFund VP--Consumer Goods
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.33 9,203
1/1/2003 to 12/31/2003 $8.33 $9.81 11,486
1/1/2004 to 12/31/2004 $9.81 $10.65 24,590
1/1/2005 to 12/31/2005 $10.65 $10.54 31,220
1/1/2006 to 12/31/2006 $10.54 $11.79 62,550
1/1/2007 to 12/31/2007 $11.79 $12.60 98,869
A-162
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Oil & Gas
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $9.25 262,999
1/1/2002 to 12/31/2002 $9.25 $7.63 148,807
1/1/2003 to 12/31/2003 $7.63 $9.26 336,748
1/1/2004 to 12/31/2004 $9.26 $11.91 247,649
1/1/2005 to 12/31/2005 $11.91 $15.53 373,876
1/1/2006 to 12/31/2006 $15.53 $18.61 197,658
1/1/2007 to 12/31/2007 $18.61 $24.50 179,791
- -------------------------------------------------------------------------------------
ProFund VP--Financial
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $9.28 12,893
1/1/2002 to 12/31/2002 $9.28 $7.85 31,033
1/1/2003 to 12/31/2003 $7.85 $10.06 28,956
1/1/2004 to 12/31/2004 $10.06 $11.03 259,356
1/1/2005 to 12/31/2005 $11.03 $11.39 154,652
1/1/2006 to 12/31/2006 $11.39 $13.28 128,282
1/1/2007 to 12/31/2007 $13.28 $10.67 96,858
- -------------------------------------------------------------------------------------
ProFund VP--Healthcare
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $9.42 38,320
1/1/2002 to 12/31/2002 $9.42 $7.23 76,140
1/1/2003 to 12/31/2003 $7.23 $8.44 57,417
1/1/2004 to 12/31/2004 $8.44 $8.58 342,154
1/1/2005 to 12/31/2005 $8.58 $9.04 121,611
1/1/2006 to 12/31/2006 $9.04 $9.45 256,066
1/1/2007 to 12/31/2007 $9.45 $10.01 159,903
A-163
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Industrial
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- $10.18 41,864
1/1/2004 to 12/31/2004 $10.18 $11.45 23,756
1/1/2005 to 12/31/2005 $11.45 $11.66 18,140
1/1/2006 to 12/31/2006 $11.66 $12.93 30,797
1/1/2007 to 12/31/2007 $12.93 $14.35 33,623
- -------------------------------------------------------------------------------------
ProFund VP--Internet
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.63 53,814
1/1/2003 to 12/31/2003 $8.63 $15.25 54,786
1/1/2004 to 12/31/2004 $15.25 $18.38 181,598
1/1/2005 to 12/31/2005 $18.38 $19.61 77,548
1/1/2006 to 12/31/2006 $19.61 $19.75 28,931
1/1/2007 to 12/31/2007 $19.75 $21.62 14,734
- -------------------------------------------------------------------------------------
ProFund VP--Pharmaceuticals
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.62 9,411
1/1/2003 to 12/31/2003 $8.62 $9.04 81,004
1/1/2004 to 12/31/2004 $9.04 $8.15 41,607
1/1/2005 to 12/31/2005 $8.15 $7.79 48,716
1/1/2006 to 12/31/2006 $7.79 $8.68 78,989
1/1/2007 to 12/31/2007 $8.68 $8.83 19,524
A-164
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Precious Metals
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $9.77 395,037
1/1/2003 to 12/31/2003 $9.77 $13.52 315,457
1/1/2004 to 12/31/2004 $13.52 $12.10 406,661
1/1/2005 to 12/31/2005 $12.10 $15.18 479,531
1/1/2006 to 12/31/2006 $15.18 $16.19 535,374
1/1/2007 to 12/31/2007 $16.19 $19.70 278,711
- -------------------------------------------------------------------------------------
ProFund VP--Real Estate
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $10.84 35,747
1/1/2002 to 12/31/2002 $10.84 $10.77 32,985
1/1/2003 to 12/31/2003 $10.77 $14.25 116,140
1/1/2004 to 12/31/2004 $14.25 $18.01 216,703
1/1/2005 to 12/31/2005 $18.01 $19.10 37,850
1/1/2006 to 12/31/2006 $19.10 $25.14 80,333
1/1/2007 to 12/31/2007 $25.14 $20.08 24,481
- -------------------------------------------------------------------------------------
ProFund VP--Semiconductor
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $5.17 33,410
1/1/2003 to 12/31/2003 $5.17 $9.67 51,652
1/1/2004 to 12/31/2004 $9.67 $7.35 98,700
1/1/2005 to 12/31/2005 $7.35 $7.93 79,039
1/1/2006 to 12/31/2006 $7.93 $7.32 98,783
1/1/2007 to 12/31/2007 $7.32 $7.79 139,175
A-165
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------
ProFund VP--Technology
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $5.95 53,955
1/1/2002 to 12/31/2002 $5.95 $3.51 48,717
1/1/2003 to 12/31/2003 $3.51 $5.09 83,329
1/1/2004 to 12/31/2004 $5.09 $5.03 201,017
1/1/2005 to 12/31/2005 $5.03 $5.06 103,646
1/1/2006 to 12/31/2006 $5.06 $5.43 67,983
1/1/2007 to 12/31/2007 $5.43 $6.18 147,187
- --------------------------------------------------------------------------------------
ProFund VP--Telecommunications
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $7.15 1,696
1/1/2002 to 12/31/2002 $7.15 $4.41 65,796
1/1/2003 to 12/31/2003 $4.41 $4.49 56,454
1/1/2004 to 12/31/2004 $4.49 $5.16 233,182
1/1/2005 to 12/31/2005 $5.16 $4.78 64,563
1/1/2006 to 12/31/2006 $4.78 $6.38 324,251
1/1/2007 to 12/31/2007 $6.38 $6.87 82,751
- --------------------------------------------------------------------------------------
ProFund VP--Utilities
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $8.18 48,251
1/1/2002 to 12/31/2002 $8.18 $6.18 127,336
1/1/2003 to 12/31/2003 $6.18 $7.45 88,248
1/1/2004 to 12/31/2004 $7.45 $8.97 347,666
1/1/2005 to 12/31/2005 $8.97 $10.07 171,379
1/1/2006 to 12/31/2006 $10.07 $11.93 337,008
1/1/2007 to 12/31/2007 $11.93 $13.72 337,671
A-166
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Bull
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.02 153,898
1/1/2003 to 12/31/2003 $8.02 $10.01 404,601
1/1/2004 to 12/31/2004 $10.01 $10.82 617,953
1/1/2005 to 12/31/2005 $10.82 $11.04 546,042
1/1/2006 to 12/31/2006 $11.04 $12.47 745,548
1/1/2007 to 12/31/2007 $12.47 $12.83 453,952
- -------------------------------------------------------------------------------------
ProFund VP--Bear
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $11.62 104,865
1/1/2002 to 12/31/2002 $11.62 $13.95 217,878
1/1/2003 to 12/31/2003 $13.95 $10.45 196,473
1/1/2004 to 12/31/2004 $10.45 $9.31 98,354
1/1/2005 to 12/31/2005 $9.31 $9.13 159,128
1/1/2006 to 12/31/2006 $9.13 $8.39 131,467
1/1/2007 to 12/31/2007 $8.39 $8.38 160,574
- -------------------------------------------------------------------------------------
ProFund VP--Ultra Bull
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $7.52 80,778
1/1/2002 to 12/31/2002 $7.52 $4.78 108,279
1/1/2003 to 12/31/2003 $4.78 $7.26 327,838
1/1/2004 to 12/31/2004 $7.26 $8.45 367,865
1/1/2005 to 12/31/2005 $8.45 $8.61 133,243
1/1/2006 to 12/31/2006 $8.61 $10.53 137,577
1/1/2007 to 12/31/2007 $10.53 $10.55 268,096
A-167
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------
ProFund VP NASDAQ-100
formerly, ProFund VP--OTC
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- $5.81 163,539
1/1/2002 to 12/31/2002 $5.81 $3.54 520,310
1/1/2003 to 12/31/2003 $3.54 $5.16 729,288
1/1/2004 to 12/31/2004 $5.16 $5.57 629,788
1/1/2005 to 12/31/2005 $5.57 $5.54 310,845
1/1/2006 to 12/31/2006 $5.54 $5.81 380,108
1/1/2007 to 12/31/2007 $5.81 $6.78 511,665
- ----------------------------------------------------------------------------------------
ProFund VP Short NASDAQ-100
formerly, ProFund VP--Short OTC
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $11.07 119,355
1/1/2003 to 12/31/2003 $11.07 $6.90 164,801
1/1/2004 to 12/31/2004 $6.90 $6.09 92,529
1/1/2005 to 12/31/2005 $6.09 $6.10 430,495
1/1/2006 to 12/31/2006 $6.10 $5.98 247,455
1/1/2007 to 12/31/2007 $5.98 $5.25 59,572
- ----------------------------------------------------------------------------------------
ProFund VP UltraNASDAQ-100
formerly, ProFund VP--UltraOTC
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $23.61 189,497
1/1/2000 to 12/31/2000 $23.61 $6.25 473,337
1/1/2001 to 12/31/2001 $6.25 $1.94 1,166,884
1/1/2002 to 12/31/2002 $1.94 $0.60 1,188,414
1/1/2003 to 12/31/2003 $0.60 $1.21 1,640,765
1/1/2004 to 12/31/2004 $1.21 $1.37 1,534,878
1/1/2005 to 12/31/2005 $1.37 $1.31 1,633,655
1/1/2006 to 12/31/2006 $1.31 $1.36 1,830,505
1/1/2007 to 12/31/2007 $1.36 $1.74 2,571,465
A-168
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Mid-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.72 28,913
1/1/2003 to 12/31/2003 $7.72 $10.41 192,966
1/1/2004 to 12/31/2004 $10.41 $11.99 364,242
1/1/2005 to 12/31/2005 $11.99 $12.96 260,628
1/1/2006 to 12/31/2006 $12.96 $14.46 176,362
1/1/2007 to 12/31/2007 $14.46 $14.51 150,294
- -------------------------------------------------------------------------------------
ProFund VP--Mid-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.75 21,813
1/1/2003 to 12/31/2003 $7.75 $9.85 150,991
1/1/2004 to 12/31/2004 $9.85 $10.87 181,124
1/1/2005 to 12/31/2005 $10.87 $12.01 274,073
1/1/2006 to 12/31/2006 $12.01 $12.41 118,715
1/1/2007 to 12/31/2007 $12.41 $13.78 108,048
- -------------------------------------------------------------------------------------
ProFund VP--UltraMid-Cap
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $5.75 34,937
1/1/2003 to 12/31/2003 $5.75 $9.71 91,098
1/1/2004 to 12/31/2004 $9.71 $12.32 245,338
1/1/2005 to 12/31/2005 $12.32 $14.43 77,440
1/1/2006 to 12/31/2006 $14.43 $15.87 61,966
1/1/2007 to 12/31/2007 $15.87 $16.70 40,495
A-169
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP--Small-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.14 99,422
1/1/2003 to 12/31/2003 $7.14 $9.55 346,508
1/1/2004 to 12/31/2004 $9.55 $11.40 585,857
1/1/2005 to 12/31/2005 $11.40 $11.78 112,027
1/1/2006 to 12/31/2006 $11.78 $13.74 170,318
1/1/2007 to 12/31/2007 $13.74 $12.67 78,556
- -------------------------------------------------------------------------------------
ProFund VP--Small-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $7.75 89,346
1/1/2003 to 12/31/2003 $7.75 $10.34 184,649
1/1/2004 to 12/31/2004 $10.34 $12.30 427,343
1/1/2005 to 12/31/2005 $12.30 $13.14 196,876
1/1/2006 to 12/31/2006 $13.14 $14.19 68,601
1/1/2007 to 12/31/2007 $14.19 $14.67 55,924
- -------------------------------------------------------------------------------------
ProFund VP--UltraSmall-Cap
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $11.98 --
1/1/2000 to 12/31/2000 $11.98 $9.27 233,113
1/1/2001 to 12/31/2001 $9.27 $8.51 221,152
1/1/2002 to 12/31/2002 $8.51 $4.85 147,185
1/1/2003 to 12/31/2003 $4.85 $9.61 258,143
1/1/2004 to 12/31/2004 $9.61 $12.51 476,709
1/1/2005 to 12/31/2005 $12.51 $12.41 68,999
1/1/2006 to 12/31/2006 $12.41 $15.53 77,538
1/1/2007 to 12/31/2007 $15.53 $13.40 63,150
A-170
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- --------------------------------------------------------------------------------------------
ProFund VP--U.S. Government Plus
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $11.64 206,704
1/1/2003 to 12/31/2003 $11.64 $11.27 186,404
1/1/2004 to 12/31/2004 $11.27 $12.11 195,171
1/1/2005 to 12/31/2005 $12.11 $13.11 493,711
1/1/2006 to 12/31/2006 $13.11 $12.44 112,791
1/1/2007 to 12/31/2007 $12.44 $13.61 339,646
- --------------------------------------------------------------------------------------------
ProFund VP--Rising Rates Opportunity
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- $8.07 126,238
1/1/2003 to 12/31/2003 $8.07 $7.69 217,316
1/1/2004 to 12/31/2004 $7.69 $6.81 888,013
1/1/2005 to 12/31/2005 $6.81 $6.23 566,028
1/1/2006 to 12/31/2006 $6.23 $6.82 255,289
1/1/2007 to 12/31/2007 $6.82 $6.42 211,288
- --------------------------------------------------------------------------------------------
Access VP High Yield
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.63 258,925
1/1/2006 to 12/31/2006 $10.63 $11.58 203,717
1/1/2007 to 12/31/2007 $11.58 $12.10 64,588
A-171
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------------------
First Trust Target Focus Four Portfolio
formerly, First Trust(R) 10 Uncommon Values
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- $7.46 37,575
1/1/2001 to 12/31/2001 $7.46 $4.77 44,306
1/1/2002 to 12/31/2002 $4.77 $2.99 42,562
1/1/2003 to 12/31/2003 $2.99 -- --
1/1/2004 to 12/31/2004 -- $4.50 28,099
1/1/2005 to 12/31/2005 $4.50 $4.50 23,415
1/1/2006 to 12/31/2006 $4.50 $4.65 23,015
1/1/2007 to 12/31/2007 $4.65 $4.88 33,437
- ----------------------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
1/1/1994 to 12/31/1994 $0.00 0
1/1/1995 to 12/31/1995 $0.00 $0.00 0
1/1/1996 to 12/31/1996 $0.00 $0.00 0
1/1/1997 to 12/31/1997 $0.00 $0.00 0
1/1/1998 to 12/31/1998 $0.00 $0.00 0
1/1/1999 to 12/31/1999 $0.00 $0.00 0
1/1/2000 to 12/31/2000 $0.00 -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $11.93 4,880
1/1/2005 to 12/31/2005 $11.93 $13.06 37,527
1/1/2006 to 12/31/2006 $13.06 $17.96 112,508
1/1/2007 to 12/31/2007 $17.96 $20.22 97,633
- ----------------------------------------------------------------------------------------------------
First Trust Managed VIP
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $11.40 14,798
1/1/2005 to 12/31/2005 $11.40 $12.15 15,235
1/1/2006 to 12/31/2006 $12.15 $13.46 30,539
1/1/2007 to 12/31/2007 $13.46 $14.63 53,518
A-172
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
1/1/1994 to 12/31/1994 $0.00 0
1/1/1995 to 12/31/1995 $0.00 $0.00 0
1/1/1996 to 12/31/1996 $0.00 $0.00 0
1/1/1997 to 12/31/1997 $0.00 $0.00 0
1/1/1998 to 12/31/1998 $0.00 $0.00 0
1/1/1999 to 12/31/1999 $0.00 $0.00 0
1/1/2000 to 12/31/2000 $0.00 -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $10.73 2,813
1/1/2005 to 12/31/2005 $10.73 $11.01 1,235
1/1/2006 to 12/31/2006 $11.01 $11.91 3,143
1/1/2007 to 12/31/2007 $11.91 $14.41 1,392
- -------------------------------------------------------------------------------------
First Trust S&P Target 24
1/1/1994 to 12/31/1994 $0.00 0
1/1/1995 to 12/31/1995 $0.00 $0.00 0
1/1/1996 to 12/31/1996 $0.00 $0.00 0
1/1/1997 to 12/31/1997 $0.00 $0.00 0
1/1/1998 to 12/31/1998 $0.00 $0.00 0
1/1/1999 to 12/31/1999 $0.00 $0.00 0
1/1/2000 to 12/31/2000 $0.00 -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $10.82 999
1/1/2005 to 12/31/2005 $10.82 $11.20 471
1/1/2006 to 12/31/2006 $11.20 $11.44 1,065
1/1/2007 to 12/31/2007 $11.44 $11.85 1,043
- -------------------------------------------------------------------------------------
First Trust The Dow Target 10
1/1/1994 to 12/31/1994 $0.00 0
1/1/1995 to 12/31/1995 $0.00 $0.00 0
1/1/1996 to 12/31/1996 $0.00 $0.00 0
1/1/1997 to 12/31/1997 $0.00 $0.00 0
1/1/1998 to 12/31/1998 $0.00 $0.00 0
1/1/1999 to 12/31/1999 $0.00 $0.00 0
1/1/2000 to 12/31/2000 $0.00 -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $10.55 59
1/1/2005 to 12/31/2005 $10.55 $10.15 223
1/1/2006 to 12/31/2006 $10.15 $12.66 11,382
1/1/2007 to 12/31/2007 $12.66 $12.66 3,312
A-173
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ----------------------------------------------------------------------------------------
First Trust Dow Target Dividend
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.83 10,313
1/1/2006 to 12/31/2006 $9.83 $11.53 36,613
1/1/2007 to 12/31/2007 $11.53 $11.59 39,045
- ----------------------------------------------------------------------------------------
First Trust Value Line Target 25
1/1/1994 to 12/31/1994 $0.00 0
1/1/1995 to 12/31/1995 $0.00 $0.00 0
1/1/1996 to 12/31/1996 $0.00 $0.00 0
1/1/1997 to 12/31/1997 $0.00 $0.00 0
1/1/1998 to 12/31/1998 $0.00 $0.00 0
1/1/1999 to 12/31/1999 $0.00 $0.00 0
1/1/2000 to 12/31/2000 $0.00 -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $12.67 10,691
1/1/2005 to 12/31/2005 $12.67 $15.07 34,332
1/1/2006 to 12/31/2006 $15.07 $15.40 11,865
1/1/2007 to 12/31/2007 $15.40 $18.09 20,913
- ----------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.42 410,302
1/1/2006 to 12/31/2006 $10.42 $11.29 229,253
1/1/2007 to 12/31/2007 $11.29 $11.99 325,310
A-174
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.62 401,521
1/1/2006 to 12/31/2006 $10.62 $12.53 445,563
1/1/2007 to 12/31/2007 $12.53 $12.46 289,042
- -------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $9.71 11,369
1/1/2005 to 12/31/2005 $9.71 $8.73 32,585
1/1/2006 to 12/31/2006 $8.73 $8.36 302,256
1/1/2007 to 12/31/2007 $8.36 $8.07 6,106
- -------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $9.55 12,042
1/1/2005 to 12/31/2005 $9.55 $9.21 306,255
1/1/2006 to 12/31/2006 $9.21 $8.07 327,704
1/1/2007 to 12/31/2007 $8.07 $8.38 28,374
A-175
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------
Rydex Nova
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $10.88 170,171
1/1/2000 to 12/31/2000 $10.88 $8.61 160,940
1/1/2001 to 12/31/2001 $8.61 $6.54 96,678
1/1/2002 to 12/31/2002 $6.54 $4.18 53,740
1/1/2003 to 12/31/2003 $4.18 $5.77 50,893
1/1/2004 to 12/31/2004 $5.77 $6.58 48,943
1/1/2005 to 12/31/2005 $6.58 $6.79 47,099
1/1/2006 to 12/31/2006 $6.79 $8.05 31,057
1/1/2007 to 12/31/2007 $8.05 $8.09 19,304
- -------------------------------------------------------------------------------------------
Rydex OTC
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $17.15 156,294
1/1/2000 to 12/31/2000 $17.15 $10.53 502,685
1/1/2001 to 12/31/2001 $10.53 $6.78 185,653
1/1/2002 to 12/31/2002 $6.78 $4.12 105,261
1/1/2003 to 12/31/2003 $4.12 $5.95 92,804
1/1/2004 to 12/31/2004 $5.95 $6.47 78,958
1/1/2005 to 12/31/2005 $6.47 $6.50 50,445
1/1/2006 to 12/31/2006 $6.50 $6.83 36,153
1/1/2007 to 12/31/2007 $6.83 $7.99 19,450
- -------------------------------------------------------------------------------------------
Rydex Inverse S&P 500 Strategy Fund
formerly, Rydex Inverse S&P 500
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- $9.33 39,869
1/1/2000 to 12/31/2000 $9.33 $10.76 58,713
1/1/2001 to 12/31/2001 $10.76 $12.29 1,421
1/1/2002 to 12/31/2002 $12.29 $14.85 875
1/1/2003 to 12/31/2003 $14.85 -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $9.91 0
1/1/2006 to 12/31/2006 $9.91 $9.11 0
1/1/2007 to 12/31/2007 $9.11 $9.12 0
A-176
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -----------------------------------------------------------------------------------------------------
SP International Growth
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- $10.53 14,108
1/1/2005 to 12/31/2005 $10.53 $12.18 49,783
1/1/2006 to 12/31/2006 $12.18 $14.65 54,533
1/1/2007 to 12/31/2007 $14.65 $17.40 70,733
- -----------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.01 17,259
1/1/2006 to 12/31/2006 $10.01 $11.50 40,270
1/1/2007 to 12/31/2007 $11.50 $12.52 119,072
- -----------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.01 78,453
1/1/2006 to 12/31/2006 $10.01 $11.31 271,080
1/1/2007 to 12/31/2007 $11.31 $12.33 365,220
A-177
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- ------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.02 161,883
1/1/2006 to 12/31/2006 $10.02 $11.13 634,693
1/1/2007 to 12/31/2007 $11.13 $12.08 734,238
- ------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.03 0
1/1/2006 to 12/31/2006 $10.03 $11.02 128,835
1/1/2007 to 12/31/2007 $11.02 $11.94 179,010
- ------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- -- --
1/1/1999 to 12/31/1999 -- -- --
1/1/2000 to 12/31/2000 -- -- --
1/1/2001 to 12/31/2001 -- -- --
1/1/2002 to 12/31/2002 -- -- --
1/1/2003 to 12/31/2003 -- -- --
1/1/2004 to 12/31/2004 -- -- --
1/1/2005 to 12/31/2005 -- $10.04 0
1/1/2006 to 12/31/2006 $10.04 $10.77 67,695
1/1/2007 to 12/31/2007 $10.77 $11.64 104,035
- ------------------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.74 552,445
1/1/2007 to 12/31/2007 $10.74 $11.69 320,190
- ------------------------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.57 33,872
1/1/2007 to 12/31/2007 $10.57 $11.70 65,626
- ------------------------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
3/20/2006* to 12/31/2006 $10.00 $10.67 34,428
1/1/2007 to 12/31/2007 $10.67 $11.50 102,596
A-178
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Beginning of Period End of Period End of Period
- -------------------------------------------------------------------------------------------------------------
WFVT Advantage C&B Large Cap Value
1/1/1994 to 12/31/1994 -- --
1/1/1995 to 12/31/1995 -- -- --
1/1/1996 to 12/31/1996 -- -- --
1/1/1997 to 12/31/1997 -- -- --
1/1/1998 to 12/31/1998 -- $9.58 1,943
1/1/1999 to 12/31/1999 $9.58 $9.28 22,874
1/1/2000 to 12/31/2000 $9.28 $9.76 131,343
1/1/2001 to 12/31/2001 $9.76 $9.07 131,195
1/1/2002 to 12/31/2002 $9.07 $6.84 109,227
1/1/2003 to 12/31/2003 $6.84 $8.54 44,932
1/1/2004 to 12/31/2004 $8.54 $9.43 35,085
1/1/2005 to 12/31/2005 $9.43 $9.66 13,894
1/1/2006 to 12/31/2006 $9.66 $11.72 32,164
1/1/2007 to 12/31/2007 $11.72 $11.51 12,698
- -------------------------------------------------------------------------------------------------------------
AST CLS Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $11.52 0
- -------------------------------------------------------------------------------------------------------------
AST CLS Moderate Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.05 0
- -------------------------------------------------------------------------------------------------------------
AST Horizon Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.20 14
- -------------------------------------------------------------------------------------------------------------
AST Horizon Moderate Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.18 0
- -------------------------------------------------------------------------------------------------------------
AST Niemann Capital Growth Asset Allocation Portfolio
11/19/2007* to 12/31/2007 $10.00 $10.01 0
- -------------------------------------------------------------------------------------------------------------
AST Western Asset Core Plus Bond Portfolio
11/19/2007* to 12/31/2007 $10.00 $9.99 0
* Denotes the start date of these sub-accounts.
A-179
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS
Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation
The following are examples of how the Enhanced Beneficiary Protection Optional
Death Benefit is calculated. Each example assumes that a $50,000 initial
Purchase Payment is made. Each example assumes that there is one Owner who is
age 50 on the Issue Date and that all Account Value is maintained in the
variable investment options. The formula for determining the Enhanced
Beneficiary Protection Optional Death Benefit is as follows:
Growth = Account Value of variable minus Purchase Payments -
investment options plus Interim proportional withdrawals
Value of Fixed Allocations
(no MVA applies)
Example with market increase
Assume that the Owner has made no withdrawals and that the Account Value has
been increasing due to positive market performance. On the date we receive due
proof of death, the Account Value is $75,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the
"Growth" under the Annuity.
Growth = $75,000 - [$50,000 - $0]
= $25,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth
= $25,000 * 0.40
= $10,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit
= $85,000
Examples with market decline
Assume that the Owner has made no withdrawals and that the Account Value has
been decreasing due to declines in market performance. On the date we receive
due proof of death, the Account Value is $45,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($50,000) PLUS the
"Growth" under the Annuity.
Growth = $45,000 - [$50,000 - $0]
= $-5,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth
NO BENEFIT IS PAYABLE
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit
= $50,000
In this example you would receive no additional benefit from purchasing the
Enhanced Beneficiary Protection Optional Death Benefit.
B-1
Example with market increase and withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $90,000. The basic Death Benefit is calculated as Purchase
Payments minus proportional withdrawals, or Account Value, which ever is
greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced
Beneficiary Protection Optional Death Benefit is equal to the amount payable
under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the
Annuity.
Growth = $90,000 - [$50,000 - ($50,000 * $15,000/$75,000)]
= $90,000 - [$50,000 - $10,000]
= $90,000 - $40,000
= $50,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth
= $50,000 * 0.40
= $20,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit
= $110,000
Examples of Highest Anniversary Value Death Benefit Calculation
The following are examples of how the Highest Anniversary Value Death Benefit
is calculated. Each example assumes an initial Purchase Payment of $50,000.
Each example assumes that there is one Owner who is age 70 on the Issue Date
and that all Account Value is maintained in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
date we receive due proof of death, the Account Value is $75,000; however, the
Anniversary Value on the 5/th/ anniversary of the Issue Date was $90,000.
Assume as well that the Owner has died before the Death Benefit Target Date.
The Death Benefit is equal to the greater of the Highest Anniversary Value or
the basic Death Benefit. The Death Benefit would be the Highest Anniversary
Value ($90,000) because it is greater than the amount that would have been
payable under the basic Death Benefit ($75,000).
Example with withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $80,000; however, the Anniversary Value on the 5/th/
anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Death Benefit is equal to the
greater of the Highest Anniversary Value or the basic Death Benefit.
Highest Anniversary Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Basic Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The Death Benefit therefore is $80,000.
B-2
Example with death after Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals had been made prior to the
Death Benefit Target Date. Further assume that the Owner dies after the Death
Benefit Target Date, when the Account Value is $75,000. The Highest
Anniversary Value on the Death Benefit Target Date was $80,000; however,
following the Death Benefit Target Date, the Owner made a Purchase Payment of
$15,000 and later had taken a withdrawal of $5,000 when the Account Value was
$70,000. The Death Benefit is equal to the greater of the Highest Anniversary
Value plus Purchase Payments minus proportional withdrawals after the Death
Benefit Target Date or the basic Death Benefit.
Highest Anniversary Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) *
$5,000/$70,000}]
= max [$75,000, $60,357]
= $75,000
The Death Benefit therefore is $88,214.
Examples of Combination 5% Roll-Up and Highest Anniversary Value Death Benefit
Calculation
The following are examples of how the Combination 5% Roll-Up and Highest
Anniversary Value Death Benefit are calculated. Each example assumes an
initial Purchase Payment of $50,000. Each example assumes that there is one
Owner who is age 70 on the Issue Date and that all Account Value is maintained
in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
7/th/ anniversary of the Issue Date we receive due proof of death, at which
time the Account Value is $75,000; however, the Anniversary Value on the 5/th/
anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Roll-Up Value is equal to
initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit. The Death Benefit would be the Highest
Anniversary Value ($90,000) because it is greater than both the Roll-Up Value
($67,005) and the amount that would have been payable under the basic Death
Benefit ($75,000).
Example with withdrawals
Assume that the Owner made a withdrawal of $5,000 on the 6/th/ anniversary of
the Issue Date when the Account Value was $45,000. The Roll-Up Value on the
6/th/ anniversary of the Issue Date is equal to initial Purchase Payment
accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal
Limit for the 7/th/ annuity year is equal to 5% of the Roll-Up Value as of the
6/th/ anniversary of the Issue Date, or $3,350. Therefore, the remaining
$1,650 of the withdrawal results in a proportional reduction to the Roll-Up
Value. On the 7/th/ anniversary of the Issue Date we receive due proof of
death, at which time the Account Value is $43,000; however, the Anniversary
Value on the 2/nd/ anniversary of the Issue Date was $70,000. Assume as well
that the Owner has died before the Death Benefit Target Date. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit.
Roll-Up Value = {($67,005 - $3,350) - [($67,005 - $3,350) * $1,650/($45,000 - $3,350)]}* 1.05
= ($63,655 - $2,522) * 1.05
= $64,190
Highest Anniversary Value = $70,000 - [$70,000 * $5,000/$45,000]
= $70,000 - $7,778
= $62,222
Basic Death Benefit = max [$43,000, $50,000 - ($50,000 * $5,000/$45,000)]
= max [$43,000, $44,444]
= $44,444
The Death Benefit therefore is $64,190.
B-3
Example with death after Death Benefit Target Date
Assume that the Owner has not made any withdrawals prior to the Death Benefit
Target Date. Further assume that the Owner dies after the Death Benefit Target
Date, when the Account Value is $75,000. The Roll-Up Value on the Death
Benefit Target Date (the contract anniversary on or following the Owner's
80/th/ birthday) is equal to initial Purchase Payment accumulated at 5% for 10
years, or $81,445. The Highest Anniversary Value on the Death Benefit Target
Date was $85,000; however, following the Death Benefit Target Date, the Owner
made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000
when the Account Value was $70,000. The Death Benefit is equal to the greatest
of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as
of the Death Benefit Target Date; each increased by subsequent Purchase
Payments and reduced proportionally for subsequent withdrawals.
Roll-Up Value = $81,445 + $15,000 - [($81,445 + 15,000) * $5,000/$70,000]
= $81,445 + $15,000 - $6,889
= $89,556
Highest Anniversary Value = $85,000 + $15,000 - [($85,000 + 15,000) * $5,000/$70,000]
= $85,000 + $15,000 - $7,143
= $92,857
Basic Death Benefit = max [$75,000, $50,000 + $15,000 - {(50,000 + $15,000) * $5,000/$70,000}]
= max [$75,000, $60,357]
= $75,000
The Death Benefit therefore is $92,857.
Examples of Highest Daily Value Death Benefit Calculation
The following are examples of how the HDV Death Benefit is calculated. Each
example assumes an initial Purchase Payment of $50,000. Each example assumes
that there is one Owner who is age 70 on the Issue Date.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
date we receive due proof of death, the Account Value is $75,000; however, the
Highest Daily Value was $90,000. Assume as well that the Owner has died before
the Death Benefit Target Date. The Death Benefit is equal to the greater of
the Highest Daily Value or the basic Death Benefit. The Death Benefit would be
the HDV ($90,000) because it is greater than the amount that would have been
payable under the basic Death Benefit ($75,000).
Example with withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $80,000; however, the Highest Daily Value ($90,000) was
attained during the fifth Annuity Year. Assume as well that the Owner has died
before the Death Benefit Target Date. The Death Benefit is equal to the
greater of the Highest Daily Value (proportionally reduced by the subsequent
withdrawal) or the basic Death Benefit.
Highest Daily Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Basic Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The Death Benefit therefore is $80,000.
B-4
Example with death after Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals had been made prior to the
Death Benefit Target Date. Further assume that the Owner dies after the Death
Benefit Target Date, when the Account Value is $75,000. The Highest Daily
Value on the Death Benefit Target Date was $80,000; however, following the
Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and
later had taken a withdrawal of $5,000 when the Account Value was $70,000. The
Death Benefit is equal to the greater of the Highest Daily Value on the Death
Benefit Target Date plus Purchase Payments minus proportional withdrawals
after the Death Benefit Target Date or the basic Death Benefit.
Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) * $5,000/$70,000}]
= max [$75,000, $60,357]
= $75,000
The Death Benefit therefore is $88,214.
B-184
APPENDIX C-1 - ADVANCED SERIES CHOICE PRIOR CONTRACT
Between November 1993 and July 31, 1997, the Prudential Annuities offered a
variable annuity under the marketing name Advisors Choice(R) which is no
longer being offered ("Choice" or "Prior Contract"). Purchase Payments may
continue to be made to the Prior Contract. Assets supporting the Prior
Contracts are maintained in Sub-account of Separate Account B.
The principal differences between the contracts offered by this Prospectus
under the marketing name Advisors Choice(R) 2000 ("Choice 2" or "Current
Contract") and the Prior Contract relate to the availability of fixed
investment options under the contract, charges made by the Company, and death
benefit provisions.
GLOSSARY OF TERMS
Some of the definitions used in the Choice contract are different from the
definitions used in Choice 2 contract. The definition of "Account Value" in
the Choice 2 prospectus is the same as the definition of "Account Value" in
the Choice prospectus, except for the inclusion of disclosure related to fixed
investment options. Fixed investment options are not available in the Prior
Contract. The following defined terms in the Choice 2 prospectus relating to
the fixed investment options are not applicable to the Prior Contracts:
"Current Rates," "Fixed Allocation," "Guarantee Period," "Interim Value,"
"MVA," and "Maturity Date." The definition of "Net Purchase Payment" in the
CHC2 prospectus is the same as the definition of "Net Purchase Payment" in the
Choice prospectus, except for the inclusion of any applicable sales charge,
initial maintenance fee and/or charge for taxes in the Choice contracts.
What are the Fixed Investment Options?
The Prior Contracts do not offer a fixed investment option. Therefore, any
provisions in this Prospectus that relate to the Fixed Allocations are not
applicable to the Prior Contract.
FEES AND CHARGES
What are the Contract Fees and Charges?
Annual Maintenance Fee: A maintenance fee for the Prior Contract equaling the
lesser of $35 or 2% may be assessed against: (a) the initial Purchase Payment;
and (b) each Annuity Year after the first, the Account Value. It applies to
the initial Purchase Payment only if less than $50,000. It is assessed, as of
the first Valuation Period of each Annuity Year after the first only if, at
that time, the Account Value of the Annuity is less than $50,000.
MANAGING YOUR ACCOUNT VALUE
Do you Offer Dollar Cost Averaging?
Your Choice annuity must have an Account Value of not less than $20,000 at the
time we accept your request for a dollar cost averaging program.
Do You Offer a Program to Balanced Fixed and Variable Investments?
The "Balanced Investment Program" is not available under the Prior Contract.
PERFORMANCE ADVANTAGE
This benefit is not available under the Prior Contract.
ACCESS TO ACCOUNT VALUE
Can I Make Periodic Withdrawals from the Annuity During the Accumulation
Period?
Your Choice annuity must have an Account Value of at least $25,000 at the time
we accept your request for a program of Systematic Withdrawals.
What Types Of Annuity Payment Options Are Available Upon Annuitization?
The minimum monthly annuity payment for the Choice contract is $50.00, except
where a lower amount is required by law.
LIVING BENEFITS
The Optional Living Benefits are not available under the Prior Contract.
C-185
DEATH BENEFIT
The minimum death benefit for the Choice contract is the total of each
Purchase Payment growing daily at the equivalent of a specified interest rate
per year starting as to each Purchase Payment on the date it is allocated to
the Account Value, less the total of each withdrawal, of any type, growing
daily at the equivalent of the same specified interest rate per year starting
as of the date of each such withdrawal. However, this minimum death benefit
may not exceed 200% of (A) minus (B), where (A) is the total of all Purchase
Payment received; and (B) is the total of all withdrawals of any type.
Currently, the specified rate at which the minimum death benefit increases is
5% per year, compounded yearly.
OPTIONAL DEATH BENEFITS
The Optional Death Benefits are not available under the Prior Contract.
PLUS40(TM) OPTIONAL LIFE INSURANCE RIDER
The Plus40(TM) Optional Life Insurance Rider is not available under the Prior
Contract.
PERFORMANCE INFORMATION
The calculation of performance information and the Standard Total Return and
the Non-standard Total Return for the Choice Sub-accounts are set forth in the
Choice 2 Statement of Additional Information.
C-186
APPENDIX C-2 - ADVANCED SERIES DESIGN PRIOR CONTRACT
EXPENSE EXAMPLES
The Expense Examples for the Prior Contract are as follows:
WHETHER OR NOT YOU SURRENDER YOUR CONTRACT AT THE END OF THE APPLICABLE TIME
PERIOD:
-----------------------------------
1 year 3 years 5 years 10 years
-----------------------------------
$559 $1,664 $2,754 $5,415
-----------------------------------
IF YOU ANNUITIZE AT THE END OF THE APPLICABLE TIME PERIOD:
-----------------------------------
1 year 3 years 5 years 10 years
-----------------------------------
$559 $1,664 $2,754 $5,415
-----------------------------------
The Expense Examples shown above assume your Account Value is less than
$50,000 so that the Annual Maintenance Fee applies. If your Account Value is
greater than $50,000 such that the Annual Maintenance Fee does not apply, the
amounts indicated in the Expense Examples shown above would be reduced.
FEES AND CHARGES
What are the Contract Fees and Charges?
Sales Charge: The Prior Contract provides for a sales charge in the amount of
1.5% of each Purchase Payment. Any applicable sales charge is deducted from
each Purchase Payment.
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 or
eliminate the amount of the Annual Maintenance Fee or reduce the portion of
the Insurance Charge for administrative costs. Generally, these types of
changes will be based on a reduction to our sales, maintenance or
administrative expenses due to the nature of the individual or group
purchasing the Annuity. Some of the factors we might consider in making such a
decision are: (a) the size and type of group; (b) the number of Annuities
purchased by an Owner; (c) the amount of Purchase Payments or likelihood of
additional Purchase Payments; and/or (d) other transactions where sales,
maintenance or administrative expenses are likely to be reduced. We will not
discriminate unfairly between Annuity purchasers if and when we reduce the
portion of the Insurance Charge attributed to the charge covering
administrative costs.
No sales charge is imposed when any group annuity contract or any Annuity
issued pursuant to this Prospectus is owned on its Issue Date by: (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, custodianship, 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.;
(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) above; and (j) the siblings
of any such persons noted in (b) through (h) above. Any elimination of the
sales charge or any reduction to the amount of such charges will not
discriminate unfairly between Annuity purchasers. We will not make any changes
to this charge where prohibited by law.
LIVING BENEFITS
The Optional Living Benefits are not available under the Prior Contract.
DEATH BENEFIT
OPTIONAL DEATH BENEFITS
The Optional Death Benefits are not available under the Prior Contract.
PLUS40(TM) OPTIONAL LIFE INSURANCE RIDER
The Plus40(TM) Optional Life Insurance Rider was never available under the
Prior Contract.
C-187
APPENDIX D - PERFORMANCE ADVANTAGE
PRUDENTIAL ANNUITIES' PERFORMANCE ADVANTAGE
Prudential Annuities' Performance Advantage was offered, in those states where
approved, between May 15, 1999 and October 22, 2000. The description below of
the Performance Advantage benefit applies to those Contract Owners who
purchased an Annuity during that time period when the Performance Advantage
feature was offered.
GLOSSARY OF TERMS
When determining the Account Value and Surrender Value of the Annuity, both
amounts will not include any Target Value Credits (described below) that we
are entitled to recover upon Surrender of your Annuity.
DO YOU PROVIDE ANY GUARANTEES ON MY INVESTMENT?
The Annuity provides variable investment options and fixed investment options.
Only the fixed investment options provide a guaranteed return on your
investment, subject to certain terms and conditions. However, your Annuity
includes a feature at no additional cost that provides certain benefits if
your Account Value has not reached or exceeded a "target value" on its 10/th/
anniversary. If, on the 10/th/ anniversary of your Annuity's Issue Date, your
Account Value has not reached the target value (as defined below) you can
choose either of the following benefits:
.. You may continue your Annuity without electing to receive Annuity payments
and receive an annual credit to your Account Value payable until you begin
receiving Annuity payments. The credit is equal to 0.25% of the average of
your Annuity's Account Value for the preceding four complete calendar
quarters. This credit is applied to your investment options pro-rata based
on the allocation of your then current Account Value.
OR
.. You may begin receiving Annuity payments within one year and accept a
one-time credit to your Annuity equal to 10% of the net of the Account
Value on the 10/th/ anniversary of its Issue Date minus the sum of all
Purchase Payments allocated in the prior five years. The annuity option you
select must initially guarantee payments for not less than seven years.
Following the 10/th/ anniversary of your Annuity's Issue Date, we will
inform you if your Account Value did not meet or exceed the Target Value.
We will assume that you have elected to receive the annual credit to your
Account Value unless, not less than 30 days prior to the next anniversary
of the Annuity, we receive at our home office your election to begin
receiving Annuity payments. Certain provisions of this benefit and of the
Target Value Credits described below may differ if you purchase your
Annuity as part of an exchange, replacement or transfer, in whole or in
part, from any other Annuity we issue.
WHAT IS THE "TARGET VALUE" AND HOW IS IT CALCULATED?
The Target Value is a tool used to determine whether you are eligible to elect
either of the benefits described above. The Target Value does not impact the
Account Value available if you surrender your Annuity or make a partial
withdrawal and does not impact the Death Benefit available to your
Beneficiary(ies). The Target Value assumes a rate of return over ten (10)
Annuity Years that will allow your initial investment to double in value,
adjusted for any withdrawals and/or additional Purchase Payments you make
during the 10 year period. We calculate the "Target Value" as follows:
1. Accumulate the initial Purchase Payment at an annual interest rate of 7.2%
until the 10/th/ anniversary of the Annuity's Issue Date; plus
2. Accumulate any additional Purchase Payments at an annual interest rate of
7.2% from the date applied until the 10/th/ anniversary of the Annuity's
Issue Date; minus
3. Each "proportional reduction" resulting from any withdrawal, accumulating
at an annual interest rate of 7.2% from the date the withdrawal is
processed until the 10/th/ anniversary of the Annuity's Issue Date. We
determine each "proportional reduction" by determining the percentage of
your Account Value then withdrawn and reducing the Target Value by that
same percentage. We include any withdrawals under your Annuity in this
calculation, as well as the charge we deduct for any optional benefits you
elect under the Annuity, but not the charge we deduct for the Annual
Maintenance Fee or the Transfer Fee.
D-188
EXAMPLES
1. Assume you make an initial Purchase Payment of $10,000 and make no further
Purchase Payments. The Target Value on the 10/th/ anniversary of your
Annuity's Issue Date would be $20,042, assuming no withdrawals are made.
This is equal to $10,000 accumulating at an annual rate of 7.2% for the
10-year period.
2. Assume you make an initial Purchase Payment of $10,000 and make no further
Purchase Payments. Assume at the end of Year 6, your Account Value has
increased to $15,000 and you make a withdrawal of 10% or $1,500. The Target
Value on the 10/th/ anniversary would be $18,722. This is equal to $10,000
accumulating at an annual rate of 7.2% for the 10-year period, minus the
proportional reduction accumulating at an annual interest rate of 7.2%.
CAN I RESTART THE 10-YEAR TARGET VALUE CALCULATION?
Yes, you can elect to lock in the growth in your Annuity by "restarting" the
10-year period on any anniversary of the Issue Date. If you elect to restart
the calculation period, we will treat your Account Value on the restart date
as if it was your Purchase Payment when determining if your Annuity's Account
Value meets or exceeds the Target Value on the appropriate tenth
(10/th/) anniversary. You may elect to restart the calculation more than once,
in which case, the 10-year calculation period will begin on the date of the
last restart date. We must receive your election to restart the calculation at
our home office not later than 30 days after each anniversary of the Issue
Date.
WHAT ARE TARGET VALUE CREDITS?
Target Value Credits are additional amounts that we apply to your Account
Value to increase the likelihood that your Account Value will meet or exceed
the Target Value. We add Target Value Credits to your Account Value at the
time a Purchase Payment is applied to your Annuity. Only those Purchase
Payments made before the first anniversary of the Issue Date of your Annuity
are eligible to receive Target Value Credits. The amount of the Target Value
Credit is equal to 1.0% of each qualifying Purchase Payment. Target Value
Credits are only payable on qualifying Purchase Payments if the Owner(s) of
the Annuity is (are) less than age 81 on its Issue Date. If the Annuity is
owned by an entity, the age restriction applies to the age of the Annuitant on
the Issue Date. The Target Value Credit is payable from our general account
and is allocated to the investment options in the same ratio that the
qualifying Purchase Payment is allocated. Target Value Credits will not be
available if you purchase your Annuity as part of an exchange, replacement or
transfer, in whole or in part, of an Annuity we issued that has the same or a
similar benefit.
The amount of any Target Value Credits are not immediately vested and can be
recovered by Prudential Annuities under the circumstances and for the time
periods shown below. If Prudential Annuities exercises its right to recover
the amount of any Target Value Credit, any investment gain on the Target Value
Credit will not be taken back.
1. If you surrender your Annuity before the 10th anniversary of the Issue Date
of the Annuity.
2. If you elect to begin receiving Annuity payments before the first
anniversary of the Issue Date.
3. If a person on whose life we pay the Death Benefit dies, or if a
"contingency event" occurs which triggers a medically-related surrender:
. within 12 months after the date a Target Value Credit was allocated to
your Account Value; or
. within 10 years after the date a Target Value Credit was allocated to
your Account Value if any owner was over age 70 on the Issue Date, or,
if the Annuity was then owned by an entity, the Annuitant was over age 70 on
the Issue Date. Following completion of the above time periods, the amount of
any Target Value Credits are vested in the Owner.
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APPENDIX E - PLUS40(TM) OPTIONAL LIFE INSURANCE RIDER
Prudential Annuities' Plus40(TM) Optional Life Insurance Rider was offered, in
those states where approved, between September 17, 2001 and May 1, 2003. The
description below of the Plus40(TM) benefit applies to those Contract Owners
who purchased an Annuity during that time period and elected the Plus40(TM)
benefit.
The life insurance coverage provided under the Plus40(TM) Optional Life
Insurance Rider ("Plus40(TM) rider" or the "Rider") is supported by Prudential
Annuities's general account and is not subject to, or registered as a security
under, either the Securities Act of 1933 or the Investment Company Act of
1940. Information about the Plus40(TM) rider is included as an Appendix to
this Prospectus to help you understand the Rider and the relationship between
the Rider and the value of your Annuity. It is also included because you can
elect to pay for the Rider with taxable withdrawals from your Annuity. The
staff of the Securities and Exchange Commission has not reviewed this
information. However, the information may be subject to certain generally
applicable provisions of the Federal securities laws regarding accuracy and
completeness.
The income tax-free life insurance payable to your Beneficiary(ies) under the
Plus40(TM) rider is equal to 40% of the Account Value of your Annuity as of
the date we receive due proof of death, subject to certain adjustments,
restrictions and limitations described below.
ELIGIBILITY
The Plus40(TM) rider may be purchased as a rider on your Annuity. The Rider
must cover those persons upon whose death the Annuity's death benefit becomes
payable - the Annuity's owner or owners, or the Annuitant (in the case of an
entity owned Annuity). If the Annuity has two Owners, the Rider's death
benefit is payable upon the first death of such persons. If the Annuity is
owned by an entity, the Rider's death benefit is payable upon the death of the
Annuitant, even if a Contingent Annuitant is named.
The minimum allowable age to purchase the Plus40(TM) rider is 40; the maximum
allowable age is 75. If the Rider is purchased on two lives, both persons must
meet the age eligibility requirements. The Plus40(TM) rider is not available
to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered
Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section
401 of the Internal Revenue Code ("Code").
ADJUSTMENTS, RESTRICTIONS & LIMITATIONS
. If you die during the first 24 months following the effective date of
the Plus40(TM) rider (generally, the Issue Date of your Annuity), the
death benefit will be limited to the amount of any charges paid for the
Rider while it was in effect. While we will return the charges you have
paid during the applicable period as the death benefit, your
Beneficiary(ies) will receive no additional life insurance benefit from
the Plus40(TM) rider if you die within 24 months of its effective date.
. If you make a Purchase Payment within 24 months prior to the date of
death, the Account Value used to determine the amount of the death
benefit will be reduced by the amount of such Purchase Payment(s). If we
reduce the death benefit payable under the Plus40(TM) rider based on
this provision, we will return 50% of any charges paid for the Rider
based on those Purchase Payments as an additional amount included in the
death benefit under the Rider.
. If we apply Credits to your Annuity based on Purchase Payments, such
Credits are treated as Account Value for purposes of determining the
death benefit payable under the Plus40(TM) rider. However, if Credits
were applied to Purchase Payments made within 24 months prior to the
date of death, the Account Value used to determine the amount of the
death benefit will be reduced by the amount of such Credits. If we
reduce the death benefit payable under the Plus40(TM) rider based on
this provision, we will return 50% of any charges paid for the Rider
based on such Credits as an additional amount included in the death
benefit under the Rider.
. If you become terminally ill (as defined in the Rider) and elect to
receive a portion of the Plus40(TM) rider's death benefit under the
Accelerated Death Benefit provision, the amount that will be payable
under the Rider upon your death will be reduced. Please refer to the
Accelerated Death Benefit provision described below.
. If charges for the Plus40(TM) rider are due and are unpaid as of the
date the death benefit is being determined, such charges will be
deducted from the amount paid to your Beneficiary(ies).
. If the age of any person covered under the Plus40(TM) rider is
misstated, we will adjust any coverage under the Rider to conform to the
facts. For example, if, due to the misstatement, we overcharged you for
coverage under the Rider, we will add any additional charges paid to the
amount payable to your Beneficiary(ies). If, due to the misstatement, we
undercharged you for coverage under the Rider, we will reduce the death
benefit in proportion to the charges not paid as compared to the charges
that would have been paid had there been no misstatement.
E-1
. On or after an Owner reaches the expiry date of the Rider (the
anniversary of the Annuity's Issue Date on or immediately after the
95/th/ birthday), coverage will terminate. No charge will be made for an
Owner following the expiry date. If there are two Owners, the expiry
date applies separately to each Owner; therefore, coverage may continue
for one Owner and terminate as to the other Owner.
MAXIMUM BENEFIT
The Plus40(TM) rider is subject to a Maximum Death Benefit Amount based on the
Purchase Payments applied to your Annuity. The Plus40(TM) rider may also be
subject to a Per Life Maximum Benefit that is based on all amounts paid under
any annuity contract we issue to you under which you have elected the
Plus40(TM) rider or similar life insurance coverage.
. The Maximum Death Benefit Amount is 100% of the Purchase Payments
increasing at 5% per year following the date each Purchase Payment is
applied to the Annuity until the date of death. If Purchase Payments are
applied to the Annuity within 24 months prior to the date of death, the
Maximum Death Benefit Amount is decreased by the amount of such Purchase
Payments.
. The Per Life Maximum Benefit applies to Purchase Payments applied to any
such annuity contracts more than 24 months from the date of death that
exceed $1,000,000. If you make Purchase Payments in excess of
$1,000,000, we will reduce the aggregate death benefit payable under all
Plus40(TM) riders, or similar riders issued by us, based on the combined
amount of Purchase Payments in excess of $1,000,000 multiplied by 40%.
If the Per Life Maximum Benefit applies, we will reduce the amount
payable under each applicable Plus40(TM) rider on a pro-rata basis. If
the Per Life Maximum Benefit applies upon your death, we will return any
excess charges that you paid on the portion of your Account Value on
which no benefit is payable. The Per Life Maximum Benefit does not limit
the amount of Purchase Payments that you may apply to your Annuity.
ACCELERATED DEATH BENEFIT PROVISION
If you become terminally ill, you may request that a portion of the death
benefit payable under the Plus40(TM) rider be prepaid instead of being paid to
your Beneficiary(ies) upon your death. Subject to our requirements and where
allowed by law, we will make a one time, lump sum payment. Our requirements
include proof satisfactory to us, in writing, of terminal illness after the
Rider's Effective Date.
The maximum we will pay, before any reduction, is the lesser of 50% of the
Rider's death benefit or $100,000. If you elect to accelerate payment of a
portion of the death benefit under the Plus40(TM) rider, the amount of the
remaining death benefit is reduced by the prepaid amount accumulating at an
annualized interest rate of 6.0%. Eligibility for an accelerated payout of a
portion of your Plus40(TM) rider death benefit may be more restrictive than
any medically-related surrender provision that may be applicable to you under
the Annuity.
CHARGES FOR THE PLUS40(TM) RIDER
The Plus40(TM) rider has a current charge and a guaranteed maximum charge. The
current charge for the Plus40(TM) rider is based on a percentage of your
Account Value as of the anniversary of the Issue Date of your Annuity. The
applicable percentages differ based on the attained age, last birthday of the
Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date
the charge is due. We reserve the right to change the current charge, at any
time, subject to regulatory approval where required. If there are two Owners,
we calculate the current charge that applies to each Owner individually and
deduct the combined amount as the charge for the Rider. There is no charge
based on a person's life after coverage expires as to that person. However, a
charge will still apply to the second of two Owners (and coverage will
continue for such Owner) if such Owner has not reached the expiry date.
Percentage of
Attained Age Account Value
----------------------------
Age 40-75 .80%
----------------------------
Age 76-80 1.60%
----------------------------
Age 81-85 3.20%
----------------------------
Age 86-90 4.80%
----------------------------
Age 91 6.50%
----------------------------
Age 92 7.50%
----------------------------
Age 93 8.50%
----------------------------
Age 94 9.50%
----------------------------
Age 95 10.50%
----------------------------
E-2
The charge for the Plus40(TM) rider may also be subject to a guaranteed
maximum charge that will apply if the current charge, when applied to the
Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum
charge is based on a charge per $1,000 of insurance.
We determine the charge for the Rider annually, in arrears. We deduct the
charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on
the date that you begin receiving annuity payments; (4) if you surrender your
Annuity other than a medically-related surrender; or (5) if you choose to
terminate the Rider. If the Rider terminates for any of the preceding reasons
on a date other than the anniversary of the Annuity's Issue Date, the charge
will be prorated. During the first year after the Annuity's Issue Date, the
charge will be prorated from the Issue Date. In all subsequent years, the
charge will be prorated from the last anniversary of the Issue Date.
You can elect to pay the annual charge through a redemption from your
Annuity's Account Value or through funds other than those within the Annuity.
If you do not elect a method of payment, we will automatically deduct the
annual charge from your Annuity's Account Value. The manner in which you elect
to pay for the Rider may have tax implications.
. If you elect to pay the charge through a redemption of your Annuity's
Account Value, the withdrawal will be treated as a taxable distribution,
and will generally be subject to ordinary income tax on the amount of
any investment gain withdrawn. If you are under age 59 1/2, the
distribution may also be subject to a 10% penalty on any gain withdrawn,
in addition to ordinary income taxes. We first deduct the amount of the
charge pro-rata from the Account Value in the variable investment
options. We only deduct the charge pro-rata from the Fixed Allocations
to the extent there is insufficient Account Value in the variable
investment options to pay the charge.
. If you elect to pay the charge through funds other than those from your
Annuity, we require that payment be made electronically in U.S. currency
through a U.S. financial institution. If you elect to pay the charge
through electronic transfer of funds and payment has not been received
within 31 days from the due date, we will deduct the charge as a
redemption from your Annuity, as described above.
TERMINATION
You can terminate the Plus40(TM) rider at any time. Upon termination, you will
be required to pay a pro-rata portion of the annual charge for the Rider. The
Plus40(TM) rider will terminate automatically on the date your Account Value
is applied to begin receiving annuity payments, on the date you surrender the
Annuity or, on the expiry date with respect to such person who reaches the
expiry date. We may also terminate the Plus40(TM) rider, if necessary, to
comply with our interpretation of the Code and applicable regulations. Once
terminated, you may not reinstate your coverage under the Plus40(TM) rider.
CHANGES IN ANNUITY DESIGNATIONS
Changes in ownership and annuitant designations under the Annuity may result
in changes in eligibility and charges under the Plus40(TM) rider. These
changes may include termination of the Rider. Please refer to the Rider for
specific details.
SPOUSAL ASSUMPTION
A spousal beneficiary may elect to assume ownership of the Annuity instead of
taking the Annuity's Death Benefit. However, regardless of whether a spousal
beneficiary assumes ownership of the Annuity, the death benefit under the
Plus40(TM) rider will be paid despite the fact that the Annuity will continue.
The spousal beneficiary can apply the death benefit proceeds under the
Plus40(TM) rider to the Annuity as a new Purchase Payment, can purchase a new
annuity contract or use the death benefit proceeds for any other purpose.
Certain restrictions may apply to an Annuity that is used as a qualified
investment. Spousal beneficiaries may also be eligible to purchase the
Plus40(TM) rider, in which case the Annuity's Account Value, as of the date
the assumption is effective, will be treated as the initial Purchase Payment
under applicable provisions of the Rider.
TAX CONSIDERATION
The Plus40(TM) rider was designed to qualify as a life insurance contract
under the Code. As life insurance, under most circumstances, the
Beneficiary(ies) does not pay any Federal income tax on the death benefit
payable under the Rider.
If your Annuity is being used as an Individual Retirement Annuity (IRA), we
consider the Plus40(TM) rider to be outside of your IRA, since premium for the
Rider is paid for either with funds outside of your Annuity or with
withdrawals previously subject to tax and any applicable tax penalty.
We believe payments under the accelerated payout provision of the Rider will
meet the requirements of the Code and the regulations in order to qualify as
tax-free payments. To the extent permitted by law, we will change our
procedures in relation to the Rider, or the definition of terminally ill, or
any other applicable term in order to maintain the tax-free status of any
amounts paid out under the accelerated payout provision.
E-3
APPENDIX F - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL DEATH
BENEFITS
If you purchased your Annuity before November 18, 2002 and were not a resident
of the State of New York, the following optional death benefits were offered:
ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
The Enhanced Beneficiary Protection Optional Death Benefit can provide
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 provides a benefit
that is payable in addition to the basic Death Benefit. If the Annuity has one
Owner, the Owner must be age 75 or less at the time the benefit is purchased.
If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If
the Annuity is owned by an entity, the Annuitant must be age 75 or less.
Calculation of Enhanced Beneficiary Protection Optional Death Benefit
If you purchase the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the basic Death Benefit described above
PLUS
2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by
proportional withdrawals.
"Death Benefit Amount" includes your Account Value and any amounts added to
your Account Value under the basic Death Benefit when the Death Benefit is
calculated. Under the basic Death Benefit, amounts are added to your Account
Value when the Account Value is less than Purchase Payments minus proportional
withdrawals.
"Proportional Withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn
The Enhanced Beneficiary Protection Optional Death Benefit is subject to a
maximum of 50% of all Purchase Payments applied to the Annuity at least 12
months prior to the death of the decedent that triggers the payment of the
Death Benefit.
Please refer to the section entitled "Tax Considerations" for a discussion of
special tax considerations for purchasers of this benefit.
NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death
Benefit if you have elected any other Optional Death Benefit.
Guaranteed Minimum Death Benefit
If the Annuity has one Owner, the Owner must be age 80 or less at the time the
optional Death Benefit is purchased. If the Annuity has joint Owners, the
oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the
Annuitant must be age 80 or less.
Key Terms Used with the Guaranteed Minimum Death Benefit
. The Death Benefit Target Date 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 Highest Anniversary Value equals the highest of all previous
"Anniversary Values" on or before the earlier of the Owner's date of
death and the "Death Benefit Target Date".
. The Anniversary Value is the Account Value as of each anniversary of the
Issue Date plus the sum of all Purchase Payments on or after such
anniversary less the sum of all "Proportional Reductions" since such
anniversary.
. A Proportional Reduction is a reduction to the value being measured
caused by a withdrawal, equaling the percentage of the withdrawal as
compared to the Account Value as of the date of the withdrawal. For
example, if your Account Value is $10,000 and you withdraw $2,000 (a 20%
reduction), we will reduce both your Anniversary Value and the amount
determined by Purchase Payments increasing at the appropriate interest
rate by 20%.
F-1
Calculation of Guaranteed Minimum Death Benefit
The Guaranteed Minimum 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 greatest of:
1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed
Allocations (no MVA) as of the date we receive in writing "due proof of
death"; and
2. the sum of all Purchase Payments minus the sum of all Proportional
Reductions, each increasing daily until the Owner's date of death at a rate
of 5.0%, subject to a limit of 200% of the difference between the sum of
all Purchase Payments and the sum of all withdrawals as of the Owner's date
of death; and
3. the "Highest Anniversary Value" on or immediately preceding the Owner's
date of death.
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 Reductions since such date.
If the Owner dies on or after the Death Benefit Target Date, the Death Benefit
equals the greater of:
1. the Account Value as of the date we receive in writing "due proof of death"
(an MVA may be applicable to amounts in any Fixed Allocations); and
2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the
sum of all Purchase Payments less the sum of all Proportional Reductions
since the Death Benefit Target Date.
Between May 15, 1999 and January 22, 2001, in those jurisdictions where we
received regulatory approval, Prudential Annuities offered the Guaranteed
Minimum Death Benefit with a 7.2% accumulation rate. This Benefit will apply
to Annuity Owners who purchased the Annuity and elected the 7.2% GMDB during
the period it was offered.
Annuities with joint owners
For Annuities with Joint Owners, the Death Benefit is 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 the
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 the Annuity and continue the contract instead of
receiving the Death Benefit.
Annuities owned by entities
For Annuities owned by an entity, the Death Benefit is 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).
Can I Terminate the Optional Death Benefits? Do the Optional Death Benefits
terminate under other circumstances?
You can terminate the Enhanced Beneficiary Protection Optional Death Benefit
and the Guaranteed Minimum Death Benefit at any time. Upon termination, you
will be required to pay a pro-rata portion of the annual charge for the
benefit. Both optional Death Benefits will terminate automatically on the
Annuity Date. We may also terminate any optional Death Benefit if necessary to
comply with our interpretation of the Code and applicable regulations.
What Are The Charges For The Optional Death Benefits?
We deduct a charge from your Account Value if you elect to purchase either
optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit
costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.35%
of the current Death Benefit. The charges for these death benefits are
deducted in arrears each Annuity Year. No charge applies after the Annuity
Date. We deduct the charge:
1. on each anniversary of the Issue Date;
2. when Account Value is transferred to our general account prior to the
Annuity Date;
3. if you surrender your Annuity; and
4. if you choose to terminate the benefit (Enhanced Beneficiary Protection
Optional Death Benefit only).
F-2
If you surrender the Annuity, elect to begin receiving annuity payments or
terminate the benefit on a date other than an anniversary of the Issue Date,
the charge will be prorated. During the first year after the Issue Date, the
charge will be prorated from the Issue Date. In all subsequent years, it would
be prorated from the last anniversary of the Issue Date.
We first deduct the amount of the charge pro-rata from the Account Value in
the variable investment options. We only deduct the charge pro-rata from the
Fixed Allocations to the extent there is insufficient Account Value in the
variable investment options to pay the charge. If your Annuity's Account Value
is insufficient to pay the charge, we may deduct your remaining Account Value
and terminate your Annuity. We will notify you if your Account Value is
insufficient to pay the charge and allow you to submit an additional Purchase
Payment to continue your Annuity.
Please refer to the section entitled "Tax Considerations" for additional
considerations in relation to the optional Death Benefit.
ADDITIONAL CALCULATIONS
Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation
The following are examples of how the Enhanced Beneficiary Protection Optional
Death Benefit is calculated. Each example assumes that a $50,000 initial
Purchase Payment is made and that no withdrawals are made prior to the Owner's
death. Each example assumes that there is one Owner who is age 50 on the Issue
Date and that all Account Value is maintained in the variable investment
options.
Example with market increase
Assume that the Owner's Account Value has been increasing due to positive
market performance. On the date we receive due proof of death, the Account
Value is $75,000. The basic Death Benefit is calculated as Purchase Payments
minus proportional withdrawals, or Account Value, which ever is greater.
Therefore, the basic Death Benefit is equal to $75,000. The Enhanced
Beneficiary Protection Optional Death Benefit is equal to the amount payable
under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount"
less Purchase Payments reduced by proportional withdrawals.
Purchase Payments = $50,000
Account Value = $75,000
Basic Death Benefit = $75,000
Death Benefit Amount = $75,000 - $50,000 = $25,000
Benefit Payable Under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth
= $75,000 + $12,500 = $87,500
Examples with market decline
Assume that the Owner's Account Value has been decreasing due to declines in
market performance. On the date we receive due proof of death, the Account
Value is $45,000. The basic Death Benefit is calculated as Purchase Payments
minus proportional withdrawals, or Account Value, which ever is greater.
Therefore, the basic Death Benefit is equal to $50,000. The Enhanced
Beneficiary Protection Optional Death Benefit is equal to the amount payable
under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount"
less Purchase Payments reduced by proportional withdrawals.
Purchase Payments = $50,000
Account Value = $40,000
Basic Death Benefit = $50,000
Death Benefit Amount = $50,000 - $50,000 = $0
Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit
= $50,000 + $0 = $50,000
In this example you would receive no additional benefit from purchasing the
Enhanced Beneficiary Protection Optional Death Benefit.
Examples of Guaranteed Minimum Death Benefit Calculation
The following are examples of how the Guaranteed Minimum Death Benefit is
calculated. Each example assumes that a $50,000 initial Purchase Payment is
made and that no withdrawals are made prior to the Owner's death. Each example
assumes that there is one Owner who is age 50 on the Issue Date and that all
Account Value is maintained in the variable investment options.
F-3
Example of market increase
Assume that the Owner's Account Value has generally been increasing due to
positive market performance. On the date we receive due proof of death, the
Account Value is $90,000. The Highest Anniversary Value at the end of any
previous period is $72,000. The Death Benefit would be the Account Value
($90,000) because it is greater than the Highest Anniversary Value ($72,000)
or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77).
Example of market decrease
Assume that the Owner's Account Value generally increased until the fifth
anniversary but generally has been decreasing since the fifth contract
anniversary. On the date we receive due proof of death, the Account Value is
$48,000. The Highest Anniversary Value at the end of any previous period is
$54,000. The Death Benefit would be the sum of prior Purchase Payments
increased by 5.0% annually ($73,872.77) because it is greater than the Highest
Anniversary Value ($54,000) or the Account Value ($48,000).
Example of market increase followed by decrease Assume that the Owner's
Account Value increased significantly during the first six years following the
Issue Date. On the sixth anniversary date the Account Value is $90,000. During
the seventh Annuity Year, the Account Value increases to as high as $100,000
but then subsequently falls to $80,000 on the date we receive due proof of
death. The Death Benefit would be the Highest Anniversary Value at the end of
any previous period ($90,000), which occurred on the sixth anniversary,
although the Account Value was higher during the subsequent period. The
Account Value on the date we receive due proof of death ($80,000) is lower, as
is the sum of all prior Purchase Payments increased by 5.0% annually
($73,872.77).
F-4
APPENDIX G - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS
PROGRAM RULES
. Prior to December 5, 2005, you could elect an asset allocation program
where the Sub-accounts for each asset class in each model portfolio were
designated based on an evaluation of available Sub-accounts. Effective
December 5, 2005, you can no longer enroll in an asset allocation
program, but you will be permitted to remain in the program if you
enrolled prior to the date. These Program Rules reflect how the asset
allocation program will be administered as of December 5, 2005 for those
Owners who have chosen to remain in their program. Asset allocation is a
sophisticated method of diversification that allocates assets among
asset classes in order to manage investment risk and potentially enhance
returns over the long term. However, asset allocation does not guarantee
a profit or protect against a loss.
HOW THE ASSET ALLOCATION PROGRAM WORKS
. Amounts will automatically be allocated in accordance with the
percentages and to Sub-accounts indicated for the model portfolio that
you previously chose. If you allocate your Account Value or transfer
your Account Value among any Sub-accounts that are outside of your model
portfolio, we will allocate these amounts according to the allocation
percentages of the applicable model portfolio upon the next rebalancing.
You will not be permitted to change from one model portfolio to the
other. Upon each rebalance, 100% of your Account Value allocated to the
Sub-accounts will be allocated to the asset allocation program. Any
Account Value not invested in the Sub-accounts will not be part of the
program.
. Additional Purchase Payments: Unless otherwise requested, any additional
Purchase Payments applied to the variable Sub-accounts in the Annuity
will be allocated to the Sub-accounts according to the allocation
percentages for the model portfolio you chose. Allocation of additional
Purchase Payments outside of your model portfolio but into a
Sub-account, will be reallocated according to the allocation percentages
of the applicable model portfolio upon the next rebalancing.
. Rebalancing Your Model Portfolio: Changes in the value of the
Sub-account will cause your Account Value allocated to the Sub-accounts
to vary from the percentage allocations of the model portfolio you
select. By selecting the asset allocation program, you have directed us
to periodically (e.g., quarterly) rebalance your Account Value allocated
to the Sub-accounts in accordance with the percentage allocations
assigned to each Sub-account within your model portfolio at the time you
elected the program or had later been modified with your consent. Some
asset allocation programs will only require that a rebalancing occur
when the percent of your Account Value allocated to the Sub-accounts are
outside of the acceptable range permitted under such asset allocation
program. Note - Any Account Value not invested in the Sub-accounts will
not be affected by any rebalance.
. Sub-account Changes Within the Model Portfolios: From time to time there
may be a change in a Sub-account within your model portfolio. Unless
directed by you or your Financial Professional to reallocate to the new
Sub-account, rebalancing will continue in accordance with your unchanged
model portfolio, unless the Sub-account is no longer available under
your Annuity. If the Sub-account is no longer available we will notify
you. If you do not consent to the new Sub-account, your lack of consent
will be deemed a request to terminate the asset allocation program and
the provisions under "Termination or Modification of the Asset
Allocation Program" will apply.
. Owner Changes in Choice of Model Portfolio: You may not change from the
model portfolio that you have elected to any other model portfolio.
TERMINATION OR MODIFICATION OF THE ASSET ALLOCATION PROGRAM:
. You may request to terminate your asset allocation program at any time.
Once you terminate your asset allocation program, you will not be
permitted to re-enroll in the program. Any termination will be effective
on the date that Prudential Annuities receives your termination request
in good order. If you are enrolled in certain optional benefits,
termination of your asset allocation program must coincide with (i) the
enrollment in a then currently available and approved asset allocation
program or other approved option, or (ii) the allocation of your entire
account value to the then required investment option(s) available with
these benefits. However, if you are enrolled in certain optional
benefits, you may terminate the benefit in order to then terminate your
asset allocation program. Prudential Annuities reserves the right to
terminate or modify the asset allocation program at any time with
respect to any programs.
RESTRICTIONS ON ELECTING THE ASSET ALLOCATION:
. You cannot participate in auto-rebalancing or a DCA program while
enrolled in an asset allocation program and Systematic Withdrawals can
only be made as flat dollar amounts.
G-1
APPENDIX H - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee. The factors that we use currently are derived from the
a2000 Individual Annuity Mortality Table with an assumed interest rate
of 3%. Each number in the table "a" factors (which appears below)
represents a factor, which when multiplied by the Highest Daily Annual
Income Amount, projects our total liability for the purpose of asset
transfers under the guarantee.
. Q - age based factors used in calculating the target value. These
factors are established on the Effective Date and are not changed for
the life of the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, it is 5%
TARGET VALUE CALCULATION:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C, and there are currently assets in the Benefit Fixed
Rate Account (F (greater than) 0), assets in the Benefit Fixed Rate
Account are transferred to the Permitted Sub-accounts.
H-1
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T = {Min(V, [L - F - V * C\\t\\] / (1 - C\\t\\))} T(greater than)0, Money moving from the Permitted
Sub-accounts to the Benefit Fixed Rate Account
T = {Min(F, [L - F - V * Ct] / (1 - C\\t\\))} T(less than)0, Money moving from the Benefit Fixed Rate
Account to the Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F)/V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than)) Cu ( because 83.11% (greater than) 83%) a transfer
into the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * C\\t\\] / ( 1 - C\\t\\))}
= { Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
H-2
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
H-3
APPENDIX I - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE
DEPARTMENT
Advisors Choice NY
- -------------------------------------------------------------------------------------------------------------------
Minimum Investment $5,000
- -------------------------------------------------------------------------------------------------------------------
Maximum Issue Age Annuitant 85; Owner None
- -------------------------------------------------------------------------------------------------------------------
Withdrawal Charge Schedule None
- -------------------------------------------------------------------------------------------------------------------
Insurance Charge 0.65%
- -------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee Lesser of $30 or 2% of Account Value Waived for Account Values
exceeding $50,000
- -------------------------------------------------------------------------------------------------------------------
Transfer Fee $10 after twenty in any annuity year.
- -------------------------------------------------------------------------------------------------------------------
Contract Credit No
- -------------------------------------------------------------------------------------------------------------------
Fixed Allocation Fixed Allocations Available. (Currently offering durations of 1, 2, 3, 5,
7, and 10 year periods.) MVA does apply.
- -------------------------------------------------------------------------------------------------------------------
Variable Investment Options All options generally available except when an optional rider with
investment restrictions is purchased.
- -------------------------------------------------------------------------------------------------------------------
Basic Death Benefit Prior to age 85: The greater of Account Value (variable) plus Interim
Value (fixed) or Purchase Payments minus withdrawals. On or after age
85: Account Value (variable) plus Interim Value (fixed). (no MVA
applied)
- -------------------------------------------------------------------------------------------------------------------
Optional Death Benefits (for an
additional cost) /(1)/ Highest
Anniversary Value (HAV)
- -------------------------------------------------------------------------------------------------------------------
Optional Living Benefits (for an GRO, GRO Plus, Highest Daily GRO, Guaranteed Minimum
additional cost) /(2)/ Withdrawal Benefit, (GMWB), Guaranteed Minimum Income Benefit
(GMIB), Lifetime Five, Spousal Lifetime Five, Highest Daily Lifetime
Five, Highest Daily Lifetime Seven
Spousal Highest Daily Lifetime Seven
- -------------------------------------------------------------------------------------------------------------------
Annuitization Options Fixed option only Annuity date cannot exceed the first day of the
calendar month following Annuitant's 90/th/ birthday The maximum
Annuity Date is based on the first Owner or Annuitant to reach the
maximum age, as indicated in your Annuity.
- -------------------------------------------------------------------------------------------------------------------
(1)For more information on these benefits, refer to the "Death Benefit"
section in the Prospectus.
(2)For more information on these benefits, refer to the "Living Benefit
Programs" section in the Prospectus. Highest Daily GRO and the Highest
Daily Lifetime Seven benefits are pending approval by New York.
For more information about variations applicable to annuities approved for
sale by the New York State Insurance Department, please refer to your annuity
contract.
I-1
APPENDIX J - ASSET TRANSFER FORMULA UNDER GRO PLUS 2008 AND HIGHEST DAILY GRO
The following are the Terms and Definitions referenced in the Transfer
Calculation Formula:
. AV is the current Account Value of the Annuity
. V is the current Account Value of the elected Sub-accounts of the Annuity
. B is the total current value of the AST bond portfolio Sub-account
. C\\l\\ is the lower target value. Currently, it is 79%.
. C\\t\\ is the middle target value. Currently, it is 82%.
. C\\u\\ is the upper target value. Currently, it is 85%.
For each guarantee provided under the program,
. G\\i\\ is the guarantee amount
. N\\i\\ is the number of days until the maturity date
. d\\i\\ is the discount rate applicable to the number of days until the
maturity date. It is determined with reference to a benchmark index,
reduced by the Discount Rate Adjustment. Once selected, we will not
change the applicable benchmark index. However, if the benchmark index
is discontinued, we will substitute a successor benchmark index, if
there is one. Otherwise we will substitute a comparable benchmark index.
We will obtain any required regulatory approvals prior to substitution
of the benchmark index.
The formula, which is set on the Effective Date and is not changed while the
Rider is in effect, determines, on each Valuation Day, when a transfer is
required.
The formula begins by determining the value on that Valuation Day that, if
appreciated at the applicable discount rate, would equal the guarantee amount
at the end of the Base Guarantee Period or Step-Up Guarantee Period. We call
the greatest of these values the "current liability (L)."
L = MAX (L\\i\\), where L\\i\\ = G\\i\\ / (1 + d\\i\\)/(Ni/365)/.
Next the formula calculates the following formula ratio:
r = (L - B) / V.
If the formula ratio exceeds an upper target value, then all or a portion of
the Account Value will be transferred to the bond fund Sub-account associated
with the current liability. If at the time we make a transfer to the bond fund
Sub-account associated with the current liability there is Account Value
allocated to a bond fund Sub-account not associated with the current
liability, we will transfer all assets from that bond fund Sub-account to the
bond fund Sub-account associated with the current liability.
The formula will transfer assets into the Transfer Account if r (greater than) C\\u\\.
The transfer amount is calculated by the following formula:
T = {Min (V, [ L - B - V*C\\t\\] / ( 1 - C\\t\\))}
If the formula ratio is less than a lower target value and there are assets in
the Transfer Account, then the formula will transfer assets out of the
Transfer Account into the elected Sub-accounts.
The transfer amount is calculated by the following formula:
T = {Min (B, - [ L - B - V*C\\t\\] / ( 1 - C\\t\\))}
If following a transfer to the elected Sub-accounts, there are assets
remaining in a bond fund Sub-account not associated with the current
liability, we will transfer all assets from that bond fund Sub-account to the
bond fund Sub-account associated with the current liability.
J-202
APPENDIX K - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN INCOME
BENEFIT AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. Cu - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. Ct - the target is established on the Effective Date and is not changed
for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V - the total value of all Permitted Sub-accounts in the annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Account
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable account value (V) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - B) / V.
. If r (greater than) Cu, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account.
. If r (less than) C\\l\\, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = {Min(V, [L - B - V * Ct] / (1-Ct))}, Money moving from the Permitted Sub-accounts
to the AST Investment Grade Bond Portfolio
Sub-account
T = {Min(B, - [L - B - V * Ct] / (1-Ct))}, Money moving from the AST Investment Grade
Bond Portfolio Sub-account to the Permitted
Sub-accounts]
K-203
"a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
K-204
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE PRUDENTIAL ANNUITIES ANNUITY DESCRIBED IN
PROSPECTUS CH2-PROS (05/2008).
---------------------------------------
(print your name)
---------------------------------------
(address)
---------------------------------------
(city/state/zip code)
----------------
[LOGO] Prudential PRSRT STD
The Prudential Insurance Company of America U.S. POSTAGE
751 Broad Street PAID
Newark, NJ 07102-3777 LANCASTER, PA
PERMIT NO. 1793
----------------
Variable Annuity Issued by: Variable Annuity Distributed by:
PRUDENTIAL ANNUITIES LIFE PRUDENTIAL ANNUITIES
ASSURANCE CORPORATION DISTRIBUTORS, INC.
A Prudential Financial Company A Prudential Financial Company
One Corporate Drive One Corporate Drive
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 203-926-1888
http://www.prudentialannuities.com http://www.prudentialannuities.com
MAILING ADDRESSES:
PRUDENTIAL ANNUITIES - VARIABLE ANNUITIES
P.O. Box 7960
Philadelphia, PA 19176
EXPRESS MAIL:
PRUDENTIAL ANNUITIES - VARIABLE ANNUITIES
2101 Welsh Road
Dresher, PA 19025
Prudential Annuities Life Assurance Corporation
Prospectus Supplement, dated May 1, 2009
This supplement should be read and retained with the prospectus for your
Annuity. If you would like another copy of the prospectus, please call us at
1-800-752-6342.
Prudential Annuities Life Assurance Corporation ("PALAC") 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 PALAC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act also are incorporated into the prospectus by reference. PALAC
will provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the information that has been
incorporated by reference into the prospectus but not delivered with the
prospectus. Such information will be provided upon written or oral request at
no cost to the requester by writing to Prudential Annuities Life Assurance
Corporation, One Corporate Drive, Shelton, CT 06484 or by calling 800-752-6342.
PALAC files periodic reports as required under the Securities Exchange Act of
1934. The public may read and copy any materials that PALAC files with the SEC
at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy, and information statements, and
other information regarding issuers that file electronically with the SEC (see
http://www.sec.gov). Our internet address is http://www.prudentialannuities.com.
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR/SM/ PLAN III ("ASAP III")/SM/
ADVANCED SERIES APEX II/SM/ ("APEX II")/SM/
ADVANCED SERIES LIFEVEST II/SM/ ("ASL II")/SM/
ADVANCED SERIES XTRA CREDIT/SM/ SIX ("XT6")/SM/
ADVANCED SERIES ADVISORS CHOICE/SM/ 2000 ("CHOICE 2000")
Amendment to Supplement dated February 23, 2009
To
Prospectuses dated May 1, 2008, as Supplemented
This supplement should be read and retained with the prospectus and
supplements for your ASAP III, APEX II, ASL II, XT6 and Choice 2000 Annuity.
If you would like another copy of the prospectus or the supplements, please
call us at 1-800-752-6342. The terms used in this supplement are defined in
the Glossary of Terms in the Prospectus, unless specifically defined in a
supplement to the Prospectus.
The February 23, 2009 Supplement offering the following optional living
benefits: Highest Daily Lifetime 7 Plus, Spousal Highest Daily Lifetime 7
Plus, Highest Daily Lifetime 7 Plus with Beneficiary Income Option ("BIO"),
Spousal Highest Daily Lifetime 7 Plus with BIO and Highest Daily Lifetime 7
Plus with Lifetime Income Accelerator ("LIA"), is hereby amended as follows.
The "Summary of Contract Fees and Charges - Your Optional Benefit Fees and
Charges" Table on pages 3 and 4 of your Supplement is hereby replaced in its
entirety with the following Table. The Table is being revised to clarify how
the Optional Benefit Fee is deducted from your Annuity. In the Table below,
"AV" refers to Account Value and "PWV" refers to Protected Withdrawal Value.
CORESUP8
The following line items are added to the prospectus (page 8 or page 7 for
Choice 2000) section "Summary of Contract Fees and Charges - Your Optional
Benefit Fees and Charges." The entire table of "Summary of Contract Fees and
Charges" can be found on page 6 of your prospectus.
SUMMARY OF CONTRACT FEES AND CHARGES
- ------------------------------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
- ------------------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL
CHARGE CHARGE /2/ CHARGE /2/ CHARGE /2/ CHARGE/ 2/ CHARGE /2/
for ASAP III for APEX II for ASL II for XT6 for CHOICE
2000
- ------------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS
Maximum Charge /3/ 1.50% 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
of greater of 1.50% of 1.50% of 1.50% of 1.50% of 1.50% of
AV and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
Current Charge 0.75% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 0.75% of 0.75% of 0.75% of 0.75% of 0.75% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
- ------------------------------------------------------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
Maximum Charge /3/ 1.50% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 1.50% of 1.50% of 1.50% of 1.50% of 1.50% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
Current Charge 0.90% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 0.90% of 0.90% of 0.90% of 0.90% of 0.90% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
- ------------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH BIO
Maximum Charge /3/ 2.00% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
Current Charge 1.10% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
- ------------------------------------------------------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
WITH BIO
Maximum Charge /3/ 2.00% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
Current Charge 1.10% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
- ------------------------------------------------------------------------------------------------------------------------
2
- ------------------------------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
- ------------------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL
CHARGE CHARGE /2/ CHARGE /2/ CHARGE /2/ CHARGE/ 2/ CHARGE /2/
for ASAP III for APEX II for ASL II for XT6 for CHOICE
2000
- ------------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH LIA
Maximum Charge /3/ 2.00% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
Current Charge 1.10% of 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
greater of AV 1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
and PWV greater of greater of greater of greater of greater of AV
AV and AV and AV and AV and and PWV
PWV PWV PWV PWV
- ------------------------------------------------------------------------------------------------------------------------
How Charge is Determined
1. Highest Daily Lifetime 7 Plus. Charge for this benefit is assessed against
the greater of the Account Value ("AV") and 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, 0.75% of the greater of the AV
and the PWV 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% of the greater of the AV and the PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 0.75% of
the greater of the AV and the PWV 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. For Choice 2000, 0.75% of the greater of the AV and the PWV is in
addition to 0.65% annual charge of amounts invested in the Sub-accounts.
Spousal Highest Daily Lifetime 7 Plus. Charge for this benefit is assessed
against the greater of the Account Value ("AV") and 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, 0.90% of the
greater of the AV and the PWV 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% of the greater of the AV and the PWV
is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts. For XT6, 0.90% of the greater of the AV and the PWV 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. For Choice 2000, 0.90% of the
greater of the AV and the PWV is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts.
Highest Daily Lifetime 7 Plus with BIO. Charge for this benefit is assessed
against the greater of the Account Value ("AV") and 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, 1.10% of the
greater of the AV and the PWV 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% of the greater of the AV and the PWV
is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts. For XT6, 1.10% of the greater of the AV and the PWV 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. For Choice 2000, 1.10% of the
greater of the AV and the PWV is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts.
Spousal Highest Daily Lifetime 7 Plus with BIO. Charge for this benefit is
assessed against the greater of the Account Value ("AV") and 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, 1.10% of the
greater of the AV and the PWV 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% of the greater of the AV and the PWV
is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts. For XT6, 1.10% of the greater of the AV and the PWV 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. For Choice 2000, 1.10% of the
greater of the AV and the PWV is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts.
Highest Daily Lifetime 7 Plus with LIA. Charge for this benefit is assessed
against the greater of the Account Value ("AV") and 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, 1.10% of the
greater of the AV and the PWV 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% of the greater of the AV and the PWV
is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts. For XT6, 1.10% of the greater of the AV and the PWV 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. For Choice 2000, 1.10% of the
greater of the AV and the PWV is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts.
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.
3. We reserve the right to increase the charge to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit.
3
----------------
[LOGO] Prudential PRSRT STD
The Prudential Insurance Company of America U.S. POSTAGE
751 Broad Street PAID
Newark, NJ 07102-3777 LANCASTER, PA
PERMIT NO. 1793
----------------
CORESUP8
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR/SM/ PLAN III ("ASAP III")/SM/
ADVANCED SERIES APEX II/SM/ ("APEX II")/SM/
ADVANCED SERIES LIFEVEST II/SM/ ("ASL II")/SM/
ADVANCED SERIES XTRA CREDIT/SM/ SIX ("XT6")/SM/
ADVANCED SERIES ADVISORS CHOICE(R) 2000 ("CHOICE 2000")
(marketed by some firms as "Advisors Select 2000")
Supplement dated February 23, 2009
To
Prospectuses dated May 1, 2008, as Supplemented
This supplement should be read and retained with the prospectus and
supplements for your ASAP III, APEX II, ASL II, XT6 and Choice 2000 Annuity.
If you would like another copy of the prospectus or the supplements, please
call us at 1-800-752-6342. The terms used in this supplement are defined in
the Glossary of Terms in the prospectus, unless specifically defined in this
supplement. The optional living benefits and optional features described in
this supplement are 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.
This supplement describes new optional living benefits available under each of
the above-referenced Annuities (page 7). If you currently own an Annuity with
a living benefit, you may terminate your existing benefit rider and elect
these new benefits (subject to our current rules).
This supplement also describes a new optional feature available to current
owners of Highest Daily Lifetime Five Income Benefit (page 35), Highest Daily
Lifetime Seven Income Benefit (page 37), and Spousal Highest Daily Lifetime
Seven Income Benefit (page 37) that, if elected, would provide an alternative
asset transfer formula for your benefit. Except as otherwise described in this
supplement, all terms and conditions of your Annuity and benefit rider for
Highest Daily Lifetime Five Income Benefit, Highest Daily Lifetime Seven
Income Benefit or Spousal Highest Daily Lifetime Seven Income Benefit apply
and do not change.
In addition, this supplement also: (1) discusses that certain optional living
benefits are no longer available (subject to regulatory approval of the
benefits offered in this supplement) (page 42); (2) discusses information
about Section 403(b) annuity contract exchanges (page 42); (3) provides
information regarding purchasing an Annuity if you are a beneficiary of an
annuity contract that was owned by a decedent (page 42); and (4) provides
additional information with respect to Guaranteed Return Option Plus,
Guaranteed Return Option, Highest Daily Guaranteed Return Option, Guaranteed
Return Option Plus 2008, Highest Daily Lifetime Five, Highest Daily Lifetime
Seven and Spousal Highest Daily Lifetime Seven (pages 43-50).
CORESUP7
SUPPLEMENT TABLE OF CONTENTS
Page
----
SUMMARY OF CONTRACT FEES AND CHARGES - YOUR OPTIONAL BENEFIT FEES AND CHARGES.............. 3
EXPENSE EXAMPLES........................................................................... 5
NEW OPTIONAL LIVING BENEFITS............................................................... 7
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT.......................................... 7
TRANSFER FORMULA FOR HIGHEST DAILY LIFETIME 7 PLUS/SM/ AND SPOUSAL HIGHEST DAILY LIFETIME
7 PLUS/SM/ INCOME BENEFITS.............................................................. 17
HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION/SM/.......................... 19
HIGHEST DAILY LIFETIME 7 PLUS WITH LIFETIME INCOME ACCELERATOR/SM/........................ 20
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT/ /............................... 22
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION/SM/.................. 30
TERMINATION OF EXISTING BENEFITS AND ELECTION OF NEW BENEFITS............................. 31
INVESTMENT OPTIONS......................................................................... 32
NEW OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT, HIGHEST DAILY
LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME
BENEFIT.................................................................................. 35
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT........................... 35
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL HIGHEST
DAILY LIFETIME SEVEN INCOME BENEFIT..................................................... 37
OTHER INFORMATION.......................................................................... 42
DISCONTINUANCE OF CERTAIN OPTIONAL LIVING BENEFITS........................................ 42
TAX CONSIDERATIONS - TYPES OF TAX-FAVORED PLANS........................................... 42
PURCHASING YOUR ANNUITY - "BENEFICIARY" ANNUITY........................................... 42
GUARANTEED RETURN OPTION PLUS - KEY FEATURE - ALLOCATION OF ACCOUNT VALUE................. 43
GUARANTEED RETURN OPTION - KEY FEATURE - ALLOCATION OF ACCOUNT VALUE...................... 45
GUARANTEED RETURN OPTION PLUS 2008 AND HIGHEST DAILY GRO - KEY FEATURE - ALLOCATION OF
ACCOUNT VALUE........................................................................... 46
ASSET TRANSFER COMPONENT OF HIGHEST DAILY LIFETIME FIVE................................... 47
ASSET TRANSFER COMPONENT OF HIGHEST DAILY LIFETIME SEVEN AND ASSET TRANSFER COMPONENT
OF SPOUSAL HIGHEST DAILY LIFETIME SEVEN................................................. 48
2
The following line items are added to the prospectus (page 8 or page 7 for
Choice 2000) section "Summary of Contract Fees and Charges - Your Optional
Benefit Fees and Charges." The entire table of "Summary of Contract Fees and
Charges" can be found on page 6 of your prospectus.
SUMMARY OF CONTRACT FEES AND CHARGES
- --------------------------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES /1/
- --------------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL
CHARGE CHARGE /2/ CHARGE /2/ CHARGE /2/ CHARGE/ 2/ CHARGE /2/
for ASAP III for APEX II for ASL II for XT6 for CHOICE
2000
- --------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS
Maximum Charge /3/ 1.50% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
1.50% of 1.50% of 1.50% of 1.50% of 1.50% of
PWV PWV PWV PWV PWV
Current Charge 0.75% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
0.75% of 0.75% of 0.75% of 0.75% of 0.75% of
PWV PWV PWV PWV PWV
- --------------------------------------------------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
Maximum Charge /3/ 1.50% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
1.50% of 1.50% of 1.50% of 1.50% of 1.50% of
PWV PWV PWV PWV PWV
Current Charge 0.90% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
0.90% of 0.90% of 0.90% of 0.90% of 0.90% of
PWV PWV PWV PWV PWV
- --------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH BIO
Maximum Charge /3/ 2.00% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
PWV PWV PWV PWV PWV
Current Charge 1.10% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
PWV PWV PWV PWV PWV
- --------------------------------------------------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
WITH BIO
Maximum Charge /3/ 2.00% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
PWV PWV PWV PWV PWV
Current Charge 1.10% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
PWV PWV PWV PWV PWV
- --------------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH LIA
Maximum Charge /3/ 2.00% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
2.00% of 2.00% of 2.00% of 2.00% of 2.00% of
PWV PWV PWV PWV PWV
Current Charge 1.10% of PWV 1.25% + 1.65% + 1.65% + 1.65% + 0.65% +
1.10% of 1.10% of 1.10% of 1.10% of 1.10% of
PWV PWV PWV PWV PWV
- --------------------------------------------------------------------------------------------------------------------
3
How Charge is Determined
1. Highest Daily Lifetime 7 Plus. 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,
0.75% of PWV 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% of PWV is in addition to 1.65% annual charge of amounts
invested in the Sub-accounts. For XT6, 0.75% of PWV 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. For Choice 2000, 0.75% of PWV is in addition to
0.65% annual charge of amounts invested in the Sub-accounts.
Spousal Highest Daily Lifetime 7 Plus. 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, 0.90% of PWV 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% of PWV is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts. For XT6, 0.90% of PWV 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. For Choice 2000, 0.90% of PWV is in addition
to 0.65% annual charge of amounts invested in the Sub-accounts.
Highest Daily Lifetime 7 Plus 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, 1.10% of PWV 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% of PWV is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts. For XT6, 1.10% of PWV 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. For Choice 2000, 1.10% of PWV is in addition
to 0.65% annual charge of amounts invested in the Sub-accounts.
Spousal Highest Daily Lifetime 7 Plus 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, 1.10% of PWV 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% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 1.10% of
PWV 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. For Choice 2000,
1.10% of PWV is in addition to 0.65% annual charge of amounts invested in
the Sub-accounts.
Highest Daily Lifetime 7 Plus 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, 1.10% of PWV 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% of PWV is in addition to 1.65% annual charge of
amounts invested in the Sub-accounts. For XT6, 1.10% of PWV is in addition
to 1.75% 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. For Choice 2000, 1.10% of PWV is in addition
to 0.65% annual charge of amounts invested in the Sub-accounts.
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.
3. We reserve the right to increase the charge to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit.
4
EXPENSE EXAMPLES
The following Expense Examples replace the Expense Examples in the prospectus
on page 14 and page 12 for Choice 2000.
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 following fees and charges 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 total annual operating expenses, 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 Highest Daily Lifetime 7 with BIO (which is the maximum
optional benefit charge)**
. For the XT6 example, no Purchase Credit is granted under the Annuity
. For the APEX II example, the Loyalty Credit applies to the Annuity and
is equal to 2.75% of total Purchase Payments made during the first four
Annuity years
. For the ASAP III example, the Loyalty Credit applies to the Annuity and
is equal to 0.50% of total Purchase Payments made during the first four
Annuity years.
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.
** Note: While a higher combination of charges exists, certain of the benefits
are no longer available for election and therefore not used in these
examples.
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:
If you Surrender you annuity at the end of the applicable time period: /1/
1 yr 3 yrs 5 yrs 10 yrs
----------------------------------------
ASAP III $1,247 $2,288 $3,269 $5,432
----------------------------------------
APEX II $1,389 $2,482 $3,053 $5,940
----------------------------------------
ASL II $608 $1,803 $2,971 $5,781
----------------------------------------
XT6/3/ $1,472 $2,571 $3,547 $5,877
----------------------------------------
CHOICE 2000 $511 $1,530 $2,548 $5,082
----------------------------------------
If you annuitize your annuity at the end of the applicable time period: /2/
1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------
ASAP III N/A $1,703 $2,819 $5,432
--------------------------------------
APEX II N/A $1,852 $3,053 $5,940
--------------------------------------
ASL II $608 $1,803 $2,971 $5,781
--------------------------------------
XT6/3/ N/A N/A $2,971 $5,781
--------------------------------------
CHOICE 2000 $511 $1,530 $2,548 $5,082
--------------------------------------
5
If you do not surrender your annuity:
1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------
ASAP III $572 $1,703 $2,819 $5,432
--------------------------------------
APEX II $624 $1,852 $3,053 $5,940
--------------------------------------
ASL II $608 $1,803 $2,971 $5,781
--------------------------------------
XT6/3/ $608 $1,803 $2,971 $5,781
--------------------------------------
CHOICE 2000 $511 $1,530 $2,548 $5,082
--------------------------------------
1 There is no CDSC for ASL II and Choice 2000. See "Summary of Contract Fees
and Charges" for the CDSC schedule in your prospectus.
2 If you own ASAP III or APEX II, you may not annuitize in the first Annuity
Year. If you own XT6, you may not annuitize in the first three Annuity
Years.
3 XT6 Annuities purchased prior to November 20, 2006 are subject to a
different CDSC schedule.
6
NEW OPTIONAL LIVING BENEFITS
We add the following new optional living benefits to the prospectus:
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (HD 7 Plus)/SM/
Highest Daily Lifetime 7 Plus is offered as a replacement to Highest Daily
Lifetime Seven in those jurisdictions where we have received regulatory
approval. Currently, if you elect Highest Daily Lifetime 7 Plus and
subsequently terminate the benefit, you may elect another lifetime withdrawal
benefit, subject to our current rules. See "Election of and Designations under
the Program" 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 lifetime benefit, you lose the guarantees
that you had accumulated under your existing benefit and will begin the new
guarantees under the new benefit you elect based on your Account Value as of
the date the new benefit becomes active. The income benefit under Highest
Daily Lifetime 7 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 7 Plus benefit is not available if you elect 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 program. For a more detailed
description of the permitted investment options, see the "Investment Options"
section below and in your prospectus on page 16 of your prospectus and page 13
for Choice 2000.
We offer 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 principal value (the
"Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our program 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 asset transfer program
in order to participate in Highest Daily Lifetime 7 Plus.
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 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;
7
(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 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. 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 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
8
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).
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 program does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under 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 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
9
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 with Adjusted Annual
withdrawal and Purchase Income Amount (5% of the
Date* Account Value 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 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. The amount of
the Non-Lifetime Withdrawal cannot be more than the amount that would cause
the Annuity to be taken below the minimum Surrender Value after a withdrawal
for your Annuity (See "Access to Account Value" on page 51 and page 45 for
Choice 2000 in the prospectus). This Non-Lifetime Withdrawal will not
establish your initial Annual Income Amount and the Periodic Value described
above will
10
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, the Return of Principal guarantee, and the Periodic Value
guarantees on the tenth, twentieth and twenty-fifth anniversaries of the
benefit effective date, described above, by the percentage the total
withdrawal amount (including any applicable CDSC) represents of the then
current Account Value immediately prior to the withdrawal.
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 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 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.
11
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 are 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.
.. 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.
12
.. 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.
.. 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 program rules
regarding time and amount of withdrawals), you will be able to receive your
Annual Income Amount in the form of periodic benefit payments.
.. Upon inception of the benefit, 100% of your Account Value must be 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?". Upon the
initial transfer of your Account Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation statement. In addition, you can find a copy of the AST
Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Highest Daily Lifetime 7 Plus
asset transfer program will not count toward the maximum number of free
transfers allowable under an Annuity.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit. (See "Investment Options" below and in
the prospectus on page 17 and page 14 for Choice 2000). Moreover, if you
are invested in prohibited investment options and seek to elect the
benefit, we will ask you to reallocate to permitted investment options as a
prerequisite to electing the benefit.
.. 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 at the end of each benefit
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 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 your Sub-accounts
including the AST Investment Grade Bond Portfolio Sub-account. 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.
Election of and Designations under the Benefit
For Highest Daily Lifetime 7 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 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 to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that is
satisfactory to us.
Highest Daily Lifetime 7 Plus can be elected at the time that you purchase
your Annuity or after the Issue Date, subject to our eligibility rules and
restrictions. If you elect Highest Daily Lifetime 7 Plus and terminate it, you
can re-elect it, subject to our current rules. Additionally, if you currently
own an Annuity with a living benefit, you may terminate your existing benefit
rider and elect the benefits offered in this supplement, subject to our
current rules (See "Termination of Existing Benefits and Election of New
Benefits" below on page 31). 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 will begin the new guarantees
under the new benefit you elect based 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 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
13
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 Sub-accounts as the "Permitted
Sub-accounts". 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 mathematical 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 below.
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 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, 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 AST Investment Grade Bond Sub-account. 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. 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.
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.
14
. 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
mathematical 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. For
newly-issued Annuities that elect Highest Daily Lifetime 7 Plus and existing
Annuities that elect Highest Daily Lifetime 7 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, 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 mathematical 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
. 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.
The amount and timing of transfers to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to your Annuity (and is not necessarily directly correlated
with the securities markets, bond markets, or interest rates, in general)
including:
. The difference between your Account Value and your Protected Withdrawal
Value;
. How long you have owned Highest Daily Lifetime 7 Plus or Spousal Highest
Daily Lifetime 7 Plus;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the AST Investment Grade Bond Sub-account;
. The amount allocated to each of the Permitted Sub-accounts you have
chosen;
. The amount allocated to the AST Investment Grade Bond Sub-account;
15
. Additional Purchase Payments, if any, you make to your Annuity; and
. Withdrawals, if any, you take from your Annuity (withdrawals are taken
pro rata from your Account Value).
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.
The more of your Account Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of
that Sub-account in determining whether (and how much) your Account Value is
transferred back to the Permitted Sub-accounts. Further, 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 good
performance but the performance of your Permitted Sub-accounts is negative,
that the formula might transfer your Account Value to the Permitted
Sub-accounts. Similarly, the more you have allocated to the Permitted
Sub-accounts, the greater the impact of the performance of those Permitted
Sub-accounts will have on any transfer to the AST Investment Grade Bond
Sub-account.
If you make additional Purchase Payments to your Annuity, they will be
allocated according to your allocation instructions. Once they are allocated
to your Annuity, they will also be subject to the mathematical formula
described above and therefore may be transferred to the AST Investment Grade
Bond Portfolio, if dictated by the formula.
Any Account Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts regardless of whether there is a subsequent Sub-account decline
or recovery until it is transferred out of the AST Investment Grade Bond
Sub-account.
16
TRANSFER FORMULA FOR HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT
(including Highest Daily Lifetime 7 Plus with BIO, Highest Daily Lifetime 7
Plus with LIA and Spousal Highest Daily Lifetime 7 Plus with BIO)
TRANSFERS OF ACCOUNT VALUE BETWEEN YOUR PERMITTED SUB-ACCOUNTS AND THE AST
INVESTMENT GRADE BOND SUB-ACCOUNT
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULAS:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime 7 Plus/Spousal Highest Daily Lifetime 7 Plus
benefit (the "Effective Date") and is not changed for the life of the
guarantee. Currently, it is 83%.
. Cu\\s\\ - the secondary upper target is established on the effective
date of the Highest Daily Lifetime 7 Plus/Spousal Highest Daily Lifetime
7 Plus benefit (the "Effective Date") and is not changed for the life of
the guarantee. Currently it is 84.5%
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 78%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V\\V\\ - the total value of all Permitted Sub-accounts in the Annuity.
. V\\F\\ the total value of all elected Fixed Rate Options in the Annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first Lifetime Withdrawal, the Income
Basis is equal to the Protected Withdrawal Value calculated as if the
first Lifetime Withdrawal were taken on the date of calculation. After
the first Lifetime Withdrawal, the Income Basis is equal to the greater
of (1) the Protected Withdrawal Value on the date of the first Lifetime
Withdrawal, increased for additional Purchase Payments, including the
amount of any associated Credits, and adjusted proportionally for excess
withdrawals*, and (2) any highest daily Account Value occurring on or
after the date of the first Lifetime Withdrawal and prior to or
including the date of this calculation increased for additional Purchase
Payments including the amount of any associated Credits, and adjusted
for Lifetime Withdrawals.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account.
. T\\M\\ - the amount of a monthly transfer out of the AST Investment
Grade Bond Portfolio.
* Note: Lifetime Withdrawals of less than or equal to the Annual Income
Amount do not reduce the Income Basis.
Daily Calculations
TARGET VALUE CALCULATION:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V\\V\\ + V\\F\\) is equal to
zero, no calculation is necessary.
L = 0.05 * P * a
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - B) / (V\\V\\ + V\\F\\).
. If on the third consecutive Valuation Day r (greater than) C\\u\\
and r (less or =) Cu\\s\\ or if on any day r (greater than) Cu\\s\\,
and subject to the 90% cap rule described above, assets in the
Permitted Sub-accounts are transferred to the AST Investment Grade
Bond Portfolio Sub-account.
17
. If r (less than) C\\l\\, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = Min(MAX(0, (0.90 * (V\\V\\ + V\\F\\ + B)) Money is transferred from the Permitted Sub-accounts
- B), [L - B - (V\\V\\ + V\\F\\) * and Fixed Rate Options to the AST Investment Grade
C\\t\\] / (1 - C\\t\\)) Bond Sub-account
T = {Min(B, - [L - B - (V\\V\\ + V\\F\\) * Money is transferred from the AST Investment Grade
C\\t\\] / (1 - C\\t\\))} Bond Sub-account to the Permitted Sub-accounts
Monthly Calculation
On each monthly anniversary of the Annuity Issue Date and following the daily
Transfer Calculation above, the following formula determines if a transfer
from the AST Investment Grade Bond Sub-account to the Permitted Sub-Accounts
will occur:
If, after the daily Transfer Calculation is performed,
{Min(B, .05 * (V\\V\\ + V\\F\\ +B))} (less than) (Cu * (V\\V\\ + V\\F\\) - L +
B) / (1 - C\\u\\), then
T\\M\\ = {Min(B, .05 * (V\\V\\ + V\\F\\ +B))} Money is transferred from the AST Investment
Grade Bond Sub-account to the Permitted Sub-
accounts.
"a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
- ----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06**
* The values set forth in this table are applied to all ages.
** In all subsequent years and months thereafter, the annuity factor is 4.06
18
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. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (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 non-qualified 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 7 Plus with Beneficiary Income Option/SM/
We offer 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. This
version is only being made available 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. You
may choose Highest Daily Lifetime 7 Plus with or without also selecting the
Beneficiary Income Option death benefit. However, you may not elect the
Beneficiary Income Option without Highest Daily Lifetime 7 Plus and you must
elect the Beneficiary Income Option death benefit at the time you elect
Highest Daily Lifetime 7 Plus. If you elect Highest Daily Lifetime 7 Plus
without the Beneficiary Income Option and would like to add the feature later,
you must terminate the Highest Daily Lifetime 7 Plus benefit and elect the
Highest Daily Lifetime 7 Plus with Beneficiary Income Option (subject to
availability and benefit re-election provisions). Please note that if you
terminate Highest Daily Lifetime 7 Plus and elect the Highest Daily Lifetime 7
Plus with BIO you lose the guarantees that you had accumulated under your
existing benefit and will begin the new guarantees under the new benefit you
elect based 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 program.
If you elect this death benefit, you may not elect any other optional benefit.
You may elect the Beneficiary Income Option death benefit so long as the
Annuitant is no older than age 75 at the time of election and meet 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 at the end of each benefit 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 0.275% 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 your Sub-accounts
including the AST Investment Grade Bond Sub-account. 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 (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, 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.
19
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. 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
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/.
We offer another version of Highest Daily Lifetime 7 Plus that we call Highest
Daily Lifetime 7 Plus with Lifetime Income Accelerator ("Highest Daily
Lifetime 7 Plus with LIA"). 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. You may choose Highest Daily Lifetime 7 Plus with or
without also electing LIA, however you may not elect LIA without Highest Daily
Lifetime 7 Plus and you must elect the LIA benefit at the time you elect
Highest Daily Lifetime 7 Plus. If you elect Highest Daily Lifetime 7 Plus
without LIA and would like to add the feature later, you must terminate the
Highest Daily Lifetime 7 Plus benefit and elect the Highest Daily Lifetime 7
Plus with LIA (subject to availability and benefit re-election provisions).
Please note that if you terminate Highest Daily Lifetime 7 Plus and elect the
Highest Daily Lifetime 7 Plus with LIA you lose the guarantees that you had
accumulated under your existing benefit and will begin the new guarantees
under the new benefit you elect based on your Account Value as of the date the
new benefit becomes active. Highest Daily Lifetime 7 Plus with LIA is offered
as an alternative to other lifetime withdrawal options. If you elect this
benefit, you may not elect 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 program. The income benefit under Highest Daily Lifetime 7
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. 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 at
the end of each benefit 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 0.275% 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 your Sub-accounts including
the AST Investment Grade Bond Sub-account. Since this fee is based on the
greater of Account Value or the Protected Withdrawal Value,
20
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. 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, upon the next Annuity Anniversary the
Annual Income Amount would replace the LIA Amount. 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
21
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 made.
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 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/SM/ INCOME BENEFIT (SHD7 Plus)/SM/
Spousal Highest Daily Lifetime 7 Plus is the spousal version of Highest Daily
Lifetime 7 Plus. 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. Currently, if you elect Spousal Highest Daily Lifetime 7 Plus
and subsequently terminate the benefit, you may elect another lifetime
withdrawal 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 will begin
the new guarantees under the new benefit you elect based on your Account Value
as of the date the new benefit becomes active. Spousal Highest Daily Lifetime
7 Plus must be 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 7 Plus is not available if you elect 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 program. For a
more detailed description of permitted investment options, see the "Investment
Options" section below and in your prospectus on page 16 or page 13 for Choice
2000.
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 program 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
22
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 program - the guarantees are not
lost if you withdraw less than the maximum allowable amount each year under
the rules of the benefit. As discussed below, we require that you participate
in our asset transfer program in order to participate in Spousal Highest Daily
Lifetime 7 Plus.
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,
(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.
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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. 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.
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).
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
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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 program does not affect your ability
to make withdrawals under your Annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 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).
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
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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 with Adjusted Annual
withdrawal and Purchase Income Amount (5% of the
Date* Account Value 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. The
amount of the Non-Lifetime Withdrawal cannot be more than the amount that
would cause the Annuity to be taken below the minimum Surrender Value after a
withdrawal for your Annuity (See "Access to Account Value" in the prospectus
on page 51 or page 45 in Choice 2000). This Non-Lifetime Withdrawal will not
establish your intital 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 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, the Return of Principal guarantee and the Periodic Value
guarantees on the tenth, twentieth and twenty-fifth anniversaries of the
benefit effective date, described above, 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.
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
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. 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.
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
27
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.
.. 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.
.. Upon inception of the benefit, 100% of your Account Value must be 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?". Upon the initial
transfer of your Account Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation statement. In addition, you can find a copy of the AST
Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. You can make withdrawals from your Annuity 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 declines due
to Sub-account performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
28
.. 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 asset transfer program will not count toward the maximum number of
free transfers allowable under an Annuity.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit (see "Investment Options" below and in
the prospectus on page 17 or page 14 for Choice 2000 ). Moreover, if you
are invested in prohibited investment options and seek to elect the
benefit, we will ask you to reallocate to permitted investment options as a
prerequisite to electing the benefit.
.. 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 at the end of each benefit 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 0.225%
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 your Sub-accounts including the AST Investment Grade Bond
Sub-account. 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.
Election of and Designations under the Benefit
Spousal Highest Daily Lifetime 7 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 program and at the death of the
first of the Designated Lives to die. Currently, Spousal Highest Daily
Lifetime 7 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 under
this benefit. If the Designated Lives divorce, 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.
Spousal Highest Daily Lifetime 7 Plus can be elected at the time that you
purchase 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, terminations 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 will begin the new guarantees
under the new benefit you elected based 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 (as described above). 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".
29
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" on page
14 of this supplement 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. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (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 non-qualified 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 7 Plus with Beneficiary Income Option/SM/
We offer 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. This version is only being made available 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. You
may choose Spousal Highest Daily Lifetime 7 Plus with or without also
selecting the Beneficiary Income Option death benefit. However, you may not
elect the Beneficiary Income Option without Spousal Highest Daily Lifetime 7
Plus and you must elect the Beneficiary Income Option death benefit at the
time you elect Spousal Highest Daily Lifetime 7 Plus. If you elect Spousal
Highest Daily Lifetime 7 Plus without the Beneficiary Income Option and would
like to add the feature later, you must terminate the Spousal Highest Daily
Lifetime 7 Plus benefit and elect the Spousal Highest Daily Lifetime 7 Plus
with Beneficiary Income Option (subject to availability and benefit
re-election provisions). Please note that if you terminate Spousal Highest
Daily Lifetime 7 Plus and elect the Spousal Highest Daily Lifetime 7 Plus with
BIO you lose the guarantees that you had accumulated under your existing
benefit and will begin the new guarantees under the new benefit you elect
based on your Account Value as of the date the new benefit 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 program
If you elect the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You may 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 at
the end of each benefit 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 0.275% 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 your Sub-accounts, including
the AST Investment Grade Bond Sub-account. 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.
30
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. 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 Designation under the Benefit" section above.
The following is added to page 56, or page 49 for Choice 2000 in your
prospectus under "Living Benefit Programs":
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 benefits
described in this supplement, subject to availability of the benefit at that
time and our then current rules. There is currently no waiting period to elect
any living benefit once a living benefit is terminated 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 will
begin the new guarantees under the new benefit you elect based 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.
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INVESTMENT OPTIONS
We add the following information to your prospectus under "Investment Options."
.. We add the following immediately before the chart setting forth the
Investment Objectives and policies of each Portfolio on page 18 or page 15
for Choice 2000 of your prospectus:
Certain optional living benefits (e.g., Highest Daily Lifetime 7 Plus) employ
a pre-determined mathematical formula, under which money is transferred
between your chosen variable sub-accounts and a bond portfolio (e.g., the AST
Investment Grade Bond Portfolio). You should be aware that the operation of
the mathematical formula could impact the expenses and performance of the
variable sub-accounts used with the optional living benefits (the "Permitted
Funds"). Specifically, because transfers to and from the Permitted Funds can
be frequent and the amount transferred can vary, the Permitted Funds could
experience the following effects, among others: (a) they may be compelled to
hold a larger portion of assets in highly liquid securities than they
otherwise would, which could diminish performance if the highly liquid
securities underperform other securities (e.g., equities) that otherwise would
have been held (b) they may experience higher portfolio turnover, which
generally will increase the Permitted Funds' expenses and (c) if they are
compelled by the mathematical formula to sell securities that are
thinly-traded, such sales could have a significant impact on the price of such
securities. Please consult the prospectus for the Permitted Fund for complete
information about these effects.
.. We add the following information to your prospectus on page 17 or page 14
for Choice 2000 regarding currently available and permitted investment
options when you choose Highest Daily Lifetime 7 Plus or Spousal Highest
Daily Lifetime 7 Plus.
As a condition to your participating in Highest Daily Lifetime 7 Plus and
Spousal Highest Daily Lifetime 7 Plus (these references include Highest Daily
Lifetime 7 Plus with BIO, Highest Daily Lifetime 7 Plus with LIA and Spousal
Highest Daily Lifetime 7 Plus with BIO), 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 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 Highest Daily Lifetime 7 Plus and Spousal Highest
Daily Lifetime 7 Plus may participate in the second category (along with its
attendant re-balancing requirement). This second category is called our
"Optional Allocation and Rebalancing Program." If you participate in the
Optional Allocation and Rebalancing Program, you may not participate in a
Dollar Cost Averaging Program or Automatic Rebalancing Program. We may modify
or terminate the Optional Allocation and Rebalancing 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
Highest Daily Lifetime 7 Plus and Spousal Highest Daily Lifetime 7 Plus 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
AST Advanced Strategies Asset Allocation Portfolio
AST American Century Strategic Balanced Portfolio
AST Balanced Asset Allocation Portfolio
AST Capital Growth Asset Allocation Portfolio
AST Conservative Asset Allocation Portfolio
AST CLS Growth Asset Allocation Portfolio
AST CLS Moderate Asset Allocation Portfolio
AST First Trust Balanced Target Portfolio
AST First Trust Capital Appreciation Target Portfolio
AST Horizon Growth Asset Allocation Portfolio
AST Horizon Moderate Asset Allocation Portfolio
AST Niemann Capital Growth Asset Allocation Portfolio
AST Preservation Asset Allocation Portfolio
AST Schroders Multi-Asset World Strategies Allocation Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST UBS Dynamic Alpha Strategy Portfolio
Franklin Templeton VIP Founding Funds Allocation Fund
32
The following set of tables describes the second category, under which:
(a)you must allocate at least 20% of your Account Value to certain fixed
income portfolios (currently, the AST PIMCO Total Return Bond Portfolio and
the AST Western Asset Core Plus Bond Portfolio).
(b)you may allocate up to 80% in the 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. Note that on the first
quarter-end following your participation in the Optional Allocation and
Rebalancing Program, 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 Optional Allocation and Rebalancing 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.
Group II: Optional Allocation and Rebalancing Program
AST Academic Strategies Asset Allocation
AST Advanced Strategies
AST Aggressive Asset Allocation
AST AllianceBernstein Core Value
AST AllianceBernstein Growth & Income
AST American Century Income & Growth
AST Balanced Asset Allocation
AST Capital Growth Asset Allocation
AST CLS Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST Cohen & Steers Realty
AST DeAM Large-Cap Value
AST Federated Aggressive Growth
AST First Trust Balanced Target
AST First Trust Capital Appreciation Target
AST Focus Four Plus
AST Global Real Estate
AST Goldman Sachs Concentrated Growth
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset Allocation
AST Horizon Moderate Asset Allocation
AST International Growth
AST International Value
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond-Debenture
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman/LSV Mid-Cap Value
AST Neuberger Berman Small-Cap Growth
AST Niemann Capital Growth Asset Allocation
AST Parametric Emerging Markets Equity
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST QMA US Equity Alpha
AST Schroders Multi-Asset World Strategies Allocation
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
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AST T. Rowe Price Natural Resources
AST UBS Dynamic Alpha Strategy
AST Western Asset Core Plus Bond
Franklin Templeton VIP Founding Funds Allocation Fund
The following additional Portfolios are available with ASAP III, APEX II AND
ASL II only*:
ProFund VP Consumer Goods
ProFund VP Consumer Services
ProFund VP Financials
ProFund VP Health Care
ProFund VP Industrials
ProFund VP Large-Cap Growth
ProFund VP Large-Cap Value
ProFund VP Mid-Cap Growth
ProFund VP Mid-Cap Value
ProFund VP Real Estate
ProFund VP Small-Cap Growth
ProFund VP Small-Cap Value
ProFund VP Telecommunications
ProFund VP Utilities
* For ASAP III, XT6, and ASL II Annuities issued on or after May 26, 2008, we
significantly 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 or Choice 2000 Annuity, or who
acquire an APEX II or Choice 2000 Annuity after May 26, 2008, may invest
in any ProFund VP Portfolio (except that beneficiaries who acquire an
APEX II or Choice 2000 Annuity on or after May 26, 2008 under the
Beneficiary Continuation Option may not invest in any ProFund VP
Portfolio).
34
NEW OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT, HIGHEST
DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN
INCOME BENEFIT
1. In the section entitled "Living Benefit Programs - Highest Daily Lifetime
Five/SM/ Income Benefit", we add and amend certain information contained in
that section of the prospectus (page 86 or page 79 for Choice 2000) as follows:
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
If you currently own an Annuity and have elected, as of the date of this
Supplement, the Highest Daily Lifetime Five Income Benefit, you can elect this
feature which utilizes a new asset transfer formula. The new formula is
described below and will replace the "Transfer Calculation" portion of the
asset transfer 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 asset transfer formula is added to Appendix G with
respect to ASAP III, APEX II, ASL II, and XT6 in your prospectus (on page G-1)
and Appendix H with respect to CHOICE 2000 in your prospectus (on page H-1)
and is provided below.
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 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 mathematical
formula. Once you elect this feature, the new transfer formula described above
and set forth below will be the asset transfer 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- our rule). 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.
35
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 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).
Important Considerations When Electing this Feature:
. 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 asset transfer
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.
ASSET TRANSFER FORMULA FOR CONTRACTS WITH 90% CAP FEATURE
The "Terms and Definitions referenced in this Calculation Formula" and the
"Target Value Calculation" provided below remain unchanged and are included
herein for ease of reference.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee. The factors that we use currently are derived from the
a2000 Individual Annuity Mortality Table with an assumed interest rate
of 3%. Each number in the table "a" factors (which appears on page G-3
or page H-3 for Choice 2000 in your prospectus) represents a factor,
which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under
the guarantee.
. Q - age based factors used in calculating the target value. These
factors are established on the Effective Date and are not changed for
the life of the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%.
TARGET VALUE CALCULATION:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
36
If you elect this feature, the following replaces the "Transfer Calculation"
section in Appendix G (on page G-1 of your prospectus) with respect to ASAP
III, APEX II, ASL II and XT6 and Appendix H (on page H-1 of your prospectus)
with respect to Choice 2000.
Transfer Calculation:
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required: On the effective date of this feature (and only on the effective
date of this feature), the following asset transfer calculation is performed
to determine the amount of Account Value allocated to the Benefit Fixed Rate
Account:
If (F / (V + F) (greater than) .90) then
T = F - (V + F) * .90
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date.
On each Valuation Day thereafter (including the effective date of this feature
provided F / (V + F) (less than) = .90), the following asset transfer
calculation is performed
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to the Benefit Fixed Rate Account (subject to the 90%
cap rule described above).
. If r (less than)C\\l\\ and there are currently assets in the Benefit
Fixed Rate Account (F (greater than) 0), assets in the Benefit Fixed
Rate Account are transferred to the Permitted Sub-accounts.
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines the transfer amount:
T = Min(MAX (0, (0.90 * (V + F)) - F), Money is transferred from the elected Permitted
[L - F - V * C\\t\\] / (1 - C\\t\\)) Sub-accounts to Benefit Fixed Rate Account
T = Min(F, - [L - F - V * C\\t\\] / (1 - C\\t\\)), Money is transferred from the Benefit Fixed Rate
Account to the Permitted Sub-accounts.
2. In the section entitled "Living Benefit Programs - Highest Daily Lifetime
Seven /(SM)/ Income Benefit and Spousal Highest Daily Lifetime Seven /(SM)/
Income Benefit", we add and amend certain information contained in that
section of the prospectus (pages 92 and 98, or page 85 and 91 for Choice 2000)
as follows:
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT
If you currently own an Annuity and have elected, as of the date of this
Supplement, 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 which utilizes a new
asset transfer formula. The new formula is described below and will replace
the "Transfer Calculation" portion of the asset transfer 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 asset transfer
formula is added to Appendix J with respect to ASAP III, APEX II, ASL II and
XT6 in your prospectus (on page J-1) and Appendix K with respect to CHOICE
2000 in your prospectus (on page K-1) and is provided below.
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
37
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
mathematical formula. Once you elect this feature, the new transfer formula
described above and set forth below will be the asset transfer 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 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 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. It is possible that an additional
transfer to the Permitted Sub-accounts could occur the following Valuation
Day, and in some instances (based upon the formula) this additional transfer
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 Considerations When Electing this Feature:
. 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 asset transfer
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.
ASSET TRANSFER FORMULA FOR CONTRACTS WITH 90% CAP FEATURE
Transfer Calculation if you elected Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven on or after July 21, 2008:
The "Terms and Definitions referenced in the Calculation Formula" and the
"Target Value Calculation" provided below remain unchanged and are included
herein for ease of reference.
38
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee (see page G-3 or page H-3 for Choice 2000 of your
prospectus for the "a" factors)
. V\\V\\ - the total value of all Permitted Sub-accounts in the Annuity.
. V\\F\\ - the total value of all elected Fixed Rate Options in the
Annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Account
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account.
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the Account Value (V\\V\\ + V\\F\\) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
If you elect this feature, the following replaces the sub-section entitled "D.
Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven" in your Prospectus Supplement dated July 21,
2008 on page 6, which replaced the "Transfer Calculation" section in Appendix
J with respect to ASAP III, APEX II, ASL II, and XT6 (page J-1 of your
prospectus), and Appendix K with respect to CHOICE 2000 (page K-1 of your
prospectus).
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required:
On the effective date of this feature (and only on the effective date of this
feature), the following asset transfer calculation is performed to determine
the amount of Account Value allocated to the AST Investment Grade Bond
sub-account:
If (B / (V\\v\\ + V\\f\\ + B) (greater than) .90) then
T = B - [(V\\v\\ + V\\f\\ + B) * .90]
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date and future transfers to the
AST Investment Grade Bond Sub-account will not occur at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account.
On each Valuation Day thereafter (including the effective date of this feature
provided B/( V\\v\\ + V\\f\\ +B) (less than) = .90), the following asset
transfer calculation is performed
Target Ratio r = (L - B) / (V\\V\\ + V\\F\\).
39
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account
(subject to the 90% cap rule described above).
. If r (less than) C\\l\\, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = Min(MAX(0, (0.90 * (V\\V\\ + V\\F\\ + B)) - B), Money is transferred from the elected Sub-accounts
[L - B - (V\\V\\ + V\\F\\) * C\\t\\] / (1 - C\\t\\)) to the AST Investment Grade Bond Sub-account
T = Min(B, - [L - B - ( V\\v\\ + V\\f\\) * C\\t\\] / (1 - C\\t\\)) Money is transferred from the AST Investment
Grade Sub-account to the elected Sub-accounts
Transfer Calculation if you elected Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven prior to July 21, 2008:
The "Terms and Definitions referenced in the Calculation Formula" and the
"Target Value Calculation" provided above remain unchanged and are included
herein for ease of reference.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee (see page J-2 or page K-2 for Choice 2000 of your
prospectus for the "a" factors)
. V - the total value of all Permitted Sub-accounts in the annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Account
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each business day, a target value (L) is calculated, according to the
following formula. If the variable account value (V) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
If you elect this feature, the following replaces the "Transfer Calculation"
section in Appendix J with respect to ASAP III, APEX II, ASL II and XT6 (page
J-1 of your prospectus) and Appendix K with respect to Choice 2000 (page K-1
of your prospectus).
40
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required:
On the effective date of this feature (and only on the effective date of this
feature), the following asset transfer calculation is performed to determine
the amount of Account Value allocated to the AST Investment Grade Bond
Sub-account:
If (B / (V + B) (greater than) .90) then
T = B - [(V + B) * .90]
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date.
On each Valuation Day thereafter (including the effective date of this feature
provided B/(V+B) (less than)=.90), the following asset transfer calculation is
performed
Target Ratio r = (L - B) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to AST Investment Grade Bond Sub-account.
. If r (less than) C\\l\\ and there are currently assets in the AST
Investment Grade Bond Sub-account (F (greater than) 0), assets in
the AST Investment Grade Bond Sub-account are transferred to the
Permitted Sub-accounts.
The following formula, which is set on the Effective Date of this feature and
is not changed for the life of the guarantee, determines the transfer amount:
T = Min(MAX(0, (0.90 * (V + B)) - B), Money is transferred from the elected Permitted
[L - B - V * C\\t\\] / (1 - C\\t\\)) Sub-accounts to AST Investment Grade Bond
Sub-Account
T = {Min(B, - [L - B - V * C\\t\\] / (1 - C\\t\\))}, Money is transferred from the AST Investment
Grade Bond Sub-account to the Permitted
Sub-accounts.
41
OTHER INFORMATION
1. Discontinuance of Certain Optional Living Benefits.
As of the date of this supplement and subject to regulatory approval of
Highest Daily Lifetime 7 Plus Income Benefit (including Highest Daily Lifetime
7 Plus with BIO and Highest Daily Lifetime 7 Plus with LIA) or Spousal Highest
Daily Lifetime 7 Plus Income Benefit (including Spousal Highest Daily Lifetime
7 Plus with BIO) in your state, you may no longer elect the following income
benefits: Highest Daily Lifetime Seven Income Benefit, Highest Daily Lifetime
Seven Income Benefit with Beneficiary Income Option, Highest Daily Lifetime
Seven Income Benefit with Lifetime Income Accelerator, Spousal Highest Daily
Lifetime Seven Income Benefit, and Spousal Highest Daily Lifetime Seven Income
Benefit with Beneficiary Income Option . Additionally, as of the date of this
supplement, you may no longer elect the Guaranteed Minimum Income Benefit
(GMIB), and Guaranteed Minimum Withdrawal Benefit (GMWB). Check with your
financial professional regarding availability of these benefits in your state.
2. We add the following paragraph to page 120 or page 111 for Choice 2000 of
the prospectus section "Tax Considerations - Types of Tax-favored Plans"
Caution: Recent IRS regulations may affect the taxation of 403(b) tax deferred
annuity contract exchanges that occur after September 24, 2007.
Certain transactions, often called "Revenue Ruling 90-24" exchanges or
transfers, are a common non-taxable method to exchange one tax deferred
annuity contract for another. The IRS has issued regulations that may impose
restrictions on your ability make such an exchange. The regulations are
generally effective in 2009 but there is great uncertainty about their
application to contract exchanges that take place during the period following
September 24, 2007 and before January 1, 2009 (the "gap period"). Because of
this uncertainty, it is possible that an exchange that takes place during the
gap period may cause you to incur taxation on the value of the contract. But
it is also possible that such an exchange will not have adverse tax
consequences. We have asked the IRS to provide more guidance on this critical
issue. In the meantime, before you request an exchange during the gap period
you should consult with your tax advisor. We began accepting such transfers on
or about November 24, 2008 but 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, starting on or about January 1, 2009 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.
3. The following is added to page 39 or page 36 for Choice 2000 of your
prospectus at the end of the section entitled "Purchasing Your Annuity":
"Beneficiary" Annuity
You may purchase an 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
the 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 non-qualified annuity, for distributions based on lives age 70
or under. This transfer option is not available for purchase of the XT6
Annuity. 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. We will calculate your required distributions based on the applicable
life expectancy in the year of the decedent's death, using Table 1 in IRS
Publication 590. You must take distributions at least annually. 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 your prospectus. For
non-qualified Annuities, distributions must begin within one year of the
decedent's death. For additional information regarding the tax considerations
applicable to beneficiaries of a non-qualified Annuity see "Required
Distributions Upon Your Death for Nonqualified Annuity Contracts" in the Tax
Consideration 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.
42
The Annuity may provide a basic Death Benefit upon death, and you may name a
"successor" 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:
.. 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.
.. 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 Enhanced Dollar Cost Averaging), 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.
4. Under the section of the prospectus (page 57 or page 50 for Choice 2000)
entitled "Guaranteed Return Option Plus", we remove the first paragraph and
the last paragraph under "Key Feature - Allocation of Account Value", and
replace it with the following:
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 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
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 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 Fixed Allocations
will occur. Conversely, if that largest present value is less than the Account
Value less a percentage of the Sub-account value, a transfer out of the Fixed
Allocations will occur.
At any given time, some, none, or all of your Account Value may be allocated
to the Fixed Allocations. With respect to any amounts held within the Fixed
Allocations, we can give no assurance how long the amounts will reside there
or if such amounts will transfer out of the 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 Fixed Allocations. Once the Purchase Payments are allocated to your
Annuity, they will also be subject to the mathematical formula, which may
result in immediate transfers to or from the 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.
The amount that is transferred to and from the Fixed Allocations pursuant to
the mathematical formula depends upon a number of factors unique to your
Annuity (and is not necessarily directly correlated with the securities
markets, bond markets, or interest rates, in general) including:
.. 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);
43
.. The amount invested in, and the performance of, the Sub-accounts;
.. The amount invested in, and interest earned within, the Fixed Allocations;
.. The current crediting rates associated with 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 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 Fixed Allocations.
You may not allocate purchase payments to or transfer Account Value to or from
the Fixed Allocations.
You should be aware of the following potential ramifications of the
reallocation mechanism:
.. 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 Fixed Allocations. The greater the Account Value held in 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 any guarantees under GRO Plus that
have already been locked-in.
The Asset Transfer Formula is set forth below.
Asset Transfer Formula Under the Guaranteed Return Option Plus benefit
We set out below the current formula under which we may transfer amounts
between the Sub-accounts and the Fixed Allocations. We will not alter the
asset transfer formula.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. AV is the current Account Value of the Annuity (including any Market
Value Adjustment on Fixed Allocations)
. V is the current Account Value of the elected Sub-accounts of the Annuity
. F is the current Account Value of the Fixed Allocations
For each guarantee provided under the program,
.. G\\i\\ is the Principal Value of the guarantee
.. t\\i\\ is the number of whole and partial years until the maturity date of
the guarantee.
.. r\\i\\ is the current fixed rate associated with Fixed Allocations of
length t\\i\\ (t\\i\\ is rounded to the next highest integer to determine
this rate).
The formula determines, on each Valuation Day, when a transfer is required.
The formula begins by determining for each guarantee the value (L\\i\\) that,
if appreciated at the current fixed rate, would equal the Principal Value on
the applicable maturity date. We call the greatest of these values the
"current liability (L)."
L = MAX (L\\i\\), where L\\i\\ = G\\i\\ / (1 + r\\i\\)/ti/
Next, the formula determines whether or not a transfer to or from the Fixed
Allocations is needed:
A transfer into the Fixed Allocations will occur if L (greater than) (AV -
0.2 * V), and V (greater than) 0.
The transfer amount is calculated by the following formula:
T = MIN(V, (V - (1 / 0.23) * (AV - L))
44
A transfer from the Fixed Allocations to the Sub-accounts will occur if L
(less than) (AV - 0.26 * V), and F (greater than) 0.
The transfer amount is calculated by the following formula:
T = MIN(F, ((1 / 0.23) * (AV - L) - V)
5. Under the section of the prospectus (page 60 or page 54 for Choice 2000)
entitled "Guaranteed Return Option" , we remove the first paragraph and the
last paragraph under "Key Feature - Allocation of Account Value", and replace
it with the following:
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
Fixed Allocations, the Protected Principal Value, the expected value of the
Fixed Allocations used to support the guarantee, the time remaining until
maturity, and the current crediting rates associated with the Fixed
Allocations. In essence, and as detailed in the formula, the formula will
transfer Account Value into the Fixed Allocations if needed to support an
anticipated guarantee.
Each Valuation Day, the formula determines if any portion of your Account
Value needs to be transferred into or out of the 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 Fixed Allocations. If your
entire Account Value is transferred to the Fixed Allocations, the formula will
not transfer amounts out of the Fixed Allocations to the Sub-accounts and the
entire Account Value would remain in the 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 Fixed Allocations. Once the Purchase Payments are allocated to your
Annuity, they will also be subject to the mathematical formula, which may
result in immediate transfers to or from the 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.
The amount that is transferred to and from the Fixed Allocations pursuant to
the mathematical formula depends upon a number of factors unique to your
Annuity (and is not necessarily directly correlated with the securities
markets, bond markets, or interest rates, in general) including:
.. 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 Fixed Allocations;
.. The current crediting rates associated with 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 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.
You may not allocate purchase payments to or transfer Account Value to or from
the Fixed Allocations.
You should be aware of the following potential ramifications of the allocation
mechanism:
.. 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 in the Fixed
Allocations. The greater the Account Value held in Fixed Allocations, the
larger (in dollar terms) the Market may be maintained Value Adjustment upon
any transfer of such Account Value to the Sub-accounts.
Transfers under the formula do not impact your guarantees under GRO that have
already been locked-in.
The Asset Transfer formula is set forth below.
Asset Transfer Formula Under the Guaranteed Return Option benefit
We set out below the current formula under which we may transfer amounts
between the Sub-accounts and the Fixed Allocations. We will not alter the
asset transfer formula.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. AV is the current Account Value of the Annuity (including any Market
Value Adjustment on Fixed Allocations)
. V is the current Account Value of the elected Sub-accounts of the Annuity
45
. F is the current Account Value of the Fixed Allocations
. G is the Principal Value of the guarantee
. t is the number of whole and partial years between the current Valuation
Day and the maturity date.
. t\\1\\ is the number of whole and partial years between the next
Valuation Day (i.e., the Valuation Day immediately following the current
Valuation Day) and the maturity date.
. r is the fixed rate associated with Fixed Allocations of length t
(t\\1\\ is rounded to the next highest whole number to determine this
rate) as of the current Valuation Day.
. r\\1\\ is the fixed rate associated with Fixed Allocations of length
t\\1\\ (t\\1\\ is rounded to the next highest whole number to determine
this rate) as of the next Valuation Day.
. M is the total maturity value of all Fixed Allocations, i.e., the total
value that the Fixed Allocations will have on the maturity date of the
guarantee if no subsequent transactions occur.
The formula determines, on each Valuation Day, when a transfer is required.
The formula begins by determining a "cushion", D:
D = 1 - [(G - M) / (1 + r)/t/] / V
Next, the formula determines whether or not a transfer to or from the Fixed
Allocations is needed:
A transfer into the Fixed Allocations will occur if D (less than) 0.20, V
(greater than) 0, and V (greater than) 0.02 * AV.
The transfer amount is calculated by the following formula:
T = MIN(V, (V * (0.75 * (1 + r\\1\\)/ ti/ - G + M) / (0.75 * (1 + r\\1\\)/
ti/ - (1 + r)/t/))
A transfer from the Fixed Allocations to the Sub-accounts will occur if D
(greater than) 0.30 and F (greater than) 0.
The transfer amount is calculated by the following formula:
T = MIN(F, (V * (0.75 * (1 + r\\1\\)/ ti/ - G + M) / ((1 + r)/t/ - 0.75 * (1
+ r\\1\\)/ ti/ ))
6. Under the section of the prospectus (page 63 or page 56 for Choice 2000)
entitled "Guaranteed Return Option Plus 2008" and the section (page 66 or page
59 for Choice 2000) entitled "Highest Daily GRO", we add the following to the
end of the sub-section entitled "Key Feature - Allocation of Account Value":
Each of Highest Daily Guaranteed Return Option (HD GRO) and Guaranteed Return
Option Plus 2008 (GRO Plus 2008) uses a pre-determined mathematical formula to
help manage your guarantees through all market cycles. 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 mathematical formula, which may result in
immediate transfers to or from the Bond Portfolios, 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.
The amount that is transferred to and from the Bond Portfolios pursuant to the
mathematical formula depends upon a number of factors unique to your Annuity
(and is not necessarily directly correlated with the securities markets, bond
markets, or interest rates, in general) including:
.. 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.
46
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.
7. We replace the section of the prospectus (page 90 or page 83 for Choice
2000) entitled "Asset Transfer Component of Highest Daily Lifetime Five" with
the following:
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer 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"). 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 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 asset transfer 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 a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to the prospectus). Speaking generally, the formula,
which we apply each 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 Highest Daily Annual Income
Amount (and thus your Target Value) would take into account any automatic
step-up that was scheduled to occur according to the step-up formula described
above. Next, the formula subtracts from the Target Value the amount held
within the Benefit Fixed Rate Account on that day, and divides that difference
by the amount held within the Permitted Sub-accounts. That ratio, which
essentially isolates the amount of your Target Value that is not offset by
amounts held within the Benefit Fixed Rate Account, is called the "Target
Ratio" or "r". If the Target Ratio exceeds a certain percentage (currently
83%) it means essentially that not enough Target Value is 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 elect the new asset transfer formula calculation
offered in this supplement, see the discussion above regarding the 90% cap
rule.
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
you elect Highest Daily Lifetime Five, the ratios we use will be fixed. For
newly issued annuities that elect Highest Daily Lifetime Five and existing
annuities that elect Highest Daily Lifetime Five, however, we reserve the
right to change the ratios.
While you are not notified when your 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 Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
47
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the Benefit
Fixed Rate Account; or
.. If a portion of your 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 mathematical 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 transfers will vary, as dictated by the
formula, and will depend on the factors listed below.
The amount that is transferred to and from the Benefit Fixed Rate Account
pursuant to the mathematical formula depends upon a number of factors unique
to your Annuity (and is not necessarily directly correlated with the
securities markets, bond markets, or interest rates, in general) including:
.. How long you have owned Highest Daily Lifetime Five;
.. The performance of the Permitted Sub-accounts you have chosen;
.. The performance of the Benefit Fixed Rate Account (i.e., the amount of
interest credited to the Benefit Fixed Rate Account);
.. The amount allocated to each of the Permitted Sub-accounts you have chosen;
.. The amount allocated to the Benefit Fixed Rate Account;
.. Additional Purchase Payments, if any, you make to your Annuity;
.. Withdrawals, if any, you take from your Annuity (withdrawals are taken pro
rata from your Account Value).
Any Account Value in the Benefit Fixed Rate Account will not be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a recovery until it is moved out of the Benefit Fixed Rate Account.
The more of your Account Value allocated to the Benefit Fixed Rate Account
under the formula, the greater the impact of the performance of the Benefit
Fixed Rate Account in determining whether (and how much) of your Account Value
is transferred back to the Permitted Sub-accounts. Further, it is possible
under the formula, that if a significant portion your Account Value is
allocated to the Benefit Fixed Rate Account and that Account has good
performance but the performance of your Permitted Sub-accounts is negative,
that the formula might transfer your Account Value to the Permitted
Sub-accounts. Thus, the converse is true too (the more you have allocated to
the Permitted Sub-accounts, the greater the impact of the performance of those
Sub-accounts will have on any transfer to the Benefit Fixed Rate Account).
8. We replace the sections of the prospectus (page 97 or page 90 for Choice
2000) entitled "Asset Transfer Component of Highest Daily Lifetime Seven" and
"Asset Transfer Component of Spousal Highest Daily Lifetime Seven" (as
applicable) with the following:
Asset Transfer Component of Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven. For purposes of the benefit, we refer to those permitted
Sub-accounts as the "Permitted Sub-accounts". As a requirement of
participating in Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer 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
mathematical formula, discussed below. The AST Investment Grade Bond
Sub-account is available only with this benefit, and you may not allocate
Purchase Payments to or transfer Account Value to or from the AST Investment
Grade Bond Sub-account. Under the asset transfer component of Highest Daily
Lifetime Seven/Spousal Highest Daily Lifetime Seven, we monitor your 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 the Appendices to the prospectus.
48
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 not enough Target Value is 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
asset transfer formula calculation offered in this supplement, see the
discussion above 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 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/Spousal Highest Daily Lifetime Seven, the ratios we use will be fixed.
For newly-issued Annuities that elect Highest Daily Lifetime Seven/Spousal
Highest Daily Lifetime Seven and existing Annuities that elect Highest Daily
Lifetime Seven/Spousal Highest Daily Lifetime Seven, however, we reserve the
right to change the ratios.
While you are not notified when your 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/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 mathematical 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 (and in
some instances, the transfers could be large), as dictated by the formula, and
will depend on the factors listed below.
The amount that is transferred to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to your Annuity (and is not necessarily directly correlated
with the securities markets, bond markets, or interest rates, in general)
including:
.. How long you have owned Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven;
.. The performance of the Permitted Sub-accounts you have chosen;
.. The performance of the AST Investment Grade Bond Sub-account;
.. The amount allocated to each of the Permitted Sub-accounts you have chosen;
.. The amount allocated to the AST Investment Grade Bond Sub-account;
.. Additional Purchase Payments, if any, you make to your Annuity;
.. Withdrawals, if any, you take from your Annuity (withdrawals are taken pro
rata from your Account Value).
49
Any Account Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts if there is a recovery until it is moved out of the AST
Investment Grade Bond Sub-account.
The more of your Account Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of
that Sub-account in determining whether (and how much) of your Account Value
is transferred back to the Permitted Sub-accounts. Further, it is possible
under the formula, that if a significant portion your Account Value is
allocated to the AST Investment Grade Bond Sub-account and that Sub-account
has good performance but the performance of your Permitted Sub-accounts is
negative, that the formula might transfer your Account Value to the Permitted
Sub-accounts. Thus, the converse is true too (the more you have allocated to
the Permitted Sub-accounts, the greater the impact of the performance of those
Sub-accounts will have on any transfer to the AST Investment Grade Bond
Sub-account).
50
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR PLAN III ("ASAP III")
ADVANCED SERIES APEX II ("APEX II")
ADVANCED SERIES LIFEVEST II ("ASL II")
ADVANCED SERIES XTRA CREDIT SIX ("XT6")
ADVANCED SERIES ADVISORS CHOICE(R)2000 ("CHOICE 2000")
(marketed by some firms as "Advisors Select 2000")
Supplement dated January 20, 2009
To
Prospectuses dated May 1, 2008, as Supplemented
This Supplement should be read and retained with the current Prospectus for
your annuity. This Supplement is intended to update certain information in the
Prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own. If you would like another copy of the current Prospectus, please contact
us at 1-800-752-6342.
As detailed below, this supplement announces changes to your ability to cancel
certain optional living benefits and either re-elect the same benefit or elect
another living benefit.
WHEN CONSIDERING CANCELLATION OF AN EXISTING OPTIONAL LIVING BENEFIT WITH OR
WITHOUT THE RE-ELECTION OF THE SAME BENEFIT OR ELECTION OF A NEW OPTIONAL
LIVING BENEFIT, PLEASE REVIEW THE PROSPECTUS FOR COMPLETE DETAILS AND SPEAK TO
YOUR FINANCIAL PROFESSIONAL. AMONG OTHER THINGS, THE NEW BENEFIT MAY BE MORE
EXPENSIVE THAN YOUR EXISTING BENEFIT.
A. GRO Plus 2008 - Elections of Highest Daily GRO and GRO Plus 2008. Under the
section of the prospectus entitled "Guaranteed Return Option Plus 2008", we
add the following as the last paragraph under the sub-section entitled
"Election/Cancellation of the Program":
If you wish, you may cancel the GRO Plus 2008 benefit. You may then elect
either GRO Plus 2008 or Highest Daily GRO (or any other currently available
living benefit) on the 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
cancellation of the GRO Plus 2008 benefit, any Account Value allocated to the
AST Bond Portfolio Sub-accounts used with the asset transfer formula will be
reallocated to the Permitted Sub-Accounts according to your most recent
allocation instructions or, in absence of such instructions, pro-rata. Upon
your re-election of GRO Plus 2008 or election of Highest Daily GRO, Account
Value may be transferred between the AST Bond Portfolio Sub-accounts and the
Permitted Sub-accounts according to the formula (see "Key Feature--Allocation
of Account Value" section for more details). It is possible that over time the
formula could transfer some, all, 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 termination 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.
Once the GRO Plus 2008 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
2008 benefit provided that the benefit you are looking to elect is available on
a post- issue basis.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
B. Highest Daily GRO - Elections of GRO Plus 2008 and Highest Daily GRO. Under
the section of the prospectus entitled "Highest Daily Guaranteed Return
Option", we add the following as the last paragraph under the sub-section
entitled "Election/Cancellation of the Program":
If you wish, you may cancel the Highest Daily GRO benefit. You may then elect
either GRO Plus 2008 or Highest Daily GRO (or any other currently available
living benefit) on the 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 the Highest Daily GRO benefit, any Account Value allocated to
the AST Bond Portfolio Sub-accounts used with the asset transfer formula will
be reallocated to the Permitted Sub-Accounts according to your most recent
allocation instructions or, in absence of such instructions, pro-rata. Upon
your re-election of GRO Plus 2008 or Highest Daily GRO, Account Value may be
transferred between the AST Bond Portfolio Sub-accounts and the other
Sub-accounts according to the formula (see "Key Feature--Allocation of Account
Value" section for more details). It is possible that over time the formula
could transfer some, all, 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 termination 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.
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.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
C. Lifetime Five - Elections of any Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven benefit. Under the section of the prospectus
entitled "Lifetime Five Income Benefit", we replace the sub-section
entitled "Election of the Program" with the following:
We no longer permit elections of Lifetime Five -- whether for those who
currently participate in Lifetime Five or for those who are buying an Annuity
for the first time. If you wish, you may cancel the Lifetime Five benefit. You
may then elect Highest Daily Lifetime Seven, Highest Daily Lifetime Seven with
Beneficiary Income Option, Highest Daily Lifetime Seven with Lifetime Income
Accelerator, Spousal Highest Daily Lifetime Seven, or Spousal Highest Daily
Lifetime Seven with Beneficiary Income Option (or any other currently 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). Upon your
election of any Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime
Seven benefit, Account Value may be transferred between the AST Investment
Grade Bond Portfolio Sub-account and the other Sub-accounts according to the
formula (See "Asset Transfer Component of Highest Daily Lifetime Seven/ Spousal
Highest Daily Lifetime Seven" section for more details). It is possible that
over time the formula could transfer some, all, or none of the Account Value to
the AST Investment Grade Bond Portfolio Sub-account under the newly-elected
benefit. You should be aware that upon termination of the Lifetime Five
benefit, you will lose the Protected Withdrawal Value, Annual Income Amount,
and Annual Withdrawal Amount that you had accumulated under the benefit. Thus,
the initial guarantees under any newly-elected benefit will be based on your
current Account Value. Finally, please note that the fee for all Highest Daily
Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits is a
percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal Value
is larger than Account Value, the fee will be greater than it would have been
had it been based on Account Value. Once the Lifetime Five benefit is canceled
you are not required to re-elect another optional living benefit and any
subsequent benefit election may be made on or after the first 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.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
D. Spousal Lifetime Five - Elections of any Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven benefit. Under the section of the
prospectus entitled "Spousal Lifetime Five Income Benefit", we replace the
sub-section entitled "Election of and Designation under the Program" with
the following:
We no longer permit elections of Spousal Lifetime Five -- whether for those who
currently participate in Spousal Lifetime Five or for those who are buying an
Annuity for the first time. If you wish, you may cancel the Spousal Lifetime
Five benefit. You may then elect Highest Daily Lifetime Seven, Highest Daily
Lifetime Seven with Beneficiary Income Option, Highest Daily Lifetime Seven
with Lifetime Income Accelerator, Spousal Highest Daily Lifetime Seven, or
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option (or any
other currently 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). Upon your election of any Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven benefit, Account Value may be transferred
between the AST Investment Grade Bond Portfolio Sub-account and the other
Sub-accounts according to the formula (See "Asset Transfer Component of Highest
Daily Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for more
details). It is possible that over time the formula could transfer some, all,
or none of the Account Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of the Spousal Lifetime Five benefit, you will lose the Protected
Withdrawal Value and Annual Income Amount that you had accumulated under the
benefit. Thus, the initial guarantees under any newly-elected benefit will be
based on your current Account Value. Also note that the fee for all Highest
Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits is a
percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal Value
is larger than Account Value, the fee will be greater than it would have been
had it been based on Account Value. Once the Spousal Lifetime Five benefit is
canceled you are not required to re-elect another optional living benefit and
any subsequent benefit election may be made on or after the first 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.
Please refer to your prospectus for allowable ownership designations for the
benefit you are electing.
E. Highest Daily Lifetime Five - Elections of any Highest Daily Lifetime Seven
or Spousal Highest Daily Lifetime Seven benefit. Under the section of the
prospectus entitled "Highest Daily Lifetime Five", we replace the last
paragraph in the sub-section entitled "Election of and Designation under
the Program" with the following:
We no longer permit elections of Highest Daily Lifetime Five -- whether for
those who currently participate in Highest Daily Lifetime Five or for those who
are buying an Annuity for the first time. If you wish, you may cancel the
Highest Daily Lifetime Five benefit. You may then elect Highest Daily Lifetime
Seven, Highest Daily Lifetime Seven with Beneficiary Income Option, Highest
Daily Lifetime Seven with Lifetime Income Accelerator, Spousal Highest Daily
Lifetime Seven, or Spousal Highest Daily Lifetime Seven with Beneficiary Income
Option (or any other currently 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 asset transfer formula will be reallocated to the Permitted
Sub-Accounts according to your most recent allocation instructions or, in
absence of such instructions, pro-rata. Upon your election of any Highest Daily
Lifetime Seven or Spousal Highest Daily Lifetime Seven benefit, Account Value
may be transferred between the AST Investment Grade Bond Portfolio Sub-account
and the other Sub-accounts according to the formula (See "Asset Transfer
Component of Highest Daily Lifetime Seven/ Spousal Highest Daily Lifetime
Seven" section for more details). It is possible that over time the formula
could transfer some, all or none of the Account Value to the AST Investment
Grade Bond Portfolio Sub-account under the newly-elected benefit. You should be
aware that upon termination of the Highest Daily Lifetime Five benefit, you
will lose the Protected Withdrawal Value and Annual Income Amount that you had
accumulated under the benefit, as well as any Enhanced Protected Withdrawal
Value and Return of Principal Guarantees (if no withdrawals have been taken) .
Thus, the initial guarantees under any newly-elected benefit will be based on
your current Account Value. Finally, please note that the fee for all Highest
Daily Lifetime Seven and Spousal Highest Daily Lifetime Seven benefits is a
percentage of Protected Withdrawal Value. Thus, if Protected Withdrawal Value
is larger than Account Value, the fee will be greater than it would have been
had it been based on Account Value. Once the Highest Daily Lifetime Five
benefit is canceled you are not required to re-elect another optional living
benefit and any subsequent benefit election may be made on or after the first
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.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
F. Highest Daily Lifetime Seven (including Highest Daily Lifetime Seven with
Beneficiary Income Option and Highest Daily Lifetime Seven with Lifetime
Income Accelerator) -- Elections of any Highest Daily Lifetime Seven or
Spousal Highest Daily Lifetime Seven benefit. Under the section of the
prospectus entitled "Highest Daily Lifetime Seven", we replace the last
paragraph in the sub-section entitled "Election of and Designations under
the Program" with the following:
If you wish, you may cancel any Highest Daily Lifetime Seven benefit. You may
then re-elect Highest Daily Lifetime Seven, Highest Daily Lifetime Seven with
Beneficiary Income Option, Highest Daily Lifetime Seven with Lifetime Income
Accelerator, Spousal Highest Daily Lifetime Seven, or Spousal Highest Daily
Lifetime Seven with Beneficiary Income Option (or any other currently 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 asset transfer
formula will be reallocated to the Permitted Sub-Accounts according to your
most recent allocation instructions or, in absence of such instructions,
pro-rata. Upon your election of any Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven benefit, Account Value may be transferred between
the AST Investment Grade Bond Portfolio Sub-account and the other Sub-accounts
according to the formula (See "Asset Transfer Component of Highest Daily
Lifetime Seven/ Spousal Highest Daily Lifetime Seven" section for more
details). It is possible that over time the formula could transfer some, all or
none of the Account Value to the AST Investment Grade Bond Portfolio
Sub-account under the newly-elected benefit. You should be aware that upon
termination of Highest Daily Lifetime Seven, you will lose the Protected
Withdrawal Value (including the Tenth Anniversary Date Guarantee), Annual
Income Amount, and the Return of Principal Guarantee that you had accumulated
under the benefit. Thus, the initial guarantees under any newly-elected benefit
will be based on your current Account Value. Once the Highest Daily Lifetime
Seven benefit is canceled you are not required to re-elect another optional
living benefit and any subsequent benefit election may be made on or after the
first 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.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
G. Spousal Highest Daily Lifetime Seven (including Spousal Highest Daily
Lifetime Seven with Beneficiary Income Option) -- Elections of any Highest
Daily Lifetime Seven or Spousal Highest Daily Lifetime Seven benefit. Under
the section of the prospectus entitled "Spousal Highest Daily Lifetime
Seven", we replace the last paragraph in the sub-section entitled "Election
of and Designations under the Program" with the following:
If you wish, you may cancel any Spousal Highest Daily Lifetime Seven benefit.
You may then re-elect Spousal Highest Daily Lifetime Seven, Spousal Highest
Daily Lifetime Seven with Beneficiary Income Option, Highest Daily Lifetime
Seven, Highest Daily Lifetime Seven with Beneficiary Income Option, or Highest
Daily Lifetime Seven with Lifetime Income Accelerator (or any other currently
available living benefit) on the 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 asset transfer formula will be reallocated to the
Permitted Sub-Accounts according to your most recent allocation instruction or
in absence of such instruction, pro-rata. Upon your election of any Highest
Daily Lifetime Seven or Spousal Highest Daily Lifetime Seven benefit, Account
Value may be transferred between the AST Investment Grade Bond Portfolio
Sub-account and the other Sub-accounts according to the formula (See "Asset
Transfer Component of Highest Daily Lifetime Seven/ Spousal Highest Daily
Lifetime Seven" section for more details). It is possible that over time the
formula could transfer some, all or, none of the Account Value to the AST Bond
Portfolio Sub-accounts under the newly-elected benefit. You should be aware
that upon termination of Spousal Highest Daily Lifetime Seven, you will lose
the Protected Withdrawal Value (including the Tenth Anniversary Date
Guarantee), Annual Income Amount, and the Return of Principal Guarantee that
you had accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Account Value. Once the
Spousal Highest Daily Lifetime Seven benefit is canceled you are not required
to re-elect another optional living benefit and any subsequent benefit election
may be made on or after the first 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.
Please refer to your prospectus for allowable ownership designations under the
benefit you are electing.
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR PLAN III (SM)
ADVANCED SERIES APEX II (SM)
ADVANCED SERIES XTRA CREDIT SIX (SM)
ADVANCED SERIES LIFEVEST II (SM)
ADVANCED SERIES ADVISORS CHOICE(R)2000
(marketed by some firms as "Advisors Select 2000")
Supplement, dated November 24, 2008
To
Prospectuses, dated May 1, 2008
This Supplement should be read and retained with the current Prospectus for your
annuity. This Supplement is intended to update certain information in the
Prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own. If you would like another copy of the current Prospectus, please contact us
at 1-800-752-6342.
A. Effective November 24, 2008, two additional sub-advisors are being added to
AST Academic Strategies Asset Allocation Portfolio. Accordingly, in the section
entitled "What Investment Options Can I Choose?", we add the sub-advisors
referenced below to the column entitled "Portfolio Advisor/Sub-Advisor."
First Quadrant L.P. (First Quadrant) and AlphaSimplex Group, LLC (AlphaSimplex)
are being added as additional sub-advisors to AST Academic Strategies Asset
Allocation Portfolio. The expenses and investment objectives/policies do not
change as a result of the addition of the new sub-advisors.
B. Effective on or about December 15, 2008, Eaton Vance LLC will replace J.P.
Morgan Investment Management, Inc. as sub-advisor for AST Large-Cap Value
Portfolio.
C. Effective January 1, 2009, the underlying portfolios listed below are being
offered as new Sub-accounts under your annuity. In order to reflect these
additions:
In the section of each Prospectus entitled "Summary of Contract Expenses",
sub-section "Underlying Portfolio Annual Expenses", under the heading "Advanced
Series Trust", the following portfolios have been added:
UNDERLYING PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
Acquired Total Annual
Management Other 12b-1 Portfolio Fees Portfolio Operating
UNDERLYING PORTFOLIO Fees Expenses Fees & Expenses Expenses*
- ----------------------- ---------- -------- ----- -------------- -------------------
Advanced Series Trust:
AST Bond Portfolio 2016 0.65%* 1.02%** 0.00% 0.00% 1.67%****
AST Bond Portfolio 2020 0.65%* 1.02%*** 0.00% 0.00% 1.67%****
* The contractual investment management fee rate is subject to certain
breakpoints. In the event the combined average daily net assets of the AST
Bond Portfolio 2016, the AST Bond Portfolio 2020, the AST Bond Portfolio
2015, the AST Bond Portfolio 2018, the AST Bond Portfolio 2019, and the AST
Investment Grade Bond Portfolio do not exceed $500 million, each
Portfolio's investment management fee rate will equal 0.65% of its average
daily net assets. In the event the combined average daily net assets of
these Portfolios exceed $500 million, the portion of a Portfolio's assets
to which the investment management fee rate of 0.65% applies and the
portion of a Portfolio's assets to which the investment management fee rate
of 0.64% applies will be determined on a pro rata basis.
** Estimates based on an assumed average daily net asset level of $10 million
for the AST Bond Portfolio 2016 during the fiscal year ending December 31,
2008. As used in connection with the AST Bond Portfolio 2016, "other
expenses" includes expenses for accounting and valuation services,
custodian fees, audit and legal fees, transfer agency fees, fees paid to
non-interested Trustees, and certain other miscellaneous items. Advanced
Series Trust (the
Trust) has also entered into arrangements with the issuers of the variable
insurance products offering the AST Bond Portfolio 2016 under which the Trust
currently compensates such issuers for providing ongoing services to Portfolio
shareholders (e.g., the printing and mailing of Trust prospectuses and
shareholder reports) in lieu of the Trust providing such services directly to
shareholders. The contractual administrative services fee is 0.10% of the AST
Bond Portfolio 2016 's average daily net assets, subject to certain voluntary
asset-based breakpoints.
*** Estimates based on an assumed average daily net asset level of $10 million
for the AST Bond Portfolio 2020 during the fiscal year ending December 31,
2008. As used in connection with the AST Bond Portfolio 2020, "other
expenses" includes expenses for accounting and valuation services,
custodian fees, audit and legal fees, transfer agency fees, fees paid to
non-interested Trustees, and certain other miscellaneous items. Advanced
Series Trust (the Trust) has also entered into arrangements with the
issuers of the variable insurance products offering the AST Bond Portfolio
2020 under which the Trust currently compensates such issuers for providing
ongoing services to Portfolio shareholders (e.g., the printing and mailing
of Trust prospectuses and shareholder reports) in lieu of the Trust
providing such services directly to shareholders. The contractual
administrative services fee is 0.10% of the AST Bond Portfolio 2020 's
average daily net assets, subject to certain voluntary asset-based
breakpoints.
**** Estimated in part. The Investment Managers have voluntarily agreed to waive
a portion of their investment management fees and/or reimburse certain
expenses for the AST Bond Portfolio 2016 and the AST Bond Portfolio 2020 so
that the Portfolio's investment management fees plus other expenses
(exclusive in all cases of taxes, interest, brokerage commissions,
distribution fees, and extraordinary expenses) do not exceed 1.00% of the
Portfolio's average daily net assets for the fiscal year ending December
31, 2008. These arrangements are voluntary and may be discontinued or
otherwise modified by the Investment Managers at any time without prior
notice. The following is being added to the chart in each Prospectus in the
section entitled "Investment Options":
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- ------------ ----------------------------------------------------------------- ---------------------
AST FUNDS
Fixed Income AST Bond Portfolio 2016: seeks the highest potential total return Prudential Investment
consistent with its specified level of risk tolerance to meet the Management, Inc.
parameters established to support the GRO benefits and maintain
liquidity to support changes in market conditions for a fixed
maturity of 2016. Please note that you may not make purchase
payments to this Portfolio, and that this Portfolio is available
only with certain living benefits.
Fixed Income AST Bond Portfolio 2020: seeks the highest potential total return Prudential Investment
consistent with its specified level of risk tolerance to meet the Management, Inc.
parameters established to support the GRO benefits and maintain
liquidity to support changes in market conditions for a fixed
maturity of 2020. Please note that you may not make purchase
payments to this Portfolio, and that this Portfolio is available
only with certain living benefits.
D. Closing of Lifetime Five and Spousal Lifetime Five. Lifetime Five Income
Benefit and Spousal Lifetime Five Income Benefit (the "Benefits" and each, a
"Benefit") are described in the section of the prospectus entitled "Living
Benefit Programs". Effective December 8, 2008, we will cease offering the
Benefits, for both new Annuity sales and in-force elections. If you currently
participate in either Benefit, this closing does not affect you or the
guarantees associated with your Benefit. However, subsequent to the closure, you
will no longer be allowed to re-elect either Benefit if you decide to terminate
a Benefit. Other Living Benefit programs may be available, subject to our
election rules. Please refer to your prospectus for further details.
E. GRO Plus - Allocation of Account Value. Under the section of the prospectus
entitled "Guaranteed Return Option Plus", we remove the first paragraph and the
last paragraph under "Key Feature - Allocation of Account Value", and replace it
with the following:
GRO Plus uses a mathematical formula that we operate in our sole discretion to
help manage your guarantees through all market cycles. We reserve the right to
change the mathematical formula at our sole discretion, subject to regulatory
approval if required. We also reserve the right to change the mathematical
formula with respect to existing programs, where allowed by law. Each Valuation
Day, the formula determines if any portion of your Account Value needs to be
transferred into or out of the 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 Fixed Allocations.
2
With respect to any amounts held within the Fixed Allocations, we can give no
assurance how long the amounts will reside there or if such amounts will
transfer out of the 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 Fixed Allocations. Once the
Purchase Payments are allocated to your Annuity, they will also be subject to
the mathematical formula, which may result in immediate transfers to or from the
Fixed Allocations, if dictated by the formula.
The amount that is transferred to and from the Fixed Allocations pursuant to the
mathematical formula depends upon a number of factors unique to your Annuity
(and is not necessarily directly correlated with the securities markets, bond
markets, or interest rates, in general) including:
. 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 Fixed
Allocations;
. The current crediting rates associated with 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 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 Fixed Allocations.
You should be aware of the following potential ramifications of the reallocation
mechanism:
. 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, we retain sole discretion under the allocation mechanism
(the mathematical formula) to maintain some, or even all, of your
Account Value in the Fixed Allocations. The greater the Account Value
held in Fixed Allocations, the larger (in dollar terms) the Market
Value Adjustment upon any transfer of such Account Value to the
Sub-accounts.
Transfers do not impact any guarantees that have already been locked-in.
F. GRO - Allocation of Account Value. Under the section of the prospectus
entitled "Guaranteed Return Option ", we remove the first paragraph and the last
paragraph under "Key Feature - Allocation of Account Value", and replace it with
the following:
GRO uses a mathematical formula that we operate in our sole discretion to help
manage your guarantees through all market cycles. We reserve the right to change
the mathematical formula at our sole discretion, subject to regulatory approval
if required. We also reserve the right to change the mathematical formula with
respect to existing programs, where allowed by law. Each Valuation Day, the
formula determines if any portion of your Account Value needs to be transferred
into or out of the 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 Fixed Allocations. If your entire Account Value is transferred
to the Fixed Allocations, the formula will not transfer amounts out of the Fixed
Allocations to the Sub-accounts and the entire Account Value would remain in the
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 Fixed Allocations. Once the Purchase Payments
are allocated to your Annuity, they will also be subject to the mathematical
formula, which may result in immediate transfers to or from the Fixed
Allocations, if dictated by the formula.
3
The amount that is transferred to and from the Fixed Allocations pursuant to the
mathematical formula depends upon a number of factors unique to your Annuity
(and is not necessarily directly correlated with the securities markets, bond
markets, or interest rates, in general) including:
. 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 Fixed
Allocations;
. The current crediting rates associated with 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 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 Fixed Allocation.
You should be aware of the following potential ramifications of the allocation
mechanism:
. 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, we retain sole discretion under the allocation mechanism
(the mathematical formula) to maintain some, or even all, of your
Account Value in the Fixed Allocations. The greater the Account Value
held in Fixed Allocations, the larger (in dollar terms) the Market
Value Adjustment upon any transfer of such Account Value to the
Sub-accounts.
Transfers do not impact your guarantees that have already been locked-in.
G. GRO Plus 2008 and HD GRO - Allocation of Account Value. Under the section of
the prospectus entitled "Guaranteed Return Option Plus 2008" and the section
entitled " Highest Daily GRO", we add the following to the end of the
sub-section entitled "Key Feature - Allocation of Account Value":
Each of Highest Daily Guaranteed Return Option (HD GRO) and Guaranteed Return
Option Plus 2008 (GRO Plus 2008) uses a pre-determined mathematical formula to
help manage your guarantees through all market cycles. 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 mathematical formula, which
may result in immediate transfers to or from the Bond Portfolios, if dictated by
the formula.
The amount that is transferred to and from the Bond Portfolios pursuant to the
mathematical formula depends upon a number of factors unique to your Annuity
(and is not necessarily directly correlated with the securities markets, bond
markets, or interest rates, in general) including:
. 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;
4
. 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.
Transfers do not impact any guarantees that have already been locked-in.
H. Asset Transfer Component of HD5 - Allocation of Account Value. We replace the
section of the prospectus entitled "Asset Transfer Component of Highest Daily
Lifetime Five" with the following:
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime Five. For purposes of this benefit, we
refer to those permitted sub-accounts as the "Permitted Sub-accounts". As a
requirement of participating in Highest Daily Lifetime Five, we require that you
participate in our specialized asset transfer program, under which we may
transfer 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"). We determine whether to make a transfer, and the amount of any
transfer, under a non-discretionary formula, discussed below. The Benefit Fixed
Rate Account is available only with this benefit, and thus you may not allocate
Purchase Payments to the Benefit Fixed Rate Account. The interest rate that we
pay with respect to the Benefit Fixed Rate Account is reduced by an amount that
corresponds generally to the charge that we assess against your variable
Sub-accounts for Highest Daily Lifetime Five. The Benefit Fixed Rate Account is
not subject to the Investment Company Act of 1940 or the Securities Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your 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 a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to the prospectus). Speaking generally, the formula,
which we apply each 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 Highest Daily Annual Income
Amount (and thus your Target Value) would take into account any automatic
step-up that was scheduled to occur according to the step-up formula described
above. Next, the formula subtracts from the Target Value the amount held within
the Benefit Fixed Rate Account on that day, and divides that difference by the
amount held within the Permitted Sub-accounts. That ratio, which essentially
isolates the amount of your Target Value that is not offset by amounts held
within the Benefit Fixed Rate Account, is called the "Target Ratio" or "r". If
the Target Ratio exceeds a certain percentage (currently 83%) it means
essentially that too much Target Value is not offset by assets within the
Benefit Fixed Rate Account, and therefore we will transfer an amount from your
Permitted Sub-accounts to the Benefit Fixed Rate Account. Conversely, if the
Target Ratio falls below a certain percentage (currently 77%), then a transfer
from the Benefit Fixed Rate Account to the Permitted Sub-accounts would occur.
Note that the formula is calculated with reference to the Highest Daily Annual
Income Amount, rather than with reference to the Annual Income Amount.
As you can glean from the formula, poor investment performance of your 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 you elect
Highest Daily Lifetime Five, the ratios we use will be fixed. For
5
newly issued annuities that elect Highest Daily Lifetime Five and existing
annuities that elect Highest Daily Lifetime Five, however, we reserve the right
to change the ratios.
While you are not notified when your 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 Benefit Fixed Rate Account. The formula
by which the reallocation triggers operate is designed primarily to mitigate the
financial risks that we incur in providing the guarantee under Highest Daily
Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer between the Permitted Sub-accounts and the
Benefit Fixed Rate Account; or
. If a portion of your 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.
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
mathematical formula, which may result in immediate transfers to or from the
Benefit Fixed Rate Account, if dictated by the formula.
The amount that is transferred to and from the Benefit Fixed Rate Account
pursuant to the mathematical formula depends upon a number of factors unique to
your Annuity (and is not necessarily directly correlated with the securities
markets, bond markets, or interest rates, in general) including:
. How long you have owned Highest Daily Lifetime Five;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the Benefit Fixed Rate Account (i.e., the amount of
interest credited to the Benefit Fixed Rate Account);
. The amount you have allocated to each of the Permitted Sub-accounts
you have chosen;
. The amount you have allocated to the Benefit Fixed Rate Account;
. Additional Purchase Payments, if any, you make to your Annuity;
. Withdrawals, if any, you take from your Annuity (withdrawals are taken
pro rata from your Account Value).
Any Account Value in the Benefit Fixed Rate Account will not be available to
participate in the investment experience of the Permitted Sub-accounts if there
is a recovery until it is moved out of the Benefit Fixed Rate Account.
The more of your Account Value allocated to the Benefit Fixed Rate Account under
the formula, the greater the impact of the performance of the Benefit Fixed Rate
Account in determining whether (and how much) of your Account Value is
transferred back to the Permitted Sub-accounts. Further, it is possible under
the formula, that if a significant portion your Account Value is allocated to
the Benefit Fixed Rate Account and that Account has good performance but the
performance of your Permitted Sub-accounts is negative, that the formula might
transfer your Account Value to the Permitted Sub-accounts. Thus, the converse is
true too (the more you have allocated to the
6
Permitted Sub-accounts, the greater the impact of the performance of those
Sub-accounts will have on any transfer to the Benefit Fixed Rate Account).
I. Asset Transfer Component of HD7 and SHD7 - Allocation of Account Value. We
replace the sections of the prospectus entitled "Asset Transfer Component of
Highest Daily Lifetime Seven" and "Asset Transfer Component of Spousal Highest
Daily Lifetime Seven" (as applicable) with the following:
Asset Transfer Component of Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime
Seven. For purposes of the benefit, we refer to those permitted Sub-accounts as
the "Permitted Sub-accounts". As a requirement of participating in Highest Daily
Lifetime Seven/Spousal Highest Daily Lifetime Seven, we require that you
participate in our specialized asset transfer program, under which we may
transfer 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 mathematical formula, discussed below. The
AST Investment Grade Bond Sub-account is available only with this benefit, and
thus you may not allocate Purchase Payments to the AST Investment Grade Bond
Sub-account. Under the asset transfer component of Highest Daily Lifetime
Seven/Spousal Highest Daily Lifetime Seven, we monitor your 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 the Appendices 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.
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/Spousal Highest Daily Lifetime Seven, the
ratios we use will be fixed. For newly-issued Annuities that elect Highest Daily
Lifetime Seven/Spousal Highest Daily Lifetime Seven and existing Annuities that
elect Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven,
however, we reserve the right to change the ratios.
While you are not notified when your 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/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
7
. 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). Amounts taken out of
the AST Investment Grade Bond Sub-account will be withdrawn for this
purpose on a last-in, first-out basis; or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the AST Investment Grade Bond Sub-account.
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 mathematical formula, which may
result in immediate transfers to or from the AST Investment Grade Bond
Sub-accounts, if dictated by the formula.
The amount that is transferred to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to your Annuity (and is not necessarily directly correlated with
the securities markets, bond markets, or interest rates, in general) including:
. How long you have owned Highest Daily Lifetime Seven/Spousal Highest
Daily Lifetime Seven;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the AST Investment Grade Bond Sub-account;
. The amount you have allocated to each of the Permitted Sub-accounts
you have chosen;
. The amount you have allocated to the AST Investment Grade Bond
Sub-account;
. Additional Purchase Payments, if any, you make to your Annuity;
. Withdrawals, if any, you take from your Annuity (withdrawals are taken
pro rata from your Account Value).
Any Account Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts if there is a recovery until it is moved out of the AST Investment
Grade Bond Sub-account.
The more of your Account Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of that
Sub-account in determining whether (and how much) of your Account Value is
transferred back to the Permitted Sub-accounts. Further, it is possible under
the formula, that if a significant portion your Account Value is allocated to
the AST Investment Grade Bond Sub-account and that Sub-account has good
performance but the performance of your Permitted Sub-accounts is negative, that
the formula might transfer your Account Value to the Permitted Sub-accounts.
Thus, the converse is true too (the more you have allocated to the Permitted
Sub-accounts, the greater the impact of the performance of those Sub-accounts
will have on any transfer to the AST Investment Grade Bond Sub-account).
8
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR PLAN III
ADVANCED SERIES APEX II
ADVANCED SERIES XTRA CREDIT SIX
ADVANCED SERIES LIFEVEST II
ADVANCED SERIES ADVISORS CHOICE(R) 2000
(marketed by some firms as "Advisors Select 2000")
Supplement, dated July 21, 2008
To
Prospectus, dated May 1, 2008
This supplement should be read and retained with the prospectus for your
Annuity. If you would like another copy of the prospectus, please call us at
1-888-PRU-2888.
This supplement is being issued to describe enhancements that are being made
to certain optional living benefits available under each of the
above-referenced Annuities. The terms used in this supplement are defined in
the Glossary of Terms in the prospectus. With respect to Highest Daily
Lifetime Seven, we (a) revise the way that certain withdrawals of the Annual
Income Amount are impacted by the Contingent Deferred Sales Charge ("CDSC")
(b) add an optional death benefit, (the "Highest Daily Lifetime Seven with
Beneficiary Income Option") (c) add an optional benefit that increases the
Annual Income Amount if the owner qualifies for increased payments, (the
"Highest Daily Lifetime Seven with Lifetime Income Accelerator") (d) increase
the range of "permitted portfolios" that you may elect if you have chosen the
benefit, with some restrictions and (e) modify the asset transfer formula
under the benefit, to make clear that the Account Value may include amounts
allocated to certain Fixed Rate Options. For Spousal Highest Daily Lifetime
Seven, we (a) revise the way that certain withdrawals of the Annual Income
Amount are impacted by CDSC (b) add an optional death benefit (the "Spousal
Highest Daily Lifetime Seven with Beneficiary Income Option") (c) increase the
range of "permitted portfolios" that you may elect if you have chosen the
benefit, with some restrictions and (d) modify the asset transfer formula
under the benefit, to make clear that the Account Value may include amounts
allocated to certain Fixed Rate Options. The Highest Daily Lifetime Seven with
Beneficiary Income Option and the Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option allow the beneficiary to continue to withdraw the
Annual Income Amount until the Protected Withdrawal Value is depleted. Thus,
the option may be appropriate for an Annuity Owner who wants to provide an
additional death benefit option to his/her beneficiary.
The Highest Daily Lifetime Seven with Lifetime Income Accelerator provides a
benefit under which the Annuity Owner may withdraw double the Annual Income
Amount once he/she meets the benefit's eligibility requirements (e.g., being
confined to a qualified nursing facility or being unable to perform two daily
life activities as defined below). Thus, this benefit may be appropriate for
an Annuity Owner who may meet these requirements at a future date.
Except as otherwise provided here, the description of each optional living
benefit set forth in the May 1, 2008 prospectus remains unchanged.
This supplement also discusses certain changes to the Advanced Series Lifevest
II Annuity ("ASL II"). Specifically, we have removed limitations on the amount
of the basic Death Benefit paid under ASLII when death occurs on or after the
decedent's age 85. We are also adding a restriction that the ASLII Annuity is
only available for purchase up to age 85.
CHANGES TO HIGHEST DAILY LIFETIME SEVEN
A. Addition of Death Benefit (HD Lifetime Seven with Beneficiary Income
Option/SM/)
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
Annuity Owner may opt for a death benefit, the value of which is linked to the
Annual Income Amount under the benefit. As detailed below, a beneficiary
taking the Annuity's death benefit under this feature is paid the Annual
Income Amount until the Protected Withdrawal Value is depleted. (Note that the
final payment, exhausting the Protected Withdrawal Value, may be less than the
Annual Income Amount). If you choose the Highest Daily Lifetime Seven with
Beneficiary Income Option, the maximum charge we may impose is 2.00% of
Protected Withdrawal Value ("PWV") annually. We currently assess a charge of
0.95% of PWV annually. See the table entitled "Your Optional Benefit Fees and
Charges" in the prospectus for a description of all fees and charges related
to optional benefits.
1. To reflect this death benefit option, we add the following to the
description of Highest Daily Lifetime Seven, immediately after the
sub-section entitled Additional Tax Considerations:
HD Lifetime Seven with Beneficiary Income Option/SM/
We offer 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"). You may choose Highest
Daily Lifetime Seven without also selecting the Beneficiary Income Option
death benefit. You must elect the Beneficiary Income Option death benefit at
the time you elect Highest Daily Lifetime Seven. If you elect Highest Daily
Lifetime Seven prior to your state's approval of the Beneficiary Income Option
and would like to add this feature later, you must terminate the Highest Daily
Lifetime Seven benefit and elect the Highest Daily Lifetime Seven with
Beneficiary Income Option. If you elected the Highest Daily Lifetime Seven
benefit, you will have a 90 day transition period from the date the
Beneficiary Income Option is approved in your state of residence to terminate
your Highest Daily Lifetime Seven benefit and elect the Highest Daily Lifetime
benefit with Beneficiary Income Option. After the 90 day transition period,
you may elect to add the Beneficiary Income Option on any anniversary of the
Issue Date in accordance with the eligibility rules and restrictions described
in the "Election of and Designations under the Program" section of the
prospectus describing the Highest Daily Lifetime Seven benefit. If you
terminate your Highest Daily Lifetime Seven benefit to elect the Highest Daily
Lifetime Seven with Beneficiary Income Option benefit, you will lose the
guarantees that you had accumulated under your Highest Daily Lifetime Seven
benefit and will begin new guarantees under the Highest Daily Lifetime Seven
with BIO benefit based on the Account Value as of the date the new benefit
becomes active.
If you elect this death benefit, you may not elect any other optional benefit.
You may elect 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 Annual Income Amount and
Protected Withdrawal Value in the same manner that we do under Highest Daily
Lifetime Seven itself (except that for XTra Credit SIX, we exclude from the
Protected Withdrawal Value the amount of any Credit that was granted within 12
months prior to death). 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. 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).
2
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 Program" section, above.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Beneficiary Income Option:
Highest Daily Lifetime Seven with Beneficiary Income Option: maximum charge of
2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
- ------------------------------------- ---------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
- --------
* Highest Daily Lifetime Seven with Beneficiary Income Option. 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% of PWV 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% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 0.95% of
PWV 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.
B. Addition of Lifetime Income Accelerator Feature (HD Lifetime Seven with
Lifetime Income Accelerator/SM/).
1. The following is added at the end of the section concerning Highest Daily
Lifetime Seven.
HD Lifetime Seven with Lifetime Income Accelerator/SM/. We offer another
version of Highest Daily Lifetime Seven that we call Highest Daily Lifetime
Seven with Lifetime Income Accelerator ("Highest Daily Lifetime Seven with
LIA"). 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 Seven with LIA is offered as an alternative to other
lifetime withdrawal options. If you elect this benefit, you may not elect any
other optional benefit. The income benefit under Highest Daily Lifetime Seven
with LIA currently is based on a single "designated life" who is between the
ages of 55 and 75 on the date that the benefit is elected. If you elected the
Highest Daily Lifetime Seven benefit prior to your state's approval of LIA,
you will have a 90 day transition period from the date the Highest Daily
Lifetime Seven with Lifetime Income Accelerator is approved in your state of
residence to terminate your Highest Daily Lifetime Seven benefit and elect the
Highest Daily Lifetime Seven with LIA benefit. After the 90 day transition
period, you may elect to add the Lifetime Income Accelerator option on any
anniversary of the Issue Date in accordance with the eligibility rules and
restrictions described in the "Election of and Designations under the Program"
section of the prospectus describing the Highest Daily Lifetime Seven benefit.
If you terminate your Highest Daily Lifetime Seven Benefit to elect the
Highest Daily Lifetime Seven with LIA benefit, you will lose the guarantees
that you had accumulated under your Highest Daily Lifetime Seven benefit and
will begin the new guarantees under the Highest Daily Lifetime Seven benefit
with LIA based on the account value as of the date the new benefit becomes
active.
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 choose the Highest Daily Lifetime Seven
with LIA, the maximum charge is 2.00% of Protected Withdrawal Value ("PWV")
annually. We deduct the current charge (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 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.
You may choose Highest Daily Lifetime Seven without also electing LIA, however
you may not elect 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. Currently, if you elect Highest Daily
Lifetime Seven with LIA and subsequently terminate the benefit, you will be
able to
3
re-elect Highest Daily Lifetime Seven with LIA but all conditions of the
benefit described below must be met, and you may be subject to a waiting
period until you can elect this or another lifetime withdrawal benefit.
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 you are no longer eligible to receive the LIA Amount, upon the
next Annuity Anniversary the Annual Income Amount would replace the LIA
Amount. 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 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.
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
4
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 made.
Annuity Options. In addition to the Highest Daily Lifetime Seven Annuity
Options described above, after the 10th 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 10th 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 elect Highest Daily Lifetime Seven with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Optional Lifetime Income Accelerator:
Highest Daily Lifetime Seven w/Optional Lifetime Income Accelerator: maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
- --------------------------------------- -------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
- --------
* Highest Daily Lifetime Seven With Lifetime Income Accelerator. 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% of PWV 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% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 0.95% of
PWV 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.
5
C. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Highest
Daily Lifetime Seven Benefit" to make clear that no withdrawal of the Annual
Income Amount (provided such withdrawal does not constitute Excess Income)
will be subject to a CDSC:
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.
D. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
asset transfer formula differs from that set forth in the May 1, 2008
prospectus. The revised formula reflects the fact that Account Value may
include amounts allocated to certain Fixed Rate Options. Currently, no Fixed
Rate Options are available for use with Highest Daily Lifetime Seven and
Spousal Highest Daily Lifetime Seven.
Here is the revised formula (the Table of "a" factors remains the same):
Terms and Definitions referenced in the calculation formula:
. Cu - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. Ct - the target is established on the Effective Date and is not changed
for the life of the guarantee. Currently, it is 80%.
. Cl - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current business day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V\\v\\ - the total value of all Permitted Sub-accounts in the Annuity.
. V\\F\\ the total value of all elected Fixed Rate Options in the Annuity.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Account
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account.
. * Note: withdrawals of less than the Annual Income Amount do not reduce
the Income Basis.
Target Value Calculation:
On each business day, a target value (L) is calculated, according to the
following formula. If the Account Value (V\\V\\ + V\\F\\) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - B) / (V\\V\\ + V\\F\\).
. If r (greater than) Cu, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account.
6
. If r (less than) Cl, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0), assets
in the AST Investment Grade Bond Portfolio Sub-account are transferred
to the Permitted Sub-accounts according to most recent allocation
instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
T = {Min (V\\V\\ + V\\F\\), [L - B - Money is transferred from the
(V\\V\\ + V\\F\\) * Ct] / (1-Ct))} elected Sub-accounts and Fixed
Rate Options to the Transfer
Account
T = {Min (B,-[L - B -(V\\V\\ + V\\F\\)* Money is transferred from the
C\\t\\] / (1-C\\t\\))} Transfer Account to the elected
Sub-accounts
CHANGES TO SPOUSAL HIGHEST DAILY LIFETIME SEVEN
1. We add the following, immediately after the section entitled "Additional
Tax Considerations":
A. Addition of Death Benefit (Spousal HD Lifetime Seven with Beneficiary Income
Option/SM/)
The Annuity Owner may opt for a death benefit, the value of which is linked to
the Annual Income Amount under the benefit. We refer to the death benefit as
the Beneficiary Income Option. As detailed below, a beneficiary taking the
Annuity's death benefit under this feature is paid the Annual Income Amount
until the Protected Withdrawal Value is depleted. (Note that the final
payment, exhausting the Protected Withdrawal Value, may be less than the
Annual Income Amount). If you choose the Spousal Highest Daily Lifetime Seven
with Beneficiary Income Option the maximum charge we may impose is 2.00% of
Protected Withdrawal Value ("PWV") annually. However, we impose a current
charge of 0.95% of PWV annually. To reflect this death benefit option, we add
the following to the description of Spousal Highest Daily Lifetime Seven:
Spousal HD Lifetime Seven with Beneficiary Income Option/SM/
We offer an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. You may choose Spousal Highest
Daily Lifetime Seven without also selecting the Beneficiary Income Option
death benefit ("BIO"). If you elect Spousal Highest Daily Lifetime Seven
without the Beneficiary Income Option and would like to add this feature
later, you must terminate the Spousal Highest Daily Lifetime Seven benefit and
elect the Spousal Highest Daily Lifetime Seven with Beneficiary Income Option.
If you elected the Spousal Highest Daily Lifetime Seven benefit prior to your
state's approval of BIO, you will have a 90 day transition period from the
date the Beneficiary Income Option is approved in your state of residence to
terminate your Spousal Highest Daily Lifetime Seven benefit and elect the
Spousal Highest Daily Lifetime Seven benefit with Beneficiary Income Option.
After the 90 day transition period, you may elect to add the Beneficiary
Income Option on any anniversary of the Issue Date in accordance with the
eligibility rules and restrictions described in the "Election of and
Designations under the Program" section of the prospectus describing the
Highest Daily Lifetime Seven benefit. If you terminate your Spousal Highest
Daily Lifetime Seven benefit to elect the Spousal Highest Daily Lifetime Seven
with Beneficiary Income Option benefit, you will lose all guarantees under the
Spousal Highest Daily Lifetime Seven benefit, and will begin new guarantees
under the Spousal Highest Daily Lifetime Seven with BIO based on the Account
Value as of the date the new benefit becomes active.
If you elect the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You may elect the Beneficiary Income Option death
benefit so long as each Designated Life is 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 (except that for XTra
Credit SIX, we exclude from the Protected Withdrawal Value the amount of any
Credit that was granted within 12 months prior to death). 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.
7
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. 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 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 and Designations under the Program" section, above.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Spousal Highest Daily Lifetime Seven With Beneficiary Income Option:
Spousal Highest Daily Lifetime Seven w/Beneficiary Income Option: maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
- --------------------------------------- -------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
- --------
* Spousal Highest Daily Lifetime Seven With Beneficiary Income Option. 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% of PWV 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% of PWV is in
addition to 1.65% annual charge of amounts invested in the Sub-accounts.
For XT6, 0.95% of PWV 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.
B. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Spousal
Highest Daily Lifetime Seven Benefit" to make clear that no withdrawal of the
Annual Income Amount (provided such withdrawal does not constitute Excess
Income) will be subject to a CDSC:
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.
8
C. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Spousal Highest Daily Lifetime Seven on or after July 21,
2008, the asset transfer formula differs from that set forth in the May 1,
2008 prospectus. See the section above under Highest Daily Lifetime Seven for
the revised formula.
EXPANDED GROUP OF AVAILABLE FUNDS
Under Investment Options, What Are the Investment Objectives And Policies Of
The Portfolios?, we make the revisions appearing below.
1. We replace the sentence stating "[t] following chart lists the currently
available and permitted investment options . . ." with the following:
As a condition to your participating in certain of our optional benefits, we
limit the investment options to which you may allocate your Account Value.
Broadly speaking, we offer two groups of permitted funds. Under the first
group, your allowable investment options are more limited, but you are not
subject to mandatory quarterly re-balancing. Under the second group, you may
allocate your Account Value 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. The second
set of tables describes the second category, under which:
(a) you must allocate at least 20% of your Account Value to certain fixed
income portfolios (currently, the AST PIMCO Total Return Bond Portfolio
and the AST Western Asset Core Plus Bond Portfolio).
(b) you may allocate up to 80% in the equity and other portfolios listed in
the table below.
(c) on each 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. Note that on the first
quarter-end following your participation in the Optional Allocation and
Rebalancing Program, 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 Optional Allocation and Rebalancing 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.
While those who do not participate in any optional benefit generally may
invest in any of the investment options described in this prospectus, only
those who participate in Highest Daily Lifetime Seven and Spousal Highest
Daily Lifetime Seven may participate in the second category (along with its
attendant re-balancing requirement). This second category is called our
"Optional Allocation and Rebalancing Program." If you participate in the
Optional Allocation and Rebalancing Program, you may not participate in a
Dollar Cost Averaging Program or Automatic Rebalancing Program. We may modify
or terminate the Optional Allocation and Rebalancing 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
Highest Daily Lifetime Seven or Spousal Highest Daily Lifetime Seven 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.
9
The following chart lists the currently available and permitted investment
options when you choose certain optional benefits/1/:
Group I: Allowable Benefit Allocations
- --------
/1/ Fund availability may vary by annuity.
Optional Benefit Name/2/ Allowable Benefit Allocations
Lifetime Five Income Benefit AST Academic Strategies Asset
Spousal Lifetime Five Income Benefit Allocation Portfolio
Highest Daily Lifetime Five Income AST Capital Growth Asset
Benefit Allocation Portfolio
AST Balanced Asset Allocation
Highest Daily Lifetime Seven Income Portfolio
Benefit AST Focus Four Plus Portfolio
AST Preservation Asset Allocation
Spousal Highest Daily Lifetime Seven Portfolio
Income Benefit AST First Trust Balanced Target
Portfolio
Highest Daily Value Death Benefit AST First Trust Capital
Appreciation Target Portfolio
AST Advanced Strategies Portfolio
AST T. Rowe Price Asset
Allocation Portfolio
AST UBS Dynamic Alpha Strategy
Portfolio
AST Schroders Multi-Asset World
Strategies Portfolio
AST Niemann Capital Growth Asset
Allocation Portfolio
AST CLS Growth Asset Allocation
Portfolio
AST CLS Moderate Asset Allocation
Portfolio
AST Horizon Growth Asset
Allocation Portfolio
AST Horizon Moderate Asset
Allocation Portfolio
Franklin Templeton VIP Founding
Funds Allocation Fund
--------------------------------------------------------------------------------
Combo 5% Rollup & HAV Death Benefit All investment options permitted,
EXCEPT these:
Guaranteed Minimum Income Benefit ProFund VP UltraNASDAQ-100
Guaranteed Minimum Withdrawal Benefit ProFund VP UltraSmall Cap
GRO/GRO PLUS/GRO PLUS 2008 ProFund VP Semiconductor
Highest Anniversary Value Death Benefit ProFund VP Internet
ProFund VP UltraBull
Highest Daily GRO Value Line(R) Target 25
AIM VI Technology
ProFund VP Technology
NASDAQ(R) Target 15
ProFund VP Biotechnology
ProFund VP Short Small-Cap
Access VP High Yield
ProFund VP Short Mid-Cap
Evergreen VA Growth Fund
--------------------------------------------------------------------------------
Additional 5 investment options
NOT permitted with GRO Plus 2008
GRO Plus 2008 & Highest Daily GRO
Highest Daily GRO ProFund VP Ultra Mid-Cap
ProFund VP Precious Metals
ProFund VP NASDAQ-100
ProFund VP Asia 30
ProFund VP Short NASDAQ-100
--------------------------------------------------------------------------------
Group II: Optional Allocation and Rebalancing Program
Optional Benefit Name/2/ Allowable Benefit Allocations
Highest Daily Lifetime Seven AST Academic Strategies Asset
Spousal Highest Daily Lifetime Seven Allocation
AST Advanced Strategies
AST Aggressive Asset Allocation
AST AllianceBernstein Core Value
AST AllianceBernstein Growth &
Income
--------------------------------------------------------------------------------
/2/ Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefits" sections of this prospectus.
10
AST American Century Income &
Growth
AST Balanced Asset Allocation
AST Capital Growth Asset
Allocation
AST CLS Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST Cohen & Steers Realty
AST DeAM Large-Cap Value
AST Federated Aggressive Growth
AST First Trust Balanced Target
AST First Trust Capital
Appreciation Target
AST Focus Four Plus
AST Global Real Estate
AST Goldman Sachs Concentrated
Growth
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset
Allocation
AST Horizon Moderate Asset
Allocation
AST International Growth
AST International Value
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond-Debenture
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Mid-Cap
Growth
AST Neuberger Berman / LSV Midcap
Value
AST Neuberger Berman Small-Cap
Growth
AST Niemann Capital Growth Asset
Allocation
AST Parametric Emerging Markets
Equity
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST QMA US Equity Alpha
AST Schroders Multi-Asset World
Strategies Portfolio
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural
Resources
AST UBS Dynamic Alpha Strategy
AST Western Asset Core Plus Bond
Franklin Templeton VIP Founding
Funds Allocation Fund
ProFund VP Consumer Goods
ProFund VP Consumer Services
ProFund VP Financials
ProFund VP Health Care
ProFund VP Industrials
ProFund VP Large-Cap Growth
ProFund VP Large-Cap Value
ProFund VP Mid-Cap Growth
ProFund VP Mid-Cap Value
ProFund VP Real Estate
ProFund VP Small-Cap Growth
ProFund VP Small-Cap Value
ProFund VP Telecommunications
ProFund VP Utilities
11
CHANGES TO THE ASLII ANNUITY
We make the following revisions to the prospectus in order to remove
limitations on the amount of the basic Death Benefit paid under our ASLII
Annuity when death occurs on or after the decedent's age 85. We are also
adding a restriction that the ASLII Annuity is only available for purchase up
to age 85.
. Within the section "Purchasing Your Annuity," within the subsection
"What Are Our Requirements for Purchasing One of the Annuities?," we
replace the paragraph entitled "Age Restrictions" with the following:
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. 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.
. Within the section "Death Benefit," within the subsection "Basic Death
Benefit," we replace the last three paragraphs with the following:
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 and your Interim Value
in the Fixed Allocations (less the amount of any Credits applied within
12-months prior to the date of death, with respect to XT6).
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 and your Interim Value
in the Fixed Allocations.
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 Fixed Allocations (for Annuities
issued in New York only).
For ASL II Annuities issued on or after July 21, 2008, subject to regulatory
approval, 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 and your Interim Value
in the Fixed Allocations.
"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.
12
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
In this registration statement, Prudential Annuities Life Assurance Corporation
is registering $50,000,000 ($50 million) of securities and paying a filing fee
of $2,790 therefor.
Federal Taxes
Prudential Annuities Life Assurance Corporation estimated the federal tax
effect associated with the deferred acquisition costs attributable to receipt
of $1 million of purchase payments over a two year period to be approximately
$74,000.
State Taxes
Prudential Annuities Life Assurance Corporation estimated that approximately
$1,500,000 in premium taxes would be owed upon receipt of purchase payments
under the contracts if the full $50,000,000 ($50 million) of the securities
registered herein would be applied to annuity options.
Printing Costs
Printing costs are largely inapplicable, because this filing is merely designed
to file an updated Form S-3 registration statement.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Prudential Annuities Life Assurance Corporation.
Accounting Costs
PricewaterhouseCoopers LLP, the independent registered public accounting firm
that audits Prudential Annuities Life Assurance Corporation's financial
statements, will charge approximately $715 in connection with the filing of
this registration statement with the Commission.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 33-320a of the Connecticut General Statutes, the Registrant must
indemnify a director or officer against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses including attorneys' fees, for
actions brought or threatened to be brought against him in his capacity as a
director or officer when certain disinterested parties determine that he acted
in good faith and in a manner he reasonably believed to be in the best
interests of the Registrant. In any criminal action or proceeding, it also must
be determined that the director or officer had no reason to believe his conduct
was unlawful. The director or officer must also be indemnified when he is
successful on the merits in the defense of a proceeding or in circumstances
where a court determines that he is fairly and reasonably entitled to be
indemnified, and the court approves the amount. In shareholder derivative
suits, the director or officer must be finally adjudged not to have breached
this duty to the Registrant or a court must determine that he is fairly and
reasonably entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the Registrants'
securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably
entitled to be indemnified and then for such amount as the court shall
determine. The By-Laws of Prudential Annuities Life Assurance Corporation
("PALAC") also provide directors and officers with rights of indemnification,
consistent with Connecticut Law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of PALAC and Prudential Annuities Distributors, Inc.
("PAD") can also be indemnified pursuant to indemnity agreements between each
director and officer and Prudential Annuities, Inc., a corporation organized
under the laws of the state of Delaware. The provisions of the indemnity
agreement are governed by Section 45 of the General Corporation Law of the
State of Delaware.
The directors and officers of PALAC and PAD are covered under a directors and
officers liability insurance policy. Such policy will reimburse PALAC or PAD,
as applicable, for any payments that it shall make to directors and officers
pursuant to law and, subject to certain exclusions contained in the policy,
will pay any other costs, charges and expenses, settlements and judgments
arising from any proceeding involving any director or officer of PALAC or PAD,
as applicable, in his or her past or present capacity as such.
ITEM 16. EXHIBITS
(a) Exhibits
(1)Form of Distribution Agreement between Prudential Annuities Distributors,
Inc. and Prudential Annuities Life Assurance Corporation. (Note 2)
(3)Articles of Incorporation and by-laws. (Note 3)
(4)Instruments defining the rights of security holders, including indentures
incorporated by reference to Registration Statements. (Note 1)
(5)Opinion of Counsel as to legality of the securities being registered. (Note
1)
(23)Written consent of PricewaterhouseCoopers LLP, Independent accountants
(Note 1)
(24)(a) Power of Attorney for James J. Avery. (Note 5)
(b) Power of Attorney for Helen M. Galt. (Note 5)
(c) Power of Attorney for Bernard J. Jacob. (Note 5)
(e) Power of Attorney for Stephen Pelletier. (Note 5)
(g) Power of Attorney for Kenneth Y. Tanji. (Note 5)
- --------
(Note 1) Filed herewith.
(Note 2) Underwriting agreement incorporated by reference to Post-Effective
Amendment No. 1 to Registration Statement No. 333-25733, filed via EDGAR,
March 2, 1998.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 6 to
Registration Statement No. 33-87010 filed via EDGAR March 2, 1998.
(Note 4) Filed here with. (Choice)
(Note 5) Incorporated by reference to Registration Statement filed on Form S-3
Registration No. 333-158017, filed March 16, 2009 on behalf of Prudential
Annuities Life Assurance Corporation.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Shelton, State of Connecticut, on the 16th day of
March 2009.
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION (Registrant)
By: /s/ C. Christopher Sprague
------------------------------------
C. Christopher Sprague,
Vice President, Corporate Counsel Date: March 16, 2009
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Signature Title Date
- ------------------- ----------------------------- ---------------------------
Stephen Pelletier* (Principal Executive Officer) March 16, 2009
- ------------------- Chief Executive Officer and
Stephen Pelletier President
Kenneth Y. Tanji* (Principal Financial Officer March 16, 2009
- ------------------- and Principal Accounting
Kenneth Y. Tanji Officer) Executive Vice
President and Chief Financial
Officer
(Board of Directors)
James J. Avery* Bernard J. Jacob* Helen M. Galt*
- ------------------- --------------------------- ---------------------------
James J. Avery Bernard J. Jacob Helen M. Galt
Kenneth Y. Tanji* Stephen Pelletier*
- ------------------- ---------------------------
Kenneth Y. Tanji Stephen Pelletier
By: /s/ C. Christopher Sprague
------------------------------------
C. Christopher Sprague
- --------
* Executed by C. Christopher Sprague on behalf of those indicated pursuant to
Power of Attorney
EXHIBIT INDEX
Exhibit No.
- -----------
4 Instruments of defining rights of Securities holders (Choice
Contract)
5 Opinion of Counsel
23 Written Consent of PricewaterhouseCoopers LLP, Independent
Registered Public Accounting Firm