SUPPLEMENT DATED FEBRUARY 10, 2000
TO PROSPECTUS DATED MAY 1, 1999
FOR GROUP VARIABLE UNIVERSAL LIFE INSURANCE
SPECIAL FEATURES OF THE GROUP CONTRACT FOR
SITHE ENERGIES, INC.
THIS DOCUMENT IS A SUPPLEMENT TO THE PROSPECTUS DATED MAY 1, 1999 (THE
"PROSPECTUS") FOR THE GROUP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT AND
CERTIFICATES THAT PRUDENTIAL OFFERS TO YOU. THIS SUPPLEMENT IS NOT A COMPLETE
PROSPECTUS AND MUST BE ACCOMPANIED BY THE MAY 1, 1999 PROSPECTUS. THE PROSPECTUS
DESCRIBES THE INSURANCE FEATURES AND CERTAIN OTHER ASPECTS OF THE SITHE
ENERGIES, INC. GROUP CONTRACT AND CERTIFICATES. IN THIS SUPPLEMENT, WE LIST THE
11 FUNDS THAT ARE AVAILABLE TO YOU UNDER THE SITHE ENERGIES, INC. GROUP CONTRACT
AND CERTIFICATES.
Special terms that we use are defined in the prospectus. See the DEFINITIONS OF
SPECIAL TERMS section of the prospectus. You must read the prospectus and this
supplement together to fully understand how Group Variable Universal Life
Insurance works. Throughout this supplement, we refer to Group Variable
Universal Life Insurance as "GVUL." We use the words "we," "our," "us," and
"Prudential" to refer to The Prudential Insurance Company of America, which has
issued the GVUL Group Contract.
ELIGIBILITY AND ENROLLMENT
WHO IS ELIGIBLE FOR COVERAGE?
Eligible Group Members for GVUL coverage include salaried employees of Sithe
Energies, Inc. and certain subsidiaries who work full-time, at least 30 hours
per week, on a regular basis. We refer to each person who enrolls for GVUL
coverage as a "Participant." When we use the terms "you" or "your," we mean a
Participant.
In addition, certain relatives of Participants are eligible for dependent term
life coverage (which is different than the GVUL coverage described in this
supplement). Specifically:
o Participants' spouses who are younger than age 65 when they enroll are
eligible for dependent term life coverage, provided they are not
confined for medical treatment at home or elsewhere at the time of
enrollment.
GL.2000.015
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Spouses who are also employees of Sithe Energies, Inc. may not have
BOTH GVUL coverage as a Participant (based upon their status as an
employee) AND dependent term coverage (as a spouse). If, after the
death of a spouse, we become aware that a spouse obtained both types
of coverage, we will pay the GVUL Death Benefit, but not the dependent
term life death benefit. We will return the premiums that were paid
for the dependent term life coverage.
See the Applicant Owner Provision section of the prospectus to learn
how a spouse may apply for GVUL coverage on the life of the employee.
o Participants' CHILDREN are eligible for dependent term life coverage
through age 19 (or, if an unmarried student, through age 25), provided
they are not confined for medical treatment at home or elsewhere at
the time of enrollment. Eligible children include legally adopted
children, stepchildren and foster children who live with the employee
and depend on the employee wholly for support.
When a child reaches age 19 (or, if an unmarried student, age 25), he
or she may continue coverage if he or she is not physically or
mentally capable of self-support. The Participant must provide
Prudential with evidence of the incapacity within 31 days after
coverage would end.
Children who are also employees of Sithe Energies, Inc. may not have
BOTH GVUL coverage as a Participant (based upon their status as an
employee) AND dependent term coverage (as a Participant's child). If
both of a child's parents are Participants, the child may obtain
dependent term life coverage through only one parent, not both.
IS THERE A LIMITED ENROLLMENT PERIOD?
Yes. Employees may enroll within 31 days of becoming eligible for GVUL.
Employees who do not enroll during this initial 31 day period must wait until
Sithe's next annual enrollment period.
COVERAGE INFORMATION
HOW MUCH GVUL COVERAGE MAY I BUY?
You may choose a Face Amount equal to your annual base salary, two times your
annual base salary, three times your annual base salary, four times your annual
base salary, or five times your annual base salary, up to a maximum Face Amount
of $1,000,000. We will round the Face Amount to the next higher multiple of
$1,000 if it is not already an even multiple of $1,000.
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HOW MUCH DEPENDENT TERM LIFE COVERAGE MAY I BUY FOR MY SPOUSE?
You may choose an amount of dependent term life insurance for your eligible
spouse in increments of $10,000, up to a maximum of $200,000. The amount of
coverage you choose for your spouse may not exceed 100% of your Face Amount.
HOW MUCH TERM LIFE COVERAGE MAY I BUY FOR MY DEPENDENT CHILDREN?
You may buy $4,000 of term life insurance for each eligible child.
WHEN MUST I GIVE EVIDENCE OF GOOD HEALTH?
The following rules apply to each annual enrollment period.
o FOR CURRENT EMPLOYEES WHO PARTICIPATE IN THE OPTIONAL GROUP TERM LIFE
INSURANCE PLAN: You may enroll for GVUL coverage and increase the
coverage amount you had under the optional group term life insurance
plan by your annual base salary up to a maximum Face Amount of
$500,000 without having to answer questions about your health (unless
Prudential previously denied you coverage).
o FOR CURRENT EMPLOYEES WHO DID NOT PARTICIPATE IN THE OPTIONAL GROUP
TERM LIFE INSURANCE PLAN: You may enroll for GVUL coverage with a Face
Amount equal to your annual base salary up to a maximum of $500,000
without having to answer questions about your health (unless
Prudential previously denied you coverage).
o FOR NEWLY-HIRED EMPLOYEES: You must provide evidence of good health if
you request a Face Amount that exceeds the lesser of two times your
annual base salary or $500,000. If you enroll more than 31 days after
you first become eligible, you must wait until Sithe's next annual
enrollment period to enroll. The rules for current employees outlined
above will apply to you.
WHEN MUST MY SPOUSE OR CHILD(REN) GIVE EVIDENCE OF GOOD HEALTH?
The following rules apply to each annual enrollment period.
o FOR A NEW DEPENDENT SPOUSE: Your spouse is first eligible for
dependent term life coverage on the date of your marriage, or when you
are first eligible for GVUL coverage (if you were already married).
Your spouse must provide evidence of good health to enroll for an
amount of dependent term life coverage that is greater than $50,000.
If you wish to enroll your spouse for
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dependent term life coverage more than 31 days after he or she is
first eligible for this coverage, you must wait until Sithe's next
annual enrollment period, and your spouse must give evidence of good
health.
o FOR A NEW DEPENDENT CHILD: You may enroll your dependent child for
dependent term life coverage within 31 days of when the child first
becomes eligible without providing evidence of your child's good
health. A child becomes eligible at birth, on adoption, or on the date
a court decree makes the child your dependent. If you wish to enroll
your dependent child for dependent term life coverage more than 31
days after he or she is first eligible for this coverage, you will
have to wait until Sithe's next annual enrollment period, and your
child will have to give evidence of good health.
o Your spouse or child will need to give evidence of good health if you
decline dependent term life coverage for them when they are first
eligible and later decide to enroll them, or if you want to increase
the coverage amount.
CAN I INCREASE MY FACE AMOUNT?
Yes. You may increase your Face Amount of insurance during Sithe's annual
enrollment period.
WILL MY COVERAGE AMOUNT EVER DECREASE?
No, unless you choose to decrease it.
See the CHANGES IN FACE AMOUNT and TAX TREATMENT OF CERTIFICATE Benefits
sections of the prospectus.
HOW IS THE DEATH BENEFIT COMPUTED?
See the DEATH BENEFITS section of the prospectus. If, as described in the
prospectus, we need to adjust a Death Benefit to be certain that the insurance
will meet the Internal Revenue Code's definition of insurance, we will use the
"corridor percentage" method described in the DEATH BENEFITS section of the
prospectus to increase the Death Benefit.
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DOES MY CERTIFICATE INCLUDE AN ACCELERATED DEATH BENEFIT PROVISION?
Yes. A Participant can elect to receive an early payment of part of the Death
Benefit when diagnosed as being terminally ill. A Participant may elect up to
50% of the Death Benefit, subject to a maximum of $50,000. "Terminally ill"
means the Participant has a life expectancy of 6 months or less.
AM I ENTITLED TO ADDITIONAL BENEFITS?
Yes. You are eligible for the Accelerated Death Benefit and Dependent Life
Benefits, as stated earlier.
DOES THE COVERAGE HAVE EXCLUSIONS?
Yes. As stated in the prospectus, GVUL coverage has a suicide exclusion. See the
SUICIDE EXCLUSION section of the prospectus.
WHAT ARE THE TERMS OF THE POLICY LOAN?
AMOUNT AVAILABLE FOR BORROWING: You may borrow up to the Loan Value of your
Certificate Fund. The Loan Value is 90% of your Certificate Fund minus any
existing loan (and its accrued interest), outstanding charges, and the amount of
the next month's charges. We will take an amount equal to the loan out of each
of your investment options on a pro-rata basis unless you tell us to take it
only from selected investment options. The minimum loan amount is $200.
INTEREST RATE: The net cost of the loan is equal to an annual rate of 2%.
See the LOANS section of the prospectus for more details.
PREMIUMS
HOW DO I PAY PREMIUMS?
For active employees and their dependents, Sithe Energies, Inc. will send
monthly premium payments to Prudential via payroll deduction. Retirees,
employees on an approved leave of absence, and Participants who choose Portable
coverage will be billed directly by Prudential and will submit their premium
payments directly to Prudential.
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HOW MUCH MONEY CAN I CONTRIBUTE TO MY INVESTMENT OPTIONS?
You can contribute any dollar amount, subject to annual and lifetime limits set
by the Internal Revenue Service. See the TAX TREATMENT OF CERTIFICATE BENEFITS
section of the prospectus.
MAY I MAKE ADDITIONAL PREMIUM PAYMENTS?
Yes. You may make lump sum payments at any time. The minimum lump sum payment is
$100. The maximum is subject to annual and lifetime limits set by the Internal
Revenue Service. See the TAX TREATMENT OF CERTIFICATE BENEFITS section of the
prospectus.
INVESTMENT OPTIONS
WHAT INVESTMENT OPTIONS ARE AVAILABLE?
We list the investment options below.
THE FUNDS
Below is a list of each available Fund and information about each Fund,
including its investment objective, investment management fees and other
expenses, and investment advisor/investment manager. Some Funds also provide
information about their principal strategies.
Certain Funds have adopted distribution plans pursuant to the federal securities
laws, and under those plans, the Fund may make payments to Prudential and/or its
affiliates for certain marketing efforts.
FUND NAMES AND OBJECTIVES
THE PRUDENTIAL SERIES FUND, INC.
The portfolios of the Series Fund in which the Sithe Energies, Inc. Group
Contract may currently invest and their investment objectives and principal
strategies are as follows:
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DIVERSIFIED BOND PORTFOLIO: The investment objective is a high level of income
over a longer term while providing reasonable safety of capital. The Portfolio
invests primarily in higher grade debt obligations and high quality money market
investments.
EQUITY PORTFOLIO: The investment objective is capital appreciation. The
Portfolio invests primarily in common stocks of major established corporations
as well as smaller companies that offer attractive prospects of appreciation.
FLEXIBLE MANAGED PORTFOLIO: The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
Portfolio invests in a mix of equity securities, debt obligations and money
market instruments.
GLOBAL PORTFOLIO: The investment objective is long-term growth of
capital. The Portfolio invests primarily in common stocks (and their
equivalents) of foreign and U.S. companies.
MONEY MARKET PORTFOLIO: The investment objective is maximum current income
consistent with the stability of capital and the maintenance of liquidity. The
Portfolio invests in high quality short-term debt obligations that mature in 13
months or less.
STOCK INDEX PORTFOLIO: The investment objective is investment results that
generally correspond to the performance of publicly-traded common stocks. The
Portfolio attempts to duplicate the price and yield performance of the Standard
& Poor's 500 Composite Stock Price Index
(the "S&P 500 Index").
FRANKLIN TEMPLETON
The Class 2 portfolio of the Templeton Variable Products Series Fund in which
the Sithe Energies, Inc. Group Contract may currently invest and its investment
objective are as follows:
TEMPLETON INTERNATIONAL FUND: The fund's investment goal is long-term capital
growth. Under normal market conditions, the fund will invest at least 65% of its
total assets in the equity securities of companies located outside the U.S.,
including emerging markets.
JANUS ASPEN SERIES
The portfolio of the Janus Aspen Series in which the Sithe Energies, Inc. Group
Contract may currently invest and its investment objectives are as follows:
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GROWTH PORTFOLIO: The investment objective of this Portfolio is long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective by investing in common stocks
of issuers of any size. This Portfolio generally invests in larger, more
established issuers.
LAZARD RETIREMENT SERIES, INC.
The portfolio of the Lazard Retirement Series, Inc. in which the Sithe Energies,
Inc. Group Contract may currently invest and its investment objective are as
follows:
SMALL CAP PORTFOLIO: Seeks long-term capital appreciation by investing primarily
in equity securities, principally common stocks, of relatively small U.S.
companies in the range of the Russell 2000 Index that the investment manager
believes are undervalued based on their earnings, cash flow or asset values.
T. ROWE PRICE VARIABLE FUNDS
The portfolios of the T. Rowe Price Equity Series, Inc. in which the Sithe
Energies, Inc. Group Contract may currently invest and their investment
objectives are as follows:
EQUITY INCOME PORTFOLIO: Seeks to provide substantial dividend income as well as
long-term growth of capital by investing primarily in the common stocks of
established companies paying above-average dividends, with favorable prospects
for both increasing dividends and capital appreciation.
NEW AMERICA GROWTH PORTFOLIO: Seeks to provide long-term growth of capital by
investing primarily in common stocks of U.S. growth companies operating in
service industries. The portfolio invests in stocks that range from large to
small service companies expected by the fund's investment adviser to show
superior earnings growth and that are above-average performers in their fields.
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FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
=====================================================================================
TOTAL FUND
INVESTMENT ANNUAL EXPENSES
MANAGEMENT 12B-1 OTHER (AFTER EXPENSE
FUNDS FEE FEES EXPENSES REIMBURSEMENTS) (1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND, INC.
Diversified Bond Portfolio (2) 0.40% - 0.02% 0.42%
Equity Portfolio (2) 0.45% - 0.02% 0.47%
Flexible Managed Portfolio (2) 0.60% - 0.01% 0.61%
Global Portfolio (2) 0.75% - 0.11% 0.86%
Money Market Portfolio (2) 0.40% - 0.01% 0.41%
Stock Index Portfolio (2) 0.35% - 0.02% 0.37%
FRANKLIN(R) TEMPLETON(R):
TEMPLETON VARIABLE PRODUCTS
SERIES FUND (CLASS 2 SHARES)
Templeton International Fund (3) 0.69% 0.25% 0.17% 1.11%
JANUS ASPEN SERIES
Growth Portfolio(4) 0.65% - 0.03% 0.68%
LAZARD RETIREMENT SERIES, INC.
Small Cap Portfolio(5) 0.75% 0.25% 0.25% 1.25%
T. ROWE PRICE VARIABLE FUNDS
Equity Income Portfolio(6) 0.85% - - 0.85%
New America Growth Portfolio (6) 0.85% - - 0.85%
================================================================================
</TABLE>
(1) Some, but not all, of the Funds have expense reimbursement or fee waiver
arrangements. Without these arrangements, Total Fund Annual Expenses would
have been higher. More information appears in the footnotes that accompany
the Funds that have expense reimbursement or fee waiver arrangements.
(2) With respect to the Prudential Series Fund, Inc. portfolios, except for the
Global Portfolio, Prudential reimburses a portfolio when its ordinary
operating expenses, excluding taxes, interest, and brokerage commissions
exceed 0.75% of the portfolio's average daily net assets. The amounts
listed for the portfolios under Other Expenses are based on amounts
incurred in the last fiscal year.
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(3) Class 2 of the Templeton Variable Products Series Templeton International
Fund has a distribution plan or "Rule 12b-1 Plan" which is described in the
Templeton Variable Products Series Fund's prospectus. Expenses may vary.
(4) All expenses are stated with contractual waivers and fee reductions by
Janus Capital. Fee reductions for the Growth Portfolio reduce the
Management Fee to the level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the Management Fee and
then against Other Expenses. Janus Capital has agreed to continue the other
waivers and fee reductions until at least the next annual renewal of the
advisory agreement. Without such waivers and fee reductions, the Total Fund
Annual Expenses would have been 0.75% for Growth.
(5) Lazard Asset Management, the Portfolio's Investment Manager, agreed to
reimburse the Small Cap Portfolio through December 31, 1999 to the extent
Total Fund Annual Expenses exceeded 1.25% of the Portfolio's average daily
net assets. Absent such an agreement with the Investment Manager, the
actual Total Fund Annual Expenses for the year ended December 31, 1998
would have been 16.20%.
(6) The investment management fee for the Mid-Cap Growth Portfolio and the New
America Growth Portfolio in the T. Rowe Price Variable Funds includes the
ordinary expenses of operating the Portfolios. Fees and expenses are for
the year ended December 31, 1998.
FUND ADVISERS
Prudential is the investment adviser of each of the portfolios of the Prudential
Series Fund. Prudential's principal business address is 751 Broad Street,
Newark, New Jersey 07102-3777. Prudential has a service agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that, subject to Prudential's supervision, PIC will furnish investment
advisory services in connection with the management of the Series Fund. Further
detail is provided in the prospectus and statement of additional information for
the Series Fund. Prudential and PIC are registered as investment advisers under
the Investment Advisers Act of 1940.
Lazard Asset Management, a division of Lazard Freres & Co. LLC ("Lazard
Freres"), a New York limited liability company, serves as the investment manager
and principal underwriter to the Lazard Retirement Small Cap Portfolio. Lazard
Freres' principal business address is 30 Rockefeller Plaza, New York, New York
10112.
Janus Capital Corporation ("Janus Capital") serves as the investment adviser and
principal underwriter to the Janus Aspen Series Growth Portfolio. Janus
Capital's principal business address is 100 Fillmore Street, Denver, Colorado
80206-4928.
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Templeton Investment Counsel, Inc. ("TICI") serves as the investment manager for
the Templeton Variable Products Series (Class 2 Shares) International Fund. TICI
is a Florida corporation with offices at Broward Financial Centre, Fort
Lauderdale, Florida 33394-3091. The principal underwriter of the Funds is
Franklin Templeton Distributors, Inc., 100 Fountain Parkway, St. Petersburg,
Florida 33716-1205.
The investment manager for the T. Rowe Price Variable Funds is T. Rowe Price
Associates, Inc. ("T. Rowe Price"). T. Rowe Price's principal business address
is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price Investment
Services, Inc. serves as the principal underwriter of the portfolios.
Your enrollment kit gives more information about the past performance of each
investment option.
You may also allocate money to the Fixed Account, which earns interest at a rate
determined annually and guaranteed not to be less than 4%. For more information,
see THE FIXED ACCOUNT section in the Prospectus.
CHANGES IN PERSONAL STATUS
IS THERE A DISABILITY PROVISION UNDER MY CERTIFICATE?
No. However, you may continue your GVUL coverage while on a disability leave of
absence that is approved by Sithe Energies, Inc. Prudential will bill you
directly for premium payments, and will charge a fee of $3 per bill.
CAN I CONTINUE COVERAGE WHEN I RETIRE?
Yes. Prudential will bill you directly for premium payments, and will charge a
fee of $3 per bill.
CAN I CONTINUE COVERAGE IF I LEAVE THE COMPANY FOR REASONS OTHER THAN
RETIREMENT?
You may continue your coverage on a "Portable" basis if you leave Sithe
Energies, Inc. for any reason. We call this "Portable coverage." Prudential will
bill you directly for premium payments and will charge a fee of $3 per bill.
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DOES MY COVERAGE END AT A CERTAIN AGE?
Yes. Your coverage will end at age 100. See the HOW PRUDENTIAL ISSUES
CERTIFICATES section of the prospectus to see what options you have when your
coverage ends.
WHAT HAPPENS IF THE GROUP CONTRACT IS TERMINATED?
Either Sithe Energies, Inc. or Prudential may end the Group Contract. Prudential
can end the Group Contract only under the conditions described in the
prospectus.
If the Group Contract ends, the effect on Participants depends on whether or not
Sithe Energies, Inc. replaces the Group Contract with another life insurance
contract that allows for the accumulation of cash value. Generally, here is what
will happen:
o If Sithe Energies, Inc. DOES replace the Group Contract with another
life insurance contract that allows for the accumulation of cash
value, Prudential will terminate your Certificate. In addition,
Prudential will transfer the Cash Surrender Value of your Certificate
directly to the new contract, unless you elect to receive the Cash
Surrender Value of your Certificate.
o If Sithe Energies, Inc. DOES NOT replace the Group Contract with
another life insurance contract that allows for the accumulation of
cash value, you may continue your GVUL coverage on a Portable basis.
See the OPTIONS ON TERMINATION OF COVERAGE section of the prospectus.
CHARGES AND EXPENSES
WHAT ARE THE CHARGES?
The current charges under the Sithe Energies, Inc. Group Contract are as
follows:
1. CHARGES FOR TAXES ON PREMIUM PAYMENTS. Prudential deducts a charge of 2.60%
from each premium payment. This charge is to compensate Prudential for
incurring state and local premium taxes (currently 2.25%) and for the impact
of the federal deferred acquisition cost tax (currently 0.35%).
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2. DAILY CHARGES FOR MORTALITY AND EXPENSE RISKS. Prudential deducts this charge
from the assets of the Sithe Energies Group Contract that correspond to the
Funds you select. This charge is to compensate Prudential for assuming
mortality and expense risks. Prudential does not deduct this charge from
assets invested in the Fixed Account.
For Sithe Energies, Inc., the current daily charge for mortality and expense
risks is equivalent to an effective annual rate of 0.45%.
3. DAILY CHARGES FOR INVESTMENT MANAGEMENT FEES AND EXPENSES. Each of the Funds
in which you may invest deducts investment management fees and other
expenses. These fees are described earlier in this supplement.
4. MONTHLY CHARGES. Prudential deducts a monthly charge for the cost of
insurance and a monthly charge of $2 for administrative expenses from your
Certificate Fund.
5. POSSIBLE ADDITIONAL CHARGES. Prudential will not charge for the first 12
transfers you make between investment options in a Certificate Year. However,
if you make more than 12 transfers in a Certificate Year, Prudential will
charge $20 per transfer. Prudential does not currently charge for other
transactions, but reserves the right to do so in the future, as explained in
the prospectus.
See the CHARGES AND EXPENSES section of the prospectus for more details.
WHEN MAY CHARGES CHANGE?
The prospectus lists the MAXIMUM CHARGES that Prudential may charge under the
Sithe Energies, Inc. Group Contract. Under no circumstances will we exceed these
charges. Within these maximums, we may vary the amount or level of charges. In
general, we will not change these amounts more often than once a year. We will
give you a new prospectus and a new supplement like this one each year that
shows any new charges. If we change the charges during a year, we will send you
a notice of the change.
ILLUSTRATION OF DEATH BENEFITS AND CASH SURRENDER VALUES
On the next several pages, we show you two examples of how the Death Benefit and
the Cash Surrender Value of your Certificate can change as a result of the
performance of the investment options you select. The examples are not our
prediction of how value will grow. They are hypothetical examples and are just
intended to show you how a Certificate works.
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We call these examples "ILLUSTRATIONS." The illustrations are based on several
ASSUMPTIONS about the age of the Participant, the amount of insurance, and the
rules of the Sithe Energies, Inc. Group Contract.
ASSUMPTIONS WE USED FOR BOTH ILLUSTRATIONS
Here's what we assumed about the Certificate in both illustrations:
o The Participant was 40 years old when he or she bought the GVUL
Certificate.
o The Face Amount of insurance under the Certificate is $100,000.
o The Participant makes a $100 premium payment on the first day of each
month, for a total of $1200 over the course of each year.
ILLUSTRATION #1
In Illustration #1, we assumed that the CURRENT CHARGES Prudential deducts would
stay the same as long as the Certificate remains in effect. Accordingly, we
assumed the following charges:
o The charge deducted from each premium payment for taxes on premium
payments is 2.60%.
o Prudential deducts no sales charge from premium payments.
o Prudential deducts no processing charge from premium payments.
o Each month, Prudential deducts a $2 charge for administrative
expenses.
o Prudential deducts a charge equal to an annual rate of 0.45% for
mortality and expense risks.
o Prudential deducts the current cost of insurance charge under the
Sithe Energies, Inc. Group Contract.
o Prudential does not deduct a surrender charge.
ILLUSTRATION #2
In Illustration #2, we changed our assumptions about the charges Prudential will
deduct from the Certificate. Instead of current charges, we assumed that the
MAXIMUM CHARGES permitted under the Group Contract would be made.
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Here's what we assumed:
o The charge deducted from each premium payment for taxes on premium
payments is 2.60%. (Since Prudential would increase this charge only
if a state increases its tax charge to us, we left this charge at the
current level.)
o Prudential deducts a sales charge equal to 3.5% from each premium
payment.
o Prudential deducts a processing charge of $2 from each premium
payment.
o Each month, Prudential deducts a $6 charge for administrative
expenses.
o Prudential deducts a charge equal to an annual rate of 0.90% for
mortality and expense risks.
o The Participant has cost of insurance charges equal to the maximum
rates. (The maximum rates that Prudential can charge are 100% of the
1980 Commissioner's Standard Ordinary Mortality Table [Male], Age Last
Birthday (the "1980 CSO")).
o Prudential deducts a charge upon surrender equal to the lesser of $20
or 2% of the amount surrendered.
ASSUMPTIONS ABOUT HOW THE CERTIFICATE FUND WAS INVESTED
We assumed that the Certificate Fund was invested in equal amounts in each of
the 11 Funds available under the Group Contract.
Each illustration shows three different assumptions about the
investment performance - or "investment return" - of the Funds. The
three different assumptions are:
o gross annual rate of return is 0%
o gross annual rate of return is 4.5%
o gross annual rate of return is 9%
These are only assumptions to show how the Death Benefit and Cash Surrender
Value change depending on the investment return. Actual investment return will
depend on the investment options you select and will vary from year to year.
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WALKING THROUGH THE ILLUSTRATIONS
Here's what to look for in the illustrations:
o The first column shows the CERTIFICATE YEAR.
o The second column gives you some CONTEXT FOR COMPARING the investment
return under the Certificate to the return you might expect from a
savings account. It shows the amount you would accumulate if you
invested the same premiums in a savings account paying a 4% effective
annual rate. (Of course, unlike the Certificate, a savings account
does not offer life insurance protection.)
o The next three columns show what the DEATH BENEFIT would be for each
of the four investment return assumptions (0%, 4.5% and 9%).
o The last three columns show what the CASH SURRENDER VALUE would be for
each of the four investment return assumptions (0%, 4.5% and 9%).
You should note that:
o Both "gross" and "net" investment returns are shown.
o "Gross" investment return reflects the combined effect of both income
on the investment and capital gains. It is the amount of return before
Prudential takes out any of its charges and before any Fund investment
management fees and other expenses are taken out.
o "Net" investment return is the amount of the investment return after
Prudential takes out its charges and after Fund investment management
fees and other expenses are taken out. Since Illustration #1 and
Illustration #2 use different assumptions about charges, the "net"
investment returns for each illustration are different. For some of
the Funds, the Fund's investment advisor or other entity is absorbing
certain of the Fund's expenses. In deriving net investment return, we
used those reduced Fund expenses.
- Fund investment management fees and other expenses were
assumed to equal 0.72% per year, which was the average Fund
expense in 1998.
- For Illustration #1, Prudential's mortality and expense risk
charges are 0.45% per year. (In Illustration #1, we assumed
that Prudential's current charges are in effect.) So,
including both Fund expenses and the mortality and expense
risk charges, gross returns of 0%, 4.5% and 9% become net
returns of -1.17%, 3.33% and 7.83%.
16
<PAGE>
- For Illustration #2, Prudential's mortality and expense risk
charges are 0.90% per year. (In Illustration #2, we assumed
that Prudential's maximum charges are in effect.) So,
including both Fund expenses and the mortality and expense
risk charges, gross returns of 0%, 4.5% and 9% become net
returns of -1.62%, 2.88% and 7.38%.
o The Death Benefits and Cash Surrender Values are shown with all of
Prudential's charges and Fund investment management fees and other
expenses taken out.
o We assumed no loans or partial withdrawals were taken.
The illustrations do not reflect Dividends or Experience Credits, neither of
which are available under the Sithe Contract.
IF YOU ASK, PRUDENTIAL WILL GIVE YOU A SIMILAR ILLUSTRATION FOR A CERTIFICATE
THAT SHOWS YOUR AGE, RISK CLASS, PROPOSED FACE AMOUNT OF INSURANCE, AND PROPOSED
PREMIUM PAYMENTS. WE REFER TO THIS AS A "PERSONALIZED ILLUSTRATION."
WE SHOW THESE RATES OF INVESTMENT RETURN ONLY TO HELP YOU UNDERSTAND HOW THE
CERTIFICATE WORKS. YOU SHOULD NOT ASSUME THAT THE INVESTMENT RATES OF RETURN ARE
ACTUAL RATES OF RETURN. YOU SHOULD ALSO NOT ASSUME THAT THESE RATES ARE EXAMPLES
OF PAST OR FUTURE INVESTMENT PERFORMANCE. NEITHER PRUDENTIAL NOR THE FUNDS CAN
TELL YOU WHETHER THESE RATES OF INVESTMENT RETURN CAN ACTUALLY BE ACHIEVED.
THE ACTUAL RATES OF INVESTMENT RETURN FOR YOUR CERTIFICATE WILL DEPEND ON HOW
THE INVESTMENT OPTIONS THAT YOU CHOOSE PERFORM. YOU MAY EARN MORE OR LESS THAN
WHAT IS SHOWN IN THE ILLUSTRATION.
THE DEATH BENEFITS AND CASH SURRENDER VALUES WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATE OF RETURN FOR A CERTIFICATE YEAR VARIED ABOVE OR BELOW THE
AVERAGE, HYPOTHETICAL RATES OF 0%, 4.5% AND 9%.
17
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS
SITHE ENERGIES, INC.
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME MONTHLY CONTRIBUTION OF $100 FOR ALL YEARS
USING CURRENT CHARGES
Cash Surrender Value (1) Death Benefits (1)
------------------------------------------- ------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Annual Investment Return of Annual Investment Return of
End of Annual Premiums ------------------------------------------- ------------------------------------------
Certificate Premium Accumulated 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year Age Outlay at 4% per year (-1.17%) Net (3.33% Net) (7.83% Net) (-1.17%) Net (3.33% Net) (7.83% Net)
---- --- ------- -------------- ------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $1,200 $1,226 $ 951 $ 974 $ 997 $100,951 $100,974 $100,997
2 42 1,200 2,501 1,891 1,981 2,073 101,891 101,981 102,073
3 43 1,200 3,827 2,820 3,021 3,232 102,820 103,021 103,232
4 44 1,200 5,206 3,738 4,096 4,482 103,738 104,096 104,482
5 45 1,200 6,640 4,645 5,207 5,831 104,645 105,207 105,831
6 46 1,200 8,131 5,448 6,259 7,186 105,448 106,259 107,186
7 47 1,200 9,682 6,242 7,346 8,648 106,242 107,346 108,648
8 48 1,200 11,295 7,027 8,469 10,225 107,027 108,469 110,225
9 49 1,200 12,973 7,802 9,629 11,925 107,802 109,629 111,925
10 50 1,200 14,718 8,568 10,829 13,757 108,568 110,829 113,757
15 55 1,200 24,546 11,582 16,683 24,453 111,582 116,683 124,453
22 62 1,200 41,983 12,253 22,946 43,863 112,253 122,946 143,863
23 63 1,200 44,888 12,056 23,655 47,241 112,056 123,655 147,241
24 64 1,200 47,909 11,861 24,388 50,884 111,861 124,388 150,884
25 65 1,200 51,051 11,669 25,145 54,811 111,669 125,145 154,811
26 66 1,200 54,319 10,380 24,801 57,895 110,380 124,801 157,895
27 67 1,200 57,718 9,106 24,447 61,219 109,106 124,447 161,219
32 72 1,200 76,862 123 19,519 79,074 100,123 119,519 179,074
37 77 1,200 100,154 0 (2) 6,323 96,796 0 (2) 106,323 196,796
42 82 1,200 128,492 0 0 (2) 112,587 0 0 (2) 212,587
47 87 1,200 162,970 0 0 117,937 0 0 217,937
52 92 1,200 204,918 0 0 100,310 0 0 200,310
55 95 1,200 234,331 0 0 75,545 0 0 175,545
56 96 1,200 244,930 0 0 58,062 0 0 158,062
57 97 1,200 255,954 0 0 39,209 0 0 139,209
58 98 1,200 267,418 0 0 18,881 0 0 118,881
59 99 1,200 279,340 0 0 0 (2) 0 0 0 (2)
</TABLE>
- --------------
(1) Assumes no loan or partial withdrawal has been made.
(2) Based on the interest rate and charges illustrated, the premiums paid are
insufficient to keep the certificate in force. The certificate would lapse
under this scenario.
- - The charges and expenses used in this illustration: Premium tax 2.25%; DAC Tax
0.35%; Sales charge 0%; Processing charges $0; Monthly Admin charges $2;
Mortality and Expense Risk Charge 0.45%; Average Fund expense 0.72%; Surrender
charge $0; and Cost of Insurance charges are the cost of insurance rates
currently being charged.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER
VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATE
OF RETURN AVERAGED 0%, 4.5% AND 9% OVER A PERIOD OF YEARS , BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS. NO
PEPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE FUNDS THAT HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD OF TIME.
18
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS
SITHE ENERGIES, INC.
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME MONTHLY CONTRIBUTION OF $100 FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES
Cash Surrender Value (1) Death Benefits (1)
------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Annual Accumulated ------------------------------------------- ---------------------------------------------
Certificate Premium at 4% 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year Age Outlay per year (-1.62%) Net (2.88% Net) (7.38% Net) (-1.62%) Net (2.88% Net) (7.38% Net)
- ---------- --- ------- ----------- ------------ ------------ ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $1,200 $ 1,226 $ 542 $ 555 $ 568 $100,553 $100,566 $100,580
2 42 1,200 2,501 1,036 1,088 1,140 101,056 101,108 101,160
3 43 1,200 3,827 1,488 1,601 1,718 101,508 101,621 101,738
4 44 1,200 5,206 1,886 2,080 2,289 101,906 102,100 102,309
5 45 1,200 6,640 2,227 2,522 2,850 102,247 102,542 102,870
6 46 1,200 8,131 2,509 2,921 3,395 102,529 102,941 103,415
7 47 1,200 9,682 2,728 3,272 3,920 102,748 103,292 103,940
8 48 1,200 11,295 2,883 3,572 4,420 102,903 103,592 104,440
9 49 1,200 12,973 2,969 3,812 4,888 102,989 103,832 104,908
10 50 1,200 14,718 2,982 3,985 5,315 103,002 104,005 105,335
15 55 1,200 24,546 1,612 3,379 6,291 101,632 103,399 106,311
22 62 1,200 41,983 0 (2) 0 (2) 585 0 (2) 0 (2) 100,597
23 63 1,200 44,888 0 0 0 (2) 0 0 0 (2)
24 64 1,200 47,909 0 0 0 0 0 0
25 65 1,200 51,051 0 0 0 0 0 0
26 66 1,200 54,319 0 0 0 0 0 0
27 67 1,200 57,718 0 0 0 0 0 0
32 72 1,200 76,862 0 0 0 0 0 0
37 77 1,200 100,154 0 0 0 0 0 0
42 82 1,200 128,492 0 0 0 0 0 0
47 87 1,200 162,970 0 0 0 0 0 0
52 92 1,200 204,918 0 0 0 0 0 0
55 95 1,200 234,331 0 0 0 0 0 0
56 96 1,200 244,930 0 0 0 0 0 0
57 97 1,200 255,954 0 0 0 0 0 0
58 98 1,200 267,418 0 0 0 0 0 0
59 99 1,200 279,340 0 0 0 0 0 0
</TABLE>
- -------------
(1) Assumes no loan or partial withdrawal has been made.
(2) Based on the interest rate and charges illustrated, the premiums paid are
insufficient to keep the certificate in force. The certificate would lapse
under this scenario.
- - The charges and expenses used in this illustration: Premium tax 2.25%; DAC Tax
0.35%; Sales charge 3.50%; Processing charges $2; Monthly Admin charges $6;
Mortality and Expense Risk Charge 0.90%; Average Fund expense 0.72%; Surrender
charge lesser of $20 or 2% of fund; and Maximum cost of insurance charges is
150% of 1980 CSO.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER
VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATE
OF RETURN AVERAGED 0%, 4.5% AND 9% OVER A PERIOD OF YEARS , BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS. NO
PEPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE FUNDS THAT HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD OF TIME.
19
<PAGE>
WHEN ARE MONTHLY CHARGES DEDUCTED?
The exact date that Prudential deducts monthly charges from your Certificate
Fund depends upon whether you make routine premium payments by automatic payroll
deduction or directly to Prudential. We take the charges from each investment
option in the same proportions that your Certificate Fund is invested.
o If you make routine premium payments by automatic payroll deduction,
we generally will deduct the monthly Certificate Fund charges once per
month, on the Monthly Deduction Date. The Monthly Deduction Date will
coincide with the date Sithe Energies, Inc. forwards the payroll
deductions to us. We expect the Monthly Deduction Date to be near the
first of the month.
Sithe Energies, Inc. intends to forward automatic payroll deduction
premium payments by the beginning of each month. But, even if Sithe
Energies, Inc. has not transferred the payroll deductions to us by the
45th day after the first day of any month, we will nevertheless deduct
the month's Certificate Fund charges on the next Business Day
following that 45th day.
o If you make routine premium payments directly to Prudential, we will
deduct the full monthly Certificate Fund charges on the first Business
Day of each month.
WHAT ARE THE OTHER PRIMARY FEATURES OF THE PLAN?
The prospectus describes the standard features of the Sithe Energies, Inc. Group
Contract, including:
o the free-look period
o transfers between investment options
o dollar cost averaging
o more details on how loans work
o how you can change future premium allocations among investment options
o how paid-up coverage may be available
o how your insurance could end (known as "lapsing")
o reinstatement of your coverage
o contestability rules
20
<PAGE>
o tax treatment of Certificate benefits
o definitions of special terms
o withdrawals
Please refer to the prospectus for information on these and other features of
the Sithe Energies, Inc. Group Contract. Your Enrollment Kit also explains key
features of your plan.
WHOM DO I CONTACT TO MAKE A TRANSACTION?
You may contact the Prudential Customer Service Center at 1-800-562-9874 to
obtain the proper forms.
WHAT ARE MY CANCELLATION RIGHTS?
You may return a Certificate for a refund within 10 days after you receive it.
These 10 days are known as the "free look" period. You can ask for a refund by
mailing the Certificate back to Prudential. During the first 20 days after the
Certificate Date, your premium payments are held in the Fixed Account.
See the A "FREE LOOK" PERIOD section of the prospectus for more details.
WHOM DO I CONTACT TO ANSWER MY OTHER QUESTIONS?
You may contact Prudential's Customer Service Center at 1-800-562-9874.
21
