This Prospectus describes a modified single premium variable life insurance
policy being offered by American Skandia Life Assurance Corporation ("we,"
"our," "us," "American Skandia," or "the Company"), One Corporate Drive, P.O.
Box 883, Shelton, Connecticut, 06484. This policy may be offered as individual
coverage or as interest in a group policy. This Prospectus provides a detailed
discussion of matters you should consider before buying a policy. This policy or
certain of its investment options may not be available in all jurisdictions.
Various rights and benefits may differ between jurisdictions to meet applicable
law and/or regulations. This Prospectus is made up of the following general
sections: Cover Page, Table of Contents, Definitions, Description of the
Offering, Miscellaneous Provisions and Additional Details. On this cover page
and in the Description of the Offering section, we use a "question and answer"
format to assist you in understanding this offering.
In summary, what is American Skandia offering to me? We are offering a
type of cash value life insurance coverage. This life insurance coverage is
called a "modified single premium variable life insurance policy." These
technical terms can be explained, as follows:
(1) This coverage is life insurance because a death benefit becomes
payable to a beneficiary upon the death of the person insured (if coverage is
issued on two insureds, the death benefit is payable on the death of the second
insured). It is cash value life insurance because, in addition to a death
benefit, it also provides living benefits for the owner, such as the right to
take loans from us using the value of the policy as collateral and the right to
take withdrawals.
(2) This coverage is called modified single premium because we do not
accept any premium other than the first unless we know about the additional
premium during the underwriting period or an additional amount is required to
keep the policy from being cancelled.
(3) This coverage is variable because you can allocate all or part of
your premium to variable investment options that invest in underlying mutual
funds. The performance of these investment options is not guaranteed. You bear
the investment risk if you allocate funds to these investment options because
the benefits that depend on the investment performance of these investment
options can decrease or increase.
(4) This coverage allows you to allocate all or part of your premium to
a fixed option to which we credit interest. The return on this option is
guaranteed. We bear the investment risk if you allocate funds to this option.
(5) We believe this policy will be treated as a "modified endowment
contract" under the Internal Revenue Code (the "Code"). In general, the tax
treatment of a modified endowment contract's death benefit is similar to that of
death benefits under life insurance policies, while the tax treatment of the
contract's living benefits are similar to those of living benefits under
deferred annuities. This means that in most circumstances the beneficiary owes
no Federal income tax on the death proceeds. However, most distributions from
such a policy while the insured is alive, including loans, withdrawals and
surrender, are taxable to the owner, like distributions from a deferred annuity
before annuity payments begin. This means that such distributions are deemed to
come first from any gain in the policy. Any gain is treated as ordinary income
and may be subject to a 10% tax penalty if taken before your age 59 1/2.
Information relating to the tax treatment of life insurance contracts which are
not modified endowment contracts appears in the section entitled "Additional Tax
Considerations".
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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. PLEASE
READ THIS PROSPECTUS AND THE CURRENT PROSPECTUSES FOR THE UNDERLYING FUNDS. KEEP
IT FOR FUTURE REFERENCE.
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SPVLI-PROS (5/98) CALL 1-800-752-6342 FOR FURTHER INFORMATION
Prospectus Dated:May 1, 1998
<PAGE>
Is there Federal insurance for these policies? Premiums for these
policies are not deposits or obligations of, or guaranteed or endorsed by, any
bank or bank subsidiary. Neither premiums nor any payments or benefits pursuant
to these policies are insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other agency.
What are the investment options? The premium is allocated to your
choice of investment options. The variable investment options are segments of
American Skandia Life Assurance Corporation Separate Account F ("Account F").
Each segment in Account F invests exclusively in an underlying mutual fund or
one portfolio of an underlying mutual fund. As of the date of this Prospectus,
the following underlying mutual funds or portfolios of the following underlying
mutual funds are being offered: American Skandia Trust, The Alger American Fund
and Montgomery Variable Series. The available portfolios of these underlying
funds and the applicable investment management fees and operating expenses are
listed on page 16. We also offer a fixed option that credits a fixed rate of
interest. Our obligations based on allocations to the fixed option are supported
by our general account, as are any obligations such as the portion of the death
benefit in excess of the policy's account value or any fixed settlement options.
The investment manager to American Skandia Trust, as of the date of this
Prospectus, is our affiliate, American Skandia Investment Services,
Incorporated.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
DEFINITIONS........................................................................................................................5
DESCRIPTION OF THE OFFERING........................................................................................................8
Purchasers......................................................................................................................8
The Insurance Company...........................................................................................................8
Benefits at the Insured's Death.................................................................................................8
Account Value and Cash Value...................................................................................................10
Cash Value Credits.............................................................................................................11
Costs..........................................................................................................................12
Buying a Policy................................................................................................................14
Variable Investment Options....................................................................................................16
Transfers and Allocation Services..............................................................................................19
Loans..........................................................................................................................20
Partial Withdrawals............................................................................................................21
Surrenders.....................................................................................................................22
Accelerated Death Benefit......................................................................................................22
Medically-Related Waiver.......................................................................................................22
Risks..........................................................................................................................23
Other Rights...................................................................................................................23
The Separate Account...........................................................................................................23
Taxes..........................................................................................................................24
Available Information..........................................................................................................24
MISCELLANEOUS PROVISIONS AND ADDITIONAL DETAILS...................................................................................25
Providing Services to You......................................................................................................25
Designations...................................................................................................................25
Net Investment Factor..........................................................................................................25
Allocation Programs............................................................................................................26
Limitations on Transfers.......................................................................................................26
Death During the Grace Period..................................................................................................26
Reinstatement..................................................................................................................26
Maturity.......................................................................................................................26
Pricing Transactions...........................................................................................................27
Delaying Transactions..........................................................................................................27
Voting.........................................................................................................................27
Transfers, Assignments, Pledges................................................................................................28
Reports........................................................................................................................28
Incontestability...............................................................................................................28
Suicide........................................................................................................................28
Misstatement...................................................................................................................29
Backdating.....................................................................................................................29
Policy Loans on Exchanges......................................................................................................29
Resolving Material Conflicts...................................................................................................29
Modification of the Separate Account...........................................................................................29
Entire Contract................................................................................................................30
Additional Tax Considerations..................................................................................................30
Safekeeping of the Assets......................................................................................................32
Regulation.....................................................................................................................32
Legal Matters..................................................................................................................32
Legal Proceedings..............................................................................................................32
Experts........................................................................................................................32
Distribution of this Offering..................................................................................................33
Illustrations..................................................................................................................34
Executive Officers and Directors...............................................................................................34
Financial Statements...........................................................................................................34
APPENDIX A - HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES AND CASH VALUES.........................................35
APPENDIX B - HYPOTHETICAL ILLUSTRATION OF ACCELERATED DEATH BENEFIT...............................................................46
APPENDIX C - NET SINGLE PREMIUM FACTORS FOR DETERMINING REQUIRED DEATH BENEFITS...................................................48
APPENDIX D - GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE CHARGES PER THOUSAND OF NET AMOUNT AT RISK..............................51
APPENDIX E - EXECUTIVE OFFICERS AND DIRECTORS.....................................................................................54
APPENDIX F - FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.................................................57
</TABLE>
<PAGE>
DEFINITIONS
The following are key terms used in this Prospectus. Other terms are defined in
this Prospectus as they appear.
ACCOUNT VALUE is the value of each allocation to a Sub-account and any Fixed
Allocation, plus any earnings and less any losses, distributions and charges
thereon, plus the value of any amounts in the Loan Account, plus any earnings
and less any distributions and charges thereon, all before assessment of any
contingent deferred sales charge, contingent deferred tax charge or Debt.
Account Value is determined separately for each Sub-account and each Fixed
Allocation, as well as for any amounts in the Loan Account, and then totaled to
determine the Account Value of your entire Policy.
AGE is the age of an Insured for purposes of this Policy. Initially, and for the
first Policy Year, it is the age last birthday of an Insured as of the Policy
Date. In each following Policy Year, it is the age last birthday of an Insured
as of the preceding Policy Anniversary.
APPLICATION is the form or combination of forms we require you to submit when
you are seeking a Policy. Where there are two Insureds, Application means the
form or combination of forms required for both Insureds.
BENEFICIARY is a person or entity you designate on whose behalf any Death
Proceeds are payable. Unless otherwise specified, Beneficiary refers to all
persons or entities so designated.
CASH VALUE is the Account Value less any contingent deferred sales charge,
contingent deferred tax charge and Debt.
CASH VALUE CREDITS are amounts we credit to your Account Value. We credit these
amounts if your total Cash Value on a Policy Anniversary equals or exceeds a
Cash Value trigger.
CODE is the Internal Revenue Code of 1986, as amended from time to time.
DEATH BENEFIT is the amount payable as a result of an Insured's death before any
applicable reduction for any Debt and before addition of any interest due
pursuant to law. If there is a second Insured, the Death Benefit is payable upon
the death of the last surviving Insured.
DEATH PROCEEDS is the amount payable as a result of the Insured's death after
any applicable reduction for Debt and after addition of any interest due
pursuant to law.
DEBT is the total of any outstanding loan and loan interest.
FACE AMOUNT is the Death Benefit as of the Policy Date.
FIXED ALLOCATION is an allocation of Account Value to our general account that
is to be credited a fixed rate of interest.
GROWTH is a portion of the Account Value. It equals (a) less (b) less (c),
where: (a) is the total current Account Value; (b) is any Debt; and (c) is the
Premium less any partial withdrawals treated as a withdrawal of Premium.
GUARANTEED MINIMUM DEATH BENEFIT is the minimum amount we guarantee is due as a
result of the Insured's death, prior to any reduction for Debt, even if it is
higher than the Required Death Benefit.
IN WRITING is in a written form, in a manner we accept, that is satisfactory to
us and filed at our Office. We retain the right to specifically agree in advance
to accept communication regarding a specific matter by telephone or by some
other form of electronic transmission, in a manner we prescribe.
INSURED is the person upon whose life coverage is issued and as a result of
whose death the Death Proceeds are payable. If there is more than one Insured,
Insured means the last surviving Insured, unless otherwise stated.
ISSUE DATE is the date we issue your Policy.
LOAN ACCOUNT is where we maintain Account Value as collateral for a loan to you
from us.
MATURITY DATE is the Policy Anniversary immediately following the Insured's 95th
birthday, or if there are two Insureds, immediately following the 95th birthday
of the younger Insured, or what would have been the younger Insured's 95th
birthday if the younger Insured predeceases the older Insured.
MONTHLY PROCESSING DAY/DATE is the Valuation Day each month when we deduct
charges from the Account Value. The first Monthly Processing Date is the Policy
Date. After that, the Monthly Processing Dates generally occur on the same day
of the month as the Policy Date. If the Monthly Processing Date occurs on a day
that is not a Valuation Day, the Monthly Processing Date that month will be the
next Valuation Period.
NET SINGLE PREMIUM is the amount that would be required, according to the Code
and the regulations based on the Code, to fund: (a) the Policy's Required Death
Benefit, assuming the current Required Death Benefit would not change; and (b)
future benefits and charges using assumptions about: (i) growth of Account Value
so that it would equal the current Required Death Benefit on the Maturity Date;
and (ii) charges, as provided pursuant to the Code. The Net Single Premium
depends on the attained age, gender (where permitted) and risk class of the
Insured. The Net Single Premium changes as the Insured ages. The applicable Net
Single Premiums would change if required under the Code or regulations based on
the Code.
OFFICE is our administrative office: American Skandia Life Assurance
Corporation, P.O. Box 290698, Wethersfield, Connecticut 06129-0698.
OWNER is either an entity or person who may exercise the ownership rights
provided by a Policy. If we issue a certificate representing interests in a
group life insurance policy, the rights, benefits, and requirements of and the
events relating to an Owner, as described in this Prospectus, will be your
rights as participant in such group policy. Unless later changed, Owner refers
to all persons or entities designated as such in your Policy.
POLICY is the insurance contract or certificate we issue as evidence of our
commitment to pay the Death Proceeds upon the death of the Insured.
POLICY ANNIVERSARY is the yearly anniversary of the Policy Date.
POLICY DATE is the effective date of your Policy.
POLICY YEARS are continuous 12-month periods that begin on the Policy Date and
each Policy Anniversary thereafter.
PORTFOLIO is a portfolio of an underlying mutual fund.
PREMIUM is the cash consideration you give to us for the rights, privileges and
benefits provided by a Policy according to its terms. This includes Premium paid
as of the Issue Date, as shown in the Policy, and any additional consideration
we choose to accept. Acceptance must occur before completion of the underwriting
for the Policy.
REQUIRED DEATH BENEFIT is the minimum amount due as a result of the Insured's
death pursuant to the applicable test we apply in accordance with the Code,
prior to any reduction for Debt.
SEPARATE ACCOUNT is our separate account to which we allocate assets in relation
to our obligations for benefits based on the variable investment options.
SUB-ACCOUNT is a division of the Separate Account.
UNIT is a measure used to calculate Account Value in a Sub-account.
UNIT PRICE is used for calculating: (a) the number of Units allocated to a
Sub-account; and (b) the value of transactions into or out of a Sub-account or
benefits based on Account Value in a Sub-account. Each Sub-account has its own
Unit Price, which will vary each Valuation Period to reflect the investment
experience of that Sub-account.
VALUATION DAY/DATE is every day the New York Stock Exchange is open for trading
or any other day that the Securities and Exchange Commission requires mutual
funds or unit investment trusts to be valued.
VALUATION PERIOD is the period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"We," "us," "our," "American Skandia," or "the Company" means American Skandia
Life Assurance Corporation.
"You" or "your" means the Owner.
<PAGE>
DESCRIPTION OF THE OFFERING
This Policy is described using a "question and answer" format that assumes you,
the prospective purchaser, are asking the questions. The description below is
divided into the following sections: Purchasers, The Insurance Company, Benefits
at the Insured's Death, Account Value and Cash Value, Cash Value Credits, Costs,
Buying a Policy, Variable Investment Options, Transfers and Allocation Services,
Loans, Partial Withdrawals, Surrenders, Accelerated Death Benefit,
Medically-Related Waiver, Risks, Other Rights, The Separate Account, Taxes and
Available Information. A Description of Miscellaneous Provisions and Additional
Details about American Skandia follows this description.
Purchasers
Who should buy this Policy? Life insurance can be bought to meet a
number of needs of individuals or entities, such as corporations or trusts.
Different types of life insurance are designed to address certain needs more
than others. This Policy may be appropriate for a number of persons or entities,
but it may be especially useful for addressing a range of estate planning needs.
Because of estate taxes, purchasers may want to consider placing this type of
coverage in an applicable trust or transferring ownership of the Policy in an
effort to remove the asset from their estate. This Policy may also be useful for
persons seeking to make a sizable donation to a charity or eligible non-profit
organization, where the charity is named both Owner and Beneficiary of the
Policy, and the donor is named as the Insured. You should evaluate carefully
with your financial representative whether this Policy is right for your
specific needs in light of your entire situation and your personal and financial
goals. In particular, you should evaluate the advantages and disadvantages of
replacing any existing life insurance or annuity coverage with this Policy. If
you are seeking specific tax consequences, you should consult with a competent
tax advisor as to whether and how your goals may best be achieved.
The Insurance Company
Who is American Skandia? American Skandia Life Assurance Corporation is
organized as a stock insurance company domiciled in Connecticut. We are licensed
as a life insurer in all 50 states and the District of Columbia. We are a wholly
owned subsidiary of American Skandia Investment Holding Corporation, whose
indirect parent is Skandia Insurance Company Ltd. Skandia Insurance Company Ltd.
is part of a group of companies whose predecessor began operations in 1855. Two
of our affiliates, American Skandia Marketing, Incorporated, and American
Skandia Information Services and Technology Corporation, may undertake certain
administrative functions for us. We also may engage various independent firms to
undertake various administrative functions for us. Our affiliate, American
Skandia Investment Services, Incorporated, currently acts as the investment
manager to American Skandia Trust, one of the underlying mutual funds whose
Portfolios are available as variable investment options. We currently engage
Skandia Investment Management, Inc., an affiliate whose indirect parent is
Skandia Insurance Company Ltd., as investment manager for our general account.
We are under no obligation to engage or continue to engage any investment
manager.
Benefits at the Insured's Death
What benefits are due as a result of the Insured's death? The benefits
due as a result of the Insured's death are the Death Proceeds. If there are
joint Insureds, the benefits are due as a result of the death of the last
surviving Insured.
What are the Death Proceeds? The Death Proceeds are based on the Death
Benefit as of the date we receive all our requirements for paying a death claim
and are satisfied that the death claim can be paid. These requirements include,
but are not limited to, receipt of a valid death certificate and information we
need to make payments to all Beneficiaries.
We determine the Death Proceeds by first subtracting any Debt from the Death
Benefit. We then add any interest amount required by law.
What is the Death Benefit? The Death Benefit is the higher of the
Required Death Benefit and the Guaranteed Minimum Death Benefit as of the date
we receive due proof of death. The Required Death Benefit is the minimum amount
that must be payable at the Insured's death, before reduction for any Debt, for
the Policy to be treated as life insurance under the Code. The Guaranteed
Minimum Death Benefit, which is discussed below in response to the question,
"What is the Guaranteed Minimum Death Benefit?," is the minimum amount payable
at the Insured's death, before reduction for any Debt, irrespective of the
Required Death Benefit. The Required Death Benefit is determined by treating the
Account Value as if it were a net single premium. We determine the Required
Death Benefit by dividing the Account Value by factors that are determined as of
the Policy Date. These factors vary by the attained Age, gender (where
permitted) and risk class of the Insured. See Appendix C for a complete
description of the applicable factors we use to determine the Required Death
Benefit. The following are representative examples of the factors on the Policy
Date for different Ages, genders and risk classes, as well as the amount of the
Required Death Benefit if the Account Value were $100,000.
Female, Age 55, not a tobacco user:
The factor is .400884. $100,000 divided by .400884 results in a
Required Death Benefit of $249,449.
Male, Age 60, a tobacco user:
The factor is .586632. $100,000 divided by .586632 results in a
Required Death Benefit of $170,465.
Female, Age 70, a tobacco user:
The factor is .637176. $100,000 divided by .637176 results in a
Required Death Benefit of $156,943.
Male, Age 75, not a tobacco user:
The factor is .736865. $100,000 divided by .736865 results in a
Required Death Benefit of $135,710.
As noted above, the factors depend on the Insured's gender (where permitted),
risk class and attained Age. The gender and risk class of the Insured does not
change, so the only element that changes the factor after the Policy Date is the
aging of the Insured. The following example may help you understand the effect
of aging on the Required Death Benefit.
The Insured is a woman, Age 64, for whom coverage was issued at her Age 60 in
the "not a tobacco user" risk class. On the Valuation Day before the Policy
Anniversary following the Insured's 65th birthday, the Account Value is
$100,000. The Required Death Benefit as required under the Code for this
Insured's age, gender, risk class and Account Value is $100,000 divided by the
applicable factor of .521878, which results in a Required Death Benefit of
$191,616. For the sake of this example, assume that the next Valuation Day,
which is the Policy Anniversary after the Insured's 65th birthday (the day the
Insured turns Age 65 for purposes of the Policy), the Account Value remains
$100,000. At the higher Age of 65, the Required Death Benefit on the Policy
Anniversary is $100,000 divided by the applicable factor of .536544, which
results in a Required Death Benefit of $186,378.
What else can affect the Required Death Benefit? The Required Death
Benefit changes as the Account Value changes. This is because the Required Death
Benefit is calculated based on the Account Value. A few examples may help show
what this means. Assume for purposes of these examples that the Insured is a
woman, Age 65, for whom coverage was issued at her Age 60 in the "not a tobacco
user" risk class.
(a) On a particular Monthly Processing Date, the Account Value of the
Policy is $100,000. The Required Death Benefit as of that Valuation Day is
$100,000 divided by the then applicable factor of .536544 or $186,378. As of the
next Valuation Day, assume the Account Value has grown to $100,010. The Required
Death Benefit is $100,010 divided by the same factor of .536544, or $186,396.
(b) On a particular Monthly Processing Date, the Account Value of the
Policy is $100,000. The Required Death Benefit as of that Valuation Day is
$100,000 divided by the then applicable factor of .536544, or $186,378. As of
the next Valuation Day, assume the Account Value has decreased to $99,990. The
Required Death Benefit is $99,990 divided by the same factor of .536544, or
$186,359.
(c) On a particular Monthly Processing Date, the Account Value of the
Policy before any partial withdrawal is $100,000. The Required Death Benefit as
of that Valuation Day is $100,000 divided by the then applicable factor of
.536544, or $186,378. On that same day, assume $20,000 is taken as a partial
withdrawal. Immediately after the partial withdrawal, the Required Death Benefit
is $80,000 divided by the same factor of .536544, or $149,102.
What is the Face Amount? The Face Amount is the Required Death Benefit
on the Policy Date.
What is the Guaranteed Minimum Death Benefit? We use the Guaranteed
Minimum Death Benefit in determining the Death Proceeds if the Guaranteed
Minimum Death Benefit is higher than the Required Death Benefit. The Guaranteed
Minimum Death Benefit is determined as follows:
(a) On the Policy Date, the Guaranteed Minimum Death Benefit equals the
Premium.
(b) After the Policy Date and until the first Policy Anniversary, the
Guaranteed Minimum Death Benefit is the Premium less every "reduction due to a
withdrawal," which is defined below.
(c) After the first Policy Anniversary but before the "target date,"
(the Policy Anniversary that the Insured turns Age 75), the Guaranteed Minimum
Death Benefit is the higher of (1) or (2), where: (1) is the Premium less every
"reduction due to a withdrawal"; and (2) is the highest "Anniversary Value."
"Anniversary Value" is the Account Value on any Policy Anniversary less every
reduction due to a withdrawal since that Policy Anniversary.
(d) On or after the "target date," the Guaranteed Minimum Death Benefit
is the higher of (1) or (2), where: (1) is the Premium less every "reduction due
to a withdrawal"; and (2) is the highest Anniversary Value, as defined above in
(c), as of the "target date," less every "reduction due to a withdrawal" after
the "target date."
(e) Notwithstanding items (a) through (d) above, if the Insured is Age
75 or older on the Policy Date, the Guaranteed Minimum Death Benefit is the
Premium less every "reduction due to a withdrawal."
(f) If the Policy is issued for two (2) Insureds, the Guaranteed
Minimum Death Benefit is based on the age of the younger Insured, or what would
have been the age of the younger Insured if the younger Insured predeceases the
older Insured.
A "reduction due to a withdrawal" is a proportional reduction. It equals the
ratio by which the Account Value is reduced by a partial withdrawal or a payment
under the Accelerated Death Benefit provision, described below in the section of
the same name, multiplied by the Guaranteed Minimum Death Benefit as of the
effective date of such partial withdrawal or payment. For example, if the
Guaranteed Minimum Death Benefit before a partial withdrawal is $100,000 and the
Account Value is $120,000, the Guaranteed Minimum Death Benefit after a $60,000
partial withdrawal (a 50% reduction in the Account Value) would be $50,000 (a
50% reduction in the Guaranteed Minimum Death Benefit).
How are Death Proceeds paid? We pay the Death Proceeds as a lump sum or
in accordance with the terms of whatever settlement options we then make
available to Beneficiaries. Generally, Beneficiaries can choose a lump sum or
from among the settlement options that we make available. However, you may
choose the method of payment for your Beneficiaries if you notify us In Writing
before the Insured's death how you want the Death Proceeds to be paid.
Account Value and Cash Value
What is the Account Value? The Account Value is the value of a Policy
before any deduction for any contingent deferred sales charge, contingent
deferred tax charge or Debt. It is the total of the Account Value maintained in
the investment options you choose to utilize plus any Account Value in the Loan
Account. You may allocate Account Value to variable investment options, which
are all Sub-accounts of the Separate Account, or to Fixed Allocations. Any
portion of the Account Value maintained in the Loan Account serves as collateral
for outstanding policy loans.
How does American Skandia determine the Account Value in the variable
investment options? On each Valuation Date, the Account Value in any variable
investment option you utilize equals the number of Units you then maintain in
that investment option multiplied by that investment option's then current Unit
Price. When you allocate all or a portion of the Premium to an investment option
or when you transfer Account Value into a variable investment option, Units are
purchased using the then current Unit Price. When you take all or a portion of a
distribution or benefit from a variable investment option or you transfer
Account Value from a variable investment option, Units are sold at the then
current Unit Price in order to fund that distribution, benefit or transfer.
How does American Skandia determine the Account Value for Fixed
Allocations? We credit a fixed rate of interest to Fixed Allocations. From time
to time we declare interest rates applicable to new Fixed Allocations. If you
make a Fixed Allocation, we credit the rate then in effect to that Fixed
Allocation until the next Policy Anniversary. Once that Policy Anniversary is
reached, we credit, for the next Policy Year, the then current rate applicable
to new Fixed Allocations. This applies to all your Fixed Allocations then in
effect. During each subsequent Policy Year, the rate we credit for each Policy
Year is the one then in effect for new Fixed Allocations.
The Policy offered pursuant to this Prospectus includes Fixed Allocations. These
Fixed Allocations are not registered as a security with the Securities and
Exchange Commission under either the Securities Act of 1933 or the Investment
Company Act of 1940. The Fixed Allocations are not subject to these Acts.
Information about the Fixed Allocations is included in this Prospectus to help
with your understanding of the features of the Policy. 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 assets
supporting Fixed Allocations are held in American Skandia's general account.
How does American Skandia determine the interest rate for Fixed
Allocations? We determine the interest rate applied to Fixed Allocations based
on our assessment of the earnings we expect to achieve when investing to support
these obligations, our costs, competition, profit targets and other factors. We
have sole discretion to determine the rates. However, the interest rate will
never be less than 3.0% per year, compounded yearly.
How does American Skandia determine the Account Value in the Loan
Account? The rate we credit to Account Value in the Loan Account depends on
whether that Account Value is serving as collateral for "preferred loans" or for
"standard loans," which are discussed below in response to the question "What
are a `preferred loan' and a `standard loan'?" We credit interest at the rate of
6.0% per year, compounded yearly, to Account Value in the Loan Account serving
as collateral for "preferred loans." We credit interest at the rate of 4.0% per
year, compounded yearly, to Account Value in the Loan Account serving as
collateral for "standard loans."
What is the Cash Value? The Cash Value is the total Account Value less
any contingent deferred sales charge, contingent deferred tax charge and Debt.
Do I have to maintain a minimum Cash Value? The answer depends on
whether there is any Debt. You do not have to maintain a minimum Cash Value if
there is no Debt, except if you take a partial withdrawal. We will inform you
if, on a Monthly Processing Date, your Cash Value equals or is less than zero.
Such Monthly Processing Date will be the beginning of the grace period. At that
time we will also inform you of the amount you can pay if you wish to
reestablish any Cash Value. No payment is required. The Policy remains in force
with the Death Benefit equal to the Guaranteed Minimum Death Benefit as of the
beginning of the grace period.
If there is any Debt, there must always be enough Cash Value so that after we
deduct any charges the Cash Value is more than zero. If the Cash Value would be
zero or less after we deduct charges, we send you a notice giving you a 61-day
"grace period" to send us a required amount. If this amount is not paid by the
end of the grace period, the Policy ends without value.
Cash Value Credits
What are Cash Value Credits, and how do I get them? Cash Value Credits
are amounts we credit to your Account Value, where permitted by law. We provide
these amounts if your total Cash Value on a Policy Anniversary equals or exceeds
a Cash Value trigger. We determine if your Policy is eligible for a Cash Value
Credit on each Policy Anniversary. Eligibility for Cash Value Credits may change
from year to year. Whether your Cash Value meets or exceeds the trigger depends
on investment performance of the investment options, partial withdrawals, Debt
and whether you pay back any loans or loan interest.
What is the Cash Value trigger? The Cash Value trigger is 200% of the
Premium. That means that, even if your Account Value is 200% of the Premium, you
may not have reached the trigger amount, since the Cash Value may be less than
the Account Value due to the contingent deferred sales charge, the contingent
deferred tax charge and any Debt.
How much is added to my Account Value? The Cash Value Credit, if any,
added to your Account Value equals 0.25% of the Cash Value on the applicable
Policy Anniversary. The following examples may help you understand this.
(a) Assume that the Premium paid for a Policy is $100,000. Assume that
on the 10th Policy Anniversary the Cash Value is $202,000. The
Cash Value trigger is 200% of $100,000, which is $200,000. The
amount to be added to the Account Value is 0.25% of $202,000,
which is $505.
(b) Assume that, for the same Policy, the Cash Value on the 11th
Policy Anniversary is $195,000, due to a combination of investment
performance and a loan of $25,000 in the middle of the Policy
Year. The Cash Value trigger for this Policy, as noted above, is
$200,000. Therefore, no Cash Value Credit is provided on the 11th
Policy Anniversary.
(c) Assume that, for the same Policy, the Cash Value on the 12th
Policy Anniversary is $240,000, due to a combination of investment
performance and repayment of the loan and loan interest. As noted
above, the Cash Value trigger is $200,000. The amount to be added
is 0.25% of $240,000, which is $600.
Who pays for the Cash Value Credits, and how are they paid? We pay for
any Cash Value Credits out of our general account. We allocate any Cash Value
Credits due on the applicable Policy Anniversary to the variable investment
options and Fixed Allocations in which you then maintain Account Value. We make
the allocations pro-rata based on the Account Value in the variable investment
options and any Fixed Allocations on the applicable Policy Anniversary. No
allocation is made to the Loan Account.
Cash Value Credits cannot be used to repay Debt.
Costs
What kinds of charges are there for this Policy? The Policy has four
(4) different kinds of charges: (1) charges we assess daily against assets
maintained in the Separate Account, which only apply to the Account Value you
allocate to the variable investment options; (2) charges we deduct monthly from
the Account Value and which are due in all Policy Years; (3) charges that we
deduct monthly from the Account Value only for the first ten Policy Years; and
(4) "contingent" charges, which are those charges that you only pay in certain
specified circumstances.
What are the charges assessed against the Separate Account and when are
they paid? We assess a mortality and expense risk charge and an administration
charge against the assets in the Separate Account each Valuation Period. The
mortality and expense risk charge is 0.90% per year. The charge for the
administrative expenses connected with operating the Separate Account is 0.25%
per year. We assess these charges each Valuation Period against the average
daily total value of each Sub-account. We reserve the right to assess the
Separate Account for any taxes that may be attributed to it. Currently, no such
charge for taxes is assessed.
What monthly charge applies in all Policy Years? We always deduct the
cost of insurance charge. We take this charge from your Account Value, in
advance, each Monthly Processing Day. The charge is a percentage of your then
current Account Value.
How much is the cost of insurance charge? The cost of insurance charge
is not a constant dollar amount, in part because it is a percentage of your
Account Value. The percentage of your Account Value that we charge differs
depending on four factors: (1) whether we issue the Policy for only one Insured
or for two; (2) the Age(s) of the Insured(s) as of the Policy Date; (3) the
gender of the Insured(s), where permitted; and (4) the risk class(es) of the
Insured(s). We reserve the right to also have the percentage decrease based on
the size of the Premium.
The actual charge is a monthly charge. The equivalent yearly cost of insurance
charges as of the Policy Date are shown below for a Policy issued for one
Insured. The charges will be different if we are required by law to charge the
same amount for males and females. For purposes of this and the succeeding
table, "Age" is as of the Policy Date.
---------------- ------------------------- ----------------- -----------------
Gender Tobacco Usage Class Age 20-69 Age 70-90
---------------- ------------------------- ----------------- -----------------
---------------- ------------------------- ----------------- -----------------
Male No Tobacco Use 0.55% 0.90%
---------------- ------------------------- ----------------- -----------------
---------------- ------------------------- ----------------- -----------------
Female No Tobacco Use 0.40% 0.75%
---------------- ------------------------- ----------------- -----------------
---------------- ------------------------- ----------------- -----------------
Male Tobacco User 0.90% 1.25%
---------------- ------------------------- ----------------- -----------------
---------------- ------------------------- ----------------- -----------------
Female Tobacco User 0.75% 1.10%
---------------- ------------------------- ----------------- -----------------
If the Policy is issued for two Insureds, the yearly percentages of the Account
Value we deduct for the cost of insurance will depend on the risk classes of the
Insureds. The following are examples of applicable charges as of the Policy
Date. The charges will be different if we are required by law to charge the same
amount for males and females.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
------------------------ -------------------------- ------------------------- ------------------------ ------------
Gender (1st Insured) Tobacco Usage Class Gender (2nd Insured) Tobacco Usage Class Charge
------------------------ -------------------------- ------------------------- ------------------------ ------------
------------------------ -------------------------- ------------------------- ------------------------ ------------
Male No Tobacco Use Female No Tobacco Use 0.25%
------------------------ -------------------------- ------------------------- ------------------------ ------------
------------------------ -------------------------- ------------------------- ------------------------ ------------
Male Tobacco User Female Tobacco User 0.35%
------------------------ -------------------------- ------------------------- ------------------------ ------------
------------------------ -------------------------- ------------------------- ------------------------ ------------
Male No Tobacco Use Female Tobacco User 0.30%
------------------------ -------------------------- ------------------------- ------------------------ ------------
------------------------ -------------------------- ------------------------- ------------------------ ------------
Male Tobacco User Female No Tobacco Use 0.30%
------------------------ -------------------------- ------------------------- ------------------------ ------------
</TABLE>
Is there a maximum cost of insurance charge? We monitor the cost of
insurance charge so that it never exceeds a guaranteed maximum charge. We
determine the guaranteed maximum as if we were charging you an increasing amount
based on the Insured's attained Age and were assessing that charge on the
difference between the Death Benefit and the Account Value. If the percentages
we otherwise would charge would exceed the guaranteed maximum, we only charge
the guaranteed maximum.
The guaranteed maximum cost of insurance charge depends on the risk class of the
Insured(s). Also, if required by law, unisex charges will apply. We base the
guaranteed maximum charges on the sex distinct 1980 Commissioners Standard
Ordinary Ultimate Mortality Table, age last birthday unless unisex rates apply.
See Appendix D for a description of the maximum cost of insurance charges for
different age gender and risk classes.
What monthly charges apply only in the first 10 Policy Years? We deduct
the tax charge and the sales charge only in the first 10 Policy Years.
How much is the sales charge and when do I pay it? We deduct the sales
charge during the first 10 Policy Years. It is a percentage of your Account
Value and is the equivalent of 0.40% per year. We deduct this charge monthly in
advance. We take the charge from your Account Value each Monthly Processing Day.
The charge is a percentage of your then current Account Value. If you surrender
your Policy or take a partial withdrawal, we may deduct a contingent deferred
sales charge, as described below in response to the question "How much is the
contingent deferred sales charge and when must I pay it?"
There are certain circumstances which may result in reduction or elimination of
the sales charge. These are exactly the same circumstances that may result in
reduction or elimination of the contingent deferred sales charge, as described
below in response to the question "How much is the contingent deferred sales
charge and when must I pay it?"
How much is the tax charge and when do I pay it? We deduct the tax
charge during the first 10 Policy Years. It is a percentage of your Account
Value and is the equivalent of 0.25% per year. We deduct this charge monthly in
advance. We take the charge from your Account Value each Monthly Processing Day.
The charge is a percentage of your then current Account Value. If you surrender
your Policy or take a partial withdrawal, we deduct a contingent deferred tax
charge, as described below in response to the question "How much is the
contingent deferred tax charge and when must I pay it?"
What are the contingent charges? The contingent charges are: (1) the
contingent deferred sales charge; (2) the contingent deferred tax charge; (3)
the maintenance fee; and (4) the transfer fee.
How much is the contingent deferred sales charge and when must I pay
it? The contingent deferred sales charge is a percentage of the Premium that is
charged if you surrender or withdraw any amount: (a) during the first nine (9)
Policy Years; and (b) that, according to our rules, is a withdrawal of Premium,
not a withdrawal of Growth. It may be assessed at the time of any partial
withdrawal or surrender, unless the Policy qualifies for a medically-related
waiver of these charges, as discussed in the section of the Prospectus entitled
"Medically-Related Waiver." The percentages are as follows:
----------------- ---------------- ---------------- ----------------
Policy Year Percentage Policy Year Percentage
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
1 7.75% 6 5.00%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
2 7.50% 7 4.25%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
3 7.25% 8 3.50%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
4 6.50% 9 2.75%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
5 5.75% 10+ 0.00%
----------------- ---------------- ---------------- ----------------
From time to time, and to the extent permitted by law, we may reduce the amount
of the sales charge and the contingent deferred sales charge, the period during
which such charges apply, or both, when Policies are sold to persons or groups
of persons in a manner that reduces sales expenses. We would consider such
factors as: (a) the size and type of group; (b) the amount of Premiums; and/or
(c) other transactions where sales expenses are likely to be reduced.
No sales charge or contingent deferred sales charge is imposed when, as of the
Policy Date, the Owner or the Insured of a Policy issued pursuant to this
Prospectus is: (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 American Skandia Marketing, Incorporated; (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 such person noted in (b) through (g) above; (i) such person's
child(ren) or other legal dependent under the age of 21; and (j) the siblings of
any such persons noted in (b) through (h) above.
How much is the contingent deferred tax charge, and when must I pay it?
The contingent deferred tax charge is a percentage of the Premium that is
charged if you surrender or withdraw any amount: (a) during the first nine (9)
Policy Years; and (b) that, according to our rules, is a withdrawal of Premium,
not a withdrawal of Growth. It is assessed at the time of any partial withdrawal
or surrender, unless the Policy qualifies for a medically-related waiver of
these charges, as discussed on the section of the Prospectus entitled
"Medically-Related Waiver." The percentages are as follows:
----------------- ---------------- ---------------- ----------------
Policy Year Percentage Policy Year Percentage
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
1 2.25% 6 1.00%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
2 2.00% 7 0.75%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
3 1.75% 8 0.50%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
4 1.50% 9 0.25%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
5 1.25% 10+ 0.00%
----------------- ---------------- ---------------- ----------------
How much is the maintenance fee and when must I pay it? The maintenance
fee is $2.50 per month. We take the charge from your Account Value monthly in
advance. However, we will waive the maintenance fee on any Monthly Processing
Day if your Account Value is $75,000 or greater.
How much is the transfer fee, and when must I pay it? We charge $10.00
for every transfer after the 12th in each Policy Year. That includes transfers
into a Fixed Allocation and any transfers from a Fixed Allocation unless the
transfer occurs on a Policy Anniversary. For this purpose, all transfers
occurring during the same Valuation Period are considered one transfer. We
assess the transfer fee at the time of any transfer subject to this fee.
How are charges deducted from Account Value? We deduct charges from
your investment options pro-rata based on the Account Value in each investment
option. If you maintain Account Value in more than one Fixed Allocation in a
Policy Year, any applicable charges will be deducted on a "last-in, first-out"
basis, starting with the last Fixed Allocation that was made prior to the
Monthly Processing Date the deduction is made. Upon surrender or withdrawal, we
assess charges against the investment options pro-rata in the same ratio as
Account Value is being withdrawn from such investment options.
What charges do the Portfolios make? Each Portfolio charges different
fees. Expenses for the Portfolios are provided in the "Variable Investment
Options" section below. More detailed information about fees and charges can be
found in the prospectuses for the Portfolios.
Buying a Policy
How do I buy a Policy? We require that our standards be met and that we
receive a Premium before we issue a Policy. We need information to determine if
those standards have been met. We require you to submit an Application as part
of our effort to gather the needed information. We may require additional
information, including, but not limited to, some of the Insured's medical
records. We may also require the Insured to take certain medical tests. As part
of our standards, we will not issue a Policy if, as of the Policy Date, the
Insured would be less than Age 20 or older than Age 90. If our standards are not
met and we received a Premium, we will return to you an amount equal to the
Premium. No interest will be paid.
To the extent permitted by law, we reserve the right to apply differing
standards of insurability to persons who may be part of a group or who may
qualify, for some other reason, as part of a different class. Such classes may
include, but are not limited to, persons seeking a Policy who are applying all
or a portion of proceeds from an insurance or annuity contract issued by
American Skandia or an affiliate, or proceeds of a redemption from another
financial product, such as mutual funds, distributed by any of our affiliates or
by an affiliate of any of the Portfolios. One of the criteria we may apply in
such a situation is that such differing standards of insurability apply only
after maintaining funds in such policy, contract, or financial product for a
specified period of time.
What is the Premium, and when do I pay it? The minimum Premium we
generally accept is $10,000. We may accept less under certain circumstances. The
maximum we accept without prior approval by our home office is $500,000. If you
are seeking a specific Face Amount, the Premium will depend on the Insured's
age, risk class and gender, where permitted. We will determine the Face Amount
using the Premium as the Net Single Premium for the Insured's age, risk class
and gender, where permitted. You may submit Premium with the Application if: (a)
the Insured is not over age 80; and (b) the Insured meets certain medical
underwriting criteria. If any portion of the Premium is to be received as part
of a replacement of a life insurance, endowment or annuity policy then we must
receive all our requirements In Writing for all such replacements as of the same
date and any additional Premium amounts other than the proceeds of such
replacement must be received by us at our Office at the same time as we receive
such requirements In Writing. Replacements include tax-free exchanges subject to
our acceptance. We will immediately return any Premium that should not have been
submitted based on these criteria. If we would not accept Premium with the
Application or you chose not to submit a Premium with the Application, we will
notify you if and when we have accepted the Application and agreed, subject to
submission of the Premium, to issue a Policy. We will not issue a Policy until
we receive Premium at our Office. We will not accept Premium of which we were
not informed at the time you submit the Application to us.
You may choose to use our funds transfer authorization procedures as part of
buying a Policy. If you elect this procedure, you authorize us to redeem funds
to pay Premium from one or more financial institutions with which you currently
maintain funds. You must do so In Writing using a form that authorizes us to
obtain such funds only if and when we have determined that the Application meets
our standards for issuing a Policy. If you use this procedure, you must provide
us with all such authorizations simultaneously. If you wish to also pay any
additional amounts, we must receive such Premium amounts at the same time we
receive such authorizations.
The standards we apply in reviewing the Application may depend on factors such
as the proposed Insured's age and the amount of Premium to be applied to the
Policy. In certain cases, we may apply simplified standards. However, the
Premium amount you state in the Application may be an estimate if you are
planning: (a) to replace a life insurance, endowment or annuity policy; (b) to
exchange a life insurance or endowment policy; or (c) to use our funds transfer
authorization procedures. If we used simplified standards based on a Premium
estimate but the actual amounts we receive to be applied as Premium exceed the
limits for such standards, we reserve the right, to the extent permitted by law,
to not issue a Policy and return such amounts directly to you or, on your
behalf, to the financial institution from which the funds were obtained. We
cannot guarantee such institution will accept the return of such amounts.
Am I covered while my Application is being reviewed? We may issue you a
temporary insurance agreement during the "underwriting period." The
"underwriting period" is the period between the time you first apply for a
Policy and the time we either issue the Policy or decide not to issue one. A
temporary insurance agreement may be issued if: (a) the Application is completed
in full; (b) the Insured answers "no" to certain questions on the Application
(these are questions we use as indicators of whether we will issue temporary
insurance); (c) the Insured is age 80 or younger; and (d) a Premium is submitted
with the Application. If we issue a temporary insurance agreement and the
Insured (both Insureds if there are two Insureds) dies during the underwriting
period, the temporary insurance benefit will be payable if all of the conditions
of the temporary insurance agreement are satisfied. The underwriting period
generally will not exceed 45 days. If the Insured(s) die(s) during the
underwriting period and no temporary insurance agreement was in effect, no
benefit is payable.
We will return any Premium submitted with the Application if we cannot complete
underwriting within 45 days from the date the Application is signed. If you
notify us promptly, we will continue the underwriting process and notify you if
and when you meet our standards for issuing a Policy, at which time you may once
again send us a Premium.
Temporary insurance ends 45 days after the Application is signed, even if the
underwriting period exceeds 45 days.
What is the temporary insurance benefit? If the Insured dies while
temporary insurance is in effect, we pay the Beneficiary the lesser of the Face
Amount that would be in effect on the Policy Date if a Policy had been issued or
$250,000. This $250,000 maximum applies to all temporary insurance then in
effect with us. Premium amounts in excess of this benefit are returned to you,
without interest or earnings.
How and when is my Premium invested? We invest the Premium on the Issue
Date. You can request that we allocate the Premium using one or more variable
investment options and/or a Fixed Allocation. However, we initially invest the
portion of the Premium that you indicate to us that you want invested in
variable investment options in the AST Money Market Sub-account, unless you
submit a "return waiver" In Writing before the Issue Date, where permitted by
law. A return waiver is an election by you to invest as soon as possible in the
variable investment options of your choice. If you submit a "return waiver" and
then decide to return your Policy during the "free-look" period, you may receive
back less than the Premium. Generally, we transfer the Account Value in the AST
Money Market Sub-account to the variable investment options you request as of
the Valuation Date which is on or immediately after the 15th day after the date
we issue a Policy. However, we will make the transfer as of a later date if your
"free-look" period is longer than 10 days to meet state law requirements.
What happens if I change my mind about buying a Policy? You have a
"free-look" period during which you can change your mind about buying a Policy.
The free-look period is never less than 10 days from the date you receive your
Policy. It may be longer depending on the applicable state law and the
circumstances of your purchase. If you return your Policy to us within the
free-look period, we generally will return the greater of (1) or (2) where (1)
is the Premium paid; and (2) is your Account Value plus any charges deducted
from your Account Value. However, if you have submitted a "return waiver," we
will return only your Account Value plus any charges deducted from your Account
Value. This may be more or less than Premium paid.
Variable Investment Options
What are the investment objectives and policies of the variable
investment options? What charges are made by the Portfolios in which these
options invest? Each variable investment option is a Sub-account of the Separate
Account. Each Sub-account invests exclusively in one Portfolio. Details about
the investment objectives, policies, risks, costs and management of the
Portfolios are found in the prospectuses for the underlying mutual funds. You
should carefully read such prospectuses for any Portfolio in which you are
interested. To assist you in determining which Portfolios may be of interest to
you, we have provided below a list of the Portfolios, their investment
objectives (in italics) and a short, summary description of their key policies.
Next to each Portfolio's investment objective and policies is the investment
management fee, other expenses, and the total annual expense for such Portfolio.
The total annual expense is the sum of the investment management fee and other
expenses. Each figure is stated as a percentage of the Portfolio's average daily
net assets. Except as noted, all expenses shown are after any applicable
reimbursement or waiver of fees. These percentages are fees for the calendar
year that ended December 31, 1997. Those Portfolios below that are marked with
an asterisk (*) have not been in operation for a full year. Therefore, the
expenses shown are estimated and annualized. The underlying mutual fund
portfolio information was provided by the underlying mutual funds and has not
been independently verified by the Company.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------- -------------- ----------- ----------
Investment Other Total
Portfolio: Investment Objective/Policies Management Expenses Annual
Fee Expenses
- ---------------------------------------------------------------------------------------------- -------------- ----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
American Skandia Trust Portfolios
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Lord Abbett Growth and Income: long-term growth of capital and income while attempting to avoid
excessive fluctuations in market value. Normally, investments will be made in common stocks of
seasoned companies which are expected to show above-average growth and which the Portfolio's 0.75% 0.18% 0.93%
sub-advisor believes to be in sound financial condition.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Lord Abbett Small Cap Value*: to seek long-term capital appreciation. Investments will be
primarily made in equity securities which are believed to be undervalued. Under normal
circumstances, the Portfolio will invest at least 65% of its assets in common stocks issued by 0.95% 0.39% 1.34%
smaller, less well-known companies, with market capitalizations of less than $1 billion.
Smaller companies may carry more risk than larger companies.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
JanCap Growth: growth of capital in a manner consistent with the preservation of capital. The
Portfolio pursues its objective by emphasizing investments in common stocks. 0.88% 0.18% 1.06%(1)
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
AST Janus Overseas Growth: to seek long-term growth of capital. The Portfolio pursues its
objective primarily through investments in common stocks of issuers located outside the United 1.00% 0.35% 1.35%
States.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
AST Money Market: to maximize current income and maintain high levels of liquidity. The
Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average
maturity of not more than 90 days and by investing in securities which have effective 0.45% 0.15% 0.60%(2)
maturities of not more than 397 days.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Federated High Yield: to seek high current income by investing primarily in a diversified
portfolio of fixed income securities. The Portfolio will invest at least 65% of its assets in
lower-rated (BBB or lower) fixed rate corporate debt obligations. Investments of this type are
subject to a greater risk of loss of principal and interest than investments in higher rated 0.75% 0.23% 0.98%
securities and are generally considered high risk. Lower-rated or unrated bonds are commonly
referred to as "junk bonds."
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
T. Rowe Price Asset Allocation: to seek a high level of total return by investing primarily in
a diversified group of fixed income and equity securities. Under normal conditions over the
long-term, the Portfolio expects to allocate its assets so that approximately 40% of its assets 0.85% 0.28% 1.13%
will be in fixed income securities and approximately 60% in equity securities.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
T. Rowe Price International Equity: to seek total return of its assets from long-term growth of
capital and income, principally through investments in common stock of established, non-U.S.
companies. The Portfolio intends to diversify broadly among countries and to normally have at 1.00% 0.26% 1.26%
least three different countries represented in the Portfolio.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
T. Rowe Price Natural Resources: to seek long-term growth of capital through investment
primarily in common stocks of companies which own or develop natural resources and other basic
commodities. The Portfolio will invest primarily (at least 65% of its total assets) in common 0.90% 0.26% 1.16%
stocks of companies which own or develop natural resources and other basic commodities.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
T. Rowe Price International Bond: seeks to provide high current income and capital appreciation
by investing in high-quality, non dollar-denominated government and corporate bonds outside the
United States. The Portfolio will invest at least 65% of its assets in high-quality, non
dollar-denominated government and corporate bonds outside the United States. The Portfolio may
also invest up to 20% of its assets in below investment-grade, high-risk bonds, including bonds 0.80% 0.31% 1.11%
in default or those with the lowest rating (commonly referred to as "junk bonds").
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
T. Rowe Price Small Company Value: to provide long-term capital appreciation by investing
primarily in small-capitalization stocks that appear to be undervalued. The Portfolio will
invest at least 65% of its total assets in companies with a market capitalization of $1 billion
or less that appear undervalued by various measures, such as price/earnings or price/book value 0.90% 0.26% 1.16%
ratios. Investing in small companies involves greater risk, as well as greater
opportunity, than is customarily associated with more established companies.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Founders Capital Appreciation: to seek capital appreciation. The Portfolio will normally
invest at least 65% of its total assets in common stocks of U.S. companies with market
capitalizations of $1.5 billion or less. Investment in such companies may involve greater risk 0.90% 0.23% 1.13%
than is associated with more established companies.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Founders Passport: to seek capital appreciation. The Portfolio invests primarily in securities
issued by foreign companies which have market capitalizations or annual revenues of $1 billion
or less. At least 65% of the Portfolio's assets will normally be invested in foreign
securities representing a minimum of three countries. The Portfolio will normally will invest
a significant proportion of its assets in the securities of small and medium-sized companies, 1.00% 0.35% 1.35%
which involves greater risk than is customarily associated with more established companies.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
INVESCO Equity Income: to seek high current income while following sound investment practices.
Capital growth is a secondary consideration. The Portfolio seeks to achieve its objective by
investing in securities which will provide a relatively high-yield and stable return and which,
over the years, may also provide capital appreciation. The Portfolio normally will invest at 0.75% 0.20% 0.95%
least 65% of its assets in dividend-paying, marketable common stocks of domestic
and foreign industrial issuers.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
PIMCO Total Return Bond: to seek to maximize total return consistent with preservation of
capital. The Portfolio will invest in a diversified portfolio of fixed-income securities of 0.65% 0.21% 0.86%
varying maturities with a portfolio duration from three to six years.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
PIMCO Limited Maturity Bond: to seek to maximize total return, consistent with preservation of
capital and prudent investment management. The Portfolio will invest in a diversified
portfolio of fixed income securities of varying maturities with a portfolio duration from one 0.65% 0.23% 0.88%
to three years.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Robertson Stephens Value + Growth: to seek capital appreciation. The Portfolio will invest
primarily in growth companies believed by the sub-advisor to have favorable relationships
between price/earnings ratios and growth rates in sectors offering the potential for
above-average returns. The Portfolio may invest a substantial portion of its assets in
securities of small companies. Such companies may offer greater opportunities for capital 1.00% 0.23% 1.23%
appreciation than larger companies, but investments in such companies may involve certain
special risks. The Portfolio may invest up to 35% of its net assets in securities principally
traded in foreign markets.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Twentieth Century Strategic Balanced: to seek capital growth and current income. It is the
intention of the Portfolio's sub-advisor to maintain approximately 60% of the Portfolio's
assets in common stocks that are considered by the sub-advisor to have better-than-average 0.85% 0.40% 1.25%(3)
prospects for appreciation and the remainder in bonds and other fixed income securities.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Twentieth Century International Growth: to seek capital growth. The Portfolio will invest
primarily in issuers in developed markets. Under normal conditions, the Portfolio will invest
at least 65% of its assets in equity and equity equivalent securities of issuers from at least 1.00% 0.75% 1.75%
three different countries outside the United States.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
AST Putnam Value Growth & Income: to seek capital growth with current income as a secondary
objective. The Portfolio invests primarily in common stocks that offer potential for capital
growth, and may, consistent with its investment objectives, invest in stocks that offer 0.75% 0.48% 1.23%
potential for current income. The Portfolio may invest up to 20% of its assets in securities
traded in foreign markets.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
AST Putnam International Equity: to seek capital appreciation. The Portfolio seeks its
objective by investing primarily in equity securities of companies located in a country other
than the United States. The Portfolio will, under normal circumstances, invest at least 65% of 0.88% 0.27% 1.15%
its total assets in issuers located in at least three different countries other
than the United States.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
AST Putnam Balanced: to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds which will produce both capital
growth and current income. The Portfolio may invest in almost any type of
security or negotiable instrument, including cash or money market instruments.
The portion of the Portfolio's assets invested in equity securities and
fixed income securities will vary from time to time in light of the Portfolio's investment 0.74% 0.29% 1.03%
objective, changes in interest rates and economic of other factors. Under normal market
conditions, it is expected that at least 25% of the Portfolio's total assets
will be invested in fixed income securities.
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Cohen & Steers Realty*: to maximize total return through investment in real
estate securities. The Portfolio pursues its investment objective of maximizing
total return by seeking, with approximately equal emphasis, capital appreciation
(both realized and unrealized) and current income. Under normal circumstances,
the Portfolio will invest substantially all of its assets in the equity
securities of "real estate companies". Real estate companies include those
companies that derive at least 50% of its revenues from the ownership, construction, financing, 1.00% 0.40% 1.40%
management or sale of commercial, industrial, or residential real estate or that
has at least 50% of its assets in such real estate.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Stein Roe Venture*: to seek long-term capital appreciation. The Portfolio emphasizes
investments in financially strong small and medium-sized companies, based principally on
management appraisal and stock valuation. The Portfolio will pursue its objective by investing
primarily in a diversified portfolio of common stocks and other equity-type securities of 0.95% 0.39% 1.34%
entrepreneurially managed companies the sub-advisor believes represent special opportunities.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
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Bankers Trust Enhanced 500*: to outperform the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500(R)") through stock selection resulting in different weightings of common
stocks relative to the index. The Portfolio will include the common stocks of companies
included in the S&P 500(R). While the majority of the issues held by the Portfolio will have 0.60% 0.20% 0.80%(4)
neutral weightings to the S&P 500, approximately 100 will be over- or under-weighted relative
to the index.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of
the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment
Services, Incorporated and Bankers Trust. The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Portfolio.
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- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Marsico Capital Growth*: to seek capital 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 in industries and companies the sub-advisor believes are experiencing 0.90% 0.38% 1.28%
favorable demand for their products and services, and which operate in a
favorable competitive and regulatory environment.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Neuberger&Berman Mid-Cap Value*: to seek capital growth. The Portfolio seeks capital growth
through an investment approach that is designed to increase capital with reasonable risk. The
Portfolio invests principally in common stocks of medium to large capitalization established 0.90% 0.25% 1.15%(5)
companies, using a value-oriented investment approach. The Sub-advisor looks for securities
believed to be undervalued based on strong fundamentals, including a low price-to-earnings
ratio, consistent cash flow, and the company's track record through all parts of
the market cycle.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Neuberger&Berman Mid-Cap Growth*: to seek capital appreciation. The Portfolio invests in a
diversified portfolio of common stocks believed to have the maximum potential for long-term
above-average capital appreciation. Under normal conditions, the Portfolio primarily invests 0.90% 0.24% 1.14%(6)
in the common stocks of companies with equity market capitalizations from $300 million to $10
billion at the time of investment. The Portfolio does not seek to invest in
securities that pay dividends or interest, and any such income is incidental.
- ------------------------------------------------------------------------------------------------------------------------------------
The Alger American Fund Portfolios
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Alger American Growth: long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity securities of 0.75% 0.04% 0.79%
companies that, at the time of purchase, have total market capitalization of $1
billion or greater.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Alger American Small Capitalization: long-term capital appreciation. Except during defensive
periods, the Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market capitalization 0.85% 0.04% 0.89%
within the range of companies included within the Russell 2000 Growth Index or
the S&P SmallCap 600 Index, updated quarterly.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Alger American MidCap Growth: long-term capital appreciation. Except during temporary
defensive periods, the Portfolio invests at least 65% of its total assets in equity securities
of companies that, at the time of purchase of the securities, have total market capitalization 0.80% 0.04% 0.84%
within the range of companies included in the S&P MidCap 400 Index, updated quarterly.
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
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Montgomery Variable Series Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- ----------- ----------- ----------
Emerging Markets Fund: capital appreciation, which under normal conditions it seeks by
investing at least 65% of its total assets in equity securities of companies in countries
having emerging markets. Under normal conditions, investments are maintained in at least six 1.25% 0.50% 1.75(7)
emerging market countries at all times and no more than 35% of total assets are
invested in any one emerging market country.
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</TABLE>
1 The management fee without any voluntary waiver would have been 0.90%; the
total annual expenses without any waiver or reimbursement would have been
1.08%.
2 The management fee without any voluntary waiver would have been 0.50%; the
other expenses without any reimbursement would have been 0.19%; the total
annual expenses without any waiver or reimbursement would have been 0.69%.
3 The other expenses without any reimbursement would have been 0.50%; the
total annual expenses without any waiver or reimbursement would have been
1.35%.
4 The other expenses without any reimbursement would have been 0.57%; the
total annual expenses without any waiver or reimbursement would have been
1.17%.
5 Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio (formerly, the
Federated Utility Income portfolio), for a total Investment Management fee
payable at the annual rate of .75% of the first $50 million of the average
daily net assets of the Portfolio, plus .60% of the Portfolio's average
daily net assets in excess of $50 million. As of May 1, 1998, the
Investment Manager engaged Neuberger&Berman Management Incorporated as
Sub-advisor for the Portfolio, for a total Investment Management fee
payable at the annual rate of 0.90% of the first $1 billion of the average
daily net assets of the Portfolio plus .85% of the Portfolio's average
daily net assets in excess of $1 billion. The Management Fee in the above
chart reflects the current Investment Management fee payable to the
Investment Manager.
6 Prior to May 1, 1998, the Investment Manager had engaged Berger Associates,
Inc. as Sub-advisor for the Portfolio (formerly, the Berger Capital Growth
portfolio), for a total Investment Management fee payable at the annual
rate of .75% of the average daily nets assets of the Portfolio. As of May
1, 1998, the Investment Manager engaged Neuberger&Berman Management
Incorporated as Sub-advisor for the Portfolio, for a total Investment
Management fee payable at the annual rate of 0.90% of the first $1 billion
of the average daily net assets of the Portfolio plus .85% of the
Portfolio's average daily net assets in excess of $1 billion. The
Management Fee in the above chart reflects the current Investment
Management fee payable to the Investment Manager.
7 The other expenses without any reimbursement would have been 0.56%; the
total annual expenses without any waiver or reimbursement would have been
1.81%.
Transfers and Allocation Services
May I transfer Account Value between investment options? You may
transfer Account Value between investment options, but there are limits, as well
as potential charges, which are discussed above in the question "How much is the
transfer fee, and when must I pay it?" We permit the agent of record to make
transfers on your behalf, unless you give us other instructions.
Are there any limits on transfers? No transfers are permitted when the
Policy is in its "grace period." At the time of any transfer, we require that a
minimum of $500.00 be allocated to any investment option in which you maintain
Account Value. If, at the time of a transfer there would be less than $500.00 in
an investment option, we will transfer the remaining Account Value pro rata to
the investment option(s) that you were transferring to. We retain the right to
impose a limit of not more than 12 transfers per Policy Year, including
transfers involving Fixed Allocations. Unless such a limit is in effect, there
is no limit on the number of transfers that only involve variable investment
options, or the number of transfers from variable investment options to make
Fixed Allocations. However, we do limit each transfer from Fixed Allocations
that are to be effective on any day other than a Policy Anniversary to the
greater of 25% of the Account Value in your Fixed Allocations or $1,000. If you
make such a transfer from your Fixed Allocations, you cannot make another such
transfer until either 90 days has passed or the next Policy Anniversary occurs.
We also retain the right to refuse, limit or delay transfers, either for one
Owner or a group of Owners, if we believe there may be adverse consequences for
other Owners.
What are `allocation services'? Allocation services are programs that
automatically transfer Account Value between investment options. Any limitations
on transfers from Fixed Allocations also apply if any allocation services are
being utilized.
What allocation services does American Skandia provide? We support
dollar cost averaging and static rebalancing.
Loans
When can I take a loan? We offer loans using Account Value as
collateral. We do not make loans available during the first Policy Year.
Starting after the first Policy Year, we allow one loan each Policy Year. The
Insured must be alive when you take a loan (if there are two Insureds, at least
one must be alive when a loan is taken). Subject to our rules, we will establish
on the Issue Date a loan equal to the outstanding indebtedness on previous life
insurance exchanged for a Policy.
Is this type of loan tax-free? A loan from this Policy is treated for
income tax purposes as a distribution, similar to a partial withdrawal, in that:
(a) amounts are deemed to come first from any gain in the Policy; (b)
distributions of gain are subject to income tax as ordinary income; and (c) if
the distribution occurs before the taxpayer's age 59 1/2, there may be an
additional 10% tax on any gain distributed.
How much is available for a loan? You can receive loans equal to 90% of
your current Account Value, less any applicable contingent deferred sales charge
and contingent deferred tax charge. At the time you take any loan, the amount
then available for a new loan is the maximum otherwise available less any Debt.
The minimum amount you may borrow is $500.
What happens to the Account Value if I take a loan? When you take a
loan, we move Account Value equal to the amount of the loan into the Loan
Account. Account Value in the Loan Account is maintained in our general account.
Unless you give us different instructions, we move Account Value from the
variable investment options and the Fixed Allocations in the same proportion as
your Account Value in the investment options on the Valuation Date we move such
Account Value.
The impact of a loan on your Account Value may be positive or negative. At the
time a loan is taken, there is no impact. However, if the Account Value
transferred to the Loan Account would earn more than would be earned in the
investment options, the loan will have a positive impact on your Account Value
and on the Required Death Benefit. If the Account Value transferred to the Loan
Account would earn less than would be earned in the investment options, the loan
will have a negative impact on your Account Value and on the Required Death
Benefit.
What is the interest rate charged on any loan? You owe us interest on
any loan at the rate of 6.0% per year, compounded yearly, in arrears. Each
Policy Anniversary that the loan is not repaid, we add an amount equal to any
unpaid interest to your Debt.
Does Account Value in the Loan Account earn interest? We credit
interest to Account Value in the Loan Account. The amount we credit depends on
whether the loan is a "preferred" or "standard" loan, which are described below.
The rates we credit are as follows:
1. Preferred Loans: we currently credit interest at the rate of 6.0% per year,
compounded yearly, to the Account Value maintained in the Loan Account that
serves as collateral for a "preferred loan."
2. Standard Loans: we currently credit interest at the rate of 4.0% per year,
compounded yearly, to the Account Value maintained in the Loan Account that
serves as collateral for a "standard loan."
What are a "preferred loan" and a "standard loan"? We determine what
portion of a loan is a "preferred loan" and what portion is a "standard loan" at
the time you take the loan. Whether a loan is "preferred" or "standard" depends
on the source of the collateral to support the loan. We consider the Account
Value moved to the Loan Account to come first from Growth. The portion of any
outstanding loans supported by Account Value drawn from Growth is treated as a
preferred loan. The portion of any outstanding loans supported by Account Value
drawn from other than Growth is treated as a standard loan. A loan retains its
character as "preferred" or "standard" until repaid.
Once a loan is taken, does American Skandia ever require more
`collateral' in the Loan Account? The Loan Account acts as collateral for any
loans from us, so we need to make sure the Debt and the Account Value in the
Loan Account are equal to each other. Therefore, on each Policy Anniversary we
equalize the Debt and the Account Value in the Loan Account. If the Debt is
larger due to outstanding loan interest, we transfer Account Value equal to the
difference pro-rata from the investment options and add it to the Loan Account.
We also match up the Debt and the Loan Account when you repay any portion of the
Debt. If the Account Value in the Loan Account then exceeds the Debt, we
transfer the excess pro-rata to the investment options which you are utilizing
at that time. Any amount then allocated to the fixed option will be treated as a
separate Fixed Allocation.
When must I repay the loan? You are not required to repay the loan
while the Insured is alive, except when an amount is due to keep the Policy in
force or upon reinstatement.
What happens at the Insured's death if I have not repaid the loan? If
there is any outstanding Debt when Death Proceeds are due, we subtract the Debt
from the Death Benefit as part of the calculation of the Death Proceeds.
What happens if I repay any portion of the loan? The amount of Debt is
reduced by the amount of any loan repayment. Any standard loan is repaid before
any preferred loan. The repayment reduces the amount of principal and loan
interest proportionately based on the ratio between principal and loan interest
as of the Valuation Date the loan repayment is applied. We allocate any such
loan repayment to the variable investment and fixed options pro-rata based on
the Account Value in each investment option as of the Valuation Period we
receive your loan repayment. Any amount then allocated to the fixed option will
be treated as a separate Fixed Allocation.
Partial Withdrawals
When can I make a partial withdrawal? We allow partial withdrawals
while the Insured is alive, except that, where permitted by law, you may not
take a partial withdrawal until after the end of the "free-look" period.
How much is available as a partial withdrawal? The maximum partial
withdrawal available at any time equals the then current maximum amount we would
permit as a loan under your Policy. This amount is equal to 90% of your current
Account Value less any applicable contingent deferred sales charge and
contingent deferred tax charge. The minimum amount of a partial withdrawal is
$500.00.
What happens to the Account Value if I take a partial withdrawal? When
you take a partial withdrawal, we reduce your Account Value by an amount equal
to the amount of the partial withdrawal. Unless you give us different
instructions, we take Account Value from the variable investment options and the
Fixed Allocations in the same proportion as your Account Value in the investment
options on the Valuation Date we take such Account Value. If you have multiple
Fixed Allocations, amounts are taken on a "last in, first out" basis. Any
Account Value in the Loan Account is not available for a partial withdrawal.
Is there a charge for a partial withdrawal? We charge any applicable
contingent deferred sales charge and contingent deferred tax charge on the
portion of any partial withdrawal that is not treated as a "free withdrawal" or
for which we waive such charges under the medically-related waiver provision. We
take these charges pro-rata from the investment options from which we take the
Account Value as a result of the partial withdrawal.
What amount can I take as a free withdrawal? In any Policy Year the
maximum amount you can take as a free withdrawal is the greater of Growth or 10%
of the Premium. The following examples may help show what this means. For each
example, assume that the Premium was $50,000.
(a) For this example assume the Account Value as of the Valuation Day
we process your partial withdrawal is $60,000. You request a partial withdrawal
of $25,000. Assume also that you have not requested any other partial
withdrawals during this Policy Year. The free withdrawal amount is the greater
of Growth, which is the current Account Value ($60,000) less the Premium
($50,000), or $10,000, and 10% of the Premium, which is $5,000. Therefore, we
treat $10,000 as the free withdrawal portion of this partial withdrawal.
Assuming that this partial withdrawal request occurs during the "surrender
charge period," and there is no subsequent Growth in that Policy Year, we would
assess the then applicable contingent deferred sales charge and contingent
deferred tax charge on $15,000, which is the portion of the partial withdrawal
that exceeds the free withdrawal amount. The contingent deferred sales charge
and contingent deferred tax charge would apply to the full amount of any
subsequent partial withdrawal you request during the same Policy Year that was
not eligible for a medically-related waiver.
(b) For this example assume the Account Value as of the Valuation Day
we process your partial withdrawal request for the "maximum free withdrawal
amount" is $47,000. Assume also that you have not requested any other partial
withdrawals during this Policy Year. The free withdrawal amount is the greater
of Growth, which is the current Account Value ($47,000) less the Premium
($50,000), or $3,000, and 10% of the Premium, which is $5,000. Therefore, the
maximum free withdrawal amount is $5,000. Assuming that this partial withdrawal
request occurs during the "surrender charge period," and there is no subsequent
Growth in that Policy Year, the contingent deferred sales charge and the
contingent deferred tax charge would apply to any subsequent surrender or
partial withdrawal that Policy Year that was not eligible for a
medically-related waiver.
Does a partial withdrawal affect the Death Benefit? A partial
withdrawal reduces the Required Death Benefit. The Required Death Benefit is
reduced because the Account Value, which is used in calculating the Required
Death Benefit, has been reduced. It also reduces the Guaranteed Minimum Death
Benefit in the same proportion as the Account Value is reduced by the partial
withdrawal. The effect on the Guaranteed Minimum Death Benefit is described
above in response to the question "What is the Guaranteed Minimum Death
Benefit."
Can I put back funds taken as a partial withdrawal? No.
Surrenders
When can I surrender my Policy? You can surrender your Policy after the
end of the free-look period as long as the Insured is alive.
What is paid out when a Policy is surrendered? If you surrender the
Policy, we will pay you the Cash Value.
Accelerated Death Benefit
What is an accelerated death benefit? An accelerated death benefit is
pre-payment of a portion of the Death Proceeds. The maximum we will pay, before
any reductions, is the lesser of 50% of the Required Death Benefit or $250,000.
The actual amount is reduced by a 12-month interest rate discount (currently
6.0%) and a pro-rata portion of any Debt. We reserve the right to change the
interest rate discount percentage.
When will American Skandia make such a payment? We will make such a
payment one time, where allowed by law, based on the Owner's request. The
Insured may not request such a payment unless the Insured is also the Owner. We
only make the payment if we receive all our requirements. Our requirements
include, but are not limited to, proof satisfactory to us In Writing that the
Insured (the last surviving Insured if there are two Insureds) became terminally
ill, as defined in your Policy: (a) at least 30 days after the Issue Date; or
(b) as a result of an accident that occurred after the Issue Date. To the extent
permitted by law, we will change our procedures in relation to this benefit 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 this provision.
What happens to the remaining benefits if American Skandia makes such a
payment? Any such payment reduces the Account Value, the Premium, the Guaranteed
Minimum Death Benefit and any Debt in the same ratio as the Required Death
Benefit is reduced as of the Valuation Period such a payment is made. You should
consult a tax advisor on the tax consequences of such a payment. Please refer to
Appendix B for a hypothetical illustration of the accelerated death benefit
provision.
Medically-Related Waiver
What is a medically-related waiver? A medically-related waiver is a
waiver of the contingent deferred sales charge and the contingent deferred tax
charge that would otherwise apply to a partial withdrawal or surrender. Note
that while the accelerated death benefit is payable to the Insured, the
medically-related waiver is a benefit, while based on the Insured's life, that
is of value to the Owner, who normally is the recipient of amounts paid as a
partial withdrawal or surrender. A medically-related waiver is available by
rider to the Policy currently with no charge to you.
When would American Skandia waive these charges? We will consider
waiving the contingent deferred sales charge and contingent deferred tax charge,
where allowed by law, based on your request. We only waive these charges if we
receive all of our requirements. Our requirements include, but are not limited
to proof satisfactory to us In Writing that the Insured (the last surviving
Insured if there is more than one Insured) has continuously been confined to a
long term care facility, such as a nursing home or a hospital, as defined in the
rider, and that such confinement started after the Issue Date.
Are there any restrictions on medically-related waivers? We will only
consider waiving the contingent deferred sales charge and the contingent
deferred tax charge on a partial withdrawal or surrender up to $500,000. The
$500,000 maximum will apply to a partial withdrawal(s) or surrender, regardless
of when taken, on any life insurance policy or annuity contract issued by
American Skandia where the Insured under this Policy is named as the Insured,
Owner or Annuitant under the other policy or contract.
What happens to the remaining benefits if American Skandia makes such a
payment in connection with a partial withdrawal? A partial withdrawal for which
we grant a medically-related waiver has the same impact on the remaining
benefits that results from any other partial withdrawal. We simply do not deduct
the contingent deferred sales charge and contingent deferred tax charge that
otherwise would apply.
Risks
What are the risks, and who takes the risks? We bear the risk that, for
all the Policies issued, when considered together, our expenses exceed our
charges, including the expense for providing from our general account the
difference at death between the Account Value and the Death Benefit. We also
bear the investment and reinvestment risk in providing interest crediting
guarantees to Fixed Allocations and to the Loan Account, as well as for any
settlement options that assume a fixed rate of return. We also bear the risk in
guaranteeing the Guaranteed Minimum Death Benefit if your Policy lapses and you
do not have any Debt. You bear the investment risk when allocating Account Value
to any variable investment option, since that will affect the amount available
for any loans, partial withdrawals or surrender. Any irrevocable beneficiary
bears the risk as to the Death Proceeds, which are affected by investment
performance of the investment options, the age at which the Insured dies, any
loan or withdrawal activity by the Owner prior to the Insured's death or payment
of an accelerated death benefit.
Other Rights
Do I have any other rights if I buy a Policy? There are certain other
ownership rights you may exercise under a Policy. Some of these rights include,
but are not limited to those described in this paragraph. You may name one or
more Beneficiaries. You may make that designation "irrevocable," which means it
cannot be changed. If you do not designate the Beneficiary as irrevocable, you
retain the right to change the Beneficiary before the Insured dies. However, all
Beneficiary designations are subject to our acceptance. You also may transfer,
pledge or assign your Policy, which may trigger a currently taxable event. You
should only transfer, pledge or assign your Policy after consulting with a
competent tax advisor. You may exercise voting rights in relation to the
applicable Portfolios. Some of these rights may be limited depending on the
usage of your Policy, especially if it is held in connection with certain
retirement plans designed to be "qualified" plans under the Code.
The Separate Account
What supports American Skandia's obligation to me if I buy a Policy?
The benefits provided by the Policy are our obligations. The assets supporting
our obligations equaling the Account Value allocated to the variable investment
options are held in our Separate Account F. We maintain assets in our general
account to support our obligations: (1) equal to the Account Value allocated to
the fixed option; (2) equal to the Account Value in the Loan Account; (3) for
the portion of the Death Proceeds greater than the Account Value; (4) for any
settlement option; and (5) for any other obligation we may have in relation to a
Policy.
The Separate Account was established under the laws of Connecticut. Assets in
the Separate Account may support obligations created in relation to the Policies
described in this Prospectus or other policies we offer. We are the legal owner
of the assets in the Separate Account. Income, gains and losses, whether or not
realized, are credited or charged to the Separate Account according to the terms
of the Policies and any other policies supported by the assets in the Separate
Account without regard to our other income, gains or losses or to the income,
gains or losses in any other of our separate accounts. We will maintain assets
in the Separate Account with a total market value at least equal to the reserve
and other liabilities we must maintain in relation to the life insurance
policies supported by such assets. These assets may only be charged with
liabilities that arise from such life insurance policies.
Separate Account F is registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940 as a unit investment trust,
which is a type of investment company. This does not involve any supervision by
the SEC of the investment policies, management or practices of the Separate
Account or of us. The Separate Account meets the definition of "separate
account" under the federal securities law.
The only Sub-accounts available to you are those offered in this Prospectus.
These Sub-accounts are available as investment options for other policies we
offer. Sub-accounts are permitted to invest in Portfolios we consider suitable.
The Portfolios in which the Sub-accounts invest are available to Sub-accounts of
other separate accounts, including separate accounts we use in relation to a
number of variable annuities. Separate accounts of other insurers and of various
qualified retirement plans may also invest in the Portfolios.
<PAGE>
Taxes
What are the taxes connected to the Policy? Federal and state tax laws,
as well as the interpretations of those laws, change. In addition, we do not
know your particular circumstances, which is one of a number of reasons why we
cannot give you tax advice. You should consult a professional tax advisor for
tax advice for your particular situation. You should also be sure to read the
"Additional Tax Considerations" section appearing later in this Prospectus,
which includes, but is not limited to, information regarding estate and gift
taxes. What we do provide are some brief summary answers to the following
questions about Federal income taxes.
Is gain in the Policy taxed every year? Under most circumstances, any
gain in the Policy is not taxed currently. However, if you assign or pledge the
Policy, we expect to report any gain in the Policy as then currently taxable as
ordinary income. In addition, except in the case of a partial assignment as of
the Policy Date, we expect to report gain in the Policy as currently taxable in
each tax year the assignment remains in effect.
How are amounts that I receive before the Insured's death taxed?
Amounts you receive as a partial withdrawal, a loan or if you surrender the
Policy are deemed for income tax purposes to come first from any gain in the
Policy. Any gain is taxed as ordinary income. Any portion of these types of
distributions representing gain in the Policy may be subject to a 10% tax
penalty if taken before your age 59 1/2.
Will my Beneficiary pay taxes on the Death Proceeds? Under most
circumstances, the Beneficiary does not pay any income tax on the Death
Proceeds.
Available Information
How can I find out more about this offer? You first should review the
rest of this Prospectus for additional information. This Prospectus is part of
the registration statement we filed with the Securities and Exchange Commission
regarding this offering. Additional information on American Skandia and this
offering is available in that registration statement and accompanying exhibits.
You may obtain copies of these materials at the prescribed rates from the SEC's
Public Reference Section, 450 Fifth Street N.W., Washington, D.C., 20549. You
may inspect and copy the registration statement and the accompanying exhibits at
the SEC's public reference facilities at the above address, Room 1024, and at
the SEC's Regional Offices, 7 World Trade Center, New York, NY, and the Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago, IL. 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.
<PAGE>
MISCELLANEOUS PROVISIONS AND ADDITIONAL DETAILS
The following sections provide additional information you should consider before
purchasing a Policy.
Providing Services to You
You can reach us by telephone at 1-888-554-3348 or through our Internet Website
at http://www.americanskandia.com. We may require that you provide us with
proper identification before we release information about your Policy or accept
instructions received over the phone, the Internet or via any other electronic
means. We may require that you provide your Social Security or tax
identification number. We also may require you to present the personal
identification number ("PIN") we provide you after we issue a Policy. To the
extent permitted by law or regulation, neither we nor any person authorized by
us will be responsible for any claim, loss, liability or expense in connection
with a transaction, including but not limited to a transfer between investment
options, over the phone, the Internet or via any other electronic means.
However, this will only be the case if we or such authorized person acted: (a)
in good faith reliance that you authorized the transaction; and (b) on
reasonable procedures to identify you or your designee though a number of
verification methods. These methods may include taping phone conversations,
requesting Social Security or tax identification numbers, PINs, confirming
electronic mail addresses, or similar means. We may be liable for losses due to
unauthorized or fraudulent instructions should we not follow such reasonable
procedures.
We may require that you submit forms In Writing for certain transactions. We
require the written consent of all joint Owners for any transaction for which we
require the Owner's written consent.
Designations
Certain designations apply to a Policy - the Owner, the Insured and the
Beneficiary. All designations are subject to our rules and our acceptance. We
assume all designations, other than the Insured, are revocable unless you tell
us otherwise. You should consult with a competent tax advisor on the income tax,
estate and inheritance tax implications of various designations. You should also
consult with a competent legal advisor as to the implications of certain
designations in relation to an estate, bankruptcy and community property, where
applicable, as well as other matters.
We assume the Insured is/are the Owner(s) unless you tell us otherwise. If you
name more than one Owner, all rights reserved to Owners are then held jointly.
Naming someone to be the Owner other than the payor of the Premium may have
gift, estate or other tax implications.
We assume the Beneficiary is you or your estate unless you tell us otherwise.
You may name more than one primary and more than one contingent Beneficiary.
Net Investment Factor
For each Sub-account the initial Unit Price was $10.00. The Unit Price for each
subsequent Valuation Period is the net investment factor for that Valuation
Period, multiplied by the Unit Price for the immediately preceding Valuation
Period. The net investment factor is (1) divided by (2), less (3), where:
(1) is the net result of:
(a) the net asset value per share of the underlying Portfolio at
the end of the current Valuation Period plus the per share
amount of any dividend or capital gain distribution declared
and unpaid (accrued) by the Portfolio; plus or minus
(b) any per share charge or credit during the Valuation Period as
a provision for taxes attributable to the operation or
maintenance of that Sub-account.
(2) is the net result of:
(a) the net asset value per share of the underlying Portfolio at
the end of the preceding Valuation Period plus the per share
amount of any dividend or capital gain distribution declared
and unpaid by the Portfolio; plus or minus
(b) any per share charge or credit during the preceding Valuation
Period as a provision for taxes attributable to the operation
or maintenance of the Sub-account.
(3) is the mortality and expense risk charges and the administration
charge.
Allocation Programs
We may provide administrative support for various programs that automatically
transfer Account Value between certain investment options at scheduled times.
These include dollar cost averaging and static rebalancing (periodic rebalancing
of Account Values between investment options to conform to preset percentages).
However, we only offer to support such allocation programs according to our
rules. While we are offering to support these programs as of the date of this
Prospectus, we do not guarantee to support these programs at all times.
We may also provide administrative support for various allocation programs that
may be made available by your financial professional. These may include various
asset allocation and market timing programs. In connection with such programs,
we may support periodic withdrawals from your Policy to pay your financial
professional. We only offer to support such programs according to our rules.
These rules may include, but are not limited to, receipt of your authorization
In Writing permitting a financial professional to make transfers between
investment options on your behalf, or to enroll your Policy in one of the
allocation programs for which we provide administrative support. We permit the
agent of record to make transfers on your behalf unless you give us other
instructions.
Any financial professional you authorize may or may not be appointed by us as
our agent for the sale of Policies. However, we do not engage any agent of
record or any third parties to offer investment allocation services of any type,
so that persons or firms offering such services do so independent from any
agency relationship they may have with us for the sale of Policies. We therefore
take no responsibility for the investment allocations and transfers transacted
on your behalf by such third parties, in accordance with any allocation programs
employed by such third parties or any investment allocation recommendations made
by such third parties. While we offer support for a number of these programs as
of the date of this Prospectus, we do not support all such programs and do not
guarantee to always continue support for those programs we currently support or
may support in the future.
Limitations on Transfers
We retain the right to refuse or delay transfers, either for one Owner or a
group of Owners, if we believe that: (a) excessive trading or a specific
transfer request or group of transfer requests may have a detrimental effect on
Unit Prices or the share prices of the Portfolios; or (b) we are informed by one
or more of the Portfolios that the purchase or redemption of shares is to be
restricted because of excessive trading or a specific transfer or group of
transfers is deemed to have a detrimental effect on the share prices of affected
Portfolios.
Death During the Grace Period
We deduct the unpaid charges from the Death Benefit when calculating the Death
Proceeds, if the Insured dies during a grace period. For more information on the
grace period, please refer to the response to the question "Do I have to
maintain a minimum Cash Value?"
Reinstatement
You may apply for reinstatement of the Policy if it lapses. We must receive this
application In Writing at our Office within 3 years of the date the lapse
occurred as measured from the end of the grace period. We may require evidence
of insurability satisfactory to us. In order to reinstate your Policy, you also
must pay us a reinstatement amount, including any applicable charges and any
Debt.
Maturity
A Policy "matures" as of the Policy Anniversary on which the Insured is Age 95.
If there are two Insureds, a Policy "matures" as of the Policy Anniversary on
which the younger Insured is Age 95 or would have been Age 95 if the younger
Insured is then deceased. We will pay out the Cash Value once the Policy
matures. The Policy will then end, and we will not have any more obligations
under the Policy. We may provide a rider, where permitted by law, that allows
the Policy to mature at a later date if there is adequate guidance available to
us regarding the tax treatment of all Policies if we were to permit extension of
the maturity date. Should we permit such extension of the maturity, we advise
you to seek tax advice regarding your specific circumstances should you want the
Policy to mature at a later date. If the Policy is no longer treated as life
insurance after any extension of maturity, gain in the Policy may be taxable to
you in the year of the original maturity and all or a portion of the Death
Proceeds may be taxable to the beneficiary.
Pricing Transactions
We "price" charges, transfers, distributions and payments on the dates indicated
below. If such transactions are scheduled to occur on other than a Valuation
Day, we price such transactions as of the following Valuation Period.
(1) We price "scheduled" transactions such as monthly deductions,
transfers and distributions as of the date such transactions are so scheduled.
However, if a transaction is "scheduled" to occur on a day other than a
Valuation Day, such transaction will be processed and priced on the last
Valuation Day prior to the scheduled transaction. "Scheduled" transactions
include, but are not limited to, all charges deducted on a Monthly Processing
Date, equalization of Debt and the Account Value in the Loan Account on a Policy
Anniversary, transfers under a dollar cost averaging program or transfers
previously scheduled with us at our Office as part of any rebalancing, asset
allocation or similar program, or any program of scheduled distributions.
(2) We price "unscheduled" transactions such as transfers, loans or
partial withdrawals that are not subject to any medical waiver as of the date we
receive at our Office the request for such transactions. "Unscheduled" transfers
include any transfers processed in conjunction with any market timing program,
or transfers not previously scheduled with us at our Office pursuant to any
rebalancing, asset allocation or similar program which you employ or you
authorize to be employed on your behalf. "Unscheduled" transfers received
pursuant to an authorization to accept transfer instructions using voice or data
transmission over the phone are priced as of the Valuation Period we receive the
request at our Office for such transactions. We price unscheduled payments as of
the date we receive such amounts at our Office. These include loan repayments,
payments to keep a Policy in effect during a grace period or a reinstatement
payment.
(3) We price surrenders, withdrawals subject to a medical waiver,
accelerated death benefit payments and payment of Death Proceeds as of the date
we receive at our Office all materials we require for such transactions and such
materials are satisfactory to us.
Delaying Transactions
We may defer any distribution or transfer from a Fixed Allocation or any payment
under a fixed settlement option for a period not to exceed the lesser of six (6)
months or the period permitted by law. If we defer a distribution or transfer
from any Fixed Allocation or any payment under a settlement option for more than
thirty days, or less where required by law, we pay interest at the minimum rate
required by law but not less than 3% per year on the amount deferred. We may
defer payment of proceeds of any distribution from any Sub-account or any
transfer from a Sub-account for a period not to exceed seven (7) calendar days
from the date the transaction is effected. This is a delay in payment only, and
is not a delay in the pricing of any such distribution or transfer. Any deferral
period begins on the date such distribution or transfer would otherwise have
been transacted.
All procedures, including distributions, based on the valuation of the
Sub-accounts may be postponed during the period: (1) the New York Stock Exchange
is closed (other than customary holidays or weekends) or trading on the New York
Stock Exchange is restricted as determined by the SEC; (2) the SEC permits
postponement and so orders; or (3) the SEC determines that an emergency exists
making valuation or disposal of securities not reasonably practical.
Voting
You have voting rights in relation to Account Value maintained in the
Sub-accounts. You do not have voting rights in relation to Account Value
maintained in any Fixed Allocations, in the Loan Account or in relation to fixed
payments under a settlement option.
We will vote shares of the Portfolios in which the Sub-accounts invest in the
manner directed by Owners, unless we, in our sole discretion, determine that we
are required by law or regulation to vote otherwise. Owners have voting rights
equal to the number of shares represented by the Sub-account Units attributable
to their Policy.
We will vote the shares attributable to assets held in the Sub-accounts solely
for us rather than on behalf of Owners, or any share as to which we have not
received instructions, in the same manner and proportion as the shares for which
we have received instructions. We will do so separately for each Sub-account
from various classes that may invest in the same underlying mutual fund
portfolio.
The number of votes for a Portfolio will be determined as of the record date for
such Portfolio as chosen by its board of trustees or board of directors, as
applicable. We will furnish Owners with proper forms and proxies to enable them
to instruct us how to vote.
You may instruct us how to vote on the following matters: (a) changes to the
board of trustees or board of directors, as applicable; (b) changing the
independent accountant; (c) approval of changes to the investment advisory
agreement or adoption of a new investment advisory agreement; (d) any change in
the fundamental investment policy; and (e) any other matter requiring a vote of
the shareholders.
With respect to approval of changes to the investment advisory agreement,
approval of a new investment advisory agreement or any change in fundamental
investment policy, only Owners maintaining Account Value as of the record date
in a Sub-account investing in the applicable Portfolio will instruct us how to
vote on the matter, pursuant to the requirements of Rule 18f-2 under the
Investment Company Act of 1940.
Transfers, Assignments, Pledges
Generally, your rights in a Policy may be transferred, assigned or pledged at
any time. These transactions may be subject to income taxes and certain penalty
taxes. You may transfer, assign or pledge your rights to another person at any
time, prior to the death upon which the Death Benefit is payable. You must
request a transfer or provide us a copy of the assignment In Writing. A transfer
or assignment is subject to our acceptance. We will not be deemed to know of or
be obligated under any assignment prior to our receipt and acceptance thereof.
We assume no responsibility for the validity or sufficiency of any assignment.
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.americanskandia.com
or any other electronic means, including diskettes or CD ROMs. We send a
confirmation statement to you each time an unscheduled transaction is made
affecting Account Value. Such transactions will generally include changes in
investment allocation or transfers among investment options, loans and loan
repayments, partial surrenders or withdrawals, and any charges associated with
such unscheduled transactions. We also send quarterly statements detailing the
activity affecting your Policy during the prior quarter, including all scheduled
and unscheduled transactions. To the extent permitted by law, some types of
scheduled transactions will only be confirmed on a quarterly basis. Such
transactions will generally include those pre-authorized charges deducted on the
Monthly Processing Date. You may request additional reports. We reserve the
right to charge up to $50 for each such additional report. You should review the
information in these statements carefully. You must report all errors or
corrections to us at our Office immediately to assure proper crediting to your
Policy. For transactions that are confirmed immediately, we assume all
transactions are accurate unless you notify us otherwise within 30 days after
the date of the transaction. For transactions that are only confirmed on the
quarterly statement, we assume all transactions are accurate unless you notify
us within 30 days of the end of the calendar quarter. We may also send an annual
report and a semi-annual report containing financial statements for the
applicable Sub-accounts, as of December 31 and June 30, respectively to you or,
with your prior consent, make such documents available electronically through
our Internet Website or other electronic means.
Incontestability
We may not contest the validity of a Policy after it has been in effect during
the Insured's lifetime for two years from the Issue Date. If there are two
Insureds, this applies to the lifetime of either Insured. If the Policy is
reinstated, to the extent permitted by law, we may not contest the validity of a
Policy after it has been in effect for two years from the date of the
reinstatement.
Suicide
If an Insured commits suicide within two years of the Issue Date (or whatever
maximum period is permitted under law) or the date of a reinstatement if allowed
by law, the Death Benefit will be the greater of: (a) Premium paid less any
outstanding Debt and any partial withdrawals; or (b) the Cash Value. All other
requirements as to calculation and payment of Death Proceeds will apply.
Misstatement
We will adjust the amount of the Death Proceeds to conform to the facts if the
age or gender of an Insured is incorrectly stated. We will do so as specified in
the Policy and as permitted by law.
Backdating
Depending on your Age at the time you apply for a Policy, it may be advantageous
to have the Policy Date be earlier than the Issue Date. This is known as
"backdating." Doing so may enable you to qualify for lower cost of insurance
charges. We only permit backdating if: (a) doing so will qualify you for a lower
cost of insurance charge; and (b) the Policy Date is the no earlier than the
date the Application is signed and in no case more than 90 days before the Issue
Date. If you elect backdating, on the Issue Date we will deduct charges that
would have been deducted as of the Policy Date and any Monthly Processing Dates
between the Policy Date and the Issue Date. To the extent permitted by law, we
do not guarantee any increase in the Account Value for the period between the
Policy Date and the Issue Date. However, we also reserve the right, to the
extent permitted by law, to credit you a fixed rate of interest for such period.
Policy Loans on Exchanges
Subject to our rules, we will establish a loan on a Policy that you purchase as
part of an exchange that is not subject to current taxation in accordance with
Section 1035 of the Code. The amount of the loan will be equal to the loan that
was in effect before you surrendered your prior policy. Under our rules we will,
among other things, increase the Account Value as of the Policy Date by the
amount of the loan and allocate that portion of the increased Account Value to
the Loan Account as collateral for the loan. By increasing the Account Value,
there will be a corresponding increase in the Face Amount and the Required Death
Benefit. In addition, for purposes of determining the Guaranteed Minimum Death
Benefit, we will deem the "Premium" to be the amounts paid plus the loan amount
as of the Policy Date. Any contingent deferred sales charge and contingent
deferred tax charge will be based on the actual amounts received, not such
amounts plus the amount of the loan. All charges that are calculated as a
percentage of your Account Value will increase because the Account Value will be
increased by the amount of the loan.
Resolving Material Conflicts
The Portfolios may be available to registered separate accounts offering either
or both life and annuity contracts of insurance companies not affiliated with
us. We also may offer life insurance policies and/or annuity contracts that
offer different variable investment options from those offered under this
Policy, but which invest in the same Portfolios. It is possible that differences
might arise between our Separate Account F and one or more accounts of other
insurance companies which offer a Portfolio as a Sub-account. It is also
possible that differences might arise between a Sub-account offered under this
Policy and variable investment options offered under different life insurance
policies or annuities we offer, even though such different variable investment
options invest in the same Portfolio. In some cases, it is possible that the
differences could be considered "material conflicts." Such a "material conflict"
could also arise due to changes in the law (such as state insurance law or
Federal tax law) which affect either these different life and annuity separate
accounts or differing life insurance policies and annuities. It could also arise
by reason of differences in voting instructions of persons with voting rights
under our policies and/or annuities and those of other companies, persons with
voting rights under annuities and those with rights under life policies, or
persons with voting rights under one of our life policies or annuities with
those under other life policies or annuities we offer. It could also arise for
other reasons. We will monitor events so we can identify how to respond to such
conflicts. If such a conflict occurs, we will take the necessary action to
protect persons with voting rights under our life policies or annuities
vis-a-vis those with rights under life policies or annuities offered by other
insurance companies. We will also take the necessary action to treat equitably
persons with voting rights under this Policy and any persons with voting rights
under any other life policy or annuity we offer.
Modification of the Separate Account
We reserve the right to do any or all of the following: (a) combine any
Sub-account(s) with any other Sub-account(s); (b) combine Separate Account F or
a portion thereof with other separate accounts; (c) deregister Separate Account
F under the Investment Company Act of 1940; (d) operate Separate Account F as a
management investment company under the Investment Company Act of 1940 or in any
other form permitted by law; (e) make changes required by any change in the
Securities Act of 1933, the Securities Exchange Act of 1934 or the Investment
Company Act of 1940; (f) make changes that are necessary to maintain the tax
status of your Policy under the Code; and (g) make changes required by any
change in other Federal or state laws relating to life insurance policies in
general or variable life insurance policies in particular.
We may also make additional Sub-accounts available to you from time to time.
These Sub-accounts will invest in Portfolios we believe to be suitable for the
Policy. We may or may not make a new Sub-account available to invest in any new
portfolio of one of the current underlying mutual funds should such a portfolio
be made available to Separate Account F.
We may eliminate Sub-accounts, combine two or more Sub-accounts or substitute
one or more new underlying mutual funds or portfolios for the one in which a
Sub-account is invested. Substitutions may be necessary if we believe a
Portfolio no longer suits the purpose of the Policy. This may happen due to a
change in laws or regulations, or a change in the investment objectives or
restrictions of a Portfolio, or because the Portfolio is no longer available for
investment, or for some other reason. We would obtain prior approval from the
insurance department of our state of domicile, if so required by law, before
making such a substitution, combination, deletion or addition. We also would
obtain prior approval from the SEC so long as required by law, and any other
required approvals before making such a substitution, combination, deletion or
addition.
Entire Contract
For any Policy issued, the entire contract between you and us includes the
Policy form and any of the following which may be attached to the Policy: riders
or endorsements, the copy of any Application and endorsements. All statements
made in any Application are deemed to be representations and not warranties. No
statement is used to void a Policy or defend a claim unless it is contained in
any Application attached to the Policy.
Only our President, one of our Vice Presidents or our Secretary may change or
waive any provisions of a Policy. Any change or waiver must be In Writing. To
the extent permitted by law, we are not bound by any promises or representations
made by or to any other person.
Additional Tax Considerations
The following is a brief summary of certain Federal tax laws as they are
currently interpreted. No one can be certain that the laws or interpretations
will remain unchanged or that agencies or courts will always agree as to how the
tax law or regulations are to be interpreted. This discussion is not intended as
tax advice. You may wish to consult a professional tax advisor for tax advice as
to your particular situation.
Our taxation: We are taxed as a life insurance company under Part I, subchapter
L, of the Code.
Treatment as a "modified endowment contract": Under most circumstances, taxes on
any gain in the Policy are `deferred' and not taxed every year. Unless your
Policy is established as part of an eligible exchange of a life insurance policy
entered into before June 21, 1988, amounts you receive as a partial withdrawal,
a loan or as a surrender are taxed in the same manner as distributions from a
deferred annuity before annuity payments begin. This means that these types of
distributions are deemed to come first from any gain in the policy and that any
gain is treated as ordinary income. It also means that distributions of gain may
be subject to a 10% tax penalty if taken before age 59 1/2. Under most
circumstances, the Beneficiary will not pay any income tax on the Death
Proceeds.
Assignment: If you assign or pledge any portion of the Policy, the transaction
is treated as a distribution subject to taxation as ordinary income. The tax
penalty noted above may apply. In addition, except in the case of a partial
assignment as of the Policy Date, we expect to report gain in the Policy as
currently taxable in each tax year the assignment remains in effect.
Gifts: If you give your Policy as a gift to an entity for which you are not the
taxpayer or to anyone other than your spouse (or former spouse incident to a
divorce), the gift is treated for tax purposes as a distribution.
Aggregation rules: You may purchase more than one life insurance policy from us
in the same calendar year that is treated under the Code as a "modified
endowment contract," including the Policy described in this Prospectus. If you
do, all such policies are subject to "aggregation rules." Under these rules, all
of these policies must be treated as one modified endowment contract when
determining the portion of any distribution or deemed distribution which is
currently taxable. It is also possible that these aggregation rules may apply to
any annuity contracts you purchase from us in the same calendar year as you
purchase a Policy.
Exchanges: Section 1035 of the Code permits certain tax-free exchanges of life
insurance policies. You must comply with various requirements for such exchanges
to be treated as tax-free, which include, but are not limited to: (a) the need
for the insured to be the same individual or individuals before and after the
exchange; and (b) the need to have the Debt on a Policy as of the date all
premium is received equal to any outstanding indebtedness on the life insurance
exchanged for the Policy. If you exchange a life insurance policy considered
entered into before June 21, 1988 and which is not a modified endowment
contract, we believe the new policy generally will not be treated as a modified
endowment contract if no additional premium is paid. For those Policies not
treated as modified endowment contracts, we believe that loans are not treated
as distributions and withdrawals are deemed to come first from your investment
in the policy. In addition, we believe that the aggregation rules as well as the
tax treatment of assignments, pledges and gifts, noted above, would not apply.
However, we cannot guarantee this tax treatment and advise you to consult your
tax advisor before exchanging any existing life insurance policy.
Transfers between investment options: Transfers between investment options are
not subject to taxation. The Treasury Department may promulgate guidelines under
which a variable life insurance policy will not be treated as life insurance for
tax purposes if persons with ownership rights have excessive control over the
investments underlying such a policy. Such guidelines may or may not address the
number of investment options or the number of transfers between investment
options offered. It is not known whether such guidelines, if in fact
promulgated, would have retroactive effect. It is also not known what effect, if
any, such guidelines may have on transfers between the investment options of the
Policy offered pursuant to this Prospectus. We will take any action, including
modifications to your Policy or the Sub-accounts, required to comply with such
guidelines if promulgated.
Generation skipping transfers: Under the Code certain taxes may be due when all
or part of a life insurance policy is transferred to or a death benefit is paid
to an individual two or more generations younger than the policy holder. These
generation-skipping transfers generally include those subject to federal estate
or gift tax rules. There is an aggregate $1 million exemption from tax on all
such transfers. We may be required to determine whether a transaction is a
direct skip as defined in the Code and the amount of the resulting tax. We will
deduct from your Policy or from any applicable payment treated as a direct skip
any amount we are required to pay.
Diversification: Section 817(h) of the Code provides that a variable life
insurance policy, in order to qualify as life insurance, must have an
"adequately diversified" segregated asset account (including investments in a
mutual fund by the segregated asset account of insurance companies). The
Treasury Department's regulations prescribe the diversification requirements for
variable life insurance policy. We believe the underlying mutual fund portfolios
should comply with the terms of these regulations.
Withholding: Section 3405 of the Code provides for Federal income tax
withholding on the portion of a distribution which is includible in the gross
income of the recipient. Amounts to be withheld depend upon the nature of the
distribution. However, under most circumstances a recipient may elect not to
have income taxes withheld or have income taxes withheld at a different rate by
filing a completed election form with us. A withholding form may be required.
Accelerated Death Benefits: Payments of amounts that otherwise would be payable
to the Beneficiary as a result of an Insured's death can qualify for the same
tax-free treatment as death benefits if certain requirements are met. These are
requirements regarding the terminal illness of the Insured. We believe payments
under the provisions of the accelerated death benefit of the Policy will meet
the requirements of the Code and the regulations in order to qualify as tax-free
payments. A qualified tax advisor should be consulted as to any federal gift and
estate tax consequences of an Owner's exercise of the Accelerated Death Benefit
provision and payment of the proceeds under this provision to the Insured or
other parties.
Extending the Policy's Maturity: We believe that a Policy will continue to be
treated as life insurance and as a modified endowment contract under the Code if
you extend the Policy's maturity under any extended maturity rider we may offer
in the future. However, this tax treatment is not certain, so you should consult
your tax advisor before taking this step. If the Policy is not treated as life
insurance after any extension of maturity, gain in the Policy may no longer be
taxed deferred, and all or a portion of the Death Proceeds may be taxable to the
Beneficiary.
Survivorship Policies: The Code does not directly address how certain features
of a policy paying on the death of a surviving insured should be treated. We
believe such a Policy should be treated as other life insurance policies, but
there is some uncertainty as to whether that is the case. If the surviving
Insured is an Owner, the Death Proceeds payable as a result of the death of the
last surviving Insured generally will be treated as part of the Owner's estate
for purposes of the Federal estate tax. If the surviving Insured was not an
Owner, the replacement cost of the Policy would be included in the estate of the
Owner upon his or her death and Death Proceeds payable as a result of the death
of the surviving Insured are includible in the person's estate if the proceeds
are payable to or for the benefit of that person's estate or if the surviving
Insured held incidents of ownership in the Policy within three years prior to
death.
Other Taxes: Amounts received or deemed received from a Policy that may be
subject to Federal income tax also may be subject to state income taxes. The
fair market value of a Policy or the Death Proceeds may be included under
certain circumstances in an estate for purposes of state inheritance taxes or
Federal estate taxes. Federal estate and gift taxes are integrated for various
purposes. An unlimited marital deduction may apply for purposes of Federal
estate and gift taxes, which would allow deferral of taxes until the death of
the surviving spouse.
Safekeeping of the Assets
We maintain the assets of the Separate Account and those in our general account.
The assets of the Separate Account are segregated from those in our general
account.
Regulation
We are organized as a Connecticut stock life insurance company, and are subject
to Connecticut law governing insurance companies. We are regulated and
supervised by the Connecticut Commissioner of Insurance. By March 1 of every
year, we must prepare and file an annual statement, in a form prescribed by the
Connecticut Insurance Department, which covers our operations for the preceding
calendar year, and must prepare and file our statement of financial condition as
of December 31 of such year. The Commissioner and his or her agents have the
right at all times to review or examine our books and assets. A full examination
of our operations will be conducted periodically according to the rules and
practices of the National Association of Insurance Commissioners ("NAIC"). We
are subject to the insurance laws and various Federal and state securities laws
and regulations and to regulatory agencies, such as the Securities and Exchange
Commission and the Connecticut Banking Department, which administer those laws
and regulations.
We can be assessed up to prescribed limits for policyholder losses incurred by
insolvent insurers under the insurance guaranty fund laws of most states. We
cannot predict or estimate the amount any such future assessments we may have to
pay. However, the insurance guaranty laws of most states provide for deferring
payment or exempting a company from paying such an assessment if it would
threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their affiliates
under insurance holding company laws and regulations. This applies to us and our
affiliates. Under such laws, inter-company transactions, such as dividend
payments to parent companies and transfers of assets, may be subject to prior
notice and approval, depending on factors such as the size of the transaction in
relation to the financial position of the companies.
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the anti-trust laws; (e) the barriers preventing most banks from selling or
underwriting insurance: and (f) any initiatives directed toward improving the
solvency of insurance companies. We would also be affected by federal
initiatives that have impact on the ownership of or investment in United States
companies by foreign companies or investors.
Legal Matters
The law firm of Werner & Kennedy has passed on the legal matters relating to the
offering of these Policies.
Legal Proceedings
As of the date of this Prospectus, neither we nor American Skandia Marketing,
Incorporated were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
Experts
The consolidated financial statements of American Skandia Life Assurance
Corporation included in this Prospectus and Registration Statement with respect
to the year ended December 31, 1997 have been audited by Ernst & Young LLP,
independent auditors, and by Deloitte & Touche LLP, independent auditors, with
respect to the years ended December 31, 1996, 1995, 1994, and 1993 as set forth
in their respective reports thereon appearing elsewhere herein, and are included
in reliance upon such reports given upon the authority of such firms as experts
in accounting and auditing.
William H. Strong, FSA, MAAA has approved the hypothetical illustration included
in this Prospectus and Registration Statement. We have included them relying on
his opinion that they are reasonable.
Distribution of this Offering
American Skandia Marketing, Incorporated ("ASM, Inc."), a wholly-owned
subsidiary of American Skandia Investment Holding Corporation, acts as the
principal underwriter of the Policies. ASM, Inc.'s principal business address is
One Corporate Drive, Shelton, Connecticut 06484. ASM, Inc. is a broker-dealer
registered with the SEC under the 1934 Act and a member of the National
Association of Securities Dealers, Inc. ("NASD").
ASM, Inc. will enter into distribution agreements with certain broker-dealers
registered under the Securities and Exchange Act of 1934 or with entities which
may otherwise offer the Policies that are exempt from such registration. In
addition, ASM, Inc. may offer Policies directly to potential purchasers. The
maximum initial concession to be paid on premiums received is 8.5% and a portion
of compensation may be paid from time to time based on all or a portion of
either the Account Value or the Cash Value. We reserve the right to base
concessions from time-to-time on the investment options chosen by Owners,
including investment options that may be deemed our "affiliates" or "affiliates"
of ASM, Inc. under the Investment Company Act of 1940.
As of the date of this Prospectus, we expect to pay an on-going service fee in
relation to providing certain statistical information upon request by Owners
about the investment options and the Portfolios. We may make the fee payable to
the service providers based on either the Account Value or Cash Value of
Policies. Under most circumstances, we will engage the broker-dealer of record
for your Policy, or the entity of record if such entity could offer Policies
without registration as a broker-dealer (i.e. certain banks), to be your
resource for the statistical information, and to be available upon your request
to both provide and explain such information to you. The broker-dealer of record
or the entity of record is the firm which sold you the Policy, unless later
changed. Some portion of the fee we pay for this service may be payable to your
representative. We may structure this program such that no fee is payable based
on the value in Fixed Allocations. If that were to occur, it is possible that
your representative may receive on-going service fee compensation, but only in
relation to value maintained in variable investment options.
From time to time we may promote the sale of our products such as the Policies
offered pursuant to this Prospectus through programs of non-cash rewards to
registered representatives of participating broker-dealers. We may withdraw or
alter such promotions at any time.
To the extent permitted, we may advertise certain information regarding the
performance of the investment options that does not take into consideration the
effect of either the cost of insurance charges, the contingent deferred sales
charge, the contingent tax charge or the maintenance fee. This performance
information may help you review the performance of the investment options and
provide a basis for comparison between the Policy's investment options. This
information may be less useful when comparing the performance of the investment
options with the performance of investment options provided in other variable
life policies because each plan of life insurance will have its own applicable
charges. This information is even less useful in comparing performance to that
of any savings or investment vehicle, rather than variable life insurance.
Performance information on the Sub-accounts is based on past performance only
and is no indication of future performance. Actual performance will depend on
the type, quality and, for some of the Sub-accounts, the maturities of the
investments held by the Portfolios and upon prevailing market conditions and the
response of the Portfolios to such conditions. Actual performance will also
depend on changes in the expenses of the Portfolios. Such changes are reflected,
in turn, in the Sub-accounts which invest in such Portfolios. In addition, the
charges deducted from your Account Value and those assessed against each
Sub-account will affect performance.
As of the date of this Prospectus, all the Portfolios existed prior to the
inception of these Sub-accounts. To the extent permitted by applicable law,
performance quoted in advertising regarding such Sub-accounts may indicate
periods during which the Portfolios have been in existence but prior to the
inception of the Sub-account(s) or the initial offering of the Policies. Such
performance is considered hypothetical historical performance because the
Sub-accounts did not exist during the period the performance was achieved. Such
hypothetical historical performance is calculated using the same assumptions
employed in calculating actual historical performance since inception of the
Sub-accounts. Any such historical performance will be based on assumptions.
These include assumptions regarding: (a) the Age, risk class and gender, where
applicable, of an Insured or Insureds; (b) the Premium and Policy Date; and (c)
assumptions about a lack of transfers, loans, loan repayments and withdrawals
during the period for which performance is quoted.
American Skandia Life Assurance Corporation may advertise its rankings and/or
ratings by independent financial ratings services. Such rankings may help you in
evaluating our ability to meet our obligations in relation to Fixed Allocations,
pay Death Proceeds, make payments under any settlement options or administer
Policies. Such rankings and ratings do not reflect or relate to the performance
of Separate Account F or the underlying Portfolios.
Illustrations
In Appendix A we provide examples of the kind of hypothetical illustrations
available to help you better understand how a Policy works. In that Appendix, we
also provide information on how you may obtain additional hypothetical
illustrations. In Appendix B, we provide hypothetical illustrations of how
exercise of the accelerated death benefit provision affects the values of a
Policy.
Executive Officers and Directors
Our executive officers and directors are listed in Appendix E.
Financial Statements
Financial statements for American Skandia Life Assurance are found in Appendix
F. Financial statements for American Skandia Life Assurance Corporation Separate
Account F ("Account") are not provided as the Account has not yet begun
operations.
<PAGE>
APPENDIX A
HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES AND CASH VALUES
<PAGE>
APPENDIX A
Hypothetical Illustrations of Death Benefits, Account Values And Cash Values
It is impossible to illustrate exactly how a Policy will perform in the future.
However, you may better understand how a Policy works, and may be able to better
compare a Policy with other life insurance plans, using hypothetical
illustrations based on the personal characteristics of the Insured(s) as well as
certain assumptions about the future. You can do this using the hypothetical
illustrations provided in this Appendix A. You can also do this by requesting
from us personalized hypothetical illustrations based on: (a) the Age(s) of the
Insured(s); (b) the expected risk class(es) of the Insured(s); (c) the gender of
the Insured(s), where permitted; (d) the Face Amount you seek or the amount of
Premium you intend to pay; and (e) applicable cost of insurance charges. Please
forward any such request to us at our address as shown on the first page of this
Prospectus.
As of the date of this Prospectus, we only provide such hypothetical
illustrations on paper. We reserve the right to make such illustrations
available in the future via electronic transmission or as part of a multi-media
presentation.
As of the date of this Prospectus, we do not provide hypothetical illustrations
that assume future loans, withdrawals, loan repayments or varying assumed rates
of return. However, we reserve the right to make such illustrations available in
the future.
The hypothetical illustrations that follow show the changes in the Death
Benefit, Account Value and Cash Value over time based on certain assumptions.
All values are provided as of the end of each Policy Year shown. The assumptions
used are as follows:
1. Hypothetical average annual gross rates of return in the Portfolios
of 0%, 6% and 12%.
Of course, actual investment performance is not a constant
rate. If the hypothetical gross rate of return were to
fluctuate above or below the 0%, 6% or 12% average over a
period of years, the Death Benefit, Account Value and Cash
Value may be different. For hypothetical rates of return of 0%
and 6%, the illustrations will indicate if a Policy would
lapse. HYPOTHETICAL RATES OF RETURN ARE FOR ILLUSTRATIVE
PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE
PERFORMANCE.
2. Hypothetical constant expense ratios of 1.10% for the
Portfolios. The total annual expenses for the underlying
mutual funds are shown in the section entitled "Variable
Investment Options." The 1.10% hypothetical expense ratio is
the average of the actual total annual expenses for all
available Portfolios as of December 31, 1997. Certain of the
Portfolios have not been in existence for a full year and,
therefore, the total annual expenses for those Portfolios are
estimated and annualized. The 1.10% hypothetical expense
ratio, when deducted from the hypothetical average annual
gross rates of return equals a hypothetical average annual net
rate of return of -1.10%, 4.90% and 10.90%, respectively.
3. The mortality and expense risk charge assessed against the
assets in the Separate Account at an annualized rate of 0.90%.
The charge for administrative expenses connected with
operating the Separate Account is 0.25% per year. It is also
assumed that there is no tax charge assessed against the
Separate Account.
4. The charges under the Policy, including the cost of insurance
charges that differ by gender, risk class and attained age. It
is assumed that there are no transfer fees applicable. The
hypothetical illustrations will be presented based on both the
current and guaranteed cost of insurance charges.
5. There are no loans, loan repayments, withdrawals, accelerated
death benefit payments or amounts paid to maintain the Policy
in effect during a grace period. The hypothetical values will
include Cash Value Credits, if applicable.
6. The Age(s) and, where applicable, gender of the Insured(s)
shown in each illustration.
The cost of insurance charges differ based on the age(s) of
the Insured(s) on the Policy Date and, where permitted by law,
the gender of the Insured(s).
7. The Insured(s) is/are eligible for the no tobacco use risk
class. For each gender and age classification, the cost of
insurance rate for the "No Tobacco Use" classification is .35%
lower than the rate for the "Tobacco User" classification.
8. The Premium and Face Amount are as shown in each illustration.
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $55,347 55 Male Single Life 0% No Usage
(-1.1% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 24,119 21,619 51,844 24,018 21,518 51,627
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 23,268 20,893 48,582 23,063 20,688 48,154
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 22,446 20,196 45,541 22,136 19,886 44,913
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 21,652 19,652 42,706 21,237 19,237 41,887
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 20,885 19,135 40,064 20,363 18,613 39,063
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 20,144 18,644 37,601 19,515 18,015 36,427
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 19,428 18,178 35,306 18,692 17,442 33,967
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 18,737 17,737 33,167 17,892 16,892 31,671
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 18,069 17,319 31,176 17,115 16,365 29,528
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 17,424 17,424 29,320 16,359 16,359 27,528
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 16,911 16,911 27,772 15,729 15,729 25,829
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 16,413 16,413 26,320 15,108 15,108 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 15,928 15,928 25,000 14,466 14,466 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 15,456 15,456 25,000 13,790 13,790 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 14,998 14,998 25,000 13,072 13,072 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 14,552 14,552 25,000 12,304 12,304 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 14,118 14,118 25,000 11,470 11,470 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 13,697 13,697 25,000 10,555 10,555 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 13,287 13,287 25,000 9,538 9,538 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 12,889 12,889 25,000 8,395 8,395 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 11,058 11,058 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 9,466 9,466 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 8,084 8,084 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $55,347 55 Male Single Life 6% No Usage
(4.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 25,567 23,067 54,957 25,460 22,960 54,726
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 26,147 23,772 54,594 25,917 23,542 54,113
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 26,742 24,492 54,257 26,373 24,123 53,509
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 27,350 25,350 53,946 26,826 24,826 52,912
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 27,973 26,223 53,662 27,275 25,525 52,322
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 28,611 27,111 53,407 27,719 26,219 51,741
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 29,264 28,014 53,180 28,156 26,906 51,167
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 29,933 28,933 52,986 28,585 27,585 50,600
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 30,618 29,868 52,826 29,003 28,253 50,040
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 31,319 31,319 52,701 29,409 29,409 49,487
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 32,247 32,247 52,955 29,998 29,998 49,262
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 33,202 33,202 53,244 30,580 30,580 49,039
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 34,187 34,187 53,568 31,156 31,156 48,817
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 35,202 35,202 53,926 31,725 31,725 48,598
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 36,249 36,249 54,319 32,287 32,287 48,382
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 37,327 37,327 54,750 32,838 32,838 48,167
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 38,438 38,438 55,226 33,377 33,377 47,954
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 39,583 39,583 55,751 33,897 33,897 47,743
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 40,763 40,763 56,332 34,397 34,397 47,535
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 41,979 41,979 56,970 34,875 34,875 47,328
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 48,642 48,642 60,946 36,976 36,976 46,329
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 56,954 56,954 66,858 38,664 38,664 45,387
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 66,882 66,882 74,249 40,098 40,098 44,514
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $55,347 55 Male Single Life 12% No Usage
(10.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 27,015 24,515 58,069 26,901 24,401 57,825
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 29,195 26,820 60,957 28,938 26,563 60,420
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 31,553 29,303 64,019 31,118 28,868 63,136
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 34,104 32,104 67,268 33,450 31,450 65,978
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 36,864 35,114 70,718 35,944 34,194 68,953
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 39,850 38,350 74,386 38,608 37,108 72,067
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 43,081 41,831 78,287 41,451 40,201 75,325
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 46,575 45,575 82,445 44,480 43,480 78,735
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 50,356 49,606 86,880 47,704 46,954 82,304
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 54,583 54,583 91,847 51,131 51,131 86,038
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 59,553 59,553 97,798 55,269 55,269 90,761
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 64,980 64,980 104,203 59,707 59,707 95,748
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 70,903 70,903 111,098 64,467 64,467 101,013
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 77,380 77,380 118,535 69,570 69,570 106,572
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 84,471 84,471 126,580 75,036 75,036 112,442
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 92,212 92,212 135,255 80,915 80,915 118,685
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 100,663 100,663 144,627 87,194 87,194 125,276
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 109,888 109,888 154,773 93,885 93,885 132,234
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 119,958 119,958 165,774 101,004 101,004 139,580
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 130,951 130,951 177,714 108,567 108,567 147,337
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 203,008 203,008 254,359 154,145 154,145 193,136
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 314,715 314,715 369,443 215,802 215,802 253,330
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 487,888 487,888 541,624 299,608 299,608 332,607
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $62,362 55 Female Single Life 0% No Usage
(-1.1% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 24,155 21,655 58,478 24,028 21,528 58,170
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 23,338 20,963 54,842 23,089 20,714 54,257
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 22,548 20,298 51,437 22,183 19,933 50,605
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 21,783 19,783 48,244 21,310 19,310 47,196
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 21,043 19,293 45,252 20,468 18,718 44,015
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 20,328 18,828 42,450 19,655 18,155 41,045
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 19,636 18,386 39,829 18,868 17,618 38,273
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 18,966 17,966 37,382 18,106 17,106 35,686
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 18,318 17,568 35,100 17,364 16,614 33,272
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 17,691 17,691 32,973 16,643 16,643 31,019
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 17,197 17,197 31,190 16,047 16,047 29,106
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 16,715 16,715 29,515 15,465 15,465 27,308
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 16,246 16,246 27,939 14,898 14,898 25,620
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 15,790 15,790 26,453 14,341 14,341 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 15,345 15,345 25,052 13,771 13,771 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 14,912 14,912 25,000 13,180 13,180 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 14,491 14,491 25,000 12,559 12,559 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 14,080 14,080 25,000 11,899 11,899 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 13,680 13,680 25,000 11,187 11,187 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 13,291 13,291 25,000 10,410 10,410 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 11,494 11,494 25,000 4,950 4,950 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 9,920 9,920 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ----------------
35 8,543 8,543 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ----------------
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $62,362 55 Female Single Life 6% No Usage
(4.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 25,606 23,106 61,988 25,471 22,971 61,662
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 26,226 23,851 61,629 25,947 23,572 60,972
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 26,863 24,613 61,281 26,429 24,179 60,291
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 27,516 25,516 60,941 26,919 24,919 59,618
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 28,186 26,436 60,611 27,415 25,665 58,954
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 28,872 27,372 60,293 27,917 26,417 58,299
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 29,576 28,326 59,993 28,422 27,172 57,652
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 30,298 29,298 59,718 28,926 27,926 57,014
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 31,038 30,288 59,474 29,425 28,675 56,383
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 31,798 31,798 59,264 29,918 29,918 55,761
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 32,789 32,789 59,470 30,604 30,604 55,507
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 33,812 33,812 59,706 31,292 31,292 55,256
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 34,868 34,868 59,964 31,986 31,986 55,007
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 35,958 35,958 60,243 32,687 32,687 54,761
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 37,084 37,084 60,541 33,393 33,393 54,517
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 38,245 38,245 60,865 34,104 34,104 54,275
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 39,444 39,444 61,222 34,813 34,813 54,035
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 40,681 40,681 61,622 35,516 35,516 53,798
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 41,958 41,958 62,074 36,205 36,205 53,563
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 43,276 43,276 62,584 36,877 36,877 53,330
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 50,529 50,529 65,975 39,979 39,979 52,200
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 59,768 59,768 71,724 42,607 42,607 51,130
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 70,726 70,726 79,055 44,851 44,851 50,133
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $62,362 55 Female Single Life 12% No Usage
(10.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== ---------------------------------------------------------- ======================================================
Current Charges Guaranteed Charges
End of Policy
Year
---------------------------------------------------------- ======================================================
------------------ ------------------- ------------------- ------------------ ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
1 27,056 24,556 65,499 26,914 24,414 65,155
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
2 29,283 26,908 68,812 28,971 26,596 68,078
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
3 31,696 29,446 72,307 31,184 28,934 71,138
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
4 34,311 32,311 75,990 33,566 31,566 74,341
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
5 37,144 35,394 79,875 36,129 34,379 77,693
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
6 40,213 38,713 83,977 38,884 37,384 81,201
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
7 43,539 42,289 88,316 41,841 40,591 84,873
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
8 47,142 46,142 92,919 45,010 44,010 88,715
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
9 51,047 50,297 97,813 48,397 47,647 92,736
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
10 55,415 55,415 103,281 52,015 52,015 96,944
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
11 60,553 60,553 109,827 56,384 56,384 102,265
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
12 66,171 66,171 116,844 61,096 61,096 107,883
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
13 72,312 72,312 124,358 66,182 66,182 113,815
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
14 79,045 79,045 132,426 71,674 71,674 120,077
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
15 86,419 86,419 141,084 77,614 77,614 126,710
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
16 94,481 94,481 150,362 84,037 84,037 133,741
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
17 103,295 103,295 160,328 90,947 90,947 141,163
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
18 112,931 112,931 171,065 98,363 98,363 148,998
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
19 123,466 123,466 182,662 106,302 106,302 157,268
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
20 134,984 134,984 195,210 114,785 114,785 165,999
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
25 210,843 210,843 275,294 166,595 166,595 217,521
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
30 329,332 329,332 395,215 237,627 237,627 285,164
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
35 514,410 514,410 574,995 334,733 334,733 374,156
- ------------------ ------------------ ------------------- ------------------- ------------------ ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $75,421 55 Female Joint Life 0% No Usage
55 Male (-1.1% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 24,250 21,750 70,352 24,250 21,750 70,352
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 23,517 21,142 65,621 23,517 21,142 65,621
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 22,799 20,549 61,206 22,799 20,549 61,206
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 22,096 20,096 57,085 22,096 20,096 57,085
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 21,409 19,659 53,240 21,409 19,659 53,240
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 20,735 19,235 49,651 20,735 19,235 49,651
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 20,075 18,825 46,302 20,075 18,825 46,302
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 19,427 18,427 43,177 19,427 18,427 43,177
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 18,792 18,042 40,266 18,790 18,040 40,261
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 18,177 18,177 37,568 18,163 18,163 37,540
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 17,696 17,696 35,298 17,662 17,662 35,229
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 17,228 17,228 33,184 17,163 17,163 33,059
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 16,770 16,770 31,215 16,667 16,667 31,022
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 16,325 16,325 29,381 16,173 16,173 29,108
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 15,890 15,890 27,672 15,683 15,683 27,311
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 15,466 15,466 26,080 15,195 15,195 25,623
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 15,053 15,053 25,000 14,706 14,706 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 14,649 14,649 25,000 14,197 14,197 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 14,256 14,256 25,000 13,659 13,659 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 13,873 13,873 25,000 13,080 13,080 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 12,094 12,094 25,000 9,082 9,082 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 10,525 10,525 25,000 284 284 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 9,141 9,141 25,000
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $75,421 55 Female Joint Life 6% No Usage
55 Male (4.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 25,706 23,206 74,575 25,706 23,206 74,575
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 26,427 24,052 73,741 26,427 24,052 73,741
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 27,162 24,912 72,919 27,162 24,912 72,919
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 27,912 25,912 72,108 27,912 25,912 72,108
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 28,675 26,925 71,308 28,675 26,925 71,308
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 29,450 27,950 70,519 29,450 27,950 70,519
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 30,237 28,987 69,741 30,237 28,987 69,741
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 31,033 30,033 68,973 31,033 30,033 68,973
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 31,840 31,090 68,223 31,836 31,086 68,215
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 32,668 32,668 67,518 32,644 32,644 67,467
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 33,739 33,739 67,297 33,673 33,673 67,165
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 34,845 34,845 67,119 34,714 34,714 66,867
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 35,988 35,988 66,986 35,766 35,766 66,571
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 37,170 37,170 66,898 36,826 36,826 66,279
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 38,392 38,392 66,858 37,893 37,893 65,989
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 39,655 39,655 66,870 38,963 38,963 65,702
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 40,961 40,961 66,940 40,029 40,029 65,418
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 42,310 42,310 67,076 41,087 41,087 65,137
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 43,705 43,705 67,285 42,129 42,129 64,858
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 45,147 45,147 67,575 43,148 43,148 64,582
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 53,253 53,253 70,460 47,797 47,797 63,241
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 63,475 63,475 76,376 51,764 51,764 62,284
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 75,698 75,698 84,604 55,361 55,361 61,874
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Modified Single Premium Variable Life Insurance
====================================================================================================================================
====================================================================================================================================
Illustration Assumptions:
<S> <C> <C> <C> <C> <C> <C>
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
Initial Premium Initial Face Amount Issue Age(s) Male/Female Single Life/ Hypothetical Tobacco Usage
Joint Life Rate of Return Classification
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
$25,000 $75,421 55 Female Joint Life 12% No Usage
55 Male (10.9% net)
- ------------------ -------------------- ------------------ ------------------ ------------------ ------------------ ================
================== --------------------------------------------------------- =======================================================
Current Charges Guaranteed Charges
End of Policy
Year
--------------------------------------------------------- =======================================================
------------------ ------------------- ------------------ ------------------- ------------------ ================
Account Value Cash Value Death Benefit Account Value Cash Value Death Benefit
------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
1 27,162 24,662 78,799 27,162 24,662 78,799
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
2 29,507 27,132 82,335 29,507 27,132 82,335
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
3 32,049 29,799 86,038 32,049 29,799 86,038
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
4 34,804 32,804 89,914 34,804 32,804 89,914
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
5 37,788 36,038 93,972 37,788 36,038 93,972
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
6 41,018 39,518 98,219 41,018 39,518 98,219
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
7 44,511 43,261 102,664 44,511 43,261 102,664
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
8 48,284 47,284 107,316 48,284 47,284 107,316
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
9 52,363 51,613 112,198 52,357 51,607 112,185
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
10 56,930 56,930 117,662 56,887 56,887 117,573
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
11 62,303 62,303 124,274 62,182 62,182 124,031
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
12 68,187 68,187 131,343 67,931 67,931 130,850
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
13 74,629 74,629 138,907 74,168 74,168 138,049
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
14 81,711 81,711 147,060 80,953 80,953 145,696
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
15 89,468 89,468 155,804 88,304 88,304 153,777
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
16 97,962 97,962 165,192 96,251 96,251 162,307
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
17 107,262 107,262 175,293 104,825 104,825 171,310
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
18 117,445 117,445 186,189 114,054 114,054 180,813
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
19 128,594 128,594 197,974 123,964 123,964 190,845
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
20 140,803 140,803 210,747 134,580 134,580 201,433
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
25 221,591 221,591 293,193 199,457 199,457 263,906
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
30 348,735 348,735 419,612 287,485 287,485 345,914
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
35 548,830 548,830 613,395 406,061 406,061 453,830
- ------------------ ------------------ ------------------- ------------------ ------------------- ------------------ ================
====================================================================================================================================
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS WILL DEPEND ON INVESTMENT
ALLOCATIONS MADE BY THE POLICY OWNER AND MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE POLICY FLUCTUATED
ABOVE OR BELOW THE AVERAGE AMOUNT DURING A PERIOD OF POLICY YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD ALSO VARY DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE SUB-ACCOUNTS AND THE RATES OF RETURN OF
THE SUB-ACCOUNTS. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
================================================================================
APPENDIX B
HYPOTHETICAL ILLUSTRATION OF ACCELERATED DEATH BENEFIT
<PAGE>
APPENDIX B
Hypothetical Illustration of Accelerated Death Benefit
The following are hypothetical illustrations of the impact of payments made to
the Insured under the accelerated death benefit provision of the Policy. The
first hypothetical illustration assumes the Insured is a female, age 45 as of
the Policy Date. The second hypothetical illustration assumes the Insured is a
male, age 65 as of the Policy Date. The following other assumptions apply to
both hypothetical illustrations:
1. The Premium paid was $20,000.
2. The Accelerated Death Benefit provision is exercised as of the
10th Policy Anniversary.
3. The investment options in which Account Value was allocated
have grown at a hypothetical average annual net rate of return
of 8% since the Issue Date.
4. There have been no loans or loan repayments. 5. No amounts
have been withdrawn.
6. 50% of the maximum available amount is taken pursuant to the
accelerated death benefit provision.
7. The 12 month interest rate discount used in the calculation of
the benefit assumes interest at 6% per year, compounded
yearly.
The following are various policy values immediate before and after the
accelerated death benefit is paid:
<TABLE>
<CAPTION>
------------------------- -------------------------
Female Age 45 Male Age 65
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
<S> <C> <C>
Account Value Before the Accelerated Death Benefit $34,224 $33,708
is Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Cash Value Before the Accelerated Death Benefit is $34,224 $33,708
Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Maximum Amount Available For a Loan Before the $30,802 $30,337
Accelerated Death Benefit is Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Death Benefit Before the Accelerated Death Benefit $85,371 $45,746
is Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Guaranteed Minimum Death Benefit Before the $34,224 $33,708
Accelerated Death Benefit is Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Amount Paid as the Accelerated Death Benefit $20,135 $10,789
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Account Value After the Accelerated Death Benefit is $25,668 $25,281
Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Cash Value After the Accelerated Death Benefit is $25,668 $25,281
Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Maximum Amount Available For a Loan After the $23,101 $22,753
Accelerated Death Benefit is Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Death Benefit After the Accelerated Death Benefit is $64,028 $34,310
Paid
------------------------------------------------------ ------------------------- -------------------------
------------------------------------------------------ ------------------------- -------------------------
Guaranteed Minimum Death Benefit After the $25,668 $25,281
Accelerated Death Benefit is Paid
------------------------------------------------------ ------------------------- -------------------------
</TABLE>
<PAGE>
APPENDIX C
NET SINGLE PREMIUM FACTORS FOR DETERMINING REQUIRED DEATH BENEFITS
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
APPENDIX C
Net Single Premium Factors for Determination of Required Death Benefits
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
<S> <C> <C> <C> <C> <C> <C> <C>
Male Male Female Female Unisex Unisex
Attained No Tobacco Use Tobacco User No Tobacco Use Tobacco User No Tobacco Use Tobacco User
Age
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
20 .145794 .179648 .128227 .145820 .142549 .173641
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
21 .150168 .184901 .132462 .150638 .146904 .178832
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
22 .154741 .190376 .136853 .155637 .151450 .184239
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
23 .159531 .196117 .141415 .160816 .156205 .189896
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
24 .164555 .202134 .146147 .166184 .161181 .195813
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
25 .169822 .208454 .151056 .171748 .166388 .202013
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
26 .175351 .215097 .156150 .177516 .171842 .208514
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
27 .181135 .222053 .161428 .183482 .177537 .215307
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
28 .187175 .229318 .166906 .189661 .183478 .222391
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
29 .193474 .236889 .172585 .196055 .189667 .229765
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
30 .200035 .244756 .178464 .202666 .196106 .237421
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
31 .206860 .252916 .184560 .209495 .202801 .245356
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
32 .213944 .261368 .190875 .216560 .209747 .253574
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
33 .221291 .270109 .197419 .223864 .216949 .262073
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
34 .228895 .279132 .204192 .231403 .224405 .270846
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
35 .236761 .288437 .211198 .239179 .232117 .279893
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
36 .244894 .298015 .218438 .247196 .240090 .289210
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
37 .253298 .307862 .225900 .255421 .248325 .298784
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
38 .261963 .317956 .233579 .263842 .256812 .308598
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
39 .270894 .328294 .241477 .272450 .265558 .318646
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
40 .280099 .338865 .249599 .281240 .274569 .328918
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
41 .289568 .349652 .257933 .290189 .283834 .339398
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
42 .299311 .360652 .266484 .299295 .293363 .350082
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
43 .309334 .371859 .275263 .308570 .303162 .360967
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
44 .319639 .383267 .284285 .318028 .313237 .372051
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
45 .330230 .394864 .293562 .327683 .323592 .383327
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
46 .341103 .406652 .303095 .337537 .334226 .394797
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
47 .352264 .418644 .312891 .347598 .345142 .406472
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
48 .363716 .430831 .322953 .357876 .356347 .418348
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
49 .375463 .443211 .333288 .368370 .367842 .430422
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
50 .387504 .455776 .343896 .379072 .379628 .442686
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
51 .399832 .468510 .354772 .389982 .391698 .455126
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
52 .412433 .481383 .365917 .401101 .404041 .467718
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
53 .425290 .494362 .377317 .412407 .416640 .480431
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
54 .438381 .507408 .388968 .423887 .429477 .493230
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
55 .451696 .520502 .400884 .435558 .442546 .506102
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
56 .465218 .533636 .413071 .447432 .455834 .519042
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
57 .478941 .546812 .425551 .459541 .469340 .532055
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
58 .492871 .560033 .438358 .471935 .483076 .545154
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
59 .506993 .573308 .451517 .484649 .497033 .558352
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
60 .521284 .586632 .465025 .497695 .511192 .571645
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
61 .535723 .599969 .478863 .511045 .525531 .584998
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
62 .550287 .613272 .492991 .524640 .540024 .598361
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
63 .564927 .626483 .507352 .538390 .554621 .611671
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
64 .579602 .639551 .521878 .552212 .569276 .624871
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
65 .594281 .652440 .536544 .566075 .583957 .637926
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
66 .608944 .665153 .551348 .579988 .598650 .650837
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
67 .623584 .677704 .566315 .593989 .613350 .663624
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
68 .638205 .690127 .581486 .608159 .628069 .676329
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
69 .652797 .702445 .596895 .622553 .642805 .688977
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
70 .667333 .714642 .612535 .637176 .657534 .701560
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
Male Male Female Female Unisex Unisex
Attained No Tobacco Use Tobacco User No Tobacco Use Tobacco User No Tobacco Use Tobacco User
Age
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
71 .681762 .726681 .628356 .651974 .672204 .714037
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
72 .696014 .738497 .644271 .666812 .686743 .726330
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
73 .709994 .750004 .660165 .681560 .701053 .738348
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
74 .723624 .761135 .675927 .696097 .715050 .750016
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
75 .736865 .771831 .691482 .710345 .728690 .761272
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
76 .749724 .782071 .706791 .724284 .741970 .772096
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
77 .762229 .791908 .721863 .737937 .754918 .782539
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
78 .774433 .801434 .736726 .751362 .767581 .792686
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
79 .786390 .810733 .751401 .764609 .780008 .802620
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
80 .798116 .819847 .765881 .777687 .792212 .812375
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
81 .809588 .828771 .780117 .790566 .804165 .821946
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
82 .820755 .837465 .794038 .803191 .815814 .831289
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
83 .831544 .845863 .807562 .815500 .827084 .840341
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
84 .841909 .853936 .820645 .827387 .837930 .849062
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
85 .851863 .861731 .833298 .838880 .848366 .857494
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
86 .861489 .869377 .845592 .850070 .858473 .865761
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
87 .870930 .877089 .857651 .861099 .868391 .874063
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
88 .880405 .885052 .869655 .872184 .878334 .882592
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
89 .890224 .893507 .881864 .883606 .888601 .891595
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
90 .900787 .902897 .894634 .895774 .899583 .901508
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
91 .912663 .913849 .908493 .909137 .911841 .912922
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
92 .926694 .927262 .924224 .924501 .926204 .926715
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
93 .944200 .944411 .943053 .943115 .943971 .944152
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
94 .967326 .967355 .967034 .967034 .967267 .967290
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
</TABLE>
- --------------------------------------------------------------------------------
The Required Death Benefit is determined by treating the Account Value as if it
were a net single premium. We determine the Required Death Benefit by dividing
the Account Value by factors that are determined as of the Policy Date. These
factors vary by the attained Age, gender (where permitted) and risk class of the
Insured. Factors for joint life cases depend upon an actuarial derivation of the
applicable rate for both Insureds.
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX D
GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE CHARGES
PER THOUSAND OF NET AMOUNT AT RISK
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
APPENDIX D
Guaranteed Monthly Maximum Cost of Insurance Charges Per $1,000 of Net Amount at Risk
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
Male Male Female Female Unisex Unisex
Attained No Tobacco Use Tobacco User No Tobacco Use Tobacco User No Tobacco Use Tobacco User
Age
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
20 0.1401 0.1935 0.0842 0.0976 0.1289 0.1743
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
21 0.1384 0.1935 0.0859 0.0992 0.1279 0.1747
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
22 0.1359 0.1902 0.0867 0.1017 0.1261 0.1725
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
23 0.1326 0.1869 0.0884 0.1042 0.1238 0.1703
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
24 0.1293 0.1818 0.0900 0.1067 0.1214 0.1668
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
25 0.1251 0.1760 0.0917 0.1092 0.1184 0.1626
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
26 0.1226 0.1727 0.0942 0.1134 0.1169 0.1608
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
27 0.1209 0.1710 0.0959 0.1167 0.1159 0.1601
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
28 0.1201 0.1710 0.0984 0.1209 0.1157 0.1610
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
29 0.1201 0.1735 0.1017 0.1259 0.1164 0.1640
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
30 0.1209 0.1777 0.1042 0.1318 0.1176 0.1685
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
31 0.1234 0.1835 0.1076 0.1368 0.1202 0.1742
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
32 0.1268 0.1910 0.1109 0.1426 0.1236 0.1813
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
33 0.1318 0.2011 0.1151 0.1501 0.1284 0.1909
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
34 0.1376 0.2127 0.1201 0.1585 0.1341 0.2019
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
35 0.1443 0.2269 0.1259 0.1677 0.1406 0.2151
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
36 0.1518 0.2437 0.1343 0.1818 0.1483 0.2313
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
37 0.1618 0.2646 0.1443 0.1986 0.1583 0.2513
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
38 0.1727 0.2880 0.1551 0.2178 0.1692 0.2739
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
39 0.1844 0.3147 0.1668 0.2386 0.1808 0.2995
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
40 0.1986 0.3457 0.1810 0.2637 0.1950 0.3293
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
41 0.2136 0.3791 0.1960 0.2905 0.2101 0.3614
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
42 0.2295 0.4160 0.2111 0.3172 0.2258 0.3962
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
43 0.2470 0.4561 0.2261 0.3440 0.2428 0.4337
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
44 0.2662 0.5005 0.2412 0.3708 0.2612 0.4746
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
45 0.2880 0.5475 0.2579 0.3992 0.2819 0.5178
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
46 0.3114 0.5961 0.2754 0.4285 0.3042 0.5626
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
47 0.3365 0.6490 0.2946 0.4587 0.3281 0.6109
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
48 0.3641 0.7061 0.3147 0.4913 0.3542 0.6631
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
49 0.3942 0.7682 0.3373 0.5274 0.3828 0.7200
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
50 0.4285 0.8372 0.3624 0.5659 0.4153 0.7829
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
51 0.4679 0.9154 0.3900 0.6070 0.4523 0.8537
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
52 0.5131 1.0039 0.4218 0.6540 0.4948 0.9338
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
53 0.5651 1.1042 0.4570 0.7061 0.5435 1.0244
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
54 0.6230 1.2139 0.4930 0.7590 0.5970 1.1227
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
55 0.6876 1.3314 0.5316 0.8136 0.6564 1.2276
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
56 0.7582 1.4558 0.5701 0.8675 0.7205 1.3378
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
57 0.8330 1.5871 0.6079 0.9180 0.7879 1.4529
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
58 0.9163 1.7254 0.6456 0.9676 0.8621 1.5734
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
59 1.0098 1.8742 0.6884 1.0207 0.9454 1.7029
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
60 1.1143 2.0402 0.7388 1.0839 1.0391 1.8482
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
61 1.2308 2.2279 0.8010 1.1632 1.1447 2.0140
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
62 1.3652 2.4400 0.8784 1.2654 1.2676 2.2039
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
63 1.5176 2.6774 0.9735 1.3897 1.4085 2.4184
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
64 1.6872 2.9378 1.0806 1.5286 1.5656 2.6542
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
65 1.8733 3.2146 1.1962 1.6754 1.7375 2.9046
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
66 2.0752 3.5051 1.3162 1.8249 1.9229 3.1666
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
67 2.2920 3.8070 1.4388 1.9695 2.1207 3.4365
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
68 2.5282 4.1248 1.5659 2.1161 2.3349 3.7195
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
69 2.7908 4.4708 1.7076 2.2758 2.5731 4.0275
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
70 3.0886 4.8542 1.8742 2.4648 2.8444 4.3712
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
Male Male Female Female Unisex Unisex
Attained No Tobacco Use Tobacco User No Tobacco Use Tobacco User No Tobacco Use Tobacco User
Age
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
<S> <C> <C> <C> <C> <C> <C>
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
71 3.4298 5.2869 2.0777 2.7049 3.1578 4.7646
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
72 3.8253 5.7785 2.3279 2.9998 3.5238 5.2159
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
73 4.2749 6.3264 2.6285 3.3519 3.9432 5.7236
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
74 4.7716 6.9307 2.9757 3.7549 4.4096 6.2865
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
75 5.3054 7.5807 3.3649 4.1972 4.9140 6.8938
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
76 5.8727 8.2501 3.7879 4.6698 5.4519 7.5226
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
77 6.4695 8.9272 4.2435 5.1659 6.0199 8.1623
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
78 7.1000 9.6169 4.7391 5.6933 6.6228 8.8184
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
79 7.7848 10.3436 5.2913 6.2710 7.2806 9.5142
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
80 8.5472 11.1328 5.9234 6.9226 8.0163 10.2749
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
81 9.4095 12.0089 6.6558 7.6677 8.8520 11.1238
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
82 10.3922 12.9898 7.5074 8.5225 9.8078 12.0784
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
83 11.4945 14.0624 8.4777 9.5196 10.8830 13.1353
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
84 12.6988 15.1933 9.5594 10.6131 12.0621 14.2583
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
85 13.9806 16.3456 10.7444 11.7893 13.3240 15.4156
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
86 15.3265 17.4918 12.0280 13.0418 14.6570 16.5839
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
87 16.7180 18.6836 13.4123 14.3609 16.0470 17.8021
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
88 18.1509 19.9424 14.9028 15.7562 17.4918 19.0893
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
89 19.6476 21.2120 16.5166 17.2301 19.0125 20.4012
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
90 21.2331 22.5117 18.2733 18.8930 20.6332 21.7761
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
91 22.9495 23.8839 20.2227 20.7186 22.3974 23.2417
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
92 24.8700 25.5022 22.4528 22.7883 24.3813 24.9527
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
93 27.2013 27.6222 25.1486 25.2821 26.7869 27.1492
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
94 30.4289 30.5976 28.7360 28.7360 30.0877 30.2221
------------ ---------------- ----------------- ---------------- ---------------- ---------------- ================
</TABLE>
- --------------------------------------------------------------------------------
The guaranteed maximum cost of insurance charge depends on the risk class of the
Insured(s). We base the guaranteed maximum charges on the sex distinct 1980
Commissioners Standard Ordinary Ultimate Mortality Table, age last birthday
unless unisex rates apply. The amounts shown are per $1,000 amount at risk. Cost
of insurance charges for joint life cases depend upon an actuarial derivation of
the applicable rate for both insureds. Guaranteed maximum cost of insurance
charges for specific proposed joint insureds are available upon request.
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX E
Executive Officers and Directors
<TABLE>
<CAPTION>
Our executive officers, directors and certain significant employees, their ages,
positions with us and principal occupations are indicated below. The immediately
preceding work experience is provided for officers that have not been employed
by us or an affiliate for at least five years as of the date of this Prospectus.
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
<S> <C> <C> <C> <C>
Gordon C. Boronow* Deputy Chief Executive Deputy Chief Executive
45 Officer and President Officer and President:
Director (since July, 1991) American Skandia Life
Assurance Corporation
Nancy F. Brunetti Director (since February, 1996) Executive Vice President and
36 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
42 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi* Chief Executive Senior Executive Vice President and
53 Officer and Member of Executive Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
Lincoln R. Collins Executive Vice President and Executive Vice President
37 Chief Operating Officer and Chief Operating Officer:
Director (since February, 1996) American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
44 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Wade A. Dokken Director (since July, 1991) President and Deputy
38 Chief Executive Officer:
American Skandia Marketing, Incorporated
Brian L. Hirst Vice President, Vice President,
50 Corporate Actuary Corporate Actuary:
American Skandia Life
Assurance Corporation
Mr. Hirst joined us in 1996. He previously held the positions of Vice President from 1993 to 1996 and Second Vice President from
1987 to 1992 at Allmerica Financial.
N. David Kuperstock Vice President, Vice President,
46 Product Development Product Development:
American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
45 Chief Financial Officer, Chief Financial Officer:
Director (since September, 1994) American Skandia Life
Assurance Corporation
Gunnar J. Moberg Director (since October, 1994) Director - Marketing and Sales,
43 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Vice President, Vice President,
36 Controller Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant
Vice President and Director at Allmerica Financial from August, 1994 to July,
1996 and Senior Manager at KPMG Peat Marwick from July, 1983 to July, 1994.
Rodney D. Runestad Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Anders O. Soderstrom Executive Vice President and President and
38 Chief Information Officer Chief Information Officer:
Director (since September, 1994) American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Vice President
40 Director (since July, 1991) American Skandia
Marketing, Incorporated
C. Ake Svensson Treasurer, Vice President, Corporate
47 Director (since December, 1994) Controller and Treasurer:
American Skandia Investment
Holding Corporation
Mr. Svensson joined us in 1994. He previously held the position of Senior Vice President with Nordenbanken.
Bayard F. Tracy Director (since September, 1994) Senior Vice President,
50 National Sales Manager:
American Skandia
Marketing, Incorporated
Jeffrey M. Ulness Vice President, Vice President,
37 Product Management Product Management:
American Skandia Life
Assurance Corporation
Mr. Ulness joined us in 1994. He previously held the positions of Counsel at
North American Security Life Insurance Company from March, 1991 to July, 1994
and Associate at LeBoeuf, Lamb, Leiby, Green and MacRae from January, 1990 to
March 1991.
- --------
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
</TABLE>
<PAGE>
APPENDIX F
FINANCIAL STATEMENTS
APPENDIX F
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the consolidated statement of financial condition of American
Skandia Life Assurance Corporation (the "Company" which is a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1997, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Skandia Life Assurance Corporation at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
- --------------------
Hartford, Connecticut
February 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statement of financial condition
of American Skandia Life Assurance Corporation and subsidiary (a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1996, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the two years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Skandia Life
Assurance Corporation and subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
- ------------------------
New York, New York
March 10, 1997
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
<S> <C> <C>
AS OF DECEMBER 31,
1997 1996
--------------- --------------
ASSETS
Investments:
Fixed maturities - at amortized cost $ 9,366,671 $ 10,090,369
Fixed maturities - at fair value 108,323,668 87,369,724
Investment in mutual funds - at fair value 6,710,851 2,637,731
Policy loans 687,267 159,482
--------------- --------------
Total investments 125,088,457 100,257,306
Cash and cash equivalents 81,974,204 45,332,131
Accrued investment income 2,441,671 1,958,546
Fixed assets 356,153 229,780
Deferred acquisition costs 628,051,995 438,640,918
Reinsurance receivable 3,120,221 2,167,818
Receivable from affiliates 1,910,895 691,532
Income tax receivable - current 1,047,493 -
Income tax receivable - deferred 26,174,369 17,217,582
State insurance licenses 4,562,500 4,712,500
Other assets 2,524,581 2,047,689
Separate account assets 12,095,163,569 7,734,439,793
--------------- --------------
Total Assets $12,972,416,108 $8,347,695,595
=============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 43,204,443 $ 36,245,936
Policy reserves 24,414,999 21,238,749
Income tax payable - 1,124,151
Drafts outstanding 19,277,706 13,032,719
Accounts payable and accrued expenses 71,190,019 65,471,294
Payable to affiliates 584,283 685,724
Future fees payable to parent 233,033,818 47,111,936
Payable to reinsurer 78,126,227 79,000,262
Short-term borrowing 10,000,000 10,000,000
Surplus notes 213,000,000 213,000,000
Separate account liabilities 12,095,163,569 7,734,439,793
--------------- --------------
Total Liabilities 12,787,995,064 8,221,350,564
--------------- --------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 151,527,229 122,250,117
Unrealized investment gains and losses, net 954,069 (319,631)
Foreign currency translation, net (286,038) (263,706)
Retained earnings 30,225,784 2,678,251
--------------- --------------
Total Shareholder's Equity 184,421,044 126,345,031
--------------- --------------
Total Liabilities and Shareholder's Equity $12,972,416,108 $8,347,695,595
=============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ -----------
REVENUES:
Annuity charges and fees $121,157,846 $69,779,522 $38,837,358
Fee income 27,587,231 16,419,690 6,205,719
Net investment income 8,181,073 1,585,819 1,600,674
Annuity premium income 920,042 125,000 -
Net realized capital gains 87,103 134,463 36,774
Other 80,999 5,640 8,750
------------ ----------- -----------
Total Revenues 158,014,294 88,050,134 46,689,275
------------ ----------- -----------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 2,033,275 613,594 555,421
Increase/(decrease) in annuity policy reserves 37,270 634,540 (6,778,756)
Cost of minimum death benefit reinsurance 4,544,697 2,866,835 2,056,606
Return credited to contractowners (2,018,635) 672,635 10,612,858
------------ ----------- -----------
4,596,607 4,787,604 6,446,129
------------ ----------- -----------
Expenses:
Underwriting, acquisition and other insurance expenses 90,346,952 49,737,147 35,764,392
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 24,895,456 10,790,716 6,499,414
------------ ----------- -----------
115,392,408 60,677,863 42,413,806
------------ ----------- -----------
Total Benefits and Expenses 119,989,015 65,465,467 48,859,935
------------ ----------- -----------
Income (loss) from operations
before income taxes 38,025,279 22,584,667 (2,170,660)
Income tax expense (benefit) 10,477,746 (4,038,357) 397,360
------------ ----------- -----------
Net income (loss) $ 27,547,533 $26,623,024 $(2,568,020)
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
------------ ------------ ------------
Additional paid-in capital:
Balance at beginning of year 122,250,117 81,874,666 71,623,932
Additional contributions 29,277,112 40,375,451 10,250,734
------------ ------------ ------------
Balance at end of year 151,527,229 122,250,117 81,874,666
------------ ------------ ------------
Unrealized investment gains and losses:
Balance at beginning of year (319,631) 111,359 (41,655)
Change in unrealized investment gains and losses, net 1,273,700 (430,990) 153,014
------------ ------------ ------------
Balance at end of year 954,069 (319,631) 111,359
------------ ------------ ------------
Foreign currency translation:
Balance at beginning of year (263,706) (328,252) -
Change in foreign currency translation, net (22,332) 64,546 (328,252)
------------ ------------ ------------
Balance at end of year (286,038) (263,706) (328,252)
------------ ------------ ------------
Retained earnings (deficit):
Balance at beginning of year 2,678,251 (23,944,773) (21,376,753)
Net income (loss) 27,547,533 26,623,024 (2,568,020)
------------ ------------ ------------
Balance at end of year 30,225,784 2,678,251 (23,944,773)
------------ ------------ ------------
Total Shareholder's Equity $184,421,044 $126,345,031 $ 59,713,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
--------------- --------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income/(loss) $ 27,547,533 26,623,024 (2,568,020)
Adjustments to reconcile net income/(loss) to net cash
used in operating activities:
Increase/(decrease) in policy reserves 3,176,250 1,852,259 (4,667,765)
Amortization of bond discount 72,986 27,340 23,449
Amortization of insurance licenses 150,000 150,000 150,000
Change in receivable from/payable to affiliates (1,320,804) 540,484 (347,884)
Change in income tax receivable/payable (2,171,644) 1,688,001 (600,849)
Increase in other assets (603,265) (661,084) (372,120)
Increase in accrued investment income (483,125) (1,764,472) (20,420)
Increase in reinsurance receivable (952,403) (179,776) (1,988,042)
Increase in deferred acquisition costs, net (189,411,077) (168,418,535) (96,212,774)
Increase in income tax receivable - deferred (9,630,603) (16,903,477) -
Increase in accounts payable and accrued expenses 5,718,725 32,322,727 945,483
Increase in drafts outstanding 6,244,987 13,032,719 -
Change in foreign currency translation, net (34,356) (77,450) (328,252)
Realized gain on sale of investments (87,103) (134,463) (36,774)
--------------- --------------- --------------
Net cash used in operating activities (161,783,899) (111,902,703) (106,023,968)
--------------- --------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (28,905,493) (96,812,903) (614,289)
Proceeds from sale and maturity of fixed maturity investments 10,755,550 8,947,390 100,000
Purchase of shares in mutual funds (5,595,342) (2,160,347) (1,566,194)
Proceeds from sale of shares in mutual funds 1,415,576 1,273,640 867,744
Increase in policy loans (527,785) (104,427) (37,807)
Change in investments of separate account assets (3,691,031,470) (2,789,361,685) (1,609,415,439)
--------------- --------------- ---------------
Net cash used in investing activities (3,713,888,964) (2,878,218,332) (1,610,665,985)
--------------- --------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 29,277,112 40,375,451 10,250,734
Surplus notes - 110,000,000 34,000,000
Increase in future fees payable to parent 185,921,882 47,111,936 -
Increase/(decrease) in payable to reinsurer (874,035) 14,004,792 24,890,064
Proceeds from annuity sales 3,697,989,977 2,795,114,603 1,628,486,076
--------------- --------------- ---------------
Net cash provided by financing activities 3,912,314,936 3,006,606,782 1,697,626,874
--------------- --------------- ---------------
Net increase/(decrease) in cash and cash equivalents 36,642,073 16,485,747 (19,063,079)
--------------- --------------- ---------------
Cash and cash equivalents at beginning of year 45,332,131 28,846,384 47,909,463
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 81,974,204 45,332,131 28,846,384
=============== =============== ===============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 22,307,992 11,177,120 995,496
=============== =============== ===============
Interest paid $ 16,915,835 7,094,767 540,319
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
December 31, 1997
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"); whose ultimate parent is Skandia Insurance
Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, American Skandia Marketing,
Incorporated. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. which is
a life insurance company domiciled in Mexico. This Mexican life
insurer is a start up company with expectations of selling long term
savings products within Mexico. Total shareholder's equity of Skandia
Vida, S.A. de C.V. is $1,509,146 as of December 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles. Intercompany transactions and balances have been
eliminated in consolidation.
Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
B. New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income", which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 sets standards
for the reporting and display of comprehensive income and its
components in financial statements. Application of the new rules
will not impact the Company's financial position or net income. The
Company expects to adopt this pronouncement in the first quarter of
1998, which will include the presentation of comprehensive income
for prior periods presented for comparative purposes, as required
by SFAS 130. The primary element of comprehensive income applicable
to the Company is changes in unrealized gains and losses on
securities classified as available for sale.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. Investments
The Company has classified its fixed maturity investments as either
held-to-maturity or available-for-sale. Investments classified as
held-to-maturity are investments that the Company has the ability
and intent to hold to maturity. Such investments are carried at
amortized cost. Those investments which are classified as
available-for-sale are carried at fair value and changes in
unrealized gains and losses are reported as a component of
shareholder's equity.
The Company has classified its mutual fund investments as
available-for-sale. Such investments are carried at fair value and
changes in unrealized gains and losses are reported as a component
of shareholder's equity.
Policy loans are carried at their unpaid principal balances.
Realized gains and losses on disposal of investments are determined
by the specific identification method and are included in revenues.
D. Cash Equivalents
The Company considers all highly liquid time deposits, commercial
paper and money market mutual funds purchased with a maturity of
three months or less to be cash equivalents.
E. State Insurance Licenses
Licenses to do business in all states have been capitalized and
reflected at the purchase price of $6 million less accumulated
amortization. The cost of the licenses is being amortized over 40
years.
F. Fixed Assets
Fixed assets consisting of furniture, equipment and leasehold
improvements are carried at cost and depreciated on a straight line
basis over a period of three to five years. Accumulated
depreciation amounted to $95,823 and $32,641 at December 31, 1997
and 1996, respectively. Depreciation expense for the years ended
December 31, 1997 and 1996 was $63,182 and $28,892, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Recognition of Revenue and Contract Benefits
Annuity contracts without significant mortality risk, as defined by
SFAS 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts", are classified as investment
contracts (variable, market value adjusted and certain immediate
annuities) and those with mortality risk (immediate annuities) as
insurance products. The policy for revenue and contract benefit
recognition is described below.
Revenues for variable annuity contracts consist of charges against
contractowner account values for mortality and expense risks,
administration fees, surrender charges and an annual maintenance
fee per contract. Benefit reserves for variable annuity contracts
represent the account value of the contracts and are included in
the separate account liabilities.
Revenues for market value adjusted annuity contracts consist of
separate account investment income reduced by benefit payments and
changes in reserves in support of contractowner obligations, all of
which is included in return credited to contractowners. Benefit
reserves for these contracts represent the account value of the
contracts, and are included in the general account liability for
future contractowner benefits to the extent in excess of the
separate account liabilities.
Revenues for immediate annuity contracts without life contingencies
consist of net investment income. Revenues for immediate annuity
contracts with life contingencies consist of single premium
payments recognized as annuity considerations when received.
Benefit reserves for these contracts are based on the Society of
Actuaries 1983 Table-a with assumed interest rates that vary by
issue year. Assumed interest rates ranged from 6.5% to 8.25% at
both December 31, 1997 and 1996.
Annuity sales were $3,697,990,000, $2,795,114,000 and
$1,628,486,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Annuity contract assets under management were
$12,119,191,000, $7,764,891,000 and $4,704,044,000 at December 31,
1997, 1996 and 1995, respectively.
H. Deferred Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
deferred. These costs include commissions, cost of contract
issuance, and certain selling expenses that vary with production.
These costs are being amortized generally in proportion to expected
gross profits from surrender charges, policy and asset based fees
and mortality and expense margins. This amortization is adjusted
retrospectively and prospectively when estimates of current and
future gross profits to be realized from a group of products are
revised.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Details of the deferred acquisition costs and related amortization
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Balance at beginning of year $438,640,918 $270,222,383 $174,009,609
Acquisition costs deferred
during the year 262,257,543 190,995,588 106,063,698
Acquisition costs amortized
during the year 72,846,466 22,577,053 9,850,924
------------ ------------ ------------
Balance at end of year $628,051,995 $438,640,918 $270,222,383
============ ============ ============
</TABLE>
I. Separate Accounts
Assets and liabilities in Separate Accounts are shown as separate
captions in the consolidated statements of financial condition.
Separate Account assets consist principally of long term bonds,
investments in mutual funds and short-term securities, all of
which are carried at fair value.
Included in Separate Account liabilities are $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively, relating
to annuity contracts for which the contractholder is guaranteed a
fixed rate of return. Separate Account assets of $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively,
consisting of long term bonds, short term securities, transfers
due from general account and cash are held in support of these
annuity contracts, pursuant to state regulation.
J. Fair Values of Financial Instruments
The methods and assumptions used to determine the fair value of
financial instruments are as follows:
Fair values of fixed maturities with active markets are based on
quoted market prices. For fixed maturities that trade in less
active markets, fair values are obtained from an independent
pricing service.
Fair values of investments in mutual funds are based on quoted
market prices.
The carrying value of cash and cash equivalents approximates fair
value due to the short-term nature of these investments.
Fair values of certain financial instruments, such as future fees
payable to the parent and surplus notes are not readily
determinable and are excluded from fair value disclosure
requirements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
K. Income Taxes
The Company is included in the consolidated federal income tax
return of Skandia U.S. Holding Corporation and its subsidiaries. In
accordance with the tax sharing agreement, the federal and state
income tax provision is computed on a separate return basis, as
adjusted for consolidated items, such as net operating loss
carryforwards.
Income taxes are provided in accordance with the SFAS 109,
"Accounting for Income Taxes", which requires the asset and
liability method of accounting for deferred taxes. The object of
this method is to recognize an asset and liability for the expected
future tax effects due to temporary differences between the
financial reporting and the tax basis of assets and liabilities,
based on enacted tax rates and other provisions of the tax law.
L. Translation of Foreign Currency
The financial position and results of operations of the Company's
Mexican subsidiary are measured using local currency as the
functional currency. Assets and liabilities of the subsidiary are
translated at the exchange rate in effect at each year-end.
Statements of operations and shareholder's equity accounts are
translated at the average rate prevailing during the year.
Translation adjustments arising from the use of differing exchange
rates from period to period are included in shareholder's equity.
M. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that management
make estimates and assumptions that affect the reported amount of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. The more significant estimates and assumptions are related
to deferred acquisition costs and involve policy lapses, investment
return and maintenance expenses. Actual results could differ from
those estimates.
N. Reinsurance
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provide additional
capacity for growth in supporting the cash flow strain from the
Company's variable annuity business. The reinsurance is effected
under quota share contracts.
The Company also reinsures certain mortality risks. These risks
result from the guaranteed minimum death benefit feature in the
variable annuity products.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENTS
The amortized cost, gross unrealized gains (losses) and estimated fair
value of available-for-sale and held-to-maturity fixed maturities and
investments in mutual funds as of December 31, 1997 and 1996 are shown
below. All securities held at December 31, 1997 are publicly traded.
Investments in fixed maturities as of December 31, 1997 consisted of
the following:
Held-to-Maturity
----------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $3,789,498 $71,197 $ 8,517 $3,852,178
Obligations of State and
Political Subdivisions 50,000 - - 50,000
Corporate Securities 5,527,173 1,949 19,487 5,509,635
----------- ------- -------- -----------
Totals $9,366,671 $73,146 $28,004 $9,411,813
========== ======= ======= ==========
Available-for-Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $ 14,999,291 $ 201,664 - $15,200,955
Obligations of
State and Political
Subdivisions 202,224 318 - 202,542
Corporate
Securities 91,469,384 1,505,656 54,869 92,920,171
-------------- ----------- -------- ------------
Totals $106,670,899 $1,707,638 $54,869 $108,323,668
============ ========== ======= ============
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The amortized cost and fair value of fixed maturities, by contractual
maturity, at December 31, 1997 are shown below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity Available-for-Sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
Due in one year or less $1,049,977 $1,050,001 $ 2,990,584 $ 2,992,050
Due after one through five years 8,062,630 8,105,822 26,857,218 27,121,041
Due after five through ten years 254,064 255,990 76,823,097 78,210,577
---------- ---------- ------------ ------------
Total $9,366,671 $9,411,813 $106,670,899 $108,323,668
========== ========== ============ ============
</TABLE>
Investments in fixed maturities as of December 31, 1996 consisted of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity
----------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $ 4,299,803 $88,268 $22,937 $ 4,365,134
Obligations of
State and Political
Subdivisions 250,119 229 - 250,348
Corporate
Securities 5,540,447 - 62,660 5,477,787
----------- ---------- -------- -----------
Totals $10,090,369 $88,497 $85,597 $10,093,269
=========== ======= ======= ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Available for Sale
------------------
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $14,508,780 - $ 79,745 $14,429,035
Obligations of
State and Political
Subdivisions 202,516 26 - 202,542
Other Government
Obligations 5,047,790 - 7,440 5,040,350
Corporate
Securities 68,101,413 83,312 486,928 67,697,797
----------- ------- -------- -----------
Totals $87,860,499 $83,338 $574,113 $87,369,724
=========== ======= ======== ===========
</TABLE>
Proceeds from sales of fixed maturities during 1997, 1996 and 1995 were
$5,055,550, $8,732,390 and $0, respectively. Proceeds from maturities
during 1997, 1996 and 1995 were $5,700,000, $215,000 and $100,000,
respectively.
The cost, gross unrealized gains (losses) and fair value of investments
in mutual funds at December 31, 1997 and 1996 are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- -----
1997 $6,895,821 $43,506 $228,476 $6,710,851
========== ======= ======== ==========
1996 $2,638,695 $59,278 $ 60,242 $2,637,731
========== ======= ========= ==========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Net realized investment gains (losses) were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed Maturities:
Gross gains $ 9,800 $ - $ -
Gross losses - - -
Investment in Mutual Funds:
Gross gains 115,824 139,814 65,236
Gross losses (38,521) (5,351) (28,462)
---------- ----------- --------
Totals $ 87,103 $134,463 $36,774
========= ======== =======
</TABLE>
4. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed maturities $6,616,560 $ 836,591 $ 629,743
Cash and cash equivalents 1,153,790 684,653 986,932
Investment in mutual funds 553,864 143,737 59,895
Policy loans 28,243 5,274 4,025
---------- ---------- ----------
Total investment income 8,352,457 1,670,255 1,680,595
Investment expenses 171,384 84,436 79,921
---------- ---------- ----------
Net investment income $8,181,073 $1,585,819 $1,600,674
========== ========== ==========
</TABLE>
5. INCOME TAXES
The significant components of income tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Current tax expense $20,108,348 $12,865,120 $397,360
Deferred tax benefit (9,630,602) (16,903,477) -
----------- ---------- --------
Total income tax expense (benefit) $10,477,746 $(4,038,357) $397,360
=========== ============ ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The tax effects of significant items comprising the Company's deferred
tax balance as of December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---- ----
Deferred Tax (Liabilities):
Deferred acquisition costs ($159,765,795) ($103,072,477)
Payable to reinsurer (25,369,078) (23,025,326)
Policy fees (656,311) (491,640)
Unrealized investment gains and losses (513,731) 172,109
------------- --------------
Total (186,304,915) (126,417,334)
------------ ------------
Deferred Tax Assets:
Net separate account liabilities 175,872,109 121,092,798
Reserve for future contractowner benefits 15,121,555 12,686,078
Other reserve differences 10,534,160 4,527,886
Deferred compensation 7,186,789 4,392,526
Surplus notes interest 2,728,676 548,730
Foreign exchange translation 154,020 141,996
Other 881,975 244,902
------------- -------------
Total 212,479,284 143,634,916
------------ ------------
Net deferred tax balance $ 26,174,369 $ 17,217,582
============ ============
</TABLE>
Management believes that based on the taxable income produced in the
current year and the continued growth in annuity products, the Company
will produce sufficient taxable income in the future to realize its
deferred tax asset. As such, the Company released the deferred tax
valuation allowance of $9,324,853 in 1996.
The income tax expense was different from the amount computed by
applying the federal statutory tax rate of 35% to pre-tax income from
continuing operations as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Income (loss) before taxes $38,025,279 $22,584,667 ($2,170,660)
Income tax rate 35% 35% 35%
----------- ----------- -----------
Tax expense at federal
statutory income tax rate 13,308,848 7,904,633 (759,731)
Tax effect of:
Change in valuation allowance - (9,324,853) 1,680,339
Dividend received deduction (4,585,000) (2,266,051) (477,139)
Other 866,973 (707,685) (48,821)
State income taxes 886,925 355,599 2,712
----------- ----------- -----------
Income tax expense (benefit) $10,477,746 ($ 4,038,357) $ 397,360
=========== =========== ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. RECEIVABLE FROM/PAYABLE TO AFFILIATES
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) have been charged to the Company at cost by
American Skandia Information Services and Technology Corporation, an
affiliated company; and likewise, the Company has charged operating
costs to American Skandia Investment Services, Incorporated, an
affiliated company. The total cost to the Company for these items was
$5,572,404, $11,581,114 and $12,687,337 for the years ended December
31, 1997, 1996 and 1995, respectively. Income received for these items
was $3,224,645, $1,148,364 and $396,573 for the years ended December
31, 1997, 1996 and 1995, respectively. Amounts receivable from
affiliates under these arrangements were $548,887 and $548,792 as of
December 31, 1997 and 1996, respectively. Amounts payable to affiliates
under these arrangements were $263,742 and $619,089 as of December 31,
1997 and 1996, respectively.
7. FUTURE FEES PAYABLE TO PARENT
On December 17, 1996, the Company sold to its Parent, effective
September 1, 1996, certain rights to receive future fees and charges
expected to be realized on the variable portion of a designated block
of deferred annuity contracts issued during the period from January 1,
1994 through June 30, 1996 (Transaction 1996-1). In addition, the
Company entered into the following similar transactions during 1997:
Closing Effective Contract Issue
Transaction Date Date Period
----------- ------- --------- --------------
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
In connection with these transactions, the Parent, through a trust,
issued collateralized notes in a private placement which are secured by
the rights to receive future fees and charges purchased from the
Company.
Under the terms of the Purchase Agreements, the rights sold provide for
the Parent to receive 80% (100% for Transaction 1997-3) of future
mortality and expense charges and contingent deferred sales charges,
after reinsurance, expected to be realized over the remaining surrender
charge period of the designated contracts (6.0 to 8.0 years). The
Company did not sell the right to receive future fees and charges after
the expiration of the surrender charge period.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The proceeds from the sales have been recorded as a liability and are
being amortized over the remaining surrender charge period of the
designated contracts using the interest method. The present value of
the transactions (discounted at 7.5%) as of the respective Effective
Date was as follows:
Present
Transaction Value
----------- -------
1996-1 $ 50,221,438
1997-1 58,766,633
1997-2 77,551,736
1997-3 58,193,264
Payments representing fees and charges realized during the period
January 1, 1997 through December 31, 1997 in the aggregate amount of
$22,250,158, were made by the Company to the Parent. Interest expense
of $6,842,469 has been included in the statement of operations.
Expected payments of future fees payable to Parent are as follows:
Year Ending
December 31, Amount
------------ ------
1998 $ 39,637,610
1999 41,845,736
2000 43,500,530
2001 40,738,800
2002 34,533,624
2003 22,835,020
2004 9,490,399
2005 452,099
--------------
Total $ 233,033,818
==============
The Commissioner of the State of Connecticut has approved the sale of
future fees and charges; however, in the event that the Company becomes
subject to an order of liquidation or rehabilitation, the Commissioner
has the ability to stop the payments due to the Parent under the
Purchase Agreement subject to certain terms and conditions.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. LEASES
The Company leases office space under a lease agreement established in
1989 with American Skandia Information Services and Technology
Corporation. The lease expense for 1997, 1996 and 1995 was $2,427,502,
$1,583,391 and $1,218,806, respectively. Future minimum lease payments
per year and in aggregate as of December 31, 1997 are as follows:
1998 $ 2,371,509
1999 2,595,272
2000 2,753,324
2001 2,753,324
2002 2,753,324
2003 and thereafter 21,465,933
------------
Total $34,692,686
9. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains cash, bonds and notes on deposit
with various states. The carrying value of these deposits amounted to
$3,756,572 and $3,766,564 as of December 31, 1997, and 1996,
respectively. These deposits are required to be maintained for the
protection of contractowners within the individual states.
10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $294,585,500, $275,835,076 and
$132,493,899 at December 31, 1997, 1996 and 1995, respectively.
The statutory basis net loss was $8,970,459, $5,405,179 and $7,183,003
for the years ended December 31, 1997, 1996 and 1995, respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid to shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. At December 31, 1997, no amounts may be
distributed without prior approval.
11. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Under this plan, the Company contributes 3%
of salary for all participating employees and matches employee
contributions at a 50% level up to an additional 3% Company
contribution. Company contributions to this plan on behalf of the
participants were $1,220,214, $850,111 and $627,161 for the years ended
December 31, 1997, 1996 and 1995, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The Company and an affiliate cooperatively have a long-term incentive
plan under which units are awarded to executive officers and other
personnel. The program consists of multiple plans. A new plan is
instituted each year. Generally, participants must remain employed by
the Company or its affiliates at the time such units are payable in
order to receive any payments under the plan. The accrued liability
representing the value of these units is $15,720,067 and $9,212,369 as
of December 31, 1997 and 1996, respectively. Payments under this plan
were $1,118,803, $601,603 and $0 for the years ended December 31, 1997,
1996, and 1995, respectively.
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$269,616 in 1997, $244,601 in 1996 and $139,209 in 1995.
12. REINSURANCE
The effect of the reinsurance agreements on the Company's operations
was to reduce annuity charges and fee income, death benefit expense and
policy reserves. The effect of reinsurance for the years ended December
31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997
<S> <C> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $144,417,045 $955,677 ($1,971,959)
Ceded 23,259,199 918,407 46,676
------------ --------- ----------
Net $121,157,846 $ 37,270 ($2,018,635)
============ ========= ==========
1996
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $87,369,693 $814,306 $779,070
Ceded 17,590,171 179,766 106,435
----------- -------- --------
Net $69,779,522 $634,540 $672,635
=========== ======== ========
1995
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $50,334,280 ($4,790,714) $10,945,831
Ceded 11,496,922 1,988,042 332,973
----------- ---------- -----------
Net $38,837,358 ($6,778,756) $10,612,858
=========== ========== ===========
</TABLE>
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
13. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash.
Surplus notes outstanding as of December 31, 1997, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
Interest for the
Years Ended December 31,
------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest
Issue Date Amount Rate 1997 1996 1995
---------- ------ ---- ---- ---- ----
December 29, 1993 $ 20,000,000 6.84% $ 1,387,000 $ 1,390,800 $1,387,000
February 18, 1994 10,000,000 7.28% 738,111 740,133 738,111
March 28, 1994 10,000,000 7.90% 800,972 803,167 800,972
September 30, 1994 15,000,000 9.13% 1,388,521 1,392,325 1,388,521
December 28, 1994 14,000,000 9.78% 1,388,217 1,392,020 1,392,008
December 19, 1995 10,000,000 7.52% 762,444 764,533 27,156
December 20, 1995 15,000,000 7.49% 1,139,104 1,142,225 37,450
December 22, 1995 9,000,000 7.47% 681,638 683,505 18,675
June 28, 1996 40,000,000 8.41% 3,410,722 1,747,411 -
December 30, 1996 70,000,000 8.03% 5,699,069 31,228 -
------------ ----------- ------------ ----------
Total $213,000,000 $17,395,798 $10,087,347 $5,789,893
============ =========== =========== ==========
</TABLE>
All surplus notes mature 7 years from the issue date.
Payment of interest and repayment of principal for these notes is
subject to certain conditions and require approval by the Insurance
Commissioner of the State of Connecticut. At December 31, 1997 and
1996, $7,796,218 and $1,567,800, respectively, of accrued interest on
surplus notes was not approved for payment under these criteria.
14. SHORT-TERM BORROWING
The Company has a $10,000,000 loan from the parent which matures on
March 10, 1998 and bears interest at 6.39%. The total interest expense
to the Company was $641,532, $642,886 and $709,521 and for the years
ended December 31, 1997, 1996 and 1995, respectively, of which $200,575
and $206,361 was payable as of December 31, 1997 and 1996,
respectively.
15. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities are
subject to discretionary withdrawal with market value adjustment by
contractholders. Separate account assets which are carried at market
value are adequate to pay such withdrawals which are generally subject
to surrender charges ranging from 8.5% to 1% for contracts held less
than 8 years.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company on a quarterly basis:
<TABLE>
<CAPTION>
Three Months Ended
------------------
<S> <C> <C> <C> <C> <C>
1997 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $30,185,820 $34,055,549 $41,102,381 $44,402,368
Net investment income 1,368,683 2,626,776 2,031,187 2,154,427
Net realized capital gains 20,604 43,460 20,553 2,486
----------- ----------- ----------- -----------
Total revenues $31,575,107 $36,725,785 $43,154,121 $46,559,281
=========== =========== =========== ===========
Benefits and expenses $18,319,281 $30,465,338 $31,179,403 $40,024,993
=========== =========== =========== ===========
Net income $ 8,995,975 $ 3,646,787 $ 8,621,412 $ 6,283,359
============ ============ ============ ============
Three Months Ended
------------------
1996 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $16,605,765 $20,452,733 $22,366,166 $26,933,702
Net investment income 455,022 282,926 270,092 577,779
Net realized capital gains 92,072 13,106 5,606 23,679
----------- ----------- ----------- -----------
Total revenues $17,152,859 $20,748,765 $22,641,864 $27,535,160
=========== =========== =========== ===========
Benefits and expenses $12,725,411 $ 9,429,735 $17,007,137 $25,191,857
=========== ============ =========== ===========
Net income $ 2,658,941 $ 7,695,490 $ 2,538,513 $14,470,976
============ ============ ============ ===========
Three Months Ended
------------------
1995 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $ 8,891,903 $10,066,478 $11,960,530 $14,189,048
Net investment income 551,690 434,273 293,335 321,376
Net realized capital gains (losses) (16,082) (370) 44,644 8,582
------------ ----------- ----------- -----------
Total revenues $ 9,427,511 $10,500,381 $12,298,509 $14,519,006
============ =========== =========== ===========
Benefits and expenses $11,438,798 $ 9,968,595 $11,600,587 $15,908,087
=========== ============ =========== ===========
Net income (loss) ($ 2,026,688) $ 531,486 $ 678,312 ($ 1,751,130)
============= ============= ============= ============
</TABLE>
As described in Note 5, the valuation allowance relating to deferred
income taxes was released during the three months ended December 31,
1996.
ADDITIONAL INFORMATION: Inquiries will be answered by calling
your representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
at
P.O. Box 883
Shelton, Connecticut 06484
or
[email protected]
Issued by: Serviced at:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 1-800-752-6342
http://www.AmericanSkandia.com http://www.AmericanSkandia.com
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: 203-926-1888
http://www.AmericanSkandia.com
