FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 28, 2000
REGISTRATION NO. 333-91633 INVESTMENT COMPANY ACT NO. 811-09707
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Pre-Effective Amendment No. 1
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 8 SUB-ACCOUNTS)
(Exact Name of Registrant)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Name of Depositor)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484
(Address of Depositor's Principal Executive Offices)
(203) 926-1888
(Depositor's Telephone Number)
M. PRISCILLA PANNELL, CORPORATE SECRETARY
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484
(Name and Address of Agent for Service of Process)
Copy To:
T. RICHARD KENNEDY, ESQ.
GENERAL COUNSEL
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 925-6922
Approximate Date of Proposed Sale to the Public:
MAY 1, 2000 OR AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT.
It is proposed that this filing become effective: (check appropriate space)
__ immediately upon filing pursuant to paragraph (b) of Rule 485
__ on ___________ pursuant to paragraph (b) of Rule 485
__ 60 days after filing pursuant to paragraph (a) (i) of Rule 485
X_ on May 1, 2000 pursuant to paragraph (a) (i) of Rule 485
__ 75 days after filing pursuant to paragraph (a) (ii) of Rule 485
__ on ______________pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
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<S> <C> <C>
American Skandia Life Assurance
Corporation Annuity Contracts Indefinite* Indefinite* $0
====================================================================================================================================
*Pursuant to Rule 24f-2 of the Investment Company Act of 1940
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</TABLE>
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of
1940. The Rule 24f-2 Notice for Registrant's fiscal year 1999 was filed within
90 days of the close of the fiscal year.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOMES EFFECTIVE IN ACCORDANCE WITH THE PROVISIONS OF SECTION
8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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VIA (Class 8)
VIA II n4 cr
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
<S> <C> <C> <C>
N-4 Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions Glossary of Terms
3. Synopsis or Highlights What are Some of the Key Features of the Annuity?
Highlights, Summary of Contract Fees and Charges
4. Condensed Financial Information Condensed Financial Information About
Separate Account B
5. General Description of Registrant, Depositor Who Is American Skandia?
and Portfolio Companies What Are Separate Accounts?
6. Deductions Summary of Contract Fees and Charges,
Fees and Charges
7. General Description of Variable Annuity Contracts Highlights, Purchasing Your Annuity,
8. Annuity Period Managing Your Annuity, Access to Cash Value
9. Death Benefit Annuity Benefits
10. Purchases and Contract Value Purchasing Your Annuity, Managing Your Annuity
Access to Cash Value
11. Redemptions Access to Cash Value
12. Taxes Tax Considerations
13. Legal Proceedings Not Applicable
14. Table of Contents of the Statement of Additional Information Available Information,
Contents of the Statement of Additional Information
SAI Heading
15. Cover Page Statement of Additional Information
16. Table of Contents Table of Contents
17. General Information and History General Information Regarding American Skandia
Life Assurance Corporation
18. Services Independent Auditors
19. Purchase of Securities Being Offered Noted in Prospectus under Managing Your
Annuity
20. Underwriters Principal Underwriter/Distribution
(Continued)
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
N-4 Item No. SAI Headings
21. Calculation of Performance Data Calculation of Performance Data
22. Annuity Payments Noted in Prospectus under Access to Cash Value
23. Financial Statements Appendix A
Part C Heading
24. Financial Statements and Exhibits Financial Statements
and Exhibits
25. Directors and Officers of the Depositor Noted in Prospectus under Executive
Officers and Directors
26. Persons Controlled by or Under Persons Controlled By or
Common Control with the Under Common Control with the
Depositor or Registrant Depositor or Registrant
27. Number of Contractowners Number of Contractowners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts
and Records
31. Management Services Management Services
32. Undertakings Undertakings
</TABLE>
VIA (Class 8)
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
One Corporate Drive, Shelton, Connecticut 06484
This Prospectus describes a single premium variable adjustable immediate annuity
(the "Annuity") offered by American Skandia Life Assurance Corporation
("American Skandia", "we", "our" or "us"). The Annuity may be offered as an
individual annuity contract or as an interest in a group annuity. This
Prospectus describes the important features of the Annuity and what you should
consider before purchasing the Annuity. A Statement of Additional Information is
also available from us, without charge, upon your request. The contents of the
Statement of Additional Information are described on page 39. The Annuity or
certain of its investment options may not be available in all states. Various
rights and benefits may differ between states to meet applicable laws and/or
regulations. Certain capitalized terms are either defined in the Glossary of
Terms or in the context of the particular section of this Prospectus.
WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY?
This Annuity is frequently used for retirement income. It is generally intended
to be used to "roll-over" existing funds from an IRA, SEP-IRA, Roth IRA or a Tax
Sheltered Annuity (or 403(b)). This Annuity may also be used in connection with
retirement plans that do not qualify under the sections of the Code noted above.
This Annuity also may be used as an annuitization or settlement option under any
deferred annuity or life insurance policy issued by American Skandia. This
Annuity allows you to invest your money in a number of variable investment
options while receiving monthly payments from this Annuity.
WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY?
|X| One premium.
|X| Monthly payments that may increase, decrease, or remain the same.
|X| Adjustable benefits.
|X| First payment within 60 days of the date of issue.
|X| Monthly payments over the life of the Annuitant after the first payment.
|X| Monthly payments are cushioned against market volatility using a special
stabilization procedure.
|X| Several variable investment options. Each investment option is a
Sub-Account of American Skandia Life Assurance Corporation Variable Account
B (Class 7) or (Class 8) and invests in a corresponding underlying mutual
fund portfolio. Currently, portfolios of American Skandia Trust, Montgomery
Variable Series, Wells Fargo Variable Trust, Rydex Variable Trust, INVESCO
Variable Investment Funds, Inc., Evergreen Variable Annuity Trust, and
ProFund VP are available.
|X| Death Benefit options. After an Annuitant's death, the Annuity generally
may provide Annuity Payments, or, alternatively, a lump sum, to the
Beneficiary(ies).
|X| Optional Guarantee Feature. Monthly payments will not be less than a
guaranteed payment amount while the Annuitant(s) is alive.
|X| Tax-free transfers between investment options. We also offer several
programs that enable you to manage your Contract Value as your financial
needs and investment performance change. Asset Allocation is required if
you select the Optional Guarantee Feature.
HOW DO I PURCHASE THIS ANNUITY?
We sell this Annuity through licensed, registered financial professionals. We
may require that you submit certain forms to us before we issue an Annuity,
including evidence of the age of the Annuitant(s). The minimum Premium payment
is $35,000. We may allow a lower minimum Premium payment if this Annuity is used
as an annuitization or settlement option from a deferred annuity or a life
insurance policy issued by American Skandia. No Annuitant may be greater than
age 85 on the issue date of this Annuity.
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This annuity is NOT a deposit or an obligation of, or issued, guaranteed or
endorsed by, any bank, is NOT insured or guaranteed by the U.S. government, the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any
other agency. An investment in this Annuity involves certain investment risks,
including possible loss of principal.
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This annuity provides certain credits to the owner based on the age of the
youngest annuitant, as described more fully on page 22. These credits are
provided in lieu of varying the annuity's expenses to primarily reflect the
expected different persistency rates of the owners' ages.
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 PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS.
KEEP THEM FOR FUTURE REFERENCE.
FOR FURTHER INFORMATION CALL 1-800-752-6342.
Prospectus Dated: May 1, 2000
Statement of Additional Information Dated: May 1, 2000
VIA-PROS- (05/2000) VIAPROS
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS..................................................................................................................4
SUMMARY OF CONTRACT FEES AND CHARGES...............................................................................................6
Expense Examples...................................................................................................................9
HIGHLIGHTS........................................................................................................................10
WHAT IS AN IMMEDIATE ANNUITY?..................................................................................................10
WHAT IS A VARIABLE IMMEDIATE ANNUITY?..........................................................................................10
WHY IS THIS VARIABLE IMMEDIATE ANNUITY ADJUSTABLE?.............................................................................10
HOW DOES THIS ANNUITY GENERALLY DIFFER FROM OTHER VARIABLE IMMEDIATE ANNUITIES?................................................10
HOW DOES THIS VARIABLE IMMEDIATE ANNUITY GENERALLY DIFFER FROM SYSTEMATIC WITHDRAWAL PROGRAMS?.................................10
WHAT IS THE OPTIONAL GUARANTEE FEATURE?........................................................................................10
INVESTMENT OPTIONS................................................................................................................10
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?.............................................................10
FEES AND CHARGES..................................................................................................................20
WHAT ARE THE ANNUITY FEES AND CHARGES?.........................................................................................20
WHAT CHARGES ARE DEDUCTED BY THE SEPARATE ACCOUNT?.............................................................................20
PURCHASING YOUR ANNUITY...........................................................................................................21
WHAT ARE THE REQUIREMENTS FOR PURCHASING THE ANNUITY?..........................................................................21
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?..................................................................................21
WILL I RECEIVE CREDITS ON MY PREMIUM?..........................................................................................22
MANAGING YOUR ANNUITY.............................................................................................................22
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN SUB-ACCOUNTS?...........................................................22
MAY I AUTHORIZE MY FINANCIAL REPRESENTATIVE TO MANAGE MY ACCOUNT?..............................................................23
AM I REQUIRED TO PARTICPATE IN THE ASSET ALLOCATION PROGRAM?...................................................................23
DO YOU OFFER ANY OTHER AUTOMATIC REBALANCING PROGRAMS?.........................................................................24
ACCESS TO CASH VALUE..............................................................................................................24
MAY I SURRENDER ALL OR PART OF MY ANNUITY?.....................................................................................24
WHAT IF MY INHERITANCE PERIOD IS ZERO, MAY I STILL MAKE A FULL OR PARTIAL SURRENDER?...........................................24
ANNUITY BENEFITS..................................................................................................................25
HOW DO WE CALCULATE YOUR ANNUITY PAYMENT?......................................................................................25
CAN I CHANGE THE CASH VALUE TRIGGER?...........................................................................................26
CAN YOU ILLUSTRATE HOW ANNUITY PAYMENTS ARE MADE?..............................................................................27
WHEN ARE ANNUITY PAYMENTS MADE?................................................................................................29
MAY I CONVERT ANNUITY PAYMENTS TO FIXED PAYMENTS?..............................................................................29
WHO RECEIVES THE ANNUITY PAYMENT?..............................................................................................29
WHAT HAPPENS WHEN THE ANUITANT DIES?...........................................................................................29
WHAT HAPPENS WHEN THE OWNER DIES?..............................................................................................29
WHEN DO ANNUITY PAYMENTS FOR A BENEFICIARY START?..............................................................................29
IF ANNUITY PAYMENTS ARE TO BE PAID TO A BENEFICIARY, WHAT DETERMINES THE ANNUITY PAYMENT EACH MONTH AND HOW LONG WILL THE
ANNUITY PAYMENTS BE PAID TO THE BENEFICIARY?...................................................................................29
WHAT DOCUMENTATION IS REQUIRED TO RECEIVE ANNUITY PAYMENTS?....................................................................30
PAYMENTS AND PAYEES............................................................................................................30
TAX CONSIDERATIONS................................................................................................................30
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?...............................................................30
TAXATION OF AMERICAN SKANDIA AND THE SEPARATE ACCOUNT?.........................................................................30
HOW ARE IMMEDIATE ANNUITIES TREATED UNDER THE TAX CODE?........................................................................31
HOW ARE ANNUITY PAYMENTS TAXED?................................................................................................31
HOW ARE DISTRIBUTIONS OTHER THAN ANNUITY PAYMENTS TAXED?.......................................................................31
ARE THERE TAX CONSIDERATIONS FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?........................................32
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?..........................................................................33
GENERAL TAX CONSIDERATIONS.....................................................................................................33
GENERAL INFORMATION...............................................................................................................34
HOW WILL I RECEIVE STATEMENTS AND REPORTS?.....................................................................................34
WHO IS AMERICAN SKANDIA?.......................................................................................................34
WHAT ARE SEPARATE ACCOUNTS?....................................................................................................35
MODIFICATION...................................................................................................................35
WHAT IS THE LEGAL STRUCTURE OF THE PORTFOLIOS?.................................................................................36
VOTING RIGHTS..................................................................................................................36
MATERIAL CONFLICTS.............................................................................................................36
TRANSFERS, ASSIGNMENTS OR PLEDGES..............................................................................................36
DEFERRAL OF TRANSACTIONS.......................................................................................................36
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?.........................................................................36
PERFORMANCE RELATED INFORMATION................................................................................................37
AVAILABLE INFORMATION..........................................................................................................38
HOW TO CONTACT US..............................................................................................................39
INDEMNIFICATION................................................................................................................39
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............................................................................39
</TABLE>
<PAGE>
GLOSSARY OF TERMS
Many terms used within this Prospectus are described within the text where they
appear.
ANNUITANT is the person(s) upon whose life(s) the Annuity is issued.
ANNUITY is the contract(s) or group certificate(s) offered pursuant to this
Prospectus.
ANNUITY DATE is the date Annuity Payments are to begin.
ANNUITY PAYMENTS are the periodic payments due during the life of the Annuitant
and any payments due for the benefit of a Beneficiary(ies) after the Annuitant's
death.
ANNUITY PAYMENT AMOUNT is the dollar amount of each Annuity Payment. Annuity
Payment Amounts can vary each month but cannot decrease while there is Cash
Value.
ANNUITY PAYMENT DATE is the date each month Annuity Payments are payable. This
date is the same day of the month as the Annuity Date which may be any date
chosen by you between the 1st and the 28th day of the month following the 30th
day after issue of the Annuity. The Annuity Payment Date may not be changed on
or after the Issue Date.
ANNUITY YEARS are continuous 12-month periods commencing on the Issue Date and
each anniversary of the Issue Date.
BENEFICIARY(IES) is the person(s) who may receive death proceeds or guaranteed
payment under this Annuity when there is no longer a living Annuitant(s). Unless
otherwise specified, the Beneficiary refers to all persons designated as such
for your Annuity.
CASH VALUE is the present value of the number of units scheduled to fund the
Annuity's benefits over the remaining Inheritance Period multiplied by the then
current Unit Value. The discount rate used to determine the present value is the
Benchmark Rate.
CODE is the Internal Revenue Code of 1986, as amended from time to time.
CONTRACT VALUE is the value of each allocation to a Sub-Account, plus any
earnings and any adjustments made based on whether the Annuitant(s) is alive
and/or less any losses, distributions, and charges thereon. Contract Value is
determined separately for each Sub-Account, and then totaled to determine the
Contract Value for your Annuity. The Contract Value is always more than the Cash
Value.
CREDITS are an amount we add to your Contract Value at the time the net Premium
is allocated to a Sub-Account.
GUARANTEED ANNUITY PAYMENT AMOUNT is the guaranteed minimum amount payable each
Annuity Payment Date before the Inheritance Date. This amount is reduced
proportionately by any partial surrender. This guaranteed amount is only
available if the Optional Guarantee Feature is selected.
INHERITANCE DATE is the date we receive, at our office, due proof satisfactory
to us of the Annuitant's death and all other requirements that enable us to make
payments for the benefit of a Beneficiary. If there are joint Annuitants, the
Inheritance Date refers to the death of the last surviving Annuitant.
INHERITANCE PERIOD is a variable period of time during which Annuity Payments
are due whether or not the Annuitant is still alive.
ISSUE DATE is the effective date of your Annuity.
NET INVESTMENT PERFORMANCE is the investment performance of the Units in each
Sub-Account.
OPTIONAL GUARANTEE FEATURE is the option chosen by you to guarantee that while
the Annuitant is alive, the Annuity Payment Amount will not be less than the
Guaranteed Annuity Payment Amount.
OWNER is either an entity or person who may exercise the ownership rights
provided under the Annuity. If a certificate representing interests in a group
annuity contract is issued, 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 annuity contract. Unless otherwise
specified, Owner refers to all persons or entities designated as such for your
Annuity.
PORTFOLIO is a mutual fund or a series of a mutual fund in which the Sub-Account
where you have chosen to allocate your Contract Value invests. When you allocate
Contract Value to a Sub-Account, you are a beneficial owner of Portfolio shares
and have a right to vote on matters that pertain to the Portfolio.
PREMIUM is cash consideration at or before the Issue Date you give to us for
certain rights, privileges, and benefits in relation to our obligations under
the Annuity.
SEPARATE ACCOUNT is an account owned by us where we allocate assets in relation
to our obligations pursuant to the Annuity.
SUB-ACCOUNT is a division of a Separate Account where you chose to allocate your
Contract Value.
UNITS are the measure used to determine benefits for a given Sub-Account under
this Annuity. When you choose a Sub-Account the portion of the Net Premium you
allocate to that investment, or the portion of the Contract Value you
transferred into that investment at some later date, is converted into Units.
UNIT VALUE is the measure we use to determine the performance of a Sub-Account.
It is the value of each Unit as of each Valuation Day. It also reflects the
investment experience of the Portfolio minus any insurance charges and charges
for taxes.
VALUATION DAY is any day the New York Stock Exchange is open for trading or any
other day that the Securities and Exchange Commission requires securities 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" or "the Company" means American Skandia Life Assurance
Corporation.
"you" or "your" means the Owner.
<PAGE>
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and expenses we charge for the Annuity. Some
charges are assessed directly against your Annuity while other charges are
deducted daily by us from the Separate Account. The Separate Account charges an
asset-based Insurance Charge, which is the combination of a mortality and
expense risk charge and a charge for administration of the Annuity. We assess a
state tax charge (if applicable) against your Premium at the time it is applied
to the Annuity. We may assess a Transfer Fee for transfers over a maximum number
per year. Each Portfolio assesses a charge for investment management and for
other expenses. A summary is provided on the following page. The prospectus for
each Portfolio provides more detailed information about the expenses for the
Portfolios. All these fees and expenses are described in more detail within this
Prospectus.
<TABLE>
<CAPTION>
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Your Transaction Expenses
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Amount Deducted/
Fee/Expense Description Of Charge When Deducted
- ------------------------------- ----------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C>
Tax Charge Currently ranges from 0% to 3 1/2%, depending on the applicable At the time Premium is applied
jurisdiction and usage of the Annuity
- ------------------------------- ----------------------------------------------------------------- ----------------------------------
Annual Maintenance Fee None Not Applicable
- ------------------------------- ----------------------------------------------------------------- ----------------------------------
Transfer Fee $10.00 After the 20th transfer each Annuity
Year
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Annual Expenses of the Sub-Accounts
(as a percentage of the average daily net assets of the Sub-Accounts)
- ------------------------------------------------------------------------------------------------------------------------------------
Mortality & Expense Risk
Charge 1.10%
Daily
Administration Charge 0.15%
Total Annual Expenses of the 1.25% per year of the value of each Sub-Account
Sub-Accounts*
- ------------------------------- ----------------------------------------------------------------- ----------------------------------
* The combination of the Mortality and Expense Risk Charges and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this prospectus.
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Annual Expenses of the Sub-Accounts with the
Optional Guarantee Feature (as a percentage of
the average daily net assets of the
Sub-Accounts)
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Mortality & Expense Risk
Charge 2.10%
Daily
Administration Charge 0.15%
Total Annual Expenses of the 2.25% per year of the value of each Sub-Account
Sub-Accounts*
- ------------------------------- ----------------------------------------------------------------- ----------------------------------
* The combination of the Mortality and Expense Risk Charges and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this prospectus.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Portfolio Annual Expenses
(as a percentage of the average net assets of the Portfolios)
- ------------------------------------------------------------------------------------------------------------------------------------
Below are the investment management fees, other expenses, and the total annual
expenses for each Portfolio as of December 31, 1999. The total annual expenses
are 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. For certain
of the Portfolios, a portion of the management fee is being waived and/or other
expenses are being partially reimbursed. "N/A" indicates that no portion of the
management fee and/or other expenses is being waived and/or reimbursed. Any
footnotes about expenses appear after the list of all the Portfolios. Those
Portfolios whose name includes the prefix "AST" are portfolios of American
Skandia Trust. The Portfolio information was provided by the Portfolios and has
not been independently verified by us. See the prospectuses or statements of
additional information of the Portfolios for further details.
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Underlying Mutual Fund Portfolio Annual Expenses
(as a percentage of the average net assets of the underlying Portfolios)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
Management Other Estimated Total Annual Fee Net
Fees Expenses Distribution Portfolio Waivers Annual
UNDERLYING PORTFOLIO and Service Operating and Fund
(12b-1) Expenses Expense Operating
Fees (1) Reimbursement Expenses
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
American Skandia Trust:
<S> <C> <C> <C> <C> <C> <C>
AST Founders Passport 1.00% 0.29% 0.00% 1.29% N/A 1.29%
AST AIM International Equity 0.87% 0.31% 0.04% 1.22% N/A 1.22%
AST American Century International Growth 1.00% 0.50% 0.00% 1.50% N/A 1.50%
AST MFS Global Equity (3) 1.00% 1.11% 0.00% 2.11% 0.36% 1.75%
AST Kemper Small-Cap Growth 0.95% 0.19% 0.03% 1.17% N/A 1.17%
AST Lord Abbett Small Cap Value 0.95% 0.29% 0.00% 1.24% N/A 1.24%
AST T. Rowe Price Small Company Value 0.90% 0.21% 0.00% 1.11% N/A 1.11%
AST Janus Mid-Cap Growth (4) 1.00% 0.22% 0.04% 1.26% N/A 1.26%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.23% 0.04% 1.17% N/A 1.17%
AST Neuberger Berman Mid-Cap Value 0.90% 0.23% 0.12% 1.25% N/A 1.25%
AST Alger All-Cap Growth(5) 0.95% 0.22% 0.06% 1.23% N/A 1.23%
AST T. Rowe Price Natural Resources 0.90% 0.26% 0.01% 1.17% N/A 1.17%
AST Alliance Growth 0.90% 0.21% 0.00% 1.11% N/A 1.11%
AST MFS Growth (3) 0.90% 0.45% 0.00% 1.35% N/A 1.35%
AST Marsico Capital Growth 0.90% 0.18% 0.04% 1.12% N/A 1.12%
AST JanCap Growth 0.90% 0.14% 0.01% 1.05% 0.04% 1.01%
AST Sanford Bernstein Managed Index 500 0.60% 0.19% 0.00% 0.79% N/A 0.79%
AST Cohen & Steers Realty 1.00% 0.27% 0.02% 1.29% N/A 1.29%
AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% N/A 0.98%
AST Alliance Growth and Income 0.75% 0.18% 0.08% 1.01% 0.01% 1.00%
AST MFS Growth with Income (3) 0.90% 0.33% 0.00% 1.23% N/A 1.23%
AST INVESCO Equity Income 0.75% 0.18% 0.04% 0.97% N/A 0.97%
AST AIM Balanced 0.74% 0.26% 0.02% 1.02% N/A 1.02%
AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% N/A 1.10%
AST T. Rowe Price Asset Allocation 0.85% 0.22% 0.00% 1.07% N/A 1.07%
AST T. Rowe Price Global Bond 0.80% 0.31% 0.00% 1.11% N/A 1.11%
AST Federated High Yield 0.75% 0.19% 0.00% 0.94% N/A 0.94%
AST PIMCO Total Return Bond 0.65% 0.17% 0.00% 0.82% N/A 0.82%
AST PIMCO Limited Maturity Bond 0.65% 0.21% 0.00% 0.86% N/A 0.86%
AST Money Market 0.50% 0.15% 0.00% 0.65% 0.05% 0.60%
Montgomery Variable Series:
Emerging Markets 1.25% 0.50% N/A 1.75% 0.00% 1.75%
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
Management Other Estimated Total Annual Fee Net
Fees Expenses Distribution Portfolio Waivers Annual
UNDERLYING PORTFOLIO and Service Operating and Fund
(12b-1) Expenses Expense Operating
Fees (1) Reimbursement Expenses
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
Wells Fargo Variable Trust:
<S> <C> <C> <C> <C> <C> <C>
Equity Value 0.55% 0.37% 0.25% 1.17% 0.17% 1.00%
Rydex Variable Trust:
Nova 0.75% 0.80% None 1.55% 0.00% 1.55%
Ursa 0.90% 0.83% None 1.73% 0.00% 1.73%
OTC 0.75% 0.80% None 1.55% 0.00% 1.55%
INVESCO Variable Investment Funds, Inc.:
Technology 0.75% 0.78% None 1.53% 0.21% 1.32%
Health Sciences 0.75% 2.11% None 2.86% 1.37% 1.49%
Financial Services 0.75% 1.75% None 2.50% 1.09% 1.41%
Telecommunications 0.75% 0.55% None 1.30% 0.02% 1.28%
Dynamics 0.75% 1.53% None 2.28% 0.99% 1.29%
Evergreen Variable Annuity Trust:
Global Leaders (6) 0.95% 0.25% N/A 1.20% 0.19% 1.01%
Special Equity (6) 1.36% 2.35% N/A 3.71% 2.68% 1.03%
ProFund VP:
Europe 30 0.75% 1.39% 0.25% 2.39% 0.61% 1.78%
UltraSmallCap 1.53% 1.53% 0.25% 2.53% 0.83% 1.70%
UltraOTC 0.75% 0.97% 0.25% 1.97% 0.32% 1.65%
- ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ ----------
</TABLE>
1 American Skandia Trust (the "Trust") adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940
to permit an affiliate of the Trust's Investment Manager to receive
brokerage commissions in connection with purchases and sales of securities
held by Portfolios of the Trust, and to use these commissions to promote
the sale of shares of such Portfolios. The staff of the Securities and
Exchange Commission takes the position that commission amounts received
under the Distribution Plan should be reflected as distribution expenses of
the Portfolios. The Portfolios would pay the same or comparable commission
amounts irrespective of the Distribution Plan; accordingly, total returns
for the Portfolios are not expected to be adversely affected. The
Distribution Fee estimates are derived from data regarding each Portfolio's
brokerage transactions, and the proportions of such transactions directed
to selling dealers, for the period ended December 31, 1999. However, it is
not possible to determine with accuracy actual amounts that will be
received under the Distribution Plan. Such amounts will vary based upon the
level of a Portfolio's brokerage activity, the proportion of such activity
directed under the Distribution Plan, and other factors.
2 The Investment Manager of American Skandia Trust has agreed to reimburse
and/or waive fees for certain Portfolios until at least October 17, 2000.
The caption "Total Annual Fund Operating Expenses" reflects the Portfolios'
fees and expenses before such waivers and reimbursements, while the caption
"Net Annual Fund Operating Expenses" reflects the effect of such waivers
and reimbursements.
3 These Portfolios commenced operations on October 18, 1999. "Other Expenses"
are based on estimated amounts for the fiscal year ending December 31,
2000.
4 This Portfolio commenced operations on May 1, 2000. "Other Expenses" are
based on estimated amounts for the fiscal year ending December 31, 2000.
5 This Portfolio commenced operations as of December 30, 1999. "Other
Expenses" shown are based on estimated amounts for the fiscal year ending
December 31, 2000.
6 These portfolios commenced operations on September 30, 1999. Expenses have
been estimated based upon current fund contracts.
<PAGE>
<TABLE>
<CAPTION>
Expense Examples
Below are examples showing what you would pay in expenses at the end of the
stated time periods had you invested $1,000 in the Annuity and received a 5%
annual return on assets. The examples also assume you are a 70 year old male,
you did not receive any Credits, and you have not used the Annuity's conversion
feature.
Without Optional Guarantee Feature With Optional Guarantee Feature
- -------------------------------------------------------
-------------------------------------------------------------------------------
With Surrender Without Surrender With Surrender Without Surrender
- ------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Sub-Account 1 Year 3 Years 1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AST Founders Passport 185 253 26 74 194 277 36 103
AST AIM International Equity 185 251 25 72 193 275 35 101
AST American Century International Growth 187 260 28 80 196 284 38 109
AST MFS Global Equity 190 267 30 87 199 291 40 116
AST Kemper Small-Cap Growth 184 250 24 70 193 274 35 99
AST Lord Abbett Small Cap Value 185 252 25 72 193 276 35 101
AST T. Rowe Price Small Company Value 183 248 24 68 192 272 34 98
AST Janus Mid-Cap Growth 185 253 25 73 194 277 35 102
AST Neuberger Berman Mid-Cap Growth 184 250 24 70 193 274 35 99
AST Neuberger Berman Mid-Cap Value 185 252 25 73 194 276 35 102
AST Alger All-Cap Growth 185 252 25 72 193 276 35 101
AST T. Rowe Price Natural Resources 184 250 24 70 193 274 35 99
AST Alliance Growth 183 248 24 68 192 272 34 98
AST MFS Growth 186 255 26 75 195 279 36 105
AST Marsico Capital Growth 184 248 24 69 192 272 34 98
AST JanCap Growth 182 245 23 65 191 269 33 95
AST Sanford Bernstein Managed Index 500 180 239 20 59 189 263 31 88
AST Cohen & Steers Realty 185 253 26 74 194 277 36 103
AST American Century Income & Growth 182 244 22 65 191 268 33 94
AST Alliance Growth and Income 182 245 23 65 191 269 33 94
AST MFS Growth with Income 185 252 25 72 193 276 35 101
AST INVESCO Equity Income 182 244 22 64 191 268 32 93
AST AIM Balanced 183 246 23 66 191 270 33 95
AST American Century Strategic Balanced 183 248 24 68 192 272 34 97
AST T. Rowe Price Asset Allocation 183 247 23 67 192 271 33 96
AST T. Rowe Price Global Bond 183 248 24 68 192 272 34 98
AST Federated High Yield 182 243 22 63 190 267 32 92
AST PIMCO Total Return Bond 181 240 21 60 189 264 31 89
AST PIMCO Limited Maturity Bond 181 241 21 61 190 265 31 90
AST Money Market 178 233 19 53 187 257 29 82
Montgomery Emerging Markets 190 267 30 87 199 291 40 116
WFVT Equity Value 182 245 23 65 191 269 33 94
Rydex Nova 188 261 28 81 197 285 38 111
Rydex Ursa 190 266 30 87 199 291 40 116
Rydex OTC 188 261 28 81 197 285 38 111
INVESCO VIF Technology 186 254 26 75 194 278 36 104
INVESCO VIF Health Services 187 259 28 80 196 283 38 109
INVESCO VIF Financial Services 187 257 27 77 195 281 37 106
INVESCO VIF Telecommunications 185 253 25 73 194 277 36 102
INVESCO VIF Dynamics 185 253 26 74 194 277 36 103
Evergreen VA Global Leaders 182 245 23 65 191 269 33 95
Evergreen VA Special Equity 183 246 23 66 191 270 33 95
Profund VP Europe 30 190 268 31 88 199 292 41 117
Profund VP UltraSmall-Cap 190 266 30 86 198 290 40 115
Profund VP UltraOTC 189 264 29 84 198 288 39 114
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HIGHLIGHTS
WHAT IS AN IMMEDIATE ANNUITY?
An immediate annuity begins making periodic payments to you within one year
after the Issue Date. This Annuity begins making payments within 60 days of the
Issue date.
WHAT IS A VARIABLE IMMEDIATE ANNUITY?
A variable immediate annuity is an immediate annuity where some or all of the
benefits depend upon the performance of the Sub-Accounts and you assume the
investment risk of such investment performance.
WHY IS THIS VARIABLE IMMEDIATE ANNUITY ADJUSTABLE?
This Annuity is adjustable because (a) we adjust the Inheritance Period and (b)
there is an adjustment feature which can increase Annuity Payment Amounts if and
when its Cash Value exceeds specified targets.
HOW DOES THIS ANNUITY GENERALLY DIFFER FROM OTHER VARIABLE IMMEDIATE ANNUITIES?
Most variable immediate annuities offer periodic payments that increase or
decrease depending solely on the investment performance of one or more pools of
underlying mutual fund portfolios. Changes to the Annuity Payment Amounts of
this variable immediate annuity are designed to initially depend on changes to
the Inheritance Period, which depend on the investment performance of one or
more Portfolios..
We designed this Annuity to provide a "cushion" from volatile investment
performance. As a result, negative investment performance does not automatically
result in a decrease in the Annuity Payment Amount each month, and positive
investment performance does not automatically result in an increase in the
Annuity Payment Amount each month. Generally, other variable immediate annuities
do not contain such a "cushion."
Many variable immediate annuities offer the option to assure payments for a
"certain" period regardless of whether the Annuitant is alive. If that option is
elected, that number of payments are reduced on a constant basis over time. In
comparison, this Annuity automatically includes an Inheritance Period that looks
like a "certain" period but does not change based solely on time. We set the
Inheritance Period initially when an Annuity is issued. However, as opposed to
most other variable immediate annuities, the Inheritance Period in this Annuity
subsequently varies, based on the Net Investment Performance of the Annuity, the
Annuity Payment Amounts being paid out, and the increasing age of the Annuitant.
With each Annuity Payment, the remaining Inheritance Period can decrease by one
month, more than one month, less than one month, or can even increase.
HOW DOES THIS VARIABLE IMMEDIATE ANNUITY GENERALLY DIFFER FROM SYSTEMATIC
WITHDRAWAL PROGRAMS?
This variable immediate annuity offers a guarantee of income payments for life.
This type of annuity contract is designed to transfer to an insurance company
part of the risk of outliving one's assets. Generally, the insurer charges the
purchaser for taking on the risk of this guarantee. The difference between this
type of annuity contract and a systematic withdrawal program is that this
guarantee and the tax advantages provided are not available with a program of
systematic withdrawals.
WHAT IS THE OPTIONAL GUARANTEE FEATURE?
This variable immediate annuity offers a Optional Guarantee Feature that, if
chosen, guarantees that the Annuity Payment Amount, while the Annuitant is
alive, will not be less than the Guaranteed Annuity Payment Amount. We charge an
additional amount for this feature (please refer to this Annuity's "Summary of
Fees and Charges"). If you select this optional benefit, the Guaranteed Annuity
Payment Amount will be available as of the Issue Date. Once selected, this
feature remains part of your Annuity.
INVESTMENT OPTIONS
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
Each variable investment option is a Sub-Account of American Skandia Life
Assurance Corporation Variable Account B (Class 7) or (Class 8) (see "What are
Separate Accounts" for more detailed information). Each Sub-account invests
exclusively in one Portfolio. You should carefully read the prospectus for any
Portfolio in which you are interested. The following chart classifies each of
the Portfolios based on our assessment of their investment style (as of the date
of this Prospectus). The chart also provides a short description of each
Portfolio's investment objective (in italics) and a short, summary description
of their key policies to assist you in determining which Portfolios may be of
interest to you. There is no guarantee that any underlying mutual fund portfolio
will meet its investment objective.
The name of the advisor/sub-advisor for each Portfolio appears next to the
description. Those portfolios whose name includes the prefix "AST" are
portfolios of American Skandia Trust. The investment manager for AST is American
Skandia Investment Services, Inc. ("ASISI"), an affiliated company. However, a
sub-advisor, as noted below, is engaged to conduct day-to-day investment
decisions.
Some of the Portfolios available as Sub-accounts under the Annuity are managed
by the same portfolio advisor or sub-advisor as a retail mutual fund that the
Portfolio may have been modeled after at the Portfolio's inception. Certain
retail mutual funds may also have been modeled after a Portfolio. While the
investment objective and policies of the funds may be substantially similar, the
actual investments made by the funds will differ to varying degrees. Differences
in the performance of the funds can be expected, and in some cases could be
substantial. Details about the investment objectives, policies, risks, costs and
management of the Portfolios are found in the prospectuses for the underlying
mutual funds.
If you select the Optional Guarantee Feature not all of the Portfolios are
available to you. Information about which Portfolios are not available under the
Optional Guarantee Feature is found on page 24.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ------------------------------------------------------------------------------------------
- ------------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C>
AST Money Market: seeks to maximize current J.P. Morgan Investment Management
CAPITAL income and maintain high levels of liquidity. Inc.
PRESERVATION 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
maturities of not more than 397 days.
- ------------------------------------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond: seeks to Pacific Investment Management
SHORT-TERM BOND maximize total return consistent with Company
preservation of capital and prudent investment
management. The Portfolio will invest in a
diversified portfolio of fixed-income
securities of varying maturities. The average
portfolio duration of the Portfolio generally
will vary within a one- to three-year time
frame based on the Sub-advisor's forecast for
interest rates.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond: seeks to maximize Pacific Investment Management
LONG-TERM total return consistent with preservation of Company
BOND capital and prudent investment management. The
Portfolio will invest in a diversified
portfolio of fixed-income securities of varying
maturities. The average portfolio duration of
the Portfolio generally will vary within a
three- to six-year time frame based on the
Sub-advisor's forecast for interest rates.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST Federated High Yield: seeks high current Federated Investment Counseling
HIGH YIELD BOND 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 corporate fixed income
securities ("junk bonds"). These fixed income
securities may include preferred stocks,
convertible securities, bonds, debentures,
notes, equipment lease certificates and
equipment trust certificates. A fund that
invests primarily in lower-rated fixed income
securities will be subject to greater risk and
share price fluctuation than a typical fixed
income fund, and may be subject to an amount of
risk that is comparable to or greater than
many equity funds.
- ------------------------------ ----------------------------------------------------------------------------------------------------
GLOBAL BOND AST T. Rowe Price Global Bond: seeks to provide Rowe Price-Fleming International, Inc.
high current income and capital growth by
investing in high-quality foreign and U.S.
government bonds. The Portfolio will invest at
least 65% of its total assets in bonds issued
or guaranteed by the U.S. or foreign
governments or their agencies and by foreign
authorities, provinces and municipalities.
Corporate bonds may also be purchased. The
Sub-advisor bases its investment decisions on
fundamental market factors, currency trends,
and credit quality. The Portfolio generally
invests in countries where the combination of
fixed-income returns and currency exchange
rates appears attractive, or, if the currency
trend is unfavorable, where the Sub-advisor
believes that the currency risk can be
minimized through hedging. The Portfolio may
also invest up to 20% of its assets in the
aggregate in below investment-grade, high-risk
bonds ("junk bonds").
- ------------------------------ ----------------------------------------------------------------------------------------------------
ASSET ALLOCATION AST T. Rowe Price Asset Allocation: seeks a T. Rowe Price Associates, Inc.
high level of total return by investing
primarily in a diversified portfolio of fixed
income and equity securities. The Portfolio
normally invests approximately 60% of its total
assets in equity securities and 40% in fixed
income securities. The Sub-advisor concentrates
common stock investments in larger, more
established companies, but the Portfolio may
include small and medium-sized companies with
good growth prospects. The fixed income portion
of the Portfolio will be allocated among
investment grade securities, high yield or
"junk" bonds, foreign high quality debt
securities and cash reserves.
- ------------------------------ ----------------------------------------------------------------------------------------------------
BALANCED AST AIM Balanced: seeks to provide a A I M Capital Management, Inc.
well-diversified portfolio of stocks and bonds
that will produce both capital growth and
current income. The Portfolio attempts to meet
its objective by investing, normally, a minimum
of 30% and a maximum of 70% of its total assets
in equity securities and a minimum of 30% and a
maximum of 70% of its total assets in
non-convertible debt securities. The
Sub-advisor will primarily purchase equity
securities for growth of capital and debt
securities for income purposes.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
BALANCED AST American Century Strategic Balanced: seeks American Century Investment Management, Inc.
(Cont.) capital growth and current income. The
Sub-advisor intends to maintain approximately
60% of the Portfolio's assets in equity
securities and the remainder in bonds and other
fixed income securities. Both the Portfolio's
equity and fixed income investments will
fluctuate in value. The equity securities will
fluctuate depending on the performance of the
companies that issued them, general market and
economic conditions, and investor confidence.
The fixed income investments will be affected
primarily by rising or falling interest rates
and the credit quality of the issuers.
- ------------------------------ ----------------------------------------------------------------------------------------------------
EQUITY INCOME AST INVESCO Equity Income: seeks capital growth INVESCO Funds Group, Inc.
and current income while following sound
investment practices. The Portfolio seeks to
achieve its objective by investing in
securities that are expected to produce
relatively high levels of income and
consistent, stable returns. The Portfolio
normally will invest at least 65% of its assets
in dividend-paying common and preferred stocks
of domestic and foreign issuers. Up to 30% of
the Portfolio's assets may be invested in
equity securities that do not pay regular
dividends.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST Alliance Growth and Income: seeks long-term Alliance Capital Management L.P.
growth of capital and income while attempting
to avoid excessive fluctuations in market
value. The Portfolio normally will invest in
common stocks (and securities convertible into
common stocks). The Sub-advisor will take a
value-oriented approach, in that it will try to
keep the Portfolio's assets invested in
securities that are selling at reasonable
prices in relation to their value. The stocks
that the Portfolio will normally invest in are
those of seasoned companies that are expected
to show above-average growth and that the
Sub-advisor believes are in sound financial
condition.
---------------------------------------------------------------------------------------------------
AST American Century Income & Growth: seeks American Century Investment Management, Inc.
capital growth with current income as a
secondary objective. The Portfolio invests
primarily in common stocks that offer potential
GROWTH for capital growth, and may, consistent with
its investment objective, invest in stocks that
& offer potential for current income. The
INCOME Sub-advisor utilizes a quantitative management
technique with a goal of building an equity
portfolio that provides better returns than the
S&P 500 Index without taking on significant
additional risk and while attempting to create
a dividend yield that will be greater than the
S&P 500 Index.
----------------------------------------------------------------------------------------------------
AST MFS Growth with Income: seeks reasonable Massachusetts Financial Services Company
current income and long-term capital growth and
income. Under normal market conditions, the
Portfolio invests at least 65% of its total
assets in common stocks and related securities,
such as preferred stocks, convertible
securities and depositary receipts. The stocks
in which the Portfolio invests generally will
pay dividends. While the Portfolio may invest
in companies of any size, the Portfolio
generally focuses on companies with larger
market capitalizations that the Sub-advisor
believes have sustainable growth prospects and
attractive valuations based on current and
expected earnings or cash flow. The Portfolio
may invest up to 20% of its net assets in
foreign securities.
- ------------------------------ ----------------------------------------------------------------------------------------------------
REAL ESTATE AST Cohen & Steers Realty: seeks to maximize Cohen & Steers Capital Management,
(REIT) total return through investment in real estate Inc.
securities. The Portfolio pursues its
investment objective by seeking, with
approximately equal emphasis, capital growth
and current income. Under normal circumstances,
the Portfolio will invest substantially all of
its assets in the equity securities of real
estate companies, i.e., a company that derives
at least 50% of its revenues from the
ownership, construction, financing, management
or sale of real estate or that has at least 50%
of its assets in real estate. Real estate
companies may include real estate investment
trusts or REITs.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
MANAGED INDEX AST Sanford Bernstein Managed Index 500: seeks Sanford C. Bernstein & Co., Inc.
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 invest primarily in
the common stocks of companies included in the
S&P 500(R). In seeking to outperform the S&P
500, the Sub-advisor starts with a portfolio of
stocks representative of the holdings of the
index. It then uses a set of fundamental
quantitative criteria that are designed to
indicate whether a particular stock will
predictably perform better or worse than the
S&P 500. Based on these criteria, the
Sub-advisor determines whether the Portfolio
should over-weight, under-weight or hold a
neutral position in the stock relative to the
proportion of the S&P 500 that the stock
represents. In addition, the Sub-advisor also
may determine that based on the quantitative
criteria, certain equity securities that are
not included in the S&P 500 should be held by
the Portfolio.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST Alliance Growth: seeks long-term capital Alliance Capital Management L.P.
growth. The Portfolio invests at least 85% of
its total assets in the equity securities of a
limited number of large, carefully selected,
high-quality U.S. companies that are judged
likely to achieve superior earnings growth.
Normally, about 40-60 companies will be
represented in the Portfolio, with the 25
companies most highly regarded by the
Sub-advisor usually constituting approximately
70% of the Portfolio's net assets. An emphasis
is placed on identifying companies whose
substantially above average prospective
earnings growth is not fully reflected in
current market valuations.
---------------------------------------------------------------------------------------------------
AST JanCap Growth: seeks growth of capital in a Janus Capital Corporation
manner consistent with the preservation of
capital. Realization of income is not a
significant investment consideration and any
income realized on the Portfolio's investments,
therefore, will be incidental to the
Portfolio's objective. The Portfolio will
pursue its objective by investing primarily in
common stocks of companies that the Sub-advisor
believes are experiencing favorable demand for
their products and services, and which operate
in a favorable competitive and regulatory
environment. The Sub-advisor generally takes a
"bottom up" approach to choosing investments
LARGE CAP for the Portfolio. In other words, the
EQUITY Sub-advisor seeks to identify individual
companies with earnings growth potential that
may not be recognized by the market at large.
----------------------------------------------------------------------------------------------------
AST Marsico Capital Growth: seeks capital Marsico Capital Management, LLC
growth. Income realization is not an investment
objective and any income realized on the
Portfolio's investments, therefore, will be
incidental to the Portfolio's objective. The
Portfolio will pursue its objective by
investing primarily in common stocks of larger,
more established companies. In selecting
investments for the Portfolio, the Sub-advisor
uses an approach that combines "top down"
economic analysis with "bottom up" stock
selection. The "top down" approach identifies
sectors, industries and companies that should
benefit from the trends the Sub-advisor has
observed. The Sub-advisor then looks for
individual companies with earnings growth
potential that may not be recognized by the
market at large. This is called "bottom up"
stock selection.
----------------------------------------------------------------------------------------------------
AST MFS Growth: seeks long-term capital growth Massachusetts Financial Services
and future income. Under normal market Company
conditions, the Portfolio invests at least 80%
of its total assets in common stocks and
related securities, such as preferred stocks,
convertible securities and depositary receipts,
of companies that the Sub-advisor believes
offer better than average prospects for
long-term growth. The Sub-advisor seeks to
purchase securities of companies that it
considers well-run and poised for growth. The
Portfolio may invest up to 35% of its net
assets in foreign securities.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
NATURAL RESOURCES AST T. Rowe Price Natural Resources: seeks T. Rowe Price Associates, Inc.
long-term capital growth primarily through the
common stocks of companies that own or develop
natural resources (such as energy products,
precious metals, and forest products) and other
basic commodities. The Portfolio normally
invests primarily (at least 65% of its total
assets) in the common stocks of natural
resource companies whose earnings and tangible
assets could benefit from accelerating
inflation. The Portfolio looks for companies
that have the ability to expand production, to
maintain superior exploration programs and
production facilities, and the potential to
accumulate new resources.
- ------------------------------ ----------------------------------------------------------------------------------------------------
ALL-CAP AST Alger All-Cap Growth: seeks long-term Fred Alger Management, Inc.
EQUITY capital growth. The Portfolio invests primarily
in equity securities, such as common or
preferred stocks, that are listed on U.S.
exchanges or in the over-the-counter market.
The Portfolio may invest in the equity
securities of companies of all sizes, and may
emphasize either larger or smaller companies at
a given time based on the Sub-advisor's
assessment of particular companies and market
conditions.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST Janus Mid-Cap Growth: seeks long-term Janus Capital Corporation
capital growth. The Portfolio invests primarily
in common stocks, selected for their growth
potential, and normally invests at least 65% of
its equity assets in medium-sized companies. For
purposes of the Portfolio, medium-sized
companies are those whose market capitalizations
(measured at the time of investment) fall within
the range of companies in the Standard & Poor's
MidCap 400 Index. The Sub-advisor seeks to
identify individual companies with earnings
growth potential that may not be recognized by
the market at large.
----------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth: seeks Neuberger Berman Management Incorporated
capital growth. The Portfolio primarily invests
in the common stocks of mid-cap companies,
i.e., companies with equity market
capitalizations from $300 million to $10
billion at the time of investment. The
Portfolio is normally managed using a
growth-oriented investment approach. The
Sub-advisor looks for fast-growing companies
that are in new or rapidly evolving industries.
---------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value: seeks Neuberger Berman Management Incorporated
capital growth. The Portfolio primarily invests
in the common stocks of mid-cap companies.
Under the Portfolio's value-oriented investment
approach, the Sub-advisor looks for
well-managed companies whose stock prices are
undervalued and that may rise in price before
other investors realize their worth. Factors
that the Sub-advisor may use to identify these
companies include strong fundamentals,
including a low price-to-earnings ratio,
consistent cash flow, and a sound track record
MID-CAP EQUITY through all phases of the market cycle.
---------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds - Dynamics: INVESCO Funds Group, Inc.
seeks securities that will increase in value
over the long term. The Portfolio invests in a
variety of securities which are believed to
present opportunities for capital growth -
primarily common stocks of companies traded on
U.S. securities exchanges, as well as
over-the-counter. The Portfolio also may invest
in preferred stocks and debt instruments that
are convertible into common stocks, as well as
in securities of foreign companies. In general,
the Portfolio invests in securities of
companies in industries that are growing
globally and usually avoids stocks of companies
in cyclical, mature or slow-growing industries
or economic sectors. The Portfolio seeks to
invest in stocks of leading companies in
attractive markets or industries, or emerging
leaders that have developed a new competitive
advantage.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
MID-CAP EQUITY WFVT Equity Value: seeks long-term capital Wells Fargo Bank, N.A.
(Cont.) appreciation. The Portfolio pursues its
objective by investing in a diversified
portfolio composed primarily of equity
securities that are trading at low
price-to-earnings ratios, as measured against
the stock market as a whole or against the
individual stock's own price history. Under
normal market conditions, the Portfolio invests
primarily in common stocks of both large,
well-established companies and smaller
companies with market capitalization exceeding
$50 million at the time of purchase. The
Portfolio may also invest in debt instruments
that may be converted into the common stocks of
both U.S. and foreign companies.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST Kemper Small-Cap Growth: seeks maximum Scudder Kemper Investments, Inc.
growth of investors' capital from a portfolio
primarily of growth stocks of smaller
companies. At least 65% of the Portfolio's
total assets normally will be invested in the
equity securities of smaller companies, i.e.,
those having a market capitalization of $1.5
billion or less at the time of investment, many
of which would be in the early stages of their
life cycle. The Portfolio seeks attractive
areas for investment that arise from factors
such as technological advances, new marketing
methods, and changes in the economy and
population. Because of the Portfolio's focus on
the stocks of smaller growth companies,
investment in the Portfolio may involve
substantially greater than average share price
fluctuation and investment risk.
----------------------------------------------------------------------------------------------------
SMALL CAP AST Lord Abbett Small Cap Value: seeks Lord, Abbett & Co.
EQUITY long-term capital appreciation. The Portfolio
will seek its objective through investments
primarily in equity securities that are
believed to be undervalued in the marketplace.
The Portfolio primarily seeks companies that
are small-sized, based on the value of their
outstanding stock. Specifically, under normal
circumstances, at least 65% of the Portfolio's
total assets will be invested in common stocks
issued by smaller, less well-known companies
(with market capitalizations of less than $2
billion) selected on the basis of fundamental
investment analysis. The small capitalization
companies in which the Portfolio primarily
invests may offer significant appreciation
potential. However, smaller companies may carry
more risk than larger companies.
----------------------------------------------------------------------------------------------------
AST T. Rowe Price Small Company Value: seeks to T. Rowe Price Associates, Inc.
provide long-term capital growth by investing
primarily in small-capitalization stocks that
appear to be undervalued. The Portfolio will
normally invest at least 65% of its total
assets in stocks and equity-related securities
of small companies ($1 billion or less in
market capitalization). Reflecting a value
approach to investing, the Portfolio will seek
the stocks of companies whose current stock
prices do not appear to adequately reflect
their underlying value as measured by assets,
earnings, cash flow or business franchises.
Investing in small companies involves greater
risk of loss than is customarily associated
with more established companies.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
SMALL CAP Evergreen VA Special Equity: seeks capital Meridian Investment Company
EQUITY growth. The Portfolio strives to provide a
(Cont.) return greater than broad stock market indices
such as the Russell 2000(R)Index by investing
principally in a diversified portfolio of
common stocks of domestic companies. The
Portfolio's investment advisor principally
chooses companies which it expects will
experience growth in earnings and price, and
which have small market capitalizations (under
$1 billion) and medium market capitalizations
(between $1 billion and $5 billion). The
Portfolio may also invest in companies that
have large market capitalizations (over $5
billion).
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST MFS Global Equity: seeks capital growth. Massachusetts Financial Services Company
Under normal market conditions, the Portfolio
invests at least 65% of its total assets in
common stocks and related securities, such as
preferred stock, convertible securities and
depositary receipts, of U.S. and foreign
issuers (including issuers in developing
countries). The Portfolio generally seeks to
purchase securities of companies with
relatively large market capitalizations
relative to the market in which they are
traded.
GLOBAL EQUITY ----------------------------------------------------------------------------------------------------
Evergreen VA Global Leaders: seeks to provide Evergreen Asset Management Corp.
investors with long-term capital growth. The
Portfolio normally invests as least 65% of its
assets in a diversified portfolio of U.S. and
non-U.S. equity securities of companies located
in the world's major industrialized countries.
The Portfolio will invest in no less than three
countries, which may include the U.S., but may
invest more than 25% of its total assets in one
country. The Portfolio invests only in the best
100 companies, which are selected by the
investment advisor based on qualitative and
quantitative criteria such as high return on
equity, consistent earnings growth and
established market presence.
- ------------------------------ ----------------------------------------------------------------------------------------------------
AST AIM International Equity: seeks capital A I M Capital Management, Inc.
growth. The Portfolio seeks to meet its
objective by investing, normally, at least 70%
of its assets in marketable equity securities
of foreign companies that are listed on a
recognized foreign securities exchange or
traded in a foreign over-the-counter market.
The Portfolio will normally invest in a
diversified portfolio that includes companies
from at least four countries outside the United
States, emphasizing countries of Western Europe
and the Pacific Basin.
----------------------------------------------------------------------------------------------------
AST American Century International Growth: American Century Investment Management, Inc.
seeks capital growth. The Portfolio will seek
to achieve its investment objective by
investing primarily in equity securities of
foreign companies that the Sub-advisor believes
will increase in value over time. Under normal
conditions, the Portfolio will invest at least
65% of its assets in equity securities of
issuers from at least three countries outside
of the United States. The Sub-advisor uses a
growth investment strategy it developed that
looks for companies with earnings and revenue
growth. The Sub-advisor will consider a number
of other factors in making investment
selections, including the prospects for
relative economic growth among countries or
regions, economic and political conditions,
expected inflation rates, currency exchange
fluctuations and tax considerations.
----------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY AST Founders Passport: seeks capital growth. Founders Asset Management LLC
The Portfolio normally invests primarily in
equity securities issued by foreign companies
that have market capitalizations or annual
revenues of $1 billion or less. These
securities may represent companies in both
established and emerging economies throughout
the world. At least 65% of the Portfolio's
total assets normally will be invested in
foreign securities representing a minimum of
three countries. Foreign securities are
generally considered to involve more risk than
those of U.S. companies, and securities of
smaller companies are generally considered to
be riskier than those of larger companies.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY ProFund VP Europe 30: seeks daily investment ProFund Advisors LLC
(Cont.) results that correspond to the performance of
the ProFunds Europe Index. The ProFunds Europe
Index ("PEI") is a combined measure of European
stock performance created by the investment
advisor from the leading stock indexes of
Europe's three largest economies giving equal
weight to each index each day. The PEI averages
the daily results of The Financial Times Stock
Exchange 100, The Deutsche Aktienindex and the
CAC-40. The Portfolio principally invests in
futures contracts on stock indexes and options
on futures contracts and financial instruments
such as equity caps, collars, floors and
options on securities and stock indexes of
large capitalization, widely traded, European
stocks. The Portfolio invests in financial
instruments with values that reflect the
performance of stocks of European companies.
- ----------------------------- -----------------------------------------------------------------------------------------------------
EMERGING MARKETS Montgomery Variable Series - Emerging Markets: Montgomery Asset Management, LLC
seeks 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 emerging market
countries at all times and no more than 25% of
total assets are invested in any one emerging
market country.
- ------------------------------------------------------------------------------------------------------------------------------------
Sector funds generally diversify their investments across particular economic
sectors. However, because those investments are limited to a comparatively
narrow segment of the economy, sector funds are generally not as diversified as
most mutual funds. Sector funds tend to be more volatile than other types of
funds. The value of fund shares may go up and down more rapidly than other
funds. Each sector of the economy may also have different regulatory or other
risk factors that can cause greater fluctuations in the share price. Please read
the prospectus for the underlying sector fund for further details about the
risks of the particular sector of the economy.
- ------------------------------ ----------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds - Financial INVESCO Funds Group, Inc.
Services: seeks capital appreciation. The
Portfolio normally invests at least 80% of its
assets in the equity securities of companies
involved in the financial services sector. This
sector includes, among others, banks (regional
and money-centers), insurance companies (life,
property and casualty, and multiline), and
investment and miscellaneous industries (asset
managers, brokerage firms, and
government-sponsored agencies). The investment
advisor seeks companies which it believes can
grow their revenues and earnings regardless of
the interest rate environment - although
securities prices of financial services
companies generally are interest
rate-sensitive.
SECTOR ----------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds - Health INVESCO Funds Group, Inc.
Sciences: seeks capital appreciation. The
Portfolio invests at least 80% of its assets in
the equity securities of companies that
develop, produce or distribute products or
services related to health care. These
industries include, but are not limited to,
medical equipment or supplies, pharmaceuticals,
health care facilities, and applied research
and development of new products or services.
The investment advisor attempts to blend
well-established healthcare firms with
faster-growing, more dynamic health care
companies, which have new products or are
increasing their market share of existing
products.
- ------------------------------ ----------------------------------------------------------------------------------------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------------------ ----------------------------------------------------------------------------------------------------
- ------------------------------ ----------------------------------------------------------------------------------------------------
INVESCO Variable Investment Funds - Technology: INVESCO Funds Group, Inc.
seeks capital appreciation. The Portfolio
normally invests at least 80% of its assets in
the equity securities of companies engaged in
technology-related industries. These include,
but are not limited to, communications,
computers, video, electronics, oceanography,
office and factory automation, and robotics. A
core portion of the Portfolio's holdings are
invested in market-leading technology companies
which the investment advisor believes will
maintain or improve their market share
regardless of overall conditions.
SECTOR ----------------------------------------------------------------------------------------------------
(Cont.) INVESCO Variable Investment Funds - INVESCO Funds Group, Inc.
Telecommunications: seeks capital appreciation.
The Portfolio normally invests at least 80% of
its assets in the equity securities of
companies that are primarily engaged in the
design, development, manufacture, distribution,
or sale of communications services and
equipment, and companies that are involved in
developing, constructing, or operating
communications infrastructure projects
throughout the world, or in supplying equipment
or services to such companies. The
telecommunications sector includes companies
that offer telephone services, wireless
communications, satellite communications,
television and movie programming and
broadcasting. Normally, the Portfolio will
invest at least 65% of its assets in companies
located in at least three different countries,
although U.S. issuers will often dominate the
holdings.
- ------------------------------------------------------------------------------------------------------------------------------------
The ProFund VP UltraOTC and UltraSmall-Cap portfolios and the Nova, Ursa and OTC
portfolios of the Rydex Variable Trust are available to all Owners. It is
recommended that only those Owners who engage a financial advisor to allocate
their funds in strategic or tactical asset allocation strategies invest in these
portfolios. There can be no assurance that any financial advisor will
successfully predict market fluctuations.
- ------------------------------ ----------------------------------------------------------------------------------------------------
ProFund VP UltraOTC: seeks daily investment ProFund Advisors LLC
results that correspond to twice (200%) the
performance of the NASDAQ 100 Index(TM). The
Portfolio principally invests in futures
contracts on stock indexes and options on
futures contracts and financial instruments
such as equity caps, collars, floors and
options on securities and stock indexes of
large capitalization companies. If the
Portfolio is successful in meeting its
objective, it should gain approximately twice
as much as the growth oriented NASDAQ 100
Index(TM) when the prices of the securities in
that index rise on a given day and should lose
approximately twice as much when such prices
decline on that day.
----------------------------------------------------------------------------------------------------
ProFund VP UltraSmall-Cap: seeks daily ProFund Advisors LLC
investment results that correspond to twice
(200%) the performance of the Russell 2000(R)
Index. The Portfolio principally invests in
futures contracts on stock indexes and options
STRATEGIC OR TACTICAL on futures contracts and financial instruments
ALLOCATION such as equity caps, collars, floors and
options on securities and stock indexes of
diverse, widely traded, small capitalization
companies. If the Portfolio is successful in
meeting its objective, it should gain
approximately twice as much as the growth
oriented Russell 2000(R) Index when the prices
of the securities in that index rise on a given
day and should lose approximately twice as much
when such prices decline on that day.
----------------------------------------------------------------------------------------------------
Rydex Variable Trust - Nova: seeks to provide PADCO Advisors II, Inc.
investment returns that are 150% of the daily
price movement of the S&P 500 Composite Stock
Price Index by investing to a significant
extent in futures contracts and options on
securities, futures contracts and stock
indexes. If the Portfolio meets its objective
the value of its shares will tend to increase
by 150% of the daily value of any increase in
the S&P 500 Index. However, when the value of
the S&P 500 Index declines, the value of its
shares should also decrease by 150% of the
daily value of any decrease in the S&P 500
Index.
----------------------------------------------------------------------------------------------------
Rydex Variable Trust - Ursa: seeks to provide PADCO Advisors II, Inc.
investment results that will inversely
correlate (e.g. be the opposite) to the
performance of the S&P 500 Composite Stock
Price Index by investing to a significant
extent in futures contracts and options on
securities, futures contracts and stock
indexes. The Portfolio will generally not
invest in the securities included in the S&P
500 Index. If the Portfolio meets its objective
the value of its shares will tend to increase
when the value of the S&P 500 Index is
decreasing. However, when the value of the S&P
500 Index is increasing, the value of its
STRATEGIC OR TACTICAL shares should decrease by an inversely
ALLOCATION proportional amount.
(Cont.) ----------------------------------------------------------------------------------------------------
Rydex Variable Trust - OTC: seeks to provide PADCO Advisors II, Inc.
investment results that correspond to a
benchmark for over-the-counter securities,
currently the NASDAQ 100 Index(TM), by
investing principally in the securities of
companies included in that Index. The Portfolio
may also invest in other instruments whose
performance is expected to correspond to that
of the Index, and may engage in futures and
options transactions. If the Portfolio meets
its objective the value of its shares will tend
to increase by the amount of the increase in
the NASDAQ 100 Index(TM). However, when the
value of the NASDAQ 100 Index(TM) declines, the
value of its shares should also decrease by the
amount of the decrease in the value of the
Index(TM).
- ------------------------------ ----------------------------------------------------------------------------------------------------
</TABLE>
"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. 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.
FEES AND CHARGES
WHAT ARE THE ANNUITY FEES AND CHARGES?
Tax Charges: Several states and some municipalities charge premium taxes or
similar taxes on annuities. The amount of tax will vary from jurisdiction to
jurisdiction and is subject to change. Currently, the state tax charge ranges
from 0% to 3 1/2%. We will deduct the amount of any tax charge at the time your
Premium is applied to the Annuity.
We may assess a charge against the Sub-Accounts equal to any taxes, which may be
imposed upon the Separate Account.
Transfer Fee: You may make twenty (20) free transfers between Sub-Accounts each
Annuity Year. We will charge $10.00 for each transfer after the twelfth in each
Annuity Year. Transfers made as part of a rebalancing, market timing or third
party investment advisory service will be subject to the transfer limit. For a
description of these programs see "Do You Offer Any Automatic Rebalancing
Programs?" However, all transfers made on the same day will be treated as one
(1) transfer. We may allow a higher number of transfers each Annuity Year
without charging a Transfer Fee for transfer requests transmitted electronically
or through other means that reduce our processing costs.
WHAT CHARGES ARE DEDUCTED BY THE SEPARATE ACCOUNT?
Insurance Charge: We deduct an Insurance Charge daily against the average daily
assets allocated to the Sub-Accounts. The charge is equal to 1.25% on an annual
basis, or if the Optional Guarantee Feature is selected the charge is 2.25% on
an annual basis. This charge is for insurance benefits provided by the Annuity,
including the risk that persons we guarantee Annuity Payments to will live
longer than our assumptions. The charge also covers administrative costs
associated with providing the Annuity benefits, including preparation of the
contract, confirmation statements, annual account statements and annual reports,
legal and accounting fees, as well as various related expenses. The charge for
the Optional Guarantee Feature covers our risk that the Guaranteed Annuity
Payment Amount may be higher than the Annuity Payment Amount at any time the
Annuitant(s) is alive. Finally, the charge covers the risk that our assumptions
about the administrative and non-mortality expenses under this Annuity are
incorrect. We may increase the portion of the Insurance Charge for
administrative costs. However, any increase will only apply to an Annuity issued
after the date of the increase.
We may reduce the administrative costs portion of the Insurance Charge when an
Annuity is sold to individuals or a group of individuals in a manner that
reduces our administrative expenses under the Annuity. In reducing this portion
of the charge we consider among other things: (a) the size and type of the
group; (b) the number of annuities purchased by an Owner; (c) the amount of
Premium; and/or (d) other transactions where administrative expenses are likely
to be reduced. We will not discriminate unfairly between Annuity purchasers if
and when we reduce the administration portion of the Insurance Charge.
PURCHASING YOUR ANNUITY
WHAT ARE THE REQUIREMENTS FOR PURCHASING THE ANNUITY?
Premium Payment: You must make a minimum Premium payment of not less than
$35,000. We may allow a lower minimum Premium payment if the Annuity is
purchased as a settlement option or an annuitization option from a deferred
annuity or a life insurance policy issued by us. Any Premium in excess of
$1,000,000 will require approval of our home office before issuing the Annuity.
We may require certain information before we issue an Annuity, including, but
not limited to, evidence satisfactory to us of the age of each Annuitant.
Once we agree to issue an Annuity, we invest your Net Premium (and any
applicable Credits) in the Annuity. The Net Premium is your Premium minus any
Tax Charges that may apply. We apply the Net Premium based on your instructions
for allocating your Contract Value among one or more Sub-Accounts.
Age Restrictions: The Annuitant(s) may not be greater than age 85 on the Issue
Date. If there is more than one Annuitant named, neither Annuitant may be
greater than age 85 on the Issue Date.
Owner, Annuitant, and Beneficiary Designations: We require you to name the
Owner(s), Annuitant(s) and Beneficiary(ies) for your Annuity.
|X| Owner: We assume the Annuitant is also the Owner unless you indicate
otherwise. Similarly, if there are joint Annuitants, we assume each
Annuitant is a joint Owner. You may name more than one Owner in which case
all ownership rights are held jointly. You may name a contingent Owner.
Ownership rights pass to such a contingent Owner upon the death (or in the
case of an entity, the dissolution) of the Owner. Unless you indicate
otherwise, no rights pass to any contingent Owner until the death (or
dissolution) of all Owners.
All ownership rights pass to the Beneficiary as of the Inheritance Date
unless you instruct us that ownership should remain with any then surviving
Owners. If ownership rights vest in a Beneficiary and there is no prior
irrevocable contingent Beneficiary designation, such Beneficiary may name a
person or entity to receive any remaining Annuity Payments yet to be paid
subsequent to such Beneficiary's death.
|X| Annuitant: The Annuitant is the person we agree to make Annuity Payments to
and during whose life we continue to make such payments. You may name one
or two Annuitants. The Annuitant can be, but does not have to be, the
Owner. You must name an Annuitant who is a natural person. Because our
assumptions about Annuity Payments are based on the age, life expectancy,
and where permitted gender of the Annuitant(s), the Annuitant designation
cannot be changed once your Annuity is issued.
|X| Beneficiary: The Beneficiary(ies) is/are the person(s) or entity(ies) you
name to receive any remaining payments under the Annuity if there is any
remaining Inheritance Period and if there is Cash Value due. You may name
one or more primary Beneficiaries and one or more contingent Beneficiaries.
Payments to your Beneficiary(ies) will be made in equal proportions unless
you notify us otherwise. We will make payment to a contingent Beneficiary
if the primary Beneficiary dies before the Inheritance Date. If no
Beneficiary is alive as of the Inheritance Date or you do not make a
Beneficiary designation, any remaining Annuity Payments will be made to you
or your estate. Unless you indicate otherwise, no rights pass to any
contingent Beneficiary until the death (or dissolution) of all
Beneficiaries. If Annuity Payments are being made to a Beneficiary and the
Beneficiary has not named a person or entity to receive Annuity Payments
during any remaining Inheritance Period subsequent to his or her death,
then such Annuity Payments will be made to the Beneficiary's estate.
Beneficiary designations can be changed unless the Owner requests that the
designation be made irrevocable.
Your choice of Annuitant(s) and Beneficiary(ies) can have significant tax
implications. You should seek competent tax advice on the income, estate and
gift tax implications of your designations.
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?
(The right to return the Annuity is referred to as the "Free-Look" right or
"right to cancel.")
If after purchasing your Annuity you change your mind and decide that you do not
want it, you may return it to us within a certain period of time known as a
Free-Look period. Depending on the state in which you purchased your Annuity,
the Free-Look period may be ten (10) days, twenty-one (21) days or longer,
measured from the time that you received your Annuity. If you exercise your
Free-Look right, we will refund your Contract Value, less any Credits, plus any
Tax Charges deducted. This amount may be higher or lower than your original
Premium. Certain states require that we return your current Contract Value or
the amount of your initial Premium, whichever is greater. The same rule applies
to an Annuity that is purchased as an IRA. In those states where we are required
to return the greater of your Premium or Contract Value, we will allocate your
Contract Value to the AST Money Market Sub-Account during the Free-Look period
and for a reasonable additional amount of time to allow for delivery of your
Annuity. If you exercise your Free-Look right, we will not return any Credits we
applied to your Annuity based on your Premium (see below).
WILL I RECEIVE CREDITS ON MY PREMIUM?
We may credit additional amounts to your Annuity based on the age of the
youngest Annuitant on the Issue Date. Credits are applied as a percentage of the
Premium as shown in the table below. Any such Credit will increase the amount
that is applied to your Annuity when determining the value upon which we base
your Annuity Payments.
---------------------------------- --------------------
Annuitant's Age Credit Amount*
---------------------------------- --------------------
---------------------------------- --------------------
Age 59 and below 3%
---------------------------------- --------------------
---------------------------------- --------------------
Age 60 through Age 65 2%
---------------------------------- --------------------
---------------------------------- --------------------
Age 66 through Age 71 1%
---------------------------------- --------------------
---------------------------------- --------------------
Age 72 and older 0%
---------------------------------- --------------------
* as a percentage of the Premium.
Credits are provided in higher amounts for younger Annuitants primarily to
reflect the duration of time that the Company expects to collect expenses during
which Annuity Payments are paid. These credits are provided in lieu of varying
the annuity's expenses to primarily reflect the expected different persistency
rates of the owners' ages. The life expectancies of younger Annuitants are
greater than older Annuitants. Consequently, credits are aimed at offsetting a
portion of the Insurance Charge for these younger Annuitants since we are
deducting the Insurance Charge which is a fixed annual percentage amount
deducted daily, during this extended period of time.
Credits are provided from our general account. Currently, Credits are applied to
all Annuities; although we reserve the right to cease applying Credits for
Annuities sold in the future. Any such decision will not effect your Annuity.
How are credits applied to my Annuity?
Any Credits are applied to your Annuity at the time the qualifying Net Premium
is applied to your Contract Value. Credits are allocated to the investment
options in the same ratio as the applicable Net Premium is applied.
|X| Any Credits applied to your Annuity can be recovered by us if you elect to
"Free-Look" your Annuity. The amount returned to you will not include any
Credits.
|X| We do not consider Credits to be "investment in the contract" for income tax
purposes (see "Tax Considerations").
MANAGING YOUR ANNUITY
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN SUB-ACCOUNTS?
You may make transfers between Sub-Accounts. Transfers are not subject to
taxation. We currently limit the number of Sub-Accounts you can invest in at any
one time to twenty (20) or, if asset allocation is required, the number of
categories in the asset allocation model. We may require a minimum of $500 in
any Sub-Account to which you allocate your Contract Value at the time of any
allocation or transfer. If you request a transfer and, as a result of the
transfer, there would be less than $500 in the Sub-Account, we may transfer the
remaining Contract Value in the Sub-Account pro rata to the other investment
options to which you transferred.
We retain the right to charge $10.00 for each transfer after the twentieth
(20th) in each Annuity Year, including transfers made as part of any
rebalancing, market timing or third party investment advisory service which you
have authorized. All rebalancing transfers made on the same day as part of an
automatic rebalancing program are considered as one transfer when counting the
number of transfers each year towards the maximum of 20 free transfers. We may
allow a higher number of transfers each Annuity Year without charging a Transfer
Fee for transfer requests transmitted electronically or through other means that
reduce our processing costs.
We reserve the right to limit the number of transfers in any Annuity Year for
all existing or new Owners. We also reserve the right to limit the number of
transfers in any Annuity Year or to refuse any transfer request for an Owner or
certain Owners if: (a) we believe that excessive trading or a specific transfer
request or group of transfer requests may have a detrimental effect on 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 must 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. Without
limiting the above, the most likely scenario where either of the above could
occur would be if the aggregate amount of a trade or trades represented a
relatively large proportion of the total assets of a particular Portfolio. Under
such a circumstance, we will process transfers according to our rules then in
effect and provide notice if the transfer request was denied. If a transfer
request is denied, a new transfer request may be required.
If you select the Optional Guarantee Feature, you may only make transfers within
the asset allocation model categories included in the Asset Allocation Program,
described below.
MAY I AUTHORIZE MY FINANCIAL REPRESENTATIVE TO MANAGE MY ACCOUNT?
You may authorize your financial representative to decide on the allocation of
your Contract Value and to make financial transactions between investment
options, subject to our rules. However, we can suspend or cancel these
privileges at any time. We will notify you if we do. We may restrict the
available investment options if you authorize a financial representative to make
transfers for you. We do this so that no financial representative is in a
position to control transfers of large amounts of money for multiple clients
into or out of any of the Portfolios that have expressed concern about movement
of a large proportion of a Portfolio's assets.
We may also establish different "cut-off times" by which we must receive all
financial transactions for certain Portfolios. Currently, only the portfolios of
Rydex Variable Trust and ProFund VP are subject to this restriction. Financial
transactions involving a Rydex or ProFund VP Sub-Account must be received by us
no later than one (1) hour before close of the New York Stock Exchange
(generally 3:00 p.m. Eastern time) to be processed on the current Valuation Day.
If you request a transaction involving the purchase or redemption of units in
one of the Rydex or ProFund VP Sub-Accounts after the "cut-off" time, we will
deem your request as received by us on the next Valuation Day. You may be
required to submit a new request on the following day.
We, or an affiliate of ours, may provide administrative support to financial
representatives who make transfers on your behalf. These financial
representatives may be firms or persons who also are appointed by us as
authorized sellers of the Annuity. However, we do not offer you advice about how
to allocate your Contract Value. Any financial firm or representative you engage
to provide advice and/or make transfers for you is not acting on our behalf. We
are not responsible for any recommendations such financial representatives make,
any market timing or asset allocation programs they choose to follow or any
specific transfers they make on your behalf.
AM I REQUIRED TO PARTICPATE IN THE ASSET ALLOCATION PROGRAM?
If you chose the Optional Guarantee Feature, your Net Premium (plus any
applicable Credit) is allocated in accordance with an asset allocation model we
select, and your Contract Value must be allocated in accordance with such a
model. We may use a model developed and maintained by us or we may elect to use
a model provided by an independent third party. We reserve the right to change
the model at any time.
The model we use will identify a number of asset categories in which your
Contract Value must be allocated (e.g., equities, debt, and cash). You must
allocate Contract Value to eligible Sub-accounts for each separate category. We
reserve the right to require that you use only one eligible Sub-account at a
time to complete each category.
We determine which Sub-accounts are eligible for each category or we may elect
to follow the recommendations of an independent third party. We may at any time
make new determinations as to which Sub-accounts are eligible for each category.
We may do so for a variety of reasons including, but not limited to, a change in
the investment objectives or policies of a Portfolio, or failure, in our sole
determination, of such Portfolio to invest in accordance with its stated
investment objective or policies. If we determine that a Sub-account is no
longer eligible for that category, we will notify you at least 30 days before
the Sub-account is unavailable.
You may transfer Contract Value maintained in an asset category to any other
eligible Sub-account within that category. Such transfers are counted towards
the number of free transfers available under the Annuity.
At the beginning of each calendar quarter, we rebalance the Contract Value among
categories according to the then current percentages for the asset allocation
model. We expect that the current percentages for each category may change from
time to time. Any change in the current percentages will become effective no
later than the regularly scheduled rebalancing of Contract Value occurring on or
immediately after the date of the change.
Under the Optional Guarantee Feature, the Sub-Accounts that invest in the
following Portfolios currently are not available:
----------------------------------------------------------------
Underlying Portfolios Not Available With
Optional Guarantee Feature
----------------------------------------------------------------
----------------------------------------------------------------
Rydex Variable Trust - Nova
Rydex Variable Trust - Ursa
Rydex Variable Trust - OTC
Montgomery Variable Series - Emerging Markets
ProFund VP Europe 30
ProFund VP UltraSmall-Cap
ProFund VP UltraOTC
INVESCO Funds VIF Technology
INVESCO Funds VIF Health Sciences
INVESCO Funds VIF Financial Services
INVESCO Funds VIF Telecommunications
INVESCO Funds VIF Dynamics
AST Cohen & Steers Realty
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All other Sub-Accounts and Portfolios currently are available for your
investment
DO YOU OFFER ANY OTHER AUTOMATIC REBALANCING PROGRAMS?
Yes, if you do not elect the Optional Guarantee Feature, we offer an automatic
rebalancing program that can periodically reallocate your Contract Value among
the Sub-Accounts you choose. You can choose to have your Contract Value
rebalance quarterly, semi-annually, or annually. On the appropriate date, your
Sub-Accounts are rebalanced to the allocation percentages you request. If you
request a transfer from or into any Sub-Account that is part of the automatic
rebalancing program, we will ask if you wish to change your rebalancing
percentages as well, and will automatically adjust the rebalancing percentages
in accordance with the transfer request unless we receive alternate instructions
from you.
ACCESS TO CASH VALUE
MAY I SURRENDER ALL OR PART OF MY ANNUITY?
Yes. As long as the Annuitant is alive, you may surrender all of the Annuity for
its Cash Value, if any. You also may surrender a portion of your Annuity (a
minimum of $1,000 is required) as long as the Annuitant is alive and the Cash
Value remaining after the partial surrender is at least $5,000. The Cash Value,
if any, is always less than the Contract Value. If you elect a partial surrender
of the Annuity we will apply the surrender pro-rata among all Sub-Accounts where
you are invested. Such partial surrender will reduce proportionately all the
Annuity's Contract and Cash Values, but will not effect the Inheritance Period.
This includes the Guaranteed Annuity Payment Amount if you selected the Optional
Guarantee Feature. We may request evidence satisfactory to us that the Annuitant
is alive and other information to process the surrender request (see
"Requirements for Surrender").
You may elect to return the Annuity during the Free-Look period. For additional
information about surrendering during the Free-Look period, please refer to the
section entitled "May I return the Annuity if I change my mind?"
WHAT IF MY INHERITANCE PERIOD IS ZERO, MAY I STILL MAKE A FULL OR PARTIAL
SURRENDER?
No. If your Annuity has no Inheritance Period you may not make a full or partial
surrender because there is no Cash Value.
Requirements for a Full or Partial Surrender: We must receive at our Office:
(a) a request in writing;
(b) the Annuity; and
(c) necessary representations in writing regarding tax withholding.
<PAGE>
ANNUITY BENEFITS
What are the benefits of this annuity?
The Annuity provides Annuity Payments for the life of the Annuitant, and a
guarantee that Annuity Payments will be payable during any remaining Inheritance
Period as of the Inheritance Date, even though no Annuitant is living. If you
choose the Optional Guarantee Feature, the Annuity provides an additional
benefit: a guarantee that, while the Annuitant is alive, the Annuity Payment
Amount will not be less than the initial Guaranteed Annuity Payment Amount.
The following are key terms we use when describing the benefits of this Annuity:
Adjustment is a change to the Annuity's benefits that occurs if, on an Annuity
Payment Date, the Cash Value Trigger is exceeded.
Annuity Factors are factors we apply to determine the Schedule of Units. Annuity
Factors reflect assumptions regarding the costs we expect to bear in
guaranteeing payments for the lives of the Annuitants and will depend on the
Benchmark Rate, the Inheritance Period, the Annuitant's attained age and where
permitted by law, gender. We may use different factors for different classes of
Annuities.
Benchmark Rate is an assumed rate of return used in determining the Annuity
Factors and the Schedule of Units. The Benchmark Rate is currently 4% but we may
use a different rate for different classes of purchasers. The Benchmark Rate for
the Optional Guarantee Feature is currently 3% but we may use a different rate
for different classes of purchasers. The Benchmark Rate is set forth in the
schedule page of your Annuity.
Cash Value Trigger is an amount we use to determine whether an Adjustment must
be made to your Contract values. The initial Cash Value Trigger is a percentage
of the Premium, generally 85% of Premium, and always equal to the Cash Value of
your Annuity on the Issue Date. We reserve the right to change the Cash Value
Trigger at any time.
Inheritance Date is the date we receive, at our office, due proof satisfactory
to us of the Annuitant's death and all other requirements that enable us to make
payments for the benefit of a Beneficiary. If there are joint Annuitants, the
Inheritance Date refers to the death of the last surviving Annuitant.
Inheritance Period, as discussed in the "Glossary of Terms," is a variable
period of time during which Annuity Payments are due whether or not the
Annuitant is still alive. The Inheritance Period is represented in months or
partial months.
Schedule of Units is a schedule for each Sub-Account of how many Units are
expected to fund your Annuity's benefits as of each Annuity Payment Date. The
schedule initially is assigned on the Issue Date and is based on the portion of
the Net Premium you allocate to a Sub-Account, the Benchmark Rate, and Annuity
Factors. Subsequently, the Schedule of Units is adjusted for transfers,
Adjustments, or partial surrenders.
HOW DO WE CALCULATE YOUR ANNUITY PAYMENT?
This Annuity attempts to cushion the Annuity Payment Amount from the immediate
impact of Sub-Account performance. This means that positive market performance
will not always increase the Annuity Payment Amount, and negative market
performance will not always decrease the Annuity Payment Amount. We accomplish
this cushion through a "stabilization" process. The stabilization process
adjusts the length of the Inheritance Period while generally maintaining a level
Annuity Payment Amount. When values under the Annuity exceed a trigger, then an
Adjustment is made to increase the Annuity Payment Amount and decrease the Cash
Value and the Inheritance Period. Adjustments do not change the Contract Value
of the Annuity. If the Inheritance Period reaches zero and the Annuitant is
still alive, Annuity Payments will continue. The Annuity Payment Amount will
vary depending on Sub-account performance.
Initial Annuity Payment
The initial Annuity Payment Amount is calculated based on the Schedule of Units
multiplied by the Unit Values on the Issue Date of the Annuity. We calculate
this value when we issue the Annuity and this is the amount payable on the first
Annuity Payment Date.
Subsequent Annuity Payments
The amount of Subsequent Annuity Payments are determined one month in advance.
On the Annuity Payment Date, based on your current allocations, we calculate the
Inheritance Period and the Cash Value. We calculate these initial values as
follows:
|X| The Inheritance Period is first reduced by one month (because one monthly
period has passed) and then increased or decreased to reflect the
difference between the value of the Units to be redeemed to fund the stable
Annuity Payment Amount and the value of the Units in the Schedule of Units.
Generally, if Sub-account performance exceeds the Benchmark Rate, then the
Inheritance Period will decrease less than one month, while if Sub-account
performance is less than the Benchmark Rate, the Inheritance Period will
decrease more than one month. Monthly Annuity Payment Amounts are
stabilized while the Inheritance Period absorbs the immediate impact of
market volatility.
|X| The Cash Value is determined based on the new Inheritance Period and the
current Unit Values.
The next Annuity Payment Amount on each Annuity Payment Date will depend on
whether the Inheritance Period is greater than or equal to zero and whether the
Cash Value Trigger has been exceeded.
INHERITANCE PERIOD GREATER THAN ZERO
Cash Value Trigger not exceeded
If the Cash Value Trigger has not been exceeded then we do not make an
Adjustment. The next Annuity Payment Amount is equal to the then
current Annuity Payment Amount. The Inheritance Period and the Cash
Value initially calculated above are established. The stabilization
process maintains a level Annuity Payment Amount.
Cash Value Trigger exceeded
If the Cash Value Trigger has been exceeded then we make an Adjustment.
The Cash Value of the Annuity is adjusted to be equal to the Cash Value
Trigger and the Inheritance Period is decreased. The Schedule of Units
is revised to reflect a higher Annuity Payment Amount to be paid on the
next Annuity Payment Date. Adjustments do not change the Contract Value
of the Annuity. The revised Annuity Payment Amount becomes the new
stabilized payment amount until there is an Adjustment or the
Inheritance Period becomes equal to zero.
INHERITANCE PERIOD EQUAL TO ZERO
If the Inheritance Period is equal to zero, the Annuity does not have
any Cash Value. Annuity Payments will continue until the Inheritance
Date; however, the Annuity Payment Amount may fluctuate each Annuity
Payment Date with changes in Unit Values. The next Annuity Payment
Amount is established equal to the number of Units scheduled to be paid
under the Schedule of Units multiplied by the current Unit Values.
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If you have selected the Optional Guarantee Feature, the Annuity
Payment Amount will not be less than the initial Guaranteed Annuity
Payment Amount.
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CAN I CHANGE THE CASH VALUE TRIGGER?
Unless you have selected the Optional Guarantee Feature, you can adjust the Cash
Value Trigger to 25%, 50%, or 75% of the original Cash Value Trigger on any
Annuity Payment Date.
Reducing the Cash Value Trigger increases the likelihood that your Annuity
Payment Amount will increase. However, reducing the Cash Value Trigger may also
result in using more Units to generate the larger monthly payment. This can also
decrease the Inheritance Period more rapidly to support the higher Annuity
Payment Amount during periods of poor market performance, which may effect the
stability of future Annuity Payments. Any Adjustment to the Cash Value Trigger
is permanent although you may continue to decrease the trigger in the future to
25% of the original Cash Value Trigger. If you have selected the Optional
Guarantee Feature, the Cash Value Trigger is set as of the Issue Date, and may
NOT be changed.
<PAGE>
CAN YOU ILLUSTRATE HOW ANNUITY PAYMENTS ARE MADE?
Shown below are examples of this Annuity, as a non-qualified annuity, without
the Optional Guarantee Feature or credits under different hypothetical interest
rate scenarios for a randomly chosen male and female aged 65 with a 4% Benchmark
Rate, and a $50,000 Premium amount. We have deducted all fees and charges under
this Annuity in these examples. These values are illustrative only and are
hypothetical.
<TABLE>
<CAPTION>
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Beginning Year 1 Beginning Year 5
Hypothetical Rate of Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Return Payment Period Value Payment Period Value
Amount (months) Amount (months)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0% $ 278.96 211.32 $ 50,000 $ 42,500 $ 278.96 132.90 $ 34,857 $ 24,404
4% 278.96 211.32 50,000 42,500 278.96 156.83 41,916 32,503
6% 278.96 211.32 50,000 42,500 278.96 166.53 45,789 36,713
8% 278.96 211.32 50,000 42,500 278.96 175.13 49,903 41,083
10% 278.96 211.32 50,000 42,500 299.05 161.47 53,912 42,500
12% 278.96 211.32 50,000 42,500 322.34 142.75 57,988 42,500
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Hypothetical Rate of Beginning Year 10 Beginning Year 20
Return
Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Payment Period* Value Payment Period* Value
Amount (months) Amount (months)
0% $ 175.01 0.00 $ 21,173 $ 0 $ 104.26 0.00 $ 8,332 $ 0
4% 278.96 65.92 31,224 14,753 219.83 0.00 17,567 0
6% 278.96 118.14 39,816 28,948 278.96 44.25 26,839 12,990
8% 278.96 152.19 50,118 41,912 322.81 108.15 49,512 42,500
10% 355.11 115.47 59,303 42,500 555.16 61.30 68,412 42,500
12% 421.98 89.98 70,418 42,500 888.48 37.19 101,564 42,500
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Beginning Year 1 Beginning Year 5
Hypothetical Rate of Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Return Payment Period Value Payment Period Value
Amount (months) Amount (months)
0% $ 258.24 236.78 $ 50,000 $ 42,500 $ 258.24 144.79 $ 35,656 $ 24,173
4% 258.24 236.78 50,000 42,500 258.24 179.86 42,775 33,347
6% 258.24 236.78 50,000 42,500 258.24 193.11 46,680 37,896
8% 258.24 236.78 50,000 42,500 258.54 204.14 50,826 42,500
10% 258.24 236.78 50,000 42,500 279.62 178.24 54,810 42,500
12% 258.24 236.78 50,000 42,500 296.48 158.15 59,069 42,500
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Hypothetical Rate of Beginning Year 10 Beginning Year 20
Return
Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Payment Period Value Payment Period Value
Amount (months) Amount (months)
0% $ 162.01 0.00 $ 22,625 $ 0 $ 96.51 0.00 $ 8,891 $ 0
4% 258.24 76.04 32,961 15,506 203.50 0.00 18,747 0
6% 258.24 147.89 41,792 32,064 258.24 74.90 29,798 19,391
8% 278.90 166.58 51,796 42,500 327.20 114.71 50,840 42,500
10% 335.80 125.86 61,417 42,500 544.61 65.36 72,073 42,500
12% 390.12 98.61 73,317 42,500 841.11 40.11 107,597 42,500
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</TABLE>
<PAGE>
Below are examples of this Annuity, as a non-qualified annuity without credits,
with the Optional Guarantee Feature under different hypothetical interest rate
scenarios for a randomly chosen male and female aged 65 with a 3% Benchmark
Rate, and a $50,000 Premium amount. As in the above examples we have deducted
all fees and charges under this Annuity. These values are illustrative only and
are hypothetical.
<TABLE>
<CAPTION>
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Beginning Year 1 Beginning Year 5
Hypothetical Rate of Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Return Payment Period Value Payment Period Value
Amount (months) Amount (months)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% $ 249.37 221.37 $ 50,000 $ 42,500 $ 249.37 148.67 $ 34,550 $ 25,151
4% 249.37 221.37 50,000 42,500 249.37 167.89 41,435 32,509
6% 249.37 221.37 50,000 42,500 249.37 175.80 45,210 36,410
8% 249.37 221.37 50,000 42,500 249.37 182.87 49,219 40,492
10% 249.37 221.37 50,000 42,500 264.57 173.21 53,211 42,500
12% 249.37 221.37 50,000 42,500 287.28 153.60 57,176 42,500
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Hypothetical Rate of Beginning Year 10 Beginning Year 20
Return
Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Payment Period Value Payment Period Value
Amount (months) Amount (months)
0% $ 249.37 0.00 $ 20,319 $ 0 $ 249.37 0.00 $ 7,773 $ 0
4% 249.37 82.08 30,483 16,461 249.37 0.00 16,400 0
6% 249.37 124.93 38,634 28,285 249.37 44.13 25,015 11,687
8% 249.37 154.02 48,349 39,902 249.37 121.50 47,150 41,888
10% 309.45 126.69 57,540 42,500 469.02 69.38 64,353 42,500
12% 370.41 99.14 68,044 42,500 757.89 42.21 94,439 42,500
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Beginning Year 1 Beginning Year 5
Hypothetical Rate of Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Return Payment Period Value Payment Period Value
Amount (months) Amount (months)
0% $ 228.98 248.47 $ 50,000 $ 42,500 $ 228.98 166.84 $ 35,323 $ 25,380
4% 228.98 248.47 50,000 42,500 228.98 193.27 42,265 33,383
6% 228.98 248.47 50,000 42,500 228.98 203.62 46,069 37,519
8% 228.98 248.47 50,000 42,500 228.98 212.65 50,108 41,803
10% 228.98 248.47 50,000 42,500 246.35 191.81 54,055 42,500
12% 228.98 248.47 50,000 42,500 262.61 170.89 58,198 42,500
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Hypothetical Rate of Beginning Year 10 Beginning Year 20
Return
Annuity Inheritance Contract Cash Value Annuity Inheritance Contract Cash Value
Payment Period Value Payment Period Value
Amount (months) Amount (months)
0% $ 228.98 0.00 $ 21,726 $ 0 $ 228.98 0.00 $ 8,275 $ 0
4% 228.98 99.00 32,143 17,870 228.98 0.00 17,460 0
6% 228.98 154.84 40,498 31,093 228.98 74.08 27,657 17,376
8% 236.22 183.14 50,351 42,500 267.55 130.23 48,732 42,500
10% 291.75 138.73 59,441 42,500 459.19 74.40 67,427 42,500
12% 340.24 109.31 70,699 42,500 713.90 45.82 99,672 42,500
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</TABLE>
WHEN ARE ANNUITY PAYMENTS MADE?
Each Annuity Payment is payable monthly on the Annuity Payment Date. The initial
Annuity Payment will be on a date of your choice of the 1st through the 28th day
of the calendar month following the 30th day after the Issue Date of this
Annuity. The Annuity Payment Date may not be changed after the Issue Date.
MAY I CONVERT ANNUITY PAYMENTS TO FIXED PAYMENTS?
Yes. You may convert to fixed Annuity Payments but only after two (2) years from
the Annuity's Issue Date. Before any Annuity Payment Date after this period, you
may make an irrevocable election to convert to fixed Annuity Payments. If you
elect fixed payments, on each Annuity Payment Date you will receive a fixed
amount that will not vary with investment performance. The value of these
payments depends on the Contract Value at the time of the conversion, the then
current Inheritance Period, the Annuitant's age, gender (where permitted), and
an assumed interest rate of not less than 3% per year. The subsequent Annuity
Payment Amount may be greater than, equal to, or less than the current Annuity
Payment Amount. The Inheritance Period on conversion will be fixed and
subsequently reduced by one month each month. However, after you have elected
this option under this Annuity you will not be permitted to make full or partial
surrenders.
WHO RECEIVES THE ANNUITY PAYMENT?
We make Annuity Payments to the Annuitant. Subject to our rules, we may accept
your instructions to forward Annuity Payments to an alternate payee.
WHAT HAPPENS WHEN THE ANUITANT DIES?
As of the Inheritance Date, if an Inheritance Period exists and was never zero
at any time between the death of the last surviving Annuitant and the
Inheritance Date, we will make Annuity Payments to the Beneficiary for the
remainder of the Inheritance Period. As an alternative, a lump sum can be paid
to the Beneficiary. There is no guarantee that there will be any Inheritance
Period after the date of death, which means there may be no amount due for the
Beneficiary. If there is no Inheritance Period as of the Inheritance Date, the
Annuity terminates.
If the Annuity is used in connection with a tax qualified retirement plan or
qualified contract (including individual retirement annuities), the beneficiary
may only be entitled to a lump sum distribution after the death of the last
surviving Annuitant or the period over which Annuity Payments can be paid may be
shortened.
WHAT HAPPENS WHEN THE OWNER DIES?
If any Owner dies before the Annuity Date, the Annuity will end and the Cash
Value will be payable to the Beneficiary(s) after we have received all of our
requirements to make settlement.
WHEN DO ANNUITY PAYMENTS FOR A BENEFICIARY START?
If Annuity Payments are to be paid to a Beneficiary, Annuity Payments will begin
as of the next Annuity Payment Date, or the Cash Value can then be paid. No
amounts are payable to a Beneficiary until the death of the last surviving
Annuitant. Evidence satisfactory to us of the death of all Annuitants must be
provided before any amount becomes payable to a Beneficiary.
IF ANNUITY PAYMENTS ARE TO BE PAID TO A BENEFICIARY, WHAT DETERMINES THE ANNUITY
PAYMENT EACH MONTH AND HOW LONG WILL THE ANNUITY PAYMENTS BE PAID TO THE
BENEFICIARY?
We make Annuity Payments to the Beneficiary. Each month we pay the current
number of Units scheduled to be paid multiplied by the current Unit Value. The
number of Units are determined as of the Inheritance Date and can only change as
a result of a transfer. As of the Inheritance Date, the length of the
Inheritance Period no longer depends on investment performance. At that point it
is fixed and subsequently decreases by one each month. Once the Inheritance
Period ends, the Annuity terminates.
If there is an Inheritance Period remaining as of the Inheritance Date, the
Beneficiary may elect to receive the Cash Value instead of Annuity Payments if,
before the Inheritance Date, you did not elect, in writing, to prohibit
commutation and all Beneficiaries agree in writing to such commutation. All
requirements that would otherwise apply for Annuity Payments payable for the
benefit of the Beneficiary will apply before we pay a Cash Value as an
alternative.
WHAT DOCUMENTATION IS REQUIRED TO RECEIVE ANNUITY PAYMENTS?
Requirements for Annuity Payments While the Annuitant is Alive: We must receive
at our office necessary representations in writing regarding tax withholding. We
also require, from time-to-time, evidence in writing satisfactory to us that the
Annuitant is alive. We may withhold Annuity Payments until we receive our
requirements or until we receive in writing due proof satisfactory to us of the
Annuitant's death. Such withheld Annuity Payments will be maintained in our
general account. We will credit interest of at least 3% per year, compounded
yearly, on each withheld Annuity Payment unless otherwise required by law.
Should we subsequently receive the applicable requirements, we will pay the
withheld Annuity Payments plus any interest credited in a lump sum for the
benefit of the applicable payee (see "Payments and Payees").
Requirements for Annuity Payments Payable to the Beneficiary: We must receive at
our Office:
(a) due proof satisfactory to us in writing of the death of all Annuitants and,
if applicable, no Owner died before the Annuity Date;
(b) the Annuity; and
(c) all representations, in writing, that we require or which are mandated by
applicable law or regulation in relation to making payments to a
Beneficiary, including any required in relation to tax withholding.
Once Annuity Payments begin to be paid to a Beneficiary, we may require, from
time-to-time, evidence in writing satisfactory to us that a natural person who
is a Beneficiary is alive. We may withhold Annuity Payments until we receive
such requirements, or until we receive in writing due proof satisfactory to us
of such Beneficiary's death. We will credit interest of at least 3% per year,
compounded yearly, on each withheld Annuity Payment unless otherwise required by
law. Should we subsequently receive our requirements, we will pay the withheld
Annuity Payments plus any interest credited in a lump sum for the benefit of the
applicable payee (see "Payments and Payees").
PAYMENTS AND PAYEES
The payees of an Annuity Payment, Cash Value, or a partial or full surrender may
provide us with an account at a financial institution to which we may
electronically forward such payments. Subject to our rules, we may, as a
convenience, forward a payment for an Annuitant, Owner, or Beneficiary (or a
person selected to receive remaining Annuity Payments after such Beneficiary's
death) to an account for the benefit of an alternate person or entity. We must
receive the request to forward payments to such alternate person or entity in
writing from the person or entity that then has ownership rights.
We pay Annuity Payments to the Annuitant first designated on any application
unless you instruct us to forward Annuity Payments to any other named Annuitant.
We forward any partial or full surrender to the Owner unless you instruct us
otherwise.
Before the Inheritance Date, we may split Annuity Payments among all the
recipients if requested by the Owner in writing. We reserve the right to limit
the number of payees. If a split payment has been selected and one of any
several joint payees die but other joint payees survive; and we receive proof
satisfactory to us of such death, any subsequent Annuity Payments will be split
pro rata among accounts for the surviving payees. Such split Annuity Payments
can be terminated by the Owner by forwarding a request to us in writing before
the Inheritance Date.
Any amounts due on or after the Inheritance Date will be split among any named
Beneficiaries in accordance with the Beneficiary designation. However, currently
we will not accept an instruction to pay part as a lump sum and part as Annuity
Payments. We will pay the lump sum and our liability under the Annuity will
terminate if no election is received in writing by us at our Office before the
Inheritance Date or if, as of the Inheritance Date, multiple Beneficiaries
cannot agree as to whether amounts are to be received as Annuity Payments or a
lump sum (assuming some amount is owed).
TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?
Following is a brief summary of some of the federal tax considerations relating
to this Annuity. Since the tax laws are complex and tax consequences are
affected by your individual circumstances, this summary of our interpretation of
the relevant tax laws is not comprehensive nor is it tax advice. You may wish to
consult a professional tax advisor for tax advice.
TAXATION OF AMERICAN SKANDIA AND THE SEPARATE ACCOUNT?
The Separate Account is taxed as part of American Skandia which is taxed as a
life insurance company under Subchapter L of the Code. Accordingly, the Separate
Account is not separately taxed as a "regulated investment company" under
Subchapter M of the Code. Investment income and any realized capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the value of the Units. As a result, such investment income and
realized capital gains are automatically applied to increase reserve under the
Annuity.
Currently no taxes are due on interest, dividends and short-term or long-term
capital gains earned by the Separate Account with respect to the Annuity.
HOW ARE IMMEDIATE ANNUITIES TREATED UNDER THE TAX CODE?
Section 72 of the Code governs the taxation of annuities in general. Taxation of
an immediate annuity is largely dependent upon whether it is used in a qualified
pension or profit sharing plan or other retirement arrangement eligible for
special treatment under the Code.
Pursuant to Section 72(s) of the Code, an annuity must provide for certain
required distributions after the date of death of any Owner. In addition,
pursuant to Section 72(u) an annuity will be considered an immediate annuity if
it is purchased with a single premium, Annuity Payments commence within one year
from the date of the purchase, and the Annuity provides for a series of equal
payments no less frequently than annually during the Inheritance Period. Based
on our understanding of tax law, we believe that the Annuity meets these
requirements and would be considered an immediate annuity for the federal income
tax purposes except as otherwise noted below under "Special concerns regarding
immediate annuities".
HOW ARE ANNUITY PAYMENTS TAXED?
Distributions from an annuity are taxed as ordinary income and not as capital
gains. Generally, a portion of each Annuity Payment is taxable as determined by
an IRS formula that establishes the ratio between the "investment in the
contract" and the total value of Annuity Payments to be made. This is called the
"exclusion ratio."
"Investment in the contract" is equal to the total Premium paid for the contract
minus any previous distributions (or portions of distributions) from such
contract that were not includible in gross income. "Investment in the contract"
may be affected by whether an annuity was purchased as part of a tax-free
exchange of life insurance, endowment, or annuity contracts under Section 1035
of the Code.
The portion of each Annuity Payment that represents "investment in the contract"
is excluded from gross income. When Annuity Payments cease because of the death
of the person upon whose life payments are based and, as of the date of death,
the portion of Annuity Payments excluded from taxable income pursuant to the
exclusion ratio does not exceed the "investment in the contract," then the
remaining portion of unrecovered investment is allowed as a deduction on the
decedent's final income tax return in the tax year of such death.
HOW ARE DISTRIBUTIONS OTHER THAN ANNUITY PAYMENTS TAXED?
The portion of distributions considered to be "amounts not received as an
annuity," such as a full surrender or a lump sum alternative after the
Annuitant's death, in excess of any remaining investment in the contract is
treated as "income on the contract" and includible in gross income. The amount
of the distribution exceeding "income on the contract" is not included in gross
income. "Income on the contract" for an annuity would be computed by subtracting
from the value of the taxpayer's "investment in the contract" (which is an
amount equal to total payments for the contract less any previous distributions
or portions thereof from such contract not included in gross income).
"Investment in the contract" may be affected by whether an annuity was purchased
as part of a tax-free exchange of life insurance or annuity contracts under
Section 1035 of the Code. We believe there is some uncertainty regarding the
manner in which the IRS would apply the Code and the regulations thereunder to
partial surrenders. For reporting purposes, we will treat partial surrenders as
generally coming first from any "income on the contract".
We believe that "investment on the contract" does not include the Premium paid
for "related contracts" under this Annuity. "Related contracts" mean all annuity
contracts or certificates (other than certain contracts owned in connection with
a tax-qualified retirement arrangement) for which the taxpayer is the beneficial
owner and which are issued by the same insurer within the same calendar year,
irrespective of the named annuitants. "Related contracts" are treated as one
annuity contract when determining the taxation of distributions before
annuitization. While it is clear that "related contracts" include contracts
prior to when annuity payments begin, there is some uncertainty regarding the
manner in which the Internal Revenue Service would view "related contracts" when
one or more contracts are immediate annuities or are contracts that have been
annuitized. We do not believe "related contracts" include immediate annuities or
annuities for which annuity payments have begun. If "related contracts" include
immediate annuities or annuities for which annuity payments have begun, then
"related contracts" would have to be taken into consideration in determining the
taxable portion of each annuity payment (as outlined in the "How Are Annuity
Payments Taxed?" subsection above) as well as in determining the taxable portion
of distributions from an annuity or any "related contracts" before annuity
payments have begun. The Internal Revenue Service has not issued guidance
clarifying this issue as of the date of this Prospectus. We cannot guarantee
that immediate annuities or annuities for which annuity payments have begun
could not be deemed to be "related contracts". You are particularly cautioned to
seek advice from your own tax advisor on this matter.
Special concerns regarding immediate annuities: The Internal Revenue Service has
ruled that the 10% penalty applicable to "non-qualified" immediate annuities
will apply to annuity payments under a contract recognized as an immediate
annuity under state insurance law but not under Section 72 (u) of the Code in an
exchange situation where the Premium for the exchanged contract was paid, or
deemed to have been paid, more than one year prior to the first annuity payment
payable under the immediate annuity; and the annuity payments under the
immediate annuity do not meet the requirements of any other exception to the 10%
penalty.
We believe Annuity Payments are not subject to the 10% penalty because they meet
the substantially equal payment exception under Section 72(q) (relating to
non-qualified contracts) or 72(t) (relating to tax qualified retirement plans or
qualified contracts including individual retirement annuities). If these types
of programs provided by us and other insurance companies are deemed by the
Internal Revenue Code not to meet the substantially equal periodic payments
exception in Section 72(q) or Section 72(t) of the Code and you do not meet any
of the other exceptions under the Code, you may be subject to the 10% penalty
described above.
Distributions, other than Annuity Payments, from the Annuity may be subject to a
penalty equal to 10% of the amount includible in gross income plus interest,
unless an exception applies.
Special rules in relation to tax-free exchanges under Section 1035: Section 1035
of the Code permits certain tax-free exchanges of a life insurance, annuity or
endowment contract for an annuity. If the Annuity is purchased through a
tax-free exchange of a life insurance, annuity or endowment contract that was
purchased prior to August 14, 1982, then any distributions other than as annuity
payments will be considered to come:
|X| First, from the amount of any remaining "investment in the contract" made
prior to August 14, 1982 and exchanged into the annuity;
|X| Then, from any "income on the contract" that is attributable to the Premium
payments made prior to August 14, 1982 (including income on such original
Premium after the exchange);
|X| Then, from any remaining "income on the contract"; and
|X| Lastly, from the remaining "investment in the contract."
Therefore, to the extent a distribution is equal to or less than the "investment
in the contract" made prior to August 14, 1982, such amounts are not included in
taxable income. Further, distributions received that are considered to be a
return of investment on the contract from Premium made prior to August 14, 1982,
such distributions are not subject to the 10% tax penalty. In all other
respects, the general provisions of the Code apply to distributions from
annuities obtained as part of such an exchange.
On November 22, 1999, the Internal Revenue Service issued an acquiescence in the
decision of the United States Tax Court in Conway v. Commissioner (111 T.C. 350
(1998)) that a taxpayer's partial surrender of an annuity contract and direct
transfer of the resulting proceeds for the purchase of a new annuity contract
qualifies as a non-taxable exchange under Section 1035 of the Internal Revenue
Code. "Acquiescence" means that the IRS accepts the holding of the Court in a
case and that the IRS will follow it in disposing of cases with the same
controlling facts. Prior to the Conway decision, industry practice has been to
treat a partial surrender of account value as fully taxable to the extent of any
gain in the contract for tax reporting purposes and to "step-up" the basis in
the contract accordingly. However with the IRS' acquiescence in the Conway
decision, partial surrenders may be treated in the same way as tax-free 1035
exchanges of entire contracts, therefore avoiding current taxation of any gains
in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2
withdrawals. The IRS reserved the right to treat transactions it considers
abusive as ineligible for this favorable partial 1035 exchange treatment. We do
not know what transactions may be considered abusive. For example, we do not
know how the IRS may view early withdrawals or annuitizations after a partial
exchange. In addition, it is unclear how the IRS will treat a partial exchange
from a life insurance, endowment, or annuity contract into an immediate annuity.
As of the date of this Prospectus, we continue to report partial surrenders of
non-qualified annuities as subject to current taxation to the extent of any
gain. However, we may change our reporting procedures to treat certain of these
transactions as partial 1035 exchanges. Should we do so, we reserve the right to
report transactions that may have been designed to receive partial 1035 exchange
treatment as partial surrenders subject to current taxation if we, as a
reporting and withholding agent, believe that we would be expected to deem a
transaction to be abusive.
It also is unclear whether the IRS will extend the application of the holding in
the Conway decision to transactions involving life insurance or endowment
contracts. You are particularly cautioned to seek advice from your own tax
advisor on this matter.
ARE THERE TAX CONSIDERATIONS FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED
CONTRACTS?
There are various types of tax-qualified retirement plans and qualified assets
for which the Annuity may be suitable. Generally, this Annuity may be useful to
meet income obligations under such plans and arrangements, or for taking
distributions, because of the benefits provided by the Annuity and because the
Annuity is a single premium product. Therefore, in many cases, using the Annuity
in conjunction with a qualified plan or arrangement may require a transfer or
"roll over" from an existing qualified plan or arrangement. Before purchasing
the Annuity for use with a qualified plan or arrangement, you should obtain
competent tax advice about the tax treatment and the suitability of such an
investment. American Skandia does not offer the Annuity in connection with all
types of tax-qualified retirement plans and arrangements.
Corporate Pension and Profit-sharing Plans: The Annuity may be used to fund
employee benefits of various corporate pension and profit-sharing plans
established by corporate employers under Sections 401(a) and 401(k) of the Code.
Contributions to such plans are not taxable to the employee until distributions
are made from the retirement plan.
H.R. 10 Plans: The Annuity may also be used to fund benefits of retirement plans
established by self-employed individuals for themselves and their employees.
These are commonly known as "H.R. 10 Plans" or "Keogh Plans".
Tax Sheltered Annuities: Under Section 403(b) of the Code a tax sheltered
annuity ("TSA") is a contract into which contributions may be made by certain
qualifying employers such as public schools and certain charitable, educational
and scientific organizations specified in Section 501(c)(3) for the benefit of
their employees. Such contributions are not taxable to the employee until
distributions are made from the TSA. We do not permit loans from a TSA.
Section 457 Plans: Under Section 457 of the Code, deferred compensation plans
established by governmental and certain other tax exempt employers for their
employees may invest in annuity contracts. The Code limits contributions and
distributions, and imposes eligibility requirements as well.
Individual Retirement Programs or "IRA": Section 408 of the Code allows eligible
individuals to maintain an IRA. The Annuity may be used to receive "roll-over"
distributions from certain tax-qualified retirement plans and maintain their
tax-deferral.
Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to
a Roth IRA are not tax deductible.
SEP IRAs: Eligible employers that meet specified criteria may establish
Simplified Employee Pensions or SEP IRAs.
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?
Distributions from qualified annuities are subject to a penalty equal to 10% of
the amount includible in gross income, unless an exception applies. We believe
that the exception for substantially equal periodic payments noted in Section
72(t)(2)(A)(iv) of the Code applies to Annuity Payments as noted above, under
"Special concerns regarding immediate annuities." We also believe that the
penalty does not apply to any lump sum paid to a Beneficiary under a qualified
annuity.
Distributions, other than Annuity Payments, from a qualified annuity may be
subject to a penalty equal to 10% of the amount includible in gross income plus
interest, unless an exception applies.
If required by law or regulation, once each calendar year, we will determine
whether an amount in addition to your Annuity Payment Amount is payable. We do
this so that your Annuity may satisfy the required minimum distribution rules
pursuant to Section 401(a)(9) of the Code. If we determine that an additional
amount is payable, the additional payment amount will be calculated based on the
Contract Value. Units of the Contract Value will be redeemed to fund the
additional payment amount.
GENERAL TAX CONSIDERATIONS
Diversification: Section 817(h) of the Code provides that a variable annuity
contract, in order to qualify as an annuity, must have an "adequately
diversified" segregated asset account (including investments in a mutual fund by
the segregated asset account of insurance companies). If the diversification
requirements under the Code are not met and the annuity is not treated as an
annuity, the taxpayer will be subject to income tax on the annual gain in the
contract. We believe the Portfolios should comply with the terms of these
regulations.
Transfers Between Sub-Accounts: Transfers between Sub-Accounts are not subject
to taxation. The Treasury Department may promulgate guidelines under which a
variable annuity will not be treated as an annuity for tax purposes if persons
with ownership rights have excessive control over the investments underlying
such variable annuity. It is unclear whether such guidelines, if in fact
promulgated, would have retroactive effect. It is also unclear what effect, if
any, such guidelines may have on transfers between the Sub-Accounts offered
pursuant to this Prospectus. We will take any action, including modifications to
your Annuity or the Sub-Accounts, required to comply with such guidelines if
promulgated.
Federal Income Tax 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.
Certain distributions, including rollovers, from most Qualified Contracts, may
be subject to automatic 20% withholding for Federal income taxes. This will not
apply to:
|X| direct transfers to the trustee of another retirement plan;
|X| distributions from an individual retirement account or individual
retirement annuity;
|X| distributions made as substantially equal periodic payments for the life or
life expectancy of the participant in the retirement plan or the life or
life expectancy of such participant and his or her designated beneficiary
under such plan (all Annuity Payments before the Inheritance Date meet this
exception); and
|X| certain other distributions where automatic 20% withholding may not apply.
Estate and Gift Tax Considerations: You should obtain competent tax advice with
respect to possible Federal and state estate and gift tax consequences flowing
from the ownership and transfer of annuities.
Generation-Skipping Transfers: Under the Code certain taxes may be due when all
or part of an annuity is transferred to, or a death benefit is paid to, an
individual two or more generations younger than the contract holder. These
generation-skipping transfers generally include those subject to federal estate
or gift tax rules. There is an aggregate $1 million exemption from taxes for 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 Annuity or from any applicable payment treated as a direct skip
any amount of tax we are required to pay.
GENERAL INFORMATION
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law or
regulation to you through our Internet Website at http://www.americanskandia.com
or any other electronic means, including diskettes or CD ROMs. We send a
confirmation statement to you each time a transaction is made affecting Contract
Value, transfers, or withdrawals. We send monthly statements reflecting the
processing done each Annuity Payment Date except after any conversion to fixed
payments. Before any conversion, we also send periodic statements detailing the
activity affecting your Annuity during the calendar quarter. 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.
All errors or corrections must be reported to us at our home office as soon as
possible to assure proper accounting to your Annuity. For transactions that are
confirmed immediately, we assume all transactions are accurate unless you notify
us otherwise within 10 days from the date you receive the confirmation. For
transactions that are only confirmed on the quarterly statement, we assume all
transactions are accurate unless you notify us within 10 days from the date you
receive the quarterly statement. All transactions confirmed immediately or by
quarterly statement are deemed conclusive after the applicable 10-day period. We
may also send an annual report and a semi-annual report containing applicable
financial statements, as of December 31 and June 30, respectively, to Owners or,
with your prior consent, make such documents available electronically through
our Internet Website or other electronic means.
WHO IS AMERICAN SKANDIA?
American Skandia Life Assurance Corporation ("American Skandia") is a stock life
insurance company domiciled in Connecticut with licenses in all 50 states and
the District of Columbia. American Skandia is a wholly-owned subsidiary of
American Skandia, Inc. (formerly known as American Skandia Investment Holding
Corporation), whose ultimate parent is Skandia Insurance Company Ltd., a Swedish
company. American Skandia markets its products to broker-dealers and financial
planners through an internal field marketing staff. In addition, American
Skandia markets through and in conjunction with financial institutions such as
banks that are permitted directly, or through affiliates, to sell annuities.
American Skandia is in the business of issuing variable annuity and variable
life insurance contracts. American Skandia currently offers the following
products: (a) flexible premium deferred annuities and single premium fixed
deferred annuities that are registered with the SEC; (b) certain other fixed
deferred annuities that are not registered with the SEC; (c) certain group
variable annuities that are exempt from registration with the SEC that serve as
funding vehicles for various types of qualified pension and profit sharing
plans; (d) a single premium variable life insurance policy that is registered
with the SEC; (e) flexible premium life insurance policies that is registered
with the SEC; and (f) both fixed and variable immediate adjustable annuities.
WHAT ARE SEPARATE ACCOUNTS?
The assets supporting our obligations under the Annuities are held in separate
accounts established under the laws of the State of Connecticut. We are the
legal owner of assets in the separate accounts. Assets supporting fixed annuity
payments after a conversion are held in our general account. Income, gains and
losses from assets allocated to these separate accounts are credited to or
charged against each such separate account without regard to other income, gains
or losses of American Skandia or of any other of our separate accounts. These
assets may only be charged with liabilities which arise from the annuity
contracts issued by American Skandia Life Assurance Corporation. The amount of
our obligation in relation to allocations to the Sub-Accounts is based on the
investment performance of such Sub-Accounts. However, the obligations themselves
are our general corporate obligations.
Separate Account B
The assets supporting obligations based on allocations to the variable
investment options are held in either Class 7 or Class 8 Sub-Accounts of
American Skandia Life Assurance Corporation Variable Account B, also referred to
as "Separate Account B". Separate Account B consists of multiple Sub-Accounts.
The name of each Sub-Account generally corresponds to the name of the underlying
Portfolio. The names of each Sub-Account are shown in the Statement of
Additional Information. Separate Account B was established by us pursuant to
Connecticut law. Separate Account B also holds assets of other annuities issued
by us with values and benefits that vary according to the investment performance
of Separate Account B. The Sub-Accounts offered pursuant to this Prospectus are
Class 7 and Class 8 Sub-Accounts of Separate Account B. Each class of
Sub-Account in Separate Account B has a different level of charges assessed
against such Sub-Accounts. You will find additional information about these
Portfolios in the prospectuses for such funds.
Separate Account B is registered with the SEC under the Investment Company Act
of 1940 ("Investment Company Act") as a unit investment trust, which is a type
of investment company. This does not involve any supervision by the SEC of the
investment policies, management or practices of Separate Account B. Each
Sub-Account invests only in a Portfolio. We reserve the right to add
Sub-Accounts, to eliminate Sub-Accounts, to combine Sub-Accounts, or to
substitute Portfolios.
Values and benefits based on allocations to the Sub-Accounts will vary with the
investment performance of the Portfolios, as applicable. We do not guarantee the
investment results of any Sub-Account. Your Contract Value allocated to the
Sub-Accounts may increase or decrease. You bear the entire investment risk.
MODIFICATION
We reserve the right to do any or all of the following: (a) combine a
Sub-Account with other Sub-Accounts; (b) combine Separate Account B or a portion
thereof with other separate accounts; (c) de-register Separate Account B under
the Investment Company Act of 1940; (d) operate Separate Account B 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 Exchange Act of 1934 or the Investment Company Act
of 1940; (f) make changes that are necessary to maintain the tax status of the
Annuity under the Internal Revenue Code; and (g) make changes required by any
change in other Federal or state laws relating to immediate annuities; and (h)
discontinue offering any variable investment option at any time.
Also, from time to time, we may make additional Sub-Accounts available to new
Annuity purchasers. These Sub-Accounts will invest in Portfolios we believe to
be suitable for the Annuity. We may or may not make a new Sub-Account available
to invest in any new Portfolio should such a Portfolio be made available to
Separate Account B.
We may eliminate Sub-Accounts, combine two or more Sub-Accounts or substitute
one or more new 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 Annuity. 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,
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, deletion or addition.
We reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of contracts to which your Annuity
belongs, to another separate account. We notify you and any payee of any
modification to the Annuity. We may endorse the Annuity to reflect the change.
<PAGE>
WHAT IS THE LEGAL STRUCTURE OF THE PORTFOLIOS?
Each Portfolio is registered as an open-end management investment company under
the Investment Company Act. Shares of the Portfolios are sold to separate
accounts of life insurance companies offering variable annuity and variable life
insurance products. The shares may also be sold directly to qualified pension
and retirement plans.
VOTING RIGHTS
We are the legal owner of the shares of the Portfolios in which the Sub-Accounts
invest. However, under SEC rules, you have voting rights in relation to Contract
Value maintained in the Sub-Accounts. If a Portfolio requests a vote of
shareholders, we will vote our shares in the manner directed by Owners with
Contract Value allocated to that Sub-Account. Owners have the right to vote an
amount equal to the number of shares attributable to their contracts. If we do
not receive voting instructions in relation to certain shares, we will vote
those shares in the same manner and proportion as the shares for which we have
received instructions. We will furnish those Owners who have Contract Value
allocated to a Sub-Account whose Portfolio has requested a "proxy" vote with the
necessary forms to provide us with their instructions. Generally, you will be
asked to provide instructions for us to vote on matters such as changes in a
fundamental investment strategy, adoption of a new investment advisory
agreement, or matters relating to the structure of the Portfolio that require a
vote of shareholders.
MATERIAL CONFLICTS
It is possible that differences may occur between companies that offer shares of
a Portfolio to their respective separate accounts issuing variable annuities
and/or variable life insurance products. Differences may also occur surrounding
the offering of a Portfolio to variable life insurance policies and variable
annuity contracts that we offer. Under certain circumstances, these differences
could be considered "material conflicts," in which case we would take necessary
action to protect persons with voting rights under our variable annuity
contracts and variable life insurance policies against persons with voting
rights under other insurance companies' variable insurance products. If a
"material conflict" were to arise between owners of variable annuity contracts
and variable life insurance policies issued by us we would take necessary action
to treat such persons equitably in resolving the conflict. "Material conflicts"
could arise due to differences in voting instructions between owners of variable
life insurance and variable annuity contracts of the same or different
companies. We monitor any potential conflicts that may exist.
TRANSFERS, ASSIGNMENTS OR PLEDGES
Generally, vested rights in an Annuity may be transferred, assigned or pledged
for loans at any time. However, these rights may be limited depending on the use
of the Annuity. Generally, transfers, assignments or pledges to another person
or entity may occur at any time prior to the death of the last surviving
Annuitant. We generally will not accept transfers, assignments or pledges after
such death. You must request a transfer or provide us a copy of the assignment
in writing. A transfer or assignment is subject to our acceptance. Prior to
receipt of this notice, 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.
DEFERRAL OF TRANSACTIONS
We may defer payment of proceeds of any distribution before the exercise of the
conversion right for which we have received all our requirements for a period
not to exceed 7 calendar days from the date the transaction is effected. We may
defer any payment from the general account of proceeds of any distribution after
the exercise of the conversion right for a period not to exceed the lesser of 6
months or the period permitted by law.
All procedures, including payment, 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.
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of
American Skandia, Inc., is the distributor and principal underwriter of the
securities offered through this prospectus. ASM acts as the distributor of a
number of annuity and life insurance products we offer and both American Skandia
Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds.
ASM also acts as an introducing broker-dealer through which it receives a
portion of the brokerage commissions incurred in connection with purchases and
sales of securities held by the portfolios of AST offered as underlying
investment options under this Annuity.
ASM's principal business address is One Corporate Drive, Shelton, Connecticut
06484. ASM is registered as broker-dealer under the Securities Exchange Act of
1934 ("Exchange Act") and is a member of the National Association of Securities
Dealers, Inc. ("NASD").
The Annuity is offered on a continuous basis. ASM enters into distribution
agreements with independent broker-dealers who are registered under the Exchange
Act and with entities that may offer the Annuity but are exempt from
registration. Applications for the Annuity are solicited by registered
representatives of those firms. Such representatives will also be our appointed
insurance agents under state insurance law. In addition, ASM may offer the
Annuity directly to potential purchasers.
Compensation is paid to firms on sales of the Annuity according to one or more
schedules. The individual representative will receive a portion of the
compensation, depending on the practice of the firm. Commissions and other
compensation paid in relation to the Annuity do not result in any additional
charge to you or to the Separate Account.
In addition, firms may receive separate compensation or reimbursement for, among
other things, training of sales personnel, marketing or other services they
provide to us or our affiliates. We or ASM may enter into compensation
arrangements with certain firms. These arrangements will not be offered to all
firms and the terms of such arrangements may differ between firms. Any such
compensation will be paid by us or ASM and will not result in any additional
charge to you. To the extent permitted by NASD rules and other applicable laws
and regulations, ASM may pay or allow other promotional incentives or payments
in the form of cash or other compensation.
PERFORMANCE RELATED INFORMATION
We may advertise certain information regarding the performance of the
Sub-Accounts based on SEC standards. Details on how we calculate performance for
the Sub-Accounts are found in the Statement of Additional Information. This
information may help you review the performance of the investment options and
provide a basis for comparison with other annuities. It may be less useful when
comparing the performance of the investment options with other savings or
investment vehicles. Such other investments may not provide some of the benefits
of annuities, or may not be designed for long-term investment purposes.
Additionally other savings or investment vehicles may not be receive the
beneficial tax treatment given to annuities under the Code.
If a Sub-Account advertises its standardized total return, it will usually be
calculated for one year, five years, and then ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
If a Sub-Account advertises non-standard total returns that pre-date the
inception date of the Separate Account, these non-standard total returns are
calculated by assuming that the Sub-Accounts have been in existence for the same
periods as the Portfolios and by taking deductions for all charges equal to
those currently assessed against the Sub-Accounts.
Information regarding performance of the Portfolios may provide a partial basis
for comparison with other annuities. However, when making such a comparison, you
should note whether such other annuities provide guarantees and features similar
to or different from those provided pursuant to the Annuities. Such information
may only be partially useful in comparing Annuities to other products or
investment programs designed to provide periodic income. In making any such
comparisons, you should not only compare features and benefits, but should also
compare risks, charges, tax treatment, and treatment of such vehicles for other
purposes, such as eligibility for governmental assistance programs, bankruptcy,
communal property, etc.
These performance measures may have only limited use when comparing the
performance of the investment options with savings or investment vehicles
designed for accumulation of wealth, rather than for immediate and on-going
income. Such vehicles may not provide some of the benefits of immediate
annuities, or may not be designed for income purposes. Additionally, such
savings or investment vehicles may not be treated like immediate annuities under
the Internal Revenue Code.
Performance information on the investment options 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 investment options, 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 investment options which invest in such Portfolios. In addition,
the amount of charges assessed against each investment option will affect
performance.
Some of the Portfolios existed prior to the inception of these Sub-Accounts.
Performance quoted in advertising regarding such Sub-Accounts may indicate
periods during which the Sub-Accounts have been in existence but prior to the
initial offering of the Annuities, or periods during which the Portfolios have
been in existence, but the Sub-Accounts have not. Such hypothetical performance
is calculated using the same assumptions employed in calculating actual
performance since inception of the Sub-Accounts.
Advertisements we distribute may also compare the performance of our
Sub-Accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
NASDAQ 100, the Shearson Lehman Bond Index, the Frank Russell non-U.S. Universal
Mean, the Morgan Stanley Capital International Index of Europe, Asia and Far
East Funds, and the Morgan Stanley Capital International World Index; and/or (b)
other management investment companies with investment objectives similar to the
mutual fund or portfolio underlying the Sub-Accounts being compared. This may
include the performance ranking assigned by various publications, including but
not limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's,
Business Week, USA Today and statistical services, including but not limited to
Lipper Analytical Services Mutual Funds Survey, Lipper Annuity and Closed End
Survey, the Variable Annuity Research Data Survey, SEI, the Morningstar Mutual
Fund Sourcebook and the Morningstar Variable Annuity/Life Sourcebook.
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 paying fixed
Annuity Payments, guarantee a minimum level of Annuity Payments, or administer
Annuities. Such rankings and ratings do not reflect or relate to the performance
of Separate Account B.
Illustrations: You may be provided a hypothetical illustration of how an Annuity
may perform, based on your age, gender, a proposed Premium, etc. WE DO NOT
GUARANTEE THAT ANY ANNUITY WILL PERFORM AS ILLUSTRATED. Any such illustration is
not valid unless preceded by or accompanied by this Prospectus. No illustration
is valid unless it includes examples of how the Annuity would perform assuming
Net Investment Performance both at a rate of zero and at the Benchmark Rate in
addition to any examples assuming some other interest rate. In addition, no
illustration is valid if it projects hypothetical Net Investment Performance in
the future in excess of 12% per year.
When applicable, an illustration would indicate any joint Owner and the age and
gender of any joint Annuitant. Values may be expressed as a percentage of the
Premium. In addition to the Annuity Payment Amounts, the following values may be
illustrated: Cash Value; alternative taxable income, (the income needed from an
investment taxed at ordinary income rates to which the exclusionary rules of the
Code would not apply to achieve the same after tax income); the effective rate
of return (the yield, assuming payment of the Cash Value as of the date
illustrated); the cumulative return to-date (the total amount paid, assuming
payment of the Lump Sum Alternative as of the date illustrated). Unless
otherwise permitted by law or regulation, performance information is shown based
on an assumed premium, age and gender of an annuitant, an assumed issue date and
annuity date, etc.
Unless the annuity issued exactly matches the assumptions used, performance
information cannot exactly match how an annuity you owned or might have owned
would have performed. Illustrations may be provided on paper, and may be
provided in color. Illustrations may be provided in a format other than on
paper. For example, we may provide illustrations for presentation on a computer
screen or in a video format.
AVAILABLE INFORMATION
A Statement of Additional Information is available from us without charge upon
your request. This Prospectus is part of the registration statement we filed
with the SEC regarding this offering. Additional information on us and this
offering is available in those registration statements and the exhibits thereto.
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 those registration statements and exhibits thereto 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>
HOW TO CONTACT US
You can contact us by:
|X| calling our Customer Service Team at 1-800-752-6342; or
|X| calling our automated telephone access and response system (STARS) at
1-800-766-4530; or
|X| writing to us at American Skandia Life Assurance Corporation, Attention:
Customer Service, P.O. Box 7038, Bridgeport, Connecticut 06601-7038; or
|X| sending an e-mail to [email protected]; or visiting our Internet
Website at www.americanskandia.com
|X| accessing information about your Annuity through our Internet Website at
www.americanskandia.com.
You can obtain account information through our automated telephone access and
response system (STARS) and at www.americanskandia.com, our Internet Website.
Our Customer Service representatives are also available during business hours to
provide you with information about your account. You can request certain
transactions through our telephone voice response system, our Internet Website
or through a customer service representative. You can provide authorization for
a third party, including your attorney-in-fact acting pursuant to a power of
attorney or a financial professional, to access your account information and
perform certain transactions on your account. You will need to complete a form
provided by us which identifies those transactions that you wish to authorize
via telephonic and electronic means and whether you wish to authorize a third
party to perform any such transactions. We require that you or your
representative provide proper identification before performing transactions over
the telephone or through our Internet Website. This may include a Personal
Identification Number (PIN) that will be provided to you upon issue of your
Annuity or you may establish or change your PIN through our automated telephone
access and response system (STARS) and at www.americanskandia.com, our Internet
Website. Any third party that you authorize to perform financial transactions on
your account will be assigned a PIN for your account.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the registrant
has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The following are the contents of the Statement of Additional Information:
General Information Regarding American Skandia Life Assurance Corporation
Principal Underwriter
Calculation of Performance Data
Unit Price Determinations
Independent Auditors
Legal Experts
Financial Statements
<PAGE>
Mailing Addresses:
New Business/Additional Purchase Payments:
American Skandia Life Assurance Corporation
P.O. Box 7040
Bridgeport, CT 06601-7040
Exchange Paperwork:
American Skandia Life Assurance Corporation
P.O. Box 7039
Bridgeport, CT 06601-7039
All other correspondence:
American Skandia Life Assurance Corporation
P.O. Box 7038
Bridgeport, CT 06601-7038
Express/Overnight Mail:
American Skandia Life Assurance Corporation
Three Corporate Drive
Shelton, CT 06484
- --------------------------------------------------------------------------------
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT
CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY
DESCRIBED IN PROSPECTUS VIA-PROS (05/2000).
- -------------------------------------------------------------------------------
-------------------------------------------------------
(print your name)
-------------------------------------------------------
(address)
-------------------------------------------------------
(City/State/Zip Code)
<PAGE>
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
VIA-SAI [05/2000]
STATEMENT OF ADDITIONAL INFORMATION
The Annuities are registered under the Securities Act of 1933 and the Investment
Company Act of 1940. The Annuities are issued by AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION VARIABLE ACCOUNT B (CLASS 7 SUB-ACCOUNTS) or (CLASS 8 SUB-ACCOUNTS)
and AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.
THIS STATEMENT OF ADDITIONAL INFORMATlON IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
ANNUITIES WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE lNVESTING. FOR A COPY OF THE PROSPECTUS SEND A WRITTEN REQUEST TO
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, P.O. BOX 883, SHELTON, CONNECTICUT
06484, OR TELEPHONE 1-800-752-6343.
Prospectus Dated: May 1, 2000
Statement of Additional Information Dated: May 1, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Item Page
General Information Regarding American Skandia Life Assurance Corporation 1
Principal Underwriter 1
Calculation of Performance Data 2
Unit Price Determinations 3
Independent Auditors 3
Legal Experts 3
Financial Statements 3
</TABLE>
GENERAL INFORMATION REGARDING AMERICAN SKANDIA LIFE ASSURANCE CORPORATION:
American Skandia Life Assurance Corporation ("we", "our" or "us") is a
wholly-owned subsidiary of American Skandia, Inc. (formerly known as 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 commenced operations in 1855. Skandia Insurance
Company Ltd. is a major worldwide insurance company operating from Stockholm,
Sweden which owns and controls, directly or through subsidiary companies,
numerous insurance and related companies. We are organized as a Connecticut
stock life insurance company, and are subject to Connecticut law governing
insurance companies. Our mailing address is P.O. Box 883, Shelton, Connecticut
06484.
PRINCIPAL UNDERWRITER: American Skandia Marketing, Incorporated ("ASM, Inc.")
serves as principal underwriter for the Annuities. We, ASM, Inc. and American
Skandia Investment Services, Incorporated ("ASISI"), the investment manager of
the American Skandia Trust, are wholly-owned subsidiaries of American Skandia
Investment Holding Corporation. Most of the Class 7 or Class 8 Sub-Accounts of
Separate Account B invest in portfolios offered by American Skandia Trust. ASM
also acts as an introducing broker-dealer through which it receives a portion of
brokerage commissions in connection with purchases and sales of securities held
by portfolios of American Skandia Trust which are offered as underlying
investment options under the Annuity.
Annuities may be sold by agents of ASM, Inc. or agents of securities brokers or
insurance brokers who enter into agreements with ASM, Inc. and who are legally
qualified under federal and state law to sell the Annuities in those states
where the Annuities are to be offered. The Annuities are offered on a continuous
basis. ASM, Inc. is registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker dealer and is a member of the
National Association of Securities Dealers, Inc. (`NASD"). ASM, Inc. receives no
underwriting commissions.
CALCULATION OF PERFORMANCE DATA:
We provide two types of performance information: (a) the "effective rate of
return", which is the yield of the Annuity; and (b) the cumulative return
to-date.
The performance of an Annuity over time depends on: (a) Net Investment
Performance; (b) the age of the Annuitant at the time the Annuity is issued; (c)
the gender of the Annuitant (unless applicable law or regulation requires that
we ignore gender); (d) the Annuity plan issued, particularly, the applicable
Benchmark Rate and Annuity Factors for such plan; and (e) what lump sum, if any,
is available at the end of the period. In order to provide performance
information, we assume that a hypothetical Annuity was issued at the beginning
of the period to be measured, and that:
(1) The Annuitant was [ ] on the Issue Date;
(2) The Annuitant was male, and that gender affected the Annuity Factors;
(3) A single, specified investment option was used for the entire period
being measured;
(4) The end of the period is the Inheritance Date;
(5) A lump sum is being paid to the Beneficiary as of that date in lieu of
Annuity Payments.
Both the effective rate of return and the cumulative return to-date might be
lower in certain circumstances if the Cash Value was used rather than the lump
sum in lieu of Annuity Payments.
Most of the underlying mutual fund portfolios ("Portfolios") existed prior to
the inception of the Sub-Accounts. In order to give you a basis for analyzing
the performance of the various investment options over as long a time as
possible, we assume the issuance of a hypothetical Annuity investing solely in
the applicable investment option from the date the Portfolio commenced
operations. Therefore, performance quoted in advertising regarding such
Sub-Accounts may indicate periods prior to the initial offering of the
Annuities.
To the extent allowed by law or regulation, as well as the rules of applicable
self-regulatory organizations such as the NASD, we may also provide hypothetical
performance of an Annuity as if a hypothetical Portfolio performed exactly like:
(a) a common market index, such as the Standard & Poor's 500; or (b) a stated
weighted average of such an index with an index of the performance of debt
instruments, such as an index measuring the return of corporate bonds. This
latter method of using a stated weighted average may be particularly helpful if
you are considering utilizing an investment option that expects to maintain
significant portions of its assets in both equity and debt instruments.
Shown on the following page are effective rate of return and cumulative return
to-date figures for the periods shown. The "inception-to-date" figures shown
below are based on the inception date of a Portfolio. Any performance of such
Portfolios prior to inception of a Sub-Account is provided by the Portfolios.
The total return for any Sub-Account reflecting performance prior to such
Sub-Account's inception is based on such information.
Because AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B (CLASS 7
SUB-ACCOUNTS) and (CLASS 8 SUB-ACCOUNTS) are new separate accounts they
currently have no performance. Once they have performance, the performance
quoted in any advertising should not be considered a representation of the
performance of these Sub-Accounts in the future since performance is not fixed.
Net Investment 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. Net Investment Performance will also depend on changes in the
expenses of the Portfolios.
The information provided by these measures may be useful in comparing the
performance of the Sub-Accounts that you may utilize. It may have only a limited
usefulness in comparison with other annuities, given that, as of the date of
this Statement, we were unaware of any annuities structured in a similar
fashion. (To our knowledge, other variable immediate annuities are structured
such that investment performance always directly affects the amount of each
Annuity Payment, not any Inheritance Period.) These measures may be even less
useful in providing a basis for comparison with other investments that neither
provide some of the benefits of the Annuities or the benefits of other variable
immediate annuities.
UNIT PRICE DETERMINATIONS: For each Sub-Account the initial Unit Price is
$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 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 Portfolio at the end of the
preceding 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 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.
We value the assets in each Sub-Account at their fair market value in accordance
with accepted accounting practices and applicable laws and regulations. The net
investment factor may be greater than, equal to, or less than one.
INDEPENDENT AUDITORS: The consolidated financial statements of American Skandia
Life Assurance Corporation at December 31, 1999 and 1998, and for each of the
three years in the period ended December 31, 1999, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
LEGAL EXPERTS: The General Counsel of American Skandia Life Assurance
Corporation has passed on the legal matters with respect to Federal laws and
regulations applicable to the issue and sale of the Annuities and with respect
to Connecticut law.
FINANCIAL STATEMENTS: The financial statements which follow in Appendix A are
those of American Skandia Life Assurance Corporation. Financial Statements for
American Skandia Life Assurance Corporation Separate Account B Class 7 and Class
8 are not provided as the Accounts have not yet begun operations.
To the extent and only to the extent that any statement in a document
incorporated by reference into this Statement of Additional Information is
modified or superseded by a statement in this Statement of Additional
Information or in a later-filed document, such statement is hereby deemed so
modified or superseded and not part of this Statement of Additional Information.
We furnish you without charge a copy of any or all the documents incorporated by
reference in this Statement of Additional Information, including any exhibits to
such documents which have been specifically incorporated by reference. We do so
upon receipt of your written or oral request. Please address your request to
American Skandia Life Assurance Corporation, Attention: Concierge Desk, P.O. Box
883, Shelton, Connecticut, 06484. Our phone number is 1-(800) 752-6342.
<PAGE>
Appendix A
Financial Statements for American Skandia Life Assurance Corporation and
American Skandia Life Assurance Corporation Separate Account B Class 7 and
Class 8
(Financial Statements for American Skandia Life Assurance Corporation
Separate Account B Class 7 and Class 8 are not provided as the Accounts
have not yet begun operations.)
<PAGE>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
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 statements 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, 1999 and 1998,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1999.
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 auditing standards generally accepted
in the United States. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Skandia
Life Assurance Corporation at December 31, 1999 and 1998, and the consolidated
results of their operations and cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
/s/Ernst & Young LLP
Hartford, Connecticut
February 11, 2000,
except for Note 18 as to which the date is March 22, 2000
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Financial Condition
(in thousands)
<TABLE>
<CAPTION>
As of December 31,
1999 1998
--------------- ----------------
ASSETS
Investments:
<S> <C> <C>
Fixed maturities - at amortized cost $ 3,360 $ 8,289
Fixed maturities - at fair value 198,165 141,195
Investment in mutual funds - at fair value 16,404 8,210
Derivative instruments 189 -
Policy loans 1,270 569
-------------- --------------
Total investments 219,388 158,263
Cash and cash equivalents 89,212 77,525
Accrued investment income 4,054 2,880
Deferred acquisition costs 1,087,705 721,507
Reinsurance receivable 4,062 4,191
Receivable from affiliates - 1,161
Income tax receivable - deferred 51,726 38,861
State insurance licenses 4,263 4,413
Fixed assets 3,305 328
Other assets 4,533 3,744
Separate account assets 29,381,166 17,835,400
--------------- ----------------
Total assets $ 30,849,414 $ 18,848,273
=============== ================
</TABLE>
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities:
Reserve for future contractowner benefits $ 11,215 $ 37,508
Policy reserves 29,912 25,545
Drafts outstanding 51,059 28,941
Accounts payable and accrued expenses 158,590 91,827
Income tax payable 24,268 6,657
Payable to affiliates 68,736 -
Future fees payable to parent 576,034 368,978
Short-term borrowing 10,000 10,000
Surplus notes 179,000 193,000
Separate account liabilities 29,381,166 17,835,400
--------------- ----------------
Total Liabilities 30,489,980 18,597,856
--------------- ----------------
Shareholder's equity:
Common stock, $100 and $80 par value, 25,000 shares authorized,
issued and outstanding 2,500 2,000
Additional paid-in capital 215,879 179,889
Retained earnings 141,162 64,993
Accumulated other comprehensive income (107) 3,535
--------------- ----------------
Total Shareholder's equity 359,434 250,417
--------------- ----------------
Total liabilities and shareholder's equity $ 30,849,414 $ 18,848,273
=============== ================
</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
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
-------------- ------------- -------------
REVENUES
<S> <C> <C> <C>
Annuity and life insurance charges and fees $ 289,989 $ 186,211 $ 121,158
Fee income 83,243 50,839 27,593
Net investment income 10,441 11,130 8,181
Premium income 1,278 874 920
Net realized capital gains 578 99 87
Other 1,832 387 75
-------------- ------------- -------------
Total revenues 387,361 249,540 158,014
-------------- ------------- -------------
EXPENSES
Benefits:
Annuity and life insurance benefits 612 558 2,033
Change in annuity and life insurance policy reserves 3,078 1,053 37
Cost of minimum death benefit reinsurance 2,945 5,144 4,545
Return credited to contractowners (1,639) (8,930) (2,018)
-------------- ------------- -------------
4,996 (2,175) 4,597
Expenses:
Underwriting, acquisition and other insurance
expenses 206,350 167,790 90,496
Interest expense 69,502 41,004 24,895
-------------- ------------- -------------
275,852 208,794 115,391
-------------- ------------- -------------
Total benefits and expenses 280,848 206,619 119,988
-------------- ------------- -------------
Income from operations before income tax 106,513 42,921 38,026
Income tax expense 30,344 8,154 10,478
-------------- ------------- -------------
Net income $ 76,169 $ 34,767 $ 27,548
============== ============= =============
</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
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
-------------- -------------- --------------
Common stock:
<S> <C> <C> <C>
Beginning balance $ 2,000 $ 2,000 $ 2,000
Increase in par value 500 - -
-------------- -------------- --------------
Ending balance 2,500 2,000 2,000
-------------- -------------- --------------
Additional paid in capital:
Beginning balance 179,889 151,527 122,250
Transferred to common stock (500) - -
Additional contributions 36,490 28,362 29,277
-------------- -------------- --------------
Ending balance 215,879 179,889 151,527
-------------- -------------- --------------
Retained earnings:
Beginning balance 64,993 30,226 2,678
Net income 76,169 34,767 27,548
-------------- -------------- --------------
Ending balance 141,162 64,993 30,226
-------------- -------------- --------------
Accumulated other comprehensive income:
Beginning balance 3,535 668 (584)
Other comprehensive income (3,642) 2,867 1,252
-------------- -------------- --------------
Ending Balance (107) 3,535 668
-------------- -------------- --------------
Total shareholder's equity $ 359,434 $ 250,417 $ 184,421
============== ============== ==============
</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
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
-------------- ------------- --------------
Cash flow from operating activities:
<S> <C> <C> <C>
Net income $ 76,169 34,767 $ 27,548
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization and depreciation 1,495 251 223
Deferred tax expense (10,903) (14,242) (9,631)
Change in unrealized losses on derivatives 3,749 - -
Increase in policy reserves 4,367 1,130 3,176
Change in receivable from/payable to affiliates 69,897 166 (1,321)
Change in income tax payable 17,611 7,704 (2,172)
Increase in other assets (789) (1,173) (415)
Increase in accrued investment income (1,174) (438) (483)
Decrease/(increase) in reinsurance receivable 129 2,152 (268)
Increase in deferred acquisition costs (366,198) (174,804) (190,969)
Increase in accounts payable and accrued expenses 66,763 20,637 5,719
Increase in drafts outstanding 22,118 9,663 6,245
Change in foreign currency translation, net 701 (22) (34)
Realized capital gain (578) (99) (87)
-------------- ------------- --------------
Net cash used in operating activities (116,643) (114,308) (162,469)
-------------- ------------- --------------
Cash flow from investing activites:
Purchase of fixed maturity investments (99,250) (31,828) (28,905)
Proceeds from sale and maturity of fixed
maturity investments 36,226 4,049 10,755
Purchase of derivatives (4,974) - -
Purchase of shares in mutual funds (17,703) (7,158) (5,595)
Proceeds from sale of shares in mutual funds 14,657 6,086 1,415
Purchase of fixed assets (3,178) (18) (189)
Increase in policy loans (701) 118 (528)
-------------- ------------- --------------
Net cash used in investing activities (74,923) (28,751) (23,047)
-------------- ------------- --------------
Cash flow from financing activities:
Capital contribution from parent 22,490 8,362 29,277
Increase in future fees payable to parent 207,056 135,944 185,922
Net withdrawals from contractowner accounts (26,293) (5,696) 6,959
-------------- ------------- --------------
Net cash provided by financing activities 203,253 138,610 222,158
-------------- ------------- --------------
Net increase/(decrease) in cash and cash
equivalents 11,687 (4,449) 36,642
Cash and cash equivalents at beginning of year 77,525 81,974 45,332
-------------- ------------- --------------
Cash and cash equivalent at end of year $ 89,212 77,525 $ 81,974
============== ============= ==============
Income taxes paid $ 23,637 14,651 $ 22,308
============== ============= ==============
Interest paid $ 69,697 35,588 $ 16,916
============== ============= ==============
</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, 1999
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia, Inc. ("ASI", formerly known as
American Skandia Investment Holding Corporation) whose ultimate parent is
Skandia Insurance Company Ltd., a Swedish Corporation.
The Company develops long-term savings and retirement products which are
distributed through its affiliated broker/dealer company, American Skandia
Marketing, Incorporated ("ASM"). The Company currently issues variable life
insurance and variable, fixed, market value adjusted and immediate annuities
for individuals, groups and qualified pension plans.
The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia
Vida") which is a life insurance company domiciled in Mexico. Skandia Vida
had total shareholder's equity of $4,592,000 and $4,724,000 as of December
31, 1999, and 1998, respectively. The Company considers Mexico an emerging
market and has invested in the Skandia Vida operations with the expectation
of generating profits from long-term savings products in future years. As
such, Skandia Vida has generated net losses of $2,523,000, $2,514,000 and
$1,438,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
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 March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Software Developed or Obtained for Internal Use. The SOP, which has been
adopted prospectively as of January 1, 1999, requires the capitalization
of certain costs incurred in connection with developing or obtaining
internal use software. Prior to the adoption of SOP 98-1, the Company
expensed all internal use software related costs as incurred. The
Company has identified and capitalized $3,035,000 of costs associated
with internal use software during 1999 and is amortizing the applicable
costs on a straight-line basis over a three year period. At December 31,
1999, the unamortized balance was $2,920,000 and is included in fixed
assets.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). Subsequently,
in July 1999, FASB issued FAS 137 "Deferral of the Effective Date of
FASB Statement 133". The adoption date was delayed to fiscal years
beginning after June 15, 2000. The Company is currently evaluating the
potential impact on its financial position.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 other comprehensive income.
The Company has classified its mutual fund investments held in support
of a deferred compensation plan are available-for-sale. Such investments
are carried at fair value and changes in unrealized gains and losses are
reported as a component of other comprehensive income.
Derivative instruments are recorded consistent with hedged items. The
Company hedges the market value fluctuations of the guaranteed minimum
death benefit ("GMDB") exposure embedded in its policy reserves and as
such, the portion of the derivative instrument which constitutes an
effective hedge is carried at market value. The cost associated with the
portion of the instrument which is not considered an effective hedge is
amortized to investment income over the life of the instrument.
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. Derivative Instruments
During the second quarter of 1999, the Company's agreement to reinsure
substantially all of its exposure on its GMDB liability was terminated
and the business was recaptured, as the reinsurer had recently announced
its intention to exit this market. In response, the Company instituted a
hedge program to effectively manage the market risk associated with GMDB
reserve fluctuations using put options. The cash invested in the put
options is at risk to the extent that the value of the underlying index
is less than the strike price at the exercise date. This would be offset
by a corresponding decrease in the hedged GMDB exposure.
E. 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.
F. 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.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
F. Fair Values of Financial Instruments (continued)
Fair values of investments in mutual funds are based on quoted market
prices.
The fair value of the portion of the derivative instrument which
constitutes an effective hedge is determined based on current value of
the underlying index.
The carrying value of cash and cash equivalents approximates fair value
due to the short-term nature of these investments.
The carrying value of short-term borrowing approximates fair value due
to the short-term nature of these liabilities.
Fair values of certain financial instruments, such as future fees
payable to parent and surplus notes are not readily determinable and are
excluded from fair value disclosure requirements.
G. State Insurance Licenses
Licenses to do business in all states have been capitalized and
reflected at the purchase price of $6,000,000 less accumulated
amortization. The cost of the licenses is being amortized on a straight
line basis over 40 years.
H. Income Taxes
The Company is included in the consolidated federal income tax return
and combined state income tax return of an upstream company, Skandia AFS
Development Holding Corporation and certain of its subsidiaries. In
accordance with the tax sharing agreement, the federal and state income
tax provisions are computed on a separate return basis as adjusted for
consolidated items such as net operating loss carryforwards.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
I. Recognition of Revenue and Contract Benefits
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.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
I. Recognition of Revenue and Contract Benefits (continued)
Revenues for market value adjusted fixed annuity contracts consist of
separate account investment income reduced by benefit payments and
changes in reserves in support of contractowner obligations, all of
which are 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 reserve 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 6.25% to 8.25% at December 31, 1999 and 1998.
Revenues for variable life insurance contracts consist of charges
against contractowner account values for mortality and expense risk
fees, cost of insurance fees, taxes and surrender charges. Certain
contracts also include charges against premium to pay state premium
taxes. Benefit reserves for variable life insurance contracts represent
the account value of the contracts and are included in the separate
account liabilities.
J. 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 net of
reinsurance. These costs include commissions, costs 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.
Details of the deferred acquisition costs and related amortization for
the years ended December 31, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $721,507 $546,703 $355,734
-------- -------- --------
Acquisition costs deferred
during the year 450,059 261,432 243,476
Acquisition costs amortized
during the year (83,861) (86,628) (52,507)
--------- -------- --------
366,198 174,804 190,969
------- ------- -------
Balance at end of year $1,087,705 $721,507 $546,703
========== ======== ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
K. Reinsurance
The Company cedes reinsurance under modified co-insurance arrangements.
These reinsurance arrangements provide additional capacity for growth in
supporting the cash flow strain from the Company's variable annuity and
variable life insurance business. The reinsurance is effected under
quota share contracts.
As noted in Note 2D, the Company reinsured its exposure to market
fluctuations associated with its GMDB liability in 1999, 1998 and the
beginning of 1997. Under this reinsurance agreement, the Company ceded
premiums of $2,945,000, $5,144,000 and $4,545,000; received claim
reimbursements of $242,000, $9,000 and $46,000; and, recorded
increases/(decreases) in reserves of ($2,763,000), ($323,000) and
$918,000 in each of the three years, respectively.
At December 31, 1999 and 1998, in accordance with the provisions of a
modified coinsurance agreement, the Company accrued $41,000 and
$1,976,000, respectively, for amounts receivable from favorable
reinsurance experience on a block of variable annuity business.
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 income 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 reported as a
component of other comprehensive income.
M. Separate Accounts
Assets and liabilities in Separate Accounts are included as separate
captions in the consolidated statements of financial condition. Separate
Account assets consist principally of long term bonds, investments in
mutual funds, short-term securities and cash and cash equivalents, all
of which are carried at fair value. The investments are managed
predominately through the Company's investment advisory affiliate,
American Skandia Investment Services, Inc. ("ASISI"), utilizing various
fund managers as sub-advisors. The remaining investments are managed by
independent investment firms. The contractowner has the option of
directing funds to a wide variety of mutual funds. The investment risk
on the variable portion of a contract is borne by the contractowner. A
fixed option with a minimum guaranteed interest rate is also available.
The Company is responsible for the credit risk associated with these
investments.
Included in Separate Account liabilities are $896,205,000 and
$771,195,000 at December 31, 1999 and 1998, respectively, relating to
annuity contracts for which the contractowner is guaranteed a fixed rate
of return. Separate Account assets of $896,205,000 and $771,195,000 at
December 31, 1999 and 1998, respectively, consisting of long term bonds,
short term securities, transfers due from the general account and cash
and cash equivalents which are held in support of these annuity
contracts, pursuant to state regulation.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
N. 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.
3. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, for the years ended
December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income $76,169 $34,767 $27,548
Other comprehensive income:
Unrealized investment gains/(losses) on
available for sale securities (3,082) 2,751 1,288
Reclassification adjustment for realized
losses/(gains) included in investment income (1,016) 138 (14)
------- --------- ---------
Net unrealized gains/(losses) on securities (4,098) 2,889 1,274
Foreign currency translation 456 (22) (22)
--------- ---------- ----------
Other comprehensive income (3,642) 2,867 1,252
--------- -------- --------
Comprehensive income $72,527 $37,634 $28,800
======= ======= =======
</TABLE>
The components of accumulated other comprehensive income, net of tax, as of
December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
---- ----
<S> <C> <C>
Unrealized investment gains ($255) $3,843
Foreign currency translation 148 (308)
------ -------
Accumulated other comprehensive income ($107) $3,535
====== ======
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. 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, 1999 and 1998 are shown below. All
securities held at December 31, 1999 and 1998 were publicly traded.
Investments in fixed maturities as of December 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) Held-to-Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
obligations $1,105 $ - $ (1) $1,104
Corporate securities 2,255 - (15) 2,240
----- ---- ----- -------
Totals $3,360 $ - $(16) $3,344
====== ==== ===== ======
(in thousands) Available-for-Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government
obligations $ 81,183 $ - $ (678) $ 80,505
Obligations of
state and political
subdivisions 253 (3) 250
Corporate securities 121,859 - (4,449) 117,410
--------- ---- ------ ---------
Totals $203,295 $ - $ (5,130) $198,165
======== ==== ========= ========
The amortized cost and fair value of fixed maturities, by contractual
maturity, at December 31, 1999 are shown below.
(in thousands) Held-to-Maturity Available-for-Sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or less $3,107 $3,097 $ - $ -
Due after one through five years 253 247 130,284 128,250
Due after five through ten years - - 73,011 69,915
---------- ---------- ---------- ----------
Total $3,360 $3,344 $203,295 $198,165
====== ====== ======== ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
Investments in fixed maturities as of December 31, 1998 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) Held-to-Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government
obligations $3,774 $57 $- $3,831
Obligations of
state and political
subdivisions - - - -
Corporate
securities 4,515 34 - 4,549
------- ---- --- -------
Totals $8,289 $91 $ - $8,380
====== === === ======
(in thousands) Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government
obligations $ 17,399 $ 678 $ - $ 18,077
Obligations of
state and political
subdivisions 253 7 - 260
Corporate
securities 117,774 5,160 (76) 122,858
--------- ------- ------- ----------
Totals $135,426 $5,845 $ (76) $141,195
======== ====== ====== ========
Proceeds from sales of fixed maturities during 1999, 1998 and 1997 were
$32,196,000, $999,000, and $5,056,000, respectively. Proceeds from
maturities during 1999, 1998 and 1997 were $4,030,000, $3,050,000, and
$5,700,000, respectively.
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
The cost, gross unrealized gains/losses and fair value of investments in
mutual funds at December 31, 1999 and 1998 are shown below:
<TABLE>
<CAPTION>
(in thousands) Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C> <C>
1999 $11,667 $4,763 $ (26) $16,404
======= ====== ====== =======
1998 $8,068 $416 $ (274) $8,210
====== ==== ======= ======
Net realized investment gains (losses) were as follows for the years ended
December 31:
(in thousands) 1999 1998 1997
------ ---- ----
Fixed maturities:
Gross gains $ 253 $ - $ 10
Gross losses (228) (1) -
Investment in mutual funds:
Gross gains 990 281 116
Gross losses (437) (181) (39)
------- ------ ------
Totals $ 578 $ 99 $ 87
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
5. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31, 1999,
1998 and 1997 were as follows:
(in thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $ 9,461 $ 8,534 $6,617
Cash and cash equivalents 2,159 1,717 1,153
Investment in mutual funds 32 1,013 554
Policy loans 31 45 28
Derivative Instruments (1,036) - -
--------- ---------- ---------
Total investment income 10,647 11,309 8,352
Investment expenses 206 179 171
---------- ---------- --------
Net investment income $10,441 $11,130 $8,181
======= ======= ======
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES
The significant components of income tax expense for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current tax expense $41,248 $22,384 $20,108
Deferred tax benefit (10,904) (14,230) (9,630)
-------- -------- ---------
Total income tax expense $30,344 $ 8,154 $10,478
======= ======== =======
</TABLE>
The tax effects of significant items comprising the Company's deferred
tax balance as of December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
---- ----
Deferred tax liabilities:
<S> <C> <C>
Deferred acquisition costs ($321,873) ($210,731)
Payable to reinsurers (26,733) (25,585)
Policy fees (1,146) (859)
Net unrealized gains (80) (2,069)
------------ -----------
Total (349,832) (239,244)
-------- ---------
Deferred tax assets:
Net separate account liabilities 333,521 225,600
Future contractowner benefits 3,925 13,128
Other reserve differences 39,645 25,335
Deferred compensation 18,844 9,619
Surplus notes interest 5,030 3,375
Foreign exchange translation 137 166
Other 456 882
----------- ------------
Total 401,558 278,105
-------- ---------
Income tax receivable - deferred $ 51,726 $ 38,861
========= =========
</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.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (continued)
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>
(in thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income (loss) before taxes
Domestic $109,036 $45,435 $39,464
Foreign (2,523) (2,514) (1,438)
---------- --------- ---------
Total 106,513 42,921 38,026
Income tax rate 35% 35% 35%
--------- --------- ---------
Tax expense at federal
statutory income tax rate 37,280 15,022 13,309
Tax effect of:
Dividend received deduction (9,572) (9,085) (4,585)
Losses of foreign subsidiary 883 880 503
Meals and entertainment 664 487 340
State income taxes 1,071 673 577
Other 18 177 334
--------- -------- -------
Income tax expense $ 30,344 $ 8,154 $10,478
========= ======== =======
</TABLE>
7. 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 ("ASIST"),
an affiliated company; and likewise, the Company has charged operating costs
to ASISI. The total cost to the Company for these items was $11,136,000,
$7,722,000, and $5,572,000 for the years ended December 31, 1999, 1998 and
1997, respectively. Income received for these items was $3,919,000,
$1,355,000 and $3,225,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
The Company had a $10 million short-term loan payable to ASI at December 31,
1999 and 1998. The total interest expense thereon to the Company was
$585,000, $622,000 and $642,000 for the years ended December 31, 1999, 1998
and 1997 respectively, of which $182,000 was payable as of December 31, 1999
and 1998.
Beginning in 1999, the Company was reimbursed by ASM for certain
distribution related costs associated with the sales of business through an
investment firm where ASM serves as an introducing broker dealer. Under this
agreement, the expenses reimbursed in 1999 were $1,441,000. As of December
31,1999, amounts receivable under this agreement were $245,000.
As of December 31,1999, the Company had received $71,000,000 from ASI in
advance of the sale of certain rights to receive future fees and contract
charges. This sale is expected to be completed in the first quarter of 2000.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT
In a series of transactions with ASI, the Company sold certain rights to
receive future fees and contract charges expected to be realized on variable
portions of designated blocks of deferred annuity contracts. The effective
dates and issue periods these transactions cover are as follows:
<TABLE>
<CAPTION>
Closing Effective Contract Issue
Transaction Date Date Period
<S> <C> <C> <C> <C> <C>
1996-1 12/16/96 9/1/96 1/1/94 - 6/30/96
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
1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98
1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98
1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98
1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99
1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99
</TABLE>
In connection with these transactions, ASI 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 ASI
to receive a percentage (80% or 100% depending on the underlying commission
option) 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 to 8 years).
The Company did not sell the right to receive future fees and charges after
the expiration of the surrender charge period.
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 values of the transactions
as of the respective effective date were as follows:
<TABLE>
<CAPTION>
Present
(in thousands) Transaction Discount Rate Value
----------- ------------- -----
<S> <C> <C> <C>
1996-1 7.5% $50,221
1997-1 7.5% 58,767
1997-2 7.5% 77,552
1997-3 7.5% 58,193
1998-1 7.5% 61,180
1998-2 7.0% 68,573
1998-3 7.0% 40,128
1999-1 7.5% 120,632
1999-2 7.5% 145,078
</TABLE>
Payments representing fees and charges in the aggregate amount of
$131,420,000, $69,226,000 and $22,250,000 were made by the Company to
the Parent for the years ended December 31, 1999, 1998 and 1997,
respectively. Related interest expense of $52,840,000, $22,978,000 and
$6,842,000 has been included in the statement of income for the years
ended December 31, 1999, 1998 and 1997, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT (continued)
Expected payments of future fees payable to ASI as of December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Year Ended
(in thousands) December 31, Amount
----------- ------
<S> <C> <C>
2000 $103,975
2001 107,262
2002 106,491
2003 97,550
2004 78,512
2005 51,839
2006 25,712
2007 4,693
---------
Total $576,034
</TABLE>
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.
9. LEASES
The Company leases office space under a lease agreement established in
1989 with ASIST. The lease expense for 1999, 1998 and 1997 was
$5,003,000, $3,588,000 and $2,428,000 respectively. Future minimum
lease payments per year and in aggregate as of December 31, 1999 are as
follows:
(in thousands) 2000 $ 7,004
2001 7,004
2002 6,854
2003 6,756
2004 6,929
2005 and thereafter 51,865
--------
Total $86,412
=======
10. RESTRICTED ASSETS
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 $4,868,000 and
$3,747,000 as of December 31, 1999, and 1998, respectively. These
deposits are required to be maintained for the protection of
contractowners within the individual states.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
11. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
On November 8, 1999, the Board of Directors authorized the Company to
increase the par value of its capital stock from $80 per share to $100
per share in order to comply with minimum capital levels as required by
the California Department of Insurance. This transaction resulted in a
corresponding decrease in paid in and contributed surplus of $500,000
and had no effect on capital and surplus.
Statutory basis shareholder's equity was $286,385,000 and $285,553,000
at December 31, 1999 and 1998, respectively.
The statutory basis net loss was $17,672,000, $13,152,000 and
$8,970,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Under various state insurance laws, the maximum amount of dividends
that can be paid to shareholders without prior approval of the state
insurance department is subject to restrictions relating to statutory
surplus and net gain from operations. At December 31, 1999, no amounts
may be distributed without prior approval.
12. EMPLOYEE BENEFITS
The Company has 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
$3,164,000, $2,115,000 and $1,220,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
The Company has 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 $193,000,
$342,000 and $270,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
The Company and an affiliate cooperatively have a long-term incentive
program under which units are awarded to executive officers and other
personnel. The Company also has a profit sharing program which benefits
all employees below the officer level. These programs consist of
multiple plans with new plans 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 program. The accrued liability representing the value of these
units was $42,619,000 and $21,372,000 as of December 31, 1999 and 1998,
respectively. Payments under this plan were $4,079,000, $2,407,000 and
$1,119,000 for the years ended December 31, 1999, 1998, and 1997,
respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
13. REINSURANCE
The effect of reinsurance for the years ended December 31, 1999, 1998
and 1997 is as follows:
(in thousands) 1999
----
<TABLE>
<CAPTION>
Annuity and Life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
<S> <C> <C> <C>
Gross $326,670 $315 ($1,397)
Ceded (36,681) 2,763 (242)
-------- ------ --------
Net $289,989 $3,078 ($1,639)
======== ====== ========
1998
----
Annuity and Life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
Gross $215,425 $ 691 ($8,921)
Ceded (29,214) 362 (9)
-------- ------ --------
Net $186,211 $1,053 ($8,930)
======== ====== ========
1997
----
Annuity and life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
Gross $144,417 $955 ($1,972)
Ceded (23,259) (918) (46)
-------- ----- --------
Net $121,158 $ 37 ($2,018)
======== ===== ========
</TABLE>
Such ceded reinsurance does not relieve the Company of its obligations
to policyholders. The Company remains liable to its policyholders for
the portion reinsured to the extent that any reinsurer does not meet
its 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)
14. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash.
Surplus notes outstanding as of December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
(in thousands)
Interest for the
Interest 1999 1998 Years Ended December 31,
Issue Date Rate Amount Amount 1999 1998 1997
---------- ---- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
December 29, 1993 6.84% - - - 1,387 1,387
February 18, 1994 7.28% 10,000 10,000 738 738 738
March 28, 1994 7.90% 10,000 10,000 801 801 801
September 30, 1994 9.13% 15,000 15,000 1,389 1,389 1,389
December 28, 1994 9.78% - 14,000 1,308 1,388 1,388
December 19, 1995 7.52% 10,000 10,000 762 762 762
December 20, 1995 7.49% 15,000 15,000 1,139 1,139 1,139
December 22, 1995 7.47% 9,000 9,000 682 682 682
June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,411
December 30, 1996 8.03% 70,000 70,000 5,698 5,699 5,699
Total $179,000 $193,000 $15,928 $17,396 $17,396
======== ======== ======= ======= =======
</TABLE>
The surplus note for $14,000,000 dated December 28, 1994 was converted
to additional paid-in capital on December 10, 1999. A surplus note for
$20,000,000 dated December 29, 1993 was converted to additional paid-in
capital on December 31, 1998. All surplus notes mature seven 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, 1999 and
1998, $14,372,000 and $9,644,000, respectively, of accrued interest on
surplus notes was not approved for payment under these criteria.
15. SHORT-TERM BORROWING
The Company had a $10 million short-term loan payable to the Parent at
December 31, 1999 and 1998. The total interest expense to the Company
was $585,000, $622,000 and $642,000 and for the years ended December
31, 1999, 1998 and 1997, respectively, of which $197,000 and $182,000
was payable as of December 31, 1999 and 1998, respectively.
16. CONTRACT WITHDRAWAL PROVISIONS
Approximately 99% of the Company's separate account liabilities are
subject to discretionary withdrawal by contractowners at market value
or with market value adjustment. Separate account assets which are
carried at fair value are adequate to pay such withdrawals which are
generally subject to surrender charges ranging from 10% to 1% for
contracts held less than 10 years.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
17. SEGMENT REPORTING
During 1998, to complement its annuity products, the Company launched
specific marketing and operational activities towards the release of
variable life insurance and qualified retirement plan annuity products.
Assets under management and sales for the products other than variable
annuities have not been significant enough to warrant full segment
disclosures as required by SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information."
18. SUBSEQUENT EVENT
On March 22, 2000, the Company sold certain rights to receive future
fees and contract charges expected to be received on variable portions
of deferred annuity contracts issued between August 1, 1999 and January
31, 2000. This transaction is the latest in a series of agreements with
ASI, as described in Note 8.
This transaction has an effective date of March 22, 2000. The present
value as of this date, discounted at 7.5%, was $171,781,000.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company on a quarterly basis:
<TABLE>
<CAPTION>
(in thousands) Three months Ended
------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1999
Premiums and other insurance
<S> <C> <C> <C> <C>
revenues $78,412 $88,435 $97,955 $111,540
Net investment income 2,654 2,842 2,735 2,210
Net realized capital gains 295 25 206 52
---------- ----------- ---------- -----------
Total revenues 81,361 91,302 100,896 113,802
Benefits and expenses 64,107 67,803 71,597 77,341
-------- -------- -------- --------
Pre-tax net income 17,254 23,499 29,299 36,461
Income taxes 3,844 7,142 7,898 11,460
--------- --------- --------- -------
Net income $ 13,410 $ 16,357 $ 21,401 $25,001
======== ======== ======== =======
1998
Premiums and other insurance
revenues $50,593 $57,946 $62,445 $67,327
Net investment income 3,262 2,410 2,469 2,989
Net realized capital gains (losses) 156 13 (46) (24)
---------- ----------- ----------- -----------
Total revenues 54,011 60,369 64,868 70,292
Benefits and expenses 46,764 42,220 48,471 69,164
-------- -------- -------- --------
Pre-tax net income 7,247 18,149 16,397 1,128
Income taxes 1,175 4,174 2,223 582
--------- --------- -------- ---------
Net income $ 6,072 $13,975 $14,174 $ 546
======== ======= ======= ========
1997
Premiums and other insurance
revenues $30,186 $34,056 $41,102 $44,402
Net investment income 1,369 2,627 2,031 2,154
Net realized capital gains 20 43 21 3
----------- ----------- ----------- ------------
Total revenues 31,575 36,726 43,154 46,559
Benefits and expenses 18,319 30,465 31,179 40,025
-------- -------- -------- --------
Pre-tax net income 13,256 6,261 11,975 6,534
Income taxes 4,260 2,614 3,354 250
--------- --------- --------- ----------
Net income $ 8,996 $ 3,647 $ 8,621 $ 6,284
======== ======== ======== ========
</TABLE>
<PAGE>
VIA-G (Class 8)
PART C
OTHER INFORMATION
<PAGE>
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits:
<S> <C> <C> <C>
(a) All financial statements are included in Parts A & B of this Registration Statement.
(b) Exhibits are attached as indicated.
(1) Copy of the resolution of the board of directors of Depositor authorizing the establishment of
the Registrant for Separate Account B filed via EDGAR with Post-Effective Amendment No. 6 to
Registration Statement No. 33-87010, filed March 2, 1998.
(2) Not applicable. American Skandia Life Assurance Corporation maintains custody of all assets.
(3) (a) Form of revised Principal Underwriting Agreement
between American Skandia Life Assurance Corporation and
American Skandia Marketing, Incorporated, formerly
known as Skandia Life Equity Sales Corporation filed
via EDGAR with Post-Effective Amendment No. 6 to
Registration Statement No. 33-87010, filed March 2,
1998.
(b) Form of Revised Dealer Agreement filed via EDGAR with
Post-Effective Amendment No. 7 to Registration
Statement No. 33-87010, filed April 24, 1998.
(4) (a) Copy of the Form of Annuity Contract. FILED HEREWITH
(b) Copy of Required Minimum Distribution Endorsement
filed via EDGAR in the Initial Registration Statement
to Registration Statement No. 333-93775, filed
December 29, 1999.
(5) A copy of the application form used with the Annuity. FILED HEREWITH
(6) (a) Copy of the certificate of incorporation of American
Skandia Life Assurance Corporation filed via EDGAR with
Post-Effective Amendment No. 6 to Registration
Statement No. 33-87010, filed March 2, 1998.
(b) Copy of the By-Laws of American Skandia Life Assurance
Corporation filed via EDGAR with Post-Effective
Amendment No. 6 to Registration Statement No. 33-87010,
filed March 2, 1998.
(7) Annuity Reinsurance Agreements between Depositor and:
(a) Transamerica Occidental Life Assurance Company
effective May 1, 1995, filed via EDGAR with
Post-effective Amendment No. 3 to Registration
Statement No. 33-87010, filed April 25, 1996.
(b) PaineWebber Life Insurance Company effective January
1, 1995, filed via EDGAR with Post-effective
Amendment No. 3 to Registration Statement No.
33-87010, filed April 25, 1996.
(c) Connecticut General Life Insurance Company effective
January 1, 1995, filed via EDGAR with Post-effective
Amendment No. 3 to Registration Statement No.
33-87010, filed April 25, 1996.
<PAGE>
(8) Agreements between Depositor and:
(a) American Skandia Trust filed via EDGAR with
Post-Effective Amendment No. 4 to Registration
Statement No. 33-87010, filed February 25, 1997 (At
such time, what later became American Skandia Trust
was known as the Henderson Global Asset Trust).
(b) The Montgomery Funds III filed via EDGAR in the
Initial Registration Statement to Registration
Statement No. 333-08853, filed July 25, 1996.
(c) Rydex Variable Trust filed via EDGAR with
Post-Effective Amendment No. 8 to Registration
Statement 33-87010, filed April 26, 1999.
(d) Evergreen Variable Annuity Trust filed via EDGAR with
Post-Effective Amendment No. 9 to Registration
Statement No. 33-87010.
(e) INVESCO Variable Investment Funds, Inc. filed via
EDGAR with Post-Effective Amendment No. 9 to
Registration Statement No. 33-87010.
(f) ProFunds VP filed via EDGAR with Post-Effective
Amendment No. 9 to Registration Statement No.
33-87010.
(9) Opinion and Consent of Counsel. FILED HEREWITH
(10) Consent of Ernst & Young LLP FILED HEREWITH
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of Performance filed via EDGAR with
Post-effective Amendment No. 12 to Registration Statement No. 33-44436, filed
April 29, 1996.
(14) Financial Data Schedule
</TABLE>
Item 25. Directors and Officers of the Depositor: The Directors and Officers of
the Depositor are as follows:
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.
<TABLE>
<CAPTION>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
<S> <C> <C>
Patricia J. Abram Senior Vice President Senior Vice President
48 and National Sales Manager,
Variable Life:
American Skandia
Marketing, Incorporated
Ms. Abram joined us in 1998. She previously held the position of Senior Vice
President, Chief Marketing Officer with Mutual Service Corporation. Ms. Abram
was employed there since 1982.
Lori Allen Vice President Vice President:
30 American Skandia Life
Assurance Corporation
Kimberly Anderson Vice President Vice President,
33 National Sales Manager/
Qualified Plans:
American Skandia Marketing, Incorporated
Robert M. Arena Vice President Vice President:
31 American Skandia Life
Assurance Corporation
Mr. Arena joined us in 1995. He previously held an internship position with KPMG
Peat Marwick in 1994 and the position of Group Sales Representative with Paul
Revere Insurance from October, 1990 to August, 1993.
Gordon C. Boronow President and President and
47 Deputy Chief Executive Officer Deputy Chief Executive Officer:
Director (since July, 1991) American Skandia Life
Assurance Corporation
Robert W. Brinkman Senior Vice President Senior Vice President,
35 National Sales Manager:
American Skandia
Marketing, Incorporated
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
44 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi Chief Executive Senior Executive Vice President and
55 Officer and Member of Executive Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
Carl Cavaliere Vice President Vice President:
37 American Skandia Life
Assurance Corporation
Mr. Cavaliere joined us in 1998. He previously held the position of Director of
Operations with Aetna, Inc. since 1989.
Y.K. Chan Senior Vice President Senior Vice President
42 and Chief Information Officer:
American Skandia Information
Services and Technology Corporation
Mr. Chan joined us in 1999. He previously held the position of Chief Information
Officer with E.M. Warburg Pincus from January 1995 until April 1999 and the
position of Vice President, Client Server Application Development with Scudder,
Stevens and Clark from January 1991 until January 1995.
Lucinda C. Ciccarello Vice President Vice President, Mutual Funds:
41 American Skandia
Marketing, Incorporated
Ms. Ciccarello joined us in 1997. She previously held the position of Assistant
Vice President with Phoenix Duff & Phelps since 1984.
Lincoln R. Collins Senior Vice President Senior Vice President:
39 Director (since February, 1996) American Skandia Life
Assurance Corporation
Tim Cronin Vice President Vice President:
34 American Skandia Life
Assurance Corporation
Mr. Cronin joined us in 1998. He previously held the position of Manager/Client
Investor with Columbia Circle Investors since 1995.
Henrik Danckwardt Director (since July, 1991) Director of Finance
46 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Harold Darak Vice President Vice President:
39 American Skandia Life
Assurance Corporation
Mr. Darak joined us in 1999. He previously held the position of
Consultant/Senior Manager with Deloitte & Touche since 1998 and the positions of
Second Vice President with The Guardian since 1996 and The Travelers from
October, 1982 until December, 1995.
Wade A. Dokken Deputy Chief Executive Officer DCEO and COO:
40 and Chief Operating Officer American Skandia Life
Director (since July, 1991) Assurance Corporation
Elaine C. Forsyth Vice President Vice President:
38 American Skandia Life
Assurance Corporation
Larisa Gromyko Director, Insurance Compliance Director, Insurance Compliance:
53 American Skandia Life
Assurance Corporation
Maureen Gulick Director, Business Operations Director, Business Operations:
37 American Skandia Life
Assurance Corporation
Berthann Jones Vice President Vice President:
45 American Skandia Life
Assurance Corporation
Ms. Jones joined us in 1997. She previously held the position of Vice
President/Trust Officer with Ridgefield Bank since 1996 and Manager with Wright
Investors Service since 1993.
Ian Kennedy Senior Vice President Senior Vice President,
52 Customer Service:
American Skandia
Marketing, Incorporated
Mr. Ian Kennedy joined us in 1998. He previously was self-employed since 1996
and held the position of Vice President, Customer Service with SunLife of Canada
from September, 1968 to August, 1995.
T. Richard Kennedy General Counsel and General Counsel:
65 Director (since March, 2000) American Skandia Life
Assurance Corporation
Mr. T. Richard Kennedy joined us in 1999. He previously was Managing Partner
with the law firm of Werner & Kennedy.
N. David Kuperstock Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
47 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,
45 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Senior Vice President, Senior Vice President,
38 Treasurer and Treasurer and
Corporate Controller Corporate Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant Vice
President at Allmerica Financial since 1994.
Michael A. Murray Senior Vice President Vice President,
31 National Sales Manager:
American Skandia
Marketing, Incorporated
Brian O'Connor Vice President Vice President,
35 National Sales Manager,
Internal Wholesaling:
American Skandia
Marketing, Incorporated
M. Patricia Paez Vice President Chief of Staff:
39 American Skandia, Inc.
Polly Rae Vice President Vice President:
37 American Skandia Life
Assurance Corporation
Rebecca Ray Vice President Vice President:
44 American Skandia Life
Assurance Corporation
Ms. Ray joined us in 1999. She previously held the position of First Vice
President with Prudential Securities since 1997 and Vice President with Merrill
Lynch since 1995.
Rodney D. Runestad Vice President Vice President:
50 American Skandia Life
Assurance Corporation
Hayward L. Sawyer Senior Vice President Executive Vice President
55 National Sales Manager:
American Skandia
Marketing, Incorporated
Lisa Shambelan Vice President Vice President:
34 American Skandia Life
Assurance Corporation
Karen Stockla Vice President Vice President,
33 Intellectual Resources Department:
American Skandia Life
Assurance Corporation
Ms. Stockla joined us in 1998. She previously held the position of Manager,
Application Development with Citizens Utilities Company since 1996 and HRIS Tech
Support Representative with Yale New Haven Hospital since 1993.
William H. Strong Vice President Vice President:
56 American Skandia Life
Assurance Corporation
Mr. Strong joined us in 1997. He previously held the position of Vice President
with American Financial Systems from June 1994 to October 1997 and the position
of Actuary with Connecticut Mutual Life from June 1965 to June 1994.
Leslie S. Sutherland Vice President Vice President,
46 National Key Accounts Manager:
American Skandia
Marketing, Incorporated
Amanda C. Sutyak Vice President Vice President:
42 Director (since July, 1991) American Skandia Life
Assurance Corporation
Christian A. Thwaites Senior Vice President Senior Vice President,
42 National Marketing Director:
American Skandia
Marketing, Incorporated
Mr. Thwaites joined us in 1996. He previously held the position of consultant
with Monitor Company since October 1995 and Vice President with Aetna, Inc.
since 1995.
<PAGE>
Mary Toumpas Vice President Vice President and
48 Compliance Director:
American Skandia
Marketing, Incorporated
Ms. Toumpas joined us in 1997. She previously held the position of Assistant
Vice President with Chubb Life/Chubb Securities since 1973.
Bayard F. Tracy Senior Vice President and Senior Vice President,
52 Director (since September, 1994) National Sales Manager:
American Skandia
Marketing, Incorporated
Deborah G. Ullman Senior Vice President Senior Vice President and
45 Chief Operating Officer:
American Skandia
Marketing, Incorporated
Ms. Ullman joined us in 1998. She previously held the position of Vice President
with Aetna, Inc. since 1977.
Jeffrey M. Ulness Vice President Vice President:
39 American Skandia Life
Assurance Corporation
Derek Winegard Vice President Vice President:
41 American Skandia Life
Assurance Corporation
Mr. Winegard joined us in 1999. He previously held the position of Senior Vice
President with Trust Consultants, Inc. since 1991.
Brett M. Winson Senior Vice President and Senior Vice President,
44 Director (since March 2000) Intellectual Resource Development
American Skandia, Inc.
Mr. Winson joined us in 1998. He previously held the position of Senior Vice
President with Sakura Bank, Ltd. since 1990.
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant: The Depositor does not directly or indirectly control any person.
The following persons are under common control with the Depositor by American
Skandia Investment Holding Corporation:
(1) American Skandia Information Services and Technology
Corporation ("ASIST"): The organization is a general business
corporation organized in the State of Delaware. Its primary
purpose is to provide various types of business services to
American Skandia, Inc., formerly known as American Skandia
Investment Holding Corporation, and all of its subsidiaries
including computer systems acquisition, development and
maintenance, human resources acquisition, development and
management, accounting and financial reporting services and
general office services.
(2) American Skandia Marketing, Incorporated ("ASM, Inc."): The
organization is a general business corporation organized in
the State of Delaware. It was formed primarily for the purpose
of acting as a broker-dealer in securities. It acts as the
principal "underwriter" of annuity contracts deemed to be
securities, as required by the Securities and Exchange
Commission, which insurance policies are to be issued by
American Skandia Life Assurance Corporation. It provides
securities law supervisory services in relation to the
marketing of those products of American Skandia Life Assurance
Corporation registered as securities. It also may provide such
services in relation to marketing of certain public mutual
funds. It also has the power to carry on a general financial,
securities, distribution, advisory, or investment advisory
business; to act as a general agent or broker for insurance
companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial
efficiency and operation.
(3) American Skandia Investment Services, Incorporated ("ASISI"):
The organization is a general business corporation organized
in the state of Connecticut. The organization is authorized to
provide investment service and investment management advice in
connection with the purchasing, selling, holding or exchanging
of securities or other assets to insurance companies,
insurance-related companies, mutual funds or business trusts.
It's primary role is expected to be as investment manager for
certain mutual funds to be made available primarily through
the variable insurance products of American Skandia Life
Assurance Corporation.
(4) Skandia Vida: This subsidiary of American Skandia Life
Assurance Corporation was organized in March, 1995, and began
operations in July, 1995. It offers investment oriented life
insurance designed for long-term savings products through
independent banks and brokers in Mexico.
Item 27. Number of Contract Owners: Not applicable - new registrant.
Item 28. Indemnification: Under Section 33-320a of the Connecticut General
Statutes, the Depositor must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses including
attorneys' fees, for actions brought or threatened to be brought against him in
his capacity as a director or officer when certain disinterested parties
determine that he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Depositor. In any criminal action or proceeding,
it also must be determined that the director or officer had no reason to believe
his conduct was unlawful. The director or officer must also be indemnified when
he is successful on the merits in the defense of a proceeding or in
circumstances where a court determines that he is fairly and reasonable entitled
to be indemnified, and the court approves the amount. In shareholder derivative
suits, the director or officer must be finally adjudged not to have breached
this duty to the Depositor or a court must determine that he is fairly and
reasonably entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the Registrants'
securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably
entitled to be indemnified and then for such amount as the court shall
determine. The By-Laws of American Skandia Life Assurance Corporation ("ASLAC")
also provide directors and officers with rights of indemnification, consistent
with Connecticut Law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of ASLAC and ASM, Inc. can also be indemnified pursuant
to indemnity agreements between each director and officer and American Skandia,
Inc., a corporation organized under the laws of the state of Delaware. The
provisions of the indemnity agreement are governed by Section 45 of the General
Corporation Law of the State of Delaware.
The directors and officers of ASLAC and ASM, Inc. are covered under a directors
and officers liability insurance policy issued by an unaffiliated insurance
company to Skandia Insurance Company Ltd., their ultimate parent. Such policy
will reimburse ASLAC or ASM, Inc., as applicable, for any payments that it shall
make to directors and officers pursuant to law and, subject to certain
exclusions contained in the policy, will pay any other costs, charges and
expenses, settlements and judgments arising from any proceeding involving any
director or officer of ASLAC or ASM, Inc., as applicable, in his or her past or
present capacity as such.
Registrant hereby undertakes as follows: Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid by a director,
officer or controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, unless in the opinion
of Registrant's counsel the matter has been settled by controlling precedent,
Registrant will submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters:
(a) At present, ASM, Inc. acts as principal underwriter only for annuities to
be issued by ASLAC.
(b) Directors and officers of ASM, Inc.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Business Address Position and Offices with Underwriter
Patricia J. Abram Senior Vice President and National
American Skandia Life Assurance Corporation Sales Manager, Variable Life
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Gordon C. Boronow Deputy Chief Executive Officer
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kimberly A. Bradshaw Vice President, National Sales
American Skandia Life Assurance Corporation Manager/Qualified Plans
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Robert Brinkman Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chairman of the Board
American Skandia Life Assurance Corporation of Directors and
One Corporate Drive, P.O. Box 883 Chief Executive Officer
Shelton, Connecticut 06484-0883
Y.K. Chan Senior Vice President and
American Skandia Life Assurance Corporation Chief Information Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kathleen A. Chapman Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lucinda C. Ciccarello Vice President, Mutual Funds
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President and Deputy Chief
American Skandia Life Assurance Corporation Executive Officer and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
<PAGE>
Ian Kennedy Senior Vice President,
American Skandia Life Assurance Corporation Customer Service
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
T. Richard Kennedy General Counsel
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
N. David Kuperstock Vice President, Product Development
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Thomas M. Mazzaferro Executive Vice President,
American Skandia Life Assurance Corporation Chief Financial Officer
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Eileen S. McCann Vice President,
American Skandia Life Assurance Corporation Key Accounts Marketing
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
David R. Monroe Senior Vice President,
American Skandia Life Assurance Corporation Treasurer and
One Corporate Drive, P.O. Box 883 Corporate Controller
Shelton, Connecticut 06484-0883
Michael A. Murray Vice President,
American Skandia Life Assurance Corporation National Sales Manager/
One Corporate Drive, P.O. Box 883 American Skandia Advisor Funds
Shelton, Connecticut 06484-0883
Brian O'Connor Vice President, National Sales
American Skandia Life Assurance Corporation Manager, Internal Wholesaling
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
M. Priscilla Pannell Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kathleen A. Pritchard Vice President,
American Skandia Life Assurance Corporation National Key Accounts/
One Corporate Drive, P.O. Box 883 Financial Institutions
Shelton, Connecticut 06484-0883
Hayward L. Sawyer Executive Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Anders O. Soderstrom Executive Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Leslie S. Sutherland Vice President,
American Skandia Life Assurance Corporation National Key Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Amanda C. Sutyak Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Christian Thwaites Senior Vice President,
American Skandia Life Assurance Corporation National Marketing Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Mary Toumpas Vice President and
American Skandia Life Assurance Corporation Compliance Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Bayard F. Tracy Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
Deborah G. Ullman Senior Vice President and
American Skandia Life Assurance Corporation Chief Operating Officer,
One Corporate Drive, P.O. Box 883 Finance and Business Operations
Shelton, Connecticut 06484-0883
</TABLE>
Item 30. Location of Accounts and Records: Accounts and records are maintained
by ASLAC at its principal office in Shelton, Connecticut.
Item 31. Management Services: None
Item 32. Undertakings:
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old so long as payments under the annuity contracts may be accepted and
allocated to the Sub-accounts of Separate Account B.
(b) Registrant hereby undertakes to include either (1) as part of any enrollment
form or application to purchase a contract offered by the prospectus, a space
that an applicant or enrollee can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a Statement
of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this form promptly upon written or oral request.
(d) American Skandia Life Assurance Corporation ("Depositor") hereby represents
that the aggregate fees and charges under the annuity contracts are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by the Depositor.
(e) With respect to the restrictions on withdrawals for Texas Optional
Retirement Programs and Section 403(b) plans, we are relying upon: 1) a
no-action letter dated November 28, 1988 from the staff of the Securities and
Exchange Commission to the American Council of Life Insurance with respect to
annuities issued under Section 403(b) of the code, the requirements of which
have been complied with by us; and 2) Rule 6c-7 under the 1940 Act with respect
to annuities made available through the Texas Optional Retirement Program, the
requirements of which have been complied with by us.
<PAGE>
EXHIBITS
As Noted in Item 24(b) various exhibits are incorporate by reference or are not
applicable. The exhibits included are as follows:
No. 4 (a) Copy of the Form of Annuity Contract.
No. 5 A copy of the application form used with the Annuity.
No. 9 Opinion and Consent of Counsel.
No. 10 Consent of Ernst & Young LLP
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this registration statement to be signed on
its behalf, in the Town of Shelton and State of Connecticut, on this 28th day of
April, 2000.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 8 SUB-ACCOUNTS)
Registrant
By: American Skandia Life Assurance Corporation
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature Title Date
(Principal Executive Officer)
Jan R. Carendi* Chief Executive Officer, April 28, 2000
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 28, 2000
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Senior Vice President, Treasurer April 28, 2000
David R. Monroe and Controller
(Board of Directors)
Jan. R. Carendi* Gordon C. Boronow* Malcolm M. Campbell*
Jan. R. Carendi Gordon C. Boronow Malcolm M. Campbell
Henrik Danckwardt* Amanda C. Sutyak* Wade A. Dokken*
Henrik Danckwardt Amanda C. Sutyak Wade A. Dokken
Thomas M. Mazzaferro* Gunnar Moberg* Bayard F. Tracy*
Thomas M. Mazzaferro Gunnar Moberg Bayard F. Tracy
Anders Soderstrom* C. Ake Svensson* Lincoln R. Collins*
Anders Soderstrom C. Ake Svensson Lincoln R. Collins
T. Richard Kennedy** Brett M. Winson**
T. Richard Kennedy Brett M. Winson
</TABLE>
*/**By: /s/Kathleen A. Chapman
Kathleen A. Chapman
*Pursuant to Powers of Attorney filed with Initial
Registration Statement No. 333-38119.
**Pursuant to Power of Attorney filed with Post-Effective Amendment No. 4
to Registration Statement No. 333-25733
1
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AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE, P.O. BOX 883
SHELTON, CONNECTICUT 06484
(A Stock Company)
We pay the first Annuity Payment to the named Payee on the Annuity Date. The
frequency, period and dollar amount of any subsequent payments are determined in
accordance with the terms and conditions of this Annuity.
This contract (the "Annuity") is issued in consideration of any application, a
copy of which may be attached to and made a part of this Annuity, and payment of
the single Premium. This Annuity is subject to the laws of the jurisdiction
where it is delivered.
PLEASE READ THIS CONTRACT CAREFULLY
This is a legal contract between you and us.
RIGHT TO CANCEL
You may return this Annuity to our Office or to the representative who solicited
its purchase for a refund within twenty-one days after you receive it. The
amount of the refund will equal the then current Contract Value as of the date
we receive the cancellation request in good order plus any tax charge deducted
and less an amount equal to any Credits as defined in this Annuity. You bear the
investment risk during this period.
Signed for American Skandia Life Assurance Corporation:
----------------------------------
President
SINGLE PREMIUM VARIABLE ADJUSTABLE IMMEDIATE ANNUITY
NON-PARTICIPATING
ALL INCOME AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE, AND ARE NOT GUARANTEED
AS TO DOLLAR AMOUNT EXCEPT FOR THE GUARANTEED ANNUITY PAYMENT AMOUNT
BEFORE THE INHERITANCE DATE.
<PAGE>
2
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
DEFINITIONS.......................................................................................................5
PREMIUM...........................................................................................................7
NET PREMIUM.......................................................................................................7
ASSET ALLOCATION..................................................................................................7
OPERATIONS OF THE SEPARATE ACCOUNT................................................................................7
GENERAL ACCOUNT...................................................................................................8
CHARGES...........................................................................................................8
ANNUITY FACTORS...................................................................................................8
ANNUITY BENEFITS..................................................................................................9
BASIS OF ANNUITY BENEFITS.........................................................................................9
Contract Value....................................................................................................9
VALUES ON THE ISSUE DATE.........................................................................................10
VALUES AFTER THE ISSUE DATE PRIOR to the INHERITANCE DATE........................................................11
VALUES ON AND AFTER THE INHERITANCE DATE.........................................................................12
aNNUITY PAYMENTS and benefits prior to the annuity date..........................................................12
ANNUITY PAYMENTS AND BENEFITS ON AND AFTER THE ANNUITY DATE......................................................13
PROOF OF SURVIVAL................................................................................................14
PAYMENTS AND RECIPIENTS..........................................................................................14
SURRENDER........................................................................................................14
TRANSFERS........................................................................................................15
YOUR RIGHTS......................................................................................................15
OWNERSHIP........................................................................................................16
DESIGNATIONS.....................................................................................................16
GENERAL PROVISIONS...............................................................................................17
</TABLE>
Copies of any Application and any riders and endorsements are attached.
<PAGE>
3
VIA-G (8/99)-03
SCHEDULE
ANNUITY NUMBER: [00000]
TYPE OF BUSINESS: [NON-QUALIFIED]
ISSUE DATE: [July 1, 1999]
ANNUITY DATE: [August 15, 1999]
OWNER[S]: [JOHN DOE]
[MARY DOE]
ANNUITANT[S]: [JANE DOE] ANNUITANT'S SEX: [FEMALE]
ANNUITANT'S DATE OF BIRTH: [JULY 1, 1934]
ANNUITANT'S AGE AT ISSUE: [65 YEARS 0 MONTHS]
[PAUL DOE] ANNUITANT'S SEX: [MALE]
ANNUITANT'S DATE OF BIRTH: [JULY 1, 1934]
ANNUITANT'S AGE AT ISSUE: [65 YEARS 0 MONTHS]
TRANSFERABILITY: THIS CONTRACT [IS] TRANSFERABLE.
SINGLE PREMIUM: $[100,000] NET PREMIUM: $[99,960]
TAX CHARGE: [X.XX]% ON PREMIUM PAID.
INITIAL INHERITANCE PERIOD: [270.41 MONTHS]
TRIGGER: CASH VALUE AS OF THE ISSUE DATE
GUARANTEED ANNUITY PAYMENT AMOUNT: $[430.92]
MINIMUM PARTIAL SURRENDER AMOUNT: $1,000
MINIMUM CASH VALUE AFTER PARTIAL SURRENDER: $5,000
BENCHMARK RATE: 3.00% PER YEAR COMPOUNDED YEARLY.
INSURANCE CHARGE: 2.25% OF ASSETS IN THE SEPARATE ACCOUNT PER YEAR, DEDUCTED
EACH VALUATION DAY.
CREDIT: [2.00]% OF PREMIUM.
MINIMUM INTEREST RATE CREDITED FOR ANY DELAYED ANNUITY PAYMENTS: 3.00% PER YEAR.
MINIMUM ASSUMED INTEREST RATE FOR CONVERSION: 3.00%
<PAGE>
4
VIA-G (8/99)-04
TRANSFER FEE: $10 FOR EACH TRANSFER AFTER THE TWELFTH TRANSFER IN ANY ANNUITY
YEAR.
SEPARATE ACCOUNT: AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
- CLASS 8 SUB-ACCOUNTS.
OFFICE: [AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE, P.O. BOX 883
SHELTON, CONNECTICUT 06484
TELEPHONE: 1-800-752-6342
www.AmericanSkandia.com ]
-----------------------
<PAGE>
5
VIA-G (8/99)-05
DEFINITIONS
ADJUSTMENT: A change to your Annuity's values that occurs if the Trigger is
exceeded on a Monthly Processing Date.
ANNUITANT: Unless otherwise specified, all persons so designated and upon whose
lives this Annuity is issued, as shown in the Schedule.
ANNUITY DATE: The date Annuity Payments are to begin.
ANNUITY FACTORS: Factors we use to determine the Schedule of Units.
ANNUITY PAYMENT AMOUNT: The dollar amount of each Annuity Payment. The Annuity
Payment Amount can vary each month.
ANNUITY PAYMENTS: The periodic payments due during the life of the Annuitant and
any payments due for the benefit of a Beneficiary after the Annuitant's death.
ANNUITY YEARS: Continuous 12-month periods commencing on the Issue Date and each
anniversary of the Issue Date.
APPLICATION: A form we may require you to submit when you are seeking this
Annuity.
BENCHMARK RATE: An assumed annual rate of return as shown in the Schedule. It is
one of the components used to determine Annuity Factors.
BENEFICIARY: The person(s) or entity(ies) you designate to receive benefits upon
the death of the last surviving Annuitant.
CASH VALUE: The present value of the Schedule of Units over the remaining
Inheritance Period multiplied by the then current Unit Value. The discount rate
used to determine the present value is the Benchmark Rate.
CONTRACT VALUE: The value of each allocation to a Sub-account, plus any
earnings, any Longevity Credits and any Credits and/or less any losses,
distributions, and charges thereon. Contract Value is determined separately for
each Sub-account, and then totaled to determine the Contract Value for your
entire Annuity.
CREDIT: An amount, as shown in the Schedule, we add to your Contract Value at
the time the Net Premium is allocated to a Sub-account. Credits are applied
pro-rata to the Sub-accounts in the same ratio as the Net Premium. Credits are
funded from our general account.
GUARANTEED ANNUITY PAYMENT AMOUNT: The minimum amount payable each Monthly
Processing Date before the Inheritance Date. This amount is reduced
proportionately by any partial surrender.
INHERITANCE DATE: The date we receive, at our Office, due proof satisfactory to
us of the Annuitant's death and all other requirements that enable us to make
payments for the benefit of a Beneficiary. If there are joint Annuitants, the
Inheritance Date refers to the death of the last surviving Annuitant.
INHERITANCE PERIOD: Before the Inheritance Date, the Inheritance Period is a
variable length of time that Annuity Payments are due whether or not the
Annuitant is still alive. After the Inheritance Date, the Inheritance Period, if
any, is a fixed length of time that Annuity Payments are due.
<PAGE>
6
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IN WRITING: In a written form that is satisfactory to us and filed at our
Office. In lieu of such a written communication, we, at our sole discretion, may
agree in advance to communication regarding a specific matter by telephone or by
some other form of electronic transmission in a manner we accept.
ISSUE DATE: The effective date of your Annuity.
LONGEVITY CREDITS: Amounts we credit to the Contract Value on each Monthly
Processing Date while the Annuitant is alive.
MONTHLY PROCESSING DATE: The date each month Annuity Payments are payable. It is
the same day of the month as the Annuity Date.
NET INVESTMENT PERFORMANCE: The performance of the Units in each Sub-account.
NET PREMIUM: The single Premium less any applicable deduction for taxes.
OFFICE: The office shown in the Schedule.
OWNER: Any person(s) or entity(ies) who may exercise the ownership rights
provided pursuant to this Annuity.
PAYEE: Any person(s) or entity(ies) designated to receive Annuity Payments.
Unless otherwise instructed, we assume the Annuitant is the Payee while the
Annuitant is alive. After the Inheritance Date, unless you instruct us
otherwise, the Beneficiary is the Payee.
PREMIUM: The cash consideration you give to us for the rights, privileges, and
benefits provided under this Annuity according to its terms.
SCHEDULE OF UNITS: A schedule which specifies, for each Sub-account, the number
of Units required to fund the Annuity's benefits as of each Monthly Processing
Date. On the Issue Date, the Schedule of Units is based on the portion of
Premium allocated to the Sub-accounts, the Benchmark Rate and Annuity Factors.
After the Issue Date, the Schedule of Units is adjusted should: (a) an
Adjustment occur; (b) you transfer among the Sub-accounts; or (c) you take a
partial surrender.
SEPARATE ACCOUNT: The separate account shown in the Schedule.
SUB-ACCOUNT: A division of the Separate Account. The Sub-accounts are also
referred to as "investment options."
TRIGGER: The measure we use to determine if an Adjustment is required. The
Trigger is shown in the Schedule.
UNIT: The measure used to determine benefits for a given Sub-account.
UNIT VALUE: A measure used to determine the performance of an underlying
Sub-account. It is the value of each Unit as of each Valuation Day. It reflects
the Net Investment Performance.
VALUATION DAY: 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.
<PAGE>
7
VIA-G (8/99)-07
VALUATION PERIOD: The period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"WE", "US", "OUR" OR "THE COMPANY": means American Skandia Life Assurance
Corporation.
"YOU" OR "YOUR": means the Owner.
PREMIUM
You purchase this Annuity with a single Premium. We do not accept additional
Premiums.
NET PREMIUM
You must allocate the Net Premium plus any applicable Credit to each category of
an asset allocation model that we select. The rules for allocation of the Net
Premium and any applicable Credit are the same as those described below for the
allocation of Contract Value pursuant to the asset allocation model.
ASSET ALLOCATION
Your Contract Value must be allocated in accordance with an asset allocation
model we select. We may use a model we develop and maintain or we may elect to
follow a model provided by an independent third party. We may change the model
applicable to your Annuity.
The model will specify a number of categories in which Contract Value must be
allocated. You must complete each category by allocating Contract Value to
Sub-accounts eligible for each separate category. We reserve the right to
require that you use only one eligible Sub-account at a time to complete each
category.
We determine which Sub-accounts are eligible for each category or we may elect
to follow the recommendations of an independent third party. We may at any time
make new determinations as to which Sub-accounts are eligible for each category.
We may do so for a variety reasons including, but not limited to, a change in
the investment objectives or policies of an underlying mutual fund or portfolio,
or failure, in our sole determination, of such mutual fund or portfolio to
invest in accordance with its stated investment objective or policies. We will
give you not less than 30 days notice if we determine that a Sub-account that
was eligible for a particular category will no longer be eligible for that
category.
You may transfer Contract Value maintained in a category to other eligible
Sub-accounts for that category, subject to the transfer provisions of this
Annuity.
At the beginning of each calendar quarter, we rebalance the Contract Value among
categories using the then current percentages of the asset allocation model. We
expect that the current percentages for each category may change from time to
time. Any change in the current percentages will become effective not later than
the regularly scheduled rebalancing of Contract Value occurring on or
immediately after the date of the change.
OPERATIONS OF THE SEPARATE ACCOUNT
Assets supporting the various benefits of this Annuity are held in the Separate
Account. The Separate Account consists of multiple Sub-accounts. This Separate
Account was established by us pursuant to the laws of the State of Connecticut.
<PAGE>
8
VIA-G (8/99)-08
We are the legal owner of the assets in the Separate Account. Income, gains and
losses, whether or not realized, from assets allocated to the Separate Account
are credited to or charged against such Separate Account in accordance with the
terms of the annuities supported by such assets without regard to our other
income, gains or losses or to the income, gain 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 annuity obligations supported by such assets. These
assets may be charged only with liabilities which arise from such annuities. The
investments made by the Separate Account are subject to the requirements of
applicable state laws.
The amount of our obligations in relation to allocations to the Sub-accounts are
based on the investment performance of such Sub-accounts. However, the
obligations themselves are our general corporate obligations.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (the "1940 Act") as a unit
investment trust, which is a type of investment company. Although this does
involve supervision by the SEC of the investment policies, management or
practices of the Separate Account such supervision should not affect the
operation of the Separate Account.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. Values and benefits based on allocations to the
Sub-accounts vary with the investment performance of the underlying mutual funds
or fund portfolios, as applicable. We do not guarantee the investment results of
any Sub-accounts. You bear the entire investment risk.
GENERAL ACCOUNT
We maintain assets in our general account to support obligations we may have in
relation to this Annuity for which assets are not maintained in the Separate
Account.
CHARGES
Insurance Charge: We assess a charge each Valuation Day against each
Sub-account. The charge is a percentage of the average daily total value of each
Sub-account, as indicated in the Schedule.
Tax Charges: Any tax charge is deducted from your Premium. The percentage rate
applicable is shown in the Schedule. We also reserve the right to assess a
charge against the Sub-accounts equal to any taxes which may be imposed upon the
Sub-accounts.
Transfer Fee: We charge a fee for transfers among Sub-accounts as shown in the
Schedule.
ANNUITY FACTORS
Annuity Factors are used in calculating the Schedule of Units. The Annuity
Factors depend on the Benchmark Rate, the Inheritance Period, the Annuitant's
attained age and, where permitted by law, gender. The Annuity Factors reflect
assumptions regarding the costs we expect to bear in guaranteeing payments for
the lives of Annuitants. We may use different Annuity Factors for different
classes of Annuities.
<PAGE>
9
VIA-G (8/99)-09
ANNUITY BENEFITS
This Annuity provides three benefits: (1) Annuity Payments for life of the
Annuitant(s); (2) a guarantee that, while the Annuitant is alive, the Annuity
Payment Amount will not be less than the Guaranteed Annuity Payment Amount; and
(3) a guarantee that Annuity Payments are payable during any remaining
Inheritance Period as of the Inheritance Date, even though no Annuitant is
living. The Guaranteed Annuity Payment Amount as of the Issue Date is shown in
the Schedule.
The Inheritance Period is variable and may increase or decrease. The Inheritance
Period cannot be less than zero.
Prior to the Inheritance Date, and while the Inheritance Period is greater than
zero, Annuity Payments cannot decrease. If an Adjustment of benefits is
triggered, the following month's Annuity Payment will increase. If the
Inheritance Period is zero, the following month's Annuity Payments may decrease,
but will not be less than the Guaranteed Annuity Payment Amount. All Premium and
distributions under this Annuity are paid in U.S. currency.
BASIS OF ANNUITY BENEFITS
The Net Premium plus any applicable Credit is allocated to purchase Units in the
investment options. We calculate a Schedule of Units, which for each investment
option, specifies the number of Units required to fund benefits on each Monthly
Processing Date. The Units in the Schedule of Units decrease each month at the
Benchmark Rate. Therefore, if the Net Investment Performance were equal to the
Benchmark Rate, the product of each month's Units multiplied by Unit Value would
remain constant.
We deliver to you a Schedule of Units upon: (a) allocation of the Net Premium;
(b) any transfer among investment options; (c) any Adjustment; and (d) any
partial surrender. The Schedule of Units reflects the number of Units for the
next Monthly Processing Date. On each Monthly Processing Date, the number of
scheduled Units from any investment option can be determined using the following
formula:
The number of Units then scheduled equals the number of Units on
the immediately preceding Monthly Processing Date divided by (1 +
Benchmark Rate)1/12
The number of Units scheduled to fund the next month's Annuity Payment and the
actual Units used to fund the Annuity Payment may differ. This difference is
reflected in the Annuity's Contract Value, Cash Value and Inheritance Period.
While an Annuitant is alive, we add Longevity Credits to your Contract Value on
each Monthly Processing Date. These are amounts we fund from our general
account. Longevity Credits reflect expected mortality of annuitants. The amount
of Longevity Credits added on each Monthly Processing Date depends on the
difference between the then current Contract Value and the then current Cash
Value, the attained age, and where permitted, gender of the Annuitant.
The commitment to calculate benefits in accordance with the Schedule of Units,
combined with both the allocation of Longevity Credits and any credits to
Contract Value required to meet our obligation to pay not less than the
Guaranteed Annuity Payment Amount, guarantees that there will be adequate Units
to fund the benefits.
CONTRACT VALUE
We determine your Contract Value separately for each Sub-account. To determine
the Contract Value in each Sub-account we multiply the Unit Value as of the
Valuation Period for which the calculation is being made by the number of Units
attributable to your Annuity in that Sub-account as of that Valuation Period.
<PAGE>
10
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Units: The number of Units attributable to the Contract Value of this Annuity in
a Sub-account is the number of Units you purchased plus the number added as
Longevity Credits less the number transferred, redeemed to fund Annuity Payments
or surrendered. We determine the number of Units involved in any transaction
specified in dollars by dividing the dollar value of the transaction by the Unit
Price of the affected Sub-account as of the Valuation Period applicable to such
transaction.
Unit Price: For each Sub-account the initial Unit Price was $10.00. The Unit
Price for each subsequent period is the net investment factor for that period,
multiplied by the Unit Price for the immediately preceding Valuation Period. The
Unit Price for a Valuation Period applies to each day in the period.
Net Investment Factor: A net investment factor is determined for each
Sub-account and each Valuation Period. The net investment factor is an index
that measures the investment performance of and charges assessed against a
Sub-account from one Valuation Period to the next. The net investment factor for
a Valuation Period is (a) divided by (b), less (c); where:
(a) is the net result of :
(1) the net asset value per share of the underlying mutual
fund shares held in the Sub-account 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 underlying mutual fund; plus or
minus
(2) any per share charge or credit during the Valuation
Period as a provision for taxes attributable to the
operation or maintenance of the Sub-account.
(b) is the net result of :
(1) the net asset value per share of the underlying mutual
fund shares held in the Sub-account at the end of the
preceding Valuation Period plus the per share amount of
any dividend or capital gain distribution declared and
unpaid (accrued) by the underlying mutual fund; plus or
minus
(2) 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.
(c) is the insurance charge.
We value the assets in the Sub-accounts at their fair market value in accordance
with accepted accounting practices and applicable laws and regulations. The net
investment factor may be greater than, equal to, or less than one.
VALUES ON THE ISSUE DATE
On the Issue Date we determine the initial value for each of the Annuity's
benefits and various measures, as follows:
1. Units: We allocate your Net Premium and any applicable Credit to the
investment options to purchase Units at the Unit Value as of the close of
business on the Issue Date for each applicable Sub-account.
2. Contract Value: The initial Contract Value equals the Net Premium plus any
Credit.
3. Inheritance Period: We determine the initial Inheritance Period based on
the age and, where permitted, gender of the
Annuitant(s).
4. Schedule of Units: We calculate an initial Schedule of Units based on the
number of Units purchased for each Sub-account, the Benchmark Rate and the
applicable Annuity Factor.
<PAGE>
11 VIA-G (8/99)-11
5. Cash Value: The present value of the Schedule of Units over the remaining
Inheritance Period multiplied by the then current Unit Values. The Cash
Value is always less than the Contract Value.
6. Annuity Date: The date of the first Annuity Payment. You may not change the
Annuity Date.
7. Annuity Payment Amount: The initial Annuity Payment Amount is equal to the
number of Units scheduled to be paid under the Schedule of Units multiplied
by the Unit Value.
8. Trigger: The Trigger as of the Issue Date is shown in the Schedule.
VALUES AFTER THE ISSUE DATE PRIOR TO THE INHERITANCE DATE
After the Issue Date, the value of certain benefits and measures may change,
either every Valuation Period or on each Monthly Processing Date.
Values that may change each Valuation Period: Each Valuation Period the values
of the following measures may change.
1. Units: The number of Units in each investment option may change if you
transfer between investment options.
2. Unit Value: The Unit Value may increase or decrease each Valuation Period
to reflect Net Investment Performance.
3. Contract Value: The Contract Value may increase or decrease each Valuation
Period as a result of the changes in Unit Value.
4. Schedule of Units: If you transfer between investment options, we
recalculate the Schedule of Units for the affected investment options.
5. Cash Value: The Cash Value may increase or decrease each Valuation Period
as a result of the changes in Unit Value.
Values that may change on a Monthly Processing Date: On each Monthly Processing
Date the values of the following measures may change.
1. Contract Value: On each Monthly Processing Date, the Contract Value is
reduced by the Annuity Payment Amount, except for any amount taken from the
general account that is used to fund any portion of the Guaranteed Minimum
Payment Amount, and any pro-rata reduction due to a partial surrender based
on the portion of Cash Value surrendered. The Contract Value is increased
by the amount of Longevity Credits due.
2. Inheritance Period, Cash Value and Annuity Payment Amount: On each Monthly
Processing Date, we first determine preliminary values for the Inheritance
Period, Cash Value and Annuity Payment Amount. The preliminary values are
determined as follows:
a) Inheritance Period: The Inheritance Period is first reduced by
one month and then increased or decreased to reflect the
difference between the value of the Units redeemed to fund the
Annuity Payment and the value of the Units in the Schedule of
Units.
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12
VIA-G (8/99)-12
b) Cash Value: The Cash Value is determined by the new Inheritance
Period and the current Unit Values.
c) Annuity Payment Amount: The Annuity Payment Amount calculated as
of the previous Monthly Processing Date.
We then determine if the Trigger has been exceeded and make any
necessary Adjustment to the preliminary values.
a) If the Trigger has not been exceeded and the Inheritance Period
is greater than zero, no Adjustment is required. The preliminary
values become the current values.
b) If the Trigger has not been exceeded and the Inheritance Period
is equal to zero, then the preliminary values for the Inheritance
Period and for the Cash Value become the current values. The next
Annuity Payment Amount is set equal to the greater of the number
of Units scheduled to be paid under the Schedule of Units
multiplied by the current Unit Values and the Guaranteed Annuity
Payment Amount.
c) If the Trigger has been exceeded, we perform an Adjustment,
whereby we set the Cash Value equal to the Trigger, decrease the
Inheritance Period, revise each Schedule of Units, and increase
the next Annuity Payment Amount. The Adjustment does not change
the Contract Value.
VALUES ON AND AFTER THE INHERITANCE DATE
As of the Inheritance Date, the Inheritance Period no longer is variable - it is
fixed and subsequently decreases by one month on each Monthly Processing Date.
The amount of each Annuity Payment will be determined on the date due, not one
month in advance. Annuity Payments will equal the sum over all Sub-accounts of
the Units from the Schedule of Units multiplied by the corresponding Unit Value
for each Monthly Processing Date. If the Inheritance Period is between zero and
one month, the payment for that month will equal the amount determined above
multiplied by the fractional Inheritance Period. Once the Inheritance Period is
equal to zero, the Annuity terminates.
ANNUITY PAYMENTS AND BENEFITS PRIOR TO THE ANNUITY DATE
No Annuity Payments are due prior to the Annuity Date.
If the Owner dies prior to the Annuity Date: If the Owner dies prior to the
Annuity Date, the Annuity will end and the Cash Value is payable as settlement
to the Beneficiary(ies) upon our receipt of all our requirements to make
settlement. If the Owner's spouse is also an Owner or is the designated and sole
Beneficiary, then he/she may elect to continue the Annuity or he/she may elect
to terminate the Annuity and receive the Cash Value.
If the Annuitant dies prior to the Annuity Date: If an Annuitant dies prior to
the Annuity Date, the Annuity will end and the Cash Value is payable as
settlement to the Beneficiary(ies) upon our receipt of all our requirements to
make settlement. This provision will apply upon the death of any Annuitant
unless this Annuity qualifies for one of the exceptions under Section 72 (s)(5)
of the Internal Revenue Code, as amended.
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VIA-G (8/99)-13
In order to make settlement upon the death of an Owner or Annuitant, as
described above, we must receive all of the following: (a) due proof
satisfactory to us In Writing of the death; (b) the Annuity; and (c) all
representations, In Writing, that we require or which are mandated by applicable
law or regulation in relation to making settlement payment, including any
required representations in relation to tax withholding.
The Cash Value is payable within five years of the date of the Owner's or
Annuitant's death or as an annuity over the life or life expectancy of the
Beneficiary, if such annuity payments begin within one year of the Owner's or
Annuitant's death.
ANNUITY PAYMENTS AND BENEFITS ON AND AFTER THE ANNUITY DATE
An Annuity Payment is payable on the Annuity Date and each subsequent Monthly
Processing Date while Annuity Payments are due. The amount payable on the
Annuity Date is determined on the Issue Date. The amount of all other Annuity
Payments before the Inheritance Date are determined on the Monthly Processing
Date immediately preceding the payment date. Annuity Payments on and after the
Inheritance Date are determined as of the Monthly Processing Date such Annuity
Payments are due. We redeem Units pro-rata from the investment options to make
Annuity Payments in proportion to the Units in the Schedule of Units as of the
date an Annuity Payment is due. Annuity Payments are due while the Annuitant is
alive and during any Inheritance Period remaining following the Inheritance
Date.
Conversion to Fixed Annuity Payments: After the second Annuity Year and before
the Inheritance Date, you can lock in level Annuity Payment Amounts by
converting to fixed Annuity Payments on a Monthly Processing Date. However, the
level Annuity Payment Amounts could be more or less than your Annuity Payment
Amount prior to this conversion. The Inheritance Period, if any, as of the
effective date of the conversion will be fixed and subsequently reduces by one
month each month. The fixed Annuity Payment Amount is calculated based on your
then Contract Value, Inheritance Period, the attained age, and where permitted,
gender of the Annuitant. It includes interest of not less than the minimum
assumed interest rate for conversion shown in the Schedule. There is no Cash
Value after conversion.
Requirements for Annuity Payments Payable to a Payee: Annuity Payments before
the Inheritance Date are payable to the Payee each month on the Monthly
Processing Date.
Requirements for Annuity Payments Payable to a Beneficiary: No amounts are
payable to a Beneficiary until the death of the last surviving Annuitant. If the
last surviving Annuitant dies and there is a non-zero Inheritance Period as of
every Monthly Processing Date between the date of death and the Inheritance
Date, the Beneficiary is eligible to receive the Annuity Payments due for the
rest of the Inheritance Period. The Inheritance Period, if any, as of the
Inheritance Date will be fixed and subsequently reduces by one month each month.
In order to make Annuity Payments payable to a Beneficiary, we must receive at
our Office: (a) your election of Annuity Payments prior to the Inheritance Date
or, if no election was made, election of Annuity Payments by a Beneficiary; (b)
due proof satisfactory to us In Writing of the death of all Annuitants; (c) the
Annuity; and (d) all representations, In Writing, that we require or which are
mandated by applicable law or regulation in relation to making payments for the
Beneficiary, including any required in relation to tax withholding.
Lump Sum in Lieu of Annuity Payments to the Beneficiary: If there is an
Inheritance Period remaining as of the Inheritance Date, the Annuity Payments
payable to a Beneficiary may be commuted by the Beneficiary to a lump sum
payment if before the Inheritance Date you did not elect, In Writing, to
prohibit commutation. All requirements that would otherwise apply for Annuity
Payments payable for the benefit of the Beneficiary will apply before we pay a
lump sum as an alternative.
The lump sum is the Cash Value as of the Inheritance Date.
<PAGE>
14
VIA-G (8/99)-14
PROOF OF SURVIVAL
The payment of any Annuity Payment while the Annuitant is alive is subject to
evidence satisfactory to us that the Annuitant is alive. The payment of any
Annuity Payment for a Beneficiary is subject to evidence satisfactory to us that
the Beneficiary is alive.
Starting with the Annuity Payment due immediately after the date we require
submission of such evidence, we may withhold Annuity Payments until we receive
such evidence or until we receive In Writing due proof satisfactory to us of the
Annuitant's or Beneficiary's death, as applicable. Such withheld Annuity
Payments will be maintained in our general account. We credit the interest rate
shown in the Schedule on any withheld Annuity Payment unless otherwise required
by law. Should we subsequently receive the applicable requirements, we pay any
withheld Annuity Payments plus any interest credited in a lump sum for the
benefit of the applicable Payee.
PAYMENTS AND RECIPIENTS
The recipient of any payment must provide us with either an account at a
financial institution to which we may forward such payments or an address to
which a check may be sent. Subject to our rules, we may, as a convenience, send
a payment for an Annuitant, Owner or Beneficiary to an account for the benefit
of an alternate person or entity. We must receive the request to send payments
to such alternate person or entity In Writing from the then current Owner.
Unless you instruct us otherwise, we pay Annuity Payments to the Annuitant first
designated on the Application. We pay any Cash Value upon surrender to the
Owner(s) unless you instruct us otherwise.
Split Annuity Payments: Before the Inheritance Date, we will split Annuity
Payments among all Payees if so requested In Writing. Such splits of Annuity
Payments can be terminated by the Owner by informing us In Writing. We reserve
the right to limit the number of Payees.
Any amounts due on or after the Inheritance Date will be split among accounts
for any named Beneficiaries in accordance with the Beneficiary designation. We
will pay in a lump sum and our liability under the Annuity will terminate if no
other election is received by us at our Office before the Inheritance Date.
Within 90 days after we receive all other requirements for a claim and in our
sole discretion, we will make a determination that no agreement can be reached
as to payment election.
Recovery of Excess Annuity Payments: We may recover an amount equal to any
Annuity Payments made on or after the Monthly Processing Date when the
Inheritance Period was zero after the death of the last surviving Annuitant. We
may seek payment from the Owner or look to any other assets of such Owner, as
permitted by law, to recover such amounts if not recoverable from the Payee.
SURRENDER
Full Surrender: You may surrender your Annuity for an amount equal to its Cash
Value, if any, at any time after the Right to Cancel period, as long as the
Annuitant is alive. The Cash Value is determined as of the Valuation Day we
receive our requirements for a full surrender. We require evidence satisfactory
to us that the Annuitant is alive.
In order to process a full surrender, we must receive at our Office all of the
following: (a) your request In Writing; (b) the Annuity; (c) proof the Annuitant
is alive; (d) any necessary representations In Writing regarding tax
withholding; and (e) any other representations we require.
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VIA-G (8/99)-15
Partial Surrender: You may surrender part of your Annuity on a Monthly
Processing Date for an amount not greater than 50% of its then current Cash
Value nor less than the minimum partial surrender amount, shown in the Schedule.
The Cash Value that must remain in the Annuity as of the date of this
transaction is as shown in the Schedule. You may do so at any time after the
Right to Cancel period, as long as the Annuitant is alive. The Cash Value is
determined as of the Valuation Day we receive our requirements for a partial
surrender. We require evidence satisfactory to us that the Annuitant is alive.
Payment of a partial surrender will reduce all Annuity benefits and measures,
other than the Inheritance Period, on a pro-rata basis.
We must receive at our Office: (a) your request In Writing; (b) proof the
Annuitant is alive; (c) any necessary representations In Writing regarding tax
withholding; and (d) any other representations we require.
TRANSFERS
Persons or entities with ownership rights may transfer Contract Value among
Sub-accounts, subject to our allocation rules. The number of Units and the
Schedule of Units may change. The number of Units redeemed and purchased will be
calculated based on the then current Unit Value for the Sub-account(s) selected.
The number of Units in any Sub-account not involved in a transfer will not be
affected by such transfer.
We reserve the right to require that transfer requests be In Writing. The
transfer is effective as of the date our transfer requirements are satisfied.
All transfers on the same day are treated as a single transfer.
We may accept your authorization of a third party to make eligible transfers
within the asset allocation model categories on your behalf. We may suspend or
cancel this acceptance at any time. We give you prior notification of any such
suspension or cancellation. We may restrict the investment options that will be
available to you during any period in which you authorize such third party to
act on your behalf. We give the third party you authorize prior notification of
any such restrictions. However, we will not enforce such a restriction if we are
provided evidence satisfactory to us that: (a) such third party has been
appointed by a court of competent jurisdiction to act on your behalf; or (b)
such third party has been appointed by you to act on your behalf for all your
financial affairs.
We allow at least 12 transfers within the asset allocation model categories each
Annuity Year. We reserve the right to limit the number of transfers in any
Annuity Year or to refuse any transfer request if we believe that: (a) excessive
trading may have a detrimental effect on Unit Values or the share prices of the
underlying mutual funds; or (b) we are informed by one or more of the underlying
mutual funds 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 share prices of affected underlying
mutual funds.
YOUR RIGHTS
You may exercise the rights, options and privileges granted in this Annuity or
permitted by us once this Annuity is issued, which include, but are not limited
to, the following. You may change revocable designations. You may transfer or
assign this Annuity. Voting rights may be exercised in relation to the
applicable Sub-accounts in which you have chosen to invest. Your rights are
subject to the rights of any assignee recorded by us and of any irrevocably
designated Beneficiary.
<PAGE>
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VIA-G (8/99)-16
OWNERSHIP
Owner: We assume the Annuitant is the Owner, unless we are otherwise notified In
Writing before we issue the Annuity. If there are joint Annuitants, we assume
each Annuitant is an Owner unless otherwise notified In Writing. You may name
more than one Owner. If you do, all rights reserved to Owners are then held
jointly. We require the consent In Writing of all Owners for any transaction for
which we require the written consent of Owners. If an Owner who is a natural
person dies, all rights vest equally in the surviving Owners. If there are no
surviving Owners, all rights vest equally in the contingent Owners.
Contingent Owner: You may name a contingent Owner. You may name more than one
contingent Owner. If you name more than one contingent Owner, ownership rights
pass as follows, unless you have requested otherwise In Writing: first
contingent Owners, then second contingent Owners. If all Owners of a given class
are not living, ownership rights pass to those designated contingent Owners of
the next class then living, if any. Multiple Owners of a given class are deemed
to be Owners.
Any revocable contingent Owner may be changed by you. The change request must be
In Writing. The change takes effect on the date you sign the request, but does
not apply to any proceeds we pay or any transactions we process before we
receive your request.
All ownership rights pass to the Beneficiary as of the Inheritance Date unless
you instruct us prior to that time that ownership should remain with any then
surviving Owner. If ownership rights vest in a Beneficiary and if there is no
prior irrevocable contingent Beneficiary designation, such Beneficiary may name
a person or entity to receive any remaining Annuity Payments yet to be paid
subsequent to such Beneficiary's death. Similar rights and rules apply if any
person on whose behalf Annuity Payments are payable after the Beneficiary's
death dies while there are remaining Annuity Payments due.
If ownership rights do not pass as discussed above to another Owner, a
contingent Owner, a Beneficiary, contingent Beneficiary or person named by a
Beneficiary to take over ownership rights in case of the Beneficiary's death,
then ownership rights pass as provided by law upon the occurrence of: (a) death,
if the last person holding ownership rights is a natural person; (b) the
dissolution of any entity with ownership rights, if such entity is a corporation
or partnership; or (c) if ownership rights are held by a trust, custodial
account or person acting as a court-appointed legal representative of another,
the resignation or death of such a trustee, custodian or legal representative,
or the determination by a court of competent jurisdiction that such a trustee,
custodian or legal representative no longer may fill such role.
DESIGNATIONS
Any designations you make and any changes to such designations are subject to
our rules and to applicable regulatory or statutory requirements. Where required
by law, we require the consent In Writing of the spouse of any person with a
vested interest in this Annuity before processing a transaction requiring such
person's written consent.
Annuitant: You must name an Annuitant. The Annuitant designation cannot be
changed once an Annuity is issued.
Beneficiary and Contingent Beneficiary: You may name more than one primary and
more than one contingent Beneficiary. If you do, the proceeds will be payable in
equal shares for the survivors in the appropriate beneficiary class, unless you
have requested otherwise In Writing and we have accepted such designation.
Should you wish, you may provide instructions that cannot be changed by the
Beneficiary as to whether any payments for a Beneficiary must be payable as
Annuity Payments or as a lump sum. We must receive such instructions In Writing
before the Inheritance Date.
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VIA-G (8/99)-17
Unless you notify us otherwise, if no Beneficiary is alive as of the Inheritance
Date or in the absence of any Beneficiary designation, amounts then payable will
vest in you or your estate. If Annuity Payments are payable for a Beneficiary
and no contingent Beneficiary has been named, then such Annuity Payments vest in
the Beneficiary's estate.
Changing Revocable Designations: Unless you indicate that a prior choice was
irrevocable or your Annuity has been endorsed to limit certain changes, You may
request to change all designations other than any Annuitant designation. The
request must be In Writing. Such changes will be subject to our acceptance.
Common Disaster: If the Annuitant and any Beneficiary die in a common disaster,
it must be proved to our satisfaction that the Annuitant died first. Unless
information provided indicates otherwise, the Annuity is treated as though the
Beneficiary died first and proceeds are payable as if the Beneficiary died
before the Annuitant.
GENERAL PROVISIONS
Entire Contract: This Annuity, including any attached riders or endorsements,
the attached copy of any application form and any supplemental applications and
endorsements are the entire contract. All statements made in any application
form are deemed to be representations and not warranties. No statement is used
to void the Annuity or defend against a claim unless it is contained in any
application or any supplemental application.
Only our President, a Vice President or Secretary may change or waive any
provisions of your Annuity. Any change or waiver must be In Writing. We are not
bound by any promises or representations made by or to any other person.
Misstatement of Age or Sex: If there has been a misstatement of the age and/or
sex of any Annuitant, we make adjustments to conform to the facts. As to Annuity
Payments: (a) any underpayments by us will be remedied following correction; and
(b) any overpayments by us will be charged against future amounts payable by us
under your Annuity.
Transfers, Assignments or Pledges: Generally, your rights in this Annuity may be
transferred, assigned or pledged for loans at any time. However, these rights
may be limited depending on your use of this Annuity. You must request a
transfer or provide us a copy of the assignment In Writing. A transfer or
assignment is subject to our acceptance. Prior to receipt of this notice, 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.
Nonparticipation: This Annuity does not share in our profits or surplus
earnings.
Deferral of Transactions: We may defer payment of proceeds of any distribution
funded by a redemption of Units for a period not to exceed 7 calendar days from
the date the transaction is effected. We may defer any payment of proceeds of
any distribution funded by our general account for a period not to exceed the
lesser of 6 months or the period permitted by law.
All procedures, including payment, 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.
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VIA-G (8/99)-18
Elections, Designations, Changes and Requests: All elections, designations,
changes and requests must be In Writing and are effective only after they have
been approved by us, subject to any transactions made by us before receipt of
such notices. We inform you of any changes that materially affect your rights.
We reserve the right to require that this Annuity be returned to our Office for
endorsement of any change.
Claims of Creditors: To the extent permitted by law, neither this Annuity nor
any payment hereunder is subject to the claims of any creditors or those of any
Annuitant, Payee or Beneficiary.
Facility of Payment: We reserve the right, in settlement of full liability, to
make payments to a guardian, relative or other person if a Payee is legally
incompetent, as permitted by law.
Reports to You: We will provide you with reports at least once each quarter
while this Annuity is in force. You may request additional reports. We reserve
the right to charge up to $50 for each such additional report.
Reserved Rights: In addition to rights specifically reserved elsewhere in this
Annuity, we reserve the right to any or all of the following: (a) combine a
Sub-account with other Sub-accounts; (b) combine the Separate Account shown in
the Schedule with other separate accounts; (c) deregister the Separate Account
shown in the Schedule under the Investment Company Act of 1940; (d) operate the
Separate Account shown in the Schedule 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 Exchange
Act of 1934 or the Investment Company Act of 1940; (f) make changes that are
necessary to maintain the tax status of your Annuity under the Internal Revenue
Code; and (g) make changes required by any change in other federal or state laws
relating to retirement annuities or annuity contracts.
We may eliminate 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 an underlying mutual fund or
portfolio no longer suits the purpose of the Annuity. This may happen due to a
change in laws or regulations, or a change in the investment objectives or
restrictions of an underlying mutual fund or portfolio, or because the
underlying mutual fund or 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, 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, deletion or addition.
<PAGE>
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VIA-G (8/99)-19
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VIA-G (8/99)-20
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE, P.O. BOX 883
SHELTON, CONNECTICUT 06484
(A Stock Company)
SINGLE PREMIUM VARIABLE ADJUSTABLE IMMEDIATE ANNUITY
NON-PARTICIPATING
ALL INCOME AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE, AND ARE NOT GUARANTEED
AS TO DOLLAR AMOUNT EXCEPT FOR THE GUARANTEED ANNUITY PAYMENT AMOUNT
BEFORE THE INHERITANCE DATE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
logo American For Internal Use Only
Skandia
Where To Invest
American Skandia Life Assurance Corporation
One Corporate Drive
P.O. Box 883
Shelton, CT 06484-0883 Annuity No.
1 4
Guaranteed Annuity Payment Amount: Name:
_Yes _No FIRST M. LAST
Address:
2 City: State:_ _
_Non-qualified Zip:_ _ _ _ _
_IRA _SEP/IRA _IRA Rollover Sex: _Male _Female
_401 _403(b) _Roth IRA Date of Birth: MM - DD - YYYY
_Other: Social Security/Tax I.D. No: _ _ _ - _ _ _ -_ _ _ _
3
Name: Name:
FIRST M. LAST FIRST M. LAST
Address: Address:
City: State:_ _ City: State:__ _
Zip:_ _ _ _ _ Zip:_ _ _ _ _
Sex: _Male _Female Sex: _Male _Female
Date of Birth: MM - DD - YYYY Date of Birth: MM - DD - YYYY
Social Security/Tax I.D. No: _ _ _ - _ _ _ -_ _ _ _ Social Security/Tax I.D. No: _ _ _ - _ _ _ - _ _ _ _
5
If left blank, Annuitant(s) will be considered payee(s).
Name: Name:
FIRST M. LAST FIRST M. LAST
Address: Address:
City: State:_ _ City: State:_ _
Zip:_ _ _ _ _ Zip:_ _ _ _ _
Sex: _Male _Female Total: 100%
Date of Birth: MM - DD - YYYY
Social Security/Tax I.D. No: _ _ _ - _ _ _ -_ _ _ _ 6
Annuitant
_Driver's License _Birth Certificate _Passport
_Other:
Joint Annuitant
_Driver's License _Birth Certificate _Passport
_Other:
VIA-App(8/99)
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<PAGE>
logo American For Internal Use Only
Skandia
Where To Invest
American Skandia Life Assurance Corporation
One Corporate Drive
P.O. Box 883
Shelton, CT 06484-0883 Annuity No.
7 9
(Unless otherwise indicated, beneficiary becomes owner upon (Indicate your investment allocation below. Please use
death of last surviving annuitant with the submission of all only whole number percentages. They must total 100%.)
necessary paperwork.)
PRIMARY BENEFICIARY(IES) Investment Options
Name: _ _%
FIRST M. LAST
Social Security #:_ _ _ - _ _ _-_ _ _ _ _ _%
Relationship to Annuitant: _ _%
Name: _ _%
FIRST M. LAST
Social Security #:_ _ _ - _ _ _-_ _ _ _ _ _%
Relationship to Annuitant: _ _%
Name: _ _%
FIRST M. LAST _ _%
Social Security #:_ _ _ - _ _ _-_ _ _ _ _ _%
Relationship to Annuitant: _ _%
TOTAL 100% TOTAL 100%
CONTINGENT BENEFICIARY(IES) 10
Name: Choice of the 1st through the 28th of the month. _ _
FIRST M. LAST
Social Security #:_ _ _ - _ _ _ - _ _ _ _ _ _%
Name:
FIRST M. LAST
Social Security #:_ _ _ - _ _ _ - _ _ _ _ _ _% _ If this box is checked, please complete the following
sections. If this box is not checked, please proceed
Name: to Replacement Information section.
FIRST M. LAST
Social Security #:_ _ _ - _ _ _ - _ _ _ _ _ _% 11
TOTAL 100% _ 3 Percent _ 5 Percent _ 6 Percent
_ other
8
PREMIUM: $ 12
Type of Payment: _ Life Only
_Check _ Direct Rollover _ Life with Certain Period __years
_Wire _ Mutual Fund Transfer _ Certain Period Only __years
_Trustee-to-Trustee Transfer _ CD Transfer
_1035 Exchange
VIA-APP(8/99)
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<PAGE>
logo American For Internal Use Only
Skandia
Where To Invest
American Skandia Life Assurance Corporation
One Corporate Drive
P.O. Box 883
Shelton, CT 06484-0883 Annuity No.
13 17
Is this annuity intended to replace (in whole or in part) BY SIGNING BELOW THE OWNER(S) UNDERSTAND THAT:
an existing life insurance or annuity? _Yes _No 1. The Annuity Payments, and if applicable, Inheritance
Period or Cash Value may increase or decrease
(If yes, please indicate carrier, contract number and depending on the contract's investment results;
approximate premium amount in Special Instructions.)
14 2. The Variable Annuity applied for is suitable for
______________________________________________ my/our financial situation and needs; and
______________________________________________ 3. I/We have received a current prospectus.
______________________________________________ I/We represent to the best of my/our knowledge and
belief the statements made in this application are
true and complete including under penalty of perjury,
the Social Security or Tax ID numbers provided. It is
indicated and agreed that the only statements which
15 are to be constructed as the basis of the contract are
those contained in this application or in any
Federal/State income tax withholding applies only to the amendment to this application.
portion of your payment that is subject to federal/state
income tax. You may elect not to have withholding apply. SIGNATURES:
If you elect no withholding, or if you do not have enough
tax withheld from your payment, you may have to pay an estimated Owner(s)
tax. If you elect withholding and you do not indicate a X_________________________________
percentage, American Skandia Life Assurance Corporation will X_________________________________
withhold at the maximum federal and state levels. If your
withholding and estimated tax payments are insufficient, you Location where signed_____________
may be penalized under the estimated tax rules. Date MM - DD - YYYY
Federal Income Tax (select one) Annuitant (If other than owner)
_No, I/we do not want to have Federal income tax withheld. X_________________________________
OR
_Yes. I/we want Federal income tax withheld at __%. X_________________________________
State Income Tax (select one)
_No, I/we do not want to have State income tax withheld. Location where signed______________
OR Date MM - DD - YYYY
_Yes, I/we want State income tax withheld at __%
for the state of ___________. Signature of Agent
I/we taxpayer hereby certify(ies), under penalty of perjury X_________________________________
that such taxpayer is not subject to backup withholding order
under Section 3406(a)(1)(c) of the Internal Revenue Code. Name:
FIRST M. LAST
16 Name of Firm:
_________________________________________
Firm Address:
_________________________________________
_________________________________________ City: State:_ _ Zip:_ _ _ _ _
Do you have any reason to believe the contract applied
for is to replace existing annuities or life insurance?
_Yes _No
VIA-APP(8/99)
Page 3 of 3
</TABLE>
American Skandia Life
Assurance Corporation
One Corporate Drive
P.O. Box 883
Shelton, CT 06484-0883
Telephone (203) 926-1888
Fax (203) 925-6932
April 25, 2000
American Skandia Life Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
RE: Pre-Effective Amendment No. 1 to Registration Statement on
Form N-4 filed by American Skandia Life Assurance Corporation,
Depositor, and American Skandia Life Assurance Corporation
Variable Account B (Class 8), Registrant
Securities Act Registration No. 333-91633
Investment Company Act Registration No. 811-9707
Dear Sir/Madam:
I have acted as General Counsel to American Skandia Life Assurance Corporation
(the "Company"), a Connecticut insurance company, and American Skandia Life
Assurance Corporation Variable Account B (Class 8) (the "Account") in connection
with the registration of an indefinite amount of securities in the form of
variable annuity contracts (the "Contracts") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
I have examined or caused to be examined such documents (including the Form N-4
registration statement) and reviewed or caused to be reviewed such questions of
law as I considered necessary and appropriate, and on the basis of such
examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contracts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ T. Richard Kennedy
T. Richard Kennedy
General Counsel
VIAG
VIAII-G
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated February 11, 2000 relating to American
Skandia Life Assurance Corporation included in the Registration Statement (Form
N-4 No. 333-91633) and related Prospectus, which is part of this Registration
Statement.
We also consent to incorporation by reference herein of our report dated
February 11, 2000 with respect to the financial statements of American Skandia
Life Assurance Corporation at December 31, 1999 and 1998 and for each of the
three years in the period ended December 31, 1999, included in the Annual Report
(Form 10-K) for 1999 filed with the Securities and Exchange Commission.
/s/Ernst & Young LLP
Hartford, Connecticut
April 26, 2000
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 198,165
<DEBT-CARRYING-VALUE> 201,525
<DEBT-MARKET-VALUE> 201,509
<EQUITIES> 16,404
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 219,388
<CASH> 89,212
<RECOVER-REINSURE> 4,062
<DEFERRED-ACQUISITION> 1,087,705
<TOTAL-ASSETS> 30,849,414 <F1>
<POLICY-LOSSES> 41,127
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 189,000
0
0
<COMMON> 2,500
<OTHER-SE> 356,934
<TOTAL-LIABILITY-AND-EQUITY> 30,849,414 <F2>
1,278
<INVESTMENT-INCOME> 10,441
<INVESTMENT-GAINS> 578
<OTHER-INCOME> 375,064 <F3>
<BENEFITS> 4,996
<UNDERWRITING-AMORTIZATION> 83,861
<UNDERWRITING-OTHER> 191,991
<INCOME-PRETAX> 106,513
<INCOME-TAX> 30,344
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,169
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Included in Total Assets are Assets Held in Separate Accounts of
$29,381,166.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $29,381,166.
<F3> Other income includes annuity charges and fees of $289,989 and fee income
of $83,243.
</FN>
</TABLE>
