Filed with the Securities and Exchange Commission on April 26, 1996
Registration No. 33-87010 Investment Company Act No. 811-5438
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
Registration Statement under The Securities Act of 1933
Post-effective Amendment No. 3
and/or
Registration Statement under The Investment Company Act of 1940
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 1 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. PATRICIA PAEZ, CORPORATE SECRETARY
One Corporate Drive, Shelton, Connecticut 06484
(Name and Address of Agent for Service of Process)
Copy To:
JOHN T. BUCKLEY, ESQ.
WERNER & KENNEDY
1633 Broadway, New York, New York 10019 (212) 408-6900
Approximate Date of Proposed Sale to the Public:
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
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
_ 60 days after filing pursuant to paragraph (a) (i) of Rule 485
_ on ______________ 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.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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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American Skandia Life Assurance
Corporation Annuity Contracts Indefinite* Indefinite* $0
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*Pursuant to Rule 24f-2 of the Investment Company Act of 1940
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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 1995 was filed
within 60 days of the close of the fiscal year.
ASAP2
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<TABLE>
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
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N-4 Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis or Highlights Highlights
4. Condensed Financial Information Condensed Financial Information, Advertising
5. General Description of Registrant, Depositor Investment Options, Operations of the
and Portfolio Companies Separate Accounts, The Company
6. Deductions Charges Assessed or Assessable Against the Annuity, Charges Assessed
Against Assets, Charges of the Underlying Mutual Funds
7. General Description of Variable Annuity Contracts Purchasing Annuities, Rights, Benefits and
Services, Modification
8. Annuity Period Annuity Payments
9. Death Benefit Death Benefit
10. Purchases and Contract Value Purchasing Annuities, Account Value and Surrender Value
11. Redemptions Distributions, Pricing of Transfers and Distributions, Deferral of Transactions
12. Taxes Certain Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Additional 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 Exchange Contracts,
Bank Drafting and Sale of the Annuities
20. Underwriters Principal Underwriter
(Continued)
<PAGE>
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 Annuity Payments
23. Financial Statements Financial Statements for Separate
Account B (Class 1 Sub-accounts)
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>
This Prospectus describes a type of annuity (the "Annuity") being offered by
American Skandia Life Assurance Corporation ("we", "our" or "us"), One Corporate
Drive, Shelton, Connecticut, 06484. This flexible premium Annuity may be offered
as individual annuity contracts or as interests in a group annuity. The Table of
Contents is on Page 4. Definitions applicable to this Prospectus are on page 6.
The highlights of this offering are described beginning on Page 8. This
Prospectus contains a detailed discussion of matters you should consider before
purchasing this Annuity. A Statement of Additional Information has been filed
with the Securities and Exchange Commission and is available from us without
charge upon request. The contents of the Statement of Additional Information are
described on page 51. The Annuity or certain of its investment options may not
be available in all jurisdictions. Various rights and benefits may differ
between jurisdictions to meet applicable laws and/or regulations.
A Purchase Payment for this Annuity is assessed any applicable tax charge (see
"Tax Charges"). It is then allocated to the investment options you select,
except in certain jurisdictions, where allocations of Purchase Payments we
receive during the "free-look" period that you direct to any Sub-accounts are
temporarily allocated to a money-market type Sub-account (see "Allocation of Net
Purchase Payments"). You may transfer Account Value between investment options
(see "Investment Options" and "Transfers"). Account Value may be distributed as
periodic annuity payments in a "payout phase". Such annuity payments can be
guaranteed for life (see "Annuity Payments"). During the "accumulation phase"
(the period before any payout phase), you may surrender the Annuity for its
Surrender Value or make withdrawals (see "Distributions"). Such distributions
may be subject to tax, including a tax penalty, and any applicable contingent
deferred sales charges (see "Contingent Deferred Sales Charge"). A death benefit
may be payable during the accumulation phase (see "Death Benefit").
Account Value in the variable investment options increases or decreases daily to
reflect investment performance and the deduction of charges. No minimum amount
is guaranteed (see "Account Value in the Sub-accounts"). The variable investment
options are Class 1 Sub-accounts of American Skandia Life Assurance Corporation
Variable Account B ("Separate Account B")(see "Separate Accounts" and "Separate
Account B"). Each Sub-account invests exclusively in one portfolio of an
underlying mutual fund or in an underlying mutual fund. As of the date of this
Prospectus, the underlying mutual funds (and the portfolios of such underlying
mutual funds in which Sub-accounts offered pursuant to this Prospectus invest)
are: (a) American Skandia Trust (portfolios - JanCap Growth, Lord Abbett Growth
and Income, Seligman Henderson International Equity, Seligman Henderson
International Small Cap, Federated Utility Income, Federated High Yield, AST
Phoenix Balanced Asset, AST Money Market, T. Rowe Price Asset Allocation, T.
Rowe Price International Equity, T. Rowe Price Natural Resources, T. Rowe Price
International Bond, Founders Capital Appreciation, INVESCO Equity Income, PIMCO
Total Return Bond, PIMCO Limited Maturity Bond, Berger Capital Growth, Robertson
Stephens Value + Growth); (b) The Alger American Fund (portfolios - Growth,
Small Capitalization, MidCap Growth); (c) Neuberger & Berman Advisers Management
Trust (portfolio - Partners); and (d) Montgomery Variable Series (portfolio -
Emerging Markets).
[Account Value in the variable investment options increases or decreases daily
to reflect investment performance and the deduction of charges. No minimum
amount is guaranteed (see "Account Value in the Sub-accounts"). The variable
investment options are Class 1 Sub-accounts of American Skandia Life Assurance
Corporation Variable Account B ("Separate Account B")(see "Separate Accounts"
and "Separate Account B"). Each Sub-account invests exclusively in one portfolio
of an underlying mutual fund or in an underlying mutual fund. As of the date of
this Prospectus, the underlying mutual funds (and the portfolios of such
underlying mutual funds in which Sub-accounts offered pursuant to this
Prospectus invest) are: (a) Galaxy VIP Fund: (portfolios - Money Market; Equity;
High Quality Bond; Asset Allocation); (b) American Skandia Trust (portfolios -
JanCap Growth, Lord Abbett Growth and Income, Seligman Henderson International
Equity, T. Rowe Price Asset Allocation, T. Rowe Price International Equity,
Founders Capital Appreciation, INVESCO Equity Income, PIMCO Limited Maturity
Bond; and (c) The Alger American Fund (portfolios - Growth, Small
Capitalization).]
In most jurisdictions, Account Value may be allocated to a fixed investment
option during the accumulation phase. Account Value so allocated earns a fixed
rate of interest for a specified period of time referred to as a Guarantee
Period. Guarantee Periods of different durations may be offered (see "Fixed
Investment Options"). Such an allocation and the interest earned is guaranteed
by us only if held to its Maturity Date. You are cautioned that with respect to
the Fixed Investment Options during the accumulation phase, we do not guarantee
any minimum amount, because the value may be increased or decreased by a market
value adjustment (see "Account Value of the Fixed Allocations"). Assets
supporting such allocations in the accumulation phase are held in American
Skandia Life Assurance Corporation Separate Account D ("Separate Account D")
(see "Separate Accounts" and "Separate Account D").
We guarantee fixed annuity payments. We also guarantee any adjustable annuity
payments we may make available (see "Annuity Payments").
(continued on Page 2)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE
READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
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FOR FURTHER INFORMATION CALL 1-800-752-6342 [1-800-444-3970].
Prospectus Dated: May 1, 1996
Statement of Additional Information Dated: May 1, 1996
ASAP2 [GAL 4]-PROS-(05/96)
<PAGE>
Taxes on gains during the accumulation phase may be deferred until you begin to
take distributions from your Annuity. Distributions before age 59 1/2 may be
subject to a tax penalty. In the payout phase, a portion of each annuity payment
may be treated as a return of your "investment in the contract" until it is
completely recovered. Transfers between investment options are not subject to
taxation. The Annuity may also qualify for special tax treatment under certain
sections of the Code, including, but not limited to, Sections 401, 403 or 408
(see "Certain Tax Considerations").
[Broker-dealers or entities which may offer variable annuities without
registration as broker-dealers may offer Annuities to persons or entities who
have established an account with such broker-dealer or entity. Such eligible
persons or eligible entities also will be customers of one or more subsidiaries
of Fleet Financial Group, Inc. Fleet Investment Advisors Inc., one of the
investment advisers of one of the underlying mutual funds, is a subsidiary of
Fleet Financial Group, Inc. In certain cases, the broker-dealer may also be an
affiliate of one of the investment advisers of one of the underlying mutual
funds.]
Purchase Payments under these Annuities are not deposits or obligations of,
or guaranteed or endorsed by, any bank or bank subsidiary, are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency and are not insured by the Securities Investor Protection
Corporation ("SIPC") as to the loss of the principal amount invested. Purchase
Payments are subject to investment risks, including possible loss of principal.
[
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Annuities:
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Are NOT FDIC insured, or insured by the Federal Reserve Board or any other
agency
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Are NOT Obligations of Fleet Bank or its Affiliates
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Are NOT guaranteed or endorsed by Fleet Bank or its Affiliates
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DO involve risks, including possible loss of principal amount invested
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]
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TABLE OF CONTENTS
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DEFINITIONS...............................................................................6
HIGHLIGHTS................................................................................8
AVAILABLE
INFORMATION..............................................................................10
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................................................................10
CONTRACT EXPENSE
SUMMARY..................................................................................11
EXPENSE
EXAMPLES.................................................................................13
CONDENSED FINANCIAL
INFORMATION..............................................................................14
Unit Prices And Numbers Of
Units...........................................................................14
Yields On Money Market
Sub-account.....................................................................16
INVESTMENT
OPTIONS..................................................................................16
Variable Investment
Options.........................................................................16
Fixed Investment
Options.........................................................................18
OPERATIONS OF THE SEPARATE
ACCOUNTS.................................................................................20
Separate
Accounts........................................................................20
Separate Account
B...............................................................................20
Separate Account
D...............................................................................20
INSURANCE ASPECTS OF THE
ANNUITY..................................................................................21
CHARGES ASSESSED OR ASSESSABLE AGAINST THE
ANNUITY.............................................................................. 21
Contingent Deferred Sales
Charge..........................................................................22
Maintenance
Fee.............................................................................22
Tax
Charges.........................................................................22
Transfer
Fee.............................................................................23
Allocation Of Annuity
Charges.........................................................................23
CHARGES ASSESSED AGAINST THE
ASSETS...................................................................................23
Administration
Charge..........................................................................23
Mortality and Expense Risk
Charges.........................................................................23
CHARGES OF THE UNDERLYING MUTUAL
FUNDS....................................................................................24
PURCHASING
ANNUITIES................................................................................24
Uses Of The
Annuity.........................................................................24
Application And Initial
Payment.........................................................................24
Bank
Drafting........................................................................24
Periodic Purchase
Payments........................................................................24
Right to Return the
Annuity.........................................................................25
Allocation of Net Purchase
Payments........................................................................25
Balanced Investment
Program.........................................................................25
Ownership, Annuitant and Beneficiary
Designations....................................................................25
ACCOUNT VALUE AND SURRENDER
VALUE....................................................................................26
Account Value in the
Sub-accounts....................................................................26
Account Value of the Fixed
Allocations.....................................................................26
Additional Amounts in the Fixed
Allocations.....................................................................27
RIGHTS, BENEFITS AND
SERVICES.................................................................................28
Additional Purchase
Payments........................................................................28
Changing Revocable
Designations....................................................................28
Allocation
Rules...........................................................................28
Transfers.......................................................................29
Renewals...............................................................29
Dollar Cost
Averaging..............................................................30
Rebalancing............................................................30
Distributions...................................................................31
Surrender..............................................................31
Medically-Related
Surrender..............................................................31
Free
Withdrawals............................................................32
Partial
Withdrawals............................................................33
Systematic
Withdrawals............................................................33
Minimum
Distributions..........................................................34
Death
Benefit................................................................34
Annuity
Payments...............................................................35
Qualified Plan Withdrawal
Limitations............................................................36
Pricing of Transfers and
Distributions...................................................................37
Voting
Rights..........................................................................37
Transfers, Assignments or
Pledges.........................................................................38
Reports to
You.............................................................................38
SALE OF THE
ANNUITIES................................................................................38
Distribution....................................................................38
Advertising.....................................................................38
CERTAIN TAX
CONSIDERATIONS...........................................................................39
Our Tax
Considerations..................................................................39
Tax Considerations Relating to Your
Annuity.........................................................................39
Non-natural
Persons................................................................39
Natural
Persons................................................................40
Distributions..........................................................40
Assignments and
Pledges................................................................40
Penalty on
Distributions..........................................................40
Annuity
Payments...............................................................41
Gifts..................................................................41
Tax Free
Exchanges..............................................................41
Transfers Between Investment
Options................................................................41
Generation-Skipping
Transfers..............................................................41
Diversification........................................................41
Federal Income Tax
Withholding............................................................41
Tax Considerations When Using Annuities in Conjunction with Qualified
Plans........................................... 42
Individual Retirement
Programs...............................................................42
Tax Sheltered
Annuities..............................................................42
Corporate Pension and Profit-sharing
Plans..................................................................42
H.R. 10
Plans..................................................................42
Tax Treatment of Distributions from Qualified
Annuities...................................................... 42
Section 457
Plans..................................................................43
OTHER
MATTERS..................................................................................43
Deferral of
Transactions....................................................................43
Resolving Material
Conflicts.......................................................................43
Modification....................................................................43
Misstatement of Age or
Sex.............................................................................44
Ending the
Offer...........................................................................44
Indemnification.................................................................44
Legal
Proceedings.....................................................................44
THE
COMPANY..................................................................................44
Lines of
Business........................................................................44
Selected Financial
Data............................................................................44
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............. 45
Results of
Operations.............................................................45
Liquidity and Capital
Resources..............................................................45
Segment
Information............................................................45
Reinsurance.....................................................................45
Surplus
Notes...........................................................................46
Reserves........................................................................46
Competition.....................................................................46
Employees.......................................................................46
Regulation......................................................................46
Executive Officers and
Directors.......................................................................46
Executive
Compensation....................................................................49
Summary Compensation
Table..................................................................49
Long-Term Incentive Plans - Awards in the Last Fiscal
Year.................................................... 49
Compensation of
Directors..............................................................51
Compensation Committee Interlocks and Insider
Participation................................................... 51
CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................................................ .51
FINANCIAL
STATEMENTS...............................................................................51
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION............................................... 52
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES..................... 52
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<PAGE>
DEFINITIONS: The following are key terms used in this Prospectus. Other
terms are defined in this Prospectus as they appear.
ACCOUNT VALUE is the value of each allocation to a Sub-account or a Fixed
Allocation prior to the Annuity Date, plus any earnings, and/or less any losses,
distributions and charges thereon, before assessment of any applicable
contingent deferred sales charge and/or any applicable maintenance fee. Account
Value is determined separately for each Sub-account and for each Fixed
Allocation, and then totaled to determine Account Value for your entire Annuity.
Account Value of each Fixed Allocation on other than such Fixed Allocation's
Maturity Date may be calculated using a market value adjustment.
ANNUITANT is the person upon whose life your Annuity is written.
ANNUITY is the type of annuity being offered pursuant to this Prospectus. It is
also, if issued, your individual Annuity, or with respect to a group Annuity,
the certificate evidencing your participation in a group Annuity. It also
represents an account we set up and maintain to track our obligations to you.
ANNUITY DATE is the date annuity payments are to commence.
ANNUITY YEARS are continuous 12-month periods commencing on the Issue Date and
each anniversary of the Issue Date.
APPLICATION is the enrollment form or application form we may require you to
submit for an Annuity.
BENEFICIARY is a person designated as the recipient of the death benefit.
CODE is the Internal Revenue Code of 1986, as amended from time to time.
CONTINGENT ANNUITANT is the person named to become the Annuitant on the
Annuitant's death prior to the Annuity Date.
CURRENT RATES are the interest rates we offer to credit to Fixed Allocations for
the duration of newly beginning Guarantee Periods under this Annuity. Current
Rates are contained in a schedule of rates established by us from time to time
for the Guarantee Periods then being offered. We may establish different
schedules for different classes and for different annuities.
FIXED ALLOCATION is an allocation of Account Value that is to be credited a
fixed rate of interest for a specified Guarantee Period during the accumulation
phase and is to be supported by assets in Separate Account D.
GUARANTEE PERIOD is a period of time during the accumulation phase during which
we credit a fixed rate of interest on a Fixed Allocation.
IN WRITING is in a written form satisfactory to us and filed at the Office.
INTERIM VALUE is, as of any particular date, the initial value of a Fixed
Allocation plus all interest credited thereon, less the sum of all previous
transfers and withdrawals of any type from such Fixed Allocation of such Interim
Value and interest thereon from the date of each withdrawal or transfer.
ISSUE DATE is the effective date of your Annuity.
MVA is a market value adjustment used in the determination of Account Value of
each Fixed Allocation as of a date other than such Fixed Allocation's Maturity
Date, and, where required by law, the 30 days prior to the Maturity Date.
MATURITY DATE is the last day in a Guarantee Period.
MINIMUM DISTRIBUTIONS are minimum amounts that must be distributed each year
from an Annuity if used in relation to certain qualified plans under the Code.
NET PURCHASE PAYMENT is a Purchase Payment less any applicable charge for taxes.
OFFICE is our business office, American Skandia Life Assurance Corporation,
One Corporate Drive, P.O. Box 883, Shelton, Connecticut 06484.
OWNER is either an eligible entity or person named as having ownership rights in
relation to an Annuity issued as an individual contract. An Annuity may be
issued as a certificate evidencing interest in a group annuity contract. If so,
the rights, benefits and requirements of and the events relating to an Owner, as
described in this Prospectus, will be the rights, benefits and requirements of
and events relating to the person or entity designated as the participant in
such certificate.
PURCHASE PAYMENT is a cash consideration you give to us for certain rights,
privileges and benefits provided under an Annuity according to its terms.
SUB-ACCOUNT is a division of Separate Account B. We use Sub-accounts to
calculate variable benefits under this Annuity.
SURRENDER VALUE is the value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender less any applicable contingent deferred sales charge and any
applicable maintenance fee.
SYSTEMATIC WITHDRAWAL is one of a plan of periodic withdrawals of Surrender
Value during the accumulation phase. Such a plan is subject to our rules.
UNIT is a measure used to calculate your Account Value in a Sub-account prior to
the Annuity Date.
UNIT PRICE is used for calculating: (a) the number of Units allocated to a
Sub-account; and (b) the value of transactions into or out of a Sub-account or
benefits based on Account Value in a Sub-account prior to the Annuity Date. Each
Sub-account has its own Unit Price which will vary each Valuation Period to
reflect the investment experience of that Sub-account.
VALUATION DAY is every day the New York Stock Exchange is open for trading or
any other day that the Securities and Exchange Commission requires mutual funds
or unit investment trusts to be valued.
VALUATION PERIOD is the period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"We", "us", "our" or "the Company" means American Skandia Life Assurance
Corporation.
"You" or "your" means the Owner.
<PAGE>
HIGHLIGHTS: The following are only the highlights of the Annuity being
offered pursuant to this Prospectus. A more detailed description follows these
highlights.
(1) Investment Options: We currently offer multiple variable and, in most
jurisdictions, fixed investment options.
During the accumulation phase, we currently offer a number of variable
investment options. Each of these investment options is a Class 1 Sub-account of
Separate Account B. Each Sub-account invests exclusively in one underlying
mutual fund, or a portfolio of an underlying mutual fund. The underlying mutual
fund portfolios are managed by various investment advisors, and in certain
cases, various sub-advisors. A short description of the investment objectives
and policies is found in Appendix A. Certain variable investment options may not
be available in all jurisdictions.
As of the date of this Prospectus, the underlying mutual funds (and the
portfolios of such underlying mutual funds in which Sub-accounts offered
pursuant to this Prospectus invest) are: (a) American Skandia Trust (portfolios
- - JanCap Growth, Lord Abbett Growth and Income, Seligman Henderson International
Equity, Seligman Henderson International Small Cap, Federated Utility Income,
Federated High Yield, AST Phoenix Balanced Asset, AST Money Market, T. Rowe
Price Asset Allocation, T. Rowe Price International Equity, T. Rowe Price
Natural Resources, T. Rowe Price International Bond, Founders Capital
Appreciation, INVESCO Equity Income, PIMCO Total Return Bond, PIMCO Limited
Maturity Bond, Berger Capital Growth, Robertson Stephens Value + Growth); (b)
The Alger American Fund (portfolios - Growth, Small Capitalization, MidCap
Growth); (c) Neuberger & Berman Advisers Management Trust (portfolio -
Partners); and (d) Montgomery Variable Series (portfolio - Emerging Markets).
[As of the date of this Prospectus, the underlying mutual funds (and the
portfolios of such underlying mutual funds in which Sub-accounts offered
pursuant to this Prospectus invest) are: (a) Galaxy VIP Fund: (portfolios -
Money Market; Equity; High Quality Bond; Asset Allocation); (b) American Skandia
Trust (portfolios - JanCap Growth, Lord Abbett Growth and Income, Seligman
Henderson International Equity, T. Rowe Price Asset Allocation, T. Rowe Price
International Equity, Founders Capital Appreciation, INVESCO Equity Income,
PIMCO Limited Maturity Bond; and (c) The Alger American Fund (portfolios -
Growth, Small Capitalization).]
In most jurisdictions, we also offer the option during the accumulation phase of
earning one or more fixed rates of interest on all or a portion of your Account
Value. As of the date of this Prospectus, we offered the option to make
allocations at interest rates that could be guaranteed for 1, 2, 3, 5, 7 and 10
years. Each such Fixed Allocation earns the fixed interest rate applicable as of
the date of such allocation. The interest rate credited to a Fixed Allocation
does not change during its Guarantee Period. You may maintain multiple Fixed
Allocations. From time-to-time we declare Current Rates for Fixed Allocations
beginning a new Guarantee Period. The rates we declare are subject to a minimum,
but we may declare higher rates. The minimum is determined in relation to an
index that we do not control.
The end of a Guarantee Period for a specific Fixed Allocation is called its
Maturity Date. At that time, the Guarantee Period normally "renews" and we begin
crediting interest for a new Guarantee Period lasting the same amount of time as
the one just ended. That Fixed Allocation then earns interest during the new
Guarantee Period at a rate that is not less than the one then being earned by
Fixed Allocations for that Guarantee Period by new Annuity purchasers in the
same class. You also may choose a different Guarantee Period from among those we
are then currently making available or you may transfer that Account Value to a
variable Sub-account.
In the payout phase, you may elect fixed annuity payments based on our then
current annuity rates. We also may make available adjustable annuity rates.
For more information, see the section entitled "Investment Options",
including the following subsections: (a) Variable Investment Options; and (b)
Fixed Investment Options.
(2) Operations of the Separate Accounts: In the accumulation phase, the
assets supporting guarantees we make in relation to Fixed Allocations are held
in our Separate Account D. This is a "non-unitized" separate account. However,
values and benefits calculated on the basis of Fixed Allocations are guaranteed
by our general account. In the payout phase, fixed annuity payments and any
adjustable annuity payments we may make available are also guaranteed by our
general account, but the assets supporting such payments are not held in
Separate Account D.
In the accumulation phase, the assets supporting the Account Values maintained
in the Sub-accounts are held in our Separate Account B. These are Class 1
Sub-accounts of Separate Account B. Values and benefits based on these
Sub-accounts are not guaranteed and will vary with the investment performance of
the underlying mutual funds or fund portfolios, as applicable.
For more information, see the section entitled Operations of the Separate
Accounts, including the following subsections: (a) Separate Accounts; (b)
Separate Account B; and (c) Separate Account D.
(3) Insurance Aspects of the Annuity: There are insurance risks which we
bear in relation to the Annuity. For more information, see the section entitled
Insurance Aspects of the Annuity.
(4) Charges Assessed or Assessable Against the Annuity: The Annuity
charges which are assessed or may be assessable under certain circumstances are
the contingent deferred sales charge, the maintenance fee, a charge for taxes
and a transfer fee. These charges are allocated according to our rules. We may
also charge for certain special services. For more information, see the section
entitled Charges Assessed or Assessable Against the Annuity, including the
following subsections: (a) Contingent Deferred Sales Charge; (b) Maintenance
Fee; (c) Tax Charges; (d) Transfer Fee; and (e) Allocation of Annuity Charges.
(5) Charges Assessed Against the Assets: The charges assessed against
assets in the Sub-accounts are the administration charge and the mortality and
expense risk charges. There are no charges deducted from the assets supporting
Fixed Allocations. For more information, see the section entitled Charges
Assessed Against the Assets, including the following subsections: (a)
Administration Charge; and (b) Mortality and Expense Risk Charges.
(6) Charges Of The Underlying Mutual Funds: Each underlying mutual fund
assesses various charges, including charges for investment management and
investment advisory fees. These charges generally differ between portfolios
within the same underlying mutual fund. You will find additional details in each
fund prospectus and its statement of additional information.
(7) Purchasing Annuities: Annuities are available for multiple uses,
including as a funding vehicle for various retirement programs which qualify for
special treatment under the Code. We may require a properly completed
Application, an acceptable Purchase Payment, and any other materials under our
underwriting rules before we agree to issue an Annuity. You have the right to
return an Annuity within a "free-look" period if you are not satisfied with it.
In most jurisdictions, the initial Purchase Payment and any Purchase Payments
received during the "free-look" period are allocated according to your
instructions. In jurisdictions that require a "free-look" provision such that,
if the Annuity is returned under that provision, we must return at least your
Purchase Payments less any withdrawals, we temporarily allocate such Purchase
Payments to the AST Money Sub-account. Where permitted by law in such
jurisdictions, we will allocate such Purchase Payments according to your
instructions, without any temporary allocation to the AST Money Market
Sub-account, if you execute a return waiver. We offer a balanced investment
program in relation to your initial Purchase Payment. Certain designations must
be made, including an Owner and an Annuitant. You may also make certain other
designations that apply to the Annuity if issued. These designations include, a
contingent Owner, a Contingent Annuitant (Contingent Annuitants may be required
in conjunction with certain uses of the Annuity), a Beneficiary, and a
contingent Beneficiary. See the section entitled Purchasing Annuities, including
the following subsections: (a) Uses of the Annuity; (b) Application and Initial
Payment; (c) Bank Drafting ; (d) Periodic Purchase Payments; (e) Right to Return
the Annuity; (f) Allocation of Net Purchase Payments; (g) Balanced Investment
Program; and (h) Ownership, Annuitant and Beneficiary Designations.
[(7) Purchasing Annuities: Annuities are available for multiple uses,
including as a funding vehicle for various retirement programs which qualify for
special treatment under the Code. We may require a properly completed
Application, an acceptable Purchase Payment, and any other materials under our
underwriting rules before we agree to issue an Annuity. You have the right to
return an Annuity within a "free-look" period if you are not satisfied with it.
In most jurisdictions, the initial Purchase Payment and any Purchase Payments
received during the "free-look" period are allocated according to your
instructions. In jurisdictions that require a "free-look" provision such that,
if the Annuity is returned under that provision, we must return at least your
Purchase Payments less any withdrawals, we temporarily allocate such Purchase
Payments to the GAL Money Market Sub-account. Where permitted by law in such
jurisdictions, we will allocate such Purchase Payments according to your
instructions, without any temporary allocation to the GAL Money Market
Sub-account, if you execute a return waiver. We offer a balanced investment
program in relation to your initial Purchase Payment. Certain designations must
be made, including an Owner and an Annuitant. You may also make certain other
designations that apply to the Annuity if issued. These designations include, a
contingent Owner, a Contingent Annuitant (Contingent Annuitants may be required
in conjunction with certain uses of the Annuity), a Beneficiary, and a
contingent Beneficiary. See the section entitled Purchasing Annuities, including
the following subsections: (a) Uses of the Annuity; (b) Application and Initial
Payment; (c) Bank Drafting ; (d) Periodic Purchase Payments; (e) Right to Return
the Annuity; (f) Allocation of Net Purchase Payments; (g) Balanced Investment
Program; and (h) Ownership, Annuitant and Beneficiary Designations.]
(8) Account Value and Surrender Value: In the accumulation phase your
Annuity has an Account Value. Your total Account Value as of a particular date
is the sum of your Account Value in each Sub-account and in each Fixed
Allocation. Surrender Value is the Account Value less any applicable contingent
deferred sales charge and any applicable maintenance fee. To determine your
Account Value in each Sub-account we multiply the Unit Price as of the Valuation
Period for which the calculation is being made times the number of Units
attributable to you in that Sub-account as of that Valuation Period. We also
determine your Account Value separately for each Fixed Allocation. A Fixed
Allocation's Account Value as of a particular date is determined by multiplying
its then current Interim Value times the MVA. No MVA applies to a Fixed
Allocation as of its Maturity Date. Under certain circumstances, the MVA formula
may change. For more information, see the section entitled Account Value and
Surrender Value, including the following subsections: (a) Account Value in the
Sub-accounts; (b) Account Value of Fixed Allocations; and (c) Additional Amounts
in the Fixed Allocations.
(9) Rights, Benefits and Services: You have a number of rights and
benefits under an Annuity once issued. We also currently provide a number of
services to Owners. These rights, benefits and services are subject to a number
of rules and conditions. These rights, benefits and services include, but are
not limited to, those described in this Prospectus. We accept additional
Purchase Payments during the accumulation phase. You may use bank drafting to
make Purchase Payments. We support certain Periodic Purchase Payments subject to
our rules. You may change revocable designations. You may transfer Account
Values between investment options. Transfers in excess of 12 per year are
subject to a fee. We offer dollar cost averaging and rebalancing during the
accumulation phase. During the accumulation phase, surrender, free withdrawals
and partial withdrawals are available, as are medically-related surrenders under
which the contingent deferred sales charge is waived under specified
circumstances. In the accumulation phase we offer Systematic Withdrawals and,
for Annuities used in qualified plans, Minimum Distributions. We offer fixed
annuity options, and may offer adjustable annuity options, that can guarantee
payments for life. In the accumulation phase, a death benefit may be payable.
You may transfer or assign your Annuity unless such rights are limited in
conjunction with certain uses of the Annuity. You may exercise certain voting
rights in relation to the underlying mutual fund portfolios in which the
Sub-accounts invest. You have the right to receive certain reports periodically.
For additional information, see the section entitled Rights, Benefits and
Services including the following subsections: (a) Additional Purchase Payments;
(b) Changing Revocable Designations; (c) Allocation Rules; (d) Transfers; (e)
Renewals; (f) Dollar Cost Averaging; (g) Rebalancing; (h) Distributions
(including: (i) Surrender; (ii) Medically-Related Surrender; (iii) Free
Withdrawals; (iv) Partial Withdrawals; (v) Systematic Withdrawals; (vi) Minimum
Distributions; (vii) Death Benefit; (viii) Annuity Payments; and (ix) Qualified
Plan Withdrawal Limitations); (i) Pricing of Transfers and Distributions (j)
Voting Rights; (k) Transfers, Assignments and Pledges; and (l) Reports to You.
(10) The Company: American Skandia Life Assurance Corporation is a wholly
owned subsidiary of American Skandia Investment Holding Corporation, whose
indirect parent is Skandia Insurance Company Ltd. Skandia Insurance Company Ltd.
is a Swedish company that holds a number of insurance companies in many
countries. The predecessor to Skandia Insurance Company Ltd. commenced
operations in 1855. For more information, see the section entitled The Company
and the following subsections: (a) Lines of Business; (b) Selected Financial
Data; (c) Management's Discussion and Analysis of Financial Condition and
Results of Operations (including: (i) Results of Operations; (ii) Liquidity and
Capital Resources; and (iii) Segment Information); (d) Reinsurance; (e)
Reserves; (f) Competition; (g) Employees; (h) Regulation; (i) Executive Officers
and Directors; and (j) Executive Compensation (including: (i) Summary
Compensation Table; (ii) Long Term Incentive Plans-Awards in the Last Fiscal
Year; (iii) Compensation of Directors; and (iv) Compensation Committee
Interlocks and Insider Participation).
AVAILABLE INFORMATION: A Statement of Additional Information is available
from us without charge upon request by filling in the coupon at the end of the
Prospectus and sending it (or a written request) to American Skandia Life
Assurance Corporation, Concierge Desk [Galaxy Annuity Customer Service], P.O.
Box 883, Shelton, CT 06484. It includes further information, as described in the
section of this Prospectus entitled "Contents of the Statement of Additional
Information". This Prospectus is part of the registration statements we filed
with the Securities and Exchange Commission ("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 the exhibits thereto at the SEC's public reference
facilities at the above address, Rm. 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE: To the extent and only to
the extent that any statement in a document incorporated by reference into this
Prospectus is modified or superseded by a statement in this Prospectus or in a
later-filed document, such statement is hereby deemed so modified or superseded
and not part of this Prospectus.
We furnish you without charge a copy of any or all of the documents incorporated
by reference in this Prospectus, 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 [Galaxy Annuity Customer
Service], P.O. Box 883, Shelton, Connecticut, 06484. Our phone number is 1-(800)
752-6342 [1-800-444-3970].
CONTRACT EXPENSE SUMMARY: The summary provided below includes information
regarding the expenses for your Annuity, for the Sub-accounts and for the
underlying mutual fund portfolios. The only expense applicable if you allocate
all your Account Value to Fixed Allocations would be the contingent deferred
sales charge. More detail regarding the expenses of the underlying mutual funds
and their portfolios may be found either in the prospectuses for such mutual
funds or in the annual reports of such mutual funds. The expenses of our
Sub-accounts (not those of the underlying mutual fund portfolios in which our
Sub-accounts invest) are the same no matter which Sub-account you choose.
Therefore, these expenses are only shown once below. In certain states, premium
taxes may be applicable.
<TABLE>
<CAPTION>
Your Transaction Expenses
<S> <C> <C> <C> <C>
Contingent Deferred Sales Charge, as a Year 1 -7.5%; year 2 - 7.0%; year 3- 6.0%; year 4 - 5.0% year 5 - 4.0%;
percentage of Purchase Payments liquidated year 6 - 3.0%; year 7 - 2.0% year 8 and thereafter - 0% of each
Purchase Payment as measured from the date it was allocated to Account Value
Annual Maintenance Fee Smaller of $30 or 2% of Account Value
Tax Charges Dependent on the requirements of the applicable jurisdiction
Transfer Fee $10 for each transfer after the twelfth in any Annuity Year
Annual Expenses of the Sub-accounts (as a percentage of average daily net assets)
Mortality and Expense Risk Charges 1.25%
Administration Charge 0.15%
-----
Total Annual Expenses of the Sub-accounts 1.40%
</TABLE>
Underlying Mutual Fund Portfolio Annual Expenses (as a percentage of
average net assets)
Unless otherwise shown, the expenses shown below are for the year ending
December 31, 1995. "N/A" shown below indicates that no entity has agreed to
reimburse the particular expense indicated. "+" indicates that no reimbursement
was provided in 1995, but that the underlying mutual fund has indicated to us
that current arrangements (which may change) provide for reimbursement.
<TABLE>
<CAPTION>
Manage- Manage- Total Total
ment ment Other Other Annual Annual
Fee Fee Expenses Expenses Expenses Expenses
after without after without after without
any any any any any any
applicable applicable applicable applicable applicable applicable
reimburse- reimburse- reimburse- reimburse- reimburse- reimburse-
ment ment ment ment ment ment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American Skandia Trust
JanCap Growth N/A 0.90% + 0.22% + 1.12%
Lord Abbett Growth
and Income N/A 0.75% + 0.24% + 0.99%
Seligman Henderson
International Equity 0.90% 1.00% 0.27% 0.27% 1.17% 1.27%
Seligman Henderson
International Small Cap(1) N/A 1.00% + 0.46% + 1.46%
Federated Utility
Income N/A 0.75% + 0.18% + 0.93%
Federated High Yield N/A 0.75% + 0.36% + 1.11%
T. Rowe Price
Asset Allocation N/A 0.85% 0.40% 0.44% 1.25% 1.29%
T. Rowe Price
International Equity N/A 1.00% + 0.33% + 1.33%
T. Rowe Price
Natural Resources(1) N/A 0.90% 0.45% 0.90% 1.35% 1.80%
T. Rowe Price
International Bond(2) N/A 0.80% + 0.53% + 1.33%
Founders Capital Appreciation N/A 0.90% + 0.32% + 1.22%
INVESCO Equity Income N/A 0.75% + 0.23% + 0.98%
PIMCO Total Return Bond N/A 0.65% + 0.24% + 0.89%
PIMCO Limited Maturity Bond(1) N/A 0.65% + 0.24% + 0.89%
AST Phoenix Balanced Asset N/A 0.75% + 0.19% + 0.94%
AST Money Market 0.45% 0.50% 0.15% 0.22% 0.60% 0.72%
Berger Capital Growth N/A 0.75% + 0.42% + 1.17%
Robertson Stephens Value + Growth(3) N/A 1.00% + 0.45% + 1.45%
The Alger American Fund
Growth N/A 0.75% + 0.10% + 0.85%
Small Capitalization N/A 0.85% + 0.07% + 0.92%
MidCap Growth N/A 0.80% + 0.10% + 0.90%
Neuberger & Berman Advisers
Management Trust
Partners(4) N/A 0.85% + 0.30% + 1.15%
Montgomery Variable Series
Emerging Markets(5) N/A 1.25% + .50% + 1.75%
[The Galaxy VIP Fund(1)
Money Market N/A 0.40% + 0.71% + 1.11%
Equity N/A 0.75% + 0.49% + 1.24%
High Quality Bond N/A 0.55% + 1.02% + 1.57%
Asset Allocation N/A 0.75% + 0.79% + 1.54%
American Skandia Trust
JanCap Growth N/A 0.90% + 0.22% + 1.12%
Lord Abbett Growth
and Income N/A 0.75% + 0.24% + 0.99%
Seligman Henderson
International Equity 0.90% 1.00% 0.27% 0.27% 1.17% 1.27%
T. Rowe Price
Asset Allocation N/A 0.85% 0.40% 0.44% 1.25% 1.29%
T. Rowe Price
International Equity N/A 1.00% + 0.33% + 1.33%
Founders Capital Appreciation N/A 0.90% + 0.32% + 1.22%
INVESCO Equity Income N/A 0.75% + 0.23% + 0.98%
PIMCO Limited Maturity Bond N/A 0.65% + 0.24% + 0.89%
The Alger American Fund
Growth N/A 0.75% + 0.10% + 0.85%
Small Capitalization N/A 0.85% + 0.07% + 0.92%]
</TABLE>
(1) These portfolios commenced operation on May 1, 1995, therefore expenses
shown are annualized and should not be considered representative of future
expenses; actual expenses may be greater than shown.
(2) The Portfolio was formerly known as the "AST Scudder International Bond
Portfolio" and was managed by American Skandia Investment Services, Incorporated
("ASISI"), as investment manager, and was sub-advised by Scudder, Steven &
Clark, as sub-advisor, for a total fee payable at the annual rate of 1.0% of the
Portfolio's average daily net assets. As of May 1, 1996, the Portfolio is
managed by ASISI, as investment manager, and sub-advised by Rowe Price-Fleming
International, Inc., as sub-advisor, for a total fee payable at the annual rate
of .80 of 1.0% of the Portfolio's average daily net assets. The Management Fee
has been restated to reflect the current Management Fee. As of May 1, 1996
various changes have been made to the Portfolio's investment objective and
fundamental and non-fundamental investment restrictions.
(3) This portfolio commenced operation on May 1, 1996, therefore expenses shown
are estimated and annualized and should not be considered representative of
future expenses; actual expenses may be greater than shown.
(4) The "Management Fee" includes the aggregate of administration fees paid by
the Partners Portfolio of the Neuberger & Berman Advisers Management Trust
("AMT") and the management fees paid by the Series of AMT in which that
Portfolio invests, and "Other Expenses" include all other expenses of the
Portfolio and the corresponding Series. (See "Expenses" in the AMT prospectus).
The Management Fee has been restated to reflect current expenses.
(5) This portfolio commenced operation on February 2, 1996, therefore expenses
shown are estimated and annualized and should not be considered representative
of future expenses; actual expenses may be greater than shown.
The underlying mutual fund portfolio information was provided by the underlying
mutual funds. The Company has not independently verified such information.
The expenses of the underlying mutual fund portfolios either are currently being
partially reimbursed or may be partially reimbursed in the future. Management
Fees, Other Expenses and Total Annual Expenses are provided above on both a
reimbursed and not reimbursed basis, if applicable. See the prospectuses or
statements of additional information of the underlying mutual funds for details.
EXPENSE EXAMPLES: The examples which follow are designed to assist you in
understanding the various costs and expenses you will bear directly or
indirectly if you maintain Account Value in the Sub-accounts. The examples
reflect expenses of our Sub-accounts, as well as those of the underlying mutual
fund portfolios.
The examples shown assume that: (a) all your Account Value is maintained only in
Sub-accounts; (b) fees and expenses remain constant; (c) there are no
withdrawals of Account Value during the period shown; (d) there are no transfers
or other transactions subject to a fee during the period shown; (e) no tax
charge applies; and (f) the expenses throughout the period for the underlying
mutual fund portfolios will be the lower of the expenses without any applicable
reimbursement or expenses after any applicable reimbursement, as shown above in
the section entitled Contract Expense Summary.
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
Sub-accounts are referred to below by their specific names.
Examples (amounts shown are rounded to the nearest dollar)
<PAGE>
<TABLE>
<CAPTION>
If you do not surrender your Annuity at the end of
If you surrender your Annuity at the end of the the applicable time period or begin taking annuity
applicable time period, you would pay the following payments at such time, you would pay the
expenses on a $1,000 investment, assuming 5% annual following expenses on a $1,000 investment,
return on assets: assuming 5% annual return on assets:
- ------------------------------------------------------------------------------------------------------------------------------------
After: After:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sub-accounts 1 yr. 3 yrs. 5 yrs. 10 yrs. 1 yr. 3 yrs. 5 yrs. 10 yrs.
Seligman Henderson International 102 143 181 298 27 83 141 298
Equity
Seligman Henderson International
Small Cap 105 152 196 328 30 92 156 328
LA Growth and Income 100 137 172 280 25 77 132 280
JanCap Growth 102 142 179 294 27 82 139 294
Fed Utility Inc 100 136 169 274 25 76 129 274
Fed High Yield 101 141 178 293 26 81 138 293
AST Phoenix Balanced Asset 100 136 170 276 25 76 130 276
AST Money Market 96 125 152 240 21 65 112 240
T. Rowe Price Asset Allocation 103 145 185 307 28 85 145 307
T. Rowe Price International Equity 104 148 189 314 29 88 149 314
T. Rowe Price Natural Resources 104 148 190 317 29 88 150 317
T. Rowe Price International Bond 104 148 189 314 29 88 149 314
Founders Capital Appreciation 103 145 184 304 28 85 144 304
INVESCO Equity Income 100 137 172 280 25 77 132 280
PIMCO Total Return Bond 99 134 167 270 24 74 127 270
PIMCO Limited Maturity Bond 99 134 167 270 24 74 127 270
Berger Capital Growth 102 143 181 298 27 83 141 298
RS Value + Growth 105 151 195 325 30 91 155 325
AA Growth 99 133 165 267 24 73 125 267
AA Small Capitalization 99 135 168 273 24 75 128 273
AA MidCap Growth 99 134 167 270 24 74 127 270
NB Partners 102 142 180 297 27 82 140 297
MV Emerging Markets 108 160 210 354 33 100 170 354
[Money Market 97 129 158 251 22 69 118 251
Equity 104 150 193 321 29 90 153 321
High Quality Bond 99 135 168 272 24 75 128 272
Asset Allocation 104 150 193 321 29 90 153 321
JanCap Growth 102 142 179 294 27 82 139 294
LA Growth and Income 100 137 172 280 25 77 132 280
Seligman Henderson International
Equity 102 143 182 300 27 83 142 300
T. Rowe Price Asset Allocation 103 146 186 308 28 86 146 308
T. Rowe Price International Equity 104 148 190 315 29 88 150 315
Founders Capital Appreciation 103 145 184 304 28 85 144 304
INVESCO Equity Income 100 137 172 280 25 77 132 280
PIMCO Limited Maturity Bond 99 134 167 270 24 74 127 270
AA Growth 99 133 165 267 24 73 125 267
AA Small Capitalization 100 136 169 274 25 76 129 274]
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units in the
Sub-accounts are shown below, as is yield information on the AST Money Market
[GAL Money Market] Sub-account. All of these Sub-accounts were available during
the periods shown as investment options for other variable annuities we offer
pursuant to different prospectuses. The charges assessed against the
Sub-accounts under the terms of those other variable annuities are the same as
the charges assessed against such Sub-accounts under the Annuity offered
pursuant to this Prospectus.
Unit Prices And Numbers Of Units: The following table shows: (a) the Unit
Price as of the dates shown for Units in each of the Class 1 Sub-accounts of
Separate Account B available prior to the date of this Prospectus being offered
pursuant to this Prospectus or which we offer pursuant to certain other
prospectuses; and (b) the number of Units outstanding in each such Sub-account
as of the dates shown. The year in which operations commenced in each such
Sub-account is noted in parentheses. The portfolios in which a particular
Sub-account invests may or may not have commenced operations prior to the date
such Sub-account commenced operations. The initial offering price for each
Sub-account was $10.00.
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
AA Seligman Seligman
Small AA AST Henderson Henderson
Capitali- AA MidCap Money International International JanCap
zation Growth Growth Market Equity Small Cap Growth
(1988) (1988) (1993) (1992) (1989) (1995) (1992)
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/95 12,317,364 12,092,291 8,299,743 30,564,442 14,393,137 2,601,283 28,662,737
as of 12/31/94 9,356,764 5,614,760 4,308,374 27,491,389 14,043,215 0 22,354,170
as of 12/31/93 7,101,658 2,997,458 1,450,892 11,422,783 9,063,464 0 13,603,637
as of 12/31/92 4,846,024 1,482,037 0 457,872 1,948,773 0 1,476,139
as of 12/31/91 2,172,189 559,779 0 0 1,092,902 0 0
as of 12/31/90 419,718 82,302 0 0 398,709 0 0
as of 12/31/89 35,438 6,900 0 0 29,858 0 0
as of 12/31/88 3,000 0 0 0 0 0 0
Unit Price
as of 12/31/95 $39.78 $31.18 $19.00 $10.77 $18.23 $10.23 $14.85
as of 12/31/94 27.95 23.18 13.34 10.35 16.80 0 10.91
as of 12/31/93 29.65 23.18 13.74 10.12 16.60 0 11.59
as of 12/31/92 26.54 19.19 0 10.01 12.37 0 10.51
as of 12/31/91 26.00 17.32 0 0 13.69 0 0
as of 12/31/90 16.74 12.51 0 0 12.98 0 0
as of 12/31/89 15.61 12.19 0 0 13.64 0 0
as of 12/31/88 9.63 9.96 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Sub-account and the Year Sub-account Operations Commenced
LA AST T. Rowe T. Rowe T. Rowe
Growth Phoenix Fed Fed Price Price Price
and Balanced Utility High Asset International Natural
Income Asset Income Yield Allocation Equity Resources
(1992) (1993) (1993) (1994) (1994) (1994) (1995)
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/95 18,411,759 20,163,848 8,642,186 6,915,158 4,868,956 17,935,251 808,605
as of 12/31/94 7,479,449 13,986,604 7,177,232 2,106,791 2,320,063 11,166,758 0
as of 12/31/93 4,058,228 8,743,758 5,390,887 0 0 0 0
as of 12/31/92 956,949 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
Unit Price
as of 12/31/95 $15.22 $12.49 $12.20 $11.27 $11.92 $10.39 $11.01
as of 12/31/94 11.98 10.34 9.81 9.56 9.80 9.49 0
as of 12/31/93 11.88 10.47 10.69 0 0 0 0
as of 12/31/92 10.60 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
T. Rowe PIMCO PIMCO
Price Founders INVESCO Total Limited Berger
International Capital Equity Return Maturity Capital NB
Bond Appreciation Income Bond Bond Growth Partners
(1994) (1994) (1994) (1994) (1995) (1994) (1995)
------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/95 4,186,695 6,076,373 13,883,712 19,061,840 15,058,644 3,658,836 7,958,498
as of 12/31/94 1,562,364 2,575,105 6,633,333 4,577,708 0 301,267 0
as of 12/31/93 0 0 0 0 0 0 0
as of 12/31/92 0 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
Unit Price
as of 12/31/95 $10.51 $13.97 $12.33 $11.26 $10.37 $12.20 $12.05
as of 12/31/94 9.59 10.69 9.61 9.61 0 9.94 0
as of 12/31/93 0 0 0 0 0 0 0
as of 12/31/92 0 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
[ LA Seligman
GAL GAL GAL Growth Henderson
Money GAL High Quality Asset JanCap and International
Market* Equity* Bond* Allocation* Growth Income Equity
(1996) (1996) (1996) (1996) (1992) (1992) (1989)
------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/95 0 0 0 0 28,662,737 18,411,759 14,393,137
as of 12/31/94 0 0 0 0 22,354,170 7,479,449 14,043,215
as of 12/31/93 0 0 0 0 13,603,637 4,058,228 9,063,464
as of 12/31/92 0 0 0 0 1,476,139 956,949 1,948,773
as of 12/31/91 0 0 0 0 0 0 1,092,902
as of 12/31/90 0 0 0 0 0 0 398,709
as of 12/31/89 0 0 0 0 0 0 29,858
Unit Price
as of 12/31/95 0 0 0 0 $14.85 $15.22 $18.23
as of 12/31/94 0 0 0 0 10.91 11.98 16.80
as of 12/31/93 0 0 0 0 11.59 11.88 16.60
as of 12/31/92 0 0 0 0 10.51 10.60 12.37
as of 12/31/91 0 0 0 0 0 0 13.69
as of 12/31/90 0 0 0 0 0 0 12.98
as of 12/31/89 0 0 0 0 0 0 13.64
</TABLE>
<TABLE>
<CAPTION>
T. Rowe T. Rowe PIMCO AA
Price Price Founders INVESCO Limited Small
Asset International Capitalization Equity Maturity AA Capitali-
Allocation Equity Appreciation Income Bond Growth zation
(1994) (1994) (1994) (1994) (1995) (1988) (1988)
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/95 4,868,956 17,935,251 6,076,373 13,883,712 15,058,644 12,092,291 12,317,364
as of 12/31/94 2,320,063 11,166,758 2,575,105 6,633,333 0 5,614,760 9,356,764
as of 12/31/93 0 0 0 0 0 2,997,458 7,101,658
as of 12/31/92 0 0 0 0 0 1,482,037 4,846,024
as of 12/31/91 0 0 0 0 0 559,779 2,172,189
as of 12/31/90 0 0 0 0 0 82,302 419,718
as of 12/31/89 0 0 0 0 0 6,900 35,438
as of 12/31/88 0 0 0 0 0 0 3,000
Unit Price
as of 12/31/95 $11.92 $10.39 $13.97 $12.33 $10.37 $31.18 $39.78
as of 12/31/94 9.80 9.49 10.69 9.61 0 23.18 27.95
as of 12/31/93 0 0 0 0 0 23.18 29.65
as of 12/31/92 0 0 0 0 0 19.19 26.54
as of 12/31/91 0 0 0 0 0 17.32 26.00
as of 12/31/90 0 0 0 0 0 12.51 16.74
as of 12/31/89 0 0 0 0 0 12.19 15.61
as of 12/31/88 0 0 0 0 0 9.96 9.63]
</TABLE>
*These Sub-accounts were not operational prior to the date of this Prospectus.
The financial statements of the Sub-accounts being offered to you are found in
the Statement of Additional Information.
Yields On Money Market Sub-account: Shown below are the current and
effective yields for a hypothetical contract. The yield is calculated based on
the performance of the AST Money Market -[GAL Money Market] Sub-account during
the last seven days of the calendar year ending prior to the date of this
Prospectus. At the beginning of the seven day period, the hypothetical contract
had a balance of one Unit. The current and effective yields reflect the
recurring charges against the Sub-account. Please note that current and
effective yield information will fluctuate. This information may not provide a
basis for comparisons with deposits in banks or other institutions which pay a
fixed yield over a stated period of time, or with investment companies which do
not serve as underlying funds for variable annuities.
Sub-account Current Yield Effective Yield
AST Money Market 5.34% 5.48%
[GAL Money Market 5.25% 5.39%]
INVESTMENT OPTIONS: We offer a range of variable and fixed options as ways
to invest your Account Value. Compensation to your representative may depend on
the investment options selected (see "Sale of the Annuities").
Variable Investment Options: During the accumulation phase, we offer a
number of Sub-accounts as variable investment options. These are all Class 1
Sub-accounts of American Skandia Life Assurance Corporation Variable Account B
("Separate Account B"). Each of these Sub-accounts invests exclusively in one
underlying mutual fund, or a portfolio of an underlying mutual fund. As of the
date of this Prospectus, our Sub-accounts and the underlying mutual funds or
portfolios in which they invest are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Small Capitalization Small Capitalization
AA Growth Growth
AA MidCap Growth MidCap Growth
Underlying Mutual Fund: Neuberger & Berman Advisers
Management Trust
Sub-account Underlying Mutual Fund Portfolio
NB Partners Partners
Underlying Mutual Fund: American Skandia Trust
Sub-account Underlying Mutual Fund Portfolio
Seligman Henderson International Equity Seligman Henderson International Equity
Seligman Henderson International Seligman Henderson International
Small Cap Small Cap
LA Growth and Income Lord Abbett Growth and Income
JanCap Growth JanCap Growth
Fed Utility Inc Federated Utility Income
Fed High Yield Federated High Yield
AST Phoenix Balanced Asset AST Phoenix Balanced Asset
AST Money Market AST Money Market
T. Rowe Price Asset Allocation T. Rowe Price Asset Allocation
T. Rowe Price International Equity T. Rowe Price International Equity
T. Rowe Price Natural Resources T. Rowe Price Natural Resources
T. Rowe Price International Bond T. Rowe Price International Bond
Founders Capital Appreciation Founders Capital Appreciation
INVESCO Equity Income INVESCO Equity Income
PIMCO Total Return Bond PIMCO Total Return Bond
PIMCO Limited Maturity Bond PIMCO Limited Maturity Bond
Berger Capital Growth Berger Capital Growth
RS Value + Growth Robertson Stephens Value + Growth
Underlying Mutual Fund: Montgomery Variable Series
Sub-account Underlying Mutual Fund Portfolio
MV Emerging Markets Montgomery Variable Series: Emerging Markets
[ Underlying Mutual Fund: Galaxy VIP fund
Sub-Account Underlying Mutual Fund Portfolio
GAL Money Market Money Market Portfolio
GAL Equity Equity Portfolio
GAL High Quality Bond High Quality Bond Portfolio
GAL Asset Allocation Asset Allocation Portfolio
Underlying Mutual Fund: American Skandia Trust
Sub-account Underlying Mutual Fund Portfolio
JanCap Growth JanCap Growth
LA Growth and Income Lord Abbett Growth and Income
Seligman Henderson International Equity Seligman Henderson International Equity
T. Rowe Price Asset Allocation T. Rowe Price Asset Allocation
T. Rowe Price International Equity T. Rowe Price International Equity
Founders Capital Appreciation Founders Capital Appreciation
INVESCO Equity Income INVESCO Equity Income
PIMCO Limited Maturity Bond PIMCO Limited Maturity Bond
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Growth Growth
AA Small Capitalization Small Capitalization]
</TABLE>
Certain Sub-accounts may not be available in all jurisdictions. If and when we
obtain approval of the applicable authorities to make such variable investment
options available, we will notify Owners of the availability of such
Sub-accounts.
We may make other underlying mutual funds available by creating new
Sub-accounts. Additionally, new portfolios may be made available by the creation
of new Sub-accounts from time to time. Such a new portfolio of an underlying
mutual fund may be disclosed in its prospectus. However, addition of a portfolio
does not require us to create a new Sub-account to invest in that portfolio. We
may take other actions in relation to the Sub-accounts and/or Separate Account B
(see "Modifications").
Each underlying mutual fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment company.
Each underlying mutual fund or portfolio thereof may or may not be diversified
as defined in the 1940 Act. As of the date of this Prospectus, the portfolios in
which Sub-accounts offered pursuant to this Prospectus invest are those shown
above. A summary of the investment objectives and policies of such underlying
mutual fund portfolios is found in Appendix B. The trustees or directors, as
applicable, of an underlying mutual fund may add, eliminate or substitute
portfolios from time to time. Generally, each portfolio issues a separate class
of shares. Shares of the underlying mutual fund portfolios are available to
separate accounts of life insurance companies offering variable annuity and
variable life insurance products. The shares may also be made available, subject
to obtaining all required regulatory approvals, for direct purchase by various
pension and retirement savings plans that qualify for preferential tax treatment
under the Code.
The investment objectives, policies, charges, operations, the attendant risks
and other details pertaining to each underlying mutual fund portfolio are
described in the prospectus of each underlying mutual fund and the statements of
additional information for such underlying mutual fund. Also included in such
information is the investment policy of each mutual fund or portfolio regarding
the acceptable ratings by recognized rating services for bonds and other debt
obligations. There can be no guarantee that any underlying mutual fund or
portfolio will meet its investment objectives.
Shares of the underlying mutual funds may be available to variable life
insurance and variable annuity separate accounts of other insurance companies.
Possible consequences of this multiple availability are discussed in the
subsection entitled Resolving Material Conflicts.
The prospectus for any underlying mutual fund or funds being considered by you
should be read in conjunction herewith. A copy of each prospectus may be
obtained without charge from us by calling our Concierge Desk [Galaxy Annuity
Customer Service], 1-800-752-6342 [1-800-444-3970] or writing to us at P.O. Box
883, Attention: Concierge Desk [Galaxy Annuity Customer Service], Shelton,
Connecticut, 06484-0883.
Fixed Investment Options: For the payout phase you may elect fixed annuity
payments based on our then current annuity rates. The discussion below describes
the fixed investment options in the accumulation phase.
As of the date of this Prospectus we offer in most jurisdictions in which the
Annuity is available Fixed Allocations with Guarantee Periods of 1, 2, 3, 5, 7
and 10 years. Each such Fixed Allocation is accounted for separately. Each Fixed
Allocation earns a fixed rate of interest throughout a set period of time called
a Guarantee Period. Multiple Fixed Allocations are permitted, subject to our
allocation rules. The duration of a Guarantee Period may be the same or
different from the duration of the Guarantee Periods of any of your prior Fixed
Allocations.
We may or may not be able to obtain approval in the future in certain
jurisdictions of endorsements to individual or group annuities that include the
type of Fixed Allocations offered pursuant to this Prospectus. If such approval
is obtained, we may take those steps needed to make such Fixed Allocations
available to purchasers to whom Annuities were issued prior to the date of such
approval.
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those which were available
when your Annuity was issued. We also reserve the right at any time to stop
accepting new allocations, transfers or renewals for a particular Guarantee
Period. Such an action may have an impact on the MVA (see "Account Value of the
Fixed Allocations").
A Guarantee Period for a Fixed Allocation begins: (a) when all or part of a Net
Purchase Payment is allocated for that particular Guarantee Period; (b) upon
transfer of any of your Account Value to a Fixed Allocation for that particular
Guarantee Period; or (c) when a Guarantee Period attributable to a Fixed
Allocation "renews" after its Maturity Date.
We declare the rates of interest applicable during the various Guarantee Periods
offered. Declared rates are effective annual rates of interest. The rate of
interest applicable to a Fixed Allocation is the one in effect when its
Guarantee Period begins. The rate is guaranteed throughout the Guarantee Period.
We inform you of the interest rate applicable to a Fixed Allocation, as well as
its Maturity Date, when we confirm the allocation. We declare interest rates
applicable to new Fixed Allocations from time-to-time. Any new Fixed Allocation
in an existing Annuity is credited interest at a rate not less than the rate we
are then crediting to Fixed Allocations for the same Guarantee Period selected
by new Annuity purchasers in the same class.
To the extent permitted by law, we reserve the right, from time to time, to
increase interest rates offered to the class of Owners who, during the term of
such offering, choose to participate in various services we make available. This
may include, but is not limited to, Owners who elect to use dollar cost
averaging from Fixed Allocations (see "Dollar Cost Averaging") or the balanced
investment program (see "Balanced Investment Program"). We may do so at our sole
discretion.
The interest rates we credit are subject to a minimum. We may declare a higher
rate. The minimum is based on both an index and a reduction to the interest rate
determined according to the index.
The index is based on the published rate for certificates of indebtedness
(bills, notes or bonds, depending on the term of indebtedness) of the United
States Treasury at the most recent Treasury auction held at least 30 days prior
to the beginning of the applicable Fixed Allocation's Guarantee Period. The term
(length of time from issuance to maturity) of the certificates of indebtedness
upon which the index is based is the same as the duration of the Guarantee
Period. If no certificates of indebtedness are available for such term, the next
shortest term is used. If the United States Treasury's auction program is
discontinued, we will substitute indexes which in our opinion are comparable. If
required, implementation of such substitute indexes will be subject to approval
by the Securities and Exchange Commission and the Insurance Department of the
jurisdiction in which your Annuity was delivered. (For Annuities issued as
certificates of participation in a group contract, it is our expectation that
approval of only the jurisdiction in which such group contract was delivered
applies.)
The reduction used in determining the minimum interest rate is two and one
quarter percent of interest (2.25%).
Where required by the laws of a particular jurisdiction, a specific minimum
interest rate, compounded yearly, will apply should the index less the reduction
be less than the specific minimum interest rate applicable to that jurisdiction.
WE MAY CHANGE THE INTEREST RATES WE CREDIT NEW FIXED ALLOCATIONS AT ANY TIME.
Any such change does not have an impact on the rates applicable to Fixed
Allocations with Guarantee Periods that began prior to such change. However,
such a change will affect the MVA (see "Account Value of the Fixed
Allocations").
We have no specific formula for determining the interest rates we declare. Rates
may differ between classes and between types of annuities we offer, even for
guarantees of the same duration starting at the same time. We expect our
interest rate declarations for Fixed Allocations to reflect the returns
available on the type of investments we make to support the various classes of
annuities supported by the assets in Separate Account D. However, we may also
take into consideration in determining rates such factors including, but not
limited to, the durations offered by the annuities supported by the assets in
Separate Account D, regulatory and tax requirements, the liquidity of the
secondary markets for the type of investments we make, commissions,
administrative expenses, investment expenses, our mortality and expense risks in
relation to Fixed Allocations, general economic trends and competition. OUR
MANAGEMENT MAKES THE FINAL DETERMINATION AS TO INTEREST RATES TO BE CREDITED. WE
CANNOT PREDICT THE RATES WE WILL DECLARE IN THE FUTURE.
OPERATIONS OF THE SEPARATE ACCOUNTS: The assets supporting our obligations
under the Annuities may be held in various accounts, depending on the obligation
being supported. In the accumulation phase, assets supporting Account Values are
held in separate accounts established under the laws of the State of
Connecticut. In the payout phase, assets supporting fixed annuity payments and
any adjustable annuity payments we make available are held in our general
account.
Separate Accounts: We are the legal owner of assets in the separate
accounts. Income, gains and losses, whether or not realized, from assets
allocated to these separate accounts, are credited to or charged against each
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, gains or losses in any other of our separate accounts. We will maintain
assets in each 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 only be charged with
liabilities which arise from such annuities. This may include Annuities offered
pursuant to this Prospectus or certain other annuities we may offer. The
investments made by separate accounts are subject to the requirements of
applicable state laws. These investment requirements may differ between those
for separate accounts supporting variable obligations and those for separate
accounts supporting fixed obligations.
Separate Account B: In the accumulation phase, the assets supporting
obligations based on allocations to the variable investment options are held in
our Separate Account B. Separate Account B consists of multiple Sub-accounts.
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 all Class 1
Sub-accounts of Separate Account B. Each class of Sub-accounts in Separate
Account B have a different level of charges assessed against such Sub-accounts.
The amount of our obligations 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 is registered with the SEC under the 1940 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 single mutual fund or
mutual fund portfolio.
The only Sub-accounts available for allocation of your Account Value are those
offered pursuant to this Prospectus. Persons interested in our other annuities
may be offered the same or different Sub-accounts of Separate Account B or any
of our other separate accounts. Such sub-accounts may invest in some or all of
the same underlying mutual funds or portfolios of such underlying mutual funds
as the Sub-accounts offered pursuant to this Prospectus. As of the date of this
Prospectus, the Annuities offered pursuant to this Prospectus and annuities
offered pursuant to a number of other prospectuses maintained assets in Class 1
Sub-accounts. We may offer additional annuities that maintain assets in Class 1
Sub-accounts. In addition, some of the Class 1 Sub-accounts may invest in
underlying mutual funds or underlying mutual fund portfolios in which
Sub-accounts in other classes of Separate Account B invest.
You will find additional information about these underlying mutual funds and
portfolios in the prospectuses for such funds. Portfolios added to the
underlying mutual funds may or may not be offered through added Sub-accounts.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to add Sub-accounts,
eliminate Sub-accounts, to combine Sub-accounts, or to substitute underlying
mutual funds or portfolios of underlying mutual funds.
Values and benefits based on allocations to the Sub-accounts will vary with the
investment performance of the underlying mutual funds or fund portfolios, as
applicable. We do not guarantee the investment results of any Sub-account, nor
is there any assurance that the Account Value allocated to the Sub-accounts will
equal the amounts allocated to the Sub-accounts as of any time other than the
Valuation Period of such allocation. You bear the entire investment risk.
Separate Account D: In the accumulation phase, assets supporting our
obligations based on Fixed Allocations are held in Separate Account D, which is
a "non-unitized" separate account. Such obligations are based on the interest
rates we credit to Fixed Allocations and the terms of the Annuities. These
obligations do not depend on the investment performance of the assets in
Separate Account D. Separate Account D was established by us pursuant to
Connecticut law.
There are no discrete units in Separate Account D. No party with rights under
any annuity nor any group contract owner participates in the investment gain or
loss from assets belonging to Separate Account D. Such gain or loss accrues
solely to us. We retain the risk that the value of the assets in Separate
Account D may drop below the reserves and other liabilities we must maintain.
Should the value of the assets in Separate Account D drop below the reserve and
other liabilities we must maintain in relation to the annuities supported by
such assets, we will transfer assets from our general account to Separate
Account D to make up the difference. We have the right to transfer to our
general account any assets of Separate Account D in excess of such reserves and
other liabilities. We maintain assets in Separate Account D supporting a number
of annuities we offer.
If you surrender, withdraw or transfer Account Value from a Fixed Allocation
before the end of its Guarantee Period, you bear the risk inherent in the MVA
(see "Account Value of the Fixed Allocations"). The Account Value of a Fixed
Allocation is guaranteed on its Maturity Date to be its then current Interim
Value.
We operate Separate Account D in a fashion designed to meet the obligations
created by Fixed Allocations. Factors affecting these operations include the
following:
(1) The State of New York, which is one of the jurisdictions in which
we are licensed to do business, requires that we meet certain "matching"
requirements. These requirements address the matching of the durations of the
assets with the durations of obligations supported by such assets. We believe
these matching requirements are designed to control an insurer's ability to risk
investing in long-term assets to support short term interest rate guarantees. We
also believe this limitation controls an insurer's ability to offer unrealistic
rate guarantees.
(2) We employ an investment strategy designed to limit the risk of
default. Some of the guidelines of our current investment strategy for Separate
Account D include, but are not limited to, the following:
(a) Investments may be made in cash; debt securities issued by
the United States Government or its agencies and instrumentalities; money market
instruments; short, intermediate and long-term corporate obligations; private
placements; asset-backed obligations; and municipal bonds.
(b) At the time of purchase, fixed income securities will be in one of the
top four generic lettered rating classifications as established by Standard &
Poor's, Moody's Investor Services, Inc. or any Nationally Recognized Statistical
Rating Organization ("NRSRO").
We are not obligated to invest according to the aforementioned guidelines or any
other strategy except as may be required by Connecticut and other state
insurance laws.
(3) We have the sole discretion to employ investment managers that we
believe are qualified, experienced and reputable to manage Separate Account D.
We currently employ investment managers for Separate Account D including, but
not limited to, J.P. Morgan Investment Management Inc. Each manager is
responsible for investment management of different portions of Separate Account
D. From time to time additional investment managers may be employed or
investment managers may cease being employed. We are under no obligation to
employ or continue to employ any investment manager(s).
(4) The assets in Separate Account D are accounted for at their market
value, rather than at book value.
(5) We are obligated by law to maintain our capital and surplus, as
well as our reserves, at the levels required by applicable state insurance law
and regulation.
INSURANCE ASPECTS OF THE ANNUITY: As an insurance company we bear the
insurance risk inherent in the Annuity. This includes the risks that mortality
and expenses exceed our expectations, and the investment and re-investment risks
in relation to the assets supporting obligations not based on the investment
performance of a separate account. We are subject to regulation that requires
reserving and other practices in a manner that minimizes the insurance risk (see
"Regulation").
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY: The Annuity charges
which are assessed or may be assessable under certain circumstances are the
contingent deferred sales charge, the maintenance fee, a charge for taxes and a
transfer fee. These charges are allocated according to our rules. The
maintenance fee and transfer charge are not assessed if no Account Value is
maintained in the Sub-accounts at the time such fee or charge is payable.
However, we make certain assumptions regarding maintenance and transfer expenses
as part of the overall expense assumptions used in determining the interest
rates we credit to Fixed Allocations. Charges are also assessed against the
Sub-accounts and the underlying mutual funds. We also may charge you for special
services, such as dollar cost averaging, rebalancing, Systematic Withdrawals,
Minimum Distributions, and additional reports. As of the date of this
Prospectus, we do not charge you for any special services.
Contingent Deferred Sales Charge: Although we incur sales expenses in
connection with the sale of contracts (for example, preparation of sales
literature, expenses of selling and distributing the contracts, including
commissions, and other promotional costs), we do not deduct any charge from your
Purchase Payments for such expenses. However, a contingent deferred sales charge
may be assessed. We assess a contingent deferred sales charge against the
portion of any withdrawal or surrender that is deemed to be a liquidation of
your Purchase Payments paid within the preceding seven years. The contingent
deferred sales charge applies to each Purchase Payment that is liquidated. It is
a decreasing percentage of each Purchase Payment being liquidated. The charge
decreases as the Purchase Payment ages. The aging of a Purchase Payment is
measured from the date it is applied to your Account Value. The charge is: year
1 -7.5%; year 2 - 7.0%; year 3 - 6.0%; year 4 - 5.0%; year 5 - 4.0%; year 6 -
3.0%; year 7 - 2.0%; year 8 and thereafter - 0%.
Each Annuity Year in the accumulation phase you may withdraw a limited amount of
Account Value without application of any contingent deferred sales charge (see
"Free Withdrawal"). However, for purposes of the contingent deferred sales
charge, amounts withdrawn as a free withdrawal are not considered a liquidation
of Purchase Payments. Account Value is deemed withdrawn according to specific
rules in determining how much, if any, contingent deferred sales charge applies
to a partial withdrawal (see "Partial Withdrawal"). There is no contingent
deferred sales charge on Purchase Payments that were applied at least 7 years
prior to the date of either a full surrender or a partial withdrawal. Where
permitted by law, any contingent deferred sales charge applicable to a full
surrender is waived if such full surrender qualifies under our rules as a
medically-related withdrawal (see "Medically-Related Surrenders").
From time to time we may reduce the amount of the contingent deferred sales
charge, the period during which it applies, or both, when Annuities are sold to
individuals or a group of individuals in a manner that reduces sales expenses.
We would consider such factors as: (a) the size and type of group; (b) the
amount of Purchase Payments; (c) present Owners making additional Purchase
Payments; and/or (d) other transactions where sales expenses are likely to be
reduced.
No contingent deferred sales charge is imposed when any group annuity contract
or any Annuity issued pursuant to this Prospectus is owned on its Issue Date by:
(a) any parent company, affiliate or subsidiary of ours; (b) an officer,
director, employee, retiree, sales representative, or in the case of an
affiliated broker-dealer, registered representative of such company; (c) a
director or trustee of any underlying mutual fund; (d) a director, officer or
employee of any investment manager or sub-advisor providing investment
management and/or advisory services to an underlying mutual fund or any
affiliate of such investment manager or sub-advisor; (e) a director, officer,
employee or registered representative of a broker-dealer that has a then current
selling agreement with American Skandia Marketing, Incorporated; (f) the then
current spouse of any such person noted in (b) through (e), above; (g) the
parents of any such person noted in (b) through (f), above; and (h) such
person's child or other legal dependent under the age of 21.
No contingent deferred sales charge is assessed on Minimum Distributions, to the
extent such Minimum Distributions are required from your Annuity at the time it
is taken. However, the charge may be assessed for any partial withdrawal taken
in excess of the Minimum Distribution, even if such amount is taken to meet
minimum distribution requirements in relation to other savings or investments
held pursuant to various retirement plans designed to qualify for preferred tax
treatment under various sections of the Code (see "Minimum Distributions").
Any elimination of the contingent deferred sales charge or any reduction to the
amount or duration of such charges will not discriminate unfairly between
Annuity purchasers. We will not make any such changes to this charge where
prohibited by law.
Expenses incurred in connection with the sale of Annuities may exceed the
charges made for such purpose. We expect that the contingent deferred sales
charge will not be sufficient to cover the sales expenses. We expect to meet any
deficiency from any profit we may make on Annuities and from our surplus. This
may include proceeds from, among others, the mortality and expense risk charges
assessed against the Sub-accounts.
Maintenance Fee: A maintenance fee equaling the smaller of $30 or 2% of
your then current Account Value is deductible from the Account Values in the
Sub-accounts annually and upon surrender. The fee is limited to the Account
Values in the Sub-accounts as of the Valuation Period such fee is due. Certain
representations regarding the maintenance fee are found in the section entitled
Administration Charge.
Tax Charges: In several states a tax is payable. We will deduct the amount
of tax payable, if any, from your Purchase Payments if the tax is then incurred
or from your Account Value when applied under an annuity option if the tax is
incurred at that time. The amount of the tax varies from jurisdiction to
jurisdiction. It may also vary depending on whether the Annuity qualifies for
certain treatment under the Code. In each jurisdiction, the state legislature
may change the amount of any current tax, may decide to impose the tax,
eliminate it, or change the time it becomes payable. In those jurisdictions
imposing such a tax, the tax rates currently in effect range up to 31/2%. In
addition to state taxes, local taxes may also apply. The amounts of these taxes
may exceed those for state taxes.
Transfer Fee: We charge $10.00 for each transfer after the twelfth in each
Annuity Year. However, the fee is only charged if there is Account Value in at
least one Sub-account immediately subsequent to such transfer.
Allocation Of Annuity Charges: Charges applicable to a surrender are used
in calculating Surrender Value. Charges applicable to any type of withdrawal are
taken from the investment options in the same ratio as such a withdrawal is
taken from the investment options (see "Allocation Rules"). The transfer fee is
assessed against the Sub-accounts in which you maintain Account Value
immediately subsequent to such transfer. The transfer fee is allocated on a
pro-rata basis in relation to the Account Values in such Sub-accounts as of the
Valuation Period for which we price the applicable transfer. No fee is assessed
if there is no Account Value in any Sub-account at such time. Tax charges are
assessed against the entire Purchase Payment or Account Value as applicable. The
maintenance fee is assessed against the Sub-accounts on a pro-rata basis in
relation to the Account Values in each Sub-account as of the Valuation Period
for which we price the fee.
CHARGES ASSESSED AGAINST THE ASSETS: There are charges assessed against
assets in the Sub-accounts. These charges are described below. There are no
charges deducted from the Fixed Allocations. The factors we use in determining
the interest rates we credit Fixed Allocations are described above in the
subsection entitled Fixed Investment Options. No charges are deducted from
assets supporting fixed or adjustable annuity payments. The factors we use in
determining fixed or adjustable annuity payments include, but are not limited
to, our expected investment returns, costs, risks and profit targets. We reserve
the right to assess a charge against the Sub-accounts and the Fixed Allocations
equal to any taxes which may be imposed upon the separate accounts.
Administration Charge: We assess each Class 1 Sub-account, on a daily
basis, an administration charge. The charge is 0.15% per year of the average
daily total value of such Sub-account.
We assess the administration charge and the maintenance fee, described in the
subsection entitled Maintenance Fee, at amounts we believe necessary to recover
the actual costs of maintaining and administering the Account Values allocated
to the Class 1 Sub-accounts and Separate Account B itself. The administration
charge and maintenance fee can be increased only for Annuities issued subsequent
to the effective date of any such change.
A relationship does not necessarily exist between the portion of the
administration charge and the maintenance fee attributable to a particular
Annuity and the expenses attributable to that Annuity. However, we believe the
total administration charges made against the Class 1 Sub-accounts will not be
greater than the total anticipated costs. We allocate costs pro-rata between
classes in Separate Account B in proportion to the assets in various classes.
Types of expenses which might be incurred include, but are not necessarily
limited to, the expenses of: developing and maintaining a computer support
system for administering the Account Values in the Sub-accounts and Separate
Account B itself, preparing and delivering confirmations and quarterly
statements, processing transfers, withdrawal and surrender requests, responding
to Owner inquiries, reconciling and depositing cash receipts, calculating and
monitoring daily values of each Sub-account, reporting for the Sub-accounts,
including quarterly, semi-annual and annual reports, and mailing and tabulation
of shareholder proxy solicitations.
From time to time we may reduce the amount of the maintenance fee and/or the
administration charge. We may do so when Annuities are sold to individuals or a
group of individuals in a manner that reduces maintenance and/or administrative
expenses. We would consider such factors as: (a) the size and type of group; (b)
the number of Annuities purchased by an Owner; (c) the amount of Purchase
Payments; and/or (d) other transactions where maintenance and/or administration
expenses are likely to be reduced.
Any elimination of the maintenance fee and/or the administration charge or any
reduction of such charges will not discriminate unfairly between Annuity
purchasers. We will not make any changes to these charges where prohibited by
law.
Mortality and Expense Risk Charges: For Class 1 Sub-accounts, the mortality
risk charge is 0.90% per year and the expense risk charge is 0.35% per year.
These charges are assessed in combination each day against each Sub-account at
the rate of 1.25% per year of the average daily total value of each Sub-account.
With respect to the mortality risk charge, we assume the risk that the mortality
experience under the Annuities may be less favorable than our assumptions. This
could arise for a number of reasons, such as when persons upon whose lives
annuity payments are based live longer than we anticipated, or when the
Sub-accounts decline in value resulting in losses in paying death benefits. If
our mortality assumptions prove to be inadequate, we will absorb any resulting
loss. Conversely, if the actual experience is more favorable than our
assumptions, then we will benefit from the gain. We also assume the risk that
the administration charge may be insufficient to cover our actual administration
costs. If we realize a profit from the mortality and expense risk charges, such
profit may be used to recover sales expenses incurred which may not be recovered
by the contingent deferred sales charge.
CHARGES OF THE UNDERLYING MUTUAL FUNDS: Each underlying mutual fund
assesses various charges for investment management and investment advisory fees.
These charges generally differ between portfolios within the same underlying
mutual fund. You will find additional details in the fund prospectuses and the
statements of additional information.
PURCHASING ANNUITIES: You may purchase an Annuity for various purposes. You
must meet our requirements before we issue an Annuity and it takes effect.
Certain benefits may be available to certain classes of purchasers. You have a
"free-look" period during which you may return your Annuity for a refund amount
which may be less or more than your Purchase Payment, except in specific
circumstances.
Uses Of The Annuity: The Annuity may be issued in connection with or
purchased as a funding vehicle for certain retirement plans designed to meet the
requirements of various sections of the Code. These include, but are not limited
to: (a) Sections 401 (corporate, association, or self-employed individuals'
retirement plans); (b) Section 403(b) (tax-sheltered annuities available to
employees of certain qualifying employers); and (c) Section 408 (individual
retirement accounts and individual retirement annuities - "IRAs"; Simplified
Employee Pensions). We may require additional information regarding such plans
before we issue an Annuity to be used in connection with such retirement plans.
We may also restrict or change certain rights and benefits if, in our opinion,
such restrictions or changes are necessary for your Annuity to be used in
connection with such retirement plans. We may elect to no longer offer Annuities
in connection with various retirement plans. As of May 1, 1996, the Annuity will
no longer be offered in connection with Section 401 plans. The Annuity may also
be used in connection with plans that do not qualify under the sections of the
Code noted above. Some of the potential tax consequences resulting from various
uses of the Annuities are discussed in the section entitled "Certain Tax
Consequences".
Application And Initial Payment: You must meet our underwriting
requirements and forward a Purchase Payment if you seek to purchase an Annuity.
These requirements may include a properly completed Application. Where permitted
by law, we may issue an Annuity without completion of an Application for certain
classes of Annuities.
The minimum initial Purchase Payment we accept is $1,000 unless you authorize
the use of bank drafting to make Purchase Payments (see "Bank Drafting"). If you
choose bank drafting, we will accept a lower initial Purchase Payment provided
that the Purchase Payments received in the first year total at least $1,000. The
initial Purchase Payment must be paid by check or by wire transfer. It cannot be
made through bank drafting. Our Office must give you prior approval before we
accept a Purchase Payment that would result in the Account Value of all
annuities you maintain with us exceeding $500,000. We confirm each Purchase
Payment in writing. Multiple annuities purchased from us within the same
calendar year may be treated for tax purposes as if they were a single annuity
(see "Certain Tax Considerations").
We reserve the right to allocate your initial Net Purchase Payment to the
investment options up to two business days after we receive, at our Office, all
of our requirements for issuing the Annuity as applied for. We may retain the
Purchase Payment and not allocate the initial Net Purchase Payment to the
investment options for up to five business days while we attempt to obtain all
such requirements. We will try to reach you or any other party from whom we need
any information or materials. If the requirements cannot be fulfilled within
that time, we will: (a) attempt to inform you of the delay; and (b) return the
amount of the Purchase Payment, unless you specifically consent to our retaining
it until all our requirements are met. Once our requirements are met, the
initial Net Purchase Payment is applied to the investment options within two
business days. Once we accept your Purchase Payment and our requirements are
met, we issue an Annuity.
Bank Drafting: You may make Purchase Payments to your Annuity using bank
drafting, but only for allocations to variable investment options. However, you
must pay at least one prior Purchase Payment by check or wire transfer. We will
accept an initial Purchase Payment lower than our standard minimum Purchase
Payment requirement of $1,000 if you also furnish bank drafting instructions
that provide amounts that will meet a $1,000 minimum Purchase Payment
requirement to be paid within 12 months. We will accept an initial Purchase
Payment in an amount as low as $100, but it must be accompanied by a bank
drafting authorization form allowing monthly Purchase Payments of at least $75.
Periodic Purchase Payments: We may, from time-to-time, offer opportunities
to make Purchase Payments automatically on a periodic basis, subject to our
rules. These opportunities may include, but are not limited to, certain salary
reduction programs agreed to by an employer. As of the date of this Prospectus,
we only agree to accept Purchase Payments on such a basis if: (a) we receive
your request In Writing for a salary reduction program and we agree to accept
Purchase Payments on this basis; (b) the allocations are only to variable
investment options or the frequency and number of allocations to fixed
investment options is limited in accordance with our rules; and (c) the total of
Purchase Payments in the first Annuity Year is scheduled to equal at least our
then current minimum requirements. We may also require an initial Purchase
Payment to be submitted by check or wire before agreeing to such a program. Our
minimum requirements may differ based on the usage of the Annuity, such as
whether it is being used in conjunction with certain retirement plans.
Right to Return the Annuity: You have the right to return the Annuity
within twenty-one days of receipt or longer where required by law. The period in
which you can take this action is known as a "free-look" period. To exercise
your right to return the Annuity during the "free-look" period, you must return
the Annuity. The amount to be refunded is the then current Account Value plus
any tax charge deducted. This is the "standard refund". If necessary to meet
Federal requirements for IRAs or certain state law requirements, we return the
greater of the "standard refund" or the Purchase Payments received less any
withdrawals (see "Allocation of Net Purchase Payments"). We tell you how we
determine the amount payable under any such right at the time we issue your
Annuity. Upon the termination of the "free-look" period, if you surrender your
Annuity, you may be assessed certain charges (see "Charges Assessed or
Assessable Against the Annuity").
Allocation of Net Purchase Payments: All allocations of Net Purchase
Payments are subject to our allocation rules (see "Allocation Rules").
Allocation of the portion of the initial Net Purchase Payment and any Net
Purchase Payments received during the free-look period that you wish to allocate
to any Sub-accounts are subject to an additional allocation rule if state law
requires return of at least your Purchase Payments should you return the Annuity
under such free-look provision. If such state law applies to your Annuity: (a)
we allocate any portion of any such Net Purchase Payments that you indicate you
wish to go into the Sub-accounts to the AST Money Market [GAL Money Market]
Sub-account; and (b) at the end of such free-look period we reallocate Account
Value according to your then most recent allocation instructions to us, subject
to our allocation rules. However, where permitted by law in such jurisdictions,
we will allocate such Net Purchase Payments according to your instructions,
without any temporary allocation to the AST Money Market [GAL Money Market]
Sub-account, if you execute a return waiver ("Return Waiver"). Under the Return
Waiver, you waive your right to the return of the greater of the "standard
refund" or the Purchase Payments received less any withdrawals. Instead, you
only are entitled to the return of the "standard refund" (see "Right to Return
the Annuity").
Your initial Purchase Payments, as well as other Purchase Payments will be
allocated in accordance with the then current requirements of any rebalancing,
asset allocation or market timing program which you have authorized or have
authorized an independent third party to use in connection with your Annuity
(see "Allocation Rules").
Balanced Investment Program: We offer a balanced investment program in
relation to your Purchase Payments, if Fixed Allocations are available under
your Annuity. If you choose this program, we commit a portion of your Net
Purchase Payments as a Fixed Allocation for the Guarantee Period you select.
This Fixed Allocation will have grown pre-tax to equal the exact amount of your
entire Purchase Payments at the end of its initial Guarantee Period if no
amounts are transferred or withdrawn from such Fixed Allocation. The rest of
your Net Purchase Payments is invested in the variable investment options you
select.
We reserve the right, from time to time, to credit additional amounts to Fixed
Allocations ("Additional Amounts") if you allocate Purchase Payments in
accordance with the balanced investment program we offer. We offer to do so at
our sole discretion. Such an offer is subject to our rules, including but not
limited to, a change to the MVA formula. For more information, see "Additional
Amounts in the Fixed Allocations".
Ownership, Annuitant and Beneficiary Designations: You make certain
designations that apply to the Annuity if issued. These designations are subject
to our rules and to various regulatory or statutory requirements depending on
the use of the Annuity. These designations include an Owner, a contingent Owner,
an Annuitant, a Contingent Annuitant, a Beneficiary, and a contingent
Beneficiary. Certain designations are required, as indicated below. Such
designations will be revocable unless you indicate otherwise or we endorse your
Annuity to indicate that such designation is irrevocable to meet certain
regulatory or statutory requirements. Changing the Owner or Annuitant
designations may affect the minimum death benefit (see " Death Benefits").
Some of the tax implications of various designations are discussed in the
section entitled "Certain Tax Considerations". However, there are other tax
issues than those addressed in that section, including, but not limited to,
estate and inheritance tax issues. You should consult with a competent tax
counselor regarding the tax implications of various designations. You should
also consult with a competent legal advisor as to the implications of certain
designations in relation to an estate, bankruptcy, community property, where
applicable, and other matters.
An Owner must be named. 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 joint Owners for any transaction for which we require the written consent of
Owners. Where required by law, we require the consent In Writing of the spouse
of any person with a vested interest in an Annuity. Naming someone other than
the payor of any Purchase Payment as Owner may have gift, estate or other tax
implications.
Where allowed by law, you may name a contingent Owner. However, this designation
takes effect only on or after the Annuity Date.
You must name an Annuitant. We do not accept a designation of joint Annuitants.
Where allowed by law, you may name one or more Contingent Annuitants.
There may be adverse tax consequences if a Contingent Annuitant succeeds an
Annuitant and the Annuity is owned by a trust that is neither tax exempt nor
does not qualify for preferred treatment under certain sections of the Code,
such as Section 401 (a "non-qualified" trust). In general, the Code is designed
to prevent the benefit of tax deferral from continuing for long periods of time
on an indefinite basis. Continuing the benefit of tax deferral by naming one or
more Contingent Annuitants when the Annuity is owned by a non-qualified trust
might be deemed an attempt to extend the tax deferral for an indefinite period.
Therefore, adverse tax treatment may depend on the terms of the trust, who is
named as Contingent Annuitant, as well as the particular facts and
circumstances. You should consult your tax advisor before naming a Contingent
Annuitant if you expect to use an Annuity in such a fashion.
Where allowed by law, you must name Contingent Annuitants according to our rules
when an Annuity is used as a funding vehicle for certain retirement plans
designed to meet the requirements of Section 401 of the Code.
You may name more than one primary and more than one contingent Beneficiary, and
if you do, the proceeds will be paid in equal shares to the survivors in the
appropriate beneficiary class, unless you have requested otherwise In Writing.
If the primary Beneficiary dies before death proceeds become payable, the
proceeds will become payable to the contingent Beneficiary. If no Beneficiary is
alive when death proceeds become payable or in the absence of any Beneficiary
designation, the proceeds will vest in you or your estate.
ACCOUNT VALUE AND SURRENDER VALUE: In the accumulation phase your Annuity
has an Account Value. Your total Account Value is the sum of your Account Value
in each investment option. Surrender Value is the Account Value less any
applicable contingent deferred sales charge and any applicable maintenance fee.
Account Value in the Sub-accounts: We determine your Account Value
separately for each Sub-account. To determine the Account Value in each
Sub-account we multiply the Unit Price as of the Valuation Period for which the
calculation is being made times the number of Units attributable to you in that
Sub-account as of that Valuation Period. The method we use to determine Unit
Prices is shown in the Statement of Additional Information.
The number of Units attributable to you in a Sub-account is the number of Units
you purchased less the number transferred or withdrawn. 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 effected Sub-account as of the
Valuation Period applicable to such transaction.
Account Value of the Fixed Allocations: We determine the Account Value of
each Fixed Allocation separately. A Fixed Allocation's Account Value as of a
particular date is determined by multiplying its then current Interim Value
times the MVA.
<PAGE>
A formula is used to determine the MVA. The formula is applied separately to
each Fixed Allocation. Values and time durations used in the formula are as of
the date for which the Account Value is being determined. The formula is:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate for your class of annuities for new
Fixed Allocations with Guarantee Periods of durations equal to
the number of years (rounded to the next higher integer when
occurring on other than an anniversary of the beginning of the
Fixed Allocation's Guarantee Period) remaining in such
Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if amounts are surrendered pursuant to the right to
return the Annuity is [(1 + I)/(1 + J)]N/12.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date. If we are not offering a Guarantee Period with a duration equal to the
number of years remaining in a Fixed Allocation's Guarantee Period, we calculate
a rate for "J" above using a specific formula. This formula is described in the
Statement of Additional Information.
Our Current Rates are expected to be sensitive to interest rate fluctuations,
thereby making each MVA equally sensitive to such changes. There would be a
downward adjustment when the applicable Current Rate plus 0.10 percent of
interest exceeds the rate credited to the Fixed Allocation and an upward
adjustment when the applicable Current Rate is more than 0.10 percent of
interest lower than the rate being credited to the Fixed Allocation. See the
Statement of Additional Information for an illustration of how the MVA works.
We reserve the right, from time to time, to determine the MVA using an interest
rate lower than the Current Rate for all transactions applicable to a class of
Annuities. We may do so at our sole discretion. This would benefit all such
Annuities if transactions to which the MVA applies occur while we use such lower
interest rate.
Additional Amounts in the Fixed Allocations: To the extent permitted by
law, we reserve the right, from time to time, to credit Additional Amounts to
Fixed Allocations. We may do so at our sole discretion. We may offer to credit
such Additional Amounts only in relation to Fixed Allocations of specific
durations (i.e. 10 years) when used as part of certain programs we offer such as
the balanced investment program and dollar cost averaging (see "Balanced
Investment Program" and "Dollar Cost Averaging"). We would provide such
Additional Amounts with funds from our general account and credit them to the
applicable Fixed Allocation. Such a program is subject to the following rules:
(1) The Additional Amounts are credited in relation to initial or
additional Purchase Payments, not to Account Value transferred to a Fixed
Allocation for use in the applicable programs. The Additional Amounts are not
credited in relation to any exchange of another annuity issued by us for an
Annuity.
(2) The Additional Amounts are credited as of the later of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation or
the 30th day after the Issue Date.
(3) Interest on the Additional Amounts is credited as of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation.
(4) The Additional Amounts are a percentage of the amount credited to the
applicable Fixed Allocation. However, we may change the percentage from time to
time.
(5) There is an increase to any applicable "adjustment amount" in the
MVA formula, which otherwise is 0.0010, to 0.0020 (see "Account Value of the
Fixed Allocations"). This change would only apply to a transfer, surrender or
withdrawal from the applicable Fixed Allocation, but not to any payments of
death benefit proceeds or a medically-related surrender (see "Medically-Related
Surrender"). This change could reduce your Account Value.
(6) We do not consider Additional Amounts to be "investment in the
contract" for income tax purposes (see "Certain Tax Considerations").
(7) Additional Amounts credited are not included in any amounts you may
withdraw without assessment of the contingent deferred sales charge pursuant to
the Free Withdrawal provision (see "Free Withdrawals").
(8) We determine if a Purchase Payment is received during the period we
are offering such credits based on the earlier of: (a) the date we receive at
our Office the applicable Purchase Payment; or (b) the date we receive at our
Office our requirements in relation to either an exchange of an existing annuity
issued by another insurer or a "rollover" or transfer of such an annuity
pursuant to specific sections of the Code.
(9) No Purchase Payment may be applied to more than one program
crediting Additional Amounts solely to a Fixed Allocation.
RIGHTS, BENEFITS AND SERVICES: The Annuity provides various rights,
benefits and services subsequent to its issuance and your decision to keep it
beyond the free-look period. A number of these rights, benefits and services, as
well as some of the rules and conditions to which they are subject, are
described below. These rights, benefits and services include, but are not
limited to: (a) making additional Purchase Payments; (b) changing revocable
designations; (c) transferring Account Values between investment options; (d)
receiving lump sum payments, Systematic Withdrawals or Minimum Distributions,
annuity payments and death benefits; (e) transferring or assigning your Annuity;
(f) exercising certain voting rights in relation to the underlying mutual funds
in which the Sub-accounts invest; and (g) receiving reports. These rights,
benefits and services may be limited, eliminated or altered when an Annuity is
purchased in conjunction with a qualified plan. We may require presentation of
proper identification, including a personal identification number ("PIN") issued
by us, prior to accepting any instruction by telephone. We forward your PIN to
you shortly after your Annuity is issued. To the extent permitted by law or
regulation, neither we nor any person authorized by us will be responsible for
any claim, loss, liability or expense in connection with a telephone transfer if
we or such other person acted on telephone transfer instructions in good faith
in reliance on your telephone transfer authorization and on reasonable
procedures to identify persons so authorized through verification methods which
may include a request for your Social Security number or a personal
identification number (PIN) as issued by us. We may be liable for losses due to
unauthorized or fraudulent instructions should we not follow such reasonable
procedures.
Additional Purchase Payments: The minimum for any additional Purchase
Payment is $100, except as part of a bank drafting program (see "Bank
Drafting"), or unless we authorize lower payments pursuant to a Periodic
Purchase Payment program (see "Periodic Purchase Payments"), or less where
required by law. Additional Purchase Payments may be paid at any time before the
Annuity Date. Subject to our allocation rules, we allocate additional Net
Purchase Payments according to your instructions. Should no instructions be
received, we shall return your additional Purchase Payment.
Changing Revocable Designations: Unless you indicated that a prior choice
was irrevocable or your Annuity has been endorsed to limit certain changes, you
may request to change Owner, Annuitant and Beneficiary designations by sending a
request In Writing. Where allowed by law, such changes will be subject to our
acceptance. Some of the changes we will not accept include, but are not limited
to: (a) a new Owner subsequent to the death of the Owner or the first of any
joint Owners to die, except where a spouse-Beneficiary has become the Owner as a
result of an Owner's death; (b) a new Annuitant subsequent to the Annuity Date
if the annuity option selected includes a life contingency; and (c) a new
Annuitant prior to the Annuity Date if the Annuity is owned by an entity.
Allocation Rules: In the accumulation phase, you may maintain Account Value
in up to ten Sub-accounts. Currently, you may also maintain an unlimited number
of Fixed Allocations. We reserve the right, to the extent permitted by law, to
limit the number of fixed allocations or the amount you may allocate to any
Fixed Allocation. Should you request a transaction that would leave less than
any minimum amount we then require in an investment option, we reserve the
right, to the extent permitted by law, to add the balance of your Account Value
in the applicable Sub-account or Fixed Allocation to the transaction and close
out your balance in that investment option.
Should you either: (a) request rebalancing services (see "Rebalancing"); (b)
authorize an independent third party to transact transfers on your behalf and
such third party arranges for rebalancing of any portion of your Account Value
in accordance with any asset allocation strategy; or (c) authorize an
independent third party to transact transfers in accordance with a market timing
strategy; then all Purchase Payments, including the initial Purchase Payment,
received while your Annuity is subject to such an arrangement are allocated to
the same investment options and in the same proportions as then required
pursuant to the applicable rebalancing, asset allocation or market timing
program, unless we have received alternate instructions. Such allocation
requirements terminate simultaneous to the termination of an authorization for
rebalancing or any authorization to a third party to transact transfers on your
behalf.
Withdrawals of any type are taken pro-rata from the investment options based on
the then current Account Values in such investment options unless we receive
instructions from you prior to such withdrawal. For this purpose only, the
Account Value in all your then current Fixed Allocations is deemed to be in one
investment option. If you transfer or withdraw Account Value from multiple Fixed
Allocations and do not provide instructions indicating the Fixed Allocations
from which Account Value should be taken: (a) we transfer Account Value first
from the Fixed Allocation with the shortest amount of time remaining to the end
of its Guarantee Period, and then from the Fixed Allocation with the next
shortest amount of time remaining to the end of its Guarantee Period, etc.; and
(b) if there are multiple Fixed Allocations with the same amount of time left in
each Guarantee Period, as between such Fixed Allocations we first take Account
Value from the Fixed Allocation that had the shorter Guarantee Period.
Transfers: In the accumulation phase you may transfer Account Value between
investment options, subject to our allocation rules (see "Allocation Rules").
Transfers are not subject to taxation (see "Transfers Between Investment
Options"). We charge $10.00 for each transfer after the twelfth in each Annuity
Year, including transfers transacted as part of a dollar cost averaging program
(see "Dollar Cost Averaging") or any rebalancing, market timing, asset
allocation or similar program which you employ or you authorize to be employed
on your behalf. Renewals or transfers of Account Value from a Fixed Allocation
at the end of its Guarantee Period are not subject to the transfer charge and
are not counted in determining whether other transfers may be subject to the
transfer charge (see "Renewals"). Your transfer request must be In Writing or
meet our requirements for accepting instructions we receive over the phone.
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 we believe that: (a) excessive trading by such Owner or Owners
or a specific transfer request or group of transfer requests 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.
To the extent permitted by law, we may request up to 2 business days' notice of
any transfer into or out of a Fixed Allocation if the market value of such
transfer is at least $1,000,000.00.
In order to help you determine whether you wish to transfer Account Values to a
Fixed Allocation, you may obtain our Current Rates by writing us or calling us
at 1-800-766-4530 [1-800-444-3970].
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf, subject to our rules. We may suspend or
cancel such acceptance at any time. We notify you of any such suspension or
cancellation. We may restrict the investment options that will be available for
transfers or allocations of Net Purchase Payments 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 or an affiliate of ours may provide administrative or other support services
to independent third parties you authorize to conduct transfers on your behalf
or who provide recommendations as to how your Account Values should be
allocated. This includes, but is not limited to, rebalancing your Account Value
among investment options in accordance with various investment allocation
strategies such third party may employ, or transferring Account Values between
investment options in accordance with market timing strategies employed by such
third parties. Such independent third parties may or may not be appointed our
agents for the sale of Annuities. However, we do not engage any third parties to
offer investment allocation services of any type, so that persons or firms
offering such services do so independent from any agency relationship they may
have with us for the sale of Annuities. We therefore take no responsibility for
the investment allocations and transfers transacted on your behalf by such third
parties or any investment allocation recommendations made by such parties. We do
not currently charge you extra for providing these support services.
Renewals: A renewal is a transaction that occurs automatically as of the
last day of a Fixed Allocation's Guarantee Period unless we receive alternative
instructions. This day as to each Fixed Allocation is called its Maturity Date.
As of the end of a Maturity Date, the Fixed Allocation's Guarantee Period
"renews" and a new Guarantee Period of the same duration as the one just
completed begins. However, the renewal will not occur if the Maturity Date is on
the date we apply your Account Value to determine the annuity payments that
begin on the Annuity Date (see "Annuity Payments").
As an alternative to a renewal, you may transfer all or part of that Fixed
Allocation's Account Value to a different Fixed Allocation or you may transfer
such Account Value to one or more Sub-accounts, subject to our allocation rules.
To accomplish this, we must receive instructions from you In Writing at least
two business days before the Maturity Date. No MVA applies to transfers of a
Fixed Allocation's Account Value occurring as of its Maturity Date. An MVA will
apply in determining the Account Value of a Fixed Allocation at the time annuity
payments are determined, unless the Maturity Date of such Fixed Allocation is
the 15th day before the Annuity Date (see "Annuity Payments").
At least 30 days prior to a Maturity Date, or earlier if required by law or
regulation, we inform you of the Guarantee Periods available as of the date of
such notice. We do not provide a similar notice if the Fixed Allocation's
Guarantee Period is of less than a year's duration. Such notice may include an
example of the rates we are then crediting new Fixed Allocations as of the date
such notice is prepared. The rates actually credited to a Fixed Allocation as of
the date of any renewal or transfer immediately subsequent to the Maturity Date
may be more or less than any rates quoted in such notice.
If your Fixed Allocation's then ending Guarantee Period is no longer available
for new allocations and renewals or you choose a different Guarantee Period that
is no longer available on the date following the Maturity Date, we will try to
reach you so you may make another choice. If we cannot reach you, we will assign
the next shortest Guarantee Period then currently available for new allocations
and renewals to that Fixed Allocation.
Dollar Cost Averaging: We offer dollar cost averaging in the accumulation
phase. Dollar cost averaging is a program designed to provide for regular,
approximately level investments over time. You may choose to transfer earnings
only, principal plus earnings or a flat dollar amount. We make no guarantee that
a dollar cost averaging program will result in a profit or protect against a
loss in a declining market. You may select this program by submitting to us a
request In Writing. You may cancel your participation in this program In Writing
or by phone if you have previously authorized our acceptance of such
instructions.
Dollar cost averaging is available from any of the investment options we choose
to make available for such a program. Your Annuity must have an Account Value of
not less than $10,000 at the time we accept your request for a dollar cost
averaging program. Transfers under a dollar cost averaging program are counted
in determining the applicability of the transfer fee (see "Transfers"). We
reserve the right to limit the investment options into which Account Value may
be transferred as part of a dollar cost averaging program. We currently do not
permit dollar cost averaging programs where Account Value is transferred to
Fixed Allocations. We also reserve the right to charge a processing fee for this
service. Should we suspend or cancel the offering of this service, such
suspension or cancellation will not affect any dollar cost averaging programs
then in effect. Dollar cost averaging is not available while a rebalancing,
asset allocation or market timing type of program is used in connection with
your Annuity.
Dollar cost averaging from Fixed Allocations are subject to the following rules:
(a) you may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years; (b) such a program may only be selected in conjunction with and
simultaneous to a new or renewing Fixed Allocation; (c) only averaging of
earnings only or principal plus earnings is permitted; (d) a program averaging
principal plus earnings from a Fixed Allocation must be designed to last that
Fixed Allocation's entire current Guarantee Period; (e) dollar cost averaging
transfers from a Fixed Allocation are not subject to the MVA; (f) dollar cost
averaging may be done on a monthly basis only; and (g) you may not
simultaneously use Account Value in any Fixed Allocation to participate in
dollar cost averaging and receive Systematic Withdrawals or Minimum
Distributions from such Fixed Allocation (see "Systematic Withdrawals" and
"Minimum Distributions").
We reserve the right, from time to time, to credit additional amounts
("Additional Amounts") if you allocate Purchase Payments to Fixed Allocations as
part of a dollar cost averaging program. Such an offer is at our sole discretion
and is subject to our rules, including but not limited to, a change to the MVA
formula. For more information see "Additional Amounts in the Fixed Allocations".
Rebalancing: We offer, during the accumulation phase, automatic quarterly,
semi-annual or annual rebalancing among the variable investment options of your
choice. This provides the convenience of automatic rebalancing without having to
provide us instructions on a periodic basis. Failure to choose this option does
not prevent you from providing us with transfer instructions from time-to-time
that have the effect of rebalancing. It also does not prevent other requested
transfers from being transacted.
Under this program, Account Values in variable investment options are rebalanced
quarterly, semi-annually or annually, as applicable, to the percentages you
request. The rebalancing may occur quarterly, semi-annually or annually based
upon the Issue Date. If a transfer is requested involving any investment option
participating in an automatic rebalancing program, we automatically alter the
rebalancing percentages going forward (unless we receive alternate instructions)
to the ratios between Account Values in the variable investment options as of
the effective date of such requested transfer once it has been processed.
Automatic rebalancing is delayed one quarter if Account Value is being
maintained in the AST Money Market [GAL Money Market] Sub-account for the
duration of your Annuity's "free-look" period and rebalancing would otherwise
occur during such period (see "Allocation of Net Purchase Payments").
You may change the percentage allocable to each variable investment option at
any time. However, you may not choose to allocate less than 5% of Account Value
to any variable investment option.
We do not offer automatic rebalancing in connection with Fixed Allocations. The
Account Value of your Annuity must be at least $10,000 when we receive your
automatic rebalancing request. We may require that all variable investment
options in which you maintain Account Value must be used in the rebalancing
program. You may maintain Account Value in at least two and not more than ten
variable investment options when using a rebalancing program. You may not
simultaneously participate in rebalancing and dollar cost averaging. Rebalancing
also is not available when a program of Systematic Withdrawals of earnings or
earnings plus principal is in effect.
For purposes of determining the number of transfers made in any Annuity Year,
all rebalancing transfers made on the same day are treated as one transfer. We
reserve the right to charge a processing fee for signing up for this service.
To elect to participate or to terminate participation in automatic rebalancing,
we may require instructions In Writing at our Office in a form satisfactory to
us.
Distributions: Distributions available from your Annuity during the
accumulation phase include surrender, medically-related surrender, free
withdrawals, partial withdrawals, Systematic Withdrawals, Minimum Distributions
(in relation to qualified plans) and a death benefit. In the payout phase we pay
annuity payments. Distributions from your Annuity generally are subject to
taxation, and may be subject to a tax penalty as well (see "Certain Tax
Considerations"). You may wish to consult a professional tax advisor for tax
advice prior to exercising any right to an elective distribution. During the
accumulation phase, any distribution other than a death benefit: (a) must occur
prior to any death that would cause a death benefit to become payable; and (b)
will occur subsequent to our receipt of a completed request In Writing.
Surrender: Surrender of your Annuity for its Surrender Value is permitted
during the accumulation phase. A contingent deferred sales charge may apply to
such surrender (see "Contingent Deferred Sales Charge"). Your Annuity must
accompany your surrender request.
Medically-Related Surrender: Where permitted by law, you may apply to
surrender your Annuity for its Account Value prior to the Annuity Date upon
occurrence of a "Contingency Event". The Annuitant must be alive as of the date
we pay the proceeds of such surrender request. If the Owner is one or more
natural persons, all such Owners must also be alive at such time. Specific
details and definitions of terms in relation to this benefit may differ in
certain jurisdictions. This waiver of any applicable contingent deferred sales
charge is subject to our rules. This benefit is not available if the total
Purchase Payments received exceed $500,000.00 for all annuities issued by us
with this benefit for which the same person is named as Annuitant. For contracts
issued before May 1, 1996 a "Contingency Event" occurs if the Annuitant is:
(1) First confined in a "Medical Care Facility" while your Annuity is in
force and remains confined for at least 90 days in a row; or
(2) First diagnosed as having a "Fatal Illness" while your Annuity is in
force.
For contracts issued on or after May 1, 1996, and where allowed by law, the
Annuitant must have been named or any change of Annuitant must have been
accepted by us, prior to the "Contingent Event" described above, in order to
qualify for a medically-related surrender.
"Medical Care Facility" means any state licensed facility providing medically
necessary in-patient care which is prescribed by a licensed "Physician" in
writing and based on physical limitations which prohibit daily living in a
non-institutional setting. "Fatal Illness" means a condition diagnosed by a
licensed "Physician" which is expected to result in death within 2 years for 80%
of the diagnosed cases. "Physician" means a person other than you, the Annuitant
or a member of either your or the Annuitant's families who is state licensed to
give medical care or treatment and is acting within the scope of that license.
We must receive satisfactory proof of the Annuitant's confinement or Fatal
Illness In Writing.
Free Withdrawals: Each Annuity Year in the accumulation phase you may
withdraw a limited amount of Account Value without application of any applicable
contingent deferred sales charge. Such free withdrawals are available to meet
liquidity needs. Free withdrawals are not available at the time of a surrender
of an Annuity. Withdrawals of any type made prior to age 59 1/2 may be subject
to a 10% tax penalty (see "Penalty on Distributions").
The minimum amount available as a free withdrawal is $100. Amounts received as
Systematic Withdrawals or as Minimum Distributions are deemed to come first from
the amount available under this Free Withdrawal provision (see "Systematic
Withdrawals" and "Minimum Distributions"). You may also request to receive as a
lump sum any free withdrawal amount not already received that Annuity Year under
a plan of Systematic Withdrawals or as Minimum Distributions.
The maximum amount available as a free withdrawal depends on its Issue Date and
the jurisdiction in which your Annuity is delivered.
(1) For Annuities used in connection with retirement plans designed to
meet the requirements of Section 401 of the Code, the maximum amount available
as a free withdrawal, where permitted by law, is the greater of (a), (b) or (c),
where:
(a) is the then current "emergency withdrawal amount" (defined below);
(b) is the Annuity's "growth" (defined below); and
(c) is 20% of "new" Purchase Payments ("new" Purchase Payments are defined
below) less prior free withdrawals or amounts deemed to come from free
withdrawals during the then current Annuity Year.
(2) For all other Annuities, the maximum amount available as a free
withdrawal is the greater of (a), (b) or (c), where:
(a) is the then current "emergency withdrawal amount" (defined below);
(b) is the Annuity's "growth" (defined below); and
(c) is 10% of "new" Purchase Payments ("new" Purchase Payments are defined
below) less prior free withdrawals or amounts deemed to come from free
withdrawals during the then current Annuity Year.
The "emergency withdrawal amount" depends on the jurisdiction in which your
Annuity is issued and the date it is issued, as follows:
(i) For Annuities purchased before May 1, 1996, the "emergency withdrawal
amount" in the first Annuity Year is zero. Thereafter, it equals 35% of "new"
Purchase Payments, less the sum of all prior withdrawals of any type.
(ii) For Annuities purchased on or after May 1, 1996, except where
prohibited by law, a new, revised emergency withdrawal provision applies. Under
this revised provision, the "emergency withdrawal amount" on the Issue Date is
10% of the initial Purchase Payment. It is subsequently increased by 10% of each
additional "new" Purchase Payment and by 10% of all "new" Purchase Payments at
the start of each Annuity Year, to a maximum of 50% of all "new" Purchase
Payments. It is then reduced by an amount equal to the sum of all prior free
withdrawals or amounts deemed to come from free withdrawals. For example,
assuming an initial Purchase Payment of $10,000, no subsequent Purchase Payments
and no prior free withdrawals, the emergency withdrawal amount in Annuity Year 4
would be 40% of the initial Purchase Payment, which would be $4,000. However,
assuming there had been prior free withdrawals totaling $2,500, the maximum
emergency withdrawal amount in Annuity Year 4 would be $1,500 ($4,000 minus the
$2,500 prior free withdrawals). Assuming further, that no additional free
withdrawals were made in Annuity Year 4, and no additional Purchase Payments
were made, the emergency withdrawal amount in annuity Year 5 would be $2,500
($5,000 minus the $2,500 prior free withdrawals).
[The "emergency withdrawal amount" on the Issue Date is 10% of the initial
Purchase Payment. It is subsequently increased by 10% of each additional "new"
Purchase Payment and by 10% of all "new" Purchase Payments at the start of each
Annuity Year, to a maximum of 50% of all "new" Purchase Payments. It is then
reduced by an amount equal to the sum of all prior free withdrawals or amounts
deemed to come from free withdrawals. For example, assuming an initial Purchase
Payment of $10,000, no subsequent Purchase Payments and no prior free
withdrawals, the emergency withdrawal amount in Annuity Year 4 would be 40% of
the initial Purchase Payment, which would be $4,000. However, assuming there had
been prior free withdrawals totaling $2,500, the maximum emergency withdrawal
amount in Annuity Year 4 would be $1,500 ($4,000 minus the $2,500 prior free
withdrawals). Assuming further, that no additional free withdrawals were made in
Annuity Year 4, and no additional Purchase Payments were made, the emergency
withdrawal amount in annuity Year 5 would be $2,500 ($5,000 minus the $2,500
prior free withdrawals).]
"Growth" equals the then current Account Value less all "unliquidated" Purchase
Payments and less the value at the time credited of any exchange credits or
Additional Amounts (see "Additional Amounts in the Fixed Allocations").
"Unliquidated" means not previously surrendered or withdrawn. "New" Purchase
Payments are those received in the seven (7) years prior to the date as of which
a free withdrawal occurs. For purposes of the contingent deferred sales charge,
amounts withdrawn as a free withdrawal are not considered a liquidation of
Purchase Payments. Therefore, any free withdrawal will not reduce the amount of
any applicable contingent deferred sales charge upon any partial withdrawal or
subsequent surrender.
In jurisdictions where the revised emergency withdrawal amount as set forth in c
(i) above is not available, the existing emergency withdrawal amount provision
applies. As of the date of this Prospectus, we had obtained or were seeking
approval, where required, in all jurisdictions to use the revised provision. Our
intention is to implement the revised provision for new Annuities in a
jurisdiction as soon as practicable after we obtain approval. YOU SHOULD
PARTICULARLY NOTE DURING THE "FREE-LOOK" PERIOD THE EMERGENCY WITHDRAWAL AMOUNT
PROVISION INCLUDED IN ANY ANNUITY ISSUED TO YOU. Unless a change is required by
law, the emergency withdrawal amount provision included in your Annuity may not
be changed without both your and our consent.
Partial Withdrawals: You may withdraw part of your Surrender Value. The
minimum partial withdrawal is $100. The Surrender Value that must remain in the
Annuity as of the date of this transaction is $1,000. If the amount of the
partial withdrawal request exceeds the maximum amount available, we reserve the
right to treat your request as one of a full surrender.
On a partial withdrawal, the contingent deferred sales charge is assessed
against any "unliquidated" "new" Purchase Payments withdrawn. "Unliquidated"
means not previously surrendered or withdrawn. For these purposes, amounts are
deemed to be withdrawn in the following order:
(1) From any amount then available as a free withdrawal; then from
(2) "Old" Purchase Payments (Purchase Payments allocated to Account
Value more than seven years prior to the partial withdrawal); then from
(3) "New" Purchase Payments (If there are multiple "new" Purchase
Payments, the one received earliest is liquidated first, then the one received
next earliest, and so forth); then from
(4) Other Surrender Value.
Systematic Withdrawals: We offer Systematic Withdrawals of earnings only,
principal plus earnings or a flat dollar amount. Systematic Withdrawals from
Fixed Allocations are limited to earnings accrued after the program of
Systematic Withdrawals begins, or payments of fixed dollar amounts that do not
exceed such earnings. A program of Systematic Withdrawals begins on the date we
accept, at our Office, your request for such a program. Systematic Withdrawals
are deemed to be withdrawn from Surrender Value in the same order as partial
withdrawals for purposes of determining if the contingent deferred sales charge
applies. Penalties may apply (see "Free Withdrawals".)
A Systematic Withdrawal from a Fixed Allocation is not subject to the MVA. We
calculate the Fixed Allocation's credited interest since the prior withdrawal as
A minus B, plus C, where:
A is the Interim Value of the applicable Fixed Allocation as of the date of
the Systematic Withdrawal;
B is the Interim Value of the applicable Fixed Allocation as of
the later of the beginning of its then current Guarantee
Period or the beginning of the Systematic Withdrawal program;
and
C is the total of all partial or free withdrawals and any
transfers from such Fixed Allocation since the later of the
beginning of its then current Guarantee Period or the
beginning of the Systematic Withdrawal program.
Systematic Withdrawals are available on a monthly, quarterly, semi-annual or
annual basis. You may not simultaneously receive Systematic Withdrawals from a
Fixed Allocation and participate in a dollar cost averaging program under which
Account Value is transferred from the same Fixed Allocation (see "Dollar Cost
Averaging"). Systematic Withdrawals are not available while you are taking any
Minimum Distributions (see "Minimum Distributions"). Systematic Withdrawals of
earnings or earnings plus principal are not available while any rebalancing or
asset allocation program is in effect in relation to your Annuity.
The Surrender Value of your Annuity must be at least $20,000 when we accept your
request for a program of Systematic Withdrawals. The minimum for each Systematic
Withdrawal is $100. For any scheduled Systematic Withdrawal other than the last
that does not meet this minimum, we reserve the right to defer such a withdrawal
and add the amount that would have been withdrawn to the amount that is to be
withdrawn at the next Systematic Withdrawal.
We reserve the right to charge a processing fee for this service. Should we
suspend or cancel offering Systematic Withdrawals, such suspension or
cancellation will not affect any Systematic Withdrawal programs then in effect.
Minimum Distributions: You may elect to have us calculate Minimum
Distributions annually if your Annuity is being used for certain qualified
purposes under the Code. We calculate such amounts assuming the Minimum
Distribution amount is based solely on the value of your Annuity. The required
Minimum Distribution amounts applicable to your particular situation may depend
on other annuities, savings or investments of which we are unaware, so that the
required amount may be greater than the Minimum Distribution amount we calculate
based on the value of your Annuity. We reserve the right to charge a fee for
each annual calculation. Minimum Distributions are not available if you are
taking Systematic Withdrawals (see "Systematic Withdrawals"). You may elect to
have Minimum Distributions paid out monthly, quarterly, semi-annually or
annually.
Each Minimum Distribution will be taken from the investment options you select.
However, the portion of any Minimum Distribution that can be taken from any
Fixed Allocations may not exceed the then current ratio between your Account
Value in all Fixed Allocations you maintain and your total Account Value. No MVA
applies to any portion of Minimum Distributions taken from Fixed Allocations.
Minimum Distributions are not available from any Fixed Allocations if such Fixed
Allocation is being used in a dollar cost averaging program (see "Dollar Cost
Averaging").
No contingent deferred sales charge is assessed against amounts withdrawn as a
Minimum Distribution, but only to the extent of the Minimum Distribution
required from your Annuity at the time it is taken. The contingent deferred
sales charge may apply to additional amounts withdrawn to meet minimum
distribution requirements in relation to other retirement programs you may
maintain.
Amounts withdrawn as Minimum Distributions are considered to come first from the
amounts available as a free withdrawal (see "Free Withdrawals") as of the date
of the yearly calculation of the Minimum Distribution amount. Minimum
Distributions over that amount are not deemed to be a liquidation of Purchase
Payments (see "Partial Withdrawals").
Death Benefit: In the accumulation phase, a death benefit is payable. If
the Annuity is owned by one or more natural persons, it is payable upon the
first death of such Owners. If the Annuity is owned by an entity, the death
benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. If a Contingent Annuitant was designated before the Annuitant's death
and the Annuitant dies, the Contingent Annuitant then becomes the Annuitant.
There may be adverse tax consequences for certain entity Owners if they name a
Contingent Annuitant (see "Ownership, Annuitant and Beneficiary Designations").
The person upon whose death the death benefit is payable is referred to below as
the "decedent". For purposes of this death benefit provision, "withdrawals"
means withdrawals of any type (free withdrawals, partial withdrawals, Systematic
Withdrawals, Minimum Distributions) before assessment of any applicable
contingent deferred sales charge and after any applicable MVA. For purposes of
this provision, persons named Owner or Annuitant within 60 days of the Issue
Date are treated as if they were an Owner or Annuitant on the Issue Date.
The death benefit is as follows, and is subject to the conditions described in
(1),(2) and (3) below:
(1) If death occurs prior to the decedent's age 90: the death benefit is
the greater of your Account Value in Sub-accounts plus the Interim Value of any
Fixed Allocations, or the minimum death benefit ("Minimum Death Benefit"). The
Minimum Death Benefit is the sum of all Purchase Payments less the sum of all
withdrawals.
(2) If death occurs when the decedent is age 90 or older: the death benefit
is your Account Value.
(3) If a decedent was not named an Owner or Annuitant as of the Issue Date
and did not become such as a result of a prior Owner's or Annuitant's death: the
Minimum Death Benefit is suspended as to that person for a two year period from
the date he or she first became an Owner or Annuitant. If that person's death
occurs during the suspension period and prior to age 90, the death benefit is
your Account Value in Sub-accounts plus the Interim Value of any Fixed
Allocations. If death occurs during the suspension period when such decedent is
age 90 or older, the death benefit is your Account Value. After the suspension
period is completed, the death benefit is the same as if such person had been an
Owner or Annuitant on the Issue Date.
The amount of the death benefit is determined as of the date we receive In
Writing: (a) "due proof of death"; (b) all representations we require or which
are mandated by applicable law or regulation in relation to the death claim and
the payment of death proceeds; and (c) any applicable election of the mode of
payment of the death benefit, if not previously elected by the Owner. The death
benefit is reduced by any annuity payments made prior to the date we receive In
Writing such due proof of death. The following constitutes "due proof of death":
(a) a certified copy of a death certificate; (b) a certified copy of a decree of
a court of competent jurisdiction as to the finding of death; or (c) any other
proof satisfactory to us.
If the death benefit becomes payable prior to the Annuity Date due to the death
of the Owner and the Beneficiary is the Owner's spouse, then in lieu of
receiving the death benefit, such Owner's spouse may elect to be treated as an
Owner and continue the Annuity.
In the event of your death, the benefit must be distributed within: (a) five
years of the date of death; or (b) over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Distribution
after your death to be paid under (b) above, must commence within one year of
the date of death.
If the Annuitant dies before the Annuity Date, the Contingent Annuitant will
become the Annuitant. Where allowed by law, if the Annuity is owned by one or
more natural persons, the oldest of any such Owners not named as the Annuitant
immediately becomes the Contingent Annuitant if: (a) the Contingent Annuitant
predeceases the Annuitant; or (b) if you do not designate a Contingent
Annuitant.
In the payout phase, we continue to pay any "certain" payments (payments not
contingent on the continuance of any life) to the Beneficiary subsequent to the
death of the Annuitant.
Annuity Payments: Annuity payments can be guaranteed for life, for a
certain period, or for a certain period and life. We make available fixed
payments, and as of the date of this Prospectus, adjustable payments (payments
which may or may not be changed on specified adjustment dates based on annuity
purchase rates we are then making available to annuities of the same class). We
may or may not be making adjustable annuities available on the Annuity Date. To
the extent there is any tax basis in the annuity, a portion of each annuity
payment is treated for tax purposes as a return of such basis until such tax
basis is exhausted. The amount deemed such a return of basis is determined in
accordance with the requirements of the Code (see "Certain Tax Considerations").
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments when you purchase an Annuity, or at a later date. Your choice of
Annuity Date and annuity option may be limited depending on your use of the
Annuity and the applicable jurisdiction. Subject to our rules, you may choose an
Annuity Date, option and frequency of payments suitable to your needs and
circumstances. You should consult with competent tax and financial advisors as
to the appropriateness of any such choice. Should Annuities subject to New York
law be made available, the Annuity Date for such Annuities may not exceed the
first day of the calendar month following the Annuitant's 85th birthday. Other
jurisdictions may impose similar requirements.
You may change your choices at any time up to 30 days before the earlier of: (a)
the date we would have applied your Account Value to an annuity option had you
not made the change; or (b) the date we will apply your Account Value to an
annuity option in relation to the new Annuity Date you are then selecting. You
must request this change In Writing. The Annuity Date must be the first or the
fifteenth day of a calendar month.
In the absence of an election In Writing: (a) the Annuity Date is the first day
of the calendar month first following the later of the Annuitant's 85th birthday
or the fifth anniversary of our receipt at our Office of your request to
purchase an Annuity; and (b) where allowed by law, fixed monthly payments will
commence under option 2, described below, with 10 years certain. Should
Annuities subject to New York law be made available, for such Annuities, in the
absence of an election In Writing: (a) the Annuity Date is the first day of the
calendar month following the Annuitant's 85th birthday; and (b) fixed monthly
payments will commence under Option 2, described below, with 10 years certain.
Other jurisdictions may impose similar requirements. The amount to be applied is
your Annuity's Account Value 15 business days prior to the Annuity Date. In
determining your annuity payments, we credit interest using our then current
crediting rate for this purpose, which is not less than 3% of interest per year,
between the date Account Value is applied to an annuity option and the Annuity
Date. If there is any remaining contingent deferred sales charge applicable as
of the Annuity Date, then the annuity option you select must include a certain
period of not less than 5 years' duration. As a result of this rule, making
additional Purchase Payments within seven years of the Annuity Date will prevent
you from choosing an annuity option with a certain period of less than 5 years'
duration. Annuity options in addition to those shown are available with our
consent. The minimum initial amount payable is the minimum initial annuity
amount we allow under our then current rules. Should you wish to receive a lump
sum payment, you must request to surrender your Annuity prior to the Annuity
Date (see "Surrender").
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below, but only to the extent selecting such
an option does not alter the tax status of the Annuity. Except where a lower
amount is required by law, the minimum monthly annuity payment is $100.
If you have not made an election prior to proceeds becoming due, the Beneficiary
may elect to receive the death benefit under one of the annuity options.
However, if you made an election, the Beneficiary may not alter such election.
For purposes of the annuity options described below, the term "key life" means
the person or persons upon whose life any payments dependent upon the
continuation of life are based.
(1) Option 1 - Payments for Life: Under this option, income is payable
periodically prior to the death of the key life, terminating with the last
payment due prior to such death. Since no minimum number of payments is
guaranteed, this option offers the maximum level of periodic payments of the
life contingent annuity options. It is possible that only one payment will be
payable if the death of the key life occurs before the date the second payment
was due, and no other payments nor death benefits would be payable.
(2) Option 2 - Payments for Life with 10, 15, or 20 Years Certain:
Under this option, income is payable periodically for 10, 15, or 20 years, as
selected, and thereafter until the death of the key life. Should the death of
the key life occur before the end of the period selected, the remaining payments
are paid to the Beneficiary to the end of such period.
(3) Option 3 - Payments Based on Joint Lives: Under this option, income
is payable periodically during the joint lifetime of two key lives, and
thereafter during the remaining lifetime of the survivor, ceasing with the last
payment prior to the survivor's death. No minimum number of payments is
guaranteed under this option. It is possible that only one payment will be
payable if the death of all the key lives occurs before the date the second
payment was due, and no other payments nor death benefits would be payable.
(4) Option 4 - Payments for a Certain Period: Under this option, income
is payable periodically for a specified number of years. The number of years is
subject to our then current rules. Should the payee die before the end of the
specified number of years, the remaining payments are paid to the Beneficiary to
the end of such period. Note that under this option, payments are not based on
how long we expect any key life to live. Therefore, that portion of the
mortality risk charge assessed to cover the risk that key lives outlive our
expectations provides no benefit to an Owner selecting this option.
The first payment varies according to the annuity options and payment frequency
selected. The first periodic payment is determined by multiplying the Account
Value (expressed in thousands of dollars) as of the close of business on the
fifteenth day preceding the Annuity Date, plus interest at not less than 3% per
year from such date to the Annuity Date, by the amount of the first periodic
payment per $1,000 of value obtained from our annuity rates for that type of
annuity and for the frequency of payment selected. Our rates will not be less
than our guaranteed minimum rates. These guaranteed minimum rates are derived
from the 1983a Individual Annuity Mortality Table with ages set back one year
for males and two years for females and with an assumed interest rate of 3% per
annum. Where required by law or regulation, such annuity table will have rates
that do not differ according to the gender of the key life. Otherwise, the rates
will differ according to the gender of the key life.
Qualified Plan Withdrawal Limitations: The Annuities are endorsed such that
there are surrender or withdrawal limitations when used in relation to certain
retirement plans for employees which qualify under various sections of the Code.
These limitations do not affect certain roll-overs or exchanges between
qualified plans. Distribution of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Code section 403(b)), or
attributable to transfers to a tax sheltered annuity from a custodial account
(as defined in Code section 403(b)(7)), is restricted to the employee's: (a)
separation from service; (b) death; (c) disability (as defined in Section
72(m)(7) of the Code); (d) reaching age 59 1/2; or (e) hardship. Hardship
withdrawals are restricted to amounts attributable to salary reduction
contributions, and do not include investment results. In the case of tax
sheltered annuities, these limitations do not apply to certain salary reduction
contributions made and investment results earned prior to dates specified in the
Code. In addition, the limitation on hardship withdrawals does not apply to
salary reduction contributions made and investment results earned prior to dates
specified in the Code which have been transferred from custodial accounts.
Rollovers from the types of plans noted to another qualified plan or to an
individual retirement account or individual retirement annuity are not subject
to the limitations noted. Certain distributions, including rollovers, that are
not transferred directly to the trustee of another qualified plan, the custodian
of an individual retirement account or the issuer of an individual retirement
annuity may be subject to automatic 20% withholding for Federal income tax. This
may also trigger withholding for state income taxes (see "Certain Tax
Considerations").
We may make annuities available through the Texas Optional Retirement Program
subsequent to receipt of the required regulatory approvals and implementation.
In addition to the restrictions required for such Annuities to qualify under
Section 403(b) of the Code, Annuities issued in the Texas Optional Retirement
Program are amended as follows: (a) no benefits are payable unless you die
during, or are retired or terminated from, employment in all Texas institutions
of higher education; and (b) if a second year of participation in such program
is not begun, the total first year State of Texas' contribution will be
returned, upon its request, to the appropriate institute of higher education.
With respect to the restrictions on withdrawals set forth above, 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 the 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 the us.
Pricing of Transfers and Distributions: We "price" transfers and
distributions on the dates indicated below.
(1) We price "scheduled" transfers and distributions as of the date
such transactions are so scheduled. "Scheduled" transactions include transfers
under a dollar cost averaging program, Systematic Withdrawals, Minimum
Distributions, transfers previously scheduled with us at our Office pursuant to
any on-going rebalancing, asset allocation or similar program, and annuity
payments.
(2) We price "unscheduled" transfers, partial withdrawals and free
withdrawals as of the date we receive at our Office the request for such
transactions. "Unscheduled" transfers include any transfers processed in
conjunction with any market timing program, or transfers not previously
scheduled with us at our Office pursuant to any rebalancing, asset allocation or
similar program which you employ or you authorize to be employed on your behalf.
"Unscheduled" transfers received pursuant to an authorization to accept
transfers over the phone are priced as of the Valuation Period we receive the
request at our Office for such transactions.
(3) We price surrenders, medically-related surrenders and death
benefits as of the date we receive at our Office all materials we require for
such transactions and such materials are satisfactory to us (see "Surrenders",
"Medically-related Surrenders" and "Death Benefits").
The pricing of transfers and distributions involving Sub-accounts includes the
determination of the applicable Unit Price for the Units transferred or
distributed. The pricing of transfers and distributions involving Fixed
Allocations includes the determination of any applicable MVA. Any applicable MVA
alters the amount available when all the Account Value in a Fixed Allocation is
being transferred or distributed. Any applicable MVA alters the amount of
Interim Value needed when only a portion of the Account Value is being
transferred or distributed. Unit Prices may change each Valuation Period to
reflect the investment performance of the Sub-accounts. The MVA applicable to
each Fixed Allocation changes once each month and also each time we declare a
different rate for new Fixed Allocations. Payment is subject to our right to
defer transactions for a limited period (see "Deferral of Transactions").
Voting Rights: You have voting rights in relation to Account Value
maintained in the Sub-accounts. You do not have voting rights in relation to
Account Value maintained in any Fixed Allocations or in relation to fixed or
adjustable annuity payments.
We will vote shares of the underlying mutual funds or portfolios in which the
Sub-accounts invest in the manner directed by Owners. Owners give instructions
equal to the number of shares represented by the Sub-account Units attributable
to their Annuity.
We will vote the shares attributable to assets held in the Sub-accounts solely
for us rather than on behalf of Owners, or any share as to which we have not
received instructions, in the same manner and proportion as the shares for which
we have received instructions. We will do so separately for each Sub-account
from various classes that may invest in the same underlying mutual fund
portfolio.
The number of votes for an underlying mutual fund or portfolio will be
determined as of the record date for such underlying mutual fund or portfolio as
chosen by its board of trustees or board of directors, as applicable. We will
furnish Owners with proper forms and proxies to enable them to instruct us how
to vote.
You may instruct us how to vote on the following matters: (a) changes to the
board of trustees or board of directors, as applicable; (b) changing the
independent accountant; (c) approval of changes to the investment advisory
agreement or adoption of a new investment advisory agreement; (d) any change in
the fundamental investment policy; and (e) any other matter requiring a vote of
the shareholders.
With respect to approval of changes to the investment advisory agreement,
approval of a new investment advisory agreement or any change in fundamental
investment policy, only Owners maintaining Account Value as of the record date
in a Sub-account investing in the applicable underlying mutual fund portfolio
will instruct us how to vote on the matter, pursuant to the requirements of Rule
18f-2 under the 1940 Act.
Transfers, Assignments or Pledges: Generally, your rights in an Annuity may
be transferred, assigned or pledged for loans at any time. However, these rights
may be limited depending on your use of the Annuity. These transactions may be
subject to income taxes and certain penalty taxes (see "Certain Tax
Considerations"). You may transfer, assign or pledge your rights to another
person at any time, prior to any death upon which the death benefit is payable.
You must request a transfer or provide us a copy of the assignment In Writing. A
transfer or assignment is subject to our acceptance. 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. Transfer of all or a portion of
ownership rights may affect the minimum death benefit (see "Death Benefits").
Reports to You: We mail to Owners, at their last known address of record,
any statements and reports required by applicable law or regulation. Owners
should therefore give us prompt notice of any address change. We send a
confirmation statement to Owners each time a transaction is made affecting
Account Value, such as making additional Purchase Payments, transfers, exchanges
or withdrawals. Quarterly statements are also mailed 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. Instead of immediately confirming transactions made pursuant to some
type of periodic transfer program (such as a dollar cost averaging program) or a
periodic Purchase Payment program, such as a salary reduction arrangement, we
may confirm such transactions in quarterly statements. You should review the
information in these statements carefully. All errors or corrections must be
reported to us at our Office immediately to assure proper crediting to your
Annuity. For transactions for which we immediately send confirmations, we assume
all transactions are accurate unless you notify us otherwise within 30 days
after the date of the transaction. For transactions that are only confirmed on
the quarterly statement, we assume all transactions are accurate unless you
notify us within 30 days of the end of the calendar quarter. We may also send to
Owners each year an annual report and a semi-annual report containing financial
statements for the applicable Sub-accounts, as of December 31 and June 30,
respectively.
SALE OF THE ANNUITIES: American Skandia Marketing, Incorporated ("ASM,
Inc."), formerly Skandia Life Equity Sales Corporation, a wholly-owned
subsidiary of American Skandia Investment Holding Corporation, acts as the
principal underwriter of the Annuities. ASM, Inc.'s principal business address
is One Corporate Drive, Shelton, Connecticut 06484. ASM, Inc. is a member of the
National Association of Securities Dealers, Inc. ("NASD").
Distribution: ASM, Inc. will enter into distribution agreements with
certain broker-dealers registered under the Securities and Exchange Act of 1934
or with entities which may otherwise offer the Annuities that are exempt from
such registration. Under such distribution agreements such broker-dealers or
entities may offer Annuities to persons who have established an account with the
broker-dealer or entity. In addition, ASM, Inc. may offer Annuities directly to
potential purchasers. The maximum initial concession to be paid on premiums
received is 7.0% and a portion of compensation may be paid from time to time
based on all or a portion of Account Value. We reserve the right to base
concessions from time-to-time on the investment options chosen by Annuity
Owners, including investment options that may be deemed our "affiliates" or
"affiliates" of ASM, Inc. under the Investment Company Act of 1940.
As of the date of this Prospectus, we expect to pay an on-going service fee in
relation to providing certain statistical information upon request by Owners
about the variable investment options and the underlying mutual fund portfolios.
The fee is payable to the service providers based on your Annuity's Account
Value maintained in the variable investment options. No fee is payable based on
any Account Values maintained in any Fixed Allocations. Under most
circumstances, we will engage the broker-dealer of record for your Annuity, or
the entity of record is such entity could offer Annuities with registration as a
broker-dealer (i.e. certain banks), to be your resource for the statistical
information, and to be available upon your request to both provide and explain
such information to you. The broker-dealer of record or the entity of record is
the firm which sold you the Annuity, unless later changed. Some portion of the
fee we pay for this service may be payable to your representative. Therefore,
your representative may receive on-going service fee compensation, but only in
relation to Account Values maintained in variable investment options.
As of the date of this Prospectus, we were promoting the sale of our products
and the solicitation of additional purchase payments, where applicable, for our
products, including Annuities offered pursuant to this Prospectus, through a
program of non-cash rewards to registered representatives of participating
broker-dealers. We may withdraw or alter this promotion at any time.
Advertising: We may advertise certain information regarding the performance
of the investment options. Details on how we calculate performance measures for
the Sub-accounts are found in the Statement of Additional Information. This
performance information may help you review the performance of the investment
options and provide a basis for comparison with other annuities. This
information 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 treated like annuities under the Code.
The information we may advertise regarding the Fixed Allocations may include the
then current interest rates we are crediting to new Fixed Allocations.
Information on Current Rates will be as of the date specified in such
advertisement. Rates will be included in advertisements to the extent permitted
by law. Given that the actual rates applicable to any Fixed Allocation are as of
the date of any such Fixed Allocation's Guarantee Period begins, the rate
credited to a Fixed Allocation may be more or less than those quoted in an
advertisement.
Performance information on the Sub-accounts is based on past performance only
and is no indication of future performance. Performance of the Sub-accounts
should not be considered a representation of the performance of such
Sub-accounts in the future. Performance of the Sub-accounts is not fixed. Actual
performance will depend on the type, quality and, for some of the Sub-accounts,
the maturities of the investments held by the underlying mutual funds or
portfolios and upon prevailing market conditions and the response of the
underlying mutual funds to such conditions. Actual performance will also depend
on changes in the expenses of the underlying mutual funds or portfolios. Such
changes are reflected, in turn, in the Sub-accounts which invests in such
underlying mutual fund or portfolio. In addition, the amount of charges assessed
against each Sub-account will affect performance.
Some of the underlying mutual fund 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 underlying mutual fund 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.
As part of any advertisement of Standard Total Return, we may advertise the
"Non-standard Total Return" of the Sub-accounts. Non-standard Total Return does
not take into consideration the Annuity's contingent deferred sales charge.
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
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 Fixed Allocations,
pay minimum death benefits, pay annuity payments or administer Annuities. Such
rankings and ratings do not reflect or relate to the performance of Separate
Account B.
CERTAIN TAX CONSIDERATIONS: The following is a brief summary of certain
Federal income tax laws as they are currently interpreted. No one can be certain
that the laws or interpretations will remain unchanged or that agencies or
courts will always agree as to how the tax law or regulations are to be
interpreted. This discussion is not intended as tax advice. You may wish to
consult a professional tax advisor for tax advice as to your particular
situation.
Our Tax Considerations: We are taxed as a life insurance company under Part
I, subchapter L, of the Code.
Tax Considerations Relating to Your Annuity: Section 72 of the Code governs
the taxation of annuities in general. Taxation of an annuity is largely
dependent upon: (a) whether it is used in a qualified pension or profit sharing
plan or other retirement arrangement eligible for special treatment under the
Code; and (b) the status of the beneficial owner as either a natural or
non-natural person (when the annuity is not used in a retirement plan eligible
for special tax treatment). Non-natural persons include corporations, trusts,
and partnerships, except where these entities own an annuity for the benefit of
a natural person. Natural persons are individuals.
Non-natural Persons: Any increase during a tax year in the value of an
annuity if not used in a retirement plan eligible for special treatment under
the Code is currently includible in the gross income of a non-natural person
that is the contractholder. There are exceptions if an annuity is held by: (a) a
structured settlement company; (b) an employer with respect to a terminated
pension plan; (c) entities other than employers, such as a trust, holding an
annuity as an agent for a natural person; or (d) a decedent's estate by reason
of the death of the decedent.
Natural Persons: Increases in the value of an annuity when the
contractholder is a natural person generally are not taxed until distribution
occurs. Distribution can be in a lump sum payment or in annuity payments under
the annuity option elected. Certain other transactions may be deemed to be a
distribution. The provisions of Section 72 of the Code concerning these
distributions are summarized briefly below.
Distributions: Distributions received before the annuity payments begin
are treated as being derived first from "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 is computed by subtracting from the value of all "related contracts"
(our term, discussed below) the taxpayer's "investment in the contract": an
amount equal to total purchase payments for all "related contracts" less any
previous distributions or portions of such distributions from such "related
contracts" not includible in gross income. "Investment in the contract" may be
affected by whether an annuity or any "related contract" was purchased as part
of a tax-free exchange of life insurance or annuity contracts under Section 1035
of the Code.
"Related contracts" may mean all annuity contracts or certificates evidencing
participation in a group annuity contract 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. It is clear that "related
contracts" include contracts prior to when annuity payments begin. However,
there may be circumstances under which "related contracts" may include contracts
recognized as immediate annuities under state insurance law or annuities for
which annuity payments have begun. In a ruling addressing the applicability of a
penalty on distributions, the Internal Revenue Service treated distributions
from a contract recognized as an immediate annuity under state insurance law
like distributions from a deferred annuity. The situation addressed by such
ruling included the fact that: (a) the immediate annuity was obtained pursuant
to an exchange of contracts; and (b) the purchase payments for the exchanged
contract were contributed more than one year prior to the first annuity payment
payable under the immediate annuity. This ruling also may or may not imply that
annuity payments from a deferred annuity on or after its annuity date may be
treated the same as distributions prior to the annuity date if such deferred
annuity was: (a) obtained pursuant to an exchange of contracts; and (b) the
purchase payments for the exchanged contract were made or may be deemed to have
been made more than one year prior to the first annuity payment.
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 "Annuity Payments" subsection below) as well as in
determining the taxable portion of distributions from an annuity or any "related
contracts" before annuity payments have begun. 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.
Assignments and Pledges: Any assignment or pledge of any portion of the
value of an annuity before annuity payments have begun are treated as a
distribution subject to taxation under the distribution rules set forth above.
Any gain in an annuity subsequent to the assignment or pledge of an entire
annuity while such assignment or pledge remains in effect is treated as "income
on the contract" in the year in which it is earned. For annuities not issued for
use as qualified plans (see "Tax Considerations When Using Annuities in
Conjunction with Qualified Plans"), the cost basis of the annuity is increased
by the amount of any assignment or pledge includible in gross income. The cost
basis is not affected by any repayment of any loan for which the annuity is
collateral or by payment of any interest thereon.
Penalty on Distributions: Subject to certain exceptions, any distribution
is subject to a penalty equal to 10% of the amount includible in gross income.
This penalty does not apply to certain distributions, including: (a)
distributions made on or after the taxpayer's age 59 1/2; (b) distributions made
on or after the death of the holder of the contract, or, where the holder of the
contract is not a natural person, the death of the annuitant; (c) distributions
attributable to the taxpayer's becoming disabled; (d) distributions which are
part of a scheduled series of substantially equal periodic payments for the life
(or life expectancy) of the taxpayer (or the joint lives of the taxpayer and the
taxpayer's Beneficiary); (e) distributions of amounts which are allocable to
"investments in the contract" made prior to August 14, 1982; (f) payments under
an immediate annuity as defined in the Code; (g) distributions under a qualified
funding asset under Code Section 130(d); or (h) distributions from an annuity
purchased by an employer on the termination of a qualified pension plan that is
held by the employer until the employee separates from service.
Any modification, other than by reason of death or disability, of distributions
which are part of a scheduled series of substantially equal periodic payments as
noted in (d), above, that occur before the taxpayer's age 59 1/2 or within 5
years of the first of such scheduled payments will result in the requirement to
pay the taxes that would have been due had the payments been treated as subject
to tax in the years received, plus interest for the deferral period. It is our
understanding that the Internal Revenue Service does not consider a scheduled
series of distributions to qualify under (d), above, if the holder of the
annuity retains the right to modify such distributions at will, even if such
right is not exercised, or, for a variable annuity, if the distributions are not
based on a substantially equal number of Units, rather than a substantially
equal dollar amount.
The Internal Revenue Service has ruled that the exception to the 10% penalty
described above for "non-qualified" immediate annuities as defined under the
Code may not apply to annuity payments under a contract recognized as an
immediate annuity under state insurance law obtained pursuant to an exchange of
contracts if: (a) purchase payments for the exchanged contract were contributed
or deemed to be contributed more than one year prior to the first annuity
payment payable under the immediate annuity; and (b) the annuity payments under
the immediate annuity do not meet the requirements of any other exception to the
10% penalty. This ruling may or may not imply that the exception to the 10%
penalty may not apply to annuity payments paid pursuant to a deferred annuity
obtained pursuant to an exchange of contract if: (a) purchase payments for the
exchanged contract were contributed or may be deemed to be contributed more than
one year prior to the first annuity payment pursuant to the deferred annuity
contract; or (b) the annuity payments pursuant to the deferred annuity do not
meet the requirements of any other exception to the 10% penalty.
Annuity Payments: The taxable portion of each payment is determined by a
formula which establishes the ratio that "investment in the contract" bears to
the total value of annuity payments to be made. However, the total amount
excluded under this ratio is limited to the "investment in the contract". The
formula differs between fixed and variable annuity payments. Where the annuity
payments cease because of the death of the person upon whose life payments are
based and, as of the date of death, the amount of annuity payments excluded from
taxable income by the exclusion ratio does not exceed the investment in the
contract, then the remaining portion of unrecovered investment is allowed as a
deduction in the tax year of such death.
Gifts: The gift of an annuity to other than the spouse of the contract
holder (or former spouse incident to a divorce) is treated for tax purposes as a
distribution.
Tax Free Exchanges: Section 1035 of the Code permits certain tax-free
exchanges of a life insurance, annuity or endowment contract for an annuity. If
an annuity is obtained by a tax-free exchange of a life insurance, annuity or
endowment contract purchased prior to August 14, 1982, then any distributions
other than as annuity payments which do not exceed the portion of the
"investment in the contract" (purchase payments made into the other contract,
less prior distributions) prior to August 14, 1982, are not included in taxable
income. In all other respects, the general provisions of the Code apply to
distributions from annuities obtained as part of such an exchange.
Transfers Between Investment Options: Transfers between investment options
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. Such guidelines may or may not
address the number of investment options or the number of transfers between
investment options offered under a variable annuity. It is not known whether
such guidelines, if in fact promulgated, would have retroactive effect. It is
also not known what effect, if any, such guidelines may have on transfers
between the investment options of the Annuity 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.
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 taxes
tend to apply to transfers of significantly large dollar amounts. We may be
required to determine whether a transaction must be treated as a direct skip as
defined in the Code and the amount of the resulting tax. If so required, we will
deduct from your Annuity or from any applicable payment to be treated as a
direct skip any amount we are required to pay as a result of the transaction.
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). The Treasury Department's
regulations prescribe the diversification requirements for variable annuity
contracts. We believe the underlying mutual fund portfolios should comply with
the terms of these regulations.
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 retirement plans, may be
subject to automatic 20% withholding for Federal income taxes. This will not
apply to: (a) any portion of a distribution paid as Minimum Distributions; (b)
direct transfers to the trustee of another retirement plan; (c) distributions
from an individual retirement account or individual retirement annuity; (d)
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; and (e) certain other distributions where automatic 20% withholding may
not apply.
Tax Considerations When Using Annuities in Conjunction with Qualified
Plans: There are various types of qualified plans for which an annuity may be
suitable. Benefits under a qualified plan may be subject to that plan's terms
and conditions irrespective of the terms and conditions of any annuity used to
fund such benefits ("qualified contract"). We have provided below general
descriptions of the types of qualified plans in conjunction with which we may
issue an Annuity. These descriptions are not exhaustive and are for general
informational purposes only. We are not obligated to make or continue to make
new Annuities available for use with all the types of qualified plans shown
below.
The tax rules regarding qualified plans are complex. The application of these
rules depend on individual facts and circumstances. Before purchasing an Annuity
for use in funding a qualified plan, you should obtain competent tax advice,
both as to the tax treatment and suitability of such an investment.
Qualified contracts include special provisions changing or restricting certain
rights and benefits otherwise available to non-qualified annuities. You should
read your Annuity carefully to review any such changes or limitations. The
changes and limitations may include, but may not be limited to, restrictions on
ownership, transferability, assignability, contributions, distributions, as well
as reductions to the minimum allowable purchase payment for an annuity and any
subsequent annuity you may purchase for use as a qualified contract.
Additionally, various penalty and excise taxes may apply to contributions or
distributions made in violation of applicable limitations.
Individual Retirement Programs: Eligible individuals may maintain an
individual retirement account or individual retirement annuity ("IRA"). Subject
to limitations, contributions of certain amounts may be deductible from gross
income. Purchasers of IRAs are to receive a special disclosure document, which
describes limitations on eligibility, contributions, transferability and
distributions. It also describes the conditions under which distributions from
IRAs and other qualified plans may be rolled over or transferred into an IRA on
a tax-deferred basis. Eligible employers that meet specified criteria may
establish simplified employee pensions for employees using the employees' IRAs.
These arrangements are known as SEP-IRAs. Employer contributions that may be
made to SEP-IRAs are larger than the amounts that may be contributed to other
IRAs, and may be deductible to the employer.
Tax Sheltered Annuities: A tax sheltered annuity ("TSA") under Section
403(b) of the Code is a contract into which contributions may be made for the
benefit of their employees by certain qualifying employers: public schools and
certain charitable, educational and scientific organizations. Such contributions
are not taxable to the employee until distributions are made from the TSA. The
Code imposes limits on contributions, transfers and distributions.
Nondiscrimination requirements apply as well.
Corporate Pension and Profit-sharing Plans: Annuities may be used to fund
employee benefits of various retirement plans established by corporate
employers. Contributions to such plans are not taxable to the employee until
distributions are made from the retirement plan. The Code imposes limitations on
contributions and distributions. The tax treatment of distributions is subject
to special provisions of the Code, and also depends on the design of the
specific retirement plan. There are also special requirements as to
participation, nondiscrimination, vesting and nonforfeitability of interests.
H.R. 10 Plans: Annuities 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". These
plans are subject to most of the same types of limitations and requirements as
retirement plans established by corporations. However, the exact limitations and
requirements may differ from those for corporate plans.
Tax Treatment of Distributions from Qualified Annuities: A 10% penalty tax
applies to the taxable portion of a distribution from a qualified contract
unless one of the following exceptions apply to such distribution: (a) it is
part of a properly executed transfer to another IRA, an individual retirement
account or another eligible qualified plan; (b) it occurs on or after the
taxpayer's age 59 1/2; (c) it is subsequent to the death or disability of the
taxpayer (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) it is part of substantially equal periodic payments to be paid not
less frequently than annually for the taxpayer's life or life expectancy or for
the joint lives or life expectancies of the taxpayer and a designated
beneficiary; (e) it is subsequent to a separation from service after the
taxpayer attains age 55; (f) it does not exceed the employee's allowable
deduction in that tax year for medical care; and (g) it is made to an alternate
payee pursuant to a qualified domestic relations order. The exceptions stated
above in (e), (f) and (g) do not apply to IRAs.
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. Contributions
are not taxable to employees until distributed from the plan. However, plan
assets remain the property of the employer and are subject to the claims of the
employer's general creditors until such assets are made available to
participants or their beneficiaries.
OTHER MATTERS: Outlined below are certain miscellaneous matters you should
know before investing in an Annuity.
Deferral of Transactions: We may defer any distribution or transfer from a
Fixed Allocation or an annuity payout for a period not to exceed the lesser of 6
months or the period permitted by law. If we defer a distribution or transfer
from any Fixed Allocation or any annuity payout for more than thirty days, or
less where required by law, we pay interest at the minimum rate required by law
but not less than 3%, or at least 4% if required by your contract, per year on
the amount deferred. We may defer payment of proceeds of any distribution from
any Sub-account or any transfer from a Sub-account for a period not to exceed 7
calendar days from the date the transaction is effected. Any deferral period
begins on the date such distribution or transfer would otherwise have been
transacted (see "Pricing of Transfers and Distributions").
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.
Resolving Material Conflicts: Underlying mutual funds or portfolios may be
available to registered separate accounts offering either or both life and
annuity contracts of insurance companies not affiliated with us. We also may
offer life insurance and/or annuity contracts that offer different variable
investment options from those offered under this Annuity, but which invest in
the same underlying mutual funds or portfolios. It is possible that differences
might arise between our Separate Account B and one or more accounts of other
insurance companies which participate in a portfolio. It is also possible that
differences might arise between a Sub-account offered under this Annuity and
variable investment options offered under different life insurance policies or
annuities we offer, even though such different variable investment options
invest in the same underlying mutual fund or portfolio. In some cases, it is
possible that the differences could be considered "material conflicts". Such a
"material conflict" could also arise due to changes in the law (such as state
insurance law or Federal tax law) which affect either these different life and
annuity separate accounts or differing life insurance policies and annuities. It
could also arise by reason of differences in voting instructions of persons with
voting rights under our policies and/or annuities and those of other companies,
persons with voting rights under annuities and those with rights under life
policies, or persons with voting rights under one of our life policies or
annuities with those under other life policies or annuities we offer. It could
also arise for other reasons. We will monitor events so we can identify how to
respond to such conflicts. If such a conflict occurs, we will take the necessary
action to protect persons with voting rights under our life policies or
annuities vis-a-vis those with rights under life policies or annuities offered
by other insurance companies. We will also take the necessary action to treat
equitably persons with voting rights under this Annuity and any persons with
voting rights under any other life policy or annuity we offer.
Modification: We reserve the right to 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 "unitized" separate accounts; (c) terminate
offering certain Guarantee Periods for new or renewing Fixed Allocations; (d)
combine Separate Account D with other "non-unitized" separate accounts; (e)
deregister Separate Account B under the 1940 Act; (f) operate Separate Account B
as a management investment company under the 1940 Act or in any other form
permitted by law; (g) make changes required by any change in the Securities Act
of 1933, the Exchange Act of 1934 or the 1940 Act; (h) make changes that are
necessary to maintain the tax status of your Annuity under the Code; and (i)
make changes required by any change in other Federal or state laws relating to
retirement annuities or annuity contracts.
Also, from time to time, we may make additional Sub-accounts available to you.
These Sub-accounts will invest in underlying mutual funds or portfolios of
underlying mutual funds 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 of one of
the current underlying mutual funds 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 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.
We reserve the right to transfer assets of Separate Account B, which we
determine to be associated with the class of contracts to which your Annuity
belongs, to another "unitized" separate account. We also reserve the right to
transfer assets of Separate Account D which we determine to be associated with
the class of contracts to which your annuity belongs, to another "non-unitized"
separate account. We notify you (and/or any payee during the payout phase) of
any modification to your Annuity. We may endorse your Annuity to reflect the
change.
Misstatement of Age or Sex: If there has been a misstatement of the age
and/or sex of any person upon whose life annuity payments or the minimum death
benefit are based, we make adjustments to conform to the facts. As to annuity
payments: (a) any underpayments by us will be remedied on the next payment
following correction; and (b) any overpayments by us will be charged against
future amounts payable by us under your Annuity.
Ending the Offer: We may limit or discontinue offering Annuities. Existing
Annuities will not be affected by any such action.
Indemnification: Insofar as indemnification for liabilities arising under
the Securities Act of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Legal Proceedings: As of the date of this Prospectus, neither we nor ASM,
Inc. were involved in any litigation outside of the ordinary course of business,
and know of no material claims.
THE COMPANY: American Skandia Life Assurance Corporation is a stock
insurance company domiciled in Connecticut with licenses in all 50 states. It is
a wholly owned subsidiary of American Skandia Investment Holding Corporation,
whose indirect parent is Skandia Insurance Company Ltd. Skandia Insurance
Company Ltd. is part of a group of companies whose predecessor commenced
operations in 1855. Two of our affiliates, American Skandia Marketing,
Incorporated, and American Skandia Information Services and Technology
Corporation, may undertake certain administrative functions on our behalf. Our
affiliate, American Skandia Investment Services, Incorporated, currently acts as
the investment manager to the American Skandia Trust. We currently engage
Skandia Investment Management, Inc., an affiliated whose indirect parent is
Skandia Insurance Company Ltd., as investment manager for our general account.
We are under no obligation to engage or continue to engage any investment
manager.
During 1995, Skandia Vida, S.A. de C.V. was formed by the ultimate parent
Skandia Insurance Company Ltd. The Company owns 99.9% ownership in Skandia Vida,
S.A. de C.V. which is a life insurance company domiciled in Mexico. This Mexican
life insurer is a start up company with expectations of selling long term
savings product within Mexico. Total shareholders' equity of Skandia Vida, S.A.
de C.V. is $881,648 at December 31, 1995.
Lines of Business: The Company is in the business of issuing annuity
policies, and has been so since its business inception in 1988. The Company
currently offers the following annuity products: a) certain deferred annuities
that are registered with the Securities and Exchange Commission, including
variable annuities and fixed interest rate annuities that include a market value
adjustment feature; b) certain other fixed deferred annuities that are not
registered with the Securities and Exchange Commission; and c) fixed and
adjustable immediate annuities. We may, in the future, offer other annuities,
life insurance and other forms of insurance.
Selected Financial Data: The following selected financial data are
qualified by reference to, and should be read in conjunction with, the financial
statements, including related notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The selected financial data as of and for each of the five
years ended December 31, 1995, 1994, 1993, 1992 and 1991 has not been audited.
The selected financial data has been derived from the full financial statements
for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 which were
presented in accordance with generally accepted accounting principles and which
were audited by Deloitte & Touche LLP, independent auditors, whose report
thereon is included herein.
<TABLE>
<CAPTION>
Income Statement Data:
1995 1994 1993 1992 1991
---- ----- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C> <C>
Net investment income $ 1,600,674 $ 1,300,217 $ 692,758 $ 892,053 $ 723,253
Annuity premium income 0 70,000 101,643 1,304,629 2,068,452
Annuity charges and fees* 38,837,358 24,779,785 11,752,984 4,846,134 1,335,079
Net realized capital gains (losses) 36,774 (1,942) 330,024 195,848 4,278
Fee income 6,205,719 2,111,801 938,336 125,179 0
Other income 64,882 24,550 1,269 15,119 45,010
----------- ------------ ----------- ---------- ----------
Total revenues $46,745,407 $ 28,284,411 $13,817,014 $7,378,962 $4,176,072
=========== =========== =========== ========== ==========
Benefits and Expenses:
Return credited to contractowners 10,612,858 (516,730) 252,132 560,243 235,470
Cost of minimum death benefit reinsurance 2,056,606 0 0 0 0
Annuity benefits 555,421 369,652 383,515 276,997 107,536
Increase/(decrease) in annuity policy reserves (6,778,756) 5,766,003 1,208,454 1,331,278 2,045,722
Underwriting, acquisition and
other insurance expenses 35,970,524 18,942,720 9,547,951 11,338,765 7,294,400
Interest expense 6,499,414 3,615,845 187,156 0 0
------------- ----------- ----------- ----------- ----------
Total benefits and expenses $48,916,067 $ 28,177,490 $11,579,208 $13,507,283 $9,683,128
============= =========== =========== =========== ==========
Income tax $ 397,360 $ 247,429 $ 182,965 $ 0 $ 0
============= ============ =========== ============ ==========
Net income (loss) $ (2,568,020) $ 140,508) $ 2,054,841 $ (6,128,321) ($5,507,056
============== ============= ============ ============ ===========
Balance Sheet Data:
Total Assets $5,021,012,890 $2,864,416,329 $1,558,548,537 $552,345,206 $239,435,675
============== ============== ============== ============ ============
Surplus Notes $103,000,000 $ 69,000,000 $ 20,000,000 $ 0 $ 0
============ =========== ============== ============ ============
Shareholder's Equity $59,713,00 $ 52,205,524 $ 52,387,687 $ 46,332,846 $ 14,292,772
========== ============ ============== ============ ============
</TABLE>
*On annuity sales of $1,628,486,000, $1,372,874,000, $890,640,000, $287,596,000,
and $141,017,000 during the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively, with contractowner assets under management of
$4,704,044,001, $2,661,161,000, $1,437,554,000, $495,176,000, and $217,425,000
as of December 31, 1995, 1994, 1993, 1992, and 1991, respectively.
The above selected financial data should be read in conjunction with the
financial statements and the notes thereto.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation: The Company's long term business plan was developed
reflecting the current sales and marketing approach. Annuity sales increased
19%, 54% and 210% in 1995, 1994 and 1993, respectively. The Company continues to
show significant growth in sales volume and increased market share within the
variable annuity industry. Total assets grew 75%, 84% and 182% in 1995, 1994 and
1993, respectively. These increases were a direct result of the substantial
sales volume increasing separate account assets and deferred acquisition costs.
Liabilities grew 76%, 87%, and 198% in 1995, 1994 and 1993, respectively, as a
result of the reserves required for the increased sales activity and borrowing
during 1995, 1994 and 1993. The borrowing is needed to fund the acquisition
costs of the Company's variable annuity business.
The Company experienced a net loss after tax in 1995 and 1994, which was in
excess of plan. The 1995 result was related to higher than anticipated expense
levels and additional reserving requirements on our market value adjusted
annuities. The increase in expenses was primarily attributable to improving our
service infrastructure and marketing related costs.
The 1994 loss is a result of additional reserving of approximately $4.6
million to cover the minimum death benefit exposure in the Company's annuity
contracts along with higher than expected general expenses relative to sales
volume. The additional reserve may be required from time to time, within the
variable annuity market place, and is a result of volatility in the financial
markets as it relates to the underlying separate account investments. The
Company achieved profits in 1993 of $2 million which was expected.
Increasing volume of annuity sales results in higher assets under
management. The fees realized on assets under management has resulted in annuity
charges and fees to increase 57%, 111% and 143% in 1995, 1994 and 1993,
respectively.
Net investment income increased 23% and 88% in 1995 and 1994, respectively,
and decreased 22% in 1993. The increase in 1995 is a result of a higher average
level of Company bonds and short-term investments. The increase in 1994 is a
result of an increase in the Company's bonds and short-term investments, which
were $33.6 million and $29.1 million at December 31, 1994 and 1993,
respectively. The decrease in 1993 is a result of the need to liquidate
investments to support the cash needs required to fund the acquisition costs on
the variable annuity business.
Fee income has increased 194%, 125% and 650% in 1995, 1994 and 1993,
respectively, as a result of income from transfer agency type activities.
Annuity benefits represent payments on annuity contracts with mortality
risks, this being the immediate annuity with life contingencies and
supplementary contracts with life contingencies.
Increase in annuity policy reserves represent change in reserves for the
immediate annuity with life contingencies, supplementary contracts with life
contingencies and minimum death benefit. During 1995 the Company entered into an
agreement to reinsure the guaranteed minimum death benefit exposure on most of
the variable annuity contracts. The costs associated with reinsuring the minimum
death benefit reserve approximates the change in the minimum death benefit
reserve during 1995, thereby having no significant effect on the statement of
operations. The significant increase in 1994 reflects the required increase in
the minimum death benefit reserve on variable annuity contracts. This increase
covers the escalating death benefit in the product which was further enhanced as
a result of poor performance of the underlying mutual funds within the variable
annuity contract.
Return credited to contractowners represents revenues on the variable and
market value adjusted annuities offset by the benefit payments and change in
reserves required on this business. Also included are the benefit payments and
change in reserves on immediate annuity contracts without significant mortality
risks. In 1995, the Company earned a lower than anticipated separate account
investment return on the market value adjusted contracts in support of the
benefits and required reserves. In addition, the 1995 result includes an
increase in the required reserves associated with this product.
The result for 1994 was better than anticipated due to separate account
investment return on the market value adjusted contracts being in excess of the
benefits and required reserves.
Underwriting, acquisition and other insurance expenses for 1995 is made up
of $62.8 million of commissions and $42.2 million of general expenses offset by
the net capitalization of deferred acquisition costs totaling $69.2 million.
This compares to the same period last year of $46.2 million of commissions and
$26.2 million of general expenses offset by the net capitalization of deferred
acquisition costs totaling $53.7 million.
Underwriting, acquisition and other insurance expenses in 1993 were made up
of $36.7 million of commissions and $19.3 million of general expenses offset by
the net capitalization of deferred acquisition costs totaling $46.3 million.
Interest expense increased $2.9 million and $3.4 million in 1995 and 1994,
respectively, as a result of Surplus Notes totaling $103 million and $69
million, at 1995 and 1994, respectively.
Liquidity and Capital Resources: The liquidity requirement of ASLAC was met
by cash from insurance operations, investment activities and borrowings from its
parent.
As previously stated, the Company had significant growth during 1995. The
sales volume of $1.628 billion was primarily (approximately 80%) variable
annuities which carry a contingent deferred sales charge. This type of product
causes a temporary cash strain in that 100% of the proceeds are invested in
separate accounts supporting the product leaving a cash (but not capital) strain
caused by the acquisition cost for the new business. This cash strain required
the Company to look beyond the insurance operations and investments of the
Company. During 1995, the Company borrowed an additional $34 million from its
parent in the form of Surplus Notes and extended the reinsurance agreement
(which was initiated in 1993 and 1994) along with entering into a third
reinsurance agreement with a large reinsurer in support of its cash needs. The
reinsurance agreements are modified coinsurance arrangements where the reinsurer
shares in the experience of a specific book of business. The income and expense
items presented above are net of reinsurance.
The Company is reviewing various options to fund the cash strain
anticipated from the acquisition costs on the coming years' sales volume.
The tremendous growth of this young organization has depended on capital
support from its parent.
As of December 31, 1995 and December 31, 1994, shareholder's equity was
$59,713,000 and $52,205,524 respectively, which includes the carrying value of
the state insurance licenses in the amount of $4,862,500 and $5,012,500
respectively.
ASLAC has long term surplus notes with its parent and a short term
borrowing with an affiliate. No dividends have been paid to its parent company.
Segment Information: As of the date of this Prospectus, we offered only
variable and fixed deferred annuities and immediate annuities.
Reinsurance: The Company cedes reinsurance under modified coinsurance
arrangements. The reinsurance arrangements provide additional capacity for
growth in supporting the cash flow strain from the Company's variable annuity
business. The reinsurance is effected under quota share contracts.
Effective January 1, 1995, the Company reinsured certain mortality risks.
These risks result from the guaranteed minimum death benefit feature in the
variable annuity products.
The effect of the reinsurance agreements on the Company's operations was to
reduce annuity charges and fee income, death benefit expense, and policy
reserves.
Such ceded reinsurance does not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet the obligations assumed
under the reinsurance agreement.
Surplus Notes: During 1995, the Company received $34 million from its
parent in exchange for three surplus notes. The amounts were $10 million, $15
million and $9 million, at interest rates of 7.52%, 7.49% and 7.47%,
respectively. Interest expense for these notes was $83,281 for the year ended
December 31, 1995.
During 1994, the Company received $49 million from its parent in exchange
for four surplus notes, two in the amount of $10 million, one in the amount of
$15 million and one in the amount of $14 million, at interest rates of 7.28%,
7.90%, 9.13% and 9.78%, respectively. Interest expense for these notes was
$4,319,612 and $1,618,504 for the years ended December 31, 1995 and 1994,
respectively.
During 1993, the Company received $20 million from its parent in exchange
for a surplus note in the amount of $20 million at a 6.84% interest rate.
Interest expense for this note was $1,387,000, $1,387,000 and $11,400 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Payment of interest and repayment of principal for these notes requires
approval by the Commissioner of the State of Connecticut. In 1995, approval was
granted for the payment of surplus note interest with the stipulation that it be
funded through a capital contribution from the Parent.
Reserves: We are obligated to carry on our statutory books, as liabilities,
actuarial reserves to meet our obligations on outstanding annuity or life
insurance contracts. This is required by the life insurance laws and regulations
in the jurisdictions in which we do business. Such reserves are based on
mortality and/or morbidity tables in general use in the United States. In
general, reserves are computed amounts that, with additions from premiums to be
received, and with interest on such reserves compounded at certain assumed
rates, are expected to be sufficient to meet our policy obligations at their
maturities if death occurs in accordance with the mortality tables employed. In
the accompanying Financial Statements these reserves for policy obligations are
determined in accordance with generally accepted accounting principles and are
included in the liabilities of our separate accounts and the general account
liabilities for future benefits of annuity or life insurance contracts we issue.
Competition: We are engaged in a business that is highly competitive due to
the large number of insurance companies and other entities competing in the
marketing and sale of insurance products. There are approximately 2300 stock,
mutual and other types of insurers in the life insurance business in the United
States.
Employees: As of December 31, 1995, we had 198 direct salaried employees.
An affiliate, American Skandia Information Services and Technology Corporation,
which provides services almost exclusively to us, had 67 direct salaried
employees.
Regulation: We are organized as a Connecticut stock life insurance company,
and are subject to Connecticut law governing insurance companies. We are
regulated and supervised by the Connecticut Commissioner of Insurance. By March
1 of every year, we must prepare and file an annual statement, in a form
prescribed by the Connecticut Insurance Department, which covers our operations
for the preceding calendar year, and must prepare and file our statement of
financial condition as of December 31 of such year. The Commissioner and his or
her agents have the right at all times to review or examine our books and
assets. A full examination of our operations will be conducted periodically
according to the rules and practices of the National Association of Insurance
Commissioners ("NAIC"). We are subject to the insurance laws and various federal
and state securities laws and regulations and to regulatory agencies, such as
the Securities and Exchange Commission (the "SEC") and the Connecticut Banking
Department, which administer those laws and regulations.
We can be assessed up to prescribed limits for policyholder losses incurred by
insolvent insurers under the insurance guaranty fund laws of most states. We
cannot predict or estimate the amount any such future assessments we may have to
pay. However, the insurance guaranty laws of most states provide for deferring
payment or exempting a company from paying such an assessment if it would
threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their affiliates
under insurance holding company laws and regulations. This applies to us and our
affiliates. Under such laws, inter-company transactions, such as dividend
payments to parent companies and transfers of assets, may be subject to prior
notice and approval, depending on factors such as the size of the transaction in
relation to the financial position of the companies.
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the anti-trust laws; (e) the barriers preventing most banks from selling or
underwriting insurance: and (f) any initiatives directed toward improving the
solvency of insurance companies. We would also be affected by federal
initiatives that have impact on the ownership of or investment in United States
companies by foreign companies or investors.
Executive Officers and Directors:
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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
Alan Blank Employee Vice President and,
47 National Sales Manager:
American Skandia
Marketing, Incorporated
Mr. Blank joined us in 1994. He previously held the position of Vice-Chairman at Liberty Securities.
<FN>
Gordon C. Boronow* President President and
43 and Chief Chief Operating Officer:
Operating Officer, American Skandia Life
Director (since July, 1991) Assurance Corporation
</FN>
Nancy F. Brunetti Senior Vice President, Senior Vice President, Business and
34 Business and Application Application Development:
Development American Skandia Life
Director (since February, 1996) Assurance Corporation
Ms. Brunetti joined us in 1992. She previously held the position of Senior Business Analyst at Monarch Life Insurance Company.
Malcolm M. Campbell Director (since April, 1991) Director of Operations,
40 Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
<FN>
Jan R. Carendi* Chief Executive Executive Vice President and
51 Officer and Member of Corporate Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
</FN>
Lincoln R. Collins Senior Vice President, Senior Vice President,
Product Management Product Management:
35 Director (since February, 1996) American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
42 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Wade A. Dokken Director (since July, 1991) Director:
36 and Employee American Skandia Life
Assurance Corporation;
President, Chief Operating Officer
and Chief Marketing Officer:
American Skandia Marketing, Incorporated
N. David Kuperstock Vice President, Vice President,
44 Product Development Product Development:
American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
43 Chief Financial Officer, Chief Financial Officer:
Director (since October, 1994) American Skandia Life
Assurance Corporation
Dianne B. Michael Senior Vice President, Senior Vice President,
41 Customer Service Customer Service:
Director (since February, 1996) American Skandia Life
Assurance Corporation
Ms. Michael joined us in 1995. She previously held the position of Vice President with J. P. Morgan Investment Management Inc.
Gunnar Moberg Director (since November, 1994) Director - Marketing and Sales,
41 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
M. Patricia Paez Assistant Vice President Assistant Vice President
35 and Corporate Secretary and Corporate Secretary:
American Skandia Life
Assurance Corporation
Don Thomas Peck Employee Vice President,
52 National Sales Manager:
American Skandia
Marketing, Incorporated
Mr. Peck joined us in 1995. He previously held the position of Regional Vice President with MFS Financial Services Inc.
Rodney D. Runestad Vice President and Vice President and
46 Valuation Actuary Valuation Actuary:
American Skandia Life
Assurance Corporation
Hayward Sawyer Employee Vice President and
51 National Sales Manager:
American Skandia
Marketing, Incorporated
Mr. Sawyer joined us in 1994. He previously held the position of Regional Vice President with AIM Distributors, Inc.
Todd L. Slade Vice President, Vice President,
38 Applications Development Applications Development:
American Skandia Life
Assurance Corporation
Anders O. Soderstrom Director (since October, 1994) President and
36 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Executive Vice President
38 and Deputy Chief and Deputy Chief
Operating Officer, Operating Officer:
Director (since July, 1991) American Skandia Life
Assurance Corporation
C. Ake Svensson Treasurer, Vice President, Treasurer
45 Director (since December, 1994) and Corporate Controller:
American Skandia Investment
Holding Corporation
Mr. Svensson joined us in 1994. He previously held the position of Senior Vice President with Nordenbanken.
Bayard F. Tracy Senior Vice President, Senior Vice President,
48 Institutional Sales, Institutional Sales and Marketing:
Director (since October, 1994) American Skandia Life
Assurance Corporation
</TABLE>
Executive Compensation
Summary Compensation Table: The summary table below summarizes the
compensation payable to our Chief Executive Officer and to the most highly
compensated of our executive officers whose compensation exceeded $100,000 in
the fiscal year immediately preceding the date of this Prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Principal Annual Annual Other Annual
Position Year Salary Bonus Compensation
Jan R. Carendi 1995 $200,315
Chief Executive Officer 1994 170,569
1993 214,121
Gordon C. Boronow 1995 $157,620
President & Chief 1994 129,121
Operating Officer 1993 123,788
Lincoln R. Collins 1995 $156,550
Senior Vice President 1994 92,700
Product Management 1993 72,100
N. David Kuperstock 1995 $133,120
Vice President, Product 1994 103,000
Development 1993 88,864
Bayard F. Tracy 1995 $168,052
Senior Vice President 1994 127,050
Institutional Sales 1993 123,363
</TABLE>
Long-Term Incentive Plans - Awards in the Last Fiscal Year: The following
table provides information regarding our long-term incentive plan. Units are
awarded to executive officers and other personnel. The table shows units awarded
to our Chief Executive Officer and the most highly compensated of our executive
officers whose compensation exceeded $100,000 in the fiscal year immediately
preceding the date of this Prospectus. This program is designed to induce
participants to remain with the company over long periods of time and to tie a
portion of their compensation to the fortunes of the company. Currently, the
program consists of multiple plans. A new plan may be instituted each year.
Participants are awarded units at the beginning of a plan. Generally,
participants must remain employed by the company or its affiliates at the time
such units are payable in order to receive any payments under the plan. There
are certain exceptions, such as in cases of retirement or death.
Changes in the value of units reflect changes in the "embedded value" of
the company. "Embedded value" is the net asset value of the company (valued at
market value and not including the present value of future profits), plus the
present value of the anticipated future profits (valued pursuant to state
insurance law) on its existing contracts. Units will not have any value for
participants if the embedded value does not increase by certain target
percentages during the first four years of a plan. The target percentages may
differ between each plan. Any amounts available under a plan are paid out in the
fifth through eighth years of a plan. Payments will be postponed if the payment
would exceed 20% of any profit (as determined under state insurance law) earned
by the company in the prior fiscal year or 30% of the individual's current year
salary. The amount to be received by a participant at the time any payment is
due will be the then current number of units payable multiplied by the then
current value of such units.
<PAGE>
<TABLE>
<CAPTION>
---------Estimated Future Payouts---------
Name Number of Units Period Until Payout Threshold Target Maximum
(#) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Number Period until Estimated Future Payouts
Name of Units Payout Threshold Target Maximum
Jan R. Carendi 120,000 Various $648,060
Gordon C. Boronow 110,000 Various $561,558
Lincoln R. Collins 36,750 Various $198,807
N. David Kuperstock 32,000 Various $200,968
Bayard E. Tracy 52,500 Various $286,263
</TABLE>
Compensation of Directors: The following directors were compensated as
shown below in 1995:
Malcolm M. Campbell $4,000 Gunnar Moberg $2,500
Henrik Danckwardt $4,000
Compensation Committee Interlocks and Insider Participation: The
compensation committee of our board of directors as of December 31, 1995
consisted of Malcolm M. Campbell and Henrik Danckwardt.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION: The following are the
contents of the Statement of Additional Information:
(1) General Information Regarding American Skandia Life Assurance
Corporation
(2) Principal Underwriter
(3) Calculation of Performance Data
(4) Unit Price Determinations
(5) Calculating the Market Value Adjustment
(6) Independent Auditors
(7) Legal Experts
(8) Appendix A - Financial Statements for Separate Account B (Class 1
Sub-accounts)
FINANCIAL STATEMENTS: The financial statements which follow in Appendix A
are those of American Skandia Life Assurance Corporation for the years ended
December 31, 1995, 1994, and 1993, respectively. Financial statements for the
Class 1 Sub-accounts of Separate Account B are found in the Statement of
Additional Information.
<PAGE>
APPENDIXES
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITORS' REPORT
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
<PAGE>
APPENDIX A
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statements of financial condition
of American Skandia Life Assurance Corporation (a wholly-owned subsidiary of
Skandia Insurance Company Ltd.) as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Skandia Life
Assurance Corporation as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 14, 1996
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1995 1994
--------------------- ----------------------
ASSETS
Investments:
<S> <C> <C>
Fixed maturities - at amortized cost $ 10,112,705 $ 9,621,865
Investment in mutual funds - at market value 1,728,875 840,637
Short-term investments - at amortized cost 15,700,000 24,000,000
--------------------- ----------------------
Total investments 27,541,580 34,462,502
Cash and cash equivalents 13,146,384 23,909,463
Accrued investment income 194,074 173,654
Fixed assets 82,434 0
Deferred acquisition costs 270,222,383 174,009,609
Reinsurance receivable 1,988,042 0
Receivable from affiliates 860,991 459,960
Income tax receivable 563,850 0
State insurance licenses 4,862,500 5,012,500
Other assets 1,589,006 1,261,513
Separate account assets 4,699,961,646 2,625,127,128
--------------------- ----------------------
Total Assets $ 5,021,012,890 $ 2,864,416,329
===================== ======================
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 30,493,018 $ 11,422,381
Annuity policy reserves 19,386,490 24,054,255
Income tax payable 0 36,999
Accounts payable and accrued expenses 32,816,517 31,753,380
Payable to affiliates 314,699 261,552
Payable to reinsurer 64,995,470 40,105,406
Short-term borrowing-affiliate 10,000,000 10,000,000
Surplus notes 103,000,000 69,000,000
Deferred contract charges 332,050 449,704
Separate account liabilities 4,699,961,646 2,625,127,128
--------------------- ----------------------
Total Liabilities 4,961,299,890 2,812,210,805
--------------------- ----------------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 81,874,666 71,623,932
Unrealized investment gains and losses 111,359 (41,655)
Foreign currency translation (328,252) 0
Accumulated deficit (23,944,773) (21,376,753)
--------------------- ----------------------
Total Shareholder's Equity 59,713,000 52,205,524
--------------------- ----------------------
Total Liabilities and Shareholder's $ 5,021,012,890 $ 2,864,416,329
Equity
===================== ======================
</TABLE>
See notes to consolidated financial statements
10
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
---------------- ---------------- ---------------
REVENUES:
<S> <C> <C> <C>
Annuity charges and fees $ 38,837,358 $ 24,779,785 $ 11,752,984
Fee Income 6,205,719 2,111,801 938,336
Net investment income 1,600,674 1,300,217 692,758
Annuity premium income 0 70,000 101,643
Net realized capital gains/(losses) 36,774 (1,942) 330,024
Other 64,882 24,550 1,269
---------------- ---------------- ---------------
Total Revenues 46,745,407 28,284,411 13,817,014
---------------- ---------------- ---------------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 555,421 369,652 383,515
Increase/(decrease) in annuity policy reserves (6,778,756) 5,766,003 1,208,454
Cost of minimum death benefit reinsurance 2,056,606 0 0
Return credited to contractowners 10,612,858 (516,730) 252,132
---------------- ---------------- ---------------
6,446,129 5,618,925 1,844,101
---------------- ---------------- ---------------
Expenses:
Underwriting, acquisition and other insurance expenses 35,820,524 18,792,720 9,397,951
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 6,499,414 3,615,845 187,156
---------------- ---------------- ---------------
42,469,938 22,558,565 9,735,107
---------------- ---------------- ---------------
Total Benefits and Expenses 48,916,067 28,177,490 11,579,208
---------------- ---------------- ---------------
Income (loss) from operations before federal income taxes (2,170,660) 106,921 2,237,806
Income tax 397,360 247,429 182,965
---------------- ---------------- ---------------
Net income (loss) $ (2,568,020) $ (140,508) $ 2,054,841
================ ================ ===============
</TABLE>
See notes to consolidated financial statements
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
----------------- --------------- ---------------
<S> <C> <C> <C>
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
----------------- --------------- ---------------
Additional paid-in capital:
Balance at beginning of year 71,623,932 71,623,932 67,623,932
Additional contributions 10,250,734 0 4,000,000
----------------- --------------- ---------------
Balance at end of year 81,874,666 71,623,932 71,623,932
----------------- --------------- ---------------
Unrealized investment gains and losses:
Balance at beginning of year (41,655) 0 0
Change in unrealized investment gains and losses 153,014 (41,655) 0
----------------- --------------- ---------------
Balance at end of year 111,359 (41,655) 0
----------------- --------------- ---------------
Foreign currency translation:
Balance at beginning of year 0 0 0
Change in foreign currency translation (328,252) 0 0
----------------- --------------- ---------------
Balance at end of year (328,252) 0 0
----------------- --------------- ---------------
Accumulated deficit:
Balance at beginning of year (21,376,753) (21,236,245) (23,291,086)
Net income (loss) (2,568,020) (140,508) 2,054,841
----------------- --------------- ---------------
Balance at end of year (23,944,773) (21,376,753) (21,236,245)
----------------- --------------- ---------------
TOTAL SHAREHOLDER'S EQUITY $ 59,713,000 $ 52,205,524 $ 52,387,687
================= =============== ===============
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------ ------------------- -----------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (2,568,020) $ (140,508) $ 2,054,841
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
(Decrease)/increase in annuity policy reserves (4,667,765) 6,004,603 4,223,289
Decrease in policy and contract claims 0 0 (52,400)
Amortization of bond discount 23,449 21,964 6,754
Amortization of state insurance licenses 150,000 150,000 150,000
(Decrease)/increase in due to/from affiliates (347,884) 256,779 (397,125)
Change in income tax payable/receivable (600,849) 36,999 0
Increase in other assets (409,927) (742,041) (220,172)
(Increase)/decrease in accrued investment income (20,420) (44,847) 154,902
Change in reinsurance receivable (1,988,042) 0 0
Increase in accounts payables and accrued expenses 1,063,137 13,396,502 14,005,962
Change in deferred acquisition costs (96,212,774) (83,986,073) (57,387,042)
Change in deferred contract charges (117,654) (71,117) 13,898
Change in foreign currency translation (328,252) 0 0
Realized (gain)/loss on sale of investments (36,774) 1,942 (330,024)
------------------ ------------------- -----------------
Net cash used in operating activities (106,061,775) (65,115,797) (37,777,117)
------------------ ------------------- -----------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (614,289) (1,989,120) (6,847,630)
Proceeds from the maturity of fixed maturity investments 100,000 2,010,000 0
Proceeds from the sale of fixed maturity investments 0 0 10,971,574
Purchase of shares in mutual funds (1,566,194) (922,822) 0
Proceeds from sale of shares in mutual funds 867,744 38,588 0
Purchase of short-term investments (202,700,000) (513,100,000) (1,207,575,307)
Sale of short-term investments 211,000,000 508,500,000 1,202,333,907
Investments in separate accounts (1,609,415,439) (1,365,775,177) (890,125,018)
------------------ ------------------- -----------------
Net cash used in investing activities (1,602,328,178) (1,371,238,531) (891,242,474)
------------------ ------------------- -----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 10,250,734 0 4,000,000
Surplus notes 34,000,000 49,000,000 20,000,000
Short-term borrowing 0 0 10,000,000
Increase in payable to reinsurer 24,890,064 28,555,190 11,550,216
Proceeds from annuity sales 1,628,486,076 1,372,873,747 890,639,947
------------------ ------------------- -----------------
Net cash provided by financing activities 1,697,626,874 1,450,428,937 936,190,163
------------------ ------------------- -----------------
Net increase/(decrease) in cash and cash equivalents (10,763,079) 14,074,609 7,170,572
Cash and cash equivalents at beginning of year 23,909,463 9,834,854 2,664,282
------------------ ------------------- -----------------
Cash and cash equivalents at end of year $ 13,146,384 $ 23,909,463 $ 9,834,854
================== =================== =================
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 995,496 $ 161,398 $ 169,339
================== =================== =================
Interest paid $ 540,319 $ 557,639 $ 111,667
================== =================== =================
</TABLE>
See notes to consolidated financial statements
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
1. BUSINESS OPERATIONS
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), which in turn is a wholly-owned subsidiary
of Skandia Insurance Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, American Skandia Marketing,
Incorporated. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
During 1995, Skandia Vida, S.A. de C.V. was formed by the ultimate
parent Skandia Insurance Company Ltd. The Company owns 99.9% ownership
in Skandia Vida, S.A. de C.V. which is a life insurance company
domiciled in Mexico. This Mexican life insurer is a start up company
with expectations of selling long term savings product within Mexico.
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.
B. Investments
-----------
The Company has classified its fixed maturity investments as
held to maturity as the Company has the ability and intent to
hold those investments to maturity. Such investments are
carried at amortized cost.
The Company has classified its mutual fund investments as
available for sale. Such investments are carried at market
value and changes in unrealized gains and losses are reported
as a component of shareholder's equity.
Short-term investments are reported at cost which approximates
market value.
Realized gains and losses on disposal of investments are
determined by the specific identification method and are
included in revenues.
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", effective January 1, 1994. The
adoption of SFAS No. 115 had no impact on the Company's
financial statements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. Cash Equivalents
----------------
The Company considers all highly liquid time deposits
purchased with a maturity of three months or less to be cash
equivalents.
D. State Insurance Licenses
------------------------
Licenses to do business in all states have been capitalized
and reflected at the purchase price of $6 million less
accumulated amortization. The cost of the licenses is being
amortized over 40 years.
E. Fixed Assets
------------
Fixed Assets consisting of furniture, equipment and leasehold
improvements are carried at cost and depreciated on a straight
line basis over a period of three to five years. Accumulated
depreciation at December 31, 1995 and related depreciation
expense for the year ended December 31, 1995 was $3,749.
F. Recognition of Revenue and Contract Benefits
--------------------------------------------
Annuity contracts without significant mortality risk, as
defined by Financial Accounting Standard No. 97, are
classified as investment contracts (variable, market value
adjusted and certain immediate annuities) and those with
mortality risk (immediate annuities) as insurance products.
The policy of revenue and contract benefit recognition is
described below.
Revenues for variable annuity contracts consist of charges
against contractowner account values for mortality and expense
risks and administration fees and an annual maintenance fee
per contract. Benefit reserves for variable annuity contracts
represent the account value of the contracts, and are included
in the separate account liabilities.
Revenues for market value adjusted annuity contracts consist
of separate account investment income reduced by benefit
payments and change in reserves in support of contractowner
obligations, all of which is included in return credited to
contractowners. Benefit reserves for these contracts represent
the account value of the contracts, and are included in the
general account liability for future contractowner benefits to
the extent in excess of the separate account liabilities.
Revenues for immediate annuity contracts without life
contingencies consist of net investment income. Revenues for
immediate annuity contracts with life contingencies consist of
single premium payments recognized as annuity considerations
when received. Benefit reserves for these contracts are based
on the Society of Actuaries 1983 - a Table with an assumed
interest rate of 8.25%.
Annuity sales were $1,628,486,000, $1,372,874,000 and
$890,640,000 for 1995, 1994 and 1993, respectively. Annuity
contract assets under management were $4,704,044,000,
$2,661,161,000 and $1,437,554,000 at December 31, 1995, 1994
and 1993, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Deferred Acquisition Costs
--------------------------
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
amortized in relation to the present value of estimated gross
profits. These costs include commissions, cost of contract
issuance, and certain selling expenses that vary with
production. Details of the deferred acquisition costs for the
years ended December 31 follow:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $174,009,609 $ 90,023,536 $32,636,494
Acquisition costs deferred
during the year 106,063,698 85,801,180 59,676,296
Acquisition costs amortized
during the year 9,850,924 1,815,107 2,289,254
------------- --------------- -------------
Balance at end of year $270,222,383 $174,009,609 $90,023,536
============ ============= ===========
</TABLE>
H. Deferred Contract Charges
-------------------------
Certain contracts are assessed a front-end fee at the time of
issue. These fees are deferred and recognized in income in
relation to the present value of estimated gross profits of
the related contracts. Details of the deferred contract
charges for the years ended December 31 follow:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $449,704 $520,821 $506,923
Contract charges deferred
during the year 21,513 87,114 144,537
Contract charges amortized
during the year 139,167 158,231 130,639
--------- --------- ---------
Balance at end of year $332,050 $449,704 $520,821
======== ======== ========
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
I. Separate Accounts
-----------------
Assets and liabilities in Separate Account are shown as
separate captions in the consolidated statement of financial
condition. The assets consist of long-term bonds, investments
in mutual funds and short-term securities, all of which are
carried at market value.
Included in Separate Account liabilities is $586,233,752 and
$259,556,863 at December 31, 1995 and 1994, respectively,
relating to annuity contracts for which the contractholder is
guaranteed a fixed rate of return. Separate Account assets of
$588,835,051 and $269,488,557 at December 31, 1995 and 1994,
respectively, consisting of long term bonds, short term
securities, transfers due from general account and cash are in
support of these annuity contracts, as pursuant to state
regulation.
J. Income taxes
------------
The Company is included in the consolidated federal income tax
return with all Skandia Insurance Company Ltd. subsidiaries in
the U.S. The federal and state income tax provision is
computed on a separate return basis in accordance with the
provisions of the Internal Revenue Code, as amended. Prior to
1995, the Company filed a separate federal income tax return.
K. Translation of Foreign Currency
-------------------------------
The financial position and results of operations of the
Company's foreign operations are measured using local currency
as the functional currency. Assets and liabilities of the
operations are translated at the exchange rate in effect at
each year-end. Statements of operations and shareholder's
equity accounts are translated at the average rate prevailing
during the year. Translation adjustments arising from the use
of differing exchange rates from period to period are included
in shareholder's equity.
L. 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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
M. Reinsurance
-----------
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provides additional
capacity for growth in supporting the cash flow strain from
the Company's variable annuity business. The reinsurance is
effected under quota share contracts.
Effective January 1, 1995, the Company reinsured certain
mortality risks. These risks result from the guaranteed
minimum death benefit feature in the variable annuity
products.
3. INVESTMENTS
The carrying value (amortized cost), gross unrealized gains (losses)
and estimated market value of investments in fixed maturities by
category as of December 31, 1995 and 1994 are shown below. All
securities held at December 31, 1995 are publicly traded.
Investments in fixed maturities as of December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $ 4,304,731 $183,201 $1,778 $4,486,154
Obligations of
State and Political
Subdivisions 256,095 0 3,165 252,930
Corporate
Securities 5,551,879 13,252 346 5,564,785
------------- ---------- -------- ------------
Totals $10,112,705 $196,453 $5,289 $10,303,869
=========== ======== ====== ===========
</TABLE>
The amortized cost and market value of fixed maturities, by contractual
maturity, at December 31, 1995 are shown below.
<TABLE>
<CAPTION>
<S> <C> <C>
Amortized Market
Cost Value
Due in one year or less $ 379,319 $ 393,745
Due after one through five years 6,358,955 6,519,880
Due after five through ten years 3,374,431 3,390,244
------------ -------------
$10,112,705 $10,303,869
=========== ===========
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Investments in fixed maturities as of December 31, 1994 consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $3,796,390 $2,119 $156,759 $3,641,750
Obligations of
State and Political
Subdivisions 261,852 0 9,156 252,696
Corporate
Securities 5,563,623 0 547,023 5,016,600
----------- ---------- --------- -----------
Totals $9,621,865 $2,119 $712,938 $8,911,046
========== ====== ======== ==========
</TABLE>
Proceeds from maturities and sales of fixed maturity investments during
1995, 1994 and 1993, were $100,000, $2,010,000 and $10,971,574,
respectively.
<TABLE>
<CAPTION>
Gross gains and gross losses realized were as follows:
<S> <C> <C>
Gross Gross
Gains Losses
----- ------
1995 $ 0 $ 0
1994 $ 0 $ 0
1993 $329,000 $ 0
</TABLE>
19
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The cost, gross unrealized gains (losses) and market value of
investments in mutual funds at December 31, 1995 and 1994 are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
1995 $1,617,516 $111,686 $ 327 $1,728,875
========== ======== ========= ==========
1994 $ 882,292 $ 4,483 $ 46,138 $ 840,637
========== ======== ========= ==========
</TABLE>
Proceeds from sales of investments in mutual funds during 1995 and 1994
were $867,744 and $38,588.
Mutual fund gross gains and gross losses were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Gross Gross
Gains Losses
----- ------
1995 $65,236 $28,462
======= =======
1994 $ 510 $ 2,452
======== =======
</TABLE>
4. NET INVESTMENT INCOME
Additional information with respect to net investment income for the
years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed Maturities $ 629,743 $ 616,987 $409,552
Mutual Funds 59,895 12,049 0
Short-Term Investments 256,351 142,421 394,545
Cash and Cash Equivalents 730,581 633,298 15,034
Interest on Policy Loans 4,025 1,275 1,015
------------- ------------- ----------
Total Investment Income 1,680,595 1,406,030 820,146
Investment Expenses 79,921 105,813 127,388
------------ ----------- ---------
Net investment income $1,600,674 $1,300,217 $692,758
========== ========== ========
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's deferred tax
balance as of December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Deferred Tax (Liabilities):
<S> <C> <C>
Deferred acquisition costs ($57,399,960) ($37,885,053)
Payable to reinsurer (19,802,861) (12,754,591)
Unrealized investment gains and losses (38,976) 14,579
Other (308,304) (214,505)
-------------- --------------
Total ($77,550,101) ($50,839,570)
------------ ------------
Deferred Tax Assets:
Deferred contract charge $ 116,218 $ 157,396
Net separate account liabilities 72,024,094 51,637,155
Reserve for future contractowner benefits 10,672,556 3,997,833
Net operating loss carryforward 0 1,813,670
AMT credit carryforward 286,094 0
Foreign exchange translation 114,888 0
Other 3,661,104 878,030
------------ -------------
Total $86,874,954 $58,484,084
----------- -----------
Net before valuation allowance $ 9,324,853 $ 7,644,514
Valuation allowance (9,324,853) (7,644,514)
------------ ------------
Net deferred tax balance $ 0 $ 0
----------------- -----------------
</TABLE>
The significant components of federal tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 394,648 $184,771 $182,965
Deferred tax benefit:
(exclusive of the effects of
the change in valuation allowance) (1,680,339) (365,288) (404,480)
Change in valuation allowance 1,680,339 365,288 404,480
----------- ---------- ---------
Total deferred tax expense 0 0 0
------------ ---------- ---------
Total income tax expense $ 394,648 $184,771 $182,965
============ ======== ========
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The state income tax expense was $2,712 and $62,658 for the years ended
1995 and 1994, respectively.
The federal 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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before taxes ($2,170,660) $106,921 $2,237,806
Income tax rate 35% 35% 35%
------------ ---------- -----------
Tax expense at federal
statutory income tax rate (759,731) 37,422 783,232
Tax effect of:
Permanent tax differences (253,101) (82,188) 63,535
Difference between financial
statement and taxable income 2,986,464 3,161,331 2,414,254
Utilization of net operating
loss carryforwards (1,487,144) (3,116,565) (3,261,021)
Utilization of AMT credits (91,840) 0 0
Alternative minimum tax 0 184,771 182,965
-------------- ----------- -----------
Income tax expense $ 394,648 $ 184,771 $ 182,965
=========== ========== ==========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) and investment expenses have been charged to
the Company at cost by American Skandia Information Services and
Technology Corporation, an affiliated company; and likewise, the
Company has charged operating costs to American Skandia Investment
Services, Incorporated, an affiliated company. Income received for
these items was $396,573, $248,799 and $146,134 for the years ended
December 31, 1995, 1994 and 1993, respectively. The total cost to the
Company for these items was $12,687,337, $8,524,840 and $3,537,566 for
the years ended December 31, 1995, 1994 and 1993, respectively. Amounts
receivable from affiliates under this arrangement were $857,156 and
$317,285 as of December 31, 1995 and 1994, respectively. Amounts
payable to affiliates under this arrangement were $304,525 and $261,552
as of December 31, 1995 and 1994, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
7. LEASES
The Company leases office space under a lease agreement established in
1989 with an affiliate (American Skandia Information Services and
Technology Corporation). The lease expense for 1995, 1994 and 1993 was
$1,265,771, $961,080 and $280,363, respectively. Future minimum lease
payments per year and in aggregate as of December 31, 1995 are as
follows:
1996 1,178,550
1997 1,178,550
1998 1,178,550
1999 1,178,550
2000 and thereafter 6,831,312
-----------
Total $11,545,512
===========
8. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains bonds/notes on deposit with various
states. The carrying value of these deposits amounted to $3,267,357 and
$3,410,135 as of December 31, 1995, and 1994, respectively. These
deposits are required to be maintained for the protection of
contractowners within the individual states.
9. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $132,493,899, $95,001,971 and
$60,666,243 at December 31, 1995, 1994 and 1993, respectively.
The statutory basis net income (loss) was ($7,183,003), ($9,789,297)
and $387,695 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. At December 31, 1995, no amounts may be
distributed without prior approval.
10. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Company contributions to this plan on
behalf of the participants were $627,161, $431,559 and $250,039 for the
years ended December 31, 1995, 1994 and 1993, respectively.
The Company has a long-term incentive plan where units are awarded to
executive officers and other personnel. The program consists of
multiple plans. A new plan is instituted each year. Generally,
participants must remain employed by the Company or its affiliates at
the time such units are payable in order to receive any payments under
the plan. The accrued liability representing the value of these units
is $4,600,831 and $1,564,407 as of December 31, 1995 and 1994,
respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$139,209 in 1995 and $106,882 in 1994.
11. REINSURANCE
The effect of the reinsurance agreements on the Company's operations
was to reduce annuity charges and fee income, death benefit expense and
policy reserves. The effect of reinsurance for the years ended December
31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $50,334,280 ($4,790,714) $10,945,831
Ceded 11,496,922 1,988,042 332,973
------------- ------------- -------------
Net $38,837,358 ($6,778,756) $10,612,858
=========== =========== ===========
</TABLE>
1994 1993
---------------- ----------------
Annuity Annuity
Charges and Fees Charges and Fees
---------------- ----------------
Gross $30,116,166 $12,446,277
Ceded 5,336,381 693,293
------------- -------------
Net $24,779,785 $11,752,984
=========== ===========
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
12. SURPLUS NOTES
During 1995, the Company received $34 million from its parent in
exchange for three surplus notes. The amounts were $10 million, $15
million and $9 million, at interest rates of 7.52%, 7.49% and 7.47%,
respectively. Interest expense for these notes was $83,281 for the
year ended December 31, 1995.
During 1994, the Company received $49 million from its parent in
exchange for four surplus notes, two in the amount of $10 million, one
in the amount of $15 million and one in the amount of $14 million, at
interest rates of 7.28%, 7.90%, 9.13% and 9.78%, respectively. Interest
expense for these notes was $4,319,612 and $1,618,504 for the years
ended December 31, 1995 and 1994, respectively.
During 1993, the Company received $20 million from its parent in
exchange for a surplus note in the amount of $20 million at a 6.84%
interest rate. Interest expense for this note was $1,387,000,
$1,387,000 and $11,400 for the years ended December 31, 1995, 1994 and
1993, respectively.
Payment of interest and repayment of principal for these notes requires
approval by the Commissioner of the State of Connecticut. In 1995,
approval was granted for the payment of surplus note interest with the
stipulation that it be funded through a capital contribution from the
Parent.
13. SHORT-TERM BORROWING
During 1993, the Company received a $10 million loan from Skandia AB, a
Swedish affiliate. Upon the last renewal the loan became payable to the
Parent rather than Skandia AB. The loan matures on March 6, 1996 and
bears interest at 6.75.%. The total interest expense to the Company was
$709,521, $569,618 and $149,861 for the years ended December 31, 1995,
1994 and 1993, respectively, of which $219,375 and $50,174 was payable
as of December 31, 1995 and 1994, respectively.
14. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities are
subject to discretionary withdrawal with market value adjustment by
contractholders. Separate account assets which are carried at market
value are adequate to pay such withdrawals which are generally subject
to surrender charges ranging from 7.5% to 1% for contracts held less
than 7 years.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company.
<TABLE>
<CAPTION>
Three Months Ended
------------------
1995 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
<S> <C> <C> <C> <C>
revenues $ 8,891,903 $10,066,478 $11,960,530 $14,189,048
Net investment income 551,690 434,273 293,335 321,376
Net realized capital gains (losses) (16,082) (370) 44,644 8,582
------------- ---------------- -------------- ---------------
Total revenues $ 9,427,511 $10,500,381 $12,298,509 $14,519,006
============ =========== =========== ===========
Benefits and expenses $11,438,798 $ 9,968,595 $11,600,587 $15,908,087
=========== ============ =========== ===========
Net income (loss) ($ 2,026,688) $ 531,486 $ 678,312 ($1,751,130)
============ ============= ============= ===========
Three Months Ended
1994 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $5,594,065 $6,348,777 $7,411,686 $7,631,608
Net investment income 252,914 336,149 264,605 446,549
Net realized capital gains (losses) 0 (30,829) 25,914 2,973
----------------- ------------- -------------- -------------
Total revenues $5,846,979 $6,654,097 $7,702,205 $8,081,130
========== ========== ========== ==========
Benefits and expenses $5,701,460 $7,883,829 $8,157,535 $6,434,666
========== ========== ========== ==========
Net income (loss) $ 104,636 ($1,257,768) ($503,793) $1,516,417
============ =========== ========= ==========
</TABLE>
<PAGE>
APPENDIX B
SHORT DESCRIPTIONS OF THE
UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES
The investment objectives for each underlying mutual fund are in bold face.
Please refer to the prospectuses of each underlying mutual fund for more
complete details and risk factors applicable to certain portfolios.
American Skandia Trust
JanCap Growth Portfolio: The investment objective of the JanCap Growth Portfolio
is growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on investments, therefore, will be incidental to this objective.
The objective will be pursued by emphasizing investments in common stocks.
Common stock investments will be in industries and companies that the
portfolio's sub-advisor believes are experiencing favorable demand for their
products and services, and which operate in a favorable competitive and
regulatory environment. Investments may be made to a lesser degree in preferred
stocks, convertible securities, warrants, and debt securities of U.S. issuers,
when the portfolio's sub-advisor perceives an opportunity for capital growth
from such securities or so that a return may be received on the portfolio's idle
cash. Debt securities which the portfolio may purchase include corporate bonds
and debentures (not to exceed 5% of net assets in bonds rated below investment
grade), mortgage-backed and asset-backed securities, zero-coupon bonds,
indexed/structured notes, high-grade commercial paper, certificates of deposit
and repurchase agreements. Securities of foreign issuers, including securities
of foreign governments and Euromarket securities, also may be purchased.
Although it is the general policy of the JanCap Growth Portfolio to purchase and
hold securities for capital growth, changes will be made whenever the
portfolio's sub-advisor believes they are advisable. Because investment changes
usually will be made without reference to the length of time a security has been
held, a significant number of short-term transactions may result.
Investments also may be made in "special situations" from time to time. A
"special situation" arises when, in the opinion of the portfolio's sub-advisor,
the securities of a particular company will be recognized and appreciate in
value due to a specific development, such as a technological breakthrough,
management change or a new product at that company. Subject to certain
limitations, the JanCap Growth Portfolio may purchase and write options on
securities (including index options) and options on foreign currencies, and may
invest in futures contracts on securities, financial indices and foreign
currencies, ("futures contracts"), options on futures contracts, forward
contracts and swaps and swap-related products. These instruments will be used
primarily for hedging purposes. Investment of up to 15% of the JanCap Growth
Portfolio's total assets may be made in securities that are considered illiquid
because of the absence of a readily available market or due to legal or
contractual restrictions.
Lord Abbett Growth and Income Portfolio: The investment objective of the Lord
Abbett Growth and Income Portfolio is long-term growth of capital and income
while attempting to avoid excessive fluctuations in market value. This objective
will be pursued by investing in securities which are selling at reasonable
prices in relation to value. Normally, investments will be made in common stocks
of seasoned companies which are expected to show above-average growth and which
the Sub-advisor believes to be in sound financial condition.
Seligman Henderson International Equity Portfolio: The investment objective of
Seligman Henderson International Equity Portfolio is long-term capital
appreciation consistent with preservation of capital primarily through
investment in securities of non-United States issuers. The portfolio may invest
in securities of issuers domiciled in any country but under normal conditions
investments may be made in two principal regions: The United Kingdom and
Continental Europe; and the Pacific Basin Countries. Continental European
countries may include, from time to time, Austria, Belgium, Denmark, Federal
Republic of Germany, Finland, France, Greece, Ireland, Italy, Luxembourg,
Netherlands, Norway, Portugal, Spain, Sweden and Switzerland. Countries in the
Pacific Basin may include Australia, Hong Kong, India, Japan, Korea, Malaysia,
New Zealand, People's Republic of China, Philippines, Singapore, Taiwan, and
Thailand. The portfolio believes that it will usually have assets invested in
both of these regions. Although under normal market conditions the portfolio
will invest in a minimum of five countries, it may have assets invested in many
of the above countries. Investments will not normally be made in securities of
issuers located in the United States or Canada.
Seligman Henderson International Small Cap Portfolio: The investment objective
of the Seligman Henderson International Small Cap Portfolio is long-term capital
appreciation. The portfolio seeks to achieve this objective primarily by making
international investments in securities of companies with small to medium market
capitalizations. The portfolio may invest in securities of issuers domiciled in
any country. Under normal conditions investments will be made in three principal
regions: The United Kingdom/Continental Europe; the Pacific Basin; and Latin
American. Under normal market conditions, the portfolio's assets will be
invested in securities of issuers located in at least three different countries.
Investments will not normally be made in securities of issuers located in the
United States or Canada. Some of the countries in which the portfolio may invest
may be considered to be developing and may involve special risks. The portfolio
may invest in all types of securities, most of which will be denominated in
currencies other than the U.S. dollar. The portfolio will normally invest its
assets in equity securities, including common stock, securities convertible into
common stock, depository receipts for these securities and warrants. The
portfolio may, however, invest up to 25% of its assets in preferred stock and
debt securities if the Sub-advisor believes that the capital appreciation
available from an investment in such securities will equal or exceed the capital
appreciation available from an investment in equity securities. In extraordinary
circumstances, the portfolio may invest for temporary defensive purposes,
without limit, in large capitalization companies or increase its investments in
debt securities.
Equity securities in which the portfolio will invest may be listed on a foreign
stock exchange or traded in foreign over-the-counter markets. Under normal
market conditions, the portfolio will invest at least 65% of its total assets in
securities of small-to medium-sized companies with market capitalizations up to
$750 million, although up to 35% of its total assets may be invested in
securities of companies with market capitalizations over $750 million There is
no requirement that the debt securities in which the portfolio may invest be
rated by a recognized rating agency. However, it is the portfolio's policy that
investments in debt securities, whether rated or unrated, will be made only if
they are "investment grade" securities or are, in the opinion of the
Sub-advisor, of equivalent quality to "investment grade" securities. The
portfolio may also invest in securities represented by European Depository
Receipts ("EDRs") or American Depository Receipts ("ADRs"). Investments in small
companies may involve greater risks, such as limited product lines, markets and
financial or managerial resources. Less frequently-traded securities may be
subject to more abrupt price movements than securities of larger companies.
Federated Utility Income Portfolio: The investment objective of the Federated
Utility Income Portfolio is to achieve high current income and moderate capital
appreciation by investing primarily in a professionally managed and diversified
portfolio of equity and debt securities of utility companies. The portfolio
intends to achieve its investment objective by investing in equity and debt
securities of utility companies that produce, transmit or distribute gas and
electric energy as well as those companies that provide communications
facilities, such as telephone and telegraph companies. As a matter of investment
policy that can be changed without shareholder vote, the portfolio will invest
at least 65% of its total assets in securities of utility companies.
Federated High Yield Portfolio: The investment objective of the Federated High
Yield Portfolio is to seek high current income by investing primarily in a
diversified portfolio of fixed income securities. The portfolio will invest at
least 65% of its assets in lower-rated fixed income bonds. Lower-rated debt
obligations are generally considered to be high-risk investments. The corporate
debt obligations in which the portfolio invests are usually not in the three
highest rating categories of a nationally recognized rating organization (AAA,
AA, or A for Standard & Poor's and Aaa, Aa or A for Moody's) but are in the
lower rating categories or are unrated but are of comparable quality and have
speculative characteristics or are speculative. Lower-rated or unrated bonds are
commonly referred to as "junk bonds". There is no minimal acceptable rating for
a security to be purchased or held in the portfolio, and the portfolio may, from
time to time, purchase or hold securities rated in the lowest rating category.
Under normal circumstances, the portfolio will not invest more than 10% of the
value of its total assets in equity securities. The fixed income securities in
which the portfolio may invest include, but are not limited to: preferred
stocks, bonds, debentures, notes, equipment lease certificates and equipment
trust certificates. The portfolio will invest primarily in fixed rate corporate
debt obligations.
AST Phoenix Balanced Asset Portfolio: The AST Phoenix Balanced Asset Portfolio
seeks as its investment objectives reasonable income, long-term capital growth
and conservation of capital. The portfolio intends to invest based on combined
considerations of risk, income, capital enhancement and protection of capital
value. The portfolio may invest in any type or class of security. Normally, the
portfolio will invest in common stocks and fixed income securities; however, it
may also invest in securities convertible into common stocks. At least 25% of
the value of its assets will be invested in fixed income senior securities. The
portfolio may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes and may
invest in deferred or zero coupon debt obligations. In implementing the
investment objectives of the portfolio, the sub-advisor will select securities
believed to have potential for the production of current income, with emphasis
on securities that also have potential for capital enhancement. In an effort to
protect its assets against major market declines, or for other temporary
defensive purposes, the portfolio may actively pursue a policy of retaining cash
or investing part or all of its assets in cash equivalents, such as government
securities and high grade commercial paper.
AST Money Market Portfolio: The investment objectives of the AST Money Market
Portfolio are to maximize current income and maintain high levels of liquidity.
This portfolio attempts to accomplish its objectives by maintaining a
dollar-weighted average maturity of not more than 90 days and by investing in
the types of securities described below which have effective maturities of not
more than 397 days. Investments may include obligations of the United States
government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances of certain financial institutions which have
more than $2 billion in total assets; commercial paper and corporate bonds;
asset-backed securities; and repurchase and reverse repurchase agreements.
Securities may be purchased on a when-issued or delayed delivery basis. Subject
to applicable investment restrictions, the AST Money Market Portfolio also may
lend its securities.
T. Rowe Price Asset Allocation Portfolio: The investment objective of the T.
Rowe Price Asset Allocation Portfolio is to seek a high level of total return by
investing primarily in a diversified group of fixed income and equity
securities. The Portfolio is designed to balance the potential appreciation of
common stocks with the income and principal stability of bonds over the long
term. Under normal market conditions over the long-term, the Portfolio expects
to allocate its assets so that approximately 40% of such assets will be in fixed
income securities and approximately 60% in equity securities.
The Portfolio's fixed income securities will be allocated among investment
grade, high yield and non-dollar debt securities. The weighted average maturity
for this portion of the Portfolio is generally expected to be intermediate,
although it may vary significantly. High-yielding, income-producing debt
securities (commonly referred to as "junk bonds") and preferred stocks including
convertible securities may be purchased without regard to maturity, however, the
average maturity of the bonds is expected to be approximately 10 years, although
it may vary if market conditions warrant. Quality will generally range from
lower-medium to low and the Portfolio may also purchase bonds in default if, in
the opinion of the Sub-advisor, there is significant potential for capital
appreciation.
The Portfolio's equity securities will be allocated among large and small-cap
U.S. and non-dollar equity securities. Large-cap will generally be stocks of
well-established companies with capitalization over $1 billion which can produce
increasing dividend income. Small-cap will be common stocks of small companies
or companies which offer the possibility of accelerated earnings growth because
of rejuvenated management, new products or structural changes in the economy.
Current income is not a factor in the selection of these stocks.
The Portfolio will generally trade in securities (either common stocks or bonds)
for short-term profits, but, when circumstances warrant, securities may be
purchased and sold without regard to the length of time held.
T. Rowe Price International Equity Portfolio: The investment objective of the T.
Rowe Price International Equity Portfolio is to seek total return on its assets
from long-term growth of capital and income, principally through investments in
common stocks of established, non-U.S. companies. Investments may be made solely
for capital appreciation or solely for income or any combination of both for the
purpose of achieving a higher overall return. Total return consists of capital
appreciation or depreciation, dividend income, and currency gains or losses. The
Portfolio intends to diversify investments broadly among countries and to
normally have at least three different countries represented in the Portfolio.
The Portfolio may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). Under unusual circumstances, the Portfolio may invest substantially
all of its assets in one or two countries.
T. Rowe Price Natural Resources: The investment objective of the T. Rowe Price
Natural Resources Portfolio is to seek long-term growth of capital through
investment primarily in common stocks of companies which own or develop natural
resources and other basic commodities. Current income is not a factor in the
selection of stocks for investment by the Portfolio. Total return will consist
primarily of capital appreciation (or depreciation). The Portfolio will invest
primarily (at least 65% of its total assets) in common stocks of companies which
own or develop natural resources and other basic commodities. However, it may
also purchase other types of securities, such as selected, non-resource growth
companies, foreign securities, convertible securities and warrants, when
considered consistent with the Portfolio's investment objective and policies.
The Portfolio may also engage in a variety of investment management practices,
such as buying and selling futures and options.
Some of the most important factors evaluated by the Sub-advisor in selecting
natural resource companies are the capability for expanded production, superior
exploration programs and production facilities, and the potential to accumulate
new resources. The Portfolio expects to invest in those natural resource
companies which own or develop energy sources (such as oil, gas, coal and
uranium), precious metals, forest products, real estate, nonferrous metals,
diversified resources, and other basic commodities which, in the opinion of the
Sub-advisor, can be produced and marketed profitably during periods of rising
labor costs and prices. However, the percentage of the Portfolio's assets
invested in natural resource and related businesses versus the percentage
invested in non-resource companies may vary greatly depending upon economic
monetary conditions and the outlook for inflation. The earnings of natural
resource companies may be expected to follow irregular patterns, because these
companies are particularly influenced by the forces of nature and international
politics. Companies which own or develop real estate might also be subject to
irregular fluctuations of earnings, because these companies are affected by
changes in the availability of money, interest rates, and other factors.
The Portfolio may invest up to 50% of its total assets in foreign securities.
These include non-dollar denominated securities traded outside of the U.S. and
dollar denominated securities traded in the U.S. (such as ADRs). Some of the
countries in which the Portfolio may invest may be considered to be developing
and may involve special risks. The Portfolio will not purchase a non-investment
grade debt security (or junk bond) if immediately after such purchase the
Portfolio would have more than 10% of its total assets invested in such
securities. Junk bonds are regarded as predominantly speculative and high risk.
The Portfolio may invest up to 10% of its total assets in hybrid instruments.
Such instruments may take a variety of forms, such as debt instruments with
interest or principal payments determined by reference to the value of a
currency, security index or commodity at a future point in time.
T. Rowe Price International Bond Portfolio: The T. Rowe Price International Bond
Portfolio seeks to provide high current income and capital appreciation by
investing in high-quality, non dollar-denominated government and corporate bonds
outside the United States. The Portfolio is intended for long-term investors who
can accept the risks associated with investing in international bonds. Total
return consists of income after expenses, bond price gains (or losses) in terms
of the local currency and currency gains (or losses). The value of the Portfolio
will fluctuate in response to various economic factors, the most important of
which are fluctuations in foreign currency exchange rates and interest rates.
The Portfolio will invest at least 65% of its assets in high-quality, non
dollar-denominated government and corporate bonds outside the United States.
Because the Portfolio's investments are primarily denominated in foreign
currencies, exchange rates are likely to have a significant impact on total
Portfolio performance. Investors should be aware that exchange rate movements
can be significant and endure for long periods of time.
The Portfolio may also invest up to 20% of its assets in below investment-grade,
high-risk bonds, including bonds in default or those with the lowest rating.
Defaulted bonds are acquired only if the Sub-advisor foresees the potential for
significant capital appreciation. Securities rated below investment-grade are
commonly referred to as "junk bonds" and involve greater price volatility and
higher degrees of speculation with respect to the payment of principal and
interest than higher quality fixed-income securities.
The Portfolio may also invest more than 5% of its assets in the fixed-income
securities of individual foreign governments. The Portfolio generally will not
invest more than 5% of its assets in any individual corporate issuer. Since, as
a nondiversified investment company, the Portfolio is permitted to invest a
greater proportion of its assets in the securities of a smaller number of
issuers, the Portfolio may be subject to greater credit risk with respect to its
portfolio securities than an investment company that is more broadly
diversified.
Because of the Portfolio's long-term investment objective, investors should not
rely on an investment in the Portfolio for their short-term financial needs and
should not view the Portfolio as a vehicle for playing short-term swings in the
international bond and foreign exchange markets. Shares of the Portfolio alone
should not be regarded as a complete investment program. Also, investors should
be aware that investing in international bonds may involve a higher degree of
risk than investing in U.S. bonds.
Founders Capital Appreciation Portfolio: The investment objective of Founders
Capital Appreciation Portfolio is capital appreciation. The portfolio will
normally invest at least 65% of its total assets in common stocks of U.S.
companies with market capitalizations of $1.5 billion or less. These stocks
normally will be traded in the over-the-counter market. Since it may engage in
short-term trading, the portfolio may have annual portfolio turnover rates in
excess of 100%.
INVESCO Equity Income Portfolio: The investment objective of the INVESCO Equity
Income Portfolio is to seek high current income while following sound investment
practices. Capital growth potential is an additional, but secondary,
consideration in the selection of portfolio securities. The portfolio seeks to
achieve its objective by investing in securities which will provide a relatively
high-yield and stable return and which, over a period of years, may also provide
capital appreciation. The portfolio normally will invest between 60% and 75% of
its assets in dividend-paying, marketable common stocks of domestic and foreign
industrial issuers. The portfolio also will invest in convertible bonds,
preferred stocks and debt securities. The portfolio may depart from the basic
investment objective and assume a defensive position with a large portion of its
assets temporarily invested in high quality corporate bonds, or notes and
government issues, or held in cash. The portfolio's investments in common stocks
may decline in value. To minimize the risk this presents, the portfolio only
invests in dividend-paying common stocks of domestic and foreign industrial
issuers which are marketable, and will not invest more than 5% of the
portfolio's assets in the securities of any one company or more than 25% of the
portfolio's assets in any one industry. The portfolio's investments in debt
securities will generally be subject to both credit risk and market risk. There
are no fixed-limitations regarding portfolio turnover. The rate of portfolio
turnover may fluctuate as a result of constantly changing economic conditions
and market circumstances. Securities initially satisfying the portfolio's basic
objectives and policies may be disposed of when they are no longer suitable. As
a result, it is anticipated that the portfolio's annual portfolio turnover rate
may be in excess of 100%, and may be higher than that of other investment
companies seeking current income with capital growth as a secondary
consideration. Increased portfolio turnover would cause the portfolio to incur
greater brokerage costs than would otherwise be the case.
PIMCO Total Return Bond Portfolio: The investment objective of the PIMCO Total
Return Bond Portfolio is to seek to maximize total return. A secondary objective
is preservation of capital. The Sub-advisor will seek to employ prudent
investment management techniques, especially in light of the broad range of
investment instruments in which the portfolio may invest. The proportion of the
portfolio's assets committed to investment in securities with particular
characteristics (such as maturity, type and coupon rate) will vary based on the
outlook for the U.S. and foreign economies, the financial markets and other
factors. The portfolio will invest at least 65% of its assets in the following
types of securities which may be issued by domestic or foreign entities and
denominated in U.S. dollars or foreign currencies: securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; corporate
debt securities; corporate commercial paper; mortgage and other asset-backed
securities; variable and floating rate debt securities; bank certificates of
deposit; fixed time deposits and bankers' acceptances; repurchase agreements and
reverse repurchase agreements; obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies or
supranational entities; and foreign currency exchange-related securities,
including foreign currency warrants. The portfolio will invest in a diversified
portfolio of fixed-income securities of varying maturities with a portfolio
duration from three to six years. The portfolio may invest up to 20% of assets
in corporate debt securities that are rated below investment grade (i.e., rated
below Baa by Moody's or BBB by S&P or, if unrated, determined by the Sub-advisor
to be of comparable quality). These securities are regarded as high risk and
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments (see the underlying fund prospectus for
details).
PIMCO Limited Maturity Bond Portfolio: The investment objective of the PIMCO
Limited Maturity Bond Portfolio is to seek to maximize total return, consistent
with preservation of capital and prudent investment management. The portfolio
will invest at least 65% of its total assets in the following types of
securities, which may be issued by domestic or foreign entities and denominated
in U.S. dollars or foreign currencies: securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities ("U.S. Government
securities"); corporate debt securities; corporate commercial paper; mortgage
and other asset-backed securities; variable and floating rate debt securities;
bank certificates of deposit, fixed time deposits and bankers' acceptances;
repurchase agreements and reverse repurchase agreements; obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies or supranational entities; and foreign currency exchange-related
securities, including foreign currency warrants.
The portfolio may hold different percentages of its assets in these various
types of securities, and may invest all of its assets in derivative instruments
or in mortgage- or asset-backed securities. There are special risks involved in
these instruments. The portfolio will invest in a diversified portfolio of fixed
income securities of varying maturities with a portfolio duration from one to
three years. The portfolio may invest up to 10% of its assets in corporate debt
securities that are rated below investment grade but rated B or higher by
Moody's or S&P (or, if unrated, determined by the Sub-advisor to be of
comparable quality). The portfolio may also invest up to 20% of its assets in
securities denominated in foreign currencies. The "total return" sought by the
portfolio will consist of interest and dividends from underlying securities,
capital appreciation reflected in unrealized increases in value of portfolio
securities (realized by the shareholder only upon selling shares) or realized
from the purchase and sale of securities, and use of futures and options, or
gains from favorable changes in foreign currency exchange rates The portfolio
may invest directly in U.S. dollar- or foreign currency-denominated fixed income
securities of non-U.S. issuers. The portfolio will limit its foreign investments
to securities of issuers based in developed countries (including Newly
Industrialized Countries, "NICs", such as Taiwan, South Korea and Mexico).
Investing in the securities of issuers in any foreign country involves special
risks.
Berger Capital Growth Portfolio: The investment objective of the Berger Capital
Growth Portfolio is long-term capital appreciation. The Portfolio seeks to
achieve this objective by investing primarily in common stocks of established
companies which the Sub-advisor believes offer favorable growth prospects.
Current income is not an investment objective of the Portfolio, and any income
produced will be a by-product of the effort to achieve the Portfolio's
objective.
In general, investment decisions for the Portfolio are based on an approach
which seeks out successful companies because they are believed to be more apt to
become profitable investments. To evaluate a prospective investment, the
Sub-advisor analyzes information from various sources, including industry
economic trends, earnings expectations and fundamental securities valuation
factors to identify companies which in the Sub-advisor's opinion are more likely
to have predictable, above average earnings growth, regardless of the company's
size and geographic location. The Sub-advisor also takes into account a
company's management and its innovations in products and services in evaluating
its prospects for continued or future earnings growth.
In selecting its portfolio securities, the Portfolio places primary emphasis on
established companies which it believes to have favorable growth prospects.
Common stocks usually constitute all or most of the Portfolio's investment
holdings, but the Portfolio remains free to invest in securities other than
common stocks, and may do so when deemed appropriate by the Sub-advisor to
achieve the objective of the Portfolio. The Portfolio may, from time to time,
take substantial positions in securities convertible into common stocks, and it
may also purchase government securities, preferred stocks and other senior
securities if its Sub-advisor believes these are likely to be the best suited at
that time to achieve the Portfolio's objective. The Portfolio's policy of
investing in securities believed to have a potential for capital growth means
that a Portfolio share may be subject to greater fluctuations in value than if
the Portfolio invested in other securities.
Robertson Stephens Value + Growth Portfolio: The investment objective of the
Robertson Stephens Value + Growth Portfolio is to seek capital appreciation. The
Portfolio will invest primarily in growth companies believed by the Sub-advisor
to have favorable relationships between price/earnings ratios and growth rates
in sectors offering the potential for above-average returns.
In selecting investments for the Portfolio, the Sub-advisor's primary emphasis
is typically on evaluating a company's management, growth prospects, business
operations, revenues, earnings, cash flows, and balance sheet in relationship to
its share price. The Sub-advisor may select stocks which it believes are
undervalued relative to the current stock price. When the Sub-advisor
anticipates that the price of a security will decline, it may sell the security
short and borrow the same security from a broker or other institution to
complete the sale.
The Portfolio may invest a substantial portion of its assets in securities
issued by small companies. Such companies may offer greater opportunities for
capital appreciation than larger companies, but investments in such companies
may involve certain special risks such as limited product lines, markets and
financial or managerial resources. These securities may be less frequently
traded and the values may fluctuate more sharply than other securities.
The Portfolio may invest up to 35% of its net assets in securities principally
traded in foreign markets. The Portfolio may buy or sell foreign currencies and
options and futures contracts on foreign currencies for hedging purposes in
connection with its foreign investments. The Portfolio may also at times invest
a substantial portion of their assets in securities of issuers in developing
countries. Although many of the securities in which the Portfolio may invest are
traded on securities exchanges, the Portfolio may trade in limited volume, and
the exchanges may not provide all of the conveniences or protections provided by
securities exchanges in more developed markets.
At times, the Portfolio may invest more than 25% of its assets in securities of
issuers in one or more market sectors such as, for example, the technology
sector. A market sector may be made up of companies in a number of related
industries. The Portfolio would only concentrate its investments in a particular
market sector if the Sub-advisor were to believe the investment return available
from concentration in that sector justifies any additional risk associated with
concentration in that sector.
The Alger American Fund
Alger American Growth Portfolio: The investment objective of the Alger American
Growth Portfolio is long-term capital appreciation. Income is a consideration in
the selection of investments but is not an investment objective of the
portfolio. It seeks to achieve its objective by investing in equity securities,
such as common or preferred stocks that are listed on a national securities
exchange, or securities convertible into or exchangeable for equity securities,
including warrants and rights, often selected by the investment manager on the
basis of original research produced by its research analysts. Except during
temporary defensive periods, the portfolio invests at least 65 percent of its
total assets in equity securities of companies that, at the time of purchase,
have total market capitalization of $1 billion or greater.
Alger American Small Capitalization Portfolio: The investment objective of the
Portfolio is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities, have
total market capitalization within the range of companies included in the
Russell 2000 Growth Index, updated quarterly. The Russell 2000 Growth Index is
designed to track the performance of small capitalization companies. At the date
of this Prospectus, the range of market capitalization of these companies was
$20 million to $3.0 billion. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time of purchase, have
total market capitalization outside the range of companies included in the
Russell 2000 Growth Index and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Alger American MidCap Growth Portfolio: The investment objective of the
Portfolio is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities, have
total market capitalization within the range of companies included in the S&P
MidCap 400 Index, updated quarterly. The S&P MidCap 400 Index is designed to
track the performance of medium capitalization companies. At the date of this
Prospectus, the range of market capitalization of these companies was $153
million to $8.9 billion. The Portfolio may invest up to 35% of its total assets
in equity securities of companies that, at the time of purchase, have total
market capitalization outside the range of companies included in the S&P MidCap
400 Index and in excess of that amount (up to 100% of its assets) during
temporary defensive periods.
Neuberger & Berman Advisers Management Trust
(Each portfolio of the Neuberger & Berman Advisers Management Trust invests
exclusively in a corresponding series of Advisers Managers Trust in what is
sometimes known as a "master/feeder" fund structure. Therefore, the investment
objective of each portfolio matches that of the series of the Advisers Managers
Trust in which the portfolio invests. Therefore, the following information is
presented in terms of the applicable series of the Advisers Management Trust).
AMT Partners Investments: The investment objective of the AMT Partners
Investments is to seek capital growth. This investment objective is
non-fundamental.
The AMT Partners Investments invests primarily in common stocks of established
companies, using the value-oriented investment approach. The series seeks
capital growth through an investment approach that is designed to increase
capital with reasonable risk. Its investment program seeks securities believed
to be undervalued based on strong fundamentals such as low price-to-earnings
ratios, consistent cash flow, and support from asset values.
Up to 15% of the series' net assets may be invested in corporate debt securities
rated below investment grade or in comparable unrated securities. Securities
rated below investment grade as well as unrated securities are often considered
to be speculative and usually entail greater risk.
Montgomery Variable Series
Emerging Markets Fund: The investment objective of the Montgomery Variable
Series Emerging Markets Fund is 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. For these
purposes, the Fund defines an emerging market country as having an economy that
is or would be considered by the World Bank or the United Nations to be emerging
or developing. This Fund considers emerging market companies to be companies the
securities of which are principally traded in the capital market of an emerging
market country, companies that derive at least 50% of their total revenue from
either goods produced or services rendered in emerging market countries or from
sales made in such emerging market countries, regardless of where the securities
of such companies are principally traded, or companies organized under the laws
of, and with a principal office in, an emerging market country.
This Fund uses a proprietary, quantitative asset allocation model created by the
Manager. This model employs mean-variance optimization, a process used in
developed markets based on modern portfolio theory and statistics. Mean-variance
optimization helps determine the percent of assets to invest in each country to
maximize expected returns for a given risk level. This Fund's aims are to invest
in those countries that are expected to have the highest risk/reward tradeoff
when incorporated into a total portfolio context and to construct a portfolio of
emerging market investments approximating the risk level of an internationally
diversified portfolio of securities in developed markets. This "top-down"
country selection is combined with "bottom-up" fundamental industry analysis and
stock selection based on original research, publicly available information, and
company visits.
This Fund invests primarily in common stock but also may invest in other types
of equity and equity derivatives securities. It may invest up to 35% of its
total assets in debt securities, including up to 5% in debt securities rated
below investment grade. The Fund has the right to purchase securities in foreign
countries. Accordingly, shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. While the Fund may invest in mature suppliers of products and
services, and technologies, the Fund also may invest in smaller companies that
may benefit from the development of new products and services. These smaller
companies may present greater opportunities for capital appreciation but may
involve greater risk than larger, mature issuers. The Fund is authorized to
invest in medium quality (rated or equivalent to BBB by S&P or Baa by Moody's)
and in limited amounts of high risk, lower quality debt securities, sometimes
called "junk bonds," (i.e., securities rated below BBB or Baa) or, if unrated,
deemed to be of equivalent investment quality as determined by the Manager.
Medium quality debt securities have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt securities. [
Galaxy VIP Fund
GAL Money Market Fund: The Money Market Fund's investment objective is to seek
as high a level of current income as is consistent with liquidity and stability
of principal. The Fund seeks to achieve its objective by investing in "money
market" instruments that are determined by the investment adviser to present
minimal credit risk and meet certain rating criteria. Instruments that may be
purchased by the Money Market Fund include obligations of domestic and foreign
banks (including negotiable certificates of deposit, non-negotiable time
deposits, savings deposits, and bankers' acceptances); commercial paper
(including variable and floating rate notes); obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; and repurchase
agreements issued by financial institutions such as banks and broker/dealers.
These instruments have remaining maturities of thirteen months or less (except
for certain variable and floating rate notes and securities underlying certain
repurchase agreements).
In accordance with a rule promulgated by the Securities and Exchange Commission,
the Money Market Fund will purchase only those instruments which meet the
applicable quality requirements described below. The Money Market Fund will not
purchase a security (other than a U.S. Government security) unless the security
or the issuer with respect to comparable securities (i) is rated by at least two
nationally recognized statistical rating organizations ("Rating Organizations")
(such as S&P or Moody's) in the highest category for short-term debt securities,
(ii) is rated by the only Rating Organization that has issued a rating in such
Rating Organization's highest category for short-term debt, or (iii) if not
rated, the security is determined to be of comparable quality. Determinations of
comparable quality will be made in accordance with procedures established by the
Board of Trustees.
GAL Equity Fund: The Equity Fund's investment objective is to seek long-term
growth by investing in companies that the Fund's investment adviser believes
have above-average earnings potential. The Fund seeks to achieve its investment
objective by investing, under normal market and economic conditions, at least
75% of its total assets in a broadly diversified portfolio of equity securities
such as common stock, preferred stock, common stock warrants and securities
convertible into common stock of companies that the investment adviser believes
will increase future earnings to a level above the average earnings of similar
issuers. Such companies often retain their earnings to finance current and
future growth and, for this reason, generally pay little or no dividends. Equity
securities in which the Fund invests are selected based on analyses of trends in
industries and companies, earning power, growth features, quality and depth of
management, marketing and manufacturing skills, financial conditions and other
investment criteria. By investing in convertible securities, the Fund will seek
the opportunity, through the conversion feature, to participate in the capital
appreciation of the common stock into which the securities are convertible.
All debt obligations, including convertible bonds, purchased by the Fund will be
rated at the time of purchase in one of the four highest rating categories by
S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and Baa) or, if not rated, will
be determined to be of an equivalent quality by the investment adviser. Debt
securities rated BBB by S&P or Baa by Moody's are generally considered to be
investment grade securities although they may have speculative characteristics
and changes in economic conditions or circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case for
higher grade debt obligations.
The Equity Fund may invest indirectly in foreign securities through the purchase
of American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs"). In addition, the Fund may invest in securities issued by foreign
branches of U.S. banks and foreign banks, Canadian commercial paper and Canadian
securities listed on a national securities exchange, and Europaper (U.S.
dollar-denominated commercial paper of foreign issuers). The Fund may also write
covered call options.
As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments and obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities at such times and in such
proportions as, in the opinion of the investment adviser, prevailing market or
economic conditions warrant.
GAL High Quality Bond Fund: The High Quality Bond Fund's investment objective is
to seek a high level of current income consistent with prudent risk of capital.
The Fund invests its assets in corporate debt obligations such as bonds,
debentures, obligations convertible into common stock, "money market"
instruments such as bank obligations and commercial paper, in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, and in
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include The
International Bank for Reconstruction and Development ("World Bank"), The Asian
Development Bank and The InterAmerican Development Bank. Obligations of
supranational entities may be supported by appropriated but unpaid commitments
of their member countries, and there is no assurance that these commitments will
be undertaken or met in the future. The failure by a member country to honor
such commitments could adversely affect the payment of principal and interest on
these obligations. The Fund may also invest, from time to time, in obligations
issued by state and local governmental issuers ("Municipal Securities"). The
purchase of Municipal Securities may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of such
securities, on a pretax basis, is comparable to that of corporate or U.S. debt
obligations. The High Quality Bond Fund may enter into interest rate futures
contracts to hedge against changes in market values of fixed-income instruments
that the Fund holds or intends to purchase. At least 65% of the Fund's total
assets will be invested in non-convertible bonds. Any common stock received
through the conversion of convertible debt obligations will be sold in an
orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest at least 80%
of its assets in high quality debt obligations that are rated, at the time of
purchase, within the two highest ratings of S&P (AAA and AA) or Moody's (Aaa and
Aa) (or which, if unrated, are determined by the investment adviser to be of
comparable quality) and in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and other "money market"
instruments. Unrated securities will be determined to be of comparable quality
to high quality debt obligations if, among other things, other outstanding
obligations of the issuers of such securities are rated AA or A-2/P-2 or better.
When, in the opinion of the investment adviser, a defensive investment posture
is warranted, the Fund may invest temporarily and without limitation in high
quality, short-term "money market" instruments.
The Fund may also invest up to 5% of its total assets in dollar-denominated high
quality debt obligations of U.S. companies issued outside the United States. In
addition, the Fund may acquire high quality obligations issued by Canadian
Provincial Governments which are similar to U.S. Municipal Securities except
that the income derived therefrom is fully subject to U.S. Federal taxation.
These instruments are denominated in either Canadian or U.S. dollars and have an
established over-the-counter market in the United States.
The Fund seeks to provide a current yield greater than that generally available
from a portfolio of high quality short-term obligations. The High Quality Bond
Fund's average weighted maturity will vary from time to time depending on, among
other things, current market and economic conditions and the comparative yields
on instruments with different maturities. The Fund adjusts its average weighted
maturity and its holdings of corporate and U.S. Government debt securities in a
manner consistent with the investment adviser's assessment of prospective
changes in interest rates. The success of this strategy depends upon the
investment adviser's ability to predict changes in interest rates.
The value of the Fund's portfolio securities will generally vary inversely with
changes in prevailing interest rates. The high quality credit criteria applied
to the selection of portfolio securities are intended to reduce adverse price
changes due to credit considerations.
GAL Asset Allocation Fund: The investment objective of the Asset Allocation Fund
is to seek a high total return by providing both a current level of income that
is greater than that provided by the popular stock market averages as well as
long-term growth in the value of the Fund's assets. The Fund seeks to achieve
its investment objective and at the same time reduce volatility by allocating
its assets among short-term obligations, common stock, preferred stock and
bonds. The proportion of the Fund's assets invested in each type of security
will vary from time to time as a result of the investment adviser's
interpretation of economic and market conditions. However, at least 25% of the
Fund's total assets will at all times be invested in fixed-income senior
securities, including debt securities and preferred stocks. Debt securities
purchased by the Fund will be rated at the time of purchase in one of the four
highest rating categories by S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and
Baa) (or which, if unrated, are determined by the investment adviser to be of
comparable quality). Debt securities rated BBB by S&P or Baa by Moody's are
generally considered to be investment grade securities although they may have
speculative characteristics and changes in economic conditions or circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade debt obligations. In selecting common
stock for purchase by the Fund, the investment adviser will analyze trends in
industries and companies, earning power, growth features, quality and depth of
management, marketing and manufacturing skills, financial conditions and other
investment criteria.
The Asset Allocation Fund may also invest up to 20% of its total assets in
foreign securities, either directly or indirectly through ADRs and EDRs. The
Fund may write covered call options, purchase asset-backed securities and
mortgage-backed securities and enter into foreign currency exchange
transactions.
As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments and obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities at such times and in such
proportions as, in the opinion of the investment adviser, prevailing market and
economic conditions warrant.
Investments in foreign securities involve higher costs for the Fund than
investments in U.S. securities, including higher transaction costs as well as
the imposition in some cases of additional taxes by foreign governments. For
example, fixed commissions on foreign stock exchanges are generally higher than
the negotiated commissions on U.S. exchanges and the Fund may be subject in some
cases to withholding and/or transfer taxes. In addition, foreign investments may
include additional risks associated with currency exchange rates, less complete
financial information about the issuers, less market liquidity, and political
instability. Future political and economic developments, the possible imposition
of withholding taxes on interest income, the possible seizure or nationalization
of foreign holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions, might adversely affect the payment
of principal and interest on foreign obligations.
Although the Asset Allocation Fund may invest in securities denominated in
foreign currencies, the Fund values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Fund's shares may fluctuate
with U.S. dollar exchange rates as well as with price changes of the Fund's
securities in the various local markets and currencies. Thus, an increase in the
value of the U.S. dollar compared to the currencies in which the Fund makes its
investments could reduce the effect of increases and magnify the effect of
decreases in the price of the Fund's securities in their local markets.
Conversely, a decrease in the value of the U.S. dollar will have the opposite
effect of magnifying the effect of increases and reducing the effect of
decreases in the prices of the Fund's securities in their local markets. In
addition to favorable and unfavorable currency exchange-rate developments, the
Fund is subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.
American Skandia Trust
JanCap Growth Portfolio: The investment objective of the JanCap Growth Portfolio
is growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on investments, therefore, will be incidental to this objective.
The objective will be pursued by emphasizing investments in common stocks.
Common stock investments will be in industries and companies that the
portfolio's sub-advisor believes are experiencing favorable demand for their
products and services, and which operate in a favorable competitive and
regulatory environment. Investments may be made to a lesser degree in preferred
stocks, convertible securities, warrants, and debt securities of U.S. issuers,
when the portfolio's sub-advisor perceives an opportunity for capital growth
from such securities or so that a return may be received on the portfolio's idle
cash. Debt securities which the portfolio may purchase include corporate bonds
and debentures (not to exceed 5% of net assets in bonds rated below investment
grade), mortgage-backed and asset-backed securities, zero-coupon bonds,
indexed/structured notes, high-grade commercial paper, certificates of deposit
and repurchase agreements. Securities of foreign issuers, including securities
of foreign governments and Euromarket securities, also may be purchased.
Although it is the general policy of the JanCap Growth Portfolio to purchase and
hold securities for capital growth, changes will be made whenever the
portfolio's sub-advisor believes they are advisable. Because investment changes
usually will be made without reference to the length of time a security has been
held, a significant number of short-term transactions may result.
Investments also may be made in "special situations" from time to time. A
"special situation" arises when, in the opinion of the portfolio's sub-advisor,
the securities of a particular company will be recognized and appreciate in
value due to a specific development, such as a technological breakthrough,
management change or a new product at that company. Subject to certain
limitations, the JanCap Growth Portfolio may purchase and write options on
securities (including index options) and options on foreign currencies, and may
invest in futures contracts on securities, financial indices and foreign
currencies, ("futures contracts"), options on futures contracts, forward
contracts and swaps and swap-related products. These instruments will be used
primarily for hedging purposes. Investment of up to 15% of the JanCap Growth
Portfolio's total assets may be made in securities that are considered illiquid
because of the absence of a readily available market or due to legal or
contractual restrictions.
Lord Abbett Growth and Income Portfolio: The investment objective of the Lord
Abbett Growth and Income Portfolio is long-term growth of capital and income
while attempting to avoid excessive fluctuations in market value. This objective
will be pursued by investing in securities which are selling at reasonable
prices in relation to value. Normally, investments will be made in common stocks
of seasoned companies which are expected to show above-average growth and which
the Sub-advisor believes to be in sound financial condition.
Seligman Henderson International Equity Portfolio: The investment objective of
Seligman Henderson International Equity Portfolio is long-term capital
appreciation consistent with preservation of capital primarily through
investment in securities of non-United States issuers. The portfolio may invest
in securities of issuers domiciled in any country but under normal conditions
investments may be made in two principal regions: The United Kingdom and
Continental Europe; and the Pacific Basin Countries. Continental European
countries may include, from time to time, Austria, Belgium, Denmark, Federal
Republic of Germany, Finland, France, Greece, Ireland, Italy, Luxembourg,
Netherlands, Norway, Portugal, Spain, Sweden and Switzerland. Countries in the
Pacific Basin may include Australia, Hong Kong, India, Japan, Korea, Malaysia,
New Zealand, People's Republic of China, Philippines, Singapore, Taiwan, and
Thailand. The portfolio believes that it will usually have assets invested in
both of these regions. Although under normal market conditions the portfolio
will invest in a minimum of five countries, it may have assets invested in many
of the above countries. Investments will not normally be made in securities of
issuers located in the United States or Canada.
T. Rowe Price Asset Allocation Portfolio: The investment objective of the T.
Rowe Price Asset Allocation Portfolio is to seek a high level of total return by
investing primarily in a diversified group of fixed income and equity
securities. The Portfolio is designed to balance the potential appreciation of
common stocks with the income and principal stability of bonds over the long
term. Under normal market conditions over the long-term, the Portfolio expects
to allocate its assets so that approximately 40% of such assets will be in fixed
income securities and approximately 60% in equity securities.
The Portfolio's fixed income securities will be allocated among investment
grade, high yield and non-dollar debt securities. The weighted average maturity
for this portion of the Portfolio is generally expected to be intermediate,
although it may vary significantly. High-yielding, income-producing debt
securities (commonly referred to as "junk bonds") and preferred stocks including
convertible securities may be purchased without regard to maturity, however, the
average maturity of the bonds is expected to be approximately 10 years, although
it may vary if market conditions warrant. Quality will generally range from
lower-medium to low and the Portfolio may also purchase bonds in default if, in
the opinion of the Sub-advisor, there is significant potential for capital
appreciation.
The Portfolio's equity securities will be allocated among large and small-cap
U.S. and non-dollar equity securities. Large-cap will generally be stocks of
well-established companies with capitalization over $1 billion which can produce
increasing dividend income. Small-cap will be common stocks of small companies
or companies which offer the possibility of accelerated earnings growth because
of rejuvenated management, new products or structural changes in the economy.
Current income is not a factor in the selection of these stocks.
The Portfolio will generally trade in securities (either common stocks or bonds)
for short-term profits, but, when circumstances warrant, securities may be
purchased and sold without regard to the length of time held.
T. Rowe Price International Equity Portfolio: The investment objective of the T.
Rowe Price International Equity Portfolio is to seek total return on its assets
from long-term growth of capital and income, principally through investments in
common stocks of established, non-U.S. companies. Investments may be made solely
for capital appreciation or solely for income or any combination of both for the
purpose of achieving a higher overall return. Total return consists of capital
appreciation or depreciation, dividend income, and currency gains or losses. The
Portfolio intends to diversify investments broadly among countries and to
normally have at least three different countries represented in the Portfolio.
The Portfolio may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). Under unusual circumstances, the Portfolio may invest substantially
all of its assets in one or two countries.
Founders Capital Appreciation Portfolio: The investment objective of Founders
Capital Appreciation Portfolio is capital appreciation. The portfolio will
normally invest at least 65% of its total assets in common stocks of U.S.
companies with market capitalizations of $1.5 billion or less. These stocks
normally will be traded in the over-the-counter market. Since it may engage in
short-term trading, the portfolio may have annual portfolio turnover rates in
excess of 100%.
INVESCO Equity Income Portfolio: The investment objective of the INVESCO Equity
Income Portfolio is to seek high current income while following sound investment
practices. Capital growth potential is an additional, but secondary,
consideration in the selection of portfolio securities. The portfolio seeks to
achieve its objective by investing in securities which will provide a relatively
high-yield and stable return and which, over a period of years, may also provide
capital appreciation. The portfolio normally will invest between 60% and 75% of
its assets in dividend-paying, marketable common stocks of domestic and foreign
industrial issuers. The portfolio also will invest in convertible bonds,
preferred stocks and debt securities. The portfolio may depart from the basic
investment objective and assume a defensive position with a large portion of its
assets temporarily invested in high quality corporate bonds, or notes and
government issues, or held in cash. The portfolio's investments in common stocks
may decline in value. To minimize the risk this presents, the portfolio only
invests in dividend-paying common stocks of domestic and foreign industrial
issuers which are marketable, and will not invest more than 5% of the
portfolio's assets in the securities of any one company or more than 25% of the
portfolio's assets in any one industry. The portfolio's investments in debt
securities will generally be subject to both credit risk and market risk. There
are no fixed-limitations regarding portfolio turnover. The rate of portfolio
turnover may fluctuate as a result of constantly changing economic conditions
and market circumstances. Securities initially satisfying the portfolio's basic
objectives and policies may be disposed of when they are no longer suitable. As
a result, it is anticipated that the portfolio's annual portfolio turnover rate
may be in excess of 100%, and may be higher than that of other investment
companies seeking current income with capital growth as a secondary
consideration. Increased portfolio turnover would cause the portfolio to incur
greater brokerage costs than would otherwise be the case.
PIMCO Limited Maturity Bond Portfolio: The investment objective of the PIMCO
Limited Maturity Bond Portfolio is to seek to maximize total return, consistent
with preservation of capital and prudent investment management. The portfolio
will invest at least 65% of its total assets in the following types of
securities, which may be issued by domestic or foreign entities and denominated
in U.S. dollars or foreign currencies: securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities ("U.S. Government
securities"); corporate debt securities; corporate commercial paper; mortgage
and other asset-backed securities; variable and floating rate debt securities;
bank certificates of deposit, fixed time deposits and bankers' acceptances;
repurchase agreements and reverse repurchase agreements; obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies or supranational entities; and foreign currency exchange-related
securities, including foreign currency warrants.
The portfolio may hold different percentages of its assets in these various
types of securities, and may invest all of its assets in derivative instruments
or in mortgage- or asset-backed securities. There are special risks involved in
these instruments. The portfolio will invest in a diversified portfolio of fixed
income securities of varying maturities with a portfolio duration from one to
three years. The portfolio may invest up to 10% of its assets in corporate debt
securities that are rated below investment grade but rated B or higher by
Moody's or S&P (or, if unrated, determined by the Sub-advisor to be of
comparable quality). The portfolio may also invest up to 20% of its assets in
securities denominated in foreign currencies. The "total return" sought by the
portfolio will consist of interest and dividends from underlying securities,
capital appreciation reflected in unrealized increases in value of portfolio
securities (realized by the shareholder only upon selling shares) or realized
from the purchase and sale of securities, and use of futures and options, or
gains from favorable changes in foreign currency exchange rates The portfolio
may invest directly in U.S. dollar- or foreign currency-denominated fixed income
securities of non-U.S. issuers. The portfolio will limit its foreign investments
to securities of issuers based in developed countries (including Newly
Industrialized Countries, "NICs", such as Taiwan, South Korea and Mexico).
Investing in the securities of issuers in any foreign country involves special
risks.
The Alger American Fund
Alger American Small Capitalization Portfolio: The investment objective of the
Portfolio is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities, have
total market capitalization within the range of companies included in the
Russell 2000 Growth Index, updated quarterly. The Russell 2000 Growth Index is
designed to track the performance of small capitalization companies. At the date
of this Prospectus, the range of market capitalization of these companies was
$20 million to $3.0 billion. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time of purchase, have
total market capitalization outside the range of companies included in the
Russell 2000 Growth Index and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Alger American Growth Portfolio: The investment objective of the Alger American
Growth Portfolio is long-term capital appreciation. Except during temporary
defensive periods, the Portfolio invests at least 65 percent of its total assets
in equity securities of companies that, at the time of purchase of the
securities, have total market capitalization of $1 billion or greater. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization of
less than $1 billion and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.]
<PAGE>
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American Skandia Life Assurance Corporation
Attention: Concierge Desk [Galaxy Annuity Customer Service]
P.O. Box 883
Shelton, Connecticut 06484
================================================================================
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT
CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY
DESCRIBED IN PROSPECTUS ASAP2 [GAL 4]-PROS (05/96).
================================================================================
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(print your name)
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(address)
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(city/state/zip code)
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<PAGE>
ADDITIONAL INFORMATION: Inquiries will be answered by calling your
representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
P.O. Box 883
Shelton, Connecticut 06484
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
[1-800-444-3970] [1-800-444-3970]
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: (203) 926-1888
- --------
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
STATEMENT OF ADDITIONAL lNFORMATION
The variable investment options under the annuity contracts, registered under
the Securities Act of 1933 and the Investment Company Act of 1940, are issued by
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B (CLASS 1
SUB-ACCOUNTS) and AMERICAN SKANDIA LIFE ASSURANCE CORPORATION. The fixed
investment options thereunder, registered solely under the Securities Act of
1933, are issued by AMERICAN SKANDIA LIFE ASSURANCE CORPORATION and the assets
supporting such securities are maintained in AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION SEPARATE ACCOUNT D.
THIS STATEMENT OF ADDITIONAL lNFORMATlON IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTlON 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 1-800-752-6342 [1-800-444-3970].
Date of Prospectus: May 1, 1996
Date of Statement of Additional Information: May 1, 1996
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 4
Calculating the Market Value Adjustment 4
Independent Auditors 5
Legal Experts 6
Appendix A Financial Statements for Separate Account B (Class 1 Sub-accounts) 6
</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 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."),
formerly Skandia Life Equity Sales Corporation, serves as principal underwriter
for the Annuities. We, ASM, Inc. and American Skandia Investment Services,
Incorporated ("ASISI"), formerly American Skandia Life Investment Management,
Inc., the investment manager of the American Skandia Trust, are wholly-owned
subsidiaries of American Skandia Investment Holding Corporation. Most of the
Class 1 Sub-accounts of Separate Account B invest in portfolios offered by
American Skandia Trust.
ASAP2[GAL4]-SAI (05/96)
<PAGE>
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. ASM, Inc. receives no
underwriting commissions.
CALCULATION OF PERFORMANCE DATA: We may advertise our Current Rates for new
Fixed Allocations, to the extent permitted by law.
We may advertise the performance of Sub-accounts using two types of measures.
These measures are "current and effective yield", which may be used for money
market-type Sub-accounts, and "total return", which may be used with other types
of Sub-accounts. The following descriptions provide details on how we calculate
these measures for Sub-accounts:
(1) Current and effective yield: The current yield of a money
market-type Sub-account is calculated based upon a seven day period ending on
the date of calculation. The current yield of such a Sub-account is computed by
determining the change (exclusive of capital changes) in the Account Value of a
hypothetical pre-existing allocation by an Owner to such a Sub-account (the
"Hypothetical Allocation") having a balance of one Unit at the beginning of the
period, subtracting a hypothetical maintenance fee, and dividing such net change
in the Account Value of the Hypothetical Allocation by the Account Value of the
Hypothetical Allocation at the beginning of the same period to obtain the base
period return, and multiplying the result by (365/7). The resulting figure will
be carried to at least the nearest l00th of one percent.
We compute effective compound yield for a money market-type Sub-account
according to the method prescribed by the Securities and Exchange Commission.
The effective yield reflects the reinvestment of net income earned daily on
assets of such a Sub-account. Net investment income for yield quotation purposes
will not include either realized or capital gains and losses or unrealized
appreciation and depreciation.
(2) Total Return: Total return for the other Sub-accounts is computed by
using the formula:
P(1+T)n = ERV
where:
P = a hypothetical allocation of $1,000;
T = average annual total return;
n = the number of years over which total return is being measured; and
ERV = the Account Value of the hypothetical $1,000 payment as of the end of
the period over which total return is being measured.
The Sub-accounts offered as variable investment options for the Annuities have
been available as variable investment options in other annuities we offer. In
addition, some of the underlying mutual fund 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 underlying mutual fund 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.
As part of any advertisement of Standard Total Return, we may advertise the
"Non-standard Total Return" of the Sub-accounts. Non-standard Total Return is
calculated in the same manner as the standardized returns except that the
calculations assume no redemption at the end of the applicable periods, thus
these figures do not take into consideration the Annuity's contingent deferred
sales charge.
As described in the Prospectus, Annuities may be offered in certain situations
in which the contingent deferred sales charge or certain other charges or fees
may be eliminated or reduced. Advertisements of performance in connection with
the offer of such Annuities will be based on the charges applicable to such
Annuities.
Shown below are total return figures for the periods shown. Figures are shown
only for Sub-accounts operational as of December 31, 1995. "Standard" total
return and "Non-standard" total return figures, as described above, are shown.
These figures assume that all charges and fees are applicable, except that for
"Non-standard" return, the contingent deferred sales charge is not applied. The
"inception-to-date" figures shown below are based on the inception date of an
underlying mutual fund portfolio. Any performance of such portfolios prior to
inception of a Sub-account is provided by the underlying mutual funds. The total
return for any Sub-account reflecting performance prior to such Sub-account's
inception is based on such information.
<TABLE>
<CAPTION>
Standard Total Return Non-standard Total Return
Incep- Incep-
1 3 5 10 tion-to- 1 3 5 10 tion-to-
Yr. Yr. Yr. Yr. Date Yr. Yr. Yr. Yr. Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JanCap Growth 28.57% 10.54% N/A N/A 12.06% 36.07% 12.16% N/A N/A 13.29%
LA Growth and Income 19.61% 11.17% N/A N/A 11.05% 27.11% 12.77% N/A N/A 12.07%
Seligman Henderson International Equity 0.91% 12.16% 6.34% N/A 9.23% 8.41% 13.73% 6.96% N/A 9.41%
Seligman Henderson International Small
Cap N/A N/A N/A N/A -4.06% N/A N/A N/A N/A 3.44%
AST Phoenix Balanced Asset 13.36% N/A N/A N/A 6.66% 20.86% N/A N/A N/A 8.66%
Fed Utility Inc 16.86% N/A N/A N/A 5.66% 24.36% N/A N/A N/A 7.69%
Fed High Yield 10.38% N/A N/A N/A 2.74% 17.88% N/A N/A N/A 6.13%
T. Rowe Price Asset Allocation 14.12% N/A N/A N/A 5.92% 21.62% N/A N/A N/A 9.20%
T. Rowe Price International Equity 1.99% N/A N/A N/A -1.64% 9.49% N/A N/A N/A 1.89%
T. Rowe Price Natural Resources N/A N/A N/A N/A 7.94% N/A N/A N/A N/A 15.44%
T. Rowe Price International Bond(1) 2.00% N/A N/A N/A -1.26% 9.50% N/A N/A N/A 2.94%
Founders Capital Appreciation 23.21% N/A N/A N/A 15.26% 30.71% N/A N/A N/A 18.29%
INVESCO Equity Income 20.75% N/A N/A N/A 7.84% 28.25% N/A N/A N/A 11.07%
PIMCO Total Return Bond 9.59% N/A N/A N/A 2.72% 17.09% N/A N/A N/A 6.10%
PIMCO Limited Maturity Bond N/A N/A N/A N/A -1.94% N/A N/A N/A N/A 5.56%
Berger Capital Growth 15.17% N/A N/A N/A 12.29% 22.67% N/A N/A N/A 18.01%
RS Value + Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AA Growth 26.98% 16.03% 19.57% N/A 17.66% 34.48% 17.50% 19.95% N/A 17.77%
AA Small Capitalization 34.83% 12.83% 18.43% N/A 20.81% 42.33% 14.38% 18.83% N/A 20.81%
AA MidCap Growth 34.97% N/A N/A N/A 25.68% 42.47% N/A N/A N/A 27.21%
NB Partners 25.77% N/A N/A N/A 11.67% 33.27% N/A N/A N/A 15.25%
MV Emerging Markets N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
[Equity 17.47% N/A N/A N/A 7.73% 24.97% N/A N/A N/A 9.45%
High Quality Bond 13.89% N/A N/A N/A 3.83% 21.39% N/A N/A N/A 5.70%
Asset Allocation 20.40% N/A N/A N/A 7.13% 27.90% N/A N/A N/A 8.92%
JanCap Growth 28.56% 10.53% N/A N/A 12.04% 36.06% 12.15% N/A N/A 13.27%
LA Growth and Income 19.59% 11.16% N/A N/A 11.04% 27.09% 12.76% N/A N/A 12.06%
Seligman Henderson International
Equity 0.90% 12.15% 6.33% N/A 9.21% 8.40% 13.72% 6.95% N/A 9.40%
T. Rowe Price Asset Allocation 14.11% N/A N/A N/A 5.90% 21.61% N/A N/A N/A 9.19%
T. Rowe Price International Equity 1.98% N/A N/A N/A -1.65% 9.48% N/A N/A N/A 1.87%
Founders Capital Appreciation 23.20% N/A N/A N/A 15.25% 30.70% N/A N/A N/A 18.28%
INVESCO Equity Income 20.74% N/A N/A N/A 7.83% 28.24% N/A N/A N/A 11.06%
PIMCO Limited Maturity Bond N/A N/A N/A N/A -1.95% N/A N/A N/A N/A 5.55%
AA Growth 26.97% 16.02% 19.55% N/A 17.65% 34.47% 17.49% 19.94% N/A 17.76%
AA Small Capitalization 34.82% 12.82% 18.42% N/A 20.80% 42.32% 14.37% 18.82% N/A 20.80%]
</TABLE>
(1) During these periods, the Portfolio (formerly known as the "AST Scudder
International Bond Portfolio") was managed by American Skandia Investment
Services, Incorporated ("ASISI"), as investment manager, and was sub-advised by
Scudder, Steven & Clark, as sub-adviser. As of May 1, 1996, the Portfolio is
managed by ASISI, as investment manager, and sub-advised by Rowe Price-Fleming
International, Inc., as sub-adviser. As of May 1, 1996 various changes have been
made to the Portfolio's investment objective and to its fundamental and
non-fundamental investment restrictions.
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. Actual performance will depend on the type, quality
and, for some of the Sub-accounts, the maturities of the investments held by the
underlying mutual funds and upon prevailing market conditions and the response
of the underlying mutual funds to such conditions. Actual performance will also
depend on changes in the expenses of the underlying mutual funds. In addition,
the amount of charges against each Sub-account will affect performance.
The information provided by these measures may be useful in reviewing
the performance of the Sub-accounts, and for providing a basis for comparison
with other annuities. These measures may be less useful in providing a basis for
comparison with other investments that neither provide some of the benefits of
such annuities nor are treated in a similar fashion under the Code.
UNIT PRICE DETERMINATIONS: 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. 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 by that 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 by the underlying mutual fund during that Valuation Period; 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 that
Sub-account.
(b) is the net result of:
(1) the net asset value per share plus any declared and unpaid
dividends per share of the underlying mutual fund shares held in that
Sub-account at the end of the preceding Valuation Period; 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 that Sub-account.
(c) 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.
CALCULATING THE MARKET VALUE ADJUSTMENTS: The market value adjustment ("MVA") is
used in determining the Account Value of each Fixed Allocation. The formula used
to determine the MVA is applied separately to each Fixed Allocation. Values and
time durations used in the formula are as of the date the Account Value is being
determined. Current Rates and available Guarantee Periods are those for the
class of Annuities you purchase pursuant to the Prospectus available in
conjunction with this Statement of Additional Information. The formula is:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate (for your class of annuity) being
credited to new Fixed Allocations with Guarantee Period
durations equal to the number of years (rounded to the next
higher integer when occurring on other than an anniversary of
the beginning of the Fixed Allocation's Guarantee Period)
remaining in your Fixed Allocation Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if amounts are surrendered pursuant to the right to
return the annuity is [(1 + I)/(1 + J)]N/12.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date. The formula may be changed if Additional Amounts have been added to a
Fixed Allocation. For more information, see the section of the Prospectus
entitled "Additional Amounts in the Fixed Allocations."
Irrespective of the above, we apply certain formulas to determine "I" and "J"
when we do not offer Guarantee Periods with a duration equal to the Remaining
Period. These formulas are as follows:
(a) If we offer Guarantee Periods to your class of Annuities with
durations that are both shorter and longer than the Remaining Period, we
interpolate a rate for "J" between our then current interest rates for Guarantee
Periods with the next shortest and next longest durations then available for new
Fixed Allocations for your class of Annuities .
(b) If we no longer offer Guarantee Periods to your class of Annuities
with durations that are both longer and shorter than the Remaining Period, we
determine rates for "J" and, for purposes of determining the MVA only, for "I"
based on the Moody's Corporate Bond Yield Average - Monthly Average Corporates
(the "Average"), as published by Moody's Investor Services, Inc., its successor,
or an equivalent service should such Average no longer be published by Moody's.
For determining I, we will use the Average published on or immediately prior to
the start of the applicable Guarantee Period. For determining J, we will use the
Average for the Remaining Period published on or immediately prior to the date
the MVA is calculated.
The following examples show the effect of the MVA in determining Account Value.
The example assumes: (a) Account Value of $50,000 for the Fixed Allocation at
the beginning of its Guarantee Period; (b) a Guarantee Period of 5 years; (c) an
interest rate of 5%, which is an effective annual rate; and (d) the date of the
calculation is the end of the third year since the beginning of the Guarantee
Period. That means there are two exact years remaining to the end of the
Guarantee Period.
Example of Upward Adjustment: Assume that J = 3.5% and there have been no
transfers or withdrawals. At this point I = 5% (0.05) and N = 24 (number of
months remaining in the Guarantee Period). Then:
(a) MVA = [(1+I)/(I+J+0.0010)]N/12 = [1.05/1.036]2 = 1.027210; and
(b) Account Value = Interim Value X MVA = $59,456.20.
Example of Downward Adjustment: Assume that J = 6% and there have been no
transfers or withdrawals. At this point I = 5% (0.05) and N = 24, the number of
months remaining in the Guarantee Period. Then:
(a) MVA = [(1+I)/(1+J+0.0010)]N/12 = [1.05/1.061)]2 = 0.979372; and
(b) Account Value = Interim Value X MVA = $56,687.28.
INDEPENDENT AUDITORS: Deloitte & Touche LLP, Two World Financial Center,
New York, New York 10281-1433, independent auditors, have performed an annual
audit of American Skandia Life Assurance Corporation and an annual audit of
American Skandia Life Assurance Corporation Variable Account B (Class 1
Sub-accounts). Audited financial statements regarding American Skandia Life
Assurance Corporation as of December 31, 1995 and 1994, and the related
statements of operations, shareholders's equity and cash flows for each of the
three years in the period ended December 31, 1995 are included in the
Prospectus. Audited financial statements for Variable Account B (Class 1
Sub-accounts) are included herein. The financial statements included herein and
in the Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in the report herein and in the Prospectus, and are included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL EXPERTS: Counsel with respect to Federal laws and regulations applicable
to the issue and sale of the Annuities and with respect to Connecticut law is
Werner & Kennedy, 1633 Broadway, New York, New York 10019.
FINANCIAL STATEMENTS FOR SEPARATE ACCOUNT B (CLASS 1 SUB-ACCOUNTS): The
financial statements which follow in Appendix A are those of American Skandia
Life Assurance Corporation Variable Account B (Class 1 Sub-accounts) for the
year ended December 31, 1995. There are other Sub-accounts included in Account B
that are not available in the product described in the applicable prospectus.
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 [1-(800)
444-3970].
Appendix A
Financial Statements for Separate Account B
(Class 1 Sub-accounts)
APPENDIX A
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B
CLASS 1
Financial Statements
For the Periods Ended
December 31, 1995
This report has been prepared to provide information to owners of American
Skandia Life Assurance Corporation's LifeVest(R) Personal Security Annuities,
American Skandia Advisors Plan(SM) Annuities, American Skandia Advisors Plan
II(SM) Annuities, The Imperium(SM) Annuities and The Alliance Capital Navigator
Annuities. If it is used for any other purpose, it must be accompanied or
preceded by a current LifeVest(R) Personal Security Annuity prospectus, an
American Skandia Advisors Plan(SM) prospectus, an American Skandia Advisors
Plan IISM prospectus, an Imperium(SM) prospectus or The Alliance Capital
Navigator prospectus, as applicable, which discloses any charges and other
important information about the Account, together with the current applicable
prospectus for the Neuberger & Berman Advisors Management Trust, The Alger
American Fund, the American Skandia Trust or the Alliance Variable Products
Series Fund, Inc.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
PRESIDENT'S LETTER
FEBRUARY, 1996
Dear Contractholder:
What a year it was! The New York Stock Exchange hit a record high on 69 days, a
record number of record highs! The performance of the Variable Account B
sub-accounts also reflects these outstanding investment returns. Please read the
attached sub-account managers' reports carefully, for a better appreciation of
how your mutual fund investment options performed in 1995, and their respective
outlooks for 1996.
As we look ahead, we do not expect to repeat the stellar results of 1995. But
neither do we anticipate a dramatic sell off or cause for a collapse of those
prior gains. Instead we anticipate a "normal" investment climate, with "normal"
levels of returns, and "normal" volatility in returns. As before, our conviction
is that a winning strategy must include a long term view, and a diversified
approach to asset classes and investment markets. Our commitment is to offer a
choice of excellent managers and excellent funds in a wide range of asset
classes.
In the years past we have focused on adding asset class and investment style
choices to your retirement annuity. In 1995 we added the following four new
selections:
<TABLE>
<CAPTION>
SUB-ACCOUNT ASSET CLASS/INVESTMENT STYLE
- -------------------------------- -----------------------------------------------
<S> <C>
Seligman-Henderson Small Cap International Equities (small capitalization)
T. Rowe Price Natural Resources "Hard Assets"
PIMCO Limited Bond Intermediate Bonds
Neuberger & Berman Partners Value Style Equities
</TABLE>
These new selections have proven to be very popular, and the new portfolios
raised over $120 million of new assets in 1995.
From time to time, it also makes good sense to cease offering a fund. In 1995
American Skandia closed and consolidated assets from certain fund options to
other sub-accounts with similar investment objectives. We anticipate that the
substitutions will tend to result in cost savings to contractholders through
economies of scale, reduced expenses, and more effective management.
As we look ahead to 1996, we are committed to continuing to enhance the wide
range of choice in excellent investment options, among diversified asset
classes.
Gordon C. Boronow
<TABLE>
<S> <C>
CONTENTS
I. American Skandia Life Assurance Corporation
II. The Alger American Fund
III. Neuberger & Berman Advisors Management Trust
IV. American Skandia Trust
V. Alliance Variable Product Series Fund, Inc.
VI. Scudder Variable Life Investment Fund
</TABLE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B -- Class 1 and the
Board of Directors of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statement of assets and liabilities of the
thirty-six sub-accounts of American Skandia Life Assurance Corporation Variable
Account B -- Class 1, referred to in Note 1, as of December 31, 1995, and the
related statements of operations and of changes in net assets for the periods
presented. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 with the managers of
the mutual funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the thirty-six sub-accounts of American
Skandia Life Assurance Corporation Variable Account B -- Class 1, referred to in
Note 1, as of December 31, 1995, the results of their operations and the changes
in their net assets for the periods presented in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 20, 1996
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1995
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investment in mutual funds at market value (Note 2):
Neuberger & Berman Advisers Management Trust (NBAMT):
Partners Portfolio -- 7,246,795 shares (cost $94,406,337)............................................ $ 95,875,095
The Alger American Fund (AAF):
Small Capitalization Portfolio -- 12,431,757 shares (cost $425,171,946).............................. 489,935,545
Growth Portfolio -- 12,098,178 shares (cost $340,748,419)............................................ 376,979,213
MidCap Growth Portfolio -- 8,110,421 shares (cost $145,078,834)...................................... 157,666,592
American Skandia Trust (AST):
Seligman Henderson International Equity Portfolio -- 14,414,570 shares (cost $250,210,045)........... 262,345,168
Seligman Henderson International Small Cap Portfolio -- 2,577,080 shares (cost $26,530,685).......... 26,621,232
Lord Abbett Growth & Income Portfolio -- 18,709,902 shares (cost $248,303,566)....................... 280,274,338
JanCap Growth Portfolio -- 27,632,476 shares (cost $339,716,206)..................................... 425,540,125
Money Market Portfolio -- 329,302,918 shares (cost $329,302,918)..................................... 329,302,918
Federated Utility Income Portfolio -- 8,829,132 shares (cost $92,405,310)............................ 105,419,840
Federated High Yield Portfolio -- 6,993,674 shares (cost $73,148,181)................................ 77,909,526
Phoenix Balanced Asset Portfolio -- 20,105,268 shares (cost $223,510,209)............................ 251,919,007
T. Rowe Price Asset Allocation Portfolio -- 4,833,777 shares (cost $51,549,956)...................... 58,053,656
T. Rowe Price International Equity Portfolio -- 17,499,340 shares (cost $174,844,914)................ 186,367,971
T. Rowe Price Natural Resources Portfolio -- 801,084 shares (cost $8,489,765)........................ 8,900,048
Founders Capital Appreciation Portfolio -- 5,957,728 shares (cost $71,619,186)....................... 84,897,630
INVESCO Equity Income Portfolio -- 13,696,413 shares (cost $146,831,553)............................. 171,205,167
PIMCO Total Return Bond Portfolio -- 18,929,196 shares (cost $203,363,785)........................... 214,657,080
PIMCO Limited Maturity Bond Portfolio -- 14,918,580 shares (cost $154,976,091)....................... 156,197,528
Scudder International Bond Portfolio -- 4,149,601 shares (cost $41,572,957).......................... 43,985,774
Berger Capital Growth Portfolio -- 3,599,220 shares (cost $40,392,302)............................... 44,630,334
Alliance Variable Products Series Fund (AVP):
Short-Term Multi-Market Portfolio -- 26,007 shares (cost $270,114)................................... 275,157
Premier Growth Portfolio -- 233,058 shares (cost $4,149,149)......................................... 4,148,435
Growth & Income Portfolio -- 245,236 shares (cost $3,627,236)........................................ 3,872,270
U.S. Government/High Grade Securities Portfolio -- 198,300 shares (cost $2,182,677).................. 2,312,179
Total Return Portfolio -- 229,364 shares (cost $2,797,213)........................................... 2,935,856
International Portfolio -- 154,090 shares (cost $2,073,154).......................................... 2,168,046
Money Market Portfolio -- 2,462,495 shares (cost $2,462,495)......................................... 2,462,495
North American Government Income Portfolio -- 64,818 shares (cost $632,862).......................... 679,293
Global Dollar Government Portfolio -- 64,333 shares (cost $684,101).................................. 768,779
Utility Income Portfolio -- 63,379 shares (cost $731,109)............................................ 761,182
Global Bond Portfolio -- 18,287 shares (cost $213,442)............................................... 222,183
Conservative Investors Portfolio -- 70,037 shares (cost $784,447).................................... 823,640
Growth Investors Portfolio -- 70,441 shares (cost $789,256).......................................... 836,132
Growth Portfolio -- 234,593 shares (cost $3,231,310)................................................. 3,338,260
Worldwide Privatization Portfolio -- 82,182 shares (cost $902,581)................................... 917,969
--------------
Total Invested Assets........................................................................ 3,875,205,663
Receivable from American Skandia Life Assurance Corp......................................................... 8,845,314
Receivable from Neuberger & Berman Advisers Management Trust................................................. 147,532,530
Receivable from Alliance Variable Products Series Fund....................................................... 84,492,113
Receivable from Scudder Variable Life Investment Fund........................................................ 43,386,382
--------------
Total Assets................................................................................. $ 4,159,462,002
==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
2
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF DECEMBER 31, 1995
- --------------------------------------------------------------------------------
LIABILITIES
<TABLE>
<S> <C>
Payable to Contractowners (Note 5)............................................................................. $ 776,737
Payable to American Skandia Trust.............................................................................. 260,041,990
Payable to The Alger American Fund............................................................................. 23,438,344
---------------
Total Liabilities.............................................................................. $ 284,257,071
---------------
</TABLE>
NET ASSETS
<TABLE>
<CAPTION>
UNIT
CONTRACTOWNERS' EQUITY UNITS VALUE
- ------------------------------------------------------------------------------------ ---------- ------
<S> <C> <C> <C>
NBAMT - Partners................................................................ 7,958,498 $12.05 $ 95,875,095
AAF - Small Capitalization...................................................... 12,317,364 39.78 489,935,545
AAF - Growth.................................................................... 12,092,291 31.18 376,979,213
AAF - MidCap Growth............................................................. 8,299,743 19.00 157,666,592
AST - Seligman Henderson International Equity................................... 14,393,137 18.23 262,345,168
AST - Seligman Henderson International Small Cap................................ 2,601,283 10.23 26,621,232
AST - Lord Abbett Growth & Income............................................... 18,411,759 15.22 280,274,338
AST - JanCap Growth............................................................. 28,662,737 14.85 425,540,124
AST - Money Market.............................................................. 30,564,442 10.77 329,302,918
AST - Federated Utility Income.................................................. 8,642,186 12.20 105,419,840
AST - Federated High Yield...................................................... 6,915,158 11.27 77,909,526
AST - Phoenix Balanced Asset.................................................... 20,163,848 12.49 251,919,007
AST - T. Rowe Price Asset Allocation............................................ 4,868,956 11.92 58,053,656
AST - T. Rowe Price International Equity........................................ 17,935,251 10.39 186,367,972
AST - T. Rowe Price Natural Resources........................................... 808,605 11.01 8,900,048
AST - Founders Capital Appreciation............................................. 6,076,373 13.97 84,897,630
AST - INVESCO Equity Income..................................................... 13,883,712 12.33 171,205,167
AST - PIMCO Total Return Bond................................................... 19,061,840 11.26 214,657,080
AST - PIMCO Limited Maturity Bond............................................... 15,058,644 10.37 156,197,528
AST - Scudder International Bond................................................ 4,186,695 10.51 43,985,773
AST - Berger Capital Growth..................................................... 3,658,836 12.20 44,630,334
AVP - Short-Term Multi-Market................................................... 27,220 10.11 275,157
AVP - Premier Growth............................................................ 242,960 17.07 4,148,435
AVP - Growth & Income........................................................... 256,492 15.10 3,872,270
AVP - U.S. Government/High Grade Securities..................................... 196,478 11.77 2,312,090
AVP - Total Return.............................................................. 236,194 12.43 2,935,856
AVP - International............................................................. 159,749 13.57 2,167,965
AVP - Money Market.............................................................. 233,258 10.56 2,462,404
AVP - North American Government Income.......................................... 64,465 10.54 679,214
AVP - Global Dollar Government.................................................. 65,026 11.82 768,692
AVP - Utility Income............................................................ 64,410 11.82 761,094
AVP - Global Bond............................................................... 18,122 12.26 222,158
AVP - Conservative Investors.................................................... 70,909 11.61 823,545
AVP - Growth Investors.......................................................... 70,250 11.90 836,036
AVP - Growth.................................................................... 244,481 13.65 3,338,260
AVP - Worldwide Privatization................................................... 83,741 10.96 917,969
--------------
Total Net Assets.................................................... $ 3,875,204,931
==============
</TABLE>
- --------------------------------------------------------------------------------
3
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------
NBAMT
TOTAL GROWTH
-------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends........................................................................... $ 46,122,988 $ 128,840
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)................ (43,442,537) (972,137)
------------- -----------
NET INVESTMENT INCOME (LOSS)............................................................ 2,680,451 (843,297)
------------- -----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales................................................................... 1,945,092,584 96,804,895
Cost of Securities Sold............................................................... 1,779,409,969 83,561,353
------------- -----------
Net Gain (Loss)..................................................................... 165,682,615 13,243,542
Capital Gain Distributions Received................................................... 18,666,547 1,726,459
------------- -----------
NET REALIZED GAIN (LOSS)................................................................ 184,349,162 14,970,001
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period................................................................... (15,588,734) (3,347,126)
End of Period......................................................................... 367,501,352 0
------------- -----------
NET UNREALIZED GAIN (LOSS).............................................................. 383,090,086 3,347,126
------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................... $ 570,119,699 $17,473,830
============= ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
4
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- -----------------------------------------------------------------------------------------------------------
NBAMT
PARTNERS
NBAMT - LIMITED NBAMT (MAY 2* THRU AAF - INCOME AAF - SMALL
MATURITY BOND BALANCED DEC. 31, 1995) & GROWTH CAPITALIZATION AAF - GROWTH
--------------- ----------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,870,005 $ 1,120,253 $ 0 $ 317,267 $ 0 $ 428,668
(1,846,835) (923,613) (108,954) (477,778) (5,364,107) (3,047,035)
------------- ----------- ---------- ----------- ------------ -----------
6,023,170 196,640 (108,954) (160,511) (5,364,107) (2,618,367)
------------- ----------- ---------- ----------- ------------ -----------
187,379,011 75,500,885 16,809 44,996,471 223,476,728 86,281,204
184,158,573 63,871,923 14,688 37,483,781 178,750,614 71,397,776
------------- ----------- ---------- ----------- ------------ -----------
3,220,438 11,628,962 2,121 7,512,690 44,726,114 14,883,428
0 360,081 0 0 0 1,518,710
------------- ----------- ---------- ----------- ------------ -----------
3,220,438 11,989,043 2,121 7,512,690 44,726,114 16,402,138
(2,126,276) (526,315) 0 (2,132,292) (4,831) 752,833
0 0 1,468,758 0 64,763,599 36,230,794
------------- ----------- ---------- ----------- ------------ -----------
2,126,276 526,315 1,468,758 2,132,292 64,768,430 35,477,961
------------- ----------- ---------- ----------- ------------ -----------
$ 11,369,884 $12,711,998 $1,361,925 $ 9,484,471 $104,130,437 $49,261,732
============= =========== ========== =========== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
5
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS (CONT'D)
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------
AAF AAF - MIDCAP
BALANCED GROWTH
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends...................................................................... $ 189,888 $ 9,721
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)........... (158,126) (1,461,227)
---------- -----------
NET INVESTMENT INCOME (LOSS)....................................................... 31,762 (1,451,506)
---------- -----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales.............................................................. 14,354,065 56,980,574
Cost of Securities Sold.......................................................... 12,015,109 41,258,899
---------- -----------
Net Gain (Loss)................................................................ 2,338,956 15,721,675
Capital Gain Distributions Received.............................................. 0 0
---------- -----------
NET REALIZED GAIN (LOSS)........................................................... 2,338,956 15,721,675
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period.............................................................. (151,154) 1,272,715
End of Period.................................................................... 0 12,587,758
---------- -----------
NET UNREALIZED GAIN (LOSS)......................................................... 151,154 11,315,043
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................... $ 2,521,872 $25,585,212
========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ---------------------------------------------------------------------------------------------
AST - SELIGMAN
AST - SELIGMAN HENDERSON INTL.
HENDERSON SMALL CAP AST - LORD
INTERNATIONAL (MAY 1* THRU ABBETT GROWTH AST - JANCAP AST - MONEY
EQUITY DEC. 31, 1995) & INCOME GROWTH MARKET
--------------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 0 $ 0 $ 1,657,847 $ 1,353,851 $17,436,063
(3,574,633) (103,431) (1,988,406) (4,808,745) (4,703,313)
----------- --------- ----------- ----------- -----------
(3,574,633) (103,431) (330,559) (3,454,894) 12,732,750
----------- --------- ----------- ----------- -----------
97,730,012 555,565 5,451,838 46,929,431 593,444,290
99,570,937 545,997 3,975,930 38,189,700 593,444,290
----------- --------- ----------- ----------- -----------
(1,840,925) 9,568 1,475,908 8,739,731 0
12,552,955 0 1,656,966 0 0
----------- --------- ----------- ----------- -----------
10,712,030 9,568 3,132,874 8,739,731 0
(1,373,923) 0 3,616,951 (1,818,595) 0
12,135,123 90,547 31,970,772 85,823,919 0
----------- --------- ----------- ----------- -----------
13,509,046 90,547 28,353,821 87,642,514 0
----------- --------- ----------- ----------- -----------
$20,646,443 $ (3,316) $31,156,136 $92,927,351 $12,732,750
=========== ========= =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
7
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS (CONT'D)
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-----------------------------------------
AST - FEDERATED AST - FEDERATED
UTILITY INCOME HIGH YIELD
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends...................................................................... $ 3,329,756 $ 1,151,380
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)........... (1,267,374) (624,969)
----------- ----------
NET INVESTMENT INCOME (LOSS)....................................................... 2,062,382 526,411
----------- ----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales.............................................................. 25,840,566 19,362,068
Cost of Securities Sold.......................................................... 26,368,662 18,260,851
----------- ----------
Net Gain (Loss)................................................................ (528,096) 1,101,217
Capital Gain Distributions Received.............................................. 0 0
----------- ----------
NET REALIZED GAIN (LOSS)........................................................... (528,096) 1,101,217
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period.............................................................. (4,420,441) (122,643)
End of Period.................................................................... 13,014,530 4,761,345
----------- ----------
NET UNREALIZED GAIN (LOSS)......................................................... 17,434,971 4,883,988
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................... $18,969,257 $ 6,511,616
=========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ---------------------------------------------------------------------------------------------------
AST - T. ROWE
PRICE NATURAL
AST - T. ROWE AST - T. ROWE RESOURCES
AST - PHOENIX AST - PHOENIX PRICE ASSET PRICE INTERNATIONAL (MAY 1* THRU
BALANCED ASSET CAPITAL GROWTH ALLOCATION EQUITY DEC. 31,1995)
-------------- -------------- ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
$ 3,837,709 $ 114,096 $ 513,045 $ 118,043 $ 0
(2,304,796) (277,758) (524,866) (1,999,016) (32,224)
------------ ------------ ----------- ----------- ---------
1,532,913 (163,662) (11,821) (1,880,973) (32,224)
------------ ------------ ----------- ----------- ---------
15,559,398 26,338,238 2,153,350 24,433,812 843,892
14,270,634 21,513,203 2,071,289 24,264,691 819,107
------------ ------------ ----------- ----------- ---------
1,288,764 4,825,035 82,061 169,121 24,785
0 0 0 243,203 0
------------ ------------ ----------- ----------- ---------
1,288,764 4,825,035 82,061 412,324 24,785
1,048,462 (385,057) 61,399 (2,989,688) 0
28,408,798 0 6,503,700 11,523,057 410,283
------------ ------------ ----------- ----------- ---------
27,360,336 385,057 6,442,301 14,512,745 410,283
------------ ------------ ----------- ----------- ---------
$ 30,182,013 $ 5,046,430 $ 6,512,541 $13,044,096 $ 402,844
============ ============ =========== =========== =========
</TABLE>
- --------------------------------------------------------------------------------
9
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS (CONT'D)
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------
AST - FOUNDERS
CAPITAL AST - INVESCO
APPRECIATION EQUITY INCOME
-------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends................................................................ $ 269,670 $ 1,036,385
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)..... (746,747) (1,556,324)
----------- -----------
NET INVESTMENT INCOME (LOSS)................................................. (477,077) (519,939)
----------- -----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales........................................................ 4,789,770 8,819,781
Cost of Securities Sold.................................................... 3,804,447 7,648,084
----------- -----------
Net Gain (Loss).......................................................... 985,323 1,171,697
Capital Gain Distributions Received........................................ 0 0
----------- -----------
NET REALIZED GAIN (LOSS)..................................................... 985,323 1,171,697
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period........................................................ 1,868,641 (891,893)
End of Period.............................................................. 13,278,444 24,373,614
----------- -----------
NET UNREALIZED GAIN (LOSS)................................................... 11,409,803 25,265,507
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 11,918,049 $25,917,265
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- -----------------------------------------------------------------------------------------------------------
AST - PIMCO
AST - PIMCO LIMITED MATURITY
TOTAL BOND AST - SCUDDER
RETURN MAY 1* THRU INTERNATIONAL AST - EAGLE AST - BERGER AVP - ST
BOND DEC. 31, 1995) BOND GROWTH EQUITY CAPITAL GROWTH MULTI-MKT
----------- ---------------- ------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
$1,209,016 $ 0 $ 258,689 $ 10,277 $ 3,085 $ 0
(1,373,085) (196,743) (389,161) (82,250) (296,102) (190,048)
----------- ---------- ---------- ----------- ---------- -----------
(164,069) (196,743) (130,472) (71,973) (293,017) (190,048)
----------- ---------- ---------- ----------- ---------- -----------
35,874,313 2,464,086 2,659,942 10,011,246 3,814,017 20,714,250
32,426,533 2,389,194 2,644,496 8,811,830 3,370,323 21,802,895
----------- ---------- ---------- ----------- ---------- -----------
3,447,780 74,892 15,446 1,199,416 443,694 (1,088,645)
0 0 0 0 0 0
----------- ---------- ---------- ----------- ---------- -----------
3,447,780 74,892 15,446 1,199,416 443,694 (1,088,645)
(251,292) 0 (240,434) (50,341) 30,142 (1,772,660)
11,293,295 1,221,437 2,412,817 0 4,238,032 5,043
----------- ---------- ---------- ----------- ---------- -----------
11,544,587 1,221,437 2,653,251 50,341 4,207,890 1,777,703
----------- ---------- ---------- ----------- ---------- -----------
$14,828,298 $1,099,586 $ 2,538,225 $ 1,177,784 $4,358,567 $ 499,010
=========== ========== ========== =========== ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
11
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS (CONT'D)
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------
AVP - PREMIER AVP - GROWTH
GROWTH & INCOME
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends....................................................................... $ 84,207 $ 355,890
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)............ (670,405) (538,256)
----------- -----------
NET INVESTMENT INCOME (LOSS)........................................................ (586,198) (182,366)
----------- -----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales............................................................... 67,672,027 44,126,083
Cost of Securities Sold........................................................... 50,476,857 33,765,695
----------- -----------
Net Gain (Loss)................................................................. 17,195,170 10,360,388
Capital Gain Distributions Received............................................... 236,427 369,371
----------- -----------
NET REALIZED GAIN (LOSS)............................................................ 17,431,597 10,729,759
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period............................................................... 160,860 138,583
End of Period..................................................................... (714) 245,034
----------- -----------
NET UNREALIZED GAIN (LOSS).......................................................... (161,574) 106,451
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................... $16,683,825 $10,653,844
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
12
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ---------------------------------------------------------------------------------------------------------
AVP - U.S. GOV'T/ AVP - NORTH AVP - GLOBAL
HIGH GRADE AVP - TOTAL AVP AVP - MONEY AMERICAN DOLLAR
SECURITIES RETURN INTERNATIONAL MARKET GOV'T INCOME GOV'T INCOME
----------------- ----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 13,275 $ 1,685 $ 1,911 $ 39,444 $ 7,097 $ 5,552
(16,867) (10,334) (14,798) (11,497) (5,142) (7,509)
-------- -------- -------- --------- -------- --------
(3,592) (8,649) (12,887) 27,947 1,955 (1,957)
-------- -------- -------- --------- -------- --------
622,623 18,289 270,873 1,483,317 631,965 198,106
598,438 16,836 231,612 1,483,317 623,081 184,232
-------- -------- -------- --------- -------- --------
24,185 1,453 39,261 0 8,884 13,874
0 0 2,375 0 0 0
-------- -------- -------- --------- -------- --------
24,185 1,453 41,636 0 8,884 13,874
(28,921) (6,986) 16,417 0 (14,058) (11,116)
129,502 138,643 94,892 0 46,431 84,678
-------- -------- -------- --------- -------- --------
158,423 145,629 78,475 0 60,489 95,794
-------- -------- -------- --------- -------- --------
$ 179,016 $ 138,433 $ 107,224 $ 27,947 $ 71,328 $107,711
======== ======== ======== ========= ======== ========
</TABLE>
- --------------------------------------------------------------------------------
13
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENT OF OPERATIONS (CONCLUDED)
FOR THE PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------
AVP - GLOBAL
BOND
AVP - UTILITY (APR. 18* THRU
INCOME DEC. 31, 1995)
------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends....................................................................... $ 844 $ 355
Expenses
Mortality and Expense Risks Charges and Administrative Fees (Note 4)............ (2,694) (990)
------- -------
NET INVESTMENT INCOME (LOSS)........................................................ (1,850) (635)
------- -------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales............................................................... 26,551 58,944
Cost of Securities Sold........................................................... 22,837 56,154
------- -------
Net Gain (Loss)................................................................. 3,714 2,790
Capital Gain Distributions Received............................................... 0 0
------- -------
NET REALIZED GAIN (LOSS)............................................................ 3,714 2,790
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period............................................................... (299) 0
End of Period..................................................................... 30,073 8,741
------- -------
NET UNREALIZED GAIN (LOSS).......................................................... 30,372 8,741
------- -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................... $32,236 $ 10,896
======= =======
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- --------------------------------------------------------------------------------------------
AVP
CONSERVATIVE AVP - GROWTH AVP AVP - WORLDWIDE
INVESTORS INVESTORS GROWTH PRIVATIZATION
(MAY, 29* THRU (MAY, 23* THRU (FEB. 11* THRU (APR. 3* THRU
DEC. 31, 1995) DEC. 31, 1995) DEC. 31, 1995) DEC. 31, 1995) SVL - BOND
-------------- -------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
$ 140 $ 69 $ 123 $ 808 $3,248,034
(3,457) (3,795) (10,753) (4,692) (741,545)
------- ------- -------- ------- ----------
(3,317) (3,726) (10,630) (3,884) 2,506,489
------- ------- -------- ------- ----------
16,694 10,477 127,135 17,727 96,231,266
16,241 9,851 109,674 16,531 93,092,804
------- ------- -------- ------- ----------
453 626 17,461 1,196 3,138,462
0 0 0 0 0
------- ------- -------- ------- ----------
453 626 17,461 1,196 3,138,462
0 0 0 0 (1,889,396)
39,193 46,876 106,950 15,388 0
------- ------- -------- ------- ----------
39,193 46,876 106,950 15,388 1,889,396
------- ------- -------- ------- ----------
$ 36,329 $ 43,776 $113,781 $12,700 $7,534,347
======= ======= ======== ======= ==========
</TABLE>
- --------------------------------------------------------------------------------
15
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------
NBAMT
TOTAL LIQUID ASSET
----------------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)................... $ 2,680,451 $ (2,304,906) $ 0 $ 43
Net Realized Gain (Loss)....................... 184,349,162 56,558,361 0 0
Net Unrealized Gain (Loss) On Investments...... 383,090,086 (101,980,777) 0 0
-------------- -------------- -- --------
Net Increase (Decrease) In Net Assets Resulting
From Operations.............................. 570,119,699 (47,727,322) 0 43
-------------- -------------- -- --------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits............. 1,266,602,756 1,136,301,461 0 (18,000)
Net Transfers Between Sub-accounts............. 1,911,277 891,130 0 18,533
Surrenders..................................... (226,498,569) (116,753,024) 0 (576)
-------------- -------------- -- --------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions.............. 1,042,015,464 1,020,439,567 0 (43)
-------------- -------------- -- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS............ 1,612,135,163 972,712,245 0 0
NET ASSETS:
Beginning of Period............................ 2,263,069,768 1,290,357,523 0 0
-------------- -------------- -- --------
End of Period.................................. $3,875,204,931 $2,263,069,768 $ 0 $ 0
============== ============== == ========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
16
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- -----------------------------------------------------------------------------------------------------------------------------
NBAMT NBAMT NBAMT NBAMT
GROWTH LIMITED MATURITY BOND BALANCED PARTNERS
------------------------------- ------------------------------- ------------------------------- -----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 2* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (843,297) $ (423,242) $ 6,023,170 $ 3,517,651 $ 196,640 $ 5,270 $ (108,954)
14,970,001 2,596,283 3,220,438 (834,778) 11,989,043 1,676,917 2,121
3,347,126 (5,585,664) 2,126,276 (5,190,015) 526,315 (4,487,304) 1,468,758
------------ ----------- ------------- ------------ ------------ ----------- -----------
17,473,830 (3,412,623) 11,369,884 (2,507,142) 12,711,998 (2,805,117) 1,361,925
------------ ----------- ------------- ------------ ------------ ----------- -----------
8,373,298 13,584,312 20,053,844 86,631,572 4,424,442 13,564,002 13,540,471
(66,839,025) (4,839,790) (168,830,787) (73,112,599) (72,086,096) (4,728,960) 81,177,931
(4,487,389) (2,249,171) (10,634,962) (12,305,221) (4,025,298) (3,741,693) (205,232)
------------ ----------- ------------- ------------ ------------ ----------- -----------
(62,953,116) 6,495,351 (159,411,905) 1,213,752 (71,686,952) 5,093,349 94,513,170
------------ ----------- ------------- ------------ ------------ ----------- -----------
(45,479,286) 3,082,728 (148,042,021) (1,293,390) (58,974,954) 2,288,232 95,875,095
45,479,286 42,396,558 148,042,021 149,335,411 58,974,954 56,686,722 0
------------ ----------- ------------- ------------ ----------- ----------- -----------
$ 0 $45,479,286 $ 0 $148,042,021 $ 0 $58,974,954 $95,875,095
============ =========== ============= ============ ============ =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
17
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------
AAF AAF
MONEY MARKET INCOME & GROWTH
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)............................... $ 0 $ 0 $ (160,511) $ (129,539)
Net Realized Gain (Loss)................................... 0 0 7,512,690 728,190
Net Unrealized Gain (Loss) On Investments.................. 0 0 2,132,292 (3,804,217)
------- ------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations............................................... 0 0 9,484,471 (3,205,566)
------- ------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits......................... 0 0 2,395,584 6,717,881
Net Transfers Between Sub-accounts......................... 0 6 (36,041,302) (5,864,504)
Surrenders................................................. 0 (6) (2,306,979) (1,408,813)
------- ------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions............................... 0 0 (35,952,697) (555,436)
------- ------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 0 0 (26,468,226) (3,761,002)
NET ASSETS:
Beginning of Period........................................ 0 0 26,468,226 30,229,228
------- ------- ------------ -----------
End of Period.............................................. $ 0 $ 0 $ 0 $26,468,226
======= ======= ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
18
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- --------------------------------------------------------------------------------------------------------------------------
AAF AAF AAF AAF - MIDCAP
SMALL CAPITALIZATION GROWTH BALANCED GROWTH
------------------------------ ------------------------------ ------------------------------ -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (5,364,107) $ (2,975,134) $ (2,618,367) $ (1,233,213) $ 31,762 $ (24,468) $ (1,451,506)
44,726,114 23,713,018 16,402,138 10,000,487 2,338,956 217,335 15,721,675
64,768,430 (30,043,148) 35,477,961 (8,447,531) 151,154 (681,436) 11,315,043
------------ ------------ ------------ ------------ ------------ ---------- ------------
104,130,437 (9,305,264) 49,261,732 319,743 2,521,872 (488,569) 25,585,212
------------ ------------ ------------ ------------ ------------ ---------- ------------
91,163,620 56,318,695 84,767,383 38,904,547 1,245,151 3,376,270 46,811,319
53,259,614 11,288,463 124,403,420 25,731,026 (12,198,567) (423,424) 33,476,913
(20,174,473) (7,290,412) (11,629,945) (4,253,228) (786,282) (669,880) (5,669,035)
------------ ------------ ------------ ------------ ------------ ---------- ------------
124,248,761 60,316,746 197,540,858 60,382,345 (11,739,698) 2,282,966 74,619,197
------------ ------------ ------------ ------------ ------------ ---------- ------------
228,379,198 51,011,482 246,802,590 60,702,088 (9,217,826) 1,794,397 100,204,409
261,556,347 210,544,865 130,176,623 69,474,535 9,217,826 7,423,429 57,462,183
------------ ------------ ------------ ------------ ------------ ---------- ------------
$489,935,545 $261,556,347 $376,979,213 $130,176,623 $ 0 $ 9,217,826 $157,666,592
============ ============ ============ ============ ============ ========== ============
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------
AAF - MIDCAP
GROWTH
---------------
YEAR ENDED
DEC. 31, 1994
---------------
<S> <C>
$ (536,764)
745,455
(321,790)
-----------
(113,099)
-----------
21,760,961
17,658,989
(1,777,070)
-----------
37,642,880
-----------
37,529,781
19,932,402
-----------
$57,462,183
===========
</TABLE>
- --------------------------------------------------------------------------------
19
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
------------------------------------------------------------------------------------
AST - SELIGMAN AST - SELIGMAN AST
HENDERSON HENDERSON LORD ABBETT
INTERNATIONAL EQUITY INTL. SMALL CAP GROWTH & INCOME
----------------------------- ---------------- -----------------------------
YEAR ENDED YEAR ENDED MAY 1* THRU YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........... $ (3,574,633) $ (2,748,650) $ (103,431) $ (330,559) $ (440,246)
Net Realized Gain (Loss)............... 10,712,030 17,640,678 9,568 3,132,874 1,138,699
Net Unrealized Gain (Loss) On
Investments.......................... 13,509,046 (17,148,069) 90,547 28,353,821 (91,936)
------------ ----------- ------------ ------------ -----------
Net Increase (Decrease) In Net Assets
Resulting From Operations............ 20,646,443 (2,256,041) (3,316) 31,156,136 606,517
------------ ----------- ------------ ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits..... 45,096,265 87,148,737 12,245,099 56,242,569 34,884,203
Net Transfers Between Sub-accounts..... (24,213,795) 10,704,208 14,656,915 112,141,060 9,678,044
Surrenders............................. (15,178,799) (10,097,051) (277,466) (8,837,542) (3,815,649)
------------ ----------- ------------ ------------ -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share
Transactions......................... 5,703,671 87,755,894 26,624,548 159,546,087 40,746,598
------------ ----------- ------------ ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... 26,350,114 85,499,853 26,621,232 190,702,223 41,353,115
NET ASSETS:
Beginning of Period.................... 235,995,054 150,495,201 0 89,572,115 48,219,000
------------ ----------- ------------ ------------ -----------
End of Period.......................... $262,345,168 $235,995,054 $ 26,621,232 $280,274,338 $89,572,115
============ =========== ============ ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------------------------------------
AST -
AST AST AST - FEDERATED FEDERATED
JANCAP GROWTH MONEY MARKET UTILITY INCOME HIGH YIELD
------------------------------ ------------------------------ ------------------------------ -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (3,454,894) $ (2,491,101) $ 12,732,750 $ 5,946,221 $ 2,062,382 $ (73,541) $ 526,411
8,739,731 1,587,144 0 19,022 (528,096) (192,841) 1,101,217
87,642,514 (11,094,994) 0 0 17,434,971 (5,216,614) 4,883,988
------------ ----------- ------------ ------------ ------------ ------------ -----------
92,927,351 (11,998,951) 12,732,750 5,965,243 18,969,257 (5,482,996) 6,511,616
------------ ----------- ------------ ------------ ------------ ------------ -----------
88,067,295 89,693,814 369,971,905 320,036,373 16,083,128 28,831,445 31,799,099
15,929,654 16,413,857 (269,382,453) (120,635,658) 6,339,985 (6,473,719) 21,528,708
(15,318,172) (7,841,867) (68,678,873) (36,308,163) (6,365,421) (4,108,447) (2,061,195)
------------ ----------- ------------ ------------ ------------ ------------ -----------
88,678,777 98,265,804 31,910,579 163,092,552 16,057,692 18,249,279 51,266,612
------------ ----------- ------------ ------------ ------------ ------------ -----------
181,606,128 86,266,853 44,643,329 169,057,795 35,026,949 12,766,283 57,778,228
243,933,996 157,667,143 284,659,589 115,601,794 70,392,891 57,626,608 20,131,298
------------ ----------- ------------ ------------ ------------ ------------ -----------
$425,540,124 $243,933,996 $ 329,302,918 $ 284,659,589 $105,419,840 $70,392,891 $77,909,526
============ =========== ============ ============ ============ ============ ===========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------
AST -
FEDERATED
HIGH YIELD
-------------
JAN 4* THRU
DEC. 31, 1994
-------------
<S> <C>
$ (182,878)
(198,100)
(122,643)
-----------
(503,621)
-----------
11,382,228
10,453,765
(1,201,074)
-----------
20,634,919
-----------
20,131,298
0
-----------
$20,131,298
===========
</TABLE>
- --------------------------------------------------------------------------------
21
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------------------
AST - PHOENIX AST - PHOENIX
BALANCED ASSET CAPITAL GROWTH
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED JAN. 4* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 1,532,913 $ (1,086,844) $ (163,662) $ (110,386)
Net Realized Gain (Loss)............................ 1,288,764 507,844 4,825,035 (63,342)
Net Unrealized Gain (Loss) On Investments........... 27,360,336 (907,982) 385,057 (385,057)
------------ ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 30,182,013 (1,486,982) 5,046,430 (558,785)
------------ ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 24,218,451 60,895,715 4,086,095 10,939,730
Net Transfers Between Sub-accounts.................. 67,053,988 (843,326) (22,578,278) 4,540,747
Surrenders.......................................... (14,088,834) (5,573,851) (1,178,893) (297,046)
------------ ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions................... 77,183,605 54,478,538 (19,671,076) 15,183,431
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 107,365,618 52,991,556 (14,624,646) 14,624,646
NET ASSETS:
Beginning of Period................................. 144,553,389 91,561,833 14,624,646 0
------------ ----------- ----------- -----------
End of Period....................................... $251,919,007 $144,553,389 $ 0 $14,624,646
============ =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
22
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------------------------------------------------------
AST - T. ROWE
AST - T. ROWE PRICE AST - T. ROWE PRICE PRICE NATURAL AST - FOUNDERS CAPITAL
ASSET ALLOCATION INTERNATIONAL EQUITY RESOURCES APPRECIATION
------------------------------- ------------------------------- ------------- -------------------------------
YEAR ENDED JAN. 3* THRU YEAR ENDED JAN. 3* THRU MAY 1* THRU YEAR ENDED JAN. 5* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (11,821) $ (182,803) $ (1,880,973) $ (841,016) $ (32,224) $ (477,077) $ (153,802)
82,061 (14,957) 412,324 (206,344) 24,785 985,323 66,235
6,442,301 61,399 14,512,745 (2,989,688) 410,283 11,409,803 1,868,641
------------ ------------ ------------ ----------- ----------- ----------- -----------
6,512,541 (136,361) 13,044,096 (4,037,048) 402,844 11,918,049 1,781,074
------------ ------------ ------------ ----------- ----------- ----------- -----------
19,704,164 17,100,763 53,649,285 65,204,510 3,205,819 29,337,377 14,103,413
10,966,060 6,612,892 18,923,032 46,877,402 5,391,744 17,878,947 11,996,947
(1,870,265) (836,138) (5,180,566) (2,112,739) (100,359) (1,763,301) (354,876)
------------ ------------ ------------ ----------- ----------- ----------- -----------
28,799,959 22,877,517 67,391,751 109,969,173 8,497,204 45,453,023 25,745,484
------------ ------------ ------------ ----------- ----------- ----------- -----------
35,312,500 22,741,156 80,435,847 105,932,125 8,900,048 57,371,072 27,526,558
22,741,156 0 105,932,125 0 0 27,526,558 0
------------ ------------ ------------ ----------- ----------- ----------- -----------
$58,053,656 $22,741,156 $186,367,972 $105,932,125 $ 8,900,048 $84,897,630 $27,526,558
============ ============ ============ =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
23
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------------
AST - INVESCO AST - PIMCO
EQUITY INCOME TOTAL RETURN BOND
------------------------------- -------------------------------
YEAR ENDED JAN. 3* THRU YEAR ENDED JAN. 3* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss).................... $ (519,939) $ (428,257) $ (164,069) $ (299,678)
Net Realized Gain (Loss)........................ 1,171,697 (1,642) 3,447,780 (39,295)
Net Unrealized Gain (Loss) On Investments....... 25,265,507 (891,893) 11,544,587 (251,292)
------------ ----------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting
From Operations............................... 25,917,265 (1,321,792) 14,828,298 (590,265)
------------ ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.............. 52,541,497 48,411,425 72,691,543 32,923,290
Net Transfers Between Sub-accounts.............. 33,377,835 18,185,796 87,302,875 13,167,453
Surrenders...................................... (4,408,157) (1,498,702) (4,178,333) (1,487,781)
------------ ----------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions............... 81,511,175 65,098,519 155,816,085 44,602,962
------------ ----------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............. 107,428,440 63,776,727 170,644,383 44,012,697
NET ASSETS:
Beginning of Period............................. 63,776,727 0 44,012,697 0
------------ ----------- ------------ -----------
End of Period................................... $171,205,167 $63,776,727 $214,657,080 $44,012,697
============ =========== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------------------------------------------
AST - PIMCO
LIMITED MATURITY AST - SCUDDER AST - EAGLE AST - BERGER
BOND INTERNATIONAL BOND GROWTH EQUITY CAPITAL GROWTH
--------------- ------------------------------- ------------------------------- -------------------------------
MAY 1* THRU YEAR ENDED MAY 2* THRU YEAR ENDED MAY 3* THRU YEAR ENDED OCT. 19* THRU
DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
---------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (196,743) $ (130,472) $ (85,300) $ (71,973) $ (18,282) $ (293,017) $ (3,225)
74,892 15,446 (14,892) 1,199,416 (3,648) 443,694 (1,238)
1,221,437 2,653,251 (240,434) 50,341 (50,341) 4,207,890 30,142
------------ ----------- ----------- ----------- ----------- ----------- -----------
1,099,586 2,538,225 (340,626) 1,177,784 (72,271) 4,358,567 25,679
------------ ----------- ----------- ----------- ----------- ----------- -----------
28,824,536 16,066,780 6,840,456 1,385,295 2,083,418 24,892,130 1,213,330
127,366,630 11,730,170 8,878,060 (5,725,108) 1,482,143 12,962,168 1,759,059
(1,093,224) (1,332,313) (394,979) (301,065) (30,196) (577,822) (2,777)
------------ ----------- ----------- ----------- ----------- ----------- -----------
155,097,942 26,464,637 15,323,537 (4,640,878) 3,535,365 37,276,476 2,969,612
------------ ----------- ----------- ----------- ----------- ----------- -----------
156,197,528 29,002,862 14,982,911 (3,463,094) 3,463,094 41,635,043 2,995,291
0 14,982,911 0 3,463,094 0 2,995,291 0
------------ ----------- ----------- ----------- ----------- ----------- -----------
$156,197,528 $43,985,773 $14,982,911 $ 0 $ 3,463,094 $44,630,334 $ 2,995,291
============ =========== =========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
25
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
AVP AVP
ST MULTI-MKT PREMIER GROWTH
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)............................ $ (190,048) $ 603,557 $ (586,198) $ (277,768)
Net Realized Gain (Loss)................................ (1,088,645) (295,311) 17,431,597 328,106
Net Unrealized Gain (Loss) On Investments............... 1,777,703 (1,931,642) (161,574) (1,025,385)
------------ ----------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations............................................ 499,010 (1,623,396) 16,683,825 (975,047)
------------ ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits...................... 2,647,063 12,466,700 10,108,774 15,122,332
Net Transfers Between Sub-accounts...................... (18,752,062) (12,047,999) (50,998,389) 7,312,981
Surrenders.............................................. (1,783,708) (1,584,844) (5,148,313) (981,711)
------------ ----------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions............................ (17,888,707) (1,166,143) (46,037,928) 21,453,602
------------ ----------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (17,389,697) (2,789,539) (29,354,103) 20,478,555
NET ASSETS:
Beginning of Period..................................... 17,664,854 20,454,393 33,502,538 13,023,983
------------ ----------- ------------ -----------
End of Period........................................... $ 275,157 $ 17,664,854 $ 4,148,435 $33,502,538
============ =========== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- -----------------------------------------------------------------------------------------------------------------------
AVP
AVP U.S. GOV'T/ AVP AVP
GROWTH & INCOME HIGH GRADE SECURITIES TOTAL RETURN INTERNATIONAL
----------------------------- ----------------------------- ----------------------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (182,366) $ 206,111 $ (3,592) $ 14,309 $ (8,649) $ 1,012 $ (12,887)
10,729,759 442,931 24,185 (1,423) 1,453 4,982 41,636
106,451 (1,194,217) 158,423 (54,167) 145,629 (23,507) 78,475
------------ ----------- ----------- --------- ----------- --------- -----------
10,653,844 (545,175) 179,016 (41,281) 138,433 (17,513) 107,224
------------ ----------- ----------- --------- ----------- --------- -----------
6,610,412 12,983,481 2,219,428 96,937 2,428,200 58,897 1,519,067
(40,950,663) 65,363 (445,353) (377,349) 167,151 (181,111) (164,092)
(2,353,444) (1,325,144) (179,310) (3,428) (8,142) (9,962) (34,528)
------------ ----------- ----------- --------- ----------- --------- -----------
(36,693,695) 11,723,700 1,594,765 (283,840) 2,587,209 (132,176) 1,320,447
------------ ----------- ----------- --------- ----------- --------- -----------
(26,039,851) 11,178,525 1,773,781 (325,121) 2,725,642 (149,689) 1,427,671
29,912,121 18,733,596 538,309 863,430 210,214 359,903 740,294
------------ ----------- ----------- --------- ----------- --------- -----------
$ 3,872,270 $29,912,121 $ 2,312,090 $ 538,309 $ 2,935,856 $ 210,214 $ 2,167,965
============ =========== =========== ========= =========== ========= ===========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------
AVP
INTERNATIONAL
-------------
YEAR ENDED
DEC. 31, 1994
-------------
<S> <C>
$ (4,528)
4,971
(7,326)
---------
(6,883)
---------
80,370
463,342
(23,253)
---------
520,459
---------
513,576
226,718
---------
$ 740,294
=========
</TABLE>
- --------------------------------------------------------------------------------
27
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------
AVP AVP-NORTH AMERICAN
MONEY MARKET GOV'T INCOME
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED JUL. 6* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................... $ 27,947 $ 1,531 $ 1,955 $ (2,351)
Net Realized Gain (Loss)............................... 0 0 8,884 (37,128)
Net Unrealized Gain (Loss) On Investments.............. 0 0 60,489 (14,058)
----------- --------- --------- ---------
Net Increase (Decrease) In Net Assets Resulting
From Operations...................................... 27,947 1,531 71,328 (53,537)
----------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits..................... 3,645,001 101,867 571,089 138,821
Net Transfers Between Sub-accounts..................... (1,341,382) 310,357 172,862 24,856
Surrenders............................................. (218,733) (64,184) (236,568) (9,637)
----------- --------- --------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions........................... 2,084,886 348,040 507,383 154,040
----------- --------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................... 2,112,833 349,571 578,711 100,503
NET ASSETS:
Beginning of Period.................................... 349,571 0 100,503 0
----------- --------- --------- ---------
End of Period.......................................... $ 2,462,404 $ 349,571 $ 679,214 $ 100,503
=========== ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
28
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ---------------------------------------------------------------------------------------------------------------------------
AVP
AVP - GLOBAL DOLLAR AVP - UTILITY AVP - GLOBAL CONSERVATIVE AVP - GROWTH
GOV'T INCOME INCOME BOND INVESTORS INVESTORS
------------------------------- ------------------------------- ------------ ------------- -------------
YEAR ENDED JUL. 6* THRU YEAR ENDED AUG. 29* THRU APR. 18* THRU MAY 29* THRU MAY 23* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (1,957) $ (2,425) $ (1,850) $ (42) $ (635) $ (3,317) $ (3,726)
13,874 126 3,714 0 2,790 453 626
95,794 (11,116) 30,372 (299) 8,741 39,193 46,876
--------- --------- --------- ------- --------- -------- --------
107,711 (13,415) 32,236 (341) 10,896 36,329 43,776
--------- --------- --------- ------- --------- -------- --------
431,237 129,166 729,387 13,739 253,264 794,514 793,019
(160,893) 305,882 (10,329) 5,970 (41,055) (5,538) 2,960
(21,497) (9,499) (9,568) 0 (947) (1,760) (3,719)
--------- --------- --------- ------- --------- -------- --------
248,847 425,549 709,490 19,709 211,262 787,216 792,260
--------- --------- --------- ------- --------- -------- --------
356,558 412,134 741,726 19,368 222,158 823,545 836,036
412,134 0 19,368 0 0 0 0
--------- --------- --------- ------- --------- -------- --------
$ 768,692 $ 412,134 $ 761,094 $19,368 $ 222,158 $823,545 $836,036
========= ========= ========= ======= ========= ======== ========
</TABLE>
- --------------------------------------------------------------------------------
29
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------
AVP AVP - WORLDWIDE SVL
GROWTH PRIVATIZATION BOND
------------ --------------- -----------------------------
FEB. 11* THRU APR. 3* THRU YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994
------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)................................ $ (10,630) $ (3,884) $ 2,506,489 $ 2,154,872
Net Realized Gain (Loss).................................... 17,461 1,196 3,138,462 (2,955,123)
Net Unrealized Gain (Loss) On Investments................... 106,950 15,388 1,889,396 (1,727,194)
------------ --------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations................................................ 113,781 12,700 7,534,347 (2,527,445)
------------ --------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.......................... 2,566,865 672,906 7,729,086 22,576,061
Net Transfers Between Sub-accounts.......................... 674,694 236,237 (64,445,109) 6,483,428
Surrenders.................................................. (17,080) (3,874) (3,767,183) (3,083,956)
------------ --------- ------------ -----------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions................................ 3,224,479 905,269 (60,483,206) 25,975,533
------------ --------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 3,338,260 917,969 (52,948,859) 23,448,088
NET ASSETS:
Beginning of Period......................................... 0 0 52,948,859 29,500,771
------------ --------- ------------ -----------
End of Period............................................... $ 3,338,260 $ 917,969 $ 0 $52,948,859
============== ============== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
*Date Operations Commenced.
30
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
NOTES TO
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
American Skandia Life Assurance Corporation Variable Account B -- Class 1 (the
"Account") is a separate investment account of American Skandia Life Assurance
Corporation ("American Skandia"). The Account is registered with the SEC under
the Investment Company Act of 1940 as a unit investment trust. The Account
commenced operations September 20, 1988.
As of December 31, 1995 the Account consisted of forty sub-accounts. These
financial statements report on thirty-six sub-accounts offered in the LifeVest
Personal Security Annuity, the American Skandia Advisors Plan Annuity, the
American Skandia Advisors Plan II Annuity, the Imperium Annuity and The Alliance
Capital Navigator Annuity. Each of the thirty-six sub-accounts invests only in a
single corresponding portfolio of either the Neuberger and Berman Advisers
Management Trust, The Alger American Fund, the American Skandia Trust, or the
Alliance Variable Products Series Fund, Inc. (the "Trusts"). Neuberger and
Berman Management, Inc. is the advisor for the Neuberger and Berman Advisers
Management Trust. Fred Alger Management, Inc. is the advisor for The Alger
American Fund. American Skandia Investment Services, Incorporated is the
investment manager for American Skandia Trust, while Seligman Henderson Co.,
Lord Abbett & Co., Janus Capital Corporation, J. P. Morgan Investment Management
Incorporated, Federated Investment Counseling, Phoenix Investment Counsel, Inc.,
T. Rowe Price Associates, Inc., Rowe Price-Fleming International, Inc., Founders
Asset Management, Inc., INVESCO Trust Company, Pacific Investment Management
Company, Scudder, Stevens & Clark, Inc. and Berger Associates, Inc. are the sub-
advisors. Alliance Capital Management L.P. is the advisor for the Alliance
Variable Products Series Fund, Inc. The investment advisors are paid fees for
their services by the respective Trusts.
The following nine sub-accounts have commenced operations during 1995: the
NBAMT-Partners on May 2, 1995; the AST-Seligman Henderson International Small
Cap on May 1, 1995; the AST-T. Rowe Price Natural Resources on May 1, 1995; the
AST-PIMCO Limited Maturity Bond on May 1, 1995; the AVP-Global Bond on April 18,
1995; the AVP-Conservative Investors on May 29, 1995; the AVP-Growth Investors
on May 23, 1995; the AVP-Growth on February 11, 1995 and the AVP-Worldwide
Privatization on April 3, 1995.
Effective May 1, 1995 the AST-Seligman Henderson International Equity
sub-account changed its name from Henderson International Growth.
The following eight sub-accounts ceased operations on December 29, 1995: the
NBAMT-Growth; the NBAMT-Limited Maturity Bond; the NBAMT-Balanced; the
AAF-Income & Growth; the AAF-Balanced; the AST-Phoenix Capital Growth; the
AST-Eagle Growth Equity and the SVL-Bond.
2. VALUATION OF INVESTMENTS
The market value of the investments in the sub-accounts is based on the net
asset values of the Trust shares held at the end of the current period.
Transactions are accounted for on the trade date and dividend income is
recognized on an accrual basis. Realized gains and losses on sales of
investments are determined on a first-in first-out basis.
3. INCOME TAXES
American Skandia does not expect to incur any Federal income tax liability on
earnings, or realized capital gains attributable to the Account, therefore, no
charges for Federal income taxes are currently deducted from the Account. If
American Skandia incurs income taxes attributable to the Account, or determines
that such
31
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
NOTES TO
FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
taxes will be incurred, it may make a charge for such taxes against the Account.
Under current laws, American Skandia may incur state and local income taxes (in
addition to premium tax) in several states. The company does not anticipate that
these will be significant. However, American Skandia may make charges to the
Account in the event that the amount of these taxes change.
4. CONTRACT CHARGES
The following contract charges are paid to American Skandia:
Mortality and Expense Risk Charges -- Charged daily against the Account at
an annual rate of 1.25% of the net assets.
Administrative Fees -- Charged daily against the Account at an annual rate
of .15% of the net assets. A maintenance fee of $30 is deducted at the end
of each contract year and on surrender.
Contingent Deferred Sales Charges are computed as set forth in the LifeVest
Personal Security Annuity, the American Skandia Advisors Plan Annuity, the
American Skandia Advisors Plan II Annuity, the Imperium Annuity or The
Alliance Capital Navigator Annuity. These charges may be imposed on the
full, or partial surrender of certain contracts. There is no contingent
deferred sales charge if all premiums were received at least seven complete
years prior to the date of the full or partial surrender.
5. PAYABLE TO CONTRACTOWNERS
Under the exchange program, new contractowners are eligible to receive an
"Exchange Credit" for the surrender charge paid to surrender exchange
contracts, with specific limitations. This Exchange Credit is converted to
units on behalf of the contractowner 30 days following issuance of the contract
pursuant to the exchange program.
The balance of the Exchange Credit for contracts within their first thirty days
is equal to $776,737 as of December 31, 1995.
32
[THIS PAGE INTENTIONALLY LEFT BLANK]
33
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
NOTES TO
FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
6. CHANGES IN THE UNITS OUTSTANDING
<TABLE>
<CAPTION>
-------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------
NBAMT - LIMITED
NBAMT - GROWTH MATURITY BOND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................... 2,734,835 2,388,450 10,689,462 10,615,851
Units Purchased............................................. 448,525 792,315 1,396,229 6,223,007
Units Transferred Between Sub-accounts...................... (2,956,438) (310,529) (11,348,447) (5,248,072)
Units Surrendered........................................... (226,922) (135,401) (737,244) (901,324)
---------- --------- ----------- ----------
Units Outstanding End of the Period......................... 0 2,734,835 0 10,689,462
========== ========= =========== ==========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------
AAF
AAF - BALANCED MIDCAP GROWTH
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................... 768,128 583,925 4,308,374 1,450,892
Units Purchased............................................. 94,924 276,819 2,610,647 1,672,798
Units Transferred Between Sub-accounts...................... (803,800) (36,274) 1,707,257 1,325,354
Units Surrendered........................................... (59,252) (56,342) (326,535) (140,670)
---------- --------- ----------- ----------
Units Outstanding End of the Period......................... 0 768,128 8,299,743 4,308,374
========== ========= =========== ==========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------
AST - FEDERATED AST - FEDERATED
UTILITY INCOME HIGH YIELD
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED JAN. 4* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................... 7,177,232 5,390,877 2,106,791 0
Units Purchased............................................. 1,476,370 2,825,121 2,963,225 1,166,363
Units Transferred Between Sub-accounts...................... 593,245 (624,103) 2,042,843 1,065,686
Units Surrendered........................................... (604,661) (414,663) (197,701) (125,258)
---------- --------- ----------- ----------
Units Outstanding End of the Period......................... 8,642,186 7,177,232 6,915,158 2,106,791
========== ========= =========== ==========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------
AST - FOUNDERS AST - INVESCO
CAPITAL APPRECIATION EQUITY INCOME
----------------------------- -----------------------------
YEAR ENDED JAN. 5* THRU YEAR ENDED JAN. 3* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................... 2,575,105 0 6,633,333 0
Units Purchased............................................. 2,286,783 1,412,806 4,723,155 4,940,630
Units Transferred Between Sub-accounts...................... 1,357,850 1,198,628 2,932,812 1,851,061
Units Surrendered........................................... (143,365) (36,329) (405,588) (158,358)
---------- --------- ----------- ----------
Units Outstanding End of the Period......................... 6,076,373 2,575,105 13,883,712 6,633,333
========== ========= =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
34
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------------------------
NBAMT AAF - INCOME AAF - SMALL
NBAMT - BALANCED PARTNERS & GROWTH CAPITALIZATION
------------------------------- -------------------- ------------------------------- -------------
YEAR ENDED YEAR ENDED MAY 2* THRU YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
3,956,683 3,624,095 0 1,958,603 2,023,006 9,356,764
269,961 890,323 1,178,962 147,593 482,871 2,406,348
(3,986,078) (307,645) 6,797,769 (1,962,060) (441,752) 1,130,736
(240,566) (250,090) (18,233) (144,136) (105,522) (576,484)
---------- ---------- ---------- ---------- --------- ----------
0 3,956,683 7,958,498 0 1,958,603 12,317,364
========== ========== ========== ========== ========= ==========
<CAPTION>
-------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------
AAF - SMALL
CAPITALIZATION AAF - GROWTH
--------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- -------------------
<S> <C> <C> <C>
7,101,658 5,614,760 2,997,458
2,068,053 2,850,077 1,718,430
464,709 4,034,205 1,095,282
(277,656) (406,751) (196,410)
---------- ----------- -----------
9,356,764 12,092,291 5,614,760
========== =========== ===========
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------------------------
AST - SELIGMAN HENDERSON AST - SELIGMAN HEND. AST - LORD ABBETT AST - JANCAP
INTERNATIONAL EQUITY INTL. SMALL CAP GROWTH & INCOME GROWTH
------------------------------- -------------------- ------------------------------- -------------
YEAR ENDED YEAR ENDED MAY 1* THRU YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
14,043,215 9,063,464 0 7,479,449 4,058,228 22,354,170
2,649,360 5,095,072 1,196,966 3,979,610 2,933,200 6,507,267
(1,401,250) 485,868 1,431,454 7,602,286 813,176 981,087
(898,188) (601,189) (27,137) (649,586) (325,155) (1,179,787)
---------- ---------- ---------- ---------- --------- ----------
14,393,137 14,043,215 2,601,283 18,411,759 7,479,449 28,662,737
========== ========== ========== ========== ========= ==========
<CAPTION>
-------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------
AST - JANCAP
GROWTH AST - MONEY MARKET
------------- ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- -------------------
<S> <C> <C> <C>
13,603,637 27,491,389 11,422,783
7,976,529 34,937,859 31,347,755
1,497,592 (25,355,473) (11,832,144)
(723,588) (6,509,333) (3,447,005)
---------- ----------- -----------
22,354,170 30,564,442 27,491,389
========== =========== ===========
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------------------------
AST - PHOENIX AST - PHOENIX AST - T. ROWE PRICE
BALANCED ASSET CAPITAL GROWTH ASSET ALLOCATION
-------------------------------- -------------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED JAN. 4* THRU YEAR ENDED JAN. 3* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
13,986,604 8,743,758 1,587,862 0 2,320,063 0
2,134,234 5,868,183 406,857 1,148,001 1,756,929 1,738,663
5,317,549 (79,635) (1,883,135) 472,146 961,444 667,736
(1,274,539) (545,702) (111,584) (32,285) (169,480) (86,336)
---------- ---------- ---------- ---------- --------- ----------
20,163,848 13,986,604 0 1,587,862 4,868,956 2,320,063
========== ========== ========== ========== ========= ==========
<CAPTION>
--------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------
AST - T. ROWE PRICE AST - T. ROWE PRICE
INTERNATIONAL EQUITY NATURAL RESOURCES
------------------------------- -------------------
YEAR ENDED JAN. 3* THRU MAY 1* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- -------------------
<S> <C> <C> <C>
11,166,758 0 0
5,451,722 6,643,509 306,567
1,852,683 4,744,934 512,490
(535,912) (221,685) (10,452)
---------- ----------- -----------
17,935,251 11,166,758 808,605
========== =========== ===========
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------------------------
AST - PIMCO TOTAL AST - PIMCO LTD. AST - SCUDDER AST - EAGLE
RETURN BOND MATURITY BOND INTERNATIONAL BOND GROWTH EQUITY
------------------------------- -------------------- ------------------------------- -------------
YEAR ENDED JAN. 3* THRU MAY 1* THRU YEAR ENDED MAY 2* THRU YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- -------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
4,577,708 0 0 1,562,364 0 351,319
6,858,117 3,383,108 2,833,131 1,596,914 703,494 134,138
8,025,131 1,354,594 12,333,359 1,162,185 899,756 (457,740)
(399,116) (159,994) (107,846) (134,768) (40,886) (27,717)
---------- ---------- ---------- ---------- --------- ----------
19,061,840 4,577,708 15,058,644 4,186,695 1,562,364 0
========== ========== ========== ========== ========= ==========
<CAPTION>
AST - EAGLE AST - BERGER
GROWTH EQUITY CAPITAL GROWTH
-------------- ------------------------------------
MAY 3* THRU YEAR ENDED OCT. 19* THRU
DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- -------------------
<S> <C> <C> <C>
0 301,267 0
205,932 2,242,838 123,907
148,564 1,168,175 177,648
(3,177) (53,444) (288)
---------- ----------- -----------
351,319 3,658,836 301,267
========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
35
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 1
NOTES TO
FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------
AVP - ST
MULTI-MKT AVP - PREMIER GROWTH
------------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................ 1,839,569 1,963,502 2,802,431 1,042,445
Units Purchased.......................................... 277,962 1,204,060 698,547 1,241,198
Units Transferred Between Sub-accounts................... (1,902,437) (1,171,841) (2,892,802) 602,509
Units Surrendered........................................ (187,874) (156,152) (365,216) (83,721)
---------- --------- ----------- ----------
Units Outstanding End of the Period...................... 27,220 1,839,569 242,960 2,802,431
========== ========= =========== ==========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------
AVP - NORTH AMERICAN
AVP - MONEY MARKET GOV'T INCOME
-------------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED JUL. 6* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................ 34,276 0 11,541 0
Units Purchased.......................................... 348,552 10,126 58,642 14,000
Units Transferred Between Sub-accounts................... (128,439) 30,484 18,738 (1,485)
Units Surrendered........................................ (21,131) (6,334) (24,456) (974)
---------- --------- ----------- ----------
Units Outstanding End of the Period...................... 233,258 34,276 64,465 11,541
========== ========= =========== ==========
<CAPTION>
CLASS 1 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------
AVP AVP - WORLDWIDE
GROWTH PRIVATIZATION SVL - BOND
------------- -------------- -----------------------------
FEB. 11* THRU APRIL 3* THRU YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1994
------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period................ 0 0 5,363,572 2,805,580
Units Purchased.......................................... 195,420 62,294 736,663 2,224,881
Units Transferred Between Sub-accounts................... 50,339 21,808 (5,742,035) 647,672
Units Surrendered........................................ (1,278) (361) (358,200) (314,561)
---------- --------- ----------- ----------
Units Outstanding End of the Period...................... 244,481 83,741 0 5,363,572
========== ========= =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
36
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------------------------------------------
AVP - GROWTH AVP - U.S. GOV'T/
& INCOME HIGH GRADE SECURITIES AVP - TOTAL RETURN
------------------------------- ------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
2,652,224 1,632,107 53,792 81,644 20,623 33,503
498,906 1,135,476 198,877 9,403 201,820 5,616
(2,711,896) 1,946 (40,031) (36,866) 14,441 (17,497)
(182,742) (117,305) (16,160) (389) (690) (999)
---------- ---------- ---------- ----------- ---------- -----------
256,492 2,652,224 196,478 53,792 236,194 20,623
========== ========== ========== ========== ========= ==========
<CAPTION>
----------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
----------------------------------
AVP - INTERNATIONAL
------------------------------
YEAR ENDED
DEC. 31, YEAR ENDED
1995 DEC. 31, 1994
------------ -------------
<S> <C> <C>
59,089 19,040
116,244 6,274
(12,854) 35,623
(2,730) (1,848)
---------- -----------
159,749 59,089
========== ===========
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------------------------
AVP - GLOBAL DOLLAR AVP - UTILITY AVP - GLOBAL AVP - CONSERVATIVE
GOV'T INCOME INCOME BOND INVESTORS
------------------------------- ------------------------------- --------------- -------------------
YEAR ENDED JULY 6* THRU YEAR ENDED AUG. 29* THRU APRIL 18* THRU MAY 29* THRU
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1995
------------- ------------- ------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
42,277 0 1,963 0 0 0
39,607 12,888 64,163 1,371 21,540 71,578
(14,789) 30,339 (892) 593 (3,331) (514)
(2,069) (950) (824) (1) (87) (155)
---------- ---------- ---------- ----------- ---------- -----------
65,026 42,277 64,410 1,963 18,122 70,909
========== ========== ========== ========== ========= ==========
<CAPTION>
- ----------------------------------
CLASS 1 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------
AVP - GROWTH
INVESTORS
------------
MAY 23* THRU
DEC. 31,
1995
------------
<S> <C>
0
70,305
267
(322)
-----------
70,250
==========
</TABLE>
- --------------------------------------------------------------------------------
37
[EDGAR REFERENCE - IN THE PRINTED VERSION OF THIS REPORT THE AUDITED
DECEMBER 31, 1995 FINANCIAL STATEMENTS OF THE ALGER AMERICAN FUND FOLLOW AT THIS
POINT. THE FINANCIAL STATEMENTS WERE FILED WITH THE COMMISSION VIA THE EDGAR
FORMAT ON FEBRUARY 28, 1996; FORM TYPE N-30D; FILE # 811-5550. THE FINANCIAL
STATEMENTS INCLUDE INFORMATION ON PORTFOLIOS WHICH ARE NOT AVAILABLE TO OWNERS
OF THE LIFEVEST PERSONAL SECURITY ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN
ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN II ANNUITIES NOR THE ALLIANCE CAPITAL
NAVIGATOR ANNUITIES.]
[EDGAR REFERENCE - IN THE PRINTED VERSION OF THIS REPORT THE AUDITED
DECEMBER 31, 1995 FINANCIAL STATEMENTS OF THE NEUBERGER & BERMAN ADVISORS
MANAGEMENT TRUST FOLLOW AT THIS POINT. THE FINANCIAL STATEMENTS WERE FILED WITH
THE COMMISSION VIA THE EDGAR FORMAT ON FEBRUARY 28, 1996; FORM TYPE N-30D; FILE
#811-04255. THE FINANCIAL STATEMENTS INCLUDE INFORMATION ON PORTFOLIOS WHICH ARE
NOT AVAILABLE TO OWNERS OF THE LIFEVEST PERSONAL SECURITY ANNUITIES, AMERICAN
SKANDIA ADVISORS PLAN ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN II ANNUITIES NOR
THE ALLIANCE CAPITAL NAVIGATOR ANNUITIES.]
[EDGAR REFERENCE - IN THE PRINTED VERSION OF THIS REPORT THE AUDITED
DECEMBER 31, 1995 FINANCIAL STATEMENTS OF THE AMERICAN SKANDIA TRUST FUND FOLLOW
AT THIS POINT. THE FINANCIAL STATEMENTS WERE FILED WITH THE COMMISSION VIA THE
EDGAR FORMAT ON MARCH 7, 1996; FORM TYPE N-30D; FILE # 811-05186. THE FINANCIAL
STATEMENTS INCLUDE INFORMATION ON PORTFOLIOS WHICH ARE NOT AVAILABLE TO OWNERS
OF THE LIFEVEST PERSONAL SECURITY ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN
ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN II ANNUITIES NOR THE ALLIANCE CAPITAL
NAVIGATOR ANNUITIES.]
[EDGAR REFERENCE - IN THE PRINTED VERSION OF THIS REPORT THE AUDITED DECEMBER
31, 1995 FINANCIAL STATEMENTS OF THE ALLIANCE VARIABLE PRODUCTS SERIES FUND,
INC. FOLLOW AT THIS POINT. THE FINANCIAL STATEMENTS WERE FILED WITH THE
COMMISSION VIA THE EDGAR FORMAT ON FEBRUARY 28, 1996; FORM TYPE N-30B-2; FILE
# 811-5398. THE FINANCIAL STATEMENTS INCLUDE INFORMATION ON PORTFOLIOS WHICH ARE
NOT AVAILABLE TO OWNERS OF THE LIFEVEST PERSONAL SECURITY ANNUITIES, AMERICAN
SKANDIA ADVISORS PLAN ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN II ANNUITIES NOR
THE ALLIANCE CAPITAL NAVIGATOR ANNUITIES.]
[EDGAR REFERENCE - IN THE PRINTED VERSION OF THIS REPORT THE AUDITED DECEMBER
31, 1995 FINANCIAL STATEMENTS OF THE SCUDDER VARIABLE LIFE INVESTMENT FUND
FOLLOW AT THIS POINT. THE FINANCIAL STATEMENTS WERE FILED WITH THE COMMISSION
VIA THE EDGAR FORMAT ON FEBRUARY 28, 1996; FORM TYPE N-30D; FILE # 811-4257. THE
FINANCIAL STATEMENTS INCLUDE INFORMATION ON PORTFOLIOS WHICH ARE NOT AVAILABLE
TO OWNERS OF THE LIFEVEST PERSONAL SECURITY ANNUITIES, AMERICAN SKANDIA ADVISORS
PLAN ANNUITIES, AMERICAN SKANDIA ADVISORS PLAN II ANNUITIES NOR THE ALLIANCE
CAPITAL NAVIGATOR ANNUITIES.]
American Skandia Life
Assurance Corporation
Tower One Corporate Drive
Shelton, CT 06484
----------------------
BULK RATE
U. S. POSTAGE
PAID
NEW YORK, NY
PERMIT NO. 8048
----------------------
-----------------------------------------------------------
-----------------------------------------------------------
PART C
OTHER INFORMATION
<PAGE>
Item 24. Financial Statements and Exhibits:
(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
(previously filed in the initial Registration Statement to Registration
Statement No. 33-19363, filed December 30, 1987).
(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 (previously filed in
Post-Effective Amendment No. 3 to Registration Statement No. 33-44436, filed
April 20, 1993).
(b) Form of Revised Dealer Agreement.(previously filed in Post-Effective
Amendment No. 3 of Registration Statement No. 33-44436, filed April 20, 1993).
(4) Copy of the form of the Annuity (previously filed in Post-Effective
Amendment No. 1 to this Registration Statement, filed April 20, 1995). (i) Filed
via EDGAR with this Registration Statement
(5) A copy of the application form used with the Annuity (previously filed
in Pre-Effective Amendment No. 9 to Registration Statement No. 33-44436, filed
February 17, 1995).
(6) (a) Copy of the certificate of incorporation of American Skandia Life
Assurance Corporation (previously filed in Pre-Effective Amendment No. 2 to
Registration Statement No. 33-19363, filed July 27, 1988).
(b) Copy of the By-Laws of American Skandia Life Assurance Corporation
(previously filed in Pre-Effective Amendment No. 2 to Registration Statement No.
33-19363, filed July 27, 1988).
(7) Annuity Reinsurance Agreements between Depositor and:
(a) Transamerica Occidental Life Assurance Company effective May 1, 1995.
(b) PaineWebber Life Insurance Company effective January 1, 1995.
(c) Connecticut General Life Insurance Company effective January 1, 1995.
(8) Agreements between Depositor and:
(a) Neuberger & Berman Advisers Management Trust (previously filed in
Post-Effective Amendment No. 5 to Registration Statement No. 33-19363, filed
February 28, 1990).
(b) The Alger American Fund (previously filed in Post-Effective Amendment
No. 5 to Registration Statement No. 33-19363, filed February 28, 1990).
(c) American Skandia Trust (previously filed in Post-Effective Amendment
No. 5 to Registration Statement No. 33-19363, filed February 28, 1990. At such
time, what later became American Skandia Trust was known as the Henderson Global
Asset Trust).
(9) Opinion and Consent of Werner & Kennedy.
(10) Consent of Deloitte & Touche LLP.
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of
Performance (previously filed in Pre-Effective Amendment No.1 to Registration
Statement No. 33-44436, filed March 30, 1992). (i) Filed via EDGAR with
Post-effective Amendment No. 12 to Registration Statement No. 33-44436, filed
April ______________, 1996
(14) Not applicable.
Item 25. Directors and Officers of the Depositor: The Directors and Officers of
the Depositor are shown in Part A.
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"), (formerly American Skandia Business
Services Corporation: 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 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."),
formerly Skandia Life Equity Sales Corporation: 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"),
formerly American Skandia Life Investment Management, Inc.:
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: As of December 31, 1995, there were
14,690 owners of Annuities.
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
Investment Holding Corporation, 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.
<TABLE>
<CAPTION>
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.
Name and Principal Business Address Offices With Underwriter
<S> <C>
Alan H. Blank Vice President and
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Gordon C. Boronow Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chief Executive Officer
Skandia Insurance Company Ltd. and Chairman of the
Sveavagen 44, S-103 50 Stockholm, Sweden Board of Directors
Paul DeSimone Controller
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President, Chief Operating
American Skandia Life Assurance Corporation Officer, Chief Marketing Officer
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
N. David Kuperstock Vice President and Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Thomas M. Mazzaferro Executive Vice President and
American Skandia Life Assurance Corporation Chief Financial Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Don Thomas Peck Vice President and
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Hayward Sawyer Vice President and
American Skandia Life Assurance Corporation National Sales Manager
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
Kristen Newall Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Amanda C. Sutyak Executive Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
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.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of the Registration Statement and
has duly caused this Registration Statement to be signed on its behalf, in the
Town of Shelton and State of Connecticut, on this day of April 25, 1996.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 1 SUB-ACCOUNTS)
Registrant
By: American Skandia Life Assurance Corporation
By:/s/ M. Patricia Paez Attest:/s/ Diana D. Steigauf
M. Patricia Paez, Corporate Secretary Diana D. Steigauf
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By:/s/ M. Patricia Paez Attest:/s/ Diana D. Steigauf
M. Patricia Paez, Corporate Secretary Diana D. Steigauf
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 25, 1996
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer and Principal Accounting Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 25, 1996
Thomas M. Mazzaferro Chief Financial Officer
(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
Nancy F. Brunetti**** Dianne B. Michael****
Nancy F. Brunetti Dianne B. Michael
*/**/***/****By: /s/ M. Patricia Paez
M. Patricia Paez
<FN>
*Pursuant to Powers of Attorney previously filed with Post-Effective Amendment No. 10 to Registration Statement No. 33-19363
**Pursuant to Powers of Attorney previously filed with the initial filing of Registration Statement No. 33-86918.
***Pursuant to Power of Attorney previously filed with the initial filing of Registration Statement No. 33-88360.
****Pursuant to Powers of Attorney previously filed with the initial filing of Registration Statement No. 333-00941
</FN>
</TABLE>
EXHIBITS
As noted in Item 24(b), various exhibits are incorporated by
reference or are not applicable. The exhibits included are as
follows:
No. 4 (i) EDGAR filing of Annuity
No. 7
(a) Annuity Reinsurance Agreement between Depositor and Transamerica
Occidental Life Assurance Company
(b) Annuity Reinsurance Agreement between Depositor and PaineWebber Life
Insurance Company
(c) Annuity Reinsurance Agreement between Depositor and Connecticut General
Life Insurance Company
No. 9 Opinion and Consent of Werner & Kennedy
No. 10 Consent of Deloitte & Touche LLP
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
SHELTON, CONNECTICUT
(A Stock Company)
This certificate (the "Annuity") is a summary of the provisions of a group
annuity contract. The contract owner and contract are as shown in the Schedule
made part of this Annuity.
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 Account Value plus any tax
charge deducted as of the date we receive the cancellation request. You bear the
investment risk during this period. If this Annuity is issued as an individual
retirement annuity ("IRA"), we will refund the greater of (1) the Purchase
Payment or (2) the current Account Value of the Annuity if you exercise the
Right to Cancel provision and we receive your request for refund In Writing at
our Office within ten days after you receive the Annuity.
Signed for American Skandia Life Assurance Corporation:
Secretary President
/S/ W. Patricia Paez /s/ G. Boronow
GROUP DEFERRED ANNUITY
NON-PARTICIPATING
VARIABLE AND FIXED INVESTMENT OPTIONS IN THE ACCUMULATION PERIOD
FIXED ANNUITY PAYMENTS IN THE PAYOUT PERIOD
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE VARIABLE
INVESTMENT OPTIONS ARE BASED ON THEIR INVESTMENT PERFORMANCE AND ARE,
THEREFORE, NOT GUARANTEED. PLEASE REFER TO THE SECTION ENTITLED "ACCOUNT
VALUE IN THE SUB-ACCOUNTS" FOR A MORE COMPLETE EXPLANATION.
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE FIXED
INVESTMENT OPTIONS MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT. SUCH A MARKET
VALUE ADJUSTMENT MAY INCREASE OR DECREASE ANY SUCH PAYMENTS OR VALUES. PLEASE
REFER TO THE SECTION ENTITLED "ACCOUNT VALUE OF THE FIXED ALLOCATIONS" FOR A
MORE COMPLETE EXPLANATION.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
DEFINITIONS 5
INVESTMENT OF ACCOUNT VALUE..............................................................................7
OPERATIONS OF THE SEPARATE ACCOUNTS......................................................................8
CHARGES ..........................................................................................9
PARTICIPATION RIGHTS AND DESIGNATIONS...................................................................10
PURCHASE PAYMENTS.......................................................................................11
ACCOUNT VALUE AND SURRENDER VALUE.......................................................................11
ALLOCATION RULES........................................................................................13
TRANSFERS 13
DISTRIBUTIONS 15
GENERAL PROVISIONS......................................................................................20
ANNUITY TABLES 22
</TABLE>
A copy of any enrollment form and any riders and
endorsements are attached.
<PAGE>
AXASP2/CRT (12/94)-04 ASP2
SCHEDULE
ANNUITY NUMBER: [001-00001] ISSUE DATE: [JUNE 1, 1990]
TYPE OF BUSINESS: [INDIVIDUAL RETIREMENT ANNUITY]
PARTICIPANT: [JOHN DOE]
DATE OF BIRTH: [OCTOBER 21, 1940] SEX: [MALE]
[PARTICIPANT: [MARY DOE]
DATE OF BIRTH: [OCTOBER 15, 1940] SEX: [FEMALE]]
ANNUITANT: [JOHN DOE]
ANNUITANT'S DATE OF BIRTH: [APRIL 01,1934] ANNUITANT'S SEX: [MALE]
ANNUITY DATE: [MAY 01, 2019]
CONTINGENT ANNUITANT: AS NAMED IN ANY ENROLLMENT FORM OR LATER CHANGED
BENEFICIARY: AS NAMED IN ANY ENROLLMENT FORM OR LATER CHANGED
PURCHASE PAYMENT: $[10,000] NET PURCHASE PAYMENT: $[10,000]
MINIMUM ADDITIONAL PURCHASE PAYMENT $[100]
MINIMUM WITHDRAWAL AMOUNT: $[100]
MINIMUM ACCOUNT VALUE AFTER WITHDRAWAL: $[1,000]
MINIMUM SURRENDER VALUE AT COMMENCEMENT OF
SYSTEMATIC WITHDRAWAL PROGRAM: $[20,000]
MINIMUM ACCOUNT VALUE AT COMMENCEMENT OF
DOLLAR COST AVERAGING PROGRAM: $[20,000]
MINIMUM ACCOUNT VALUE AT COMMENCEMENT OF REBALANCING PROGRAM $[20,000]
MINIMUM INITIAL PURCHASE PAYMENT IN RESPECT TO BANK DRAFTING $[1,000]
TOTAL MINIMUM MONTHLY PURCHASE PAYMENTS IN RESPECT TO BANK DRAFTING $[750]
MINIMUM ANNUITY PAYMENT: $[100 PER MONTH]
CUT OFF DATE: [THE DECEDENT'S 90TH BIRTHDAY]
<PAGE>
SCHEDULE (CONTINUED)
CONTINGENT DEFERRED SALES CHARGE:
LENGTH OF TIME PERCENTAGE OF PURCHASE
SINCE PURCHASE PAYMENT PAYMENTS BEING LIQUIDATED
[0-1 year 7.5%
1-2 years 7.0%
2-3 years 6.0%
3-4 years 5.0%
4-5 years 4.0%
5-6 years 3.0%
6-7 years 2.0%
7+ years 0%]
AUTOMATIC SUB-ACCOUNT: [AST MONEY MARKET]
TRANSFER FEE: $[10 PER TRANSFER AFTER THE TWELFTH IN AN ANNUITY YEAR]
WITHDRAWAL FEE: $[NONE]
MAINTENANCE FEE [LESSER OF $30 OR 2% OF ACCOUNT VALUE]
MORTALITY AND EXPENSE RISK CHARGE: [1.25]%
ADMINISTRATIVE CHARGE: [0.15]%
INTEREST RATE MINIMUM: [2.25 PER CENT (.0225) LESS THAN THE AMOUNT
DETERMINED BY THE INDEX. IN NO EVENT WILL THE MINIMUM BE LESS THAN ZERO.]
VARIABLE SEPARATE ACCOUNT: [AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1 SUB-ACCOUNTS]
FIXED SEPARATE ACCOUNT: [AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
SEPARATE ACCOUNT D]
OWNER: [AMERICAN SKANDIA INSURANCE TRUST]
CONTRACT: [015]
OFFICE: AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE
P.O. BOX 883
SHELTON. CONNECTICUT 06484
Telephone: 1-800-752-6342
<PAGE>
DEFINITIONS
Account Value: The value of each allocation to a Sub-account or a Fixed
Allocation prior to the Annuity Date, plus any earnings and/or less any losses,
distributions, and charges thereon, before assessment of any applicable
contingent deferred sales charge and/or any applicable maintenance fee. Account
Value is determined separately for each Sub-account and for each Fixed
Allocation, and then totaled to determine Account Value for your entire Annuity.
Account Value of each Fixed Allocation on other than such Fixed Allocation's
Maturity Date is calculated using a market value adjustment.
Accumulation Period: The period of time from the Issue Date through and
including the 15th day prior to the Annuity Date.
Annuitant: The person upon whose life this Annuity is issued.
Annuity: A summary of your rights and benefits under the contract shown in
the Schedule.
Annuity Date: The date on which annuity payments are to commence.
Annuity Years: Continuous 12 month periods commencing on the Issue Date and
each anniversary of the Issue Date.
Beneficiary: The person designated as the recipient of the death benefit.
Contingent Annuitant: The person named to become the Annuitant on the
Annuitant's death prior to the Annuity Date.
Current Rates: The interest rates we offer to credit to Fixed Allocations
for the duration of newly beginning Guarantee Periods under this Annuity.
Current Rates are contained in a schedule of rates established by us from time
to time for the Guarantee Periods then being offered. We may establish different
schedules for different classes and for different annuities.
Fixed Allocation: An allocation of Account Value that is to be credited a
fixed rate of interest for a specified Guarantee Period during the Accumulation
Period and is to be supported by assets in the Fixed Separate Account.
Fixed Separate Account: The separate account shown in the Schedule used in
relation to Fixed Allocations.
Guarantee Period: A period of time during the Accumulation Period during
which we credit a fixed rate of interest on a Fixed Allocation.
In Writing: In a written form satisfactory to us and filed at the Office.
Interim Value: As of any particular date, the initial value of a Fixed
Allocation plus all interest credited thereon, less the sum of all previous
transfers and withdrawals of any type from such Fixed Allocation and interest
thereon from the date of each withdrawal or transfer.
Issue Date: The effective date of your participation under the contract
shown in the Schedule in relation to the rights and benefits evidenced by this
Annuity.
MVA: A market value adjustment used in the determination of Account Value of
each Fixed Allocation as of a date other than such Fixed Allocation's Maturity
Date.
<PAGE>
Maturity Date: The last day in a Guarantee Period.
Minimum Distributions: Minimum amounts that must be distributed each year from
an Annuity if used in relation to certain qualified plans under the Internal
Revenue Code.
Net Purchase Payment: A Purchase Payment less any applicable charge for taxes.
Office: The location shown in the Schedule where all requests regarding
this Annuity are to be sent.
Owner: The person or entity shown in the Schedule unless later changed, that
owns the master group contract under which an Annuity is issued.
Payout Period: The period starting on the Annuity Date during which the
annuity is paid.
Purchase Payment: A cash consideration you give to us for the rights,
privileges and benefits outlined in this Annuity.
Sub-account: A division of the Variable Separate Account shown in the
Schedule. We use Sub-accounts to calculate variable benefits under this Annuity.
Surrender Value: The value of your Annuity available upon surrender prior to the
Annuity Date. It equals the Account Value as of the date we price the surrender
less any applicable contingent deferred sales charge and any applicable
maintenance fee.
Systematic Withdrawal: One of a plan of periodic withdrawals of Surrender
Value during the Accumulation Period. We must approve of such plan.
Unit: A measure used to calculate your Account Value in a Sub-account prior
to the Annuity Date.
Unit Price: Unit Price is used for calculating (a) the number of Units allocated
to a Sub-account, and (b) the value of transactions into or out of a Sub-account
or benefits based on Account Value in a Sub-account prior to the Annuity Date.
Each Sub-account has its own Unit Price which will vary each Valuation Period to
reflect the investment experience of that Sub-account.
Valuation Day: Every day the New York Stock Exchange is open for trading or any
other day that the Securities and Exchange Commission requires mutual funds or
unit investment trusts to be valued.
Valuation Period: The period of time between the close of business of the
New York Stock Exchange on successive Valuation Days.
Variable Separate Account: The variable separate account shown in the
Schedule used in relation to Sub-accounts.
we, us, our: American Skandia Life Assurance Corporation.
you, your: The participant shown in the Schedule.
<PAGE>
INVESTMENT OF ACCOUNT VALUE
General: In the Accumulation Period we offer a range of variable and fixed
options as ways to invest your Account Value. You may maintain Account Value in
multiple investment options, subject to the limits set out in the Allocation
Rules section of this Annuity. You may transfer Account Value between investment
options, subject to the requirements set out in the Transfers section of this
Annuity. Transfers may be subject to a fee.
Variable Investment Options: During the Accumulation Period we offer a
number of Sub-accounts as variable investment options. These are all
Sub-accounts of the Variable Separate Account shown in the Schedule.
Fixed Investment Options: We may offer Fixed Allocations with Guarantee Periods
of different durations. Each such Fixed Allocation is accounted for separately.
Each Fixed Allocation earns a fixed rate of interest throughout its Guarantee
Period. Multiple Fixed Allocations are permitted, subject to our allocation
rules. The duration of a Guarantee Period may be the same or different from the
duration of the Guarantee Periods of any of your prior Fixed Allocations.
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those which were available
when your Annuity was issued. We also reserve the right at any time to stop
accepting new allocations, transfers or renewals for a particular Guarantee
Period.
A Guarantee Period for a Fixed Allocation begins: (a) when all or part of a Net
Purchase Payment is allocated to that particular Guarantee Period; (b) upon
transfer of any of your Account Value to a Fixed Allocation for that particular
Guarantee Period; or (c) when a Guarantee Period attributable to a Fixed
Allocation "renews" after its Maturity Date.
We declare the rates of interest applicable during the various Guarantee Periods
offered. Declared rates are effective annual rates of interest. The rate of
interest applicable to a Fixed Allocation, for the class of contracts to which
this Annuity belongs, is the one in effect when its Guarantee Period begins. The
rate is guaranteed throughout the Guarantee Period. We inform you of the
interest rate applicable to a Fixed Allocation, as well as its Maturity Date,
when we confirm the allocation. We declare interest rates applicable to new
Fixed Allocations from time to time. Any new Fixed Allocation in an existing
Annuity is credited interest at a rate not less than the rate we are then
crediting to Fixed Allocations for the same Guarantee Period selected by new
Annuity purchasers in the same class.
The interest rates we credit are subject to a minimum. We may declare a higher
rate. The minimum is described in the Schedule.
Interest Rate Minimum
Interest rates are determined by us. However, rates are subject to a minimum.
The minimum for a Fixed Allocation is based on both an index and a reduction to
the interest rate determined according to the index. The index is based on the
published rate for certificates of indebtedness (bills, notes, or bonds,
depending on the term of indebtedness) of the United States Treasury at the most
recent Treasury auction held at least 30 days prior to the beginning of the
applicable Fixed Allocation's Guarantee Period. The term (length of time from
issuance to maturity) of the certificates of indebtedness upon which the index
is based is the same as the duration of the Guarantee Period. If no certificates
of indebtedness are available for such term, the next shortest term is used. If
the United States Treasury's auction program is discontinued, we will substitute
indexes which in our opinion are comparable. If required, implementation of such
substitute indexes will be subject to approval by the Securities and Exchange
Commission and the insurance department of the jurisdiction in which the Annuity
is delivered. The reduction used in determining the minimum is as shown in the
Schedule.
<PAGE>
OPERATIONS OF THE SEPARATE ACCOUNTS
General: The assets supporting our obligations under the Annuities may be held
in various accounts, depending on the obligation being supported. In the
Accumulation Period, assets supporting Account Values are held in separate
accounts established under the laws of the State of Connecticut. In the Payout
Period, assets supporting fixed annuity payments are held in our general
account.
Separate Accounts: We are the legal owner of assets in the separate accounts.
Income, gains and losses, whether or not realized, from assets allocated to
these separate accounts, are credited to or charged against each 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, gains or
losses in any other of our separate accounts. We will maintain assets in each
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 only be charged with liabilities
which arise from such annuities, which may include Annuities issued under the
contract shown in the Schedule.
Variable Separate Account: In both the Accumulation Period and the Payout
Period, the assets supporting obligations based on allocations to the variable
investment options are held in the Variable Separate Account shown in the
Schedule. This separate account consists of multiple Sub-accounts. This separate
account was established by us pursuant to Connecticut law. This separate account
also holds assets of other annuities issued by us with values and benefits that
vary according to the investment performance of this Variable Separate Account.
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 Variable 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. This does not
involve any supervision by the SEC of the investment policies, management or
practices of the Variable Separate Account.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to change the investment
policy of any or all Sub-accounts, add Sub-accounts, eliminate Sub-accounts,
combine Sub-accounts, or to substitute underlying mutual funds or portfolios of
underlying mutual funds, subject to any required regulatory approvals.
Values and benefits based on allocations to the Sub-accounts will vary with the
investment performance of the underlying mutual funds or fund portfolios, as
applicable. We do not guarantee the investment results of any Sub-account, nor
is there any assurance that the Account Value allocated to the Sub-accounts will
equal the amounts allocated to the Sub-accounts as of any time other than the
Valuation Period of such allocation. You bear the entire investment risk.
We reserve the right to transfer assets of the Variable Separate Account, which
we determine to be associated with the class of contracts to which this Annuity
belongs, to another Variable Separate Account. If this type of transfer is made,
the term "Variable Separate Account" as used in this Annuity, shall mean the
Variable Separate Account to which the assets were transferred.
<PAGE>
Fixed Separate Account: In the Accumulation Period, assets supporting our
obligations based on Fixed Allocations are held in the Fixed Separate Account
shown in the Schedule, which is a "non-unitized" separate account. Such
obligations are based on the interest rates we credit to Fixed Allocations and
the terms of the Annuities. These obligations do not depend on the investment
performance of the assets in the Fixed Separate Account. This separate account
was established by us pursuant to Connecticut law.
There are no discrete units in the Fixed Separate Account. No party with rights
under any annuity nor any group contract owner participates in the investment
gain or loss from assets belonging to the Fixed Separate Account. Such gain or
loss accrues solely to us. We retain the risk that the value of the assets in
the Fixed Separate Account may drop below the reserves and other liabilities we
must maintain. Should the value of the assets in the Fixed Separate Account drop
below the reserve and other liabilities we must maintain in relation to the
annuities supported by such assets, we will transfer assets from our general
account to the Fixed Separate Account to make up the difference. We have the
right to transfer to our general account any assets of the Fixed Separate
Account in excess of such reserves and other liabilities. We maintain assets in
the Fixed Separate Account supporting a number of annuities we offer.
If you surrender, withdraw or transfer Account Value from a Fixed Allocation
before the end of its Guarantee Period, you bear the risk inherent in the MVA.
The Account Value of a Fixed Allocation is guaranteed to be its then current
Interim Value on its Maturity Date.
CHARGES
General: The charges which are or may be assessed against your Annuity are the
contingent deferred sales charge, the maintenance fee, tax charges, a transfer
fee and a withdrawal fee. The charges assessed against the Sub-accounts of the
Variable Separate Account are the administration charge and the mortality and
expense risk charges. A charge for taxes may also be assessed against the
Sub-accounts.
Contingent Deferred Sales Charge: The contingent deferred sales charge for each
Purchase Payment is a percentage of the Purchase Payment being liquidated. The
charge decreases as the Purchase Payment ages. The aging of a Purchase Payment
is measured from the date it is allocated to your Annuity. The charge is shown
in the Schedule.
Maintenance Fee: This is an annual fee deducted at the end of each Annuity Year
or on surrender, if earlier. The amount of this charge is shown in the Schedule.
The fee is limited to the Account Values in the Sub-accounts as of the Valuation
Period such fee is due. The maintenance fee is not assessed if there is no
Account Value in any Sub-account as of the Valuation Period such fee is due.
Tax Charges: In several states a tax is payable, either when Purchase Payments
are received or, when the Account Value is applied under an annuity option. We
will deduct the amount of tax payable, if any, from your Purchase Payments or
Account Value.
Transfer Fee: The transfer fee is as shown in the Schedule. However, the fee is
only charged if there is Account Value in at least one Sub-account immediately
subsequent to such transfer. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the transfer
charge and are not counted in determining whether other transfers may be subject
to the transfer charge.
Withdrawal Fee: No withdrawal fee applies to a death benefit, full surrender,
medically-related surrender or annuity payment. The withdrawal fee is not
considered a liquidation of any portion of any Purchase Payment. The withdrawal
fee is taken before the withdrawal and is taken pro rata from the same
investment options that the withdrawal is being taken from. The MVA does not
apply to the withdrawal fee. The fee, if any, is shown in the Schedule.
<PAGE>
Allocation Of Annuity Charges: Charges applicable to any type of withdrawal are
taken from the investment options in the same ratio as such a withdrawal is
taken from the investment options. The transfer fee is assessed against the
Sub-accounts in which you maintain Account Value immediately subsequent to such
transfer. The transfer fee is allocated on a pro-rata basis in relation to the
Account Values in such Sub-accounts as of the Valuation Period for which we
price the applicable transfer. No fee is assessed if there is no Account Value
in any Sub-account at such time. Tax charges are assessed against the entire
Purchase Payment or Surrender Value as applicable. The maintenance fee is
assessed against the Sub-accounts on a pro-rata basis in relation to the Account
Values in each Sub-account as of the Valuation Period for which we price the
fee. The withdrawal fee is added to the gross amount withdrawn. It is allocated
on a pro-rata basis to the same investment options from which the applicable
withdrawal amounts are taken.
Administration Charge: We charge for administering each Sub-account. We assess
this charge each day at the daily equivalent of the rate shown in the Schedule
against the daily total value of each Sub-account.
Mortality and Expense Risk Charges: We assess mortality and expense risk charges
against each Sub-account. We assess this charge each day at the daily equivalent
of the rate shown in the Schedule against the daily total value in each
Sub-account.
PARTICIPATION RIGHTS AND DESIGNATIONS
Participation Rights, Annuitant and Beneficiary Designations: You may exercise
the rights, options and privileges granted participants by the contract as shown
in the Schedule or permitted by us. Your rights are subject to the rights of any
assignee recorded by us and of any irrevocably designated Beneficiary.
If more than one participant is named, all rights reserved to a participant are
then held jointly. We require the consent In Writing of all joint participants
for any transaction for which we require the written consent of a participant.
You may name a contingent participant. However, this designation takes effect
only on or after the Annuity Date. Where required by law, we require the consent
In Writing of the spouse of any person with a vested interest in an Annuity.
You make certain designations that apply to the Annuity. These designations are
subject to our rules and to various regulatory or statutory requirements
depending on the use of the Annuity. These designations include a participant, a
contingent participant, an Annuitant, a Contingent Annuitant, a Beneficiary, and
a contingent Beneficiary. Certain designations are required, as indicated below.
Such designations will be revocable unless you indicate otherwise or we endorse
your Annuity to indicate that such designation is irrevocable to meet certain
regulatory or statutory requirements.
A participant must be named. You may name more than one participant. If you do,
all rights reserved to participants are then held jointly. We require the
consent In Writing of all joint participants for any transaction for which we
require the written consent of participants. Where required by law, we require
the consent In Writing of the spouse of any person with a vested interest in an
Annuity.
You may name a contingent participant. However, where allowed by law, this
designation takes effect only on or after the Annuity Date.
You must name an Annuitant. We do not accept a designation of joint Annuitants.
Where allowed by law, you may name one or more Contingent Annuitants. If the
Annuitant dies before the Annuity Date, the Contingent Annuitant will become the
Annuitant. If there is more than one participant, all of whom are natural
persons, the oldest of any such participants not named as the Annuitant
immediately becomes the
<PAGE>
Contingent Annuitant if the Contingent Annuitant predeceases the Annuitant or if
a Contingent Annuitant is not designated.
Death benefits are payable to the Beneficiary. You may designate more than one
primary or contingent Beneficiary. If you make such a designation, the proceeds
are payable in equal shares to the survivors in the appropriate Beneficiary
class, unless you request otherwise In Writing.
If the primary Beneficiary dies before death proceeds become payable, the
proceeds will become payable to the contingent Beneficiary. If no Beneficiary is
alive when death proceeds become payable or in the absence of any Beneficiary
designation, the proceeds will vest in you or your estate.
Changing Revocable Designations: Unless you indicated that a prior choice was
irrevocable or your Annuity has been endorsed to limit certain changes, you may
request to change participant, contingent participant, Annuitant, Contingent
Annuitant and Beneficiary designations by sending a request In Writing. Such
changes will be subject to our acceptance. Some of the changes we will not
accept include, but are not limited to: (a) a new participant subsequent to the
death of the participant or the first of any joint participants to die, except
where a spouse-Beneficiary has become the participant as a result of a
participant's death; (b) a new Annuitant subsequent to the Annuity Date if the
annuity option selected includes a life contingency; and (c) a new Annuitant
prior to the Annuity Date if the Annuity is owned by an entity.
Common Disaster: If a participant is a natural person and if any Beneficiary
dies with the participant in a common disaster, it must be proved to our
satisfaction that the participant died first. Unless information provided
indicates otherwise, the Annuity is treated as though the Beneficiary died
first. If: (a) the participant is not a natural person; (b) no Contingent
Annuitant has been designated; and (c) the Annuitant and the Beneficiary die in
a common disaster, then it must be proved to our satisfaction that the Annuitant
died first. Unless provided otherwise, the proceeds are payable as if the
Beneficiary died before the Annuitant.
PURCHASE PAYMENTS
Initial Purchase Payment: Issuance of an Annuity represents both our acceptance
of an initial Purchase Payment and enrollment of a participant. The amount of
your initial Net Purchase Payment evidenced by this Annuity is shown in the
Schedule. Your initial Purchase Payment is subject to our allocation rules (see
"Allocation Rules"). You may make Purchase Payments to your Annuity using bank
drafting, but only for allocations to variable investment options.
Additional Purchase Payments: The minimum for any additional Purchase Payment is
as shown in the Schedule. Additional Purchase Payments may be paid at any time
before the Annuity Date. Subject to the allocation rules herein, we allocate
additional Net Purchase Payments according to the instructions you provide.
Should no instructions be received, we return your additional Purchase Payment.
ACCOUNT VALUE AND SURRENDER VALUE
General: In the Accumulation Period your Annuity has an Account Value and a
Surrender Value. Your total Account Value is the sum of your Account Value in
each Sub-account and each Fixed Allocation. Surrender Value is the Account Value
less any applicable contingent deferred sales charge and any applicable
maintenance fee.
Account Value in the Sub-accounts: We determine your Account Value separately
for each Sub-account. To determine the Account Value in each Sub-account we
multiply the Unit Price as of the Valuation Period for which the calculation is
being made times the number of Units attributable to your Annuity in that
Sub-account as of that Valuation Period.
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Units: The number of Units attributable to this Annuity in a Sub-account is the
number of Units you purchased less the number transferred or withdrawn. 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: Each Sub-account has a net investment factor. 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 by the underlying mutual fund during that
Valuation Period; 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 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 mortality and expense risk charge and the administration fee.
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.
Account Value of the Fixed Allocations: We determine the Account Value of each
Fixed Allocation separately. A Fixed Allocation's Account Value as of a
particular date is determined by multiplying its then current Interim Value
times the MVA.
A formula is used to determine the MVA. The formula is applied separately to
each Fixed Allocation. Values and time durations used in the formula are as of
the date for which the Account Value is being determined. The formula is: [
(1+I) /(1+J+0.0010)] N/12; where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate for your class of annuities for a new
Fixed Allocation with Guarantee Period of duration equal to
the number of years (rounded to the next higher integer when
occurring on other than an anniversary of the beginning of the
Guarantee Period) remaining in the Fixed Allocation's
Guarantee Period;
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N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in the Fixed
Allocation's Guarantee Period.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date.
ALLOCATION RULES
You may allocate your Account Value among the investment options we make
available. The variable investment options are Sub-accounts of the Variable
Separate Account. The fixed investment options are the Guarantee Periods we make
available for Fixed Allocations. In the Accumulation Period, you may maintain
Account Value in up to ten Sub-accounts. You may also maintain an unlimited
number of Fixed Allocations. Should you request a transaction that would leave
less than any minimum amount we then require in an investment option, we reserve
the right, to the extent permitted by law, to add the balance of your Account
Value in the applicable Sub-account or Fixed Allocation to the transaction and
close out your balance in that investment option.
Should you either: (a) request rebalancing services; (b) authorize an
independent third party to transact transfers on your behalf and such third
party arranges for rebalancing of your Account Value in accordance with any
asset allocation strategy; or (c) authorize an independent third party to
transact transfers in accordance with a market timing strategy; then all
Purchase Payments, including the initial Purchase Payment, received while your
Annuity is subject to such an arrangement must be allocated to the same
investment options and in the same proportions as then required pursuant to the
applicable rebalancing , asset allocation or market timing program, but only to
the extent we have received instructions to that effect. Such allocation
requirements terminate simultaneous to the termination of an authorization for
rebalancing or any authorization to a third party to transact transfers on your
behalf.
Withdrawals of any type are taken pro-rata from the investment options based on
the then current Account Values in such investment options unless we receive
other instructions from you prior to such withdrawal. If no instructions are
provided for determining the amounts to be taken from each investment option,
then the Account Value in all your then current Fixed Allocations is deemed to
be in one investment option. If you transfer or withdraw Account Value from
multiple Fixed Allocations and do not provide instructions indicating the Fixed
Allocations from which Account Value should be taken: (a) we transfer Account
Value first from the Fixed Allocation with the shortest amount of time remaining
to the end of its Guarantee Period, and then from the Fixed Allocation with the
next shortest amount of time remaining to the end of its Guarantee Period, etc.;
and (b) if there are multiple Fixed Allocations with the same amount of time
left in each Guarantee Period, as between such Fixed Allocations we first take
Account Value from the Fixed Allocation that has the shorter Guarantee Period.
TRANSFERS
General: In the Accumulation Period you may transfer Account Value between
investment options, subject to the allocation rules herein. The amount we charge
is shown in the Schedule. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the transfer
charge and are not counted in determining whether other transfers may be subject
to the transfer charge. Your transfer request must be In Writing unless we
receive a prior written authorization from you permitting transfers based on
instructions we receive over the phone.
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf. We may suspend or cancel such 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 for transfers or allocations of Net Purchase Payments during any period in
which you authorize such third
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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 reserve the right to limit the number of transfers in any Annuity Year for
all existing or new participants. We also reserve the right to limit the number
of transfers in any Annuity Year or to refuse any transfer request for a
participant or certain participants if we believe that: (a) excessive trading by
such participant or participants or a specific transfer request or group of
transfer requests 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.
Dollar Cost Averaging: We offer dollar cost averaging in the Accumulation
Period. You may choose to transfer earnings only, principal plus earnings or a
flat dollar amount. You may select this program by submitting to us a request In
Writing. You may cancel your participation in this program In Writing or by
phone if you have previously authorized our acceptance of such instructions.
Dollar cost averaging is available from any of the investment options we choose
to make available for such a program. The minimum Account Value you must have in
order for us to accept your request for a dollar cost averaging program is as
shown in the Schedule. We reserve the right to limit the investment options into
which Account Value may be transferred as part of a dollar cost averaging
program. We currently do not permit dollar cost averaging programs where Account
Value is transferred to Fixed Allocations. Dollar cost averaging is not
available while a rebalancing, asset allocation or market timing type of program
is used in connection with your Annuity.
Dollar cost averaging from Fixed Allocations is subject to the following rules:
(a) you may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years; (b) such a program may only be selected in conjunction with and
simultaneous to a new or renewing Fixed Allocation; (c) only averaging of
earnings only or principal plus earnings is permitted; (d) a program averaging
principal plus earnings from a Fixed Allocation must be designed to last that
Fixed Allocation's entire current Guarantee Period; (e) dollar cost averaging
transfers from a Fixed Allocation are not subject to the MVA; (f) dollar cost
averaging may be done on a monthly basis only; and (g) you may not
simultaneously use Account Value in any Fixed Allocation to participate in
dollar cost averaging and receive Systematic Withdrawals or Minimum
Distributions from such Fixed Allocation.
Rebalancing: We offer, during the Accumulation Period, automatic quarterly
rebalancing among the variable investment options of your choice. Under this
program, Account Values in variable investment options are rebalanced each
quarter to the percentages you request. The rebalancing occurs as of the last
Valuation Date of each calendar quarter. If a transfer is requested prior to the
end of a calendar quarter while an automatic rebalancing program is in effect,
we automatically alter the rebalancing percentages going forward (unless we
receive alternate instructions) to the ratios between Account Values in the
variable investment options as of the effective date of such requested transfer
once it has been processed. Automatic rebalancing is delayed one calendar
quarter if Account Value is being maintained in a money market type Sub-account
for the duration of your Annuity's Right to Cancel period and rebalancing would
otherwise occur during such period.
You may change the percentage allocable to each variable investment option at
any time. However, you may not choose to allocate less than 5% of Account Value
to any variable investment option.
The Account Value of your Annuity must be at least the amount shown in the
Schedule when we receive your automatic rebalancing request. All variable
investment options in which you maintain Account Value must be used in the
rebalancing program. You may be maintaining Account Value in at least two and
not more than ten variable investment options when using a rebalancing program.
Purchase Payments must be allocated in accordance with rebalancing percentages
(see "Allocation Rules").
Automatic rebalancing is not available while a dollar cost averaging program is
in effect. It also is not available when a program of Systematic Withdrawals of
earnings or earnings plus principal is in effect. We reserve the right to limit
this program if all Account Value is not maintained in the variable investment
options while this program is in effect.
Renewals: A renewal is a transaction that occurs automatically as of the last
day of a Fixed Allocation's Guarantee Period unless we receive other
instructions. As of the end of a Maturity Date, the Fixed Allocation's Guarantee
Period "renews" and a new Guarantee Period of the same duration as the one just
completed begins. However, the renewal will not occur if the Maturity Date is on
the date we apply your Account Value to determine the annuity payments that
begin on the Annuity Date.
If your Fixed Allocation's then ending Guarantee Period is no longer available
for new allocations and renewals or you choose a different Guarantee Period that
is no longer available on the date following the Maturity Date, we will try to
reach you so you may make another choice. If we cannot reach you, we will assign
the next shortest Guarantee Period then currently available for new allocations
and renewals to that Fixed Allocation.
As an alternative to a renewal, you may transfer all or part of that Fixed
Allocation's Account Value to make a different Fixed Allocation or you may
transfer such Account Value to one or more Sub-accounts, subject to our
allocation rules. To accomplish this, we must receive instructions from you In
Writing at least two business days before the Maturity Date. No MVA applies to
transfers of a Fixed Allocation's Account Value occurring as of its Maturity
Date.
DISTRIBUTIONS
Surrender: Surrender of your Annuity for its Surrender Value is permitted during
the Accumulation Period. A contingent deferred sales charge and the maintenance
fee may apply to such surrender. You must send your Annuity and surrender
request In Writing to our Office.
Medically-Related Surrender: You may request to surrender your Annuity for its
Account Value prior to the Annuity Date upon occurrence of a "Contingency
Event." The Annuitant must be alive as of the date we pay the proceeds of such
surrender request. If the participant is one or more natural persons, all such
participants must also be alive at such time. This benefit is not available if
the total Purchase Payments received exceed $500,000.00 for all annuities issued
by us with this benefit for which the same person is named as Annuitant.
A Contingency Event occurs if the Annuitant is: (a) first confined in a Medical
Care Facility while this Annuity is in force and remains confined for at least
90 days in a row; or (b) first diagnosed as having a Fatal Illness while this
Annuity is in force. We may require a second opinion regarding such diagnosis at
our expense by a physician chosen by us.
"Medical Care Facility" means any state licensed facility providing medically
necessary in-patient care which is: (a) prescribed by a licensed Physician in
writing; and (b) based on physical limitations which prohibit daily living in a
non-institutional setting.
"Fatal Illness" means a condition: (a) diagnosed by a licensed Physician;
and (b) is expected to result in death within 2 years for 80% of the diagnosed
cases.
"Physician" means a person who is: (a) state licensed to give medical care or
treatment and is acting within the scope of that license; and (b) not you, the
Annuitant or a member of either your or the Annuitant's families.
We must receive due proof of the Annuitant's confinement or Fatal Illness In
Writing.
Free Withdrawals: Each Annuity Year in the Accumulation Period you may withdraw
a limited amount of Account Value without application of any applicable
contingent deferred sales charge.
The minimum withdrawal amount is as shown in the Schedule. Amounts received as
Systematic Withdrawals or as Minimum Distributions are deemed to come first from
the amount available under this Free Withdrawal provision. You may also request
to receive as a lump sum any free withdrawal amount not already received that
Annuity Year under a plan of Systematic Withdrawals or as Minimum Distributions.
The maximum amount available as a free withdrawal in an Annuity Year is the
greater of this Annuity's "growth" or 10% of "new" Purchase Payments. "Growth"
equals the then current Account Value less all "unliquidated" Purchase Payments
and less any additions credited under any special programs we offer.
"Unliquidated" means not previously withdrawn. "New" Purchase Payments are those
received in the seven (7) years prior to the date as of which a withdrawal
occurs. For purposes of the contingent deferred sales charge, amounts withdrawn
as a free withdrawal are not considered a liquidation of Purchase Payments.
Partial Withdrawals: You may withdraw part of your Surrender Value. The minimum
partial withdrawal is as shown in the Schedule. The Surrender Value that must
remain in the Annuity as of the date of this transaction is as shown in the
Schedule. If the amount of the partial withdrawal request exceeds the maximum
amount available, we reserve the right to treat your request as one for a full
surrender.
On a partial withdrawal, the contingent deferred sales charge is assessed
against any "unliquidated" "new" Purchase Payments withdrawn. "Unliquidated"
means not previously withdrawn. For these purposes, amounts are deemed to be
withdrawn from your Annuity in the following order:
(a) From any amount then available as a free withdrawal; then from
(b) "Old" Purchase Payments (Purchase Payments allocated to Account Value
more than seven years prior to the withdrawal); then from
(c) "New" Purchase Payments (If there are multiple "new" Purchase Payments,
the one received earliest is liquidated first, then the one received next
earliest, and so forth); then from
(d) Other Surrender Value.
Systematic Withdrawals: We may offer Systematic Withdrawals of earnings only,
principal plus earnings or a flat dollar amount. Systematic Withdrawals from
Fixed Allocations are limited to earnings only. A Systematic Withdrawal from a
Fixed Allocation is not subject to the MVA. You may choose at any time to begin
such a program if withdrawals are to come solely from Account Value maintained
in the Sub-accounts. If such a program is to be based on withdrawals in whole or
in part from any Fixed Allocations, then withdrawals must be scheduled for
periods measured from the first day of the Guarantee Period for the applicable
Fixed Allocations. Systematic Withdrawals are deemed to be withdrawn in the same
order as partial withdrawals for purposes of determining if the contingent
deferred sales charge applies.
We offer Systematic Withdrawals on a monthly, quarterly, semi-annual or annual
basis. You may not simultaneously receive Systematic Withdrawals from a Fixed
Allocation and participate in a program of automatic transfers under which
Account Value is transferred from the same Fixed Allocation. Systematic
Withdrawals are not available while you are taking any Minimum Distributions.
The Surrender Value of your Annuity must be at least the minimum amount shown in
the Schedule when you begin a program of Systematic Withdrawals. The minimum for
each Systematic Withdrawal is as shown in the Schedule.
Should we suspend or cancel offering Systematic Withdrawals, such suspension or
cancellation will not affect any Systematic Withdrawal programs then in effect.
Minimum Distributions: You may elect to have us calculate Minimum Distributions
annually if your Annuity is being used for certain qualified purposes under the
Internal Revenue Code. We calculate such amounts assuming the Minimum
Distribution amount is based solely on the value of your Annuity. The Minimum
Distribution amounts applicable to you may depend on other annuities, savings or
investments of which we are unaware. Minimum Distributions are not available if
you are taking Systematic Withdrawals. You may elect to have the Minimum
Distribution paid out monthly, quarterly, semi-annually or annually.
Each Minimum Distribution will be taken from the investment options you select.
However, the portion of any Minimum Distribution that can be taken from any
Fixed Allocations may not exceed the then current ratio between your Account
Value in all Fixed Allocations you maintain and your total Account Value. No MVA
applies to any portion of Minimum Distributions taken from Fixed Allocations.
Minimum Distributions are not available from any Fixed Allocations if such Fixed
Allocations are being used in a dollar cost averaging program or other automatic
transfer programs.
No contingent deferred sales charge is assessed against amounts withdrawn as a
Minimum Distribution, but only to the extent of the Minimum Distribution
required from your Annuity at the time it is taken. The contingent deferred
sales charge may apply to additional amounts withdrawn to meet minimum
distribution requirements in relation to other retirement programs you may
maintain.
Amounts withdrawn as Minimum Distributions are considered to come first
from the amounts available as a free withdrawal as of the date of the yearly
calculation of the Minimum Distribution amount. Minimum Distributions over that
amount are not deemed to be a liquidation of Purchase Payments.
Death Benefit: In the Accumulation Period, a death benefit is payable. If there
is more than one participant, such participants being natural persons, the death
benefit is payable upon the first death of such participants. If the Annuity is
owned by an entity, the death benefit is payable upon the Annuitant's death, if
there is no Contingent Annuitant. If a Contingent Annuitant was designated
before the Annuitant's death and the Annuitant dies, the Contingent Annuitant
then becomes the Annuitant.
In the Payout Period, we distribute any payments due subsequent to a
participant's death or the death of any participant at least as rapidly as under
the method of distribution in effect as of the date of such participant's death.
If the Annuitant dies before the Annuity Date, the Contingent Annuitant will
become the Annuitant. In the Payout Period, subsequent to the death of the
Annuitant, we continue to pay any "certain" payments (payments not contingent on
the continuance of any life ) to the Beneficiary.
The person upon whose death the death benefit is payable is referred to
below as the "decedent". For purposes of this death benefit provision,
"withdrawals" means withdrawals of any type (free withdrawals, partial
withdrawals, Systematic Withdrawals, Minimum Distributions) before assessment of
any applicable contingent deferred sales charge and after any applicable MVA.
For purposes of this provision, persons named participant or Annuitant within 60
days of the Issue Date are treated as if they were a participant or Annuitant on
the Issue Date.
The death benefit is as follows, and is subject to the conditions described in
(1),(2) and (3) below:
(1) If death occurs prior to the cutoff date: the death benefit is the
greater of your Account Value in any Sub-accounts plus the Interim Value of any
Fixed Allocations, or the minimum death benefit ("Minimum Death Benefit"). The
"cutoff date" for the Minimum Death Benefit described below is shown in the
Schedule. The Minimum Death Benefit is the sum of all Purchase Payments less the
sum of all withdrawals.
(2) If death occurs when the decedent has reached or passed the cutoff
date, the death benefit is your Account Value.
(3) If a decedent was not named a participant or Annuitant as of the
Issue Date and did not become such as a result of a prior participant's or
Annuitant's death, the Minimum Death Benefit is suspended as to that person for
a two year period from the date he or she first became a participant or
Annuitant. If that person's death occurs during the suspension period and prior
to the cutoff date, the death benefit is your Account Value in Sub-accounts plus
the Interim Value of any Fixed Allocations. If death occurs during the
suspension period when such decedent has reached or passed the cutoff date, the
death benefit is your Account Value. After the suspension period is completed,
the death benefit is the same as if such person had been a participant or
Annuitant on the Issue Date.
The amount of the death benefit is determined as of the date we receive In
Writing: (a) due proof of death; (b) all representations we require or which are
mandated by applicable law or regulation in relation to the death claim and the
payment of death proceeds; and (c) any applicable election of the mode of
payment of the death benefit, if not previously elected by the Owner.
If the death benefit becomes payable prior to the Annuity Date due to a
participant's death and the Beneficiary is the spouse, then in lieu of receiving
the death benefit, the spouse may elect to be treated as a participant and
continue the Annuity.
In the event of a participant's death, the benefit must be distributed within
(a) five years of the date of death; or (b) over a period not extending beyond
the life expectancy of the Beneficiary or over the life of the Beneficiary.
Distribution after a participant's death to be paid under (b) above, must
commence within one year of the date of death.
Annuity Payments: Annuity payments can be guaranteed for life, for a certain
period, or for a certain period and life. We make available fixed payments. You
may choose an Annuity Date, an annuity option and the frequency of annuity
payments. Your choice of Annuity Date and annuity option may be limited
depending on your use of the Annuity. You may change your choices at any time up
to 30 days before the earlier of: (a) the date we would have applied your
Account Value to an annuity option had you not made the change; or (b) the date
we will apply your Account Value to an annuity option in relation to the new
Annuity Date you are then selecting. You must request this change In Writing.
The Annuity Date must be the first or the fifteenth day of a calendar month.
In the absence of an election In Writing: (a) the Annuity Date is the first
day of the calendar month first following the later of the Annuitant's 85th
birthday or the fifth anniversary of our receipt at our Office of your request
to purchase an Annuity; and (b) where allowed by law, monthly payments will
commence under option 2, described below, with 10 years certain. The amount to
be applied is your Annuity's Account Value 15 business days prior to the Annuity
Date. In determining your annuity payments, we credit interest using our then
current crediting rate for this purpose, which is not less than 3% of interest
per year, to your Account Value between the date Account Value is applied to an
annuity option and the Annuity Date. If there is any remaining contingent
deferred sales charge applicable as of the Annuity Date, then the annuity option
you select must include a certain period of not less than 5 years' duration.
Annuity options in addition to those shown are available with our consent.
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below. Except where a lower amount is
required by law, the minimum monthly annuity payment is as shown in the
Schedule. In the absence of election prior to proceeds becoming due, the
Beneficiary may make such an election. However, if you made an election, the
Beneficiary may not alter such election. Such election must be made In Writing
within one year after proceeds are payable.
For purposes of the annuity options described below, the term "key life" means
the person or persons upon whose life any payments dependent upon the
continuation of life are based.
(a) Option 1 - Payments for Life: Under this option, income is payable
periodically prior to the death of the key life, terminating with the last
payment due prior to such death.
(b) Option 2 - Payments for Life with 10, 15, or 20 Years Certain:
Under this option, income is payable periodically for 10, 15, or 20 years, as
selected, and thereafter until the death of the key life. Should the death of
the key life occur before the end of the period selected, the remaining payments
are paid to the Beneficiary to the end of such period.
(c) Option 3 - Payments Based on Joint Lives: Under this option, income
is payable periodically during the joint lifetime of two key lives, and
thereafter during the remaining lifetime of the survivor, ceasing with the last
payment prior to the survivor's death.
(d) Option 4 - Payments for a Certain Period: Under this option, income
is payable periodically for a specified number of years. The number of years is
subject to our then current rules. Should the payee die before the end of the
specified number of years, the remaining payments are paid to the Beneficiary to
the end of such period.
The first periodic payment is determined by multiplying the portion of the
Account Value being allocated to purchase annuity payments (expressed in
thousands of dollars) as of the close of business of the fifteenth day preceding
the Annuity Date, plus interest at not less than 3% per year from such date to
the Annuity Date, by the amount of the first periodic payment per $1,000 of
value obtained from our then current annuity rates for that type of annuity and
for the frequency of payment selected. These rates will not be less than those
shown in the Annuity Tables shown herein.
We reserve the right to require submission prior to commencement of any annuity
payments of evidence satisfactory to us of the age of any key life upon whose
life payment amounts are calculated.
Pricing Of Transfers And Distributions: Subject to our right to defer
transactions for a limited period, we "price" transfers and distributions on the
dates indicated below. The pricing of transfers and distributions involving
Sub-accounts includes the determination of the applicable Unit Price, for the
Units transferred or distributed. The pricing of transfers and distributions
involving Fixed Allocations includes the determination of any applicable MVA.
Any applicable MVA alters the amount available when all the Account Value in a
Fixed Allocation is being transferred or distributed. Any applicable MVA alters
the amount of Interim Value needed when only a portion of the Account Value is
being transferred or distributed. Unit Prices may change each Valuation Period
to reflect the investment performance of the Sub-accounts. The MVA applicable to
each Fixed Allocation changes once each month and each time we declare a
different rate for new Fixed Allocations.
(a) We price "scheduled" transfers and distributions as of the date
such transactions are so scheduled. "Scheduled" transactions include transfers
previously scheduled with us under an automatic transfer program, Systematic
Withdrawals, Minimum Distributions and annuity payments.
(b) We price "unscheduled" transfers, including transfers under an
automatic transfer program that were not scheduled with us, partial withdrawals
and free withdrawals as of the date we receive In Writing at our Office the
request for such transactions.
(c) We price surrenders, medically-related surrenders and death
benefits as of the date we receive at our Office all materials we require for
such transactions and such materials are satisfactory to us.
GENERAL PROVISIONS
Entire Contract: The contract shown in the Schedule, including any attached
riders or endorsements, the attached copy of any enrollment form and any
supplemental applications and endorsements are the entire contract. As to your
Annuity, the contract also includes the copy of any enrollment form attached to
your Annuity. All statements made in any application and/or any enrollment form
are deemed to be representations and not warranties. No statement is used to
void the contract or an Annuity or defend against a claim unless it is contained
in any application or any supplemental application or any enrollment form.
Only our President, a Vice President or Secretary may change or waive any
provisions of the contract or of any 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 person upon whose life annuity payments or the minimum death benefit
are based, we make adjustments to conform to the facts. As to annuity payments:
(a) any underpayments by us will be remedied on the next payment 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 an Annuity may be
transferred, assigned or pledged for loans at any time. However, these rights
may be limited depending on your use of the Annuity. You may transfer, assign or
pledge your rights to another person at any time, prior to any death upon which
the death benefit is payable. You must request a transfer or provide us a copy
of the assignment In Writing. A transfer or assignment is subject to our
acceptance. 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: The contract does not share in our profits or surplus
earnings.
Deferral of Transactions: We may defer any annuity payment for a period not to
exceed the lesser of 6 months or the period permitted by law. If we defer a
distribution or transfer from any Fixed Allocation or any fixed annuity payout
for more than thirty days, we pay interest of at least 3% per year on the amount
deferred. We may defer any distribution from any Sub-account or any transfer
from a Sub-account for a period not to exceed 7 calendar days from the date the
transaction is effected. Any other deferral period begins on the date such
distribution or transfer would otherwise have been transacted.
All transactions into, out of or based on any Sub-account may be postponed
whenever (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.
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 to the contract shown in the Schedule
that materially affect your rights. We reserve the right to require that this
Annuity be returned to our Office for endorsement of any change to such contract
or any change affecting only this Annuity.
Claims of Creditors: To the extent permitted by law, no payment under the
contract shown in the Schedule or any Annuity thereunder is subject to the
claims of the creditors of the Owner, you or any other participant, Annuitant or
Beneficiary.
Proof of Survival: The payment of any annuity is subject to evidence
satisfactory to us that the payee is alive on the date such payment is otherwise
due.
Tax Reporting: We intend to make all required regulatory reports regarding
taxable events in relation to this Annuity. Such events may include, but are not
limited to: (a) annuity payments; (b) payment of death benefits; (c) surrender
of value from an Annuity in excess of the tax basis; and (d) assignments.
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.
Participation and Termination of Certain Programs We May Offer: To elect to
participate or to terminate participation in any program we may offer, we may
require receipt at our Office of a request In Writing on a form satisfactory to
us.
Reports to You: We provide reports to you during the Accumulation Period. We
will provide you with reports at least once each quarter that you maintain
Account Values in the Sub-accounts. We will provide you with reports once a year
if you maintain Account Value only in one or more Fixed Allocations. 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 Variable Separate Account
shown in the Schedule with other "unitized" separate accounts; (c) terminate
offering certain Guarantee Periods for new or renewing Fixed Allocations; (d)
combine the Fixed Separate Account shown in the Schedule with other
"non-unitized separate accounts; (e) deregister the Variable Separate Account
shown in the Schedule under the Investment Company Act of 1940; (f) operate the
Variable 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; (g) make changes required by any change in the Securities Act of 1933,
the Exchange Act of 1934 or the Investment Company Act of 1940; (h) make changes
that are necessary to maintain the tax status of your Annuity under the Internal
Revenue Code; and (i) 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.
ANNUITY TABLES
The attached tables show the minimum dollar amount of each monthly payment for
each $1,000 applied under the options. The amounts payable when annuity payments
commence may be higher, based on our then current assumptions as to interest,
expenses and mortality, but will not be lower.
Under options one and two, the amount of each payment depends on the age and
sex, if applicable, of the payee at the time the first payment is due. Under
option three, the amount of each payment depends on the age and sex, if
applicable, of both payees at the time the first payment is due. No election can
be changed once payments begin.
The tables shown are based on interest at 3% per year compounded annually and
the 1983a Individual Annuity Mortality Table set back one year for males and two
years for females or the appropriate variation of such Table with genderless
rates when applicable to the Annuity in order to meet Federal requirements in
relation to the usage of such Annuity.
The payee's settlement age is the payee's age, last birthday, on the date of the
first payment, minus the age adjustment. The age adjustments are shown below.
They are based on the date of the first payment. The age adjustment does not
exceed the age of the payee.
Annuitization Attained Age
Year Set Back
2000 - 2009 1
2010 - 2019 2
2020 and later 3
<PAGE>
Amount of Monthly Payment For Each $1,000 Applied
(Based on 3% Annual Interest Rate)
First and Second Options - Single Life Annuities with:
<TABLE>
<CAPTION>
Male Payee with Female Payee with
Monthly Payments Guaranteed Monthly Payments Guaranteed
--------------------------- ---------------------------
None 120 180 240 None 120 180 240
Age $ $ $ $ $ $ $ $
---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 4.19 4.15 4.10 4.03 3.79 3.78 3.76 3.73
55 4.61 4.54 4.45 4.32 4.10 4.08 4.04 3.99
60 5.15 5.03 4.87 4.65 4.52 4.47 4.40 4.30
65 5.91 5.67 5.36 4.97 5.08 4.98 4.85 4.65
70 6.98 6.44 5.87 5.23 5.85 5.65 5.38 5.00
75 8.46 7.32 6.31 5.40 6.98 6.50 5.94 5.28
80 10.57 8.18 6.62 5.48 8.66 7.50 6.41 5.43
</TABLE>
Third Option - Joint and Last Survivor Annuity
<TABLE>
<CAPTION>
Age of Female Payee
Age of 35 40 45 50 55 60 65 70 75 80
Male Payee $ $ $ $ $ $ $ $ $ $
----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.15 3.27 3.39 3.53 3.67 3.79 3.91 4.00 4.07 4.12
55 3.17 3.29 3.44 3.60 3.78 3.96 4.13 4.27 4.39 4.47
60 3.18 3.31 3.47 3.66 3.88 4.11 4.35 4.57 4.76 4.91
65 3.19 3.33 3.50 3.70 3.95 4.23 4.55 4.87 5.18 5.44
70 3.19 3.34 3.52 3.74 4.01 4.33 4.72 5.16 5.62 6.05
75 3.20 3.34 3.53 3.76 4.04 4.40 4.85 5.39 6.02 6.68
80 3.20 3.35 3.53 3.77 4.07 4.45 4.94 5.57 6.35 7.26
</TABLE>
Fourth Option - Payments for a Designated Period
<TABLE>
<CAPTION>
Amount of Amount of Amount of Amount of
No. of Monthly No. of Monthly No. of Monthly No. of Monthly
Years Payments Years Payments Years Payments Years Payments
----- -------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.61 16 6.53 22 5.15 28 4.37
11 8.86 17 6.23 23 4.99 29 4.27
12 8.24 18 5.96 24 4.84 30 4.18
13 7.71 19 5.73 25 4.71
14 7.26 20 5.51 26 4.59
15 6.87 21 5.32 27 4.47
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE, P.O. BOX 883
SHELTON, CT 06484-0883
ENDORSEMENT RELATING TO FREE WITHDRAWAL PROVISION
The section of the Annuity to which this Endorsement is attached entitled "Free
Withdrawal" is hereby deleted and is replaced by the following:
Free Withdrawals: Each Annuity Year in the Accumulation Period you may withdraw
a limited amount of Account Value without application of any applicable
contingent deferred sales charge. Such withdrawal is available to meet liquidity
needs. Such withdrawal is not available at the time you surrender this Annuity.
The minimum withdrawal amount is as shown in the Schedule. Amounts received as
Systematic Withdrawals or as Minimum Distributions are deemed to come first from
the amount available under this provision. You may also request to receive as a
lump sum any free withdrawal amount not already received that Annuity Year under
a plan of Systematic Withdrawals or as Minimum Distributions.
<TABLE>
<CAPTION>
Definitions
- -----------
<S> <C>
Emergency Withdrawal Amount: The Emergency Withdrawal Amount during the first Annuity Year is
zero. After the first Annuity Year, it equals 35% of "new" Purchase
Payments less the sum of all prior withdrawals of any type.
Growth: Growth equals the then current Account Value less all "unliquidated"
Purchase Payments and less the value at the time credited of any special programs we
offer.
Unliquidated Purchase Payments: Purchase Payments not previously surrendered or withdrawn.
New Purchase Payments: Purchase Payments received in the seven (7) years prior to the date
as of which a withdrawal occurs under this provision.
</TABLE>
For purposes of the contingent deferred sales charge, amounts withdrawn as a
free withdrawal are not considered a liquidation of Purchase Payments.
Therefore, for purposes of this provision, a withdrawal will not reduce the
amount of any applicable contingent deferred sales charge upon any subsequent
partial withdrawal or subsequent surrender.
The maxiumum amount available as a withdrawal during an Annuity year depends on
the use of your Annuity on its Issue Date.
(1) For annuities used in connection with a retirement plan designed to
meet the requirements of section 401 of the code, the maximum amount
available as a free withdrawal is the greater of (a), (b), and (c),
where:
(a) is the then current Emergency Withdrawal Amount;
(b) is the Growth; and
(c) is 20% of New Purchase Payments.
(CONTINUED ON BACK PAGE)
(2) For all other Annuities, the maximum amount available as a free
withdrawal is the greater of (a), (b), and (c), where:
(a) is the then current Emergency Withdrawal Amount;
(b) is the Growth; and
(c) is 10% of New Purchase Payments.
Signed for:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
/s/ G. Boronow
PRESIDENT
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE, P.O. BOX 883
SHELTON, CT 06484-0883
ENDORSEMENT RELATING TO PROVISION ENTITLED "REBALANCING"
The section of the Annuity to which this Endorsement is attached entitled
"Rebalancing" is hereby deleted and is replaced by the following:
Rebalancing: We offer, during the Accumulation Period, an automatic quarterly,
semi-annual, or annual rebalancing program. Under this program, we periodically
transfer Account Value among investment options of your choice (as limited
below), so that the ratio of the Account Value in each investment option to the
total Account Value in the chosen investment options is in accordance with
instructions provided by you. Such periodic transfers are effected on the last
Valuation Date of the rebalancing period chosen as measured from the Issue Date
of the Annuity.
The portion of any Purchase Payment allocable to investment options being used
for rebalancing must be allocated in accordance with rebalancing percentages.
When a transfer request is received that involves any of the investment options
in a rebalancing program, we automatically amend the rebalancing investment
options and percentages going forward (unless we receive alternate instructions)
in accordance with the new Account Value ratios in the investment options chosen
for rebalancing as of the effective date of such requested transfer.
You may change the percentage allocable to each investment option at any time.
However, you may not choose to allocate less than 5% of the Account Value to any
investment option. The Account Value of your Annuity must be at least equal to
the amount shown in the Schedule when we receive your request to commence
rebalancing.
Fixed Allocations may not be included in a rebalancing program, and currently,
all variable investment options in which you maintain Account Value must be used
in the rebalancing program, although this requirement may be modified at a
future date.
Automatic rebalancing may not be available in conjunction with certain other
programs which affect automatic transfers or withdrawals from any of the
investment options chosen for the rebalancing program.
We reserve the right to modify, suspend, or cancel this program; however, such
modification, suspension, or cancellation will not affect any rebalancing
program then in effect.
Signed for:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
/s/ G. Boronow
PRESIDENT
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Shelton, Connecticut
(A Stock Company)
GROUP DEFERRED ANNUITY
NON-PARTICIPATING
VARIABLE AND FIXED INVESTMENT OPTIONS IN THE ACCUMULATION PERIOD
FIXED ANNUITY PAYMENTS IN THE PAYOUT PERIOD
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE VARIABLE
INVESTMENT OPTIONS ARE BASED ON THEIR INVESTMENT PERFORMANCE AND ARE,
THEREFORE, NOT GUARANTEED. PLEASE REFER TO THE SECTION ENTITLED "ACCOUNT
VALUE IN THE SUB-ACCOUNTS" FOR A MORE COMPLETE EXPLANATION.
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE FIXED
INVESTMENT OPTIONS MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT. SUCH A MARKET
VALUE ADJUSTMENT MAY INCREASE OR DECREASE ANY SUCH PAYMENTS OR VALUES. PLEASE
REFER TO THE SECTION ENTITLED "ACCOUNT VALUE OF THE FIXED ALLOCATIONS" FOR A
MORE COMPLETE EXPLANATION.
Exhibit 7 (a)
Automatic Modco Annuity Reinsurance Agreement
(No. 0595-3)
Between
AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION
of Shelton, Connecticut
(referred to as the Reinsured)
and
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
of Los Angeles, California
(referred to as the Reinsurer)
Effective May 1, 1995
<PAGE>
CONTENTS
ARTICLES
I Automatic Reinsurance 1
II Liability 1
III Plan and Amount of Insurance 2
IV Reinsurance Premiums 2
V Payments by Reinsurer 2
VI Reporting 3
VII Annuitization 3
VIII Deposits of the Reserve 3
IX Interest Credit on Modified Coinsurance Reserve
and Modified Coinsurance Reserve Adjustment 4
X Account Payable Liability and Reserve Basis 4
XI General Provisions 4
XII Recapture 6
XIII Exclusion of the Fixed Allocation Account 6
XIV Arbitration 7
XV Improper Solicitation of Policy Owners 8
XVI DAC Tax - Section 1.848-2(g) (8) Election 8
XVII Experience Refund Account 9
XVIII Duration of Agreement 9
XIX Entire Agreement 10
XX Execution 10
Schedules
SCHEDULE A Business Reinsured 11
SCHEDULE B Basis of Reinsurance 12
SCHEDULE C Monthly Settlement Report 13
SCHEDULE D Commission and Expense Allowances 14
SCHEDULE E Monthly Business Management Report 15
SCHEDULE F Annual Report 16
SCHEDULE G Interest Credit on Modified Coinsurance Reserve 17
SCHEDULE H Modified Coinsurance Reserve Adjustment 18
SCHEDULE I Transfer Adjustment Factors 19
SCHEDULE J Experience Refund Formula 20
<PAGE>
Page 1
The Reinsured and the Reinsurer mutually agree to reinsure on the terms and
conditions set out below.
ARTICLE I
AUTOMATIC REINSURANCE
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the policies written by the Reinsured as shown in Schedule A. No
riders or supplementary benefits are included under this Agreement.
2. Coverages. The policies reinsured in Schedule A are the Flexible Premium
Deferred Variable Annuity policies issued after May 1, 1995. Reinsurance will be
limited in percentage as provided in Schedule B.
3. This Agreement will cover only the Variable Allocation Account of the
policies. The Fixed Allocation Account will be excluded from this Agreement as
set forth in Article XIII.
ARTICLE II
LIABILITY
1. Liability. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as set forth in
Article XVIII, Execution, and ends after all policies reinsured have been
terminated. The liability of the Reinsurer to the Reinsured under this
Agreement will be coexisting with the liability of the Reinsured under the
policies reinsured.
2. The liability of the Reinsurer shall be settled and paid to the Reinsured
monthly on the basis of the monthly reports prepared by the Reinsured in
the form of Schedule C. Payment of any amount due to be paid by the
Reinsurer or the Reinsured shall be determined on a net basis and shall be
paid within two weeks after receipt of the monthly report.
3. This is a contract solely between the Reinsured and the Reinsurer. The
obligations under this contract of the Reinsurer are solely to the
Reinsured and those of the Reinsured solely to the Reinsurer.
<PAGE>
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan. Reinsurance under this Agreement will be on the modified
coinsurance basis in accordance with the policy forms issued by the Reinsured
and listed on Schedule A.
2. Reduction and Terminations. If any of the policies reinsured under this
Agreement are reduced or terminated by payment of a death benefit, withdrawal or
surrender, the reinsurance will be reduced proportionately.
ARTICLE IV
REINSURANCE PREMIUMS
1. The premium to be paid to the Reinsurer by the Reinsured with respect to
each policy reinsured, as specified in Schedule A, will be the quota share
percentage, as specified in Schedule B, of the gross premium corresponding
to the reinsured portion of the policy.
ARTICLE V
PAYMENTS BY REINSURER
1. Benefits
The Reinsurer shall pay the Reinsured the Reinsurer's quota share of
(a) the Account Value portion of the death benefits paid by the Reinsured,
(b) the Surrender Values paid by the Reinsured and (c) the Withdrawal
Benefits paid by the Reinsured.
2. Commission and Expense Allowances. The Reinsurer will pay the Reinsured
commission and expense allowances as outlined in Schedule D on the
Reinsurer's quota share portion of the policies. The maintenance expense
allowances will be paid to the Reinsured at the same time the policy's
Maintenance Expense is deducted from the policy.
<PAGE>
ARTICLE VI
REPORTING
1. The Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured.
2. Not later than ten (10) days after the end of each month, the Reinsured
will submit a report substantially in accordance with Schedule C. The
Reinsured agrees to provide or make available to the Reinsurer such
documentation as may be necessary to support the items reported.
3. Not later than ten (10) days after the end of each month, the Reinsured
will submit a report substantially in accordance with Schedule E.
4. Not later than ten (10) days after the end of each calendar year, the
Reinsured will submit a report substantially in accordance with Schedule F.
ARTICLE VII
ANNUITIZATION
1. Any policy annuitizing (going into pay-out status under an immediate
annuity plan) shall be deemed to be recaptured by the Reinsured.
2. On any annuitized policy reinsured with the Reinsurer, the Reinsurer will
pay the Reinsured an amount equal to the policy's Account Value reduced by
the Contingent Deferred Sales Charge specified in the policy.
ARTICLE VIII
DEPOSITS OF THE RESERVE
1. The Reinsurer shall deposit with the Reinsured the reserves for the
business reinsured under this Agreement.
2. For the purpose of this Article, reserves are defined to be the
total Account Value of the policies reinsured.
<PAGE>
ARTICLE IX
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
AND MODIFIED COINSURANCE RESERVE ADJUSTMENT
1 The Reinsurer shall receive an interest credit on the modified coinsurance
reserve. The amount of the credit will be determined as set forth in
Schedule G.
2. The Reinsured shall receive a modified coinsurance reserve adjustment.
The amount of the adjustment will be determined as set forth in Schedule H.
3. Both the interest credit and the reserve adjustment will be made at the
end of each month.
ARTICLE X
ACCOUNT PAYABLE LIABILITY AND RESERVE BASIS
1. The Reinsured shall set up an Account Payable liability in its financial
statements equal to the difference between the total Account Value of the
reinsured policies and the total Statutory Reserve of the policies. The
Reinsurer shall set up an Account Receivable asset equal to the Account
Payable liability set up by the Reinsured.
2. For purposes of Section 1 of this Article, the Statutory Reserve shall be
calculated by the Reinsured according to the "Commissioner's Annuity
Reserve Valuation Method" as prescribed in the Standard Valuation Law.
ARTICLE XI
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same
limitations and conditions as the insurance under the policy or policies written
by the Reinsured on which the reinsurance is based.
2. Expenses. In no event will the Reinsurer have any liability for any
extra-contractual damages which are rendered against the Reinsured as a result
of acts, omissions or course of conduct committed by the Reinsured in connection
with the annuity contracts reinsured under this Agreement. In no event will the
Reinsured have any liability for extra-contractual damages against the Reinsurer
as a result of acts, omissions, or course of conduct committed by the Reinsurer
in connection with the reinsurance of the annuity contracts under this
Agreement.
<PAGE>
3. Oversights. If failure to pay any premium due or to perform any other
act required by this Agreement is unintentional and is caused by
misunderstanding or oversight, the Reinsured and the Reinsurer will adjust the
situation to what it would have been had the misunderstanding or oversight not
occurred.
4. Inspection. At any reasonable time, the Reinsurer and the Reinsured may
inspect the original papers and any other books or documents at the Home Office
of the other relating to or affecting reinsurance under this Agreement.
It is mutually agreed by the Reinsured and the Reinsurer that any
information that is made available for inspection under this section of the
Agreement shall be kept confidential and under no circumstances may this
information be disclosed to, or made available for inspection by, any third
party without the prior consent of the other contracting party.
5. Assignment or transfer. In no event shall either the Reinsured or the
Reinsurer assign any of its rights, duties or obligations under this Agreement
without the prior written approval of the other party. Such approval shall not
unreasonably be withheld.
In no event shall either the Reinsured or the Reinsurer transfer either the
policies reinsured under this Agreement or the reinsurance without the prior
written approval of the other party. Such approval shall not unreasonable be
withheld.
6. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be construed in accordance
with the applicable federal law and the laws of the State of Connecticut.
7. Premium Taxes. The Reinsurer will not be liable for premium taxes.
8. Insolvency. In the event of the declared insolvency of the Reinsured,
and the appointment of a domiciliary liquidator, receiver, conservator or
statutory successor for the Reinsured, this reinsurance shall be payable
immediately upon demand, with reasonable provision for verification, directly to
the Reinsured or its domiciliary liquidator, receiver, conservator or statutory
successor, on the basis of the liability of the Reinsured without diminution
because of the insolvency of the Reinsured or because the liquidator, receiver,
conservator or statutory successor of the Reinsured has failed to pay all or a
portion of any claim.
For purposes of the paragraph above, the Reinsurer and the Reinsured shall
consider any balance due and unpaid, whether on account of premiums, allowances,
losses or claims expenses, to be mutual debts or credits under this Agreement
and will offset, if permitted under the applicable law. Only the balance will be
considered in determining the liability of the Reinsurer.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association shall give written notice to the
Reinsurer of the pendency of a claim involving the Reinsured indicating which of
the policies would involve possible liability on the part of the Reinsurer to
the Reinsured or its domiciliary liquidator, receiver, conservator or statutory
successor, within a reasonable amount of time after the claim is filed in the
conservation, liquidation, receivership or other proceeding.
<PAGE>
During the pendency of any claim, the Reinsurer may investigate the same
and interpose, at its own expense, in the proceeding where that claim is to
be adjudicated, any defense or defenses that it may deem available to the
Reinsured, to its policyholder, or to any liquidator, receiver or statutory
successor of the Reinsured or guaranty fund or association. The expenses
thus incurred by the Reinsurer will be chargeable, subject to approval of
the applicable court, against the Reinsured as part of the expense of
conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the Reinsured as a result of the defense
undertaken by the Reinsurer.
This reinsurance shall be payable directly by the Reinsurer to the
Reinsured or to its domiciliary liquidator, receiver, conservator or
statutory successor, except as expressly required otherwise by applicable
insurance law.
9. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, the Reinsured
may retain all or any portion of any amount then due or which may become
due to the Reinsurer under this Agreement and use such amounts for the
purposes of paying any and all liabilities of the Reinsurer incurred under
this Agreement. When all such liability hereunder has been discharged, the
Reinsured shall pay the Reinsurer, its successor or statutory receiver, the
balance of such amounts withheld as may remain.
ARTICLE XII
RECAPTURE
1. With the exceptions of the provisions in Article VII, Section 2 of this
Article and Section 6 of Schedule A, business reinsured under this
Agreement will not be eligible for recapture.
2. Business reinsured under this Agreement may be recaptured after the end of
the fifteenth policy year. The Reinsured shall notify the Reinsurer at
least 30 days prior to the end of the fifteenth policy year if the
Reinsured elects to recapture such business. Upon recapture, the Reinsurer
will pay the Reinsured an amount for each recaptured policy equal to the
Surrender Value of the policy. The Reinsured will transfer to the Reinsurer
the modified coinsurance reserve of the policy which equals the Account
Value of the policy.
ARTICLE XIII
EXCLUSION OF THE FIXED ALLOCATION ACCOUNT
1. The Fixed Allocation Account of the policies will be excluded from this
Agreement. Any transfers between the Fixed Allocation Account and the
Variable Allocation Account will be subject to a transfer adjustment as
specified in Sections 2 and 3 of this Article.
<PAGE>
2. For any transfer from the Variable Allocation Account to the Fixed
Allocation Account, the Reinsured shall pay the Reinsurer a transfer
adjustment which equals the amount transferred multiplied by the applicable
Transfer Adjustment Factor as provided in Schedule I.
3. For any transfer from the Fixed Allocation Account to the Variable
Allocation Account, the Reinsurer shall pay the Reinsured a transfer
adjustment which equals the amount transferred multiplied by the applicable
Transfer Adjustment Factor as provided in Schedule I.
For purposes of this Article XIII, Section 3. of the Agreement, any
premiums paid by the policyholder after the effective date of the policy
will be considered transfers in the Variable Allocation Account and will be
subject to the Transfer Adjustment Factor provided in Schedule I.
ARTICLE XIV
ARBITRATION
1. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
2. There must be three arbitrators who will be active, prior or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either contracting company fails to choose an arbitrator
within thirty (30) days after the other contracting company has given
written notice of its arbitrator appointment, the contracting company which
has given written notice may choose two arbitrators who shall in turn
choose a third arbitrator before entering arbitration. If the two
arbitrators are unable to agree upon the selection of a third arbitrator
within thirty (30) days following their appointment, each arbitrator shall
nominate three candidates within ten days thereafter, and the final
selection shall be made a court of competent jurisdiction from among the
submitted names (three each) or any other persons the court finds to be a
qualified and impartial arbitrator.
3. With regard to (2) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
which will be in effect on the date of delivery of demand for arbitration.
4. Each contracting company shall pay its arbitrator and its arbitration
expenses and the two companies shall share equally the third arbitrator's
expenses.
5. The award agreed by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
<PAGE>
ARTICLE XV
IMPROPER SOLICITATION OF POLICY OWNERS
1. Neither party shall contact or authorize any other person to contact owners
of the policies for the purpose of soliciting surrender of the policies,
conversion of the policies to another form of insurance, making policy
loans or withdrawals without prior written approval of the other party.
2. The Reinsured will not cause or permit the existence of this Reinsurance
Agreement to be communicated to any current or prospective policyholder
without the prior written approval of the Reinsurer, except as where
required by state or federal laws. In the event this provision is violated,
the Reinsurer may terminate this Agreement without notice.
ARTICLE XVI
DAC TAX - SECTION 1.848-2(g) (8) ELECTION
The Reinsured and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended. This election
shall be effective for 1993 and for all subsequent taxable years for which this
Agreement remains in effect.
1. The term "party" will refer to either the Reinsured or the Reinsurer as
appropriate.
2. The terms used in this Article are defined by reference to Regulation Section
1.848-2 in effect December 1992.
3. The party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1).
4. Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
5. The Reinsured will submit a schedule to the Reinsurer by May 1 of each year
of its calculation of the net consideration for the preceding calendar year.
This schedule of calculations will be accompanied by a statement signed by
an officer of the Reinsured stating that the Reinsured will report such net
consideration in its tax return for the preceding calendar year.
6. The Reinsurer may contest such calculation by providing an alternative
calculation to the Reinsured in writing within 30 days of the Reinsurer's
receipt of the Reinsured's calculation. If the Reinsurer does not so notify
the Reinsured, the Reinsurer will report the net consideration as determined
by the Reinsured in the Reinsurer's tax return for the previous calendar
year.
<PAGE>
7. If the Reinsurer contests the Reinsured's calculation of the net
consideration, the parties will act in good faith to reach an agreement as
to the correct amount within thirty (30) days of the date the Reinsurer
submits its alternative calculation. If the Reinsured and the Reinsurer
reach agreement on an amount of net consideration, each party shall report
such amount in their respective tax returns for the previous calendar year.
ARTICLE XVII
EXPERIENCE REFUND ACCOUNT
This Agreement provides for an Experience Refund Account to allow the Reinsured
to share in the favorable experience of the reinsured business as to fund
growth, mortality and lapse. Specifically, an Experience Refund Account will be
established and maintained in accordance with the formulas and terms set forth
in Schedule J of this Agreement. At the end of each five-year interval from the
effective date of the Agreement beginning with April 30, 2000, the Reinsurer
will pay the Reinsured 100% of the positive amount, if any, in the Experience
Refund Account .
ARTICLE XVIII
DURATION OF AGREEMENT
1. This Agreement may be terminated with respect to new policies at any time
by either company giving ninety (90) days' written notice of termination.
The day the notice is deposited in the mail addressed to the Home Office or
to an Officer of either company will be the first day of the ninety (90)
day period.
2. During the ninety (90) day period, this Agreement will continue to remain
in force.
3. After termination, the Reinsurer and the Reinsured shall remain liable for
all reinsurance which became effective prior to the termination of this
agreement.
<PAGE>
ARTICLE XIX
ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement between the parties with
respect to the business being reinsured hereunder. There are no understandings
between the parties other than as expressed in this Agreement. Any change or
modification to this Agreement shall be null and void unless made by amendment
to this Agreement and signed by both parties.
ARTICLE XX
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and shall be effective as of May 1, 1995.
AMERICAN SKANDIA LIFE TRANSAMERICA OCCIDENTAL
ASSURANCE CORPORATION LIFE INSURANCE COMPANY
at Shelton, Connecticut, at Charlotte, North Carolina,
on Dec. 19, 1995. on December 13, 1995.
By: /s/Gordon C. Boronow By: /s/ Michael Stein
Title: President & COO Second Vice President
By: /s/Thomas M. Mazzaferro By: /s/Richard Wang
Title: Executive Vice President Second Vice President
<PAGE>
SCHEDULE A
BUSINESS REINSURED
1. The annuitants must be residents of the United States and issue age 80 or
under.
2. Form Name and Type Form Number
ASAP2/American Skandia Advisors Plan 2
Group Deferred Annuity Certificate AXASP2/CRT(12/94)-01
Individual Deferred Annuity With Fixed Accounts AXASP2/IND(12/94)-01
Individual Deferred Annuity Without Fixed Accounts AXASP2/VAIND(12/94)-01
AXIOM
Group Deferred Annuity Certificate AXASP2/CRT(12/94)-01
Individual Deferred Annuity With Fixed Accounts AXASP2/IND(12/94)-01
Individual Deferred Annuity Without Fixed Accounts AXASP2/VAIND(12/94)-01
3. The Fixed Accounts of the policies are excluded from this Agreement subject
to provisions of Article XIII.
4. Business reinsured excludes any contract that is issued with an initial
purchase payment of less than $10,000.
5. Business reinsured excludes any purchase payments that are made after
the contract holder has attained age 80.
6. Upon the time a policyholder makes a purchase payment after attaining age
80, the Reinsured will recapture the policy. Upon recapture, the Reinsured
shall pay the Reinsurer a recapture fee equal to the percentage in Section
II of Schedule I times the account value recaptured.
For policies that have received more than one purchase payment before
recapture, the recapture fee factor shall be the weighted average of the
recapture fee factors applicable to all purchase payments using the
percentage of each purchase payment to total purchase payment as weight.
7. The M&E and Administration charges are 140 bp for ASAP2 and 100 bp for
AXIOM.
8. Other than business sold in New York and Connecticut, business reinsured
excludes any purchase payments sold through PaineWebber.
<PAGE>
SCHEDULE B
BASIS OF REINSURANCE
The amount of reinsurance under this Agreement shall be the Reinsurer's quota
share percentage shown below of the liability of the Reinsured on all policies
in the forms listed in Schedule A. The reinsurance will cover only the Variable
Allocation Account of the policy.
Quota Share Percentages
ASAP2 - 33%
AXIOM - 0%
<PAGE>
SCHEDULE C
MONTHLY SETTLEMENT REPORT
A. Due Reinsurer
(1) Initial Premium Ceded
(2) Additional/Renewal Premiums Ceded
(3) Interest Credit on Modified Coinsurance Reserve (per Article IX)
(4) Transfers-in from the Fixed Allocation Account
(5) Adjustment for transfers from the Variable Allocation Account to the
Fixed Allocation Account (per
Article XIII)
(6) Total Amount Due Reinsurer (Total 1-5)
B. Due Reinsured
(1) Commission and Expense Allowances (per Article V)
(a) Commission Allowance
(b) Consulting Fee Reimbursement
(c) Per Policy Issue Expense Allowance
(d) Sales and Marketing Expense Allowance
Subtotal
(2) Benefits Ceded
(a) Surrenders, Medically-Related Surrenders, and Annuitizations
(b) Transfers Out to Fixed
(c) Penalty Free Surrender
(d) Partial Withdrawals
(e) Systematic Withdrawals
(f) Minimum Distributions
(g) Death Claims (Account Value of Policy)
(3) Adjustment for transfers from the Fixed Allocation Account to the
Variable Allocation Account (per Article XIII)
(4) Adjustment for Additional/Renewal Premium
(5) Modified Coinsurance Reserve Adjustment (per Article IX)
(6) Total Amount Due Reinsured = (1) + (2) + (3) + (4) +(5)
C. Balance During the Period = A(6) - B(6)
If positive, the balance is due to be paid by the Reinsured. If negative,
the balance is due to be paid by the Reinsurer.
The above information shall be provided by the Reinsured on an aggregate basis.
The individual policy data shall be available to the Reinsurer on a computer
tape or diskette upon request.
<PAGE>
SCHEDULE D
COMMISSION AND EXPENSE ALLOWANCES
1. Expense Allowances. The Reinsurer will grant the Reinsured the following
expense allowances on the portion of the business reinsured:
Policy Issue Expense (% of Premium)
0.40% of premiums paid on the effective date of the policy
Maintenance Expense (First and Renewal Years)
Quota Share Percentage of $30.00 per year
Sales and Marketing Expense (% of Premium)
ASAP2: 1.90% of premium paid on the effective date of the policy
Axiom: 1.15% of premium paid on the effective date of the policy
2. Commission Allowances. The Reinsurer will grant the Reinsured
commission allowances, as a percent of premiums paid on the effective
date of the policy, on the reinsured business following the schedule below:
ASAP2: 5.5%
AXIOM: 4.0%
3. Consulting Fee Reimbursement
0.25% of the reinsured Account Value, payable at the same time as paid
by the Reinsured.
4. Annual Death Benefit Allowance
ASAP2: Annual rate of 5 basis points of Account Value, deducted on a
daily basis
Axiom: Annual rate of 2.5 basis points of Account Value, deducted on
a daily basis
<PAGE>
SCHEDULE E
MONTHLY BUSINESS MANAGEMENT REPORT
A. Informational Reports
(1) Reserve Report showing the statutory reserves, Account Values and
Surrender Values
(2) Production Report with premiums (split by initial and additional
premiums) and policy counts, including the number of policies in force
at the beginning and at the end of the month.
(3) Policy Loads Report showing the Mortality and Expense Risk Charges and
the Administration Charges.
(4) Experience Refund Account Report (Quarterly)
<PAGE>
SCHEDULE F
ANNUAL REPORT
The annual report shall provide the following information:
"Exhibit of Number of Policies, Contracts and Certificates for Annuities"
from the NAIC-prescribed annual statement.
<PAGE>
SCHEDULE G
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
The amount of the interest credit payable by the Reinsured to the Reinsurer will
be determined according to the schedule below:
A. Account Value as of the beginning of the month
B. Increases in Account Value during the month
(1) Initial Premiums
(2) Additional/Renewal Premium
(3) Transfers-in from the Fixed Allocation Account
(4) Total increase ((1) + (2) +(3))
C. Decreases in Account Value during the month
(1) Deaths benefits paid
(2) Benefits Paid Upon Surrenders,
Medically-Related Surrenders and Annuitizations (3) Deferred Sales
Charge Deductions (4) Partial Withdrawals (5) Systematic Withdrawals (6)
Minimum Distributions (7) Transfers-out to the Fixed Allocation Account (8)
M&E and Administration Fee Deductions
(9) Total Decrease (sum of (1) through (8))
D. Account Value as of the end of the month
E. Interest Credit on Modified Coinsurance Reserve as of the
end of the month (i.e., increase in policyholders' accounts
attributable to investment fund increases)
= D - A - B(4) + C(9)
<PAGE>
SCHEDULE H
MODIFIED COINSURANCE RESERVE ADJUSTMENT
The reserve adjustment will be calculated as (B) minus (A), where (A) and (B)
are defined as follows:
Increase in Mod-Co Reserve Payable by the Reinsurer to the Reinsured:
A. Account Value as of the beginning of the month
B. Account Value as of the end of the month
C. Increase in Mod-Co Reserve (B - A)
D. Statutory Reserve - End of Month
<PAGE>
SCHEDULE I
TO BE INSERTED.
<PAGE>
SCHEDULE J
EXPERIENCE REFUND ACCOUNT
An Experience Refund Account will be established and maintained under this
Agreement in accordance with the formulas, terms and actuarial assumptions set
forth below.
I. The Reinsurer will establish an Experience Refund Account (ERA) at the
effective date of the treaty with a
zero beginning balance.
II. As of the end of each quarter, the Reinsured shall calculate the
following amounts:
------------------------------- ========================================
Target Fund Level (TFL): This is the reinsured Account Value, for
each policy that is issued under the
Reinsurance Agreement, that would have
remained in the policy if the policy
experience as to fund growth, mortality
and lapse had been as assumed in
pricing as summarized in Item V of this
Schedule J. Renewal premiums and
transfers from Fixed Allocation
Account shall increase the TFL and
transfers to Fixed Allocation
Account shall decrease the TFL.
------------------------------- ========================================
------------------------------- ========================================
Actual Fund Level (AFL): The is the actual reinsured Account
Value for each policy that is inforce as
of the end of the quarter.
------------------------------- ========================================
------------------------------- ========================================
Expected Deferred Sales This is the Deferred Sales Charge the
Charge (EDSC): Reinsurer would have received for the
quarter, from each policy issued under
this Agreement, based on the pricing
lapse and mortality assumptions as
shown in Item V below.
------------------------------- ========================================
------------------------------- ========================================
Actual Deferred Sales Charge This is the actual Deferred Sales
(ADSC): Charges the Reinsurer receives for the
quarter, attributable to withdrawals and
deaths that occurred during the quarter.
------------------------------- ========================================
------------------------------- ========================================
Gain/(Loss) in Spread: Calculated as [Y% x (Average AFL -
Average TFL)], where:(Average AFL)t =
0.5 x (AFLt-1 + AFLt), (Average TFL)t =
0.5 x (TFLt-1 + TFLt) and For ASAP2,
Y=0.27387% which is derived as
(1 + 0.014 - 0.0005 - 0.0025)1/4-1
For Axiom, Y=0.18076% which is derived
as (1 + 0.01 - 0.00025 - 0.0025)1/4-1
------------------------------- ========================================
------------------------------- ========================================
Gain/(Loss) in DSC: Calculated as ADSC - EDSC
------------------------------- ========================================
<PAGE>
III: As of the end of any calendar quarter, the balance in the ERA shall equal
(1) + (2) + (3) below, where:
1. The ERA balance as of the end of the immediately preceding calendar
quarter multiplied by (1 + i)1/4, where i is the annualized US
Treasury Rate based on a maturity duration equal to the period of the
time until the next Experience Refund Date.
Experience Refund Date is defined as the end of each five-year
interval from May 1, 1995, the treaty effective date, with the first
Experience Refund Date being April 30, 2000.
2. Gain/(Loss) in Spread calculated for the current quarter in
accordance with provisions in Item II above.
3. Gain/(Loss) in DSC calculated for the current quarter in accordance
with provisions in Item II above.
IV. As of each Experience Refund Date, the Reinsurer shall pay the Reinsured
100% of the positive balance in the ERA, if any. The amount in the ERA
shall be reduced by the amount of the payment.
V. For purposes of calculating TFLs and EDSCs, the following pricing
assumptions will be used:
1. Fund growth Rate: 6.6% (i.e., 8% - 1.4%) for ASAP2
7.0% (i.e., 8% - 1.0%) for Axiom
2. Mortality rates: based on 90% of the 1980 UL Life Mortality Table
3. Lapse rates: 2%, 3%, 4%, 5% 6%, 6%, 6%, 15% for years 1 through 8,
respectively, and 10% for each year thereafter.
4. Penalty free partial surrenders: 1.5% of account value for ASAP2 and
1% for Axiom
Exhibit 7 (b)
10/24/95
REINSURANCE AGREEMENT
BETWEEN
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
SHELTON, CONNECTICUT
referred to as the "Ceding Company"
AND
PAINEWEBBER LIFE INSURANCE COMPANY
WEEHAWKEN, NEW JERSEY
referred to as the "Reinsurer"
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I GENERAL PROVISIONS 3
ARTICLE II REINSURANCE PREMIUMS 7
ARTICLE III COMMISSIONS AND ALLOWANCES 8
ARTICLE IV BENEFIT PAYMENTS 10
ARTICLE V RESERVE ADJUSTMENTS 12
ARTICLE VI ADJUSTMENT FOR TRANSFERS INVOLVING FIXED ACCOUNT 13
ARTICLE VII ACCOUNTING AND SETTLEMENTS 14
ARTICLE VIII DURATION AND RECAPTURE 16
ARTICLE IX TERMINAL ACCOUNTING AND SETTLEMENT 18
ARTICLE X ARBITRATION 19
ARTICLE XI INSOLVENCY 20
ARTICLE XII EXECUTION AND EFFECTIVE DATE 21
SCHEDULE A ANNUITIES AND RISKS REINSURED 22
SCHEDULE B MONTHLY REPORT OF ACTIVITY AND SETTLEMENTS 23
SCHEDULE C MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT 27
SCHEDULE D COMMISSION SCHEDULES 28
<PAGE>
REINSURANCE AGREEMENT
This Agreement is made and entered into by and between American Skandia Life
Assurance Corporation (hereinafter referred to as the "Ceding Company") and
Paine Webber Life Insurance Company (hereinafter referred to as the
"Reinsurer").
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remains the only party hereunder that is liable to any insured, policy owner
or beneficiary under any annuity reinsured hereunder.
<PAGE>
ARTICLE I
GENERAL PROVISIONS
1. Annuities and Risks Reinsured. The Reinsurer agrees to indemnify the
Ceding Company for, and the Ceding Company agrees to reinsure with the
Reinsurer, according to the terms and conditions hereof, the portion of the
risks under the annuities described in Schedule A attached hereto.
2. Coverages and Exclusions. Only the variable annuities described in
Schedule A are reinsured under this Agreement.
3. Plan of Reinsurance. This indemnity reinsurance will be on a
modified-coinsurance basis. The Ceding Company will retain, control and own all
assets held in relation to the Modified Coinsurance Reserve.
4. Expenses. The Reinsurer will bear no part of the expenses incurred in
connection with the annuities reinsured hereunder, except as otherwise provided
herein.
5. Annuity Changes. The Ceding Company must provide written notification to
the Reinsurer of any change which affects the original terms or conditions of
any annuity reinsured hereunder not later than thirty (30) days after the change
takes effect. The Reinsurer will provide written notification to the Ceding
Company as to the Reinsurer's acceptance or rejection of the change within
thirty (30) days after receipt of notice of the change. If the Reinsurer accepts
any such change, the Reinsurer will (a) assume that portion of any increase in
the Ceding Company's liability, resulting from the change, which corresponds to
the portion of the annuities reinsured hereunder, and (b) receive credit for
that portion of any decrease in the Ceding Company's liability, resulting from
the change, which corresponds to the portion of the annuities reinsured
hereunder. If the Reinsurer rejects any such change, the Reinsurer's liability
under this Agreement will be determined as if no such change had occurred.
6. No Extracontractual Damages. The Reinsurer does not indemnify the Ceding
Company for, and will not be liable for, any extracontractual damages or
extracontractual liability of any kind whatsoever resulting from fraud,
oppression, bad faith, strict liability, or negligent, reckless or intentional
wrongs on the part of the Ceding Company or its directors, officers, employees
and agents. The following types of damages are examples of damages that would be
excluded under this Agreement for the conduct described above: damages for
emotional distress and punitive or exemplary damages.
7. Annuity Administration. The Ceding Company will administer the annuities
reinsured hereunder and will perform all accounting for such annuities.
8. Inspection. At any reasonable time, the Reinsurer or its representatives
may inspect, during normal business hours and upon reasonable notice, at the
principal office of the Ceding Company, the original papers and any and all
other books or documents relating to or affecting reinsurance under this
Agreement. The Reinsurer or its representatives will not use any information
obtained through any inspection pursuant to this Paragraph for any purpose not
relating to reinsurance hereunder.
9. Taxes. The allowance for any premium taxes paid in connection with the
annuities reinsured hereunder is included in the Commissions and Allowances,
described in Article III. The Reinsurer will not reimburse the Ceding Company
for any other taxes paid by the Ceding Company in connection with the annuities
reinsured hereunder.
10. Proxy Tax Reimbursement. Pursuant to IRC Section 848, insurance
companies are required to capitalize and amortize specified policy acquisition
expenses. The amount capitalized is determined by proxy based on a percentage of
"reinsurance premiums" as defined in the IRS regulations relating to IRC Section
848. The Reinsurer and the Ceding Company agree that any costs which would
result from IRC Section 848 are not subject to reimbursement hereunder.
11. Election to Determine Specified Policy Acquisition Expenses. The Ceding
Company and the Reinsurer agree that the party with net positive consideration
under this Agreement will capitalize specified policy acquisition expenses with
respect to annuities reinsured under this Agreement without regard to the
general deductions limitation of Section 848(c)(1) of the Internal Revenue Code
of 1986, as amended. The Ceding Company and the Reinsurer will exchange
information pertaining to the amount of net consideration under this Agreement
each year to ensure consistency. The Ceding Company will submit a schedule to
the Reinsurer by May 1 of each year presenting its calculation of the net
consideration for the preceding taxable year. The Reinsurer may contest the
calculation in writing within thirty (30) days of receipt of the Ceding
Company's schedule. Any differences will be resolved between the parties so that
consistent amounts are reported on the respective tax returns for the preceding
taxable year. This election to capitalize specified policy acquisition expenses
without regard to the general deductions limitation is effective for all taxable
years during which this Agreement remains in effect.
12. Condition. The reinsurance hereunder is subject to the same limitations
and conditions as the annuities issued by the Ceding Company which are reinsured
hereunder, except as otherwise provided in this Agreement.
13. Misunderstandings and Oversights. If any failure to pay amounts due or
to perform any other act required by this Agreement is unintentional and caused
by misunderstanding or oversight, the Ceding Company and the Reinsurer will
adjust the situation to what it would have been had the misunderstanding or
oversight not occurred.
14. Adjustments. If the Ceding Company's liability under any of the
annuities reinsured hereunder is changed because of a misstatement of age, sex
or any other material fact, the Reinsurer will (a) assume that portion of any
increase in the Ceding Company's liability, resulting from the change, which
corresponds to the portion of the annuities reinsured hereunder, and (b) receive
credit for that portion of any decrease in the Ceding Company's liability,
resulting from the change, which corresponds to the portion of the annuities
reinsured hereunder.
15. Reinstatements. If an annuity reinsured hereunder is surrendered or
annuitized, and is subsequently reinstated while this Agreement is in force, the
reinsurance for such annuity will be reinstated automatically. The Ceding
Company will pay the Reinsurer the Reinsurer's proportionate share of all
amounts received by the Ceding Company in connection with the reinstatement of
the annuity, plus any amounts previously refunded to the Ceding Company by the
Reinsurer in connection with the lapse of the annuity.
16. Assignment. The Ceding Company may not assign any of its rights, duties
or obligations under this Agreement without prior written consent of the
Reinsurer. The Reinsurer may not assign any of its rights, duties, or
obligations under this Agreement without prior written consent of the Ceding
Company.
17. Amendments and Waiver. Any change or modification to this Agreement
will be null and void unless made by amendment to the Agreement and signed by
both parties. Any waiver will constitute a waiver only in the circumstances for
which it was given and will not be a waiver of any future circumstances.
18. Entire Agreement. The terms expressed herein constitute the entire
agreement between the parties with respect to the annuities reinsured hereunder.
There are no understandings between the parties with respect to the annuities
reinsured hereunder other than as expressed in this Agreement.
19. Current Practices. The Ceding Company will not materially change, alter
or otherwise compromise its underwriting, claims paying or administrative
practices with respect to the annuities reinsured hereunder without prior
written consent of the Reinsurer, unless they are caused by regulatory
requirements. In the case of regulatory requirements, the Ceding Company will
give the Reinsurer reasonable notice of any changes.
20. Governing Law. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be construed in
accordance with the applicable federal law and the laws of the State of
Connecticut.
<PAGE>
ARTICLE II
REINSURANCE PREMIUMS
Reinsurance Premiums. The Ceding Company will pay the Reinsurer Reinsurance
Premiums on all annuities reinsured under this Agreement in an amount equal to a
quota share, as defined in Schedule A, of the gross premiums collected and
deposited into the Variable Separate Account during the Accounting Period by the
Ceding Company. The Reinsurance Premiums paid to the Reinsurer by the Ceding
Company will be remitted to the Reinsurer at the end of the Accounting Period,
as defined in Article VII, during which the gross premiums were collected and
deposited by the Ceding Company.
<PAGE>
ARTICLE III
COMMISSIONS AND ALLOWANCES
1. Premium Tax. The Reinsurer shall reimburse the Ceding Company for all
premium taxes and guaranty fund assessments incurred on the Reinsurance
Premiums.
2. Commissions. The Reinsurer shall reimburse the Ceding Company for all
commissions and wholesaler overrides incurred on the Reinsurance Premiums and on
that portion of the Account Value of the annuities reinsured hereunder which
corresponds to the portion of the annuities reinsured hereunder as of the end of
the current Accounting Period. Commissions will be net of a quota share of
commission chargebacks on policies reinsured hereunder. Schedule D shows the
current commission schedules for the annuities reinsured hereunder.
3. Allowance for Expenses. The Reinsurer will pay the Ceding Company an
Allowance for Expenses for each Accounting Period equal to (i) plus (ii) plus
(iii) plus (iv) plus (v), where: (i) For policy maintenance, equals (a) times
(b), where: (a) equals $2.50 times the quota share percentage of the ASAP
annuities reinsured hereunder, as described in Schedule A; and (b) equals the
number of ASAP annuities reinsured hereunder and described in Schedule A, that
are inforce at the end of the current Accounting Period; (ii) For policy
issuance, equals (a) times (b), where: (a) equals $150.00 times the quota share
percentage of the ASAP annuities reinsured hereunder, as described in Schedule
A; and (b) equals the number of ASAP annuities reinsured hereunder and described
in Schedule A, that were issued during the current Accounting Period; (iii) For
DAC proxy tax, equals (a) times (b), where (a) equals 0.0036 ; and (b) equals
that amount of the Reinsurance Premiums received on non-qualified policies; (iv)
For other costs and risks, equals (a) times (b), where (a) equals .00285; and
(b) equals the Reinsurance Premiums received; (v) (a) minus (b), times (c),
where: (a) equals the quota share of the account value at the end of the
Accounting Period of the annuities reinsured hereunder. (b) equals the Modified
Coinsurance Reserve at the end of the Accounting Period of the annuities
reinsured hereunder. (c) equals (5 year Treasury Bond Rate plus 200 basis
points) divided by 12. The 5 year Treasury Bond Rate will be that which is
published in the Wall Street Journal on the first business day following the
close of the Accounting Period. (vi) Amounts in (i)(a) and (ii)(a) above will be
adjusted annually on January 1, for inflation at the change in the Consumer
Price Index (CPI-U as determined by Department of Labor and published in the
Wall Street Journal).
4. Minimum Death Benefit Guarantee Costs: The Reinsurer will pay the Ceding
Company an allowance for each Accounting Period for the costs of the minimum
death benefit guarantee equal to (a) times (b) where: (a) equals .0001167 ; and
(b) equals the quota share of the account values at the end of the accounting
period on ASAP annuities;
<PAGE>
ARTICLE IV
BENEFIT PAYMENTS
1. Benefit Payments. Benefit Payments, as referred to in this Agreement,
means the Reinsurer's quota share of (i) Claims, as described in Paragraph 2
below, (ii) Cash Surrenders, as described in Paragraph 3 below, (iii) Partial
Withdrawals, as described in Paragraph 4 below, and (iv) Annuity Benefits, as
described in Paragraph 5 below.
2. Claims. The Reinsurer will pay the Ceding Company Claims. The term
"Claims," as used in this Agreement, means that portion of the death benefits
paid by the Ceding Company on annuities reinsured hereunder which is equal to
the Reinsurer's quota share of the cash surrender value as of the date the death
benefit is payable.
3. Cash Surrenders. The Reinsurer will pay the Ceding Company that portion
of the Cash Surrenders paid by the Ceding Company on annuities reinsured
hereunder which corresponds to the portion of the annuities reinsured hereunder.
4. Partial Withdrawals. The Reinsurer will pay the Ceding Company that
portion of Partial Withdrawals paid by the Ceding Company on annuities reinsured
hereunder which corresponds to the portion of the annuities reinsured hereunder.
5. Annuity Benefits. The Reinsurer's obligation for Annuity Benefits paid
by the Ceding Company on annuities reinsured hereunder will be satisfied in full
by the payment to the Ceding Company of that portion of the Cash Surrender
Value, as of the date of annuitization, which corresponds to the portion of the
annuities reinsured hereunder.
6. Liability and Payment. The Reinsurer will accept the decision of the
Ceding Company with respect to Benefit Payments on annuities reinsured
hereunder. The Reinsurer will pay its proportionate share of Benefit Payments in
a lump sum to the Ceding Company without regard to the form of settlement by the
Ceding Company.
7. Contested Benefits. The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate Benefit Payments involving
annuities reinsured hereunder. The Reinsurer will pay its share of the expenses
of such contests, in addition to its share of Benefit Payments, or it may choose
not to participate. If the Reinsurer chooses not to participate, it will
discharge its liability by payment to the Ceding Company of the full amount of
its liability, prior to any contests, on the annuity reinsured hereunder.
<PAGE>
ARTICLE V
RESERVE ADJUSTMENTS
1. Modified Coinsurance Reserve Adjustment.
A. The Modified Coinsurance Reserve Adjustment will be computed each
Accounting Period equal to (i) minus (ii) plus (iii) minus (iv) minus (v),
where:
(i) equals the Modified Coinsurance Reserve, determined in accordance with
Paragraph 2 below, at the end of the current Accounting Period;
(ii) equals a quota share of the amount transferred from the fixed account
to the Variable Separate Account for the annuities reinsured hereunder during
the current Accounting Period;
(iii) equals a quota share of the amount transferred from the Variable
Separate Account to the fixed account for the annuities reinsured hereunder
during the current Accounting Period;
(iv) equals the Modified Coinsurance Reserve, determined in accordance with
Paragraph 2 below, at the end of the preceding Accounting Period;
(v) equals the Modified Coinsurance Reserve Investment Credit, as described
in Schedule C.
B. For any Accounting Period in which the amount computed in A. above is
positive, the Reinsurer will pay the Ceding Company such amount. For any
Accounting Period in which the amount computed in A. above is negative, the
Ceding Company will pay the Reinsurer the absolute value of such amount.
2. Modified Coinsurance Reserve. The term "Modified Coinsurance Reserve,"
as used in this Agreement, means a quota share of the statutory reserve held by
the Ceding Company with respect to that portion of the annuities reinsured
hereunder. The statutory reserve will be determined by the Commissioners Annuity
Reserve Valuation Method, or such other amount required by the Insurance
Commissioner of the Ceding Company's state of domicile.
<PAGE>
ARTICLE VI
ADJUSTMENT FOR TRANSFERS INVOLVING
THE FIXED ACCOUNT
1. The Ceding Company will pay Reinsurer an amount equal to (i) times (ii)
where:
(i) equals a quota share of the amount transferred from the Variable
Separate Account to the fixed account, grouped by policy duration at the time of
transfer; for the annuities reinsured hereunder during the current Accounting
Period;
(ii) equals the applicable exchange factor for each policy duration
described in Paragraph 3 below.
2. The Reinsurer will pay the Ceding Company an amount equal to (i) times
(ii) where:
(i) equals a quota share of the amount transferred from the fixed account
to the Variable Separate Account grouped by policy duration at the time of
transfer; for the annuities reinsured hereunder during the current Accounting
Period;
(ii) equals the applicable exchange factor for each policy duration
described in Paragraph 3 below.
3. The exchange factors for each policy duration are shown below:
Policy Duration (years) Exchange Factor
1 0.08
2 0.07
3 0.06
4 0.05
5 0.04
6 0.03
7 0.03
8 + 0.03
<PAGE>
ARTICLE VII
ACCOUNTING AND SETTLEMENTS
1. Monthly Accounting Period. Each Accounting Period under this Agreement
will be a calendar month, except that: (a) the initial Accounting Period runs
from the Effective Date of this Agreement through the last day of the calendar
month during which the Execution Date of this Agreement falls, and (b) the final
Accounting Period runs from the end of the preceding Accounting Period until the
terminal accounting date of this Agreement as described in Article IX, Paragraph
2. The amount in Article III, paragraph 3 (i) (a) will be adjusted on a pro-rata
basis for time periods less than a calendar month.
2. Monthly Accounting Reports. Monthly accounting reports in the form of
Schedule B will be submitted to the Reinsurer by the Ceding Company for each
Accounting Period not later than fifteen (15) days after the end of each
Accounting Period. Such reports will include information on the amount of
Reinsurance Premiums, Allowance for Commissions and Expenses, Benefit Payments,
Modified Coinsurance Reserve, and Modified Coinsurance Reserve Adjustment.
3. Monthly Settlements.
A. Within twenty-five (25) days after the end of each Accounting Period,
the Ceding Company will pay the Reinsurer the sum of:
(i) Reinsurance Premiums, determined in accordance with Article II, plus
(ii) any Modified Coinsurance Reserve Adjustment payable to the Reinsurer,
determined in accordance with Article V, Paragraph 1, plus
(iii) any Adjustment for Transfers Involving the Fixed Account payable to
the Reinsurer, determined in accordance with Article VI.
B. Simultaneously, the Reinsurer will pay the Ceding Company the sum of:
(i) the amount of Benefit Payments, as described in Article IV, plus
(ii) the Allowance for Commissions and Expenses, determined in accordance
with Article III, plus
(iii) any Modified Coinsurance Reserve Adjustment payable to the Ceding
Company, determined in accordance with Article V, Paragraph 1, plus
(iv) any Adjustment for Transfers Involving the Fixed Account payable to
the Ceding Company, determined in accordance with Article VI.
4. Amounts Due Monthly. Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Ceding Company or the
Reinsurer under this Agreement will be determined on a net basis as of the last
day of each Accounting Period and will be due as of such date and payable within
twenty-five (25) days after the end of the Accounting Period.
5. Annual Accounting Reports. The Ceding Company will provide the Reinsurer
with annual accounting reports within fifteen (15) days after the end of the
calendar year for which such reports are prepared. These reports will contain
sufficient information about the annuities reinsured hereunder to enable the
Reinsurer to prepare its annual financial reports and to verify the information
reported in Schedule B of this agreement, and will include Page 7, Page 27,
Schedule S, and Exhibit 1 of the Annual Statement.
6. Estimations. If the amounts, as described in Paragraph 3 above, cannot
be determined by the dates described in Paragraph 4 above, on an exact basis,
such payments will be paid in accordance with the best available information at
that time. Adjustments will then be made to reflect actual amounts when they
become available.
7. Delayed Payments. For purposes of Paragraph 4 above, if there is a
delayed settlement of a payment due, there will be an interest penalty, at the
one month London Interbank Offering Rate (LIBOR) plus 0.5%. For purposes of this
Paragraph, a payment will be considered overdue thirty (30) days after the date
such payment is due.
8. Offset of Payments. All moneys due either the Ceding Company or the
Reinsurer under this Agreement will be offset against each other, dollar for
dollar, regardless of any insolvency of either party.
<PAGE>
ARTICLE VIII
DURATION AND RECAPTURE
1. Duration. Except as otherwise provided herein, this Agreement is
unlimited in duration.
2. Reinsurer's Liability. The liability of the Reinsurer with respect to
any annuity reinsured hereunder will begin simultaneously with that of the
Ceding Company, but not prior to the Effective Date of this Agreement. The
Reinsurer's liability with respect to any annuity reinsured hereunder will
terminate on the earliest of: (i) the date such annuity is recaptured in
accordance with paragraph 4 below; (ii) the date the Ceding Company's liability
on such annuity is terminated; or (iii) the date this Agreement is terminated
under paragraph 3 below. Termination of the Reinsurer's liability is subject to
payments in respect of such liability in accordance with the provisions of
Article IX of this Agreement. In no event should the interpretation of this
Paragraph imply a unilateral right of the Reinsurer to terminate this Agreement.
However, the Reinsurer and/or the Ceding Company may, upon thirty (30) days
prior written notice to the other party, terminate this Agreement as to
annuities not yet written by the Ceding Company as of the effective date of such
termination.
3. Termination for Nonpayment of Reinsurance Premiums or Other Amounts Due.
If the Ceding Company fails to pay the Reinsurance Premiums or any other amounts
due to the Reinsurer pursuant to this Agreement within sixty (60) days after the
end of any Accounting Period, the Reinsurer may terminate this Agreement,
subject to thirty (30) days prior written notice to the Ceding Company. If the
Reinsurer fails to pay any amounts due to the Ceding Company pursuant to this
Agreement within sixty (60) days after the end of any Accounting Period, the
Ceding Company may terminate this Agreement, subject to thirty (30) days prior
written notice to the Reinsurer.
4. Recapture. Annuities reinsured hereunder will be eligible for recapture,
at the option of the Ceding Company as described below:
(i) On any January 1, all reinsured annuities that have been inforce for 20
years or longer, subject to ninety (90) days prior written notice; (ii) on any
other date which is mutually agreed to in writing.
If the Ceding Company opts to recapture, then the Ceding Company must
recapture all of the annuities reinsured hereunder that are eligible for
recapture. In no event may the Ceding Company recapture anything other than 100
percent of all annuities reinsured hereunder that are eligible for recapture.
5. Internal Replacements. Should the Ceding Company, its affiliates,
successors or assigns, initiate a formal program of Internal Replacement that
would include any of the annuities reinsured hereunder, the Ceding Company will
immediately notify the Reinsurer. The Reinsurer will participate on a quota
share basis in any expenses associated with that program. For purposes of this
Agreement, the term "Internal Replacement" means any instance in which an
annuity or any portion of the cash value of an annuity which is written by the
Ceding Company, its affiliates, successors, or assigns is exchanged for another
policy or annuity covered under this Agreement. The Ceding Company, its
affiliates, successors or assigns, will not initiate a program of internal
replacement that includes any of the annuities reinsured hereunder, to policies
or annuities that are not covered by this Agreement, unless the Reinsurer
consents.
<PAGE>
ARTICLE IX
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that this Agreement is terminated in
accordance with Article VIII, Paragraphs 3 or 4, or Article XI, a Terminal
Accounting and Settlement will take place.
2. Date. The terminal accounting date will be the earliest of: (1) the
effective date of recapture pursuant to any notice of recapture given under this
Agreement, (2) the effective date of termination pursuant to any notice of
termination given under this Agreement, or (3) any other date mutually agreed to
in writing.
3. Settlement. The Terminal Accounting and Settlement will consist of:
A. The monthly settlement as provided in Article VII, Paragraph 3, computed
as of the terminal accounting date as if the treaty were still in effect; and
B. payment by the Ceding Company to the Reinsurer of a Terminal Reserve
equal to the Modified Coinsurance Reserve on the annuities reinsured hereunder
as of the terminal accounting date;
C. payment by the Reinsurer to the Ceding Company of a Terminal Reserve
Adjustment equal to the Modified Coinsurance Reserve on the annuities reinsured
hereunder as of the terminal accounting date; If the calculation of the Terminal
Accounting and Settlement produces an amount owing to the Ceding Company, such
amount will be paid by the Reinsurer to the Ceding Company.
If the calculation of the Terminal Accounting and Settlement produces an
amount owing to the Reinsurer, such amount will be paid by the Ceding Company to
the Reinsurer.
4. Supplementary Accounting and Settlement. In the event that, subsequent
to the Terminal Accounting and Settlement as provided above, a change is made
with respect to any amounts due, a supplementary accounting will take place
pursuant to Paragraph 3 above. Any amount owed to the Ceding Company or to the
Reinsurer by reason of such supplementary accounting will be paid promptly upon
the completion thereof.
<PAGE>
ARTICLE X
ARBITRATION
1. General. All disputes and differences between the Ceding Company and the
Reinsurer on which an agreement cannot be reached will be decided by
arbitration. The arbitrators will construe this Agreement from the standpoint of
practical business and equitable principles and the customs and practices of the
insurance and reinsurance business, rather than from the standpoint of strict
law. The parties intend that the arbitrators will make their decision with a
view to effecting the intent of this Agreement.
2. Method. Three arbitrators will decide any differences. They must be
impartial and present or former officers of life insurance companies other than
the parties to this Agreement or any company owned by, or affiliated with,
either party. One of the arbitrators will be appointed by the Reinsurer, another
by the Ceding Company, and the two arbitrators thus selected will select a third
arbitrator before arbitration begins. Should one of the parties decline to
select an arbitrator within thirty (30) days after the date of a written request
to do so, or should the two arbitrators selected by the parties not be able to
agree upon the choice of a third, the appointment(s) will be left to the
President of the New York chapter of the American Arbitration Association or its
successor. The arbitrators will decide by a majority of votes and their decision
will be final and binding upon the parties. The costs of arbitration, including
the fees of the arbitrators, will be shared equally by the parties unless the
arbitrators decide otherwise. Any counsel fees incurred by a party in the
conduct of arbitration will be paid by the party incurring the fees.
3. Arbitration Site. In event of arbitration, the arbitration hearing shall
take place in New York, New York unless agreed to in writing by both the Ceding
Company and the Reinsurer.
<PAGE>
ARTICLE XI
INSOLVENCY
Insolvency. In the event of the Ceding Company's insolvency, any payments due
the Ceding Company from the Reinsurer pursuant to the terms of this Agreement
will be made directly to the Ceding Company or its conservator, liquidator,
receiver or statutory successor. The reinsurance will be payable by the
Reinsurer on the basis of the liability of the Ceding Company under the
annuities reinsured without diminution because of the insolvency of the Ceding
Company. The conservator, liquidator, receiver or statutory successor of the
Ceding Company will give the Reinsurer written notice of the pendency of a claim
against the Ceding Company on any annuity reinsured within a reasonable time
after such claim is filed in the insolvency proceeding. During the pendency of
any such claim, the Reinsurer may investigate such claim and interpose in the
Ceding Company's name (or in the name of the Ceding Company's conservator,
liquidator, receiver or statutory successor), in the proceeding where such claim
is to be adjudicated, any defense or defenses which the Reinsurer may deem
available to the Ceding Company or its conservator, liquidator, receiver or
statutory successor. The expense thus incurred by the Reinsurer will be
chargeable, subject to court approval, against the Ceding Company as a part of
the expense of liquidation to the extent of a proportionate share of the benefit
which may accrue to the Ceding Company solely as a result of the defense
undertaken by the Reinsurer.
In the event of the Reinsurer's insolvency, this treaty will terminate, and the
terminal accounting and settlement described in Article IX will occur. Any
payments due the Reinsurer from the Ceding Company pursuant to the terms of this
Agreement will be made directly to the Reinsurer or its conservator, liquidator,
receiver or statutory successor. Any amounts owed by the Reinsurer to the Ceding
Company will be payable without diminution because of the insolvency of the
Reinsurer.
<PAGE>
ARTICLE XII
EXECUTION AND EFFECTIVE DATE
In witness of the above, this Agreement is executed in duplicate on the dates
indicated below with an Effective Date of January 1, 1995.
AMERICAN SKANDIA LIFE PAINEWEBBER
ASSURANCE CORPORATION LIFE INSURANCE COMPANY
("Ceding Company") ("Reinsurer")
on October 17, 1995 on October 9, 1995
By: /s/ G. Boronow By: /s/ Richard J. Tucker
Title: President Title: Senior Vice President
By:/s/ Thomas M. Mazzaferro By: Gerianne Jasinkiewicz Silva
Title: Senior Vice President Title: Vice President & Assistant Secretary
<PAGE>
SCHEDULE A
ANNUITIES AND RISKS REINSURED
Annuities and Risks Reinsured. The amount of reinsurance under this Agreement
will be a percent quota share, shown below, of the Ceding Company's net
liability, with respect to the Variable Separate Account, on those variable
annuities and the corresponding state and group variations thereof listed below
that are issued by the Ceding Company on or after January 1, 1995 and sold by
the PaineWebber Affiliates listed below. Policies sold in the state of New York
are excluded.
Variable Annuity Issue Dates Quota Share Percentage
- ---------------------------- ----------------------
January 1, 1995 to December 31, 1995 50%
January 1, 1996 and later 35%
Coutrywide
Variable Annuity Plan Policy Form Number
ASAP2 AXASAP2/CRT (12/94)-01 et.al.
PaineWebber Affiliates Tax ID Number
- ---------------------- -------------
PWJC Agency, Inc. 51-0120742
PWJC Sales Agency 13-2769203
PWJC Insurance Agency Massachusetts 04-2535723
PWJC Insurance Sales Arizona 13-3103027
PWJC Agency Illinois 13-3117185
PWJC Insurance Agency Oklahoma 73-1065402
PWJC Insurance Sales Wyoming 63-0242350
PWJC Insurance Sales Montana, Inc. 81-0368992
PW Insurance Agency of Ohio 13-3432079
PW Insurance Agency Arkansas 13-3432081
PWJC Insurance Agency Texas 74-1976248
Rotan Mosle Insurance Agency, Inc 74-181-3848
"Net liability," as used in this Agreement, means the Ceding Company's liability
on the annuities reinsured hereunder, less amounts held on account of the death
benefit payments in excess of cash surrender values.
<PAGE>
SCHEDULE B
MONTHLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Accounting Period: ________________
Calendar Year: ____________________
Date Report Completed: ____________
1. Reinsurance Premiums (Article II) ________
2. Benefit Payments (Article IV)
a. Claims ________
b. Cash Surrender Values ________
c. Partial Withdrawals ________
d. Annuity Benefits ________
Benefit Payments = a + b + c + d ________
3. Modified Coinsurance Reserve Adjustment (Article V)
a. Modified Coinsurance Reserve end of
current Accounting Period ________
b. Quota share of transfers from fixed account to Separate
Account during the current Accounting Period ________
c. Quota share of transfers from Variable Separate Account
to fixed
account during the current Accounting Period ________
d. Modified Coinsurance Reserve end of
preceding Accounting Period ________
e. Equals a - b + c - d ________
f. Modified Coinsurance Reserve Investment
Credit (Schedule C) ________
Modified Coinsurance Reserve Adjustment = e - f ________
4. Allowance for Commissions and Expenses (Article III) ________
5. Adjustment for Transfers Involving the Fixed Account (Article VI)
a. Adjustment for transfers out of the Fixed Account ________
b. Adjustment for transfers into the Fixed Account ________
Adjustment for Transfers Involving the Fixed Account
= a - b ________
6. Cash Settlement = 1 - 2 - 3 - 4 - 5 ________
========
<PAGE>
Supplemental Information on Policies Reinsured
<TABLE>
<CAPTION>
Total Separate
Number Account Separate Premium received during
of Fund Account Period
Annuities Value Reserve qualified non-qualified
<S> <C> <C> <C> <C> <C>
Beginning of Period
--------- --------- -----
+ New Issues
--------- --------- -----
- - Terminations
--------- --------- -----
End of Period
========= ========= =====
Allowance for Commission and Expense (Article III)
a. quota share of premium taxes and guaranty fund assessments incurred on
annuities reinsured hereunder ________
b. quota share of commissions incurred on annuities reinsured hereunder
________
c. $ 2.50 x quota share of annuities reinsured hereunder ________
d. Number of annuities reinsured hereunder at the end of the current
Accounting Period ________
e. $ 150.00 x quota share of annuities reinsured hereunder
________
f. Number of annuities reinsured hereunder issued during the current Accounting
Period
________
g. 0.0036 ________
h. Reinsurance Premiums received from non-qualified annuities reinsured
hereunder ________
i. .00285 ________
j. Reinsurance Premiums received from annuities reinsured hereunder ________
k. Interest rate from Article III, paragraph 3(v) (c) ________
l. Difference between quota share of account value, and Modified Coinsurance
Reserve at end of the Accounting Period on annuities reinsured hereunder ________
m. .0001167 ________
n. Quota share of the account values at the end of the Accounting Period
on annuities reinsured hereunder ________
o. Commission and Expense Allowance = a+b+(c x d)+(e x f)+(g x h)+(i x j) ________
+ (k x l) + m x n)
========
</TABLE>
<PAGE>
Data for Calculating Adustment for Transfers Involving the Fixed Account
ASAP
------------------------------------
Transfers to Transfers
Fixed Account from Fixed
Duration Account
===============
--------------- ---------------
1
--------------- ---------------
--------------- ---------------
2
--------------- ---------------
--------------- ---------------
3
--------------- ---------------
--------------- ---------------
4
--------------- ---------------
--------------- ---------------
5
--------------- ---------------
--------------- ---------------
6
--------------- ---------------
--------------- ---------------
7
--------------- ---------------
8 +
--------------- ---------------
<PAGE>
Supplemental Data Provided by the Ceding Company
A. Reinsurer's portion of M & E charges incurred during the current
accounting period on the policies reinsured hereunder.
B. Reinsurer's portion of Administrative Charges incurred during the
current accounting period on the policies reinsured hereunder.
C. Reinsurer's portion of Surrender Charges incurred during the current
accounting period on the policies reinsured hereunder.
D. Reinsurer's portion of First Year Commissions incurred during the
current accounting period on the policies reinsured hereunder.
E. Reinsurer's portion of Renewal Commissions and Consulting Fees incurred
during the current accounting period on the policies reinsured hereunder.
<PAGE>
SCHEDULE C
MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT
Modified Coinsurance Reserve Investment Credit. The Modified Coinsurance Reserve
Investment Credit is equal to the portion of the sum of all accrued investment
income and capital gains and losses, realized and unrealized, on the Ceding
Company's Variable Separate Account for the current Accounting Period which
corresponds to the portion of the variable annuities reinsured hereunder.
For ASAP Annuities reinsured hereunder, the Modified Coinsurance Reserve
Investment Credit will be adjusted for income taxes or changes in any provision
for taxes, and investment management fees or any other fund level charges. It
will not be reduced for mortality and expense risk charges or administrative
charges as defined in the annuity contracts.
<PAGE>
SCHEDULE D
COMMISSION AND OTHER EXPENSES
Commission as percent of premium payable
in all policy durations 7.29%
Consulting fee as percent of account
value payable in all durations: .25%
Exhibit 7 (c)
<PAGE>
VARIABLE ANNUITY GUARANTEED DEATH BENEFIT REINSURANCE
Effective January 1, 1995
between
American Skandia Life Assurance Corporation
(Shelton, CT)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(Hartford, Connecticut)
<PAGE>
REINSURANCE AGREEMENT, Effective January 1, 1995
between
American Skandia Life Assurance Corporation
(Shelton, CT)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(Hartford, Connecticut)
INDEX
ARTICLE PAGE
Access to Records XI 5
Amounts at Risk II 1
Arbitration XVI 8
Automatic Excess Reinsurance III 2
Claims VII 4
Currency XIII 6
DAC Tax Regulation Election XVII 9
Delays, Errors, or Omissions XII 6
Effective Date; Term and Termination XVIII 10
Extra Contractual Obligations VIII 4
Hold Harmless XIV 6
Insolvency XV 7
Liability of Connecticut General IV 2
Litigation IX 5
Notices XIX 12
Offset X 5
Parties to the Agreement I 1
Premium Accounting VI 3
Reinsurance Premiums V 3
SCHEDULES
A. Maximum Limits of Reinsurance in Connecticut General
B. Policy Forms and Funds Subject to this Reinsurance Agreement
C. Limits and Rules of Ceding Company
E. Quarterly Reporting Format
<PAGE>
American Skandia CIGNA Reinsurance
ASAP II October 24, 1995
REINSURANCE AGREEMENT
(hereinafter called Agreement)
between
American Skandia Life Assurance Corporation
(hereinafter called Skandia)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(hereinafter called Connecticut General or Reinsurer)
It is agreed by the two companies as follows:
ARTICLE I PARTIES TO THE AGREEMENT
This Agreement shall be binding upon and shall inure solely to the benefit of
Skandia and Connecticut General. This Agreement shall not and is not intended to
create any right or interest in any third party and shall not and is not
intended to create any legal relationship between either party and any third
party, including, without limitation, annuitants, insureds, certificate holders,
employees, dependents, beneficiaries, policy owners, applicants or assignees
under any policy or contract issued by Skandia.
ARTICLE II AMOUNTS AT RISK
A. The reinsurance death benefit is the excess of the guaranteed minimum
death benefit over the annuity account value. For attained ages below 90,
the guaranteed minimum death benefit is equal to the sum of purchase
payments less withdrawals. Beginning at attained age 90, the guaranteed
minimum death benefit equals the annuity account value and the amount at
risk is zero.
B. The annuity account value represents the owner's invested assets in the
sub-accounts in Schedule B as it appears in the records of Skandia before
application of any surrender charges, on any given date.
<PAGE>
ARTICLE III AUTOMATIC EXCESS REINSURANCE
A. On and after the Effective Date of this Agreement, subject to the limit of
Reinsurer's liability set forth in Schedule A and all other terms,
conditions and limitations set forth in this Agreement and the Schedules
attached to and made a part hereof, Skandia shall cede and the Reinsurer
shall accept Skandia's guaranteed death benefit liability under the
Variable Annuity Contracts, as described in Article II A.
B. This Agreement covers only Skandia's liability for claims paid under
Variable Annuity Contracts written on forms and investment in funds which
were approved for use by Skandia's domiciliary state insurance department
or, if applicable, the SEC. Forms, as supplemented by additional
materials, and sub-accounts approved as of the date of this Agreement are
listed on Schedule B, attached hereto and made a part hereof. If Skandia
intends to use a new form or fund, or revise an approved form or fund, the
Reinsurer shall have reinsurance liability under this Agreement only after
receipt of written notice of such action together with a copy of the form,
fund or revision, and revised Schedule B.
C. Skandia shall provide written notice to Connecticut General of any changes
in its published limits and rules identified on Schedule C, and
Connecticut General shall have no liability pursuant to revised limits and
rules unless and until Connecticut General provides written notice to
Skandia that such revised limits and rules are acceptable. If Connecticut
General fails to respond to Skandia's notification of revision in limits
and rules within thirty (30) days, the revised limits and rules are deemed
to have been accepted by Connecticut General.
ARTICLE IV LIABILITY OF CONNECTICUT GENERAL
Connecticut General's liability for reinsurance under this Agreement shall
follow that of Skandia in every case, and be subject in all respects to the
general stipulations, terms, clauses, conditions, waivers and modifications of
the Variable Annuity Contracts.
In no event shall Connecticut General have any reinsurance liability unless the
Variable Annuity Contract issued by Skandia is in force and the underwriting and
issuance of coverage by Skandia constitutes the doing of business in a state of
the United States of America in which Skandia is properly licensed and
authorized to do business.
<PAGE>
ARTICLE V REINSURANCE PREMIUMS
<PAGE>
1. The Age Adjusted Aggregate Accumulation Value is the sum of the
Accumulation Values in all of Skandia's variable annuities subject to this
Agreement, minus Accumulation Values for contract holders who are Attained
Age 90 or older. The quarterly average Age Adjusted Aggregate Accumulation
Value is the sum of the Age Adjusted Aggregate Accumulation Value at the
beginning of the quarter and the end of the quarter, divided by two.
2. The quarterly premiums for reinsurance subject to the terms and conditions
of this Agreement shall be the quarterly average Age Adjusted Aggregate
Accumulation Value times a quarterly reinsurance premium rate. The
reinsurance premiums are determined separately for each fund, based on
whether the fund is variable or fixed, as described in Schedule B.
3. For attained ages less than 70, the quarterly premium rate is 0.6 basis
points (.00006) for variable funds and 0.2 basis points (.00002) for fixed
funds. For attained ages 70 and over, the quarterly premium rate is 1.2
basis points (.00012) for variable funds and 0.4 basis points (.00004) for
fixed funds.
4. An estimate of the quarterly premium, using the current Age Adjusted
Aggregate Accumulation Value, must be remitted to Connecticut General in
advance for the current quarter, at the time of settlement for the prior
quarter.
5. The reinsurance premiums shall be based on the annuitant's age at the end
of each quarter. If the contract is jointly owned, the reinsurance
premiums shall be based on the age of the older annuitant. If the owner of
the annuity is not the annuitant, the reinsurance premium will be based on
the age of the older of the annuitant and owner. Skandia shall determine
the annuitant's age at the time it prepares the Quarterly Detail Page,
Fund-Based exhibit, as set forth in Schedule E, attached hereto.
ARTICLE VI PREMIUM ACCOUNTING
Skandia shall forward to Connecticut General within thirty (30) days of the end
of the reporting period a quarterly statement as set forth in Schedule E.
Skandia shall also remit any premium due for the prior quarter along with an
advance minimum premium for the current quarter, in accordance with Article V.
<PAGE>
ARTICLE VII CLAIMS
A. Skandia is solely responsible for payment of its claims under the
Underlying Annuity Contracts, policies, master contracts or certificates
identified on Schedule B. Skandia shall provide Connecticut General with
proof of claim, proof of claim payment and any other claim documentation
requested by Connecticut General. Payment of reinsurance shall be made by
Connecticut General in one sum regardless of the method of payment by
Skandia and within thirty (30) calendar days following receipt of the
quarterly reinsurance statement, as set forth in Schedule E.
B. Skandia shall notify Connecticut General of its intentions to
contest, compromise, or litigate a claim involving reinsurance.
ARTICLE VIII EXTRA CONTRACTUAL OBLIGATIONS
A. In no event shall Connecticut General be liable for extracontractual
damages (whether they constitute Compensatory damages, Statutory
penalties, Exemplary or Punitive damages) which are awarded against
Skandia as a result of an act, omission or course of conduct by Skandia in
connection with policies subject to this Agreement, unless the Reinsurer
shall have received notice of and concurred with the actions taken or not
taken by Skandia which led to its liability, in which case the Reinsurer
shall pay its share of such liability. For this purpose, the Reinsurer's
share shall be proprotionate with its risk under the business reinsured
hereunder.
B. The following definitions shall apply:
(1) Punitive damages and Exemplary damages are those damages awarded as
a penalty, the amount of which is not governed nor fixed by statute.
(2) Statutory penalties are those amounts which are awarded as a
penalty but fixed in amount by statute.
(3) Compensatory damages are those amounts awarded to compensate for the
actual damages sustained and are not awarded as a penalty nor fixed
in amount by statute.
<PAGE>
ARTICLE IX LITIGATION
A. In the event of any action brought against Skandia under any Underlying
Annuity Contract that is subject to the terms and conditions of this
Agreement, Skandia shall provide a copy of such action and written notice
of such action within two (2) business days to Connecticut General. If
Connecticut General is a party to action brought against Skandia, Skandia
shall seek agreement by Connecticut General on the selection and
appointment of local counsel to represent Skandia in such action.
B. Skandia and Connecticut General agree that all litigation costs,
excluding the salaries of employees of Skandia and Connecticut General,
shall be borne by Skandia.
ARTICLE X OFFSET
Either party shall have, and may exercise at any time and from time to time, the
right to offset any balance or amounts whether on account of premiums or on
account of losses or otherwise, due from one party to the other under the terms
of this Agreement. However, in the event of insolvency of Skandia subject to the
provisions of Article XV, offset shall only be allowed in accordance with the
statutes and/or regulations of the state having jurisdiction over the
insolvency.
ARTICLE XI ACCESS TO RECORDS
The Reinsurer, or its duly authorized representative, shall have access (during
normal business hours upon reasonable notice) to all records of Skandia
(including the right to photocopy documents) which pertain in any way to this
reinsurance. The right of access shall survive the termination of this
Agreement.
<PAGE>
ARTICLE XII DELAYS, ERRORS OR OMISSIONS
No accidental delay, errors or omissions on the part of Skandia shall relieve
Connecticut General of liability provided such delay, errors or omissions are
rectified as soon as possible after discovery. However, Connecticut General
shall not be liable with respect to any reinsurance which may have been
inadvertently included in the premium computation but which ought not to have
been included by reason of the terms and conditions of this Agreement. It is
expressly understood and agreed that if failure to comply with any terms of this
Agreement is hereby shown to be unintentional or the result of misunderstanding
or oversight on the part of either party, both parties shall be restored to the
position they would have occupied had no such error or oversight occurred,
subject always to the correction of the error or oversight.
ARTICLE XIII CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by Connecticut General in
any other currency shall be converted into United States dollars at the rates of
exchange on the date such transactions are entered on the books of Connecticut
General.
ARTICLE XIV HOLD HARMLESS
A. Connecticut General shall indemnify and hold Skandia harmless from any and
all liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Connecticut General in fulfilling its duties and
obligations under this Agreement or which results from any action which
exceeds its authority under this Agreement.
B. Skandia shall indemnify and hold Connecticut General harmless from any and
all liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Skandia in fulfilling its duties and obligations
under this Agreement or which results from any action which exceeds its
authority under this Agreement.
<PAGE>
ARTICLE XV INSOLVENCY
In the event of insolvency of Skandia, the reinsurance under this Agreement
shall be payable directly by Connecticut General to Skandia or to its
liquidator, receiver, conservator or statutory successor on the basis of
Connecticut General's liability to Skandia without diminution because of the
insolvency of Skandia or because the liquidator, receiver, conservator or
statutory successor of Skandia has failed to pay all or a portion of any claim.
It is agreed, however, that the liquidator, receiver, conservator or statutory
successor of Skandia shall give prompt written notice to Connecticut General of
the pendency of a claim against Skandia within a reasonable time after such
claim is filed in the receivership, conservation, insolvency or liquidation
proceeding and that during the pendency of such claim, Connecticut General may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to Skandia or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by Connecticut General shall be chargeable,
subject to the approval of the Court, against Skandia as part of the expense of
conservation or liquidation to the extent of a pro-rata share of the benefit
which may accrue to Skandia solely as a result of the defense undertaken by
Connecticut General.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by Skandia.
<PAGE>
ARTICLE XVI ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement or any
right, obligation or liability of either party, whether such dispute arises
before or after termination of this Agreement, shall be submitted to arbitration
upon the written request of either party. Each party shall select an arbitrator
within thirty (30) days of the written request for arbitration. If either party
refuses or neglects to appoint an arbitrator within thirty (30) days of the
written request for arbitration, the other party may appoint the second
arbitrator. The two arbitrators shall select an umpire within thirty (30) days
of the appointment of the second arbitrator. If the two arbitrators fail to
agree on the selection of the umpire within thirty (30) days of the appointment
of the second arbitrator, each arbitrator shall submit to the other a list of
three umpire candidates, each arbitrator shall select one name from the list
submitted by the other and the umpire shall be selected from the two names
chosen by a lot drawing procedure to be agreed upon by the arbitrators.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of life insurance or life reinsurance
companies.
C. The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall make its decision
considering the custom and practice of the applicable insurance and reinsurance
business. The arbitration panel is released from judicial formalities and shall
not be bound by strict rules of procedure and evidence.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and expenses
as it deems appropriate, including, but not limited to, attorneys' fees and
interest. Judgment may be entered upon the final decision of the arbitration
panel in any court of competent jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place
in Hartford, Connecticut unless some other place is mutually agreed upon the
parties.
F. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expenses of the umpire and of
the arbitration.
<PAGE>
ARTICLE XVII DAC TAX REGULATION ELECTION
Connecticut General and Skandia hereby agree to make an election pursuant to
Internal Revenue Code Regulation Section 1.848-2(g)(8). This election shall be
effective for all taxable years for which the Reinsurance Agreement remains in
effect.
The terms used in this article are defined by reference to Regulation Section
1.848-2 promulgated on December 28, 1992.
Connecticut General and Skandia agree that the entity with net positive
consideration for the reinsurance agreement for each taxable year will
capitalize specified policy acquisition expenses with respect to the reinsurance
agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended.
Connecticut General and Skandia agree to exchange information pertaining to the
amount of net consideration under the reinsurance agreement each year to ensure
consistency. To achieve this, Skandia shall provide Connecticut General with a
schedule of its calculation of the net consideration for all reinsurance
agreements in force between them for a taxable year by no later than April 30 of
the succeeding year. Connecticut General shall advise Skandia if it disagrees
with the amounts provided by no later than May 31, otherwise the amounts will be
presumed correct and shall be reported by both parties in their respective tax
returns for such tax year. If Connecticut General contests Skandia's calculation
of the net consideration, the Parties agree to act in good faith to resolve any
differences within thirty (30) days of the date Connecticut General submits its
alternative calculation and report the amounts agreed upon in their respective
tax returns for such tax year.
Connecticut General represents and warrants that it is subject to U.S. taxation
under either Subchapter L or Subpart F of Part III of Subchapter N of the
Internal Revenue Code of 1986, as amended.
<PAGE>
ARTICLE XVIII EFFECTIVE DATE; TERM AND TERMINATION
A. The effective date of this Agreement is January 1, 1995. This Agreement
remains effective for all business written by Skandia through December 31,
1999, unless terminated pursuant to the paragraphs listed below:
B. Once each calendar year, Skandia shall have the option to recapture
existing contracts beginning with the twentieth (20) anniversary of their
reinsurance hereunder. Recapture must be made on an issue year basis, and
no contracts can be recaptured unless all contracts with earlier issue
years are recaptured.
C. Connecticut General shall have the option of not accepting additional
contracts under this Agreement at any time, upon delivery of thirty (30)
calendar days written notice to Skandia, within thirty (30) days of the
happening of any of the following events:
(1) Skandia's A. M. Best rating is reduced to a "C" or lower.
(2) Skandia is placed upon a "watch list" by its domiciliary state's
insurance regulators;
(3) An order appointing a receiver, conservator or trustee for
management of Skandia is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of
Skandia;
(4) Skandia is merged, purchased or there is any other change
(in whole or in part) in the ownership of Skandia;
(5) Skandia withdraws from or substantially reduces the active
marketing of policy forms identified in Schedule B.
(6) The Securities and Exchange Commission issues a stop order on the
registered product, offered through Skandia, covered by this
Agreement.
(7) Failure by Skandia to pay premium in accordance with Article V. If,
during the thirty (30) days notice period, Reinsurer receives all
premiums in arrears and all premiums which may become due within the
thirty (30) days notice period, the notice of termination shall be
deemed withdrawn. In the event of termination under this paragraph,
this Agreement may be reinstated upon the written consent of
Reinsurer if, at any time within sixty (60) days of termination,
Skandia pays and Reinsurer receives all premiums due and payable up
to the date of reinstatement. In the event Reinsurer consents to
reinstatement, it shall have no liability for claims incurred
between the date of termination and the date of reinstatement.
D. Skandia may terminate this Agreement upon thirty (30) days
written notice in the event of any of the following:
(1) Connecticut General's A. M. Best rating is reduced to a "C" or
lower.
(2) Connecticut General is placed upon a "watch list" by its
domiciliary states's insurance regulators;
(3) An order appointing a receiver, conservator or trustee for
management of Skandia is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of
Connecticut General;
(4) Connecticut General is merged, purchased or there is any other
change in its ownership;
E. If this Agreement is terminated, Connecticut General shall be relieved
of all liability to Skandia:
(1) for claims incurred following the termination date of this Agreement
under such Underlying Annuity Contracts issued by Skandia, and
(2) for claims incurred prior to the termination date of this Agreement,
but proof of claim approved by Skandia and proof of claim payment
made by Skandia is not provided to Connecticut General within twelve
(12) calendar months following the end of the month in which
termination of the Agreement is effective.
F. Connecticut General shall continue to be entitled to all offset credits
provided by Article X for the entire amount of premiums due and payable by
Skandia up to the effective date of termination.
G. Neither Skandia nor Connecticut General shall have the right to assign or
transfer any portion of their rights, duties and obligations under the
terms and conditions of this Agreement without the prior written approval
of the other party.
<PAGE>
ARTICLE XIX NOTICES
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile, or dispatched by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the parties as follows:
Gordon Boronow, FSA
President & Chief Operating Officer
American Skandia Life Assurance Corporation
One Corporate Drive
P.O. Box 883
Shelton, CT 06484-0853
Phone No. (203) 925-3834 Fax No. (203) 929-8071
Timothy J. Ruark, FSA
Assistant Vice President & Actuary
CIGNA Reinsurance, R26
900 Cottage Grove Road
Hartford, CT 06152-4026
Phone No. (203) 726-4053 Fax No. (203) 726-3153
Notice shall be deemed given on the date it is deposited in the mail or sent via
facsimile in accordance with the foregoing. Any party may change the address to
which to send notices by notifying the other party of such change of address in
writing in accordance with the foregoing.
This Agreement constitutes the entire contract between the parties and shall be
deemed to have been made under and governed by the laws of the State of
Connecticut. Any amendment or modification hereto shall be in writing, endorsed
upon or attached hereto and signed by both Skandia and Connecticut General.
In witness whereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
American Skandia Life Insurance Corporation
Date: Dec 12, 1995 By: /s/ G. Boronow
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Date:Jan 12, 1996 By: /s/ Timothy J. Ruard
<PAGE>
SCHEDULE A
American Skandia CIGNA Reinsurance
ASAP II October 24, 1995
SCHEDULE A
Maximum Automatic Reinsurance Limit in Connecticut General
The maximum purchase amount issued on the life of each insured without Reinsurer
notification:
$3,500,000
The maximum purchase amount is the sum of all premium contributions less
withdrawals in the contract. For purchase amounts in excess of the maximum,
Connecticut General requires notification prior to reinsurance coverage under
this Agreement.
<PAGE>
SCHEDULE B
American Skandia CIGNA Reinsurance
ASAP II October 24, 1995
SCHEDULE B
Contracts and Funds Subject to this Reinsurance Agreement
<TABLE>
<CAPTION>
<S> <C> <C>
Form Number Policy Description Date
AXASAPII/CRT (12/94)-01 et al American Skandia Advisors Plan II 5/1/95
Fund Date Fund Description
9/20/88 AA Small Capitalization
6/23/89 AA Growth
5/3/93 AA Midcap Growth
5/7/92 LA Growth and Income
11/5/92 Jancap Growth
11/9/92 AST Money Market
5/3/93 Fed Utility Inc
5/3/93 AST Phoenix Balanced Asset
1/3/94 T. Rowe Price Asset Allocation
1/3/94 PIMCO Total Return Bond
1/4/95 Fed High Yield
1/5/94 Founders Capital Appreciation
1/3/94 T. Rowe Price International Equity
10/19/94 Berger Capital Growth
5/1/95 PIMCO Limited Maturity Bond
5/1/95 T. Rowe Price Natural Resources
1/3/94 INVESCO Equity Income
5/17/89 Seligman Henderson International Equity
5/2/94 AST Scudder International Bond
5/1/95 Seligman Henderson International Small Cap
5/2/95 NB Partners
</TABLE>
Fixed Sub Accounts
Guarantee Period 001
Guarantee Period 002
Guarantee Period 003
Guarantee Period 005
Guarantee Period 007
Guarantee Period 010
<PAGE>
SCHEDULE C
American Skandia CIGNA Reinsurance
ASAP II October 24, 1995
SCHEDULE C
Limits and Rules of Skandia
1. Skandia will determine the Guaranteed Minimum Death Benefit for each
deceased within seven (7) working days of written notice of death.
2. Company approval is needed for any purchase payment that would
result in the Account Value exceeding $500,000.
3. The minimum initial purchase payment, other than for bank draft, is
$10,000 for non-qualified plans and $2,000 for qualified plans.
SCHEDULE E
American Skandia CIGNA Reinsurance
ASAP II October 24, 1995
SCHEDULE E
Quarterly Reporting Format
1. Following the end of each calendar quarter, the Quarterly Detail Page,
Fund-Based exhibit (attached) must be prepared for each Qualified plan
and Non-Qualified plan separately.
2. The tabulation should be on an Adjusted Basis, which requires
omission of annuity account values for attained ages of 90 and older.
(212) 408-6900
April 26, 1996
American Skandia Life
Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
Re: Post-effective Amendment No. 3 to Form N-4 filed by American Skandia
Life Assurance Corporation, Depositor, and American Skandia Life
Assurance Corporation Variable Account B (Class 1 Sub-Accounts),
Registrant
Registration No.: 33-87010
Investment Company No.: 811-5438
Our File No. 74877-00101
Dear Mesdames and Messrs.:
You have requested us, as general counsel to American Skandia
Life Assurance Corporation ("American Skandia"), to furnish you with this
opinion in connection with the above-referenced registration statement by
American Skandia, as Depositor, and American Skandia Life Assurance Corporation
Variable Account B (Class 1 Sub-Accounts) ("American Skandia Variable Account B
Class 1 Sub-Accounts"), as Registrant, under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, Registration
Statement No. 33-87010, Investment Company Act No. 811-5438, (the "Registration
Statement") of a certain Variable Annuity Contract (the "Contract") that will be
issued by American Skandia through American Skandia Variable Account B (Class 1
Sub-Accounts). We understand that the above registration is a combination
registration with Pre-effective Amendment No.1 on Form S-1 filed by American
Skandia Life Assurance Corporation, Registrant, Registration No.: 333-00941.
We have made such examination of the statutes and authorities,
corporate records of American Skandia, and other documents as in our judgment
are necessary to form a basis for opinions hereinafter expressed.
In our examination, we have assumed the genuineness of all
signatures on, and authenticity of, and the conformity to original documents of
all copies submitted to us. As to various questions of fact material to our
opinion, we have relied upon statements and certificates of officers and
representatives of American Skandia and others.
Based upon the foregoing, we are of the opinion that:
1. American Skandia is a validly existing corporation under the laws of the
State of Connecticut.
2. American Skandia Variable Account B (Class 1
Sub-Accounts) is validly existing as a separate
account pursuant to the laws of the State of
Connecticut.
3. The form of the Contract has been duly authorized by
American Skandia, and has been or will be filed in
states where it is eligible for approval, and upon
issuance in accordance with the laws of such
jurisdictions, and with the terms of the Prospectus
and the Statement of Additional Information included
as part of the Registration Statement, will be valid
and binding upon American Skandia.
We represent that the above-referenced Post-effective
Amendment No. 3 to the Registration Statement does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) of Rule
485.
We hereby consent to the use of this opinion as an exhibit to
the above-referenced Registration Statement of American Skandia on Form N-4
under the Securities Act of 1933, as amended, and the Investment Company Act of
1940, as amended, and to the reference to our name under the heading "Legal
Experts" included in the Registration Statement.
Very truly yours,
/s/Werner & Kennedy
Exhibit 10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-effective Amendment No. 3 to
Registration Statement No. 33-87010 of American Skandia Life Assurance
Corporation Variable Account B (Class 1 Sub-Accounts) on Form N-4 of our report
dated March 14, 1996 relating to American Skandia Life Assurance Corporation,
our report dated February 14, 1996 relating to American Skandia Life Assurance
Corporation Variable B - Class 1 and to the references to us under the heading
"Independent Auditors" appearing in the Statement of Additional Information
which is a part of such Registration Statement and 'Selected Financial Data"
appearing in the Prospectus which is also a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 25 , 1996
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<TOTAL-ASSETS> 5,021,012,890 <F1>
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<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
$4,699,961,646.
<F2> Included in Total Liabilities and Equity are Liabilities related to
Separate Acocunts of $4,699,961,646.
</FN>
</TABLE>
