Filed with the Securities and Exchange Commission on April 27, 1998
Registration No. 33-59993 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. 4
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4
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 Offices)
(203) 926-1888
(Depositor's Telephone Number)
M. PRISCILLA PANNELL, CORPORATE SECRETARY
One Corporate Drive, Shelton, Connecticut 06484
(Name and Address of Agent for Service of Process)
Copy To:
JOHN T. BUCKLEY, ESQ.
WERNER & KENNEDY
1633 Broadway, New York, New York 10019 (212) 408-6900
Approximate Date of Proposed Sale to the Public:
MAY 1, 1998 OR AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE
OF THIS REGISTRATION STATEMENT.
It is proposed that this filing become effective: (check appropriate space)
immediately upon filing pursuant to paragraph (b)of Rule 485
X on May 1, 1998 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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*The Prospectus contained in this Registration Statement also relates to annuity
contracts no longer being sold but for which additional Purchase Payments are
accepted and which are covered by earlier Registration Statement File Number
33-71118.
**Pursuant to Rule 24f-2 of the Investment Company Act of 1940
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 1997 was filed within
90 days of the close of the fiscal year.
Wells 2
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sc2 n4 cr
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 Breakpoints,
Exchange Contracts, Bank Drafting and Sale of the Annuities
20. Underwriters Principal Underwriter
(Continued)
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
N-4 Item No. SAI Headings
21. Calculation of Performance Data Calculation of Performance Data
22. Annuity Payments Noted in Prospectus under 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
Executives 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
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STAGECOACH VARIABLE ANNUITY PLUS
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 52. 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. This
Prospectus also describes a contract no longer offered by us under which we
continue to accept Purchase Payments (see "Appendix C - Prior Contract).
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 the WF Money Market 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 mutual fund or a
portfolio of an underlying mutual fund. As of the date of this Prospectus, the
underlying mutual funds are Life & Annuity Trust ("LA Trust"), American Skandia
Trust ("AST"), The Alger American Fund and Montgomery Variable Series. The
portfolios of LA Trust in which the Sub-accounts invest are: (a) WF Asset
Allocation, (b) WF U.S. Government Allocation, (c) WF Growth, (d) WF Equity
Value, (e) WF Strategic Growth, and (f) WF Money Market. The portfolios of AST
in which the Sub-accounts invest are: (a) JanCap Growth, (b) T. Rowe Price
International Equity, (c) T. Rowe Price Small Company Value (d) Founders Capital
Appreciation, (e) INVESCO Equity Income, (f) PIMCO Total Return Bond, (g) PIMCO
Limited Maturity Bond, (h) Neuberger&Berman Mid-Cap Growth, (i) Neuberger&Berman
Mid-Cap Value and (j) Stein Roe Venture. The portfolio of The Alger American
Fund is Growth. The portfolio of the Montgomery Variable Series is Emerging
Markets.
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, and, where required by law, the 30 days
prior to the Maturity Date. You are cautioned that with respect to the Fixed
Investment Options during the accumulation phase, we do not guarantee any
(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 1-800-680-8920 Prospectus Dated: May 1, 1998
Statement of Additional Information Dated: May 1, 1998
WFV2-PROS-(5/98)
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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 (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").
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").
Purchase Payments under these Annuities are not deposits or obligations of, or
guaranteed or endorsed by, any bank subsidiary of Wells Fargo Bank, N.A., 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 allocated to the investment options are subject to
investment risks, including possible loss of principal.
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TABLE OF CONTENTS
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DEFINITIONS...............................................................................................................5
HIGHLIGHTS................................................................................................................8
AVAILABLE INFORMATION....................................................................................................10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................................................................10
CONTRACT EXPENSE SUMMARY.................................................................................................10
EXPENSE EXAMPLES.........................................................................................................12
CONDENSED FINANCIAL INFORMATION..........................................................................................13
Unit Prices And Numbers Of Units.........................................................................................13
Yields On Money Market Sub-account....................................................................................15
INVESTMENT OPTIONS.......................................................................................................16
Variable Investment Options...........................................................................................16
Fixed Investment Options..............................................................................................17
OPERATIONS OF THE SEPARATE ACCOUNTS......................................................................................18
Separate Accounts.....................................................................................................18
Separate Account B....................................................................................................18
Separate Account D....................................................................................................19
INSURANCE ASPECTS OF THE ANNUITY.........................................................................................20
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY.......................................................................20
Contingent Deferred Sales Charge......................................................................................20
Tax Charges...........................................................................................................21
Transfer Fee..........................................................................................................21
Allocation Of Annuity Charges.........................................................................................21
CHARGES ASSESSED AGAINST THE ASSETS......................................................................................21
Administration Charge.................................................................................................21
Mortality and Expense Risk Charges....................................................................................22
CHARGES OF THE UNDERLYING MUTUAL FUNDS...................................................................................22
PURCHASING ANNUITIES.....................................................................................................22
Uses Of The Annuity...................................................................................................22
Application And Initial Payment.......................................................................................22
Breakpoints...........................................................................................................23
Exchange Contracts....................................................................................................23
Auto Saver............................................................................................................25
Periodic Purchase Payments............................................................................................25
Right to Return the Annuity...........................................................................................25
Allocation of Net Purchase Payments...................................................................................26
Balanced Investment Program...........................................................................................26
Ownership, Annuitant and Beneficiary Designations.....................................................................26
ACCOUNT VALUE AND SURRENDER VALUE........................................................................................27
Account Value in the Sub-accounts.....................................................................................27
Account Value of the Fixed Allocations................................................................................27
Additional Amounts in the Fixed Allocations...........................................................................28
RIGHTS, BENEFITS AND SERVICES............................................................................................29
Additional Purchase Payments..........................................................................................29
Changing Revocable Designations.......................................................................................29
Allocation Rules......................................................................................................29
Transfers.............................................................................................................30
Renewals..............................................................................................................30
Dollar Cost Averaging.................................................................................................31
Rebalancing...........................................................................................................31
Distributions.........................................................................................................32
Surrender.............................................................................................................32
Medically-Related Surrender...........................................................................................32
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...........................................................................................................39
CERTAIN TAX CONSIDERATIONS...............................................................................................39
Our Tax Considerations................................................................................................39
Tax Considerations Relating to Your Annuity...........................................................................39
Non-natural Persons...................................................................................................40
Natural Persons.......................................................................................................40
Distributions.........................................................................................................40
Loans, Assignments and Pledges........................................................................................40
Gifts.................................................................................................................40
Penalty on Distributions..............................................................................................41
Annuity Payments......................................................................................................41
Tax Free Exchanges....................................................................................................41
Transfers Between Investment Options..................................................................................41
Estate and Gift Tax Considerations....................................................................................41
Generation-Skipping Transfers.........................................................................................42
Diversification.......................................................................................................42
Federal Income Tax Withholding........................................................................................42
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............................................................................43
H.R. 10 Plans.........................................................................................................43
Tax Treatment of Distributions from Qualified Annuities...............................................................43
Section 457 Plans.....................................................................................................43
OTHER MATTERS............................................................................................................43
Deferral of Transactions..............................................................................................43
Resolving Material Conflicts..........................................................................................43
Modification..........................................................................................................44
Misstatement of Age or Sex............................................................................................44
Ending the Offer......................................................................................................44
Indemnification.......................................................................................................44
Legal Proceedings.....................................................................................................44
THE COMPANY..............................................................................................................44
Lines of Business.....................................................................................................45
Selected Financial Data...............................................................................................45
Management's Discussion and Analysis of Financial Condition and Results of Operations.................................46
Reserves..............................................................................................................49
Competition...........................................................................................................49
Employees.............................................................................................................49
Regulation............................................................................................................49
Executive Officers and Directors......................................................................................50
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION......................................................................54
FINANCIAL STATEMENTS.....................................................................................................54
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.........................................55
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES..............55
APPENDIX C PRIOR CONTRACT...............................................................................................55
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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. 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 a specific type of Systematic Withdrawal such that the
amounts payable are not less than the 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 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.
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.
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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. Certain of the variable
investment options may not be available in all jurisdictions. As of the date of
this Prospectus, we offer eighteen Sub-accounts. Six of the underlying mutual
fund portfolios are managed by Wells Fargo Bank, N.A. The available portfolios
of the LA Trust in which the Sub-accounts invest are as follows: (a) WF Asset
Allocation; (b) WF U.S. Government Allocation; (c) WF Growth; (d) WF Equity
Value; (e) WF Strategic Growth; and (f) WF Money Market. BZW Barclays Global
Fund Advisors ("BGFA") serves as Sub-advisor for the Asset Allocation Fund and
the U.S. Government Allocation Fund. American Skandia Investment Services,
Incorporated ("ASISI"), formerly American Skandia Life Investment Management,
Inc., is the investment manager for the AST Trust. Currently, ASISI engages a
sub-advisor ("Sub-advisor") for each portfolio. The Sub-advisor for each
portfolio is as follows: (a) JanCap Growth Portfolio: Janus Capital Corporation;
(b) T. Rowe Price International Equity and T. Rowe Price Small Company Value
Portfolios: T. Rowe Price Associates, Inc.; (c) Founders Capital Appreciation
Portfolio: Founders Asset Management LLC; (d) INVESCO Equity Income Portfolio:
INVESCO Funds Group, Inc.; (e) PIMCO Total Return Bond and PIMCO Limited
Maturity Bond Portfolios: Pacific Investment Management Company; (f)
Neuberger&Berman Mid-Cap Growth and Neuberger&Berman Mid-Cap Value Portfolios:
Neuberger&Berman Management, Inc. and (g) Stein Roe Venture: Stein Roe & Farnham
Incorporated. The Growth Portfolio of The Alger American Fund is managed by Fred
Alger Management, Inc. The Montgomery Emerging Markets Portfolio of the
Montgomery Variable Series is managed by Montgomery Asset Management, L.P.
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 may also 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) Tax Charges;
(c) Transfer Fee; and (d) 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
portfolio assesses various charges, including charges for investment management
and investment advisory fees. These charges generally differ between portfolios
within the underlying mutual fund. You will find additional details in the 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. We may offer special
programs in relation to Annuities on which we receive large Purchase Payments
and/or Annuities obtained as an exchange of a contract issued by an insurer not
affiliated with us. 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 WF 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 WF 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) Breakpoints; (d) Exchange
Contracts; (e) Auto Saver; (f) Periodic Purchase Payments; (g) Right to Return
the Annuity; (h) Allocation of Net Purchase Payments; (i) Balanced Investment
Program; and (j) 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. 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, and, where
required by law, the 30 days prior to the 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 Auto Saver to make
Purchase Payments. We support certain Periodic Purchase Payment programs subject
to our rules. You may change revocable designations. You may transfer Account
Values between investment options. Transfers in excess of 12 per Annuity 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) Auto Saver; (c) Changing Revocable Designations; (d) Allocation Rules; (e)
Transfers; (f) Renewals; (g) Dollar Cost Averaging; (h) Rebalancing; (i)
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); (j) Pricing of Transfers and
Distributions; (k) Voting Rights; (l) Transfers, Assignments and Pledges; and
(m) 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; and (i) Executive
Officers and Directors.
AVAILABLE INFORMATION: A Statement of Additional Information is available from
us without charge upon request by filling in the coupon at the end of this
Prospectus and sending it (or a written request) to American Skandia Life
Assurance Corporation, Stagecoach Annuity, P.O. Box 883, Shelton, CT 06484. You
also may forward such a request electronically to our Customer Service
Department or call us at 1-800-752-6342. Our electronic mail address is
[email protected]. It includes further information, as described in
the section of this Prospectus entitled "Contents of the Statement of Additional
Information." You may obtain a copy of the Statement of Additional Information
by filling in the coupon at the end of this Prospectus and sending it (or a
written request) to American Skandia Life Assurance Corporation, Attention:
Stagecoach Variable Annuity Administration, P.O. Box 883, Shelton, CT 06484.
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. These documents, as well as documents incorporated
by reference, may also be obtained through the SEC's Internet Website
(http://www.sec.gov) for this registration statement as well as for other
registrants that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE: The Annual Report on Form 10-K
for the year ended December 31, 1997 previously filed by the Company with the
SEC under the Securities Exchange Act of 1934 is incorporated by reference in
this Prospectus.
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 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: Stagecoach, P.O. Box 883, Shelton,
Connecticut, 06484. Our phone number is 1-800-680-8920. Our electronic mail
address is [email protected].
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>
Contingent Deferred Sales Charge, 7% of each Purchase Payment,
as a percentage of Purchase Payments liquidated decreasing 1% in the third year,
another 1% in the fourth year
another 1% in the fifth year
another 1% in the sixth year
and another 1% in the 7th year
with none applicable as to a Purchase Payment
starting in the eighth year after
it was allocated to Account Value
Annual Maintenance Fee None
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)
</TABLE>
Mortality and Expense Risk Charges 1.25%
Administration Charges 0.15%
-----
Total Annual Expenses of the Sub-accounts 1.40%
Underlying Mutual Fund Portfolio Annual Expenses (as a percentage of average net
assets)
Unless otherwise indicated, the expenses shown below are for the year ending
December 31, 1997. "N/A" indicates that no entity has agreed to reimburse the
particular expense indicated. The expenses of the 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
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.
<TABLE>
<CAPTION>
Total Total
Annual Annual
Management Management Other Other Expenses Expenses
Fee Fee Expenses Expenses after any without any
after any without any after any without any applicable applicable
Portfolio: voluntary voluntary applicable applicable waiver or waiver or
waiver waiver reimbursement reimbursement reimbursement reimbursement
- ------------------------------------------------------------------------------------------------------------------------------------
Life & Annuity Trust
<S> <C> <C> <C> <C> <C> <C>
WF Asset Allocation N/A 0.60% 0.36% 0.51% 0.96% 1.11%
WF U.S. Government Allocation N/A 0.60% 0.39% 0.63% 0.99% 1.23%
WF Growth(1) N/A 0.60% 0.50% 0.67% 1.10% 1.27%
WF Money Market 0.40% 0.45% 0.46% 0.88% 0.86% 1.33%
WF Equity Value(2) N/A 0.60% 0.50% 0.63% 1.10% 1.23%
WF Strategic Growth(2) N/A 0.60% 0.50% 0.63% 1.10% 1.23%
American Skandia Trust
JanCap Growth 0.88% 0.90% N/A 0.18% 1.06% 1.08%
T. Rowe Price International Equity N/A 1.00% N/A 0.26% N/A 1.26%
T. Rowe Price Small Company Value N/A 0.90% N/A 0.26% N/A 1.16%
Founders Capital Appreciation N/A 0.90% N/A 0.23% N/A 1.13%
INVESCO Equity Income N/A 0.75% N/A 0.20% N/A 0.95%
PIMCO Total Return Bond N/A 0.65% N/A 0.21% N/A 0.86%
PIMCO Limited Maturity Bond N/A 0.65% N/A 0.23% N/A 0.88%
Neuberger&Berman Mid-Cap Value(3) N/A 0.90% N/A 0.25% N/A 1.15%
Neuberger&Berman Mid-Cap Growth(4) N/A 0.90% N/A 0.24% N/A 1.14%
Stein Roe Venture(5) N/A 0.95% N/A 0.39% N/A 1.34%
The Alger American Fund
Growth N/A 0.75% N/A 0.04% N/A 0.79%
Montgomery Variable Series
Emerging Markets 1.25% 1.25% 0.50% 0.56% 1.75% 1.81%
</TABLE>
(1) The name of the Growth portfolio of Life & Annuity Trust was formerly
"Growth and Income."
(2) These portfolios commenced operations in May 1998. "Other Expenses" shown
are based on estimated amounts for the current fiscal year.
(3) Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio (formerly, the Federated
Utility Income portfolio), for a total Investment Management fee payable at the
annual rate of .75% of the first $50 million of the average daily net assets of
the Portfolio, plus .60% of the Portfolio's average daily net assets in excess
of $50 million. As of May 1, 1998, the Investment Manager engaged
Neuberger&Berman Management Incorporated as Sub-advisor for the Portfolio, for a
total Investment Management fee payable at the annual rate of 0.90% of the first
$1 billion of the average daily net assets of the Portfolio plus .85% of the
Portfolio's average daily net assets in excess of $1 billion. The Management Fee
in the above chart reflects the current Investment Management fee payable to the
Investment Manager.
(4) Prior to May 1, 1998, the Investment Manager had engaged Berger Associates,
Inc. as Sub-advisor for the Portfolio (formerly, the Berger Capital Growth
portfolio), for a total Investment Management fee payable at the annual rate of
.75% of the average daily nets assets of the Portfolio. As of May 1, 1998, the
Investment Manager engaged Neuberger&Berman Management Incorporated as
Sub-advisor for the Portfolio, for a total Investment Management fee payable at
the annual rate of 0.90% of the first $1 billion of the average daily net assets
of the Portfolio plus .85% of the Portfolio's average daily net assets in excess
of $1 billion. The Management Fee in the above chart reflects the current
Investment Management fee payable to the Investment Manager.
(5) This Portfolio commenced operations in January 1998. "Other Expenses" shown
are based on estimated amounts for the current fiscal year.
The purpose of the above table is to assist you in understanding the various
costs and expenses that you would bear directly or indirectly as an investor in
the Portfolio(s).
The underlying mutual fund portfolio information was provided by the underlying
mutual funds. The Company has not independently verified such information.
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 for 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 FUND
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)
If you surrender your Annuity at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
WF Asset Allocation 94 134 167 271
WF U.S. Government Allocation 94 135 168 274
WF Growth 96 139 174 285
WF Equity Value 96 139 174 285
WF Strategic Growth 96 139 174 285
WF Money Market 93 131 162 260
JanCap Growth 95 137 172 281
T. Rowe Price International Equity 97 143 182 300
T. Rowe Price Small Company Value 96 140 177 291
Founders Capital Appreciation 96 140 176 288
INVESCO Equity Income 94 134 167 270
PIMCO Total Return Bond 93 131 162 260
PIMCO Limited Maturity Bond 93 132 163 263
Stein Roe Venture 98 146 187 310
Neuberger&Berman Mid-Cap Value 96 140 177 290
Neuberger&Berman Mid-Cap Growth 96 140 177 290
AA Growth 92 129 158 254
MV Emerging Markets 102 158 207 349
</TABLE>
If you do not surrender your Annuity at the end of the applicable time period or
begin taking annuity payments at such time, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
WF Asset Allocation 24 74 127 271
WF U.S. Government Allocation 24 75 128 274
WF Growth 26 79 134 285
WF Equity Value 26 79 134 285
WF Strategic Growth 26 79 134 285
WF Money Market 23 71 122 260
JanCap Growth 25 77 132 281
T. Rowe Price International Equity 27 83 142 300
T. Rowe Price Small Company Value 26 80 137 291
Founders Capital Appreciation 26 80 136 288
INVESCO Equity Income 24 74 127 270
PIMCO Total Return Bond 23 71 122 260
PIMCO Limited Maturity Bond 23 72 123 263
Stein Roe Venture 28 86 147 310
Neuberger&Berman Mid-Cap Value 26 80 137 290
Neuberger&Berman Mid-Cap Growth 26 80 137 290
AA Growth 22 69 118 254
MV Emerging Markets 32 98 167 349
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units in the
Sub-accounts that commenced operations prior to January 1, 1998 are shown below
as is yield information on the WF 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 that commenced operations prior to January 1, 1998 and are
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>
WF
WF U.S. WF
Asset Government WF Money
Allocation Allocation Growth Market
(1994) (1994) (1994) (1994)
---- ------ ------ ------
No. of Units
<S> <C> <C> <C> <C>
as of 12/31/97 5,186,216 1,842,010 3,907,919 1,304,834
as of 12/31/96 3,700,609 1,173,664 2,096,545 1,157,342
as of 12/31/95 1,991,150 428,889 823,247 521,291
as of 12/31/94 743,176 84,609 204,067 144,050
as of 12/31/93 0 0 0 0
as of 12/31/92 0 0 0 0
as of 12/31/91 0 0 0 0
as of 12/31/90 0 0 0 0
as of 12/31/89 0 0 0 0
as of 12/31/88 0 0 0 0
Unit Price
as of 12/31/97 $16.67 $12.18 $18.40 $11.31
as of 12/31/96 13.99 11.50 15.90 10.92
as of 12/31/95 12.73 11.21 13.18 10.58
as of 12/31/94 10.01 9.94 10.34 10.18
as of 12/31/93 0 0 0 0
as of 12/31/92 0 0 0 0
as of 12/31/91 0 0 0 0
as of 12/31/90 0 0 0 0
as of 12/31/89 0 0 0 0
as of 12/31/88 0 0 0 0
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
T. Rowe
Price Founders INVESCO
JanCap International Capital Equity
Growth Equity Appreciation Income
(1992) (1994) (1994) (1994)
No. of Units
<S> <C> <C> <C> <C>
as of 12/31/97 62,486,302 37,784,426 14,662,728 33,420,274
as of 12/31/96 46,779,164 32,628,595 12,282,211 23,592,226
as of 12/31/95 28,662,737 17,935,251 6,076,373 13,883,712
as of 12/31/94 22,354,170 11,166,758 2,575,105 6,633,333
as of 12/31/93 13,603,637 0 0 0
as of 12/31/92 1,476,139 0 0 0
as of 12/31/91 0 0 0 0
as of 12/31/90 0 0 0 0
as of 12/31/89 0 0 0 0
as of 12/31/88 0 0 0 0
Unit Price
as of 12/31/97 $23.83 $11.69 $17.28 $17.31
as of 12/31/96 18.79 11.70 16.54 14.23
as of 12/31/95 14.85 10.39 13.97 12.33
as of 12/31/94 10.91 9.49 10.69 9.61
as of 12/31/93 11.59 0 0 0
as of 12/31/92 10.51 0 0 0
as of 12/31/91 0 0 0 0
as of 12/31/90 0 0 0 0
as of 12/31/89 0 0 0 0
as of 12/31/88 0 0 0 0
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
PIMCO PIMCO
Total Limited N&B
Return Maturity Mid-Cap AA
Bond Bond Growth1 Growth
(1994) (1995) (1994) (1988)
------ ---- ------ ------
No. of Units
<S> <C> <C> <C> <C>
as of 12/31/97 44,098,036 25,008,310 11,293,799 15,854,570
as of 12/31/96 29,921,643 18,894,375 9,563,858 15,666,357
as of 12/31/95 19,061,840 15,058,644 3,658,836 12,092,291
as of 12/31/94 4,577,708 0 301,267 5,614,760
as of 12/31/93 0 0 0 2,997,458
as of 12/31/92 0 0 0 1,482,037
as of 12/31/91 0 0 0 559,779
as of 12/31/90 0 0 0 82,302
as of 12/31/89 0 0 0 6,900
as of 12/31/88 0 0 0 0
Unit Price
as of 12/31/97 $12.44 $11.26 $16.10 $43.20
as of 12/31/96 11.48 10.62 13.99 34.84
as of 12/31/95 11.26 10.37 12.20 31.18
as of 12/31/94 9.61 0 9.94 23.18
as of 12/31/93 0 0 0 23.18
as of 12/31/92 0 0 0 19.19
as of 12/31/91 0 0 0 17.32
as of 12/31/90 0 0 0 12.51
as of 12/31/89 0 0 0 12.19
as of 12/31/88 0 0 0 0
</TABLE>
N&B
Mid-Cap
Growth2
(1994)
No. of Units
as of 12/31/97 11,293,799
as of 12/31/96 9,563,858
as of 12/31/95 3,658,836
as of 12/31/94 301,267
as of 12/31/93 0
as of 12/31/92 0
as of 12/31/91 0
as of 12/31/90 0
as of 12/31/89 0
as of 12/31/88 0
Unit Price
as of 12/31/97 $16.10
as of 12/31/96 13.99
as of 12/31/95 12.20
as of 12/31/94 9.94
as of 12/31/93 0
as of 12/31/92 0
as of 12/31/91 0
as of 12/31/90 0
as of 12/31/89 0
as of 12/31/88 0
1 The Neuberger&Berman Mid-Cap Value Portfolio was formerly called the Federated
Utility Income Portfolio. The portfolio name, investment objective and policies
were changed pursuant to a shareholder vote on April 29, 1998.
2 The Neuberger&Berman Mid-Cap Growth Portfolio was formerly called the Berger
Capital Growth Portfolio. The portfolio name, investment objective and policies
were changed pursuant to a shareholder vote on April 29, 1998.
Information is not shown above for Sub-accounts that had not commenced
operations prior to January 1, 1998.
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 WF 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
WF Money Market 3.67% 3.73%
INVESTMENT OPTIONS: We offer a range of variable and fixed options as ways to
invest your Account Value.
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 portfolio of the LA Trust, AST, The Alger American Fund,
or Montgomery Variable Series. As of the date of this Prospectus, the
Sub-accounts and the portfolios in which they invest are as follows:
<TABLE>
<CAPTION>
Underlying Mutual Fund: Life & Annuity Trust
<S> <C>
Sub-account Underlying Mutual Fund Portfolio
WF Asset Allocation Asset Allocation Fund
WF U.S. Government Allocation U.S. Government Allocation Fund
WF Growth Growth Fund
WF Equity Value Equity Value Fund
WF Strategic Growth Strategic Growth Fund
WF Money Market Money Market Fund
Underlying Mutual Fund: American Skandia Trust
Sub-account Underlying Mutual Fund Portfolio
JanCap Growth JanCap Growth
T. Rowe Price International Equity T. Rowe Price International Equity
T. Rowe Price Small Company Value T. Rowe Price Small Company Value
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
Neuberger&Berman Mid-Cap Growth Neuberger&Berman Mid-Cap Growth
Neuberger&Berman Mid-Cap Value Neuberger&Berman Mid-Cap Value
Stein Roe Venture Stein Roe Venture
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Growth Alger American Growth
Underlying Mutual Fund: Montgomery Variable Series
Sub-account Underlying Mutual Fund Portfolio
MV Emerging Markets Emerging Markets
</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, or portfolio thereof, 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 1-800-680-8920 or writing to us at
either P.O. Box 883, Attention: Stagecoach Variable Annuity Administration,
Shelton, Connecticut, 06484-0883, or to our electronic mail address which is
[email protected].
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 will 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 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").
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 has 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 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 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 (and, where required by law, 30
days prior to the 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 include 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
a nationally recognized statistical rating organization ("NRSRO") such as
Standard & Poor's or Moody's Investor Services, Inc.
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, Wells Fargo Bank, N.A. 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, a charge for taxes and a transfer fee. These charges are
allocated according to our rules. The transfer charge is not assessed if no
Account Value is maintained in the Sub-accounts at the time such charge is
payable. However, we make certain assumptions regarding 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 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 applied to your Account Value. The charge is: year
1 -7.0%; 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 as 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 if all Purchase Payments were received at least 7 years
prior to the date of either a full surrender or 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, officer or trustee of any underlying mutual fund; (d) a director,
officer or employee of any investment manager or sub-advisor, transfer agent,
custodian, auditing, legal or administrative services provider that is providing
investment management, advisory, transfer agency, custodianship, auditing, legal
and/or administrative services to an underlying mutual fund or any affiliate of
such firm; (e) a director, officer, employee or registered representative of a
broker-dealer or insurance agency that has a then current selling agreement with
us and/or American Skandia Marketing, Incorporated; (f) a director, officer,
employee or authorized representative of any firm providing us or our affiliates
with regular legal, actuarial, auditing, underwriting, claims, administrative,
computer support, marketing, office or other services; (g) the then current
spouse of any such person noted in (b) through (e), above; (h) parents of any
such person noted in (b) through (g) above; (i) such person's child(ren) or
other legal dependent under age of 21: and (j) the siblings of any such persons
noted in (b) through (h) above. No such group contract or Annuity is eligible
for any Additional Amount due to the size of Purchase Payments (see
"Breakpoints") or may qualify under any Exchange Program (see "Exchange
Contracts").
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.
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 3 1/2% and
are subject to change. 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.
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.
The administration charge can be increased only for Annuities issued subsequent
to the effective date of any such change. From time to time we may reduce the
amount of the administration charge. We may do so when Annuities are sold to
individuals or a group of individuals in a manner that reduces 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 administration expenses are likely
to be reduced.
Any elimination of the administration charge or any reduction of such charge
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 administration costs.
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 each fund prospectus and its statement
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, including, but not
limited to, those who submit Purchase Payments above specified breakpoint levels
and those who are exchanging a contract issued by another insurer for an
Annuity. 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 which meet the
requirements of various sections of the Code, including Section 403(b)
(tax-sheltered annuities available to employees of certain qualifying
employers), Section 408 (individual retirement accounts and individual
retirement annuities - "IRAs"; and Simplified Employee Pensions - "SEPs") and
Section 408A (Roth IRAs). We may require additional information regarding the
applicable retirement 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. The Annuity may
also be used in connection with plans that do not qualify under the sections of
the Code noted above. The Annuity may not be issued in connection with or
purchased as a funding vehicle for certain retirement plans designed to meet the
requirements of Section 401(a) of the Code, including defined benefit plans and
defined contribution plans such as 401(k), profit sharing and money purchase
plans. Some of the potential tax consequences resulting from various uses of the
Annuities are discussed in the section entitled "Certain Tax Considerations".
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 if the Annuity is not to be used
in connection with a plan designed to qualify for special treatment under the
Code is $10,000. However, if you choose Auto Saver, we will accept a lower
initial Purchase Payment provided that the Purchase Payments received in the
first year total at least $10,000. The minimum initial Purchase Payment we
accept if the Annuity is to be used in connection with a plan designed to
qualify for special treatment under the Code is $2,000. However, if you choose
Auto Saver, we will accept a lower initial Purchase Payment provided that the
Purchase Payments received in the first year total at least $2,000. The initial
Purchase Payment must be paid by check or by wire transfer. It cannot be made
through Auto Saver. 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.
Breakpoints: Wherever allowed by law, we reserve the right to credit
certain additional amounts ("Additional Amounts") to your Annuity if you submit
large initial or subsequent Purchase Payments. Such Additional Amounts are
credited by us on your behalf with funds from our general account. As of the
date of this Prospectus, we were making such a program available. However, we
reserve the right to modify, suspend or terminate it at any time, or from time
to time, without notice.
The current breakpoints for qualifying for Additional Amounts are shown below.
Also shown is the value of such Additional Amounts as a percentage of your
Purchase Payment. The percentage also depends on the age of the oldest of any
Owner, if the Owners is a person, or the Annuitant, if the Owner is an entity,
on the date we receive the applicable Purchase Payment at our Office.
<TABLE>
<CAPTION>
Age of the oldest of any Owner or the
Annuitant when we receive the applicable Additional Amount as a percentage
Total Purchase Payments received Purchase Payment at our Office of the Purchase Payment
- -------------------------------- ------------------------------ -----------------------
<S> <C> <C>
At least $1,000,000.00 but
less than $5,000,000.00 Less than Age 75 3.00%
At least $1,000,000.00 but Age 75
less than $5,000,000.00 and older 1.50%
$5,000,000.00 or more Less than Age 75 3.75%
$5,000,000.00 or more Age 75
and older 2.00%
</TABLE>
However, the value of any Additional Amounts combined with any Exchange Credits
due under any exchange program we offer may not exceed the specified maximum
percentage under such exchange program (see "Exchange Contracts").
Additional Amounts are added at the same time the qualifying Net Purchase
Payment is allocated to the investment options, and are allocated to the
investment options in the same manner as such qualifying Net Purchase Payment.
Should you exercise your right to return the Annuity, any Additional Amount will
be deducted from your Account Value prior to determining the amount to be
returned to you. We do not consider Additional Amounts to be "investment in the
contract" for income tax purposes (see "Certain Tax Considerations"). Additional
Amounts credited are not included in any amounts you may withdraw without
assessment of the contingent deferred sales charge (see "Contingent Deferred
Sales Charge").
Generally, the breakpoints apply separately to each Purchase Payment. However,
we will apply the breakpoints cumulatively if you provide us In Writing evidence
satisfactory to us that you will submit additional Purchase Payments within a 13
month period. We require an initial Purchase Payment of at least $500,000.00
before we agree to such a program if it is designed to provide a total of at
least $1,000,000.00 of Purchase Payments over 13 months. We require an initial
Purchase Payment of at least $2,500,000.00 before we agree to such a program if
it is designed to provide a total of at least $5,000,000.00 over 13 months.
We retain the right to recover an amount from your Annuity if such additional
Purchase Payments are not received. The amount we may recover is the Additional
Amounts when applied. Amounts recovered will be taken pro-rata from the
investment options based on the Account Values in the investment options as of
the date of the recovery. If the amount of the recovery exceeds your then
current Surrender Value, we will recover all remaining Account Value and
terminate your Annuity.
Failure to inform us In Writing at or prior to the time of the initial Purchase
Payment that you intend to submit a pair or series of large Purchase Payments
within a 13 month period may result in your Annuity being credited no Additional
Amounts or fewer Additional Amounts than would otherwise be credited to you.
Exchange Contracts: We reserve the right to offer an exchange program
(the "Exchange Program") available only to purchasers who exchange an existing
contract issued by another insurance company not affiliated with us (an
"Exchange Contract") for an Annuity or who add, under certain qualified plans,
to an existing Annuity by exchanging an Exchange Contract. As of the date of
this Prospectus, where allowed by law, we were making such a program available.
However, we reserve the right to modify, suspend, or terminate it at any time or
from time to time without notice. If such an Exchange Program is in effect, it
will apply to all such exchanges for an Annuity.
Such a program would be available only where permitted by law to owners of
insurance or annuity contracts deemed not to constitute "securities" issued by
an investment company. Therefore, while a currently owned variable annuity or
variable life insurance policy may be exchanged for an Annuity pursuant to
Section 1035 of the Code, or where applicable, may qualify for a "rollover" or
transfer to an Annuity pursuant to certain other sections of the Code, such an
exchange, "rollover" or transfer of such a currently owned variable annuity or
variable life insurance policy subject to the 1940 Act will not qualify for any
Exchange Program being offered in relation to Annuities offered pursuant to this
Prospectus. You should carefully evaluate whether any particular Exchange
Program we offer benefits you more than if you continue to hold your Exchange
Contract. Factors to consider include, but are not limited to: (a) the amount,
if any, of the surrender charges under your Exchange Contract, which you should
ascertain from your insurance company; (b) the time remaining under your
Exchange Contract during which surrender charges apply; (c) the on-going
charges, if any, under your Exchange Contract versus the on-going charges under
an Annuity; (d) the contingent deferred sales charge under an Annuity; (e) the
amount and timing of any benefits under such an Exchange Program; and (f) the
potentially greater cost to you if the contingent deferred sales charge on an
Annuity or the surrender charge on your Exchange Contract exceeds the benefits
under such an Exchange Program. There could be adverse federal income tax
consequences. You should consult with your tax advisor as to the tax
consequences of such an exchange (see "Tax Free Exchanges").
Under the Exchange Program available as of the date of this Prospectus we add
certain amounts to your Account Value as exchange credits ("Exchange Credits").
Such Exchange Credits are credited by us on behalf of the Owners of Exchange
Contracts with funds from our general account. Subject to a specified limit (the
"Exchange Credit Limit") discussed below, the Exchange Credits equal the
surrender charge paid, if any, to the other insurance company plus the
difference, if any, between the "annuity value" and the "surrender value"
attributable to a difference in interest rates that have been or would be
credited to such values in annuities typically referred to as "two tier"
annuities. Both such amounts hereafter are referred to as a "surrender charge".
Determination of whether an Exchange Contract is a "two tier" annuity qualifying
for Exchange Credits is in our sole discretion. A "two-tier" annuity is
generally credited higher interest rates if there are no or limited withdrawals
before annuitization, and a lower interest rate would apply upon surrender and
most withdrawals.
Exchange Credits are not included in any amounts returned to you during the
"free-look" period described below.
This Exchange Program is subject to the following rules:
(1) We do not add Exchange Credits unless we receive In Writing
evidence satisfactory to us:
(a) of the surrender charge, if any, you paid to surrender the
Exchange Contract and the amount of any such charge (you may have particular
difficulty in obtaining satisfactory evidence of any surrender charge paid to
surrender an Exchange Contract typically referred to as a "two tier" annuity);
and
(b) that you acknowledge that you are aware that the
contingent deferred sales charge under this Annuity will be assessed in full
against any subsequent surrender or partial withdrawal to the extent then
applicable.
(2) The ratio of the Exchange Credits to be added to any Fixed
Allocation is the ratio between such Fixed Allocation and the Purchase Payment
that qualifies for this Exchange Credit on the date we allocate the Purchase
Payment. Exchange Credits not added to Fixed Allocations, if any, are allocated
pro-rata among the Sub-accounts based on your Account Values in such
Sub-accounts at the time we allocate the Exchange Credits.
(3) The Exchange Credit is allocated as of the later of (a), (b) or
(c); where
(a) is the date the applicable Purchase Payment is allocated
to the investment options;
(b) is 30 days after the Issue Date; and
(c) is the date we receive, In Writing, evidence satisfactory
to us of the amount of the surrender charge you paid to surrender the Exchange
Contract.
For the fixed investment options, interest on the Exchange Credits is credited
as of the later of (a) or (b), where:
(a) is the date the applicable Purchase Payment was allocated;
and
(b) is the date we receive, In Writing, evidence satisfactory
to us of the amount of the surrender charge you paid to surrender the Exchange
Contract, if more than 30 days after the Issue Date.
(4) The value of the Exchange Credits as of the date of the allocation
to the investment options equals the lesser of the Exchange Credit Limit or the
surrender charge you paid to surrender the Exchange Contract. The Exchange
Credit Limit is a percentage of the net amount payable upon surrender of the
Exchange Contract. The Exchange Credit Limit depends on: (a) the age of the
oldest of any Owner, if the Owner is a person, or the Annuitant, if the Owner is
an entity, on the date we receive the applicable Purchase Payment at our Office;
and (b) the amount of proceeds we receive upon surrender of the Exchange
Contract ("Exchange Proceeds"). The current limits are as follows:
<TABLE>
<CAPTION>
Age of the oldest of any Owner or the
Annuitant when we receive the Exchange Exchange Credit Limit
applicable Purchase Payment at our Office Proceeds for all other uses
<S> <C> <C> <C>
Under 75 $10,000 or more 5.50%
Under 75 $5,000 to $9,999.99 2.70%
Under 75 Under $5,000 1.80%
75 or over Under $5,000 0.00%
75 or over $5,000 to $9,999.99 0.00%
75 or over $10,000 or more 2.75%
</TABLE>
The Exchange Credit Limit is not based on any other Purchase Payment. We reserve
the right at any time and from time to time to increase or decrease the Exchange
Credit Limit. However, the Exchange Credit Limit in effect at any time will
apply to all purchases qualifying for the Exchange Program. Further, any
Additional Amounts described under "Breakpoints" combined with any Exchange
Credit due may not exceed the Exchange Credit Limit (see "Breakpoints").
(5) The value of any Exchange Credits is not considered "growth" for
purposes of determining amounts available as a free withdrawal (see "Free
Withdrawal").
(6) We do not consider additional amounts credited to Account Value
under the Exchange Program to be an increase in your "investment in the
contract" (see "Certain Tax Considerations").
Auto Saver: You may make Purchase Payments to your Annuity using Auto
Saver, but only for allocations to variable investment options. However, you
must pay at least one prior Purchase Payment by check or wire transfer. We may
accept an initial Purchase Payment lower than our standard minimum Purchase
Payment requirement of $10,000 if you also furnish Auto Saver instructions that
provide amounts that will meet a $10,000 minimum Purchase Payment requirement to
be paid within 12 months. For Annuities designed to qualify for special tax
treatment under the Code, we may accept an initial Purchase Payment lower than
our standard minimum Purchase Payment requirement of $2,000 if you also furnish
Auto Saver instructions that provide amounts that will meet a $2,000 minimum
Purchase Payment requirement to be paid within 12 months. We may accept
additional Purchase Payments in an amount lower than $100, if accompanied by an
Auto Saver authorization form allowing monthly Purchase Payments of at least
$50.
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 or other automatic
periodic transfers to us. 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 amount 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 a specified period known as a "free-look" period. Depending on the
applicable legal and regulatory requirements, this period may be within ten days
of receipt, twenty-one days of receipt or longer. 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 and less any Additional Amounts added due to premium size (see
"Breakpoints"). 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"). For Annuities subject to California
law, owners who are age 60 or older (or annuitants if the annuity is owned by a
non-natural person) may return the Annuity within thirty days of receipt. The
amount refunded is the standard refund. 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 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 WF 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 WF 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 Payment, 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"). You must provide us with allocation instructions In
Writing if you wish to change your current allocations when making subsequent
Purchase Payments.
Balanced Investment Program: We offer a balanced investment program in
relation to your Purchase Payment if Fixed Allocations are available under your
Annuity. If you choose this program, we commit a portion of your Net Purchase
Payment 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 Payment 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 Payment is invested in the other 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 (if the Annuity is
issued as a certificate representing interest in a group annuity contract, the
designation will be for a participant), 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.
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
qualifies 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.
If an Owner's spouse is designated as the sole primary Beneficiary of the
Annuity and the Owner dies prior to the Annuity Date, the Owner's Spouse, as
Beneficiary, may elect to be treated as Owner and continue the Annuity at its
current Account Value, subject to its terms and conditions. If the Annuity is
owned jointly by both spouses, and the primary Beneficiary is designated as
"surviving spouse", each spouse named individually, or a designation of similar
intent, then upon the death of either Owner, the surviving spouse may elect to
be treated as Owner.
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.
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.
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) 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, and, where required by law, the 30 days prior to the 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. 7 or 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.
(10) We reserve the right to reduce the Additional Amount, when the
Additional Amount combined with amounts we credit under various other programs
we may offer, such as the Exchange Program, exceed the Exchange Credit Limit
(see "Exchange Contracts").
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 or other electronic means. To
the extent permitted by law or regulation, neither we or any person authorized
by us will be responsible for any claim, loss, liability or expense in
connection with a telephonic or electronic transfer if we or such other person
acted on such transfer instructions in good faith in reliance on your
authorization of telephone and/or electronic transfers 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 an Auto Saver program (see "Auto Saver"), 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 written allocation instructions. Should no written
instructions be received with an additional Purchase Payment, 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: As of the date of this Prospectus, during the
accumulation phase, you may maintain Account Value in multiple Sub-accounts and
an unlimited number of Fixed Allocations. We reserve the right, to the extent
permitted by law, to limit the number of Sub-accounts or the amount you may
allocate to any Fixed Allocation. As of the date of this Prospectus, we limited
the number of Sub-accounts available at any one time to ten. 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. Upon termination of any of the above arrangements, you must provide us
with allocation instructions In Writing for all subsequent Purchase Payments.
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
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
any Annuity Year, including transfers transacted as part of any rebalancing,
market timing, asset allocation or similar program which you employ or you
authorize to be employed on your behalf. Transfers transacted as part of a
dollar cost averaging program are not counted in determining the applicability
of the transfer fee. 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 or through means such as electronic mail with appropriate authorization.
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
fund portfolios; 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 an affected underlying mutual fund
portfolio or portfolios.
To the extent permitted by law, we may require 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 1-800-680-8920 or contact our customer service department electronically at
[email protected]. When calling us by phone, please have readily
available your Annuity number and your PIN number. When contacting us
electronically, please provide your PIN number, social security or tax I.D.
number and the Annuity contract number.
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, 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, and where required by law, the 30 days prior to 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 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, and where required by law, the 30 days prior to the 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 of the first transfer under a dollar cost
averaging program. Transfers under a dollar cost averaging program are not
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 market timing or
asset allocation 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 WF 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.
Distributions: Distributions available from your Annuity during the
accumulation phase include surrender, medically-related surrender, free
withdrawals, partial withdrawals, Systematic Withdrawals, (including 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.
Distributions from your Annuity of any amounts derived from Purchase Payments
paid by personal check may be delayed until such time as the check has cleared
the applicable financial institution upon which such check was drawn.
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 prior to the Annuity Date without application of any
contingent deferred sales charge, upon occurrence of a "Contingency Event". This
waiver of any applicable contingent deferred sales charge is subject to our
rules, including but not limited to the following: (a) the Annuitant must be
alive as of the date we pay the proceeds of such surrender request; (b) if the
Owner is one or more natural persons, all such Owners must also be alive at such
time; (c) we must receive satisfactory proof of the Annuitant's confinement or
Fatal Illness In Writing; and (d) 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" after the date as of
which such person was designated as the Annuitant remains confined for at least
90 days in a row; or
(2) First diagnosed as having a "Fatal Illness".
For contracts issued on or after May 1, 1996, and where allowed by law, the
Annuitant must have been named or any changes 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.
Specific details and definitions of terms in relation to this benefit may differ
in certain jurisdictions.
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.
There is a cumulative maximum free withdrawal amount which is determined in the
following manner. The maximum free withdrawal amount is the lesser of (a) and
(b) where (a) is the contract's Account Value less any remaining contingent
deferred sales charge and (b) is the greater of (1) and (2) where (1) is the
contract's "growth" plus "unliquidated" "old" Purchase Payments and (2) is an
amount which is 10% of the first Purchase Payment and is increased by 10% of
each subsequent Purchase Payment when it is received and by 10% of all
"unliquidated" Purchase Payments on the first day of each Annuity Year after the
first, and is reduced by all amounts received under this Free Withdrawal
provision. "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 "Exchange Contracts" and
"Breakpoints"). In order to determine future increases in the free withdrawal
amount, amounts are deemed to be withdrawn first from "growth" and then from
"unliquidated" "old" Purchase Payments. "Unliquidated" means not previously
surrendered or withdrawn. "Old" Purchase Payments are Purchase Payments
allocated to Account Value more than seven years prior to the partial
withdrawal. 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.
Partial Withdrawals: You may withdraw part of your Surrender Value. The
minimum partial withdrawal amount 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 under this
provision, we reserve the right to treat your request as one for a full
surrender.
Amounts withdrawn that are not in excess of the free withdrawal amount are
deemed to come first from "growth" and then from "unliquidated" "old" Purchase
Payments. 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. "New" Purchase
Payments are those received in the seven (7) years prior to the date as of which
a free withdrawal occurs. For the purpose of determining the applicable
contingent deferred sales charge to be assessed, 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. Generally, 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 concurrently 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: Minimum Distributions are a specific type of
Systematic Withdrawal program. Minimum Distributions are subject to all the
rules applicable to Systematic Withdrawals unless we specifically indicate that
one or more of such rules do not apply. In addition, certain rules apply only to
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. Requests to
calculate a Minimum Distribution amount must be made three (3) days prior to the
date that your Minimum Distribution payment is processed to allow for
calculation and processing of the required amount. 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 concurrently available with any other programs of Systematic Withdrawals.
You may elect to have Minimum Distributions paid out monthly, quarterly,
semi-annually or annually. The $100 minimum for Systematic Withdrawals does not
apply to Minimum Distributions.
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"). "). Minimum Distributions from Fixed Allocations are not subject to
the limitation on Systematic Withdrawals that limits a program of Systematic
Withdrawals from Fixed Allocations only to earnings accrued after program
inception.
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 new
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 85: the death benefit
is the greater of your Account Value in Sub-accounts plus the Interim Value of
any Fixed Allocations, and 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 85 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 85, 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 85 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 at its current Account Value, subject to its
terms and conditions. An Owner's spouse may only assume ownership of the Annuity
if such spouse is designated as the sole primary Beneficiary.
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. Such rules may include a prohibition on annuitization within 1
year of the Issue Date. 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 $50.
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 are designed to 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. However, if a transaction is "scheduled" to
occur on a day other than a Valuation Day, such transaction will be processed
and priced on the last Valuation Day prior to the scheduled transaction.
"Scheduled" transactions include 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, using voice or data transmission over the phone are priced as of the
Valuation Period we receive the request at our Office for such transactions.
(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 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 (but not pricing) 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 send any statements and reports required by
applicable law or regulation to you at your last known address of record. Owners
should therefore give us prompt notice of any address change. We reserve the
right, to the extent permitted by law and subject to your prior consent, to
provide any prospectus, prospectus supplements, confirmations, statements and
reports required by applicable law or regulation to you through our Internet
Website at http://www.americanskandia.com or any other electronic means,
including diskettes or CD ROMs. We send a confirmation statement to you each
time a transaction is made affecting Account Value, such as making additional
Purchase Payments, transfers, exchanges or withdrawals. We also send quarterly
statements detailing the activity affecting your Annuity during the calendar
quarter. You may request additional reports. We reserve the right to charge up
to $50 for each such additional report. 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 as soon as possible
and no later than the date below to assure proper accounting to your Annuity.
For transactions that are confirmed immediately, we assume all transactions are
accurate unless you notify us otherwise within 10 days from the date you receive
the confirmation. For transactions that are only confirmed on the quarterly
statement, we assume all transactions are accurate unless you notify us within
10 days from the date you receive the quarterly statement. All transactions
confirmed immediately or by quarterly statement are deemed conclusive after the
applicable 10 day period. We may also send an annual report and a semi-annual
report containing financial statements for the applicable Sub-accounts, as of
December 31 and June 30, respectively, to Owners or, with your prior consent,
make such documents available electronically through our Internet Website of
other electronic means.
SALE OF THE ANNUITIES: American Skandia Marketing, Incorporated ("ASM, Inc."), 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 concession to be paid on premiums received is
7.0%. 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 ("1940 Act").
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 fund portfolios
and upon prevailing market conditions and the response of the underlying mutual
fund portfolios to such conditions. Actual performance will also depend on
changes in the expenses of the underlying mutual fund portfolios. Such changes
are reflected, in turn, in the Sub-accounts which invest in such underlying
mutual fund 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
and/or the Annual Maintenance Fee.
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, 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 as an agent or
nominal owner for a natural person who is the beneficial owner. 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: Generally, 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
policyholder 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.
Amounts received under a contract on its complete surrender, redemption, or
maturity are includible in gross income to the extent that they exceed the cost
of the contract, i.e., they exceed the total premiums or other consideration
paid for the contract minus amounts received under the contract that were not
reportable as gross income.
Loans, Assignments and Pledges: Any amount received directly or
indirectly as a loan from, or 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.
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 income tax
purposes as a distribution.
Penalty on Distributions: Subject to certain exceptions, any
distribution from an annuity not used in conjunction with qualified plans 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. With respect to
Roth IRAs only, distributions are not subject to federal income tax or the 10%
penalty tax if five (5) tax years have passed since the first contribution was
made or any conversion from a traditional IRA was made, and the distribution is
made (a) once the taxpayer is age 59 1/2 or older, (b) upon the death or
disability of the taxpayer, or (c) for qualified first-time home buyer expenses,
subject to certain limitations. Distributions from a Roth IRA that are not
"qualified" as described above may be subject to a penalty tax.
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 received as an
annuity on or after the annuity start date 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.
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.
Estate and Gift Tax Considerations: You should obtain competent tax
advice with respect to possible federal and state estate and gift tax
consequences flowing from the ownership and transfer of annuities.
Generation-Skipping Transfers: Under the Code certain taxes may be due
when all or part of an annuity is transferred to or a death benefit is paid to
an individual two or more generations younger than the contract holder. These
generation-skipping transfers generally include those subject to federal estate
or gift tax rules. There is an aggregate $1 million exemption from taxes for all
such transfers. We may be required to determine whether a transaction is a
direct skip as defined in the Code and the amount of the resulting tax. We will
deduct from your Annuity or from any applicable payment treated as a direct skip
any amount of tax we are required to pay.
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 depends 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. Such persons may also maintain a form of IRA called a "Roth IRA".
Contributions to a Roth IRA are not deductible but, under certain circumstances,
distributions from such an account are tax-free. Purchasers of IRAs and Roth
IRAs will 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 qualified plans may be
rolled over or transferred into an IRA on a tax-deferred basis and the
conditions under which distributions from traditional IRAs may be rolled over
to, or the traditional IRA itself may be converted into a Roth IRA. Eligible
employers that meet specified criteria may establish Simplified Employee
Pensions 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; (i) make
changes required by any change in other Federal or state laws relating to
retirement annuities or annuity contracts; and (j) discontinue offering any
variable investment option at any time.
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 (the "Company") is a
stock life insurance company domiciled in Connecticut with licenses in all 50
states. It is a wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), whose ultimate parent is Skandia Insurance Company
Ltd., a Swedish company. The Company markets its products to broker-dealers and
financial planners through an internal field marketing staff. In addition, the
Company markets through and in conjunction with financial institutions such as
banks that are permitted directly, or through affiliates, to sell annuities.
In addition, the Company has 99.9% ownership in Skandia Vida, S.A. de C.V.
which is a life insurance company domiciled in Mexico. This Mexican life insurer
is a start up company with expectations of selling long-term savings products
within Mexico. The Company's investment in Skandia Vida, S.A. de C.V. is $1.5
million at December 31,1997.
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; c) certain group
variable annuities that are not registered with the Securities and Exchange
Commission that serve as funding vehicles for various types of qualified pension
and profit sharing plans; and d) fixed and adjustable immediate annuities.
Selected Financial Data: The following selected financial data is
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 years
ended December 31, 1997, 1996, 1995, 1994 and 1993 has not been audited. The
selected financial data has been derived from the full financial statements for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 which were
presented in conformity with generally accepted accounting principles and which
were audited by Ernst & Young LLP, independent auditors, with respect to the
year ended December 31, 1997 and Deloitte & Touche LLP, independent auditors,
with respect to the years ended December 31, 1996 and 1995, whose respective
reports on the Company's consolidated financial statements as of December 31,
1997 and 1996, and for the three years in the period ended December 31, 1997,
are included herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Income Statement Data:
Revenues:
Annuity charges and fees* $ 121,157,846 $ 69,779,522 $ 38,837,358 $ 24,779,785 $ 11,752,984
Fee income 27,587,231 16,419,690 6,205,719 2,111,801 938,336
Net investment income 8,181,073 1,585,819 1,600,674 1,300,217 692,758
Annuity premium income
and other revenues 1,088,144 265,103 45,524 92,608 432,936
--------------- -------------- -------------- -------------- --------------
Total revenues $ 158,014,294 $ 88,050,134 $ 46,689,275 $ 28,284,411 $ 13,817,014
=============== ============== ============== ============== ==============
Benefits and Expenses:
Annuity benefits 2,033,275 613,594 555,421 369,652 383,515
Increase/(decrease) in annuity
policy reserves 37,270 634,540 (6,778,756) 5,766,003 1,208,454
Cost of minimum death benefit
reinsurance 4,544,697 2,866,835 2,056,606 - -
Return credited
to contractowners (2,018,635) 672,635 10,612,858 (516,730) 252,132
Underwriting, acquisition and
other insurance expenses 90,496,952 49,887,147 35,914,392 18,942,720 9,547,951
Interest expense 24,895,456 10,790,716 6,499,414 3,615,845 187,156
--------------- -------------- -------------- -------------- --------------
Total benefits and expenses $ 119,989,015 $ 65,465,467 $ 48,859,935 $ 28,177,490 $ 11,579,208
=============== ============== ============== ============== ==============
Income tax (benefit) expense $ 10,477,746 $ (4,038,357) $ 397,360 $ 247,429 $ 182,965
=============== ============== ============== ============== ==============
Net income (loss) $ 27,547,533 $ 26,623,024 $ (2,568,020) $ (140,508) $ 2,054,841
=============== ============== ============== ============== ==============
Balance Sheet Data:
Total Assets $12,972,416,108 $8,347,695,595 $5,021,012,890 $2,864,416,329 $1,558,548,537
=============== ============== ============== ============== ==============
Future fees payable
to parent $ 233,033,818 $ 47,111,936 $ 0 $ 0 $ 0
=============== ============== ============== ============== ==============
Surplus Notes $ 213,000,000 $ 213,000,000 $ 103,000,000 $ 69,000,000 $ 20,000,000
=============== ============== ============== ============== ==============
Shareholder's Equity $ 184,421,044 $ 126,345,031 $ 59,713,000 $ 52,205,524 $ 52,387,687
=============== ============== ============== ============== ==============
</TABLE>
* On annuity sales of $3,697,990,000, $2,795,114,000, $1,628,486,000,
$1,372,874,000 and $890,640,000 during the years ended December 31, 1997,
1996, 1995, 1994, and 1993, respectively, with contractowner assets under
management of $12,119,191,000, $7,764,891,000, $4,704,044,000,
$2,661,161,000 and $1,437,554,000 as of December 31, 1997, 1996, 1995,
1994 and 1993, 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 OPERATIONS The Company's long term business plan was developed
reflecting the current sales and marketing approach. Annuity sales increased
32%, 72% and 19% in 1997, 1996 and 1995, respectively. The Company continues to
show significant growth in sales volume and increased market share within the
variable annuity industry. This growth is a result of innovative product
development activities, expansion of distribution channels and a focused effort
on customer orientation.
The Company primarily offers and sells a wide range of deferred
annuities through three focused marketing, sales and service teams.
Each team specializes in addressing one of the Company's primary
distribution channels: (a) financial planning firms; (b) broker-dealers
that generally are members of the New York Stock Exchange, including
"wirehouse" and regional broker-dealer firms; and (c) broker-dealers
affiliated with banks or which specialize in marketing to customers of
banks. The Company also offers a number of specialized products
distributed by select, large distributors. In 1995 and 1996, the
Company restructured its internal operations to better support the
specialized marketing, sales and service needs of the primary
distribution channels and of the select distributors of specialized
products. There has been continued growth and success in expanding the
number of selling agreements in the primary distribution channels.
There has also been increased success in enhancing the relationships
with the registered representatives/insurance agents of all the selling
firms.
<PAGE>
Total assets grew 55%, 66% and 75% in 1997, 1996 and 1995,
respectively. These increases were a direct result of the
substantial sales volume increasing separate account assets and
deferred acquisition costs as well as 1997 and 1996 growth in
fixed maturity investments in support of the Company's risk based
capital requirements. Liabilities grew 56%, 65%, and 76% in 1997,
1996 and 1995, respectively, as a result of the reserves required
for the increased sales activity along with borrowings during
these periods. The borrowings are needed to fund the acquisition
costs of the Company's variable annuity business.
The Company experienced a net gain after tax in 1997 and 1996 and
a net loss after tax in 1995. The 1997 and 1996 results were
related to the strong sales volume, favorable market climate,
expense savings relative to sales volume and recognition of
certain tax benefits.
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, which was in part responsible for the
strong sales and financial performance in 1996.
Increasing volume of annuity sales results in higher assets under
management. The fees realized on assets under management have
resulted in annuity charges and fees increasing 74%, 80% and 57%
in 1997, 1996 and 1995, respectively.
Fee income has increased 68%, 165% and 194% in 1997, 1996 and
1995, respectively, as a result of income from transfer agency
type activities. These increases are also as a result of
increases in assets under management.
Net investment income increased 416% in 1997, decreased 1% in
1996 and increased 23% in 1995. The increase in 1997 was a direct
result of increased bond holdings in support of the Company's
risk based capital. The level net investment income in 1996 was a
result of the consistent investment holdings throughout most of
the year. The increase in 1995 was a result of a higher average
level of Company bonds and short-term investments.
Annuity premium income represents premiums earned on sales of
immediate annuities with life contingencies and supplementary
contracts with life contingencies.
Annuity benefits represent payments on annuity contracts with
mortality risks, these being immediate annuity contracts with
life contingencies and supplementary contracts with life
contingencies.
Increase/(decrease) in annuity policy reserves represents changes
in reserves for the immediate annuity with life contingencies,
supplementary contracts with life contingencies and guaranteed
minimum death benefits. 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 guaranteed minimum death benefit
reserve exceeded the change in the guaranteed minimum death
benefit reserve during 1997 and 1996 as a result of minimum
required premiums within the reinsurance contract. The costs
associated with reinsuring the guaranteed minimum death benefit
reserve approximate the change in the guaranteed minimum death
benefit reserve during 1995, thereby having no significant effect
on the statement of operations.
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. The 1997 return credited to contractowners in
the amount of ($2.0) millions represents a break-even year for
our market value adjusted product line for the year. The 1996
return credited to contractowners in the amount of $0.7 million
represents a favorable investment return on the market value
adjusted contracts relating to the benefits and required
reserves, offset by the effect of bond market fluctuations on
December 31, 1996 in the amount of $1.8 million. While the
assets relating to the market value adjusted contracts reflect
the market interest rate fluctuations which occurred on December
31, 1996, the liabilities are based on the interest rates set
for new contracts which are generally based on the prior day's
interest rates. During the first week of January 1997, interest
rates were established for new contracts, thereby bringing the
liabilities relating to the market value adjusted contracts in
line with the related assets. Consequently, the gain realized in
1997 was a result of this liability shift.
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.
Underwriting, acquisition and other insurance expenses for 1997
were made up of $186.9 million of commissions and $94.5 million
of general expenses offset by the net capitalization of deferred
acquisition costs totaling $191.1 million. This compares to the
same period last year of $140.4 million of commissions and $63.2
million of general expenses offset by the net capitalization of
deferred acquisition costs totaling $153.9 million.
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.
Interest expense increased $14.1 million, $4.3 million and $2.9
million in 1997, 1996 and 1995, respectively, as a result of
Surplus Notes totaling $213 million, $213 million and $103
million, at December 31, 1997, 1996 and 1995, respectively, along
with interest on Securitization (future fees payable to Parent)
transactions for the year 1997.
Income tax reflected an expense of $10.5 million for the year
ended December 31, 1997, a benefit of $4 million for the year
ended December 31, 1996 and an expense of $0.4 million for the
year ended December 31, 1995. The 1997 income tax expense is a
net result of applying the federal income tax rate of 35% to
pre-tax earnings reduced by permanent differences, with the most
significant item being the dividend received deduction. The 1996
benefit is related to management's release of the deferred tax
valuation allowance of $9.3 million, established prior to 1996.
Management believes that based on the taxable income produced in
the current year and the continued growth in annuity products,
the Company will produce sufficient taxable income in the future
to realize its deferred tax assets. Income tax expense in 1995
relates principally to an increase in the deferred tax valuation
allowance of $1.7 million, as well as, the Company being in an
Alternative Minimum Tax position for the year.
Liquidity and Capital Resources: The liquidity requirement of the
Company was met by cash from insurance operations, investment
activities, borrowings from its Parent and sale of rights to
future fees and charges to its Parent.
As previously stated, the Company continued to have significant
growth during 1997. The sales volume of $3.698 billion was
primarily (approximately 94%) variable annuities, most of 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 cash made available by insurance operations and
investments of the Company. During 1996, the Company borrowed an
additional $110 million from its Parent in the form of Surplus
Notes. Also, during 1997 and 1996, the Company extended its
reinsurance agreements (which were initiated in 1993, 1994 and
1995). 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.
In addition, on December 17, 1996, the Company sold to its
Parent, effective September 1, 1996, certain rights to receive
future fees and charges expected to be realized on the variable
portion of a designated block of deferred annuity contracts
issued during the period January 1, 1994 through June 30, 1996
(Transaction 1996-1). Also, the Company entered into the
following similar transactions during 1997.
Closing Effective Contract Issue
Transaction Date Date Period
----------- ------- --------- --------------
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
In connection with these transactions, the Parent, through a
trust, issued collateralized notes in a private placement, which
are secured by the rights to receive future fees and charges
purchased from the Company.
Under the terms of the Purchase Agreements, the rights sold
provide for the Parent to receive 80% (100% for Transaction
1997-3) of future mortality and expense charges and contingent
deferred sales charges, after reinsurance where applicable,
expected to be realized over the remaining surrender charge
period of the designated contracts (6 to 8 years). The Company
did not sell the right to receive future fees and charges after
the expiration of the surrender charge period.
The proceeds from the sales have been recorded as a liability and
are being amortized over the remaining surrender charge period of
the designated contracts using the interest method. The present
value of the transactions (discounted at 7.5%) of future fees as
of the respective Effective Date was as follows (amounts in
millions):
Present
Transaction Value
----------- -------
1996-1 $50.2
1997-1 58.8
1997-2 77.6
1997-3 58.2
<PAGE>
The Company expects to use borrowing, reinsurance and the sale of
future fee revenues 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. During December 1997, the
Company received $27.7 million from its Parent to support the
capital needs of its increased business during 1997 and the
anticipated 1998 growth in business.
As of December 31, 1997 and 1996, shareholder's equity was $184.4
million and $126.3 million, respectively, which includes the
carrying value of state insurance licenses in the amount of $4.6
million and $4.7 million, 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.
Year 2000 Compliance: The Company is a relatively young company
whose internally developed systems were designed from the start
with the correct four digit date fields. As a result, the
Company anticipates few technical problems related to the year
2000. However, we take this matter seriously and continue to
take precautions to ensure year 2000 compliance.
Steps taken to date include:
1. Any new, externally developed software is evaluated for year
2000 compliance before purchase. We also evaluate all new
service providers.
2. An external specialist had been engaged to perform a complete
assessment ofthe Company's operating systems and internally
developed software.
3. The Company is working with external business partners and
software providers to request and review their year 2000
compliance status and plans.
We anticipate full internal compliance by September 1998,
followed by continuous evaluation of internal systems, external
business partners and software providers until the year 2000.
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, 1997, we had 456 direct salaried
employees. An affiliate, American Skandia Information Services and Technology
Corporation, which provides services almost exclusively to us, had 79 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.
<TABLE>
<CAPTION>
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.
<S> <C> <C> <C>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
Gordon C. Boronow* Deputy Chief Executive Deputy Chief Executive
45 Officer and President Officer and President:
Director (since July, 1991) American Skandia Life
Assurance Corporation
Nancy F. Brunetti Director (since February, 1996) Executive Vice President and
36 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
42 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi* Chief Executive Senior Executive Vice President and
53 Officer and Member of Executive Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
Lincoln R. Collins Executive Vice President and Executive Vice President
37 Chief Operating Officer and Chief Operating Officer:
Director (since February, 1996) American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
44 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Wade A. Dokken Director (since July, 1991) President and Deputy
38 Chief Executive Officer:
American Skandia Marketing, Incorporated
Brian L. Hirst Vice President, Vice President,
50 Corporate Actuary Corporate Actuary:
American Skandia Life
Assurance Corporation
Mr. Hirst joined us in 1996. He previously held the positions of Vice President
from 1993 to 1996 and Second Vice President from 1987 to 1992 at Allmerica
Financial.
N. David Kuperstock Vice President, Vice President,
46 Product Development Product Development:
American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
45 Chief Financial Officer, Chief Financial Officer:
Director (since September, 1994) American Skandia Life
Assurance Corporation
Gunnar J. Moberg Director (since October, 1994) Director - Marketing and Sales,
43 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Vice President, Vice President,
36 Controller Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant
Vice President and Director at Allmerica Financial from August, 1994 to July,
1996 and Senior Manager at KPMG Peat Marwick from July, 1983 to July, 1994.
Rodney D. Runestad Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Anders O. Soderstrom Executive Vice President and President and
38 Chief Information Officer Chief Information Officer:
Director (since September, 1994) American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Vice President
40 Director (since July, 1991) American Skandia
Marketing, Incorporated
C. Ake Svensson Treasurer, Vice President, Corporate
47 Director (since December, 1994) Controller and Treasurer:
American Skandia Investment
Holding Corporation
Mr. Svensson joined us in 1994. He previously held the position of Senior Vice
President with Nordenbanken.
Bayard F. Tracy Director (since September, 1994) Senior Vice President,
50 National Sales Manager:
American Skandia
Marketing, Incorporated
Jeffrey M. Ulness Vice President, Vice President,
37 Product Management Product Management:
American Skandia Life
Assurance Corporation
Mr. Ulness joined us in 1994. He previously held the positions of Counsel at
North American Security Life Insurance Company from March, 1991 to July, 1994
and Associate at LeBoeuf, Lamb, Leiby, Green and MacRae from January, 1990 to
March 1991.
- --------
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
</TABLE>
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 consolidated financial statements which follow in
Appendix A are those of American Skandia Life Assurance Corporation as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997. 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
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
APPENDIX C PRIOR CONTRACT
<PAGE>
APPENDIX A
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the consolidated statement of financial condition of American
Skandia Life Assurance Corporation (the "Company" which is a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1997, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Skandia Life Assurance Corporation at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
- --------------------
Hartford, Connecticut
February 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statement of financial condition
of American Skandia Life Assurance Corporation and subsidiary (a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1996, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the two years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Skandia Life
Assurance Corporation and subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
- ------------------------
New York, New York
March 10, 1997
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
<S> <C> <C>
AS OF DECEMBER 31,
1997 1996
--------------- --------------
ASSETS
Investments:
Fixed maturities - at amortized cost $ 9,366,671 $ 10,090,369
Fixed maturities - at fair value 108,323,668 87,369,724
Investment in mutual funds - at fair value 6,710,851 2,637,731
Policy loans 687,267 159,482
--------------- --------------
Total investments 125,088,457 100,257,306
Cash and cash equivalents 81,974,204 45,332,131
Accrued investment income 2,441,671 1,958,546
Fixed assets 356,153 229,780
Deferred acquisition costs 628,051,995 438,640,918
Reinsurance receivable 3,120,221 2,167,818
Receivable from affiliates 1,910,895 691,532
Income tax receivable - current 1,047,493 -
Income tax receivable - deferred 26,174,369 17,217,582
State insurance licenses 4,562,500 4,712,500
Other assets 2,524,581 2,047,689
Separate account assets 12,095,163,569 7,734,439,793
--------------- --------------
Total Assets $12,972,416,108 $8,347,695,595
=============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 43,204,443 $ 36,245,936
Policy reserves 24,414,999 21,238,749
Income tax payable - 1,124,151
Drafts outstanding 19,277,706 13,032,719
Accounts payable and accrued expenses 71,190,019 65,471,294
Payable to affiliates 584,283 685,724
Future fees payable to parent 233,033,818 47,111,936
Payable to reinsurer 78,126,227 79,000,262
Short-term borrowing 10,000,000 10,000,000
Surplus notes 213,000,000 213,000,000
Separate account liabilities 12,095,163,569 7,734,439,793
--------------- --------------
Total Liabilities 12,787,995,064 8,221,350,564
--------------- --------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 151,527,229 122,250,117
Unrealized investment gains and losses, net 954,069 (319,631)
Foreign currency translation, net (286,038) (263,706)
Retained earnings 30,225,784 2,678,251
--------------- --------------
Total Shareholder's Equity 184,421,044 126,345,031
--------------- --------------
Total Liabilities and Shareholder's Equity $12,972,416,108 $8,347,695,595
=============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ -----------
REVENUES:
Annuity charges and fees $121,157,846 $69,779,522 $38,837,358
Fee income 27,587,231 16,419,690 6,205,719
Net investment income 8,181,073 1,585,819 1,600,674
Annuity premium income 920,042 125,000 -
Net realized capital gains 87,103 134,463 36,774
Other 80,999 5,640 8,750
------------ ----------- -----------
Total Revenues 158,014,294 88,050,134 46,689,275
------------ ----------- -----------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 2,033,275 613,594 555,421
Increase/(decrease) in annuity policy reserves 37,270 634,540 (6,778,756)
Cost of minimum death benefit reinsurance 4,544,697 2,866,835 2,056,606
Return credited to contractowners (2,018,635) 672,635 10,612,858
------------ ----------- -----------
4,596,607 4,787,604 6,446,129
------------ ----------- -----------
Expenses:
Underwriting, acquisition and other insurance expenses 90,346,952 49,737,147 35,764,392
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 24,895,456 10,790,716 6,499,414
------------ ----------- -----------
115,392,408 60,677,863 42,413,806
------------ ----------- -----------
Total Benefits and Expenses 119,989,015 65,465,467 48,859,935
------------ ----------- -----------
Income (loss) from operations
before income taxes 38,025,279 22,584,667 (2,170,660)
Income tax expense (benefit) 10,477,746 (4,038,357) 397,360
------------ ----------- -----------
Net income (loss) $ 27,547,533 $26,623,024 $(2,568,020)
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
------------ ------------ ------------
Additional paid-in capital:
Balance at beginning of year 122,250,117 81,874,666 71,623,932
Additional contributions 29,277,112 40,375,451 10,250,734
------------ ------------ ------------
Balance at end of year 151,527,229 122,250,117 81,874,666
------------ ------------ ------------
Unrealized investment gains and losses:
Balance at beginning of year (319,631) 111,359 (41,655)
Change in unrealized investment gains and losses, net 1,273,700 (430,990) 153,014
------------ ------------ ------------
Balance at end of year 954,069 (319,631) 111,359
------------ ------------ ------------
Foreign currency translation:
Balance at beginning of year (263,706) (328,252) -
Change in foreign currency translation, net (22,332) 64,546 (328,252)
------------ ------------ ------------
Balance at end of year (286,038) (263,706) (328,252)
------------ ------------ ------------
Retained earnings (deficit):
Balance at beginning of year 2,678,251 (23,944,773) (21,376,753)
Net income (loss) 27,547,533 26,623,024 (2,568,020)
------------ ------------ ------------
Balance at end of year 30,225,784 2,678,251 (23,944,773)
------------ ------------ ------------
Total Shareholder's Equity $184,421,044 $126,345,031 $ 59,713,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
--------------- --------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income/(loss) $ 27,547,533 26,623,024 (2,568,020)
Adjustments to reconcile net income/(loss) to net cash
used in operating activities:
Increase/(decrease) in policy reserves 3,176,250 1,852,259 (4,667,765)
Amortization of bond discount 72,986 27,340 23,449
Amortization of insurance licenses 150,000 150,000 150,000
Change in receivable from/payable to affiliates (1,320,804) 540,484 (347,884)
Change in income tax receivable/payable (2,171,644) 1,688,001 (600,849)
Increase in other assets (603,265) (661,084) (372,120)
Increase in accrued investment income (483,125) (1,764,472) (20,420)
Increase in reinsurance receivable (952,403) (179,776) (1,988,042)
Increase in deferred acquisition costs, net (189,411,077) (168,418,535) (96,212,774)
Increase in income tax receivable - deferred (9,630,603) (16,903,477) -
Increase in accounts payable and accrued expenses 5,718,725 32,322,727 945,483
Increase in drafts outstanding 6,244,987 13,032,719 -
Change in foreign currency translation, net (34,356) (77,450) (328,252)
Realized gain on sale of investments (87,103) (134,463) (36,774)
--------------- --------------- --------------
Net cash used in operating activities (161,783,899) (111,902,703) (106,023,968)
--------------- --------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (28,905,493) (96,812,903) (614,289)
Proceeds from sale and maturity of fixed maturity investments 10,755,550 8,947,390 100,000
Purchase of shares in mutual funds (5,595,342) (2,160,347) (1,566,194)
Proceeds from sale of shares in mutual funds 1,415,576 1,273,640 867,744
Increase in policy loans (527,785) (104,427) (37,807)
Change in investments of separate account assets (3,691,031,470) (2,789,361,685) (1,609,415,439)
--------------- --------------- ---------------
Net cash used in investing activities (3,713,888,964) (2,878,218,332) (1,610,665,985)
--------------- --------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 29,277,112 40,375,451 10,250,734
Surplus notes - 110,000,000 34,000,000
Increase in future fees payable to parent 185,921,882 47,111,936 -
Increase/(decrease) in payable to reinsurer (874,035) 14,004,792 24,890,064
Proceeds from annuity sales 3,697,989,977 2,795,114,603 1,628,486,076
--------------- --------------- ---------------
Net cash provided by financing activities 3,912,314,936 3,006,606,782 1,697,626,874
--------------- --------------- ---------------
Net increase/(decrease) in cash and cash equivalents 36,642,073 16,485,747 (19,063,079)
--------------- --------------- ---------------
Cash and cash equivalents at beginning of year 45,332,131 28,846,384 47,909,463
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 81,974,204 45,332,131 28,846,384
=============== =============== ===============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 22,307,992 11,177,120 995,496
=============== =============== ===============
Interest paid $ 16,915,835 7,094,767 540,319
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
December 31, 1997
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"); whose ultimate parent is Skandia Insurance
Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, American Skandia Marketing,
Incorporated. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. which is
a life insurance company domiciled in Mexico. This Mexican life
insurer is a start up company with expectations of selling long term
savings products within Mexico. Total shareholder's equity of Skandia
Vida, S.A. de C.V. is $1,509,146 as of December 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles. Intercompany transactions and balances have been
eliminated in consolidation.
Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
B. New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income", which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 sets standards
for the reporting and display of comprehensive income and its
components in financial statements. Application of the new rules
will not impact the Company's financial position or net income. The
Company expects to adopt this pronouncement in the first quarter of
1998, which will include the presentation of comprehensive income
for prior periods presented for comparative purposes, as required
by SFAS 130. The primary element of comprehensive income applicable
to the Company is changes in unrealized gains and losses on
securities classified as available for sale.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. Investments
The Company has classified its fixed maturity investments as either
held-to-maturity or available-for-sale. Investments classified as
held-to-maturity are investments that the Company has the ability
and intent to hold to maturity. Such investments are carried at
amortized cost. Those investments which are classified as
available-for-sale are carried at fair value and changes in
unrealized gains and losses are reported as a component of
shareholder's equity.
The Company has classified its mutual fund investments as
available-for-sale. Such investments are carried at fair value and
changes in unrealized gains and losses are reported as a component
of shareholder's equity.
Policy loans are carried at their unpaid principal balances.
Realized gains and losses on disposal of investments are determined
by the specific identification method and are included in revenues.
D. Cash Equivalents
The Company considers all highly liquid time deposits, commercial
paper and money market mutual funds purchased with a maturity of
three months or less to be cash equivalents.
E. State Insurance Licenses
Licenses to do business in all states have been capitalized and
reflected at the purchase price of $6 million less accumulated
amortization. The cost of the licenses is being amortized over 40
years.
F. Fixed Assets
Fixed assets consisting of furniture, equipment and leasehold
improvements are carried at cost and depreciated on a straight line
basis over a period of three to five years. Accumulated
depreciation amounted to $95,823 and $32,641 at December 31, 1997
and 1996, respectively. Depreciation expense for the years ended
December 31, 1997 and 1996 was $63,182 and $28,892, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Recognition of Revenue and Contract Benefits
Annuity contracts without significant mortality risk, as defined by
SFAS 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts", are classified as investment
contracts (variable, market value adjusted and certain immediate
annuities) and those with mortality risk (immediate annuities) as
insurance products. The policy for revenue and contract benefit
recognition is described below.
Revenues for variable annuity contracts consist of charges against
contractowner account values for mortality and expense risks,
administration fees, surrender charges and an annual maintenance
fee per contract. Benefit reserves for variable annuity contracts
represent the account value of the contracts and are included in
the separate account liabilities.
Revenues for market value adjusted annuity contracts consist of
separate account investment income reduced by benefit payments and
changes in reserves in support of contractowner obligations, all of
which is included in return credited to contractowners. Benefit
reserves for these contracts represent the account value of the
contracts, and are included in the general account liability for
future contractowner benefits to the extent in excess of the
separate account liabilities.
Revenues for immediate annuity contracts without life contingencies
consist of net investment income. Revenues for immediate annuity
contracts with life contingencies consist of single premium
payments recognized as annuity considerations when received.
Benefit reserves for these contracts are based on the Society of
Actuaries 1983 Table-a with assumed interest rates that vary by
issue year. Assumed interest rates ranged from 6.5% to 8.25% at
both December 31, 1997 and 1996.
Annuity sales were $3,697,990,000, $2,795,114,000 and
$1,628,486,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Annuity contract assets under management were
$12,119,191,000, $7,764,891,000 and $4,704,044,000 at December 31,
1997, 1996 and 1995, respectively.
H. Deferred Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
deferred. These costs include commissions, cost of contract
issuance, and certain selling expenses that vary with production.
These costs are being amortized generally in proportion to expected
gross profits from surrender charges, policy and asset based fees
and mortality and expense margins. This amortization is adjusted
retrospectively and prospectively when estimates of current and
future gross profits to be realized from a group of products are
revised.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Details of the deferred acquisition costs and related amortization
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Balance at beginning of year $438,640,918 $270,222,383 $174,009,609
Acquisition costs deferred
during the year 262,257,543 190,995,588 106,063,698
Acquisition costs amortized
during the year 72,846,466 22,577,053 9,850,924
------------ ------------ ------------
Balance at end of year $628,051,995 $438,640,918 $270,222,383
============ ============ ============
</TABLE>
I. Separate Accounts
Assets and liabilities in Separate Accounts are shown as separate
captions in the consolidated statements of financial condition.
Separate Account assets consist principally of long term bonds,
investments in mutual funds and short-term securities, all of
which are carried at fair value.
Included in Separate Account liabilities are $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively, relating
to annuity contracts for which the contractholder is guaranteed a
fixed rate of return. Separate Account assets of $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively,
consisting of long term bonds, short term securities, transfers
due from general account and cash are held in support of these
annuity contracts, pursuant to state regulation.
J. Fair Values of Financial Instruments
The methods and assumptions used to determine the fair value of
financial instruments are as follows:
Fair values of fixed maturities with active markets are based on
quoted market prices. For fixed maturities that trade in less
active markets, fair values are obtained from an independent
pricing service.
Fair values of investments in mutual funds are based on quoted
market prices.
The carrying value of cash and cash equivalents approximates fair
value due to the short-term nature of these investments.
Fair values of certain financial instruments, such as future fees
payable to the parent and surplus notes are not readily
determinable and are excluded from fair value disclosure
requirements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
K. Income Taxes
The Company is included in the consolidated federal income tax
return of Skandia U.S. Holding Corporation and its subsidiaries. In
accordance with the tax sharing agreement, the federal and state
income tax provision is computed on a separate return basis, as
adjusted for consolidated items, such as net operating loss
carryforwards.
Income taxes are provided in accordance with the SFAS 109,
"Accounting for Income Taxes", which requires the asset and
liability method of accounting for deferred taxes. The object of
this method is to recognize an asset and liability for the expected
future tax effects due to temporary differences between the
financial reporting and the tax basis of assets and liabilities,
based on enacted tax rates and other provisions of the tax law.
L. Translation of Foreign Currency
The financial position and results of operations of the Company's
Mexican subsidiary are measured using local currency as the
functional currency. Assets and liabilities of the subsidiary are
translated at the exchange rate in effect at each year-end.
Statements of operations and shareholder's equity accounts are
translated at the average rate prevailing during the year.
Translation adjustments arising from the use of differing exchange
rates from period to period are included in shareholder's equity.
M. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that management
make estimates and assumptions that affect the reported amount of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. The more significant estimates and assumptions are related
to deferred acquisition costs and involve policy lapses, investment
return and maintenance expenses. Actual results could differ from
those estimates.
N. Reinsurance
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provide additional
capacity for growth in supporting the cash flow strain from the
Company's variable annuity business. The reinsurance is effected
under quota share contracts.
The Company also reinsures certain mortality risks. These risks
result from the guaranteed minimum death benefit feature in the
variable annuity products.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENTS
The amortized cost, gross unrealized gains (losses) and estimated fair
value of available-for-sale and held-to-maturity fixed maturities and
investments in mutual funds as of December 31, 1997 and 1996 are shown
below. All securities held at December 31, 1997 are publicly traded.
Investments in fixed maturities as of December 31, 1997 consisted of
the following:
Held-to-Maturity
----------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $3,789,498 $71,197 $ 8,517 $3,852,178
Obligations of State and
Political Subdivisions 50,000 - - 50,000
Corporate Securities 5,527,173 1,949 19,487 5,509,635
----------- ------- -------- -----------
Totals $9,366,671 $73,146 $28,004 $9,411,813
========== ======= ======= ==========
Available-for-Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $ 14,999,291 $ 201,664 - $15,200,955
Obligations of
State and Political
Subdivisions 202,224 318 - 202,542
Corporate
Securities 91,469,384 1,505,656 54,869 92,920,171
-------------- ----------- -------- ------------
Totals $106,670,899 $1,707,638 $54,869 $108,323,668
============ ========== ======= ============
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The amortized cost and fair value of fixed maturities, by contractual
maturity, at December 31, 1997 are shown below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity Available-for-Sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
Due in one year or less $1,049,977 $1,050,001 $ 2,990,584 $ 2,992,050
Due after one through five years 8,062,630 8,105,822 26,857,218 27,121,041
Due after five through ten years 254,064 255,990 76,823,097 78,210,577
---------- ---------- ------------ ------------
Total $9,366,671 $9,411,813 $106,670,899 $108,323,668
========== ========== ============ ============
</TABLE>
Investments in fixed maturities as of December 31, 1996 consisted of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity
----------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $ 4,299,803 $88,268 $22,937 $ 4,365,134
Obligations of
State and Political
Subdivisions 250,119 229 - 250,348
Corporate
Securities 5,540,447 - 62,660 5,477,787
----------- ---------- -------- -----------
Totals $10,090,369 $88,497 $85,597 $10,093,269
=========== ======= ======= ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Available for Sale
------------------
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $14,508,780 - $ 79,745 $14,429,035
Obligations of
State and Political
Subdivisions 202,516 26 - 202,542
Other Government
Obligations 5,047,790 - 7,440 5,040,350
Corporate
Securities 68,101,413 83,312 486,928 67,697,797
----------- ------- -------- -----------
Totals $87,860,499 $83,338 $574,113 $87,369,724
=========== ======= ======== ===========
</TABLE>
Proceeds from sales of fixed maturities during 1997, 1996 and 1995 were
$5,055,550, $8,732,390 and $0, respectively. Proceeds from maturities
during 1997, 1996 and 1995 were $5,700,000, $215,000 and $100,000,
respectively.
The cost, gross unrealized gains (losses) and fair value of investments
in mutual funds at December 31, 1997 and 1996 are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- -----
1997 $6,895,821 $43,506 $228,476 $6,710,851
========== ======= ======== ==========
1996 $2,638,695 $59,278 $ 60,242 $2,637,731
========== ======= ========= ==========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Net realized investment gains (losses) were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed Maturities:
Gross gains $ 9,800 $ - $ -
Gross losses - - -
Investment in Mutual Funds:
Gross gains 115,824 139,814 65,236
Gross losses (38,521) (5,351) (28,462)
---------- ----------- --------
Totals $ 87,103 $134,463 $36,774
========= ======== =======
</TABLE>
4. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed maturities $6,616,560 $ 836,591 $ 629,743
Cash and cash equivalents 1,153,790 684,653 986,932
Investment in mutual funds 553,864 143,737 59,895
Policy loans 28,243 5,274 4,025
---------- ---------- ----------
Total investment income 8,352,457 1,670,255 1,680,595
Investment expenses 171,384 84,436 79,921
---------- ---------- ----------
Net investment income $8,181,073 $1,585,819 $1,600,674
========== ========== ==========
</TABLE>
5. INCOME TAXES
The significant components of income tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Current tax expense $20,108,348 $12,865,120 $397,360
Deferred tax benefit (9,630,602) (16,903,477) -
----------- ---------- --------
Total income tax expense (benefit) $10,477,746 $(4,038,357) $397,360
=========== ============ ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The tax effects of significant items comprising the Company's deferred
tax balance as of December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---- ----
Deferred Tax (Liabilities):
Deferred acquisition costs ($159,765,795) ($103,072,477)
Payable to reinsurer (25,369,078) (23,025,326)
Policy fees (656,311) (491,640)
Unrealized investment gains and losses (513,731) 172,109
------------- --------------
Total (186,304,915) (126,417,334)
------------ ------------
Deferred Tax Assets:
Net separate account liabilities 175,872,109 121,092,798
Reserve for future contractowner benefits 15,121,555 12,686,078
Other reserve differences 10,534,160 4,527,886
Deferred compensation 7,186,789 4,392,526
Surplus notes interest 2,728,676 548,730
Foreign exchange translation 154,020 141,996
Other 881,975 244,902
------------- -------------
Total 212,479,284 143,634,916
------------ ------------
Net deferred tax balance $ 26,174,369 $ 17,217,582
============ ============
</TABLE>
Management believes that based on the taxable income produced in the
current year and the continued growth in annuity products, the Company
will produce sufficient taxable income in the future to realize its
deferred tax asset. As such, the Company released the deferred tax
valuation allowance of $9,324,853 in 1996.
The income tax expense was different from the amount computed by
applying the federal statutory tax rate of 35% to pre-tax income from
continuing operations as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Income (loss) before taxes $38,025,279 $22,584,667 ($2,170,660)
Income tax rate 35% 35% 35%
----------- ----------- -----------
Tax expense at federal
statutory income tax rate 13,308,848 7,904,633 (759,731)
Tax effect of:
Change in valuation allowance - (9,324,853) 1,680,339
Dividend received deduction (4,585,000) (2,266,051) (477,139)
Other 866,973 (707,685) (48,821)
State income taxes 886,925 355,599 2,712
----------- ----------- -----------
Income tax expense (benefit) $10,477,746 ($ 4,038,357) $ 397,360
=========== =========== ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. RECEIVABLE FROM/PAYABLE TO AFFILIATES
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) have been charged to the Company at cost by
American Skandia Information Services and Technology Corporation, an
affiliated company; and likewise, the Company has charged operating
costs to American Skandia Investment Services, Incorporated, an
affiliated company. The total cost to the Company for these items was
$5,572,404, $11,581,114 and $12,687,337 for the years ended December
31, 1997, 1996 and 1995, respectively. Income received for these items
was $3,224,645, $1,148,364 and $396,573 for the years ended December
31, 1997, 1996 and 1995, respectively. Amounts receivable from
affiliates under these arrangements were $548,887 and $548,792 as of
December 31, 1997 and 1996, respectively. Amounts payable to affiliates
under these arrangements were $263,742 and $619,089 as of December 31,
1997 and 1996, respectively.
7. FUTURE FEES PAYABLE TO PARENT
On December 17, 1996, the Company sold to its Parent, effective
September 1, 1996, certain rights to receive future fees and charges
expected to be realized on the variable portion of a designated block
of deferred annuity contracts issued during the period from January 1,
1994 through June 30, 1996 (Transaction 1996-1). In addition, the
Company entered into the following similar transactions during 1997:
Closing Effective Contract Issue
Transaction Date Date Period
----------- ------- --------- --------------
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
In connection with these transactions, the Parent, through a trust,
issued collateralized notes in a private placement which are secured by
the rights to receive future fees and charges purchased from the
Company.
Under the terms of the Purchase Agreements, the rights sold provide for
the Parent to receive 80% (100% for Transaction 1997-3) of future
mortality and expense charges and contingent deferred sales charges,
after reinsurance, expected to be realized over the remaining surrender
charge period of the designated contracts (6.0 to 8.0 years). The
Company did not sell the right to receive future fees and charges after
the expiration of the surrender charge period.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The proceeds from the sales have been recorded as a liability and are
being amortized over the remaining surrender charge period of the
designated contracts using the interest method. The present value of
the transactions (discounted at 7.5%) as of the respective Effective
Date was as follows:
Present
Transaction Value
----------- -------
1996-1 $ 50,221,438
1997-1 58,766,633
1997-2 77,551,736
1997-3 58,193,264
Payments representing fees and charges realized during the period
January 1, 1997 through December 31, 1997 in the aggregate amount of
$22,250,158, were made by the Company to the Parent. Interest expense
of $6,842,469 has been included in the statement of operations.
Expected payments of future fees payable to Parent are as follows:
Year Ending
December 31, Amount
------------ ------
1998 $ 39,637,610
1999 41,845,736
2000 43,500,530
2001 40,738,800
2002 34,533,624
2003 22,835,020
2004 9,490,399
2005 452,099
--------------
Total $ 233,033,818
==============
The Commissioner of the State of Connecticut has approved the sale of
future fees and charges; however, in the event that the Company becomes
subject to an order of liquidation or rehabilitation, the Commissioner
has the ability to stop the payments due to the Parent under the
Purchase Agreement subject to certain terms and conditions.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. LEASES
The Company leases office space under a lease agreement established in
1989 with American Skandia Information Services and Technology
Corporation. The lease expense for 1997, 1996 and 1995 was $2,427,502,
$1,583,391 and $1,218,806, respectively. Future minimum lease payments
per year and in aggregate as of December 31, 1997 are as follows:
1998 $ 2,371,509
1999 2,595,272
2000 2,753,324
2001 2,753,324
2002 2,753,324
2003 and thereafter 21,465,933
------------
Total $34,692,686
9. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains cash, bonds and notes on deposit
with various states. The carrying value of these deposits amounted to
$3,756,572 and $3,766,564 as of December 31, 1997, and 1996,
respectively. These deposits are required to be maintained for the
protection of contractowners within the individual states.
10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $294,585,500, $275,835,076 and
$132,493,899 at December 31, 1997, 1996 and 1995, respectively.
The statutory basis net loss was $8,970,459, $5,405,179 and $7,183,003
for the years ended December 31, 1997, 1996 and 1995, respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid to shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. At December 31, 1997, no amounts may be
distributed without prior approval.
11. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Under this plan, the Company contributes 3%
of salary for all participating employees and matches employee
contributions at a 50% level up to an additional 3% Company
contribution. Company contributions to this plan on behalf of the
participants were $1,220,214, $850,111 and $627,161 for the years ended
December 31, 1997, 1996 and 1995, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The Company and an affiliate cooperatively have a long-term incentive
plan under which units are awarded to executive officers and other
personnel. The program consists of multiple plans. A new plan is
instituted each year. Generally, participants must remain employed by
the Company or its affiliates at the time such units are payable in
order to receive any payments under the plan. The accrued liability
representing the value of these units is $15,720,067 and $9,212,369 as
of December 31, 1997 and 1996, respectively. Payments under this plan
were $1,118,803, $601,603 and $0 for the years ended December 31, 1997,
1996, and 1995, respectively.
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$269,616 in 1997, $244,601 in 1996 and $139,209 in 1995.
12. REINSURANCE
The effect of the reinsurance agreements on the Company's operations
was to reduce annuity charges and fee income, death benefit expense and
policy reserves. The effect of reinsurance for the years ended December
31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997
<S> <C> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $144,417,045 $955,677 ($1,971,959)
Ceded 23,259,199 918,407 46,676
------------ --------- ----------
Net $121,157,846 $ 37,270 ($2,018,635)
============ ========= ==========
1996
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $87,369,693 $814,306 $779,070
Ceded 17,590,171 179,766 106,435
----------- -------- --------
Net $69,779,522 $634,540 $672,635
=========== ======== ========
1995
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $50,334,280 ($4,790,714) $10,945,831
Ceded 11,496,922 1,988,042 332,973
----------- ---------- -----------
Net $38,837,358 ($6,778,756) $10,612,858
=========== ========== ===========
</TABLE>
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
13. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash.
Surplus notes outstanding as of December 31, 1997, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
Interest for the
Years Ended December 31,
------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest
Issue Date Amount Rate 1997 1996 1995
---------- ------ ---- ---- ---- ----
December 29, 1993 $ 20,000,000 6.84% $ 1,387,000 $ 1,390,800 $1,387,000
February 18, 1994 10,000,000 7.28% 738,111 740,133 738,111
March 28, 1994 10,000,000 7.90% 800,972 803,167 800,972
September 30, 1994 15,000,000 9.13% 1,388,521 1,392,325 1,388,521
December 28, 1994 14,000,000 9.78% 1,388,217 1,392,020 1,392,008
December 19, 1995 10,000,000 7.52% 762,444 764,533 27,156
December 20, 1995 15,000,000 7.49% 1,139,104 1,142,225 37,450
December 22, 1995 9,000,000 7.47% 681,638 683,505 18,675
June 28, 1996 40,000,000 8.41% 3,410,722 1,747,411 -
December 30, 1996 70,000,000 8.03% 5,699,069 31,228 -
------------ ----------- ------------ ----------
Total $213,000,000 $17,395,798 $10,087,347 $5,789,893
============ =========== =========== ==========
</TABLE>
All surplus notes mature 7 years from the issue date.
Payment of interest and repayment of principal for these notes is
subject to certain conditions and require approval by the Insurance
Commissioner of the State of Connecticut. At December 31, 1997 and
1996, $7,796,218 and $1,567,800, respectively, of accrued interest on
surplus notes was not approved for payment under these criteria.
14. SHORT-TERM BORROWING
The Company has a $10,000,000 loan from the parent which matures on
March 10, 1998 and bears interest at 6.39%. The total interest expense
to the Company was $641,532, $642,886 and $709,521 and for the years
ended December 31, 1997, 1996 and 1995, respectively, of which $200,575
and $206,361 was payable as of December 31, 1997 and 1996,
respectively.
15. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities are
subject to discretionary withdrawal with market value adjustment by
contractholders. Separate account assets which are carried at market
value are adequate to pay such withdrawals which are generally subject
to surrender charges ranging from 8.5% to 1% for contracts held less
than 8 years.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company on a quarterly basis:
<TABLE>
<CAPTION>
Three Months Ended
------------------
<S> <C> <C> <C> <C> <C>
1997 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $30,185,820 $34,055,549 $41,102,381 $44,402,368
Net investment income 1,368,683 2,626,776 2,031,187 2,154,427
Net realized capital gains 20,604 43,460 20,553 2,486
----------- ----------- ----------- -----------
Total revenues $31,575,107 $36,725,785 $43,154,121 $46,559,281
=========== =========== =========== ===========
Benefits and expenses $18,319,281 $30,465,338 $31,179,403 $40,024,993
=========== =========== =========== ===========
Net income $ 8,995,975 $ 3,646,787 $ 8,621,412 $ 6,283,359
============ ============ ============ ============
Three Months Ended
------------------
1996 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $16,605,765 $20,452,733 $22,366,166 $26,933,702
Net investment income 455,022 282,926 270,092 577,779
Net realized capital gains 92,072 13,106 5,606 23,679
----------- ----------- ----------- -----------
Total revenues $17,152,859 $20,748,765 $22,641,864 $27,535,160
=========== =========== =========== ===========
Benefits and expenses $12,725,411 $ 9,429,735 $17,007,137 $25,191,857
=========== ============ =========== ===========
Net income $ 2,658,941 $ 7,695,490 $ 2,538,513 $14,470,976
============ ============ ============ ===========
Three Months Ended
------------------
1995 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $ 8,891,903 $10,066,478 $11,960,530 $14,189,048
Net investment income 551,690 434,273 293,335 321,376
Net realized capital gains (losses) (16,082) (370) 44,644 8,582
------------ ----------- ----------- -----------
Total revenues $ 9,427,511 $10,500,381 $12,298,509 $14,519,006
============ =========== =========== ===========
Benefits and expenses $11,438,798 $ 9,968,595 $11,600,587 $15,908,087
=========== ============ =========== ===========
Net income (loss) ($ 2,026,688) $ 531,486 $ 678,312 ($ 1,751,130)
============= ============= ============= ============
</TABLE>
As described in Note 5, the valuation allowance relating to deferred
income taxes was released during the three months ended December 31,
1996.
<PAGE>
APPENDIX B
SHORT DESCRIPTIONS OF THE
UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES
Short descriptions of the series of the Life & Annuity Trust, the applicable
portfolios of the American Skandia Trust, the Growth portfolio of The Alger
American Fund, and the Emerging Markets Portfolio of the Montgomergy Variable
Series are found below.
Please refer to the prospectuses of each underlying mutual fund for more
complete details on expenses, investment policies, and risk factors applicable
to certain portfolios. Additional underlying mutual fund prospectuses or
Statements of Additional Information may be obtained by calling 1-800-680-8920
or writing to us at P.O. Box 883, Attention: Stagecoach Variable Annuity
Administration, Shelton, Connecticut, 06484-0883.
The investment objectives for each underlying mutual fund are in bold face.
Pleae refer to the prospectuses of each underlying mutual fund for more complete
details and risk factors applicable to certain portfolios.
Life & Annuity Trust
WF Asset Allocation Portfolio: The Asset Allocation Portfolio seeks a high level
of total return over the long-term, including net realized and unrealized
capital gains and net investment income, consistent with reasonable risk. The
Portfolio seeks to achieve its objective by pursuing an asset allocation
strategy that allocates the Portfolio's assets among three broad categories of
investments: stocks, bonds and money market instruments. This strategy is based
upon the premise that certain asset classes from time to time are either under-
or over- valued relative to each other by the market, and that undervalued asset
classes represent relatively better long-term, risk-adjusted investment
opportunities. The Portfolio is not designed to profit from short-term market
changes.
In determining the appropriate mix, Barclays Global Fund Advisors ("BGFA"), the
Portfolio's investment sub-adviser, uses an investment model, the Asset
Allocation Model, that was originally developed in 1973 and is continually
refined and updated. The Asset Allocation Model, which is proprietary to BGFA,
analyzes extensive financial data from numerous sources and recommends a
portfolio allocation among common stocks, U.S. Treasury bonds and money market
instruments. At any given time, substantially all of the Portfolio's assets may
be invested in a single asset class and the relative allocation among the asset
classes may shift significantly from time to time.
The Portfolio invests in a representative sample of the common stocks comprising
the Standard & Poor's 500 Composite Stock Price Index using, to the extent
feasible, the same weighting formula used by that index. The Portfolio purchases
U.S. Treasury bonds with maturities greater that 20 years. The money market
instrument portion of the Portfolio's holdings is invested in high-quality money
market instruments, including obligations of the U.S. Government, its agencies
or instrumentalities, obligations of domestic and foreign banks, short-term
corporate debt instruments and repurchase agreements.
WF Equity Value Portfolio: The Equity Value Portfolio seeks to provide investors
with long-term capital appreciation by investing primarily in equity securities,
including common stocks and may invest in debt instruments that are convertible
into common stocks of both domestic and foreign companies. Income generation is
a secondary consideration. The Portfolio may invest in large, well-established
companies and smaller companies with market capitalization exceeding $50
million. The Portfolio may invest up to 25% of its assets in American Depositary
Receipts and similar instruments. The Portfolio may purchase dividend paying
stocks of particular issuers when the issuer's dividend record may, in the
opinion of Wells Fargo Bank ("Wells Fargo"), the Portfolio's investment adviser,
have a favorable influence on the market value of the securities. The Portfolio
also may purchase convertible securities with the same characteristics as common
stocks. There can be no assurance that the Portfolio, which is a diversified
portfolio, will achieve its investment objective.
In selecting equity investments (which may include common stocks of both
domestic and foreign companies) for the Portfolio, Wells Fargo selects companies
for investment using both quantitative and qualitative analysis to identify
those issuers that, in the opinion of Wells Fargo, exhibit below-average
valuation multiples, above-average financial strength, a strong position in
their industry and a history of steady profit growth.
Wells Fargo also may select other equity securities in addition to common stocks
for investment by the Portfolio. Such other equity securities are preferred
stocks, high grade securities convertible into common stocks, and warrants.
The Portfolio also may hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940 and
cash, pending investment, to meet anticipated redemption requests or if Wells
Fargo deems suitable investments for the Portfolio to be unavailable.
WF Growth Portfolio: The Growth Portfolio seeks to earn current income and
achieve long-term capital appreciation by investing primarily in common stocks
and preferred stocks and debt securities that are convertible into common
stocks. Under normal market conditions, the Portfolio invests at least 65% of
its total assets in common stocks and securities which are convertible into
common stocks and at least 65% of its total assets in income-producing
securities. The Portfolio may invest up to 25% of its assets in American
Depositary Receipts and similar instruments. The Portfolio invests in common
stocks of issuers that exhibit a strong earnings growth trend and that are
believed by Wells Fargo to have above-average prospects for future earnings
growth. The Portfolio maintains a portfolio of common stocks diversified among
industries and companies. The Portfolio may invest in common stocks of large
companies with market capitalization which falls within the range of the Russell
1000 Index that Wells Fargo believes offer the potential for long-term earnings
growth or above-average dividend yield. The Portfolio may invest in companies
with a market capitalization below the Russell 1000 Index asset threshold if
Wells Fargo believes such investments to be in the best interest of the
Portfolio. The Portfolio intends generally to invest less than 50% of its assets
in the securities of medium and smaller sized companies and the remainder in
securities of larger sized companies. The Portfolio may retain cash or invest
some of its assets in high-quality money market instruments, consisting of U.S.
Treasury bills, shares of other mutual funds and repurchase agreements.
WF Money Market Portfolio: The Money Market Portfolio seeks to provide investors
with a high level of income, while preserving capital and liquidity, by
investing in high-quality, short-term securities. The Portfolio only invests its
assets in U.S. dollar-denominated, high-quality money market instruments, and
may engage in certain other investment activities as described in the Prospectus
for the Portfolio. Permitted investments consist of obligations of the U.S.
Government, its agencies or instrumentalities (including government-sponsored
enterprises), obligations of domestic and foreign banks, commercial paper,
repurchase agreements and other debt obligations such as municipal obligations,
asset-backed securities and securities issued by special purpose entities. The
Portfolio also may invest in unrated instruments determined by Wells Fargo to be
of comparable quality to other rated instruments that the Portfolio is permitted
to purchase and otherwise purchased in accordance with Portfolio procedures. The
Portfolio is not insured or guaranteed by the U.S. Government. There can be no
assurance that a stable net asset value will be maintained.
WF Strategic Growth Portfolio: The Strategic Growth Portfolio seeks to provide
investors with an above-average level of capital appreciation through the active
management of a broadly-diversified portfolio of equity securities of companies
expected to experience strong growth in revenues, earnings and assets. The
Portfolio is designed to provide above-average capital growth for investors
willing to assume above-average risk.
The Portfolio invests primarily in common stocks that Wells Fargo believes have
better-than-average prospects for appreciation. Under normal market conditions,
the Portfolio will hold at least 20 common stock issues spread across multiple
industry groups, with the majority of these holdings consisting of established
growth companies, turnaround or acquisition candidates, or attractive larger
capitalization companies. The Portfolio also may invest up to 25% of its assets
in American Depositary Receipts ("ADRs") and similar instruments and may invest
up to 15% of its assets in equity securities of companies in emerging or less
developed markets. The stock issues held by the Portfolio may have some of the
following characteristics: low or no dividends; smaller market capitalizations;
less market liquidity; relatively short operating histories; aggressive
capitalization structures (including high debt levels); and involvement in
rapidly growing/changing industries and/or new technologies.
It is expected that the Portfolio may from time to time acquire securities
through initial public offerings, and may acquire and hold common stocks of
smaller and newer issuers. It is expected that no more than 40% of the
Portfolio's assets will be invested in these highly aggressive issues at one
time.
Though the Portfolio will hold a number of larger capitalization stocks, under
normal market conditions more than 50% of the Portfolio's total assets will be
invested in companies whose market capitalizations at the time of acquisition
are within the capitalization range of companies listed on the Russell Midcap
Index. The Portfolio may invest in companies with a market capitalization below
the Russell Midcap Index capitalization range if Wells Fargo believes such
investments to be in the best interest of the Portfolio.
Under ordinary market conditions, at least 65% of the value of the total assets
of the Portfolio will be invested in common stocks and in securities which are
convertible into common stocks that Wells Fargo believes have
better-than-average prospects for appreciation.
From time to time, when Wells Fargo determines market conditions make pursuing
the Portfolio's basic investment strategy inconsistent with the best interests
of the Portfolio's investors, the Portfolio may use temporary alternative
strategies, primarily designed to reduce fluctuations in the value of the
Portfolio's assets by investing in preferred stock or investment-grade debt
securities that are convertible into common stock and in money market
instruments.
WF U.S. Government Allocation Portfolio: The U.S. Government Allocation
Portfolio seeks a high level of total return over the long term, including net
realized and unrealized capital gains and net investment income, consistent with
reasonable risk. The Portfolio seeks to achieve its objective by pursuing a
strategy of allocating and reallocating its investments among the following
three classes of debt instruments: long-term U.S. Treasury bonds,
intermediate-term U.S. Treasury notes and short-term money market instruments.
This strategy is based upon the premise that those classes of debt securities,
from time to time, are either over- or under-valued relative to each other by
the market, and that under-valued asset classes represent relatively better
long-term investment opportunities. Under normal market conditions, the
Portfolio invests at least 65% of the value of its total assets in U.S.
Government obligations.
In determining the appropriate mix of assets in the Portfolio's portfolio, BGFA,
the Portfolio's investment sub-adviser, uses an investment model, the U.S.
Government Allocation Model. The Model, which is proprietary to BGFA, analyzes
extensive financial data from various sources and recommends a portfolio
allocation among the three classes of debt instruments. At any given time,
substantially all of the Portfolio's assets may be invested in a single asset
class, and the relative allocation among the asset classes may shift
significantly from time to time. The Portfolio may purchase U.S. Treasury bonds
with remaining maturities of at least 20 years. The Portfolio may purchase U.S.
Treasury notes and other U.S. Treasury securities with remaining maturities
ranging from one to 20 years. The Portfolio may purchase short-term money market
instruments with remaining maturities of one year or less, including, U.S.
Government obligations, commercial paper, bankers' acceptances, certificates of
deposit, fixed time deposits and repurchase agreements.
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. The Portfolio
may also invest in short-term debt securities, including money market funds
managed by the Sub-advisor, as a means of receiving a return on idle cash.
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.
T. Rowe Price International Equity Portfolio: The investment objective of the T.
Rowe Price International Equity Portfolio is to seek a 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. The Portfolio may also
invest in a variety of other equity-related securities, such as preferred
stocks, warrants, and convertible securities, as well as corporate and
governmental debt securities, when considered consistent with the Portfolio's
investment objective and program.
T. Rowe Price Small Company Value Portfolio: The investment objective of the T.
Rowe Price Small Company Value Portfolio is to provide long-term capital
appreciation by investing primarily in small-capitalization stocks that appear
to be undervalued. Reflecting a value approach to investing, the Portfolio will
seek the stocks of companies whose current stock prices do not appear to
adequately reflect their underlying value as measured by assets, earnings, cash
flow, or business franchises. The Portfolio will invest at least 65% of its
total assets in companies with a market capitalization of $1 billion or less
that appear undervalued by various measures, such as price/earnings or
price/book value ratios. Although the Portfolio will invest primarily in U.S.
common stocks, it may also purchase other types of securities, for example,
foreign securities, convertible stocks and bonds, and warrants when considered
consistent with the Portfolio's investment objective and policies. Small
companies--those with a capitalization (market value) of $1 billion or less--may
offer greater potential for capital appreciation since they are often overlooked
or undervalued by investors. Investing in small companies involves greater risk,
as well as greater opportunity, than is customarily associated with more
established companies.
The Portfolio may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. The Portfolio may invest up to 20% of its
total assets (excluding reserves) in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers 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 may invest in debt
securities of any type without regard to quality or rating. The Portfolio will
not purchase a noninvestment-grade debt security (or junk bond) if immediately
after such purchase the Portfolio would have more than 5% of its total assets
invested in such securities.
The Portfolio may invest up to 10% of its total assets in hybrid instruments.
Hybrids can have volatile prices and limited liquidity and their use by the
Portfolio may not be successful. These instruments (a type of potentially
high-risk derivative) can combine the characteristics of securities, futures,
and options. The Portfolio may acquire illiquid securities; however, the
Portfolio will not invest more than 15% of its net assets in illiquid
securities, and not more than 10% of its total assets in restricted securities
(other than Rule 144A securities). The Portfolio will hold a certain portion of
its assets in U.S. and foreign dollar-denominated money market securities,
including repurchase agreements, in the two highest rating categories, maturing
in one year or less.
The Portfolio may enter into futures contracts (or options thereon) to hedge all
or a portion of its portfolio against changes in prevailing levels of interest
rates or currency exchange rates, or as an efficient means of adjusting its
exposure to the bond, stock, and currency markets. The Portfolio may also write
call and put options and purchase put and call options on securities, financial
indices, and currencies. The aggregate market value of the Portfolio's
securities or currencies covering call or put options will not exceed 25% of the
Portfolio's net assets.
Founders Capital Appreciation Portfolio: The investment objective of Founders
Capital Appreciation Portfolio is capital appreciation. The Portfolio normally
will invest at least 65% of its total assets in common stocks of U.S. companies
with market capitalizations or annual revenues of $1.5 billion or less. These
stocks normally will be traded in the over-the-counter market. The Portfolio may
engage in short-term trading and therefore normally will have annual portfolio
turnover rates which are considered to be high. Investment in such companies may
involve greater risk than is associated with more established companies. The
Portfolio may invest in convertible securities, preferred stocks, bonds,
debentures, and other corporate obligations, when these investments offer
opportunities for capital appreciation.
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 at least 65% 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 up to 100% 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. 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 higher than that of
other investment companies seeking current income with capital growth as a
secondary consideration.
PIMCO Total Return Bond Portfolio: The investment objective of the PIMCO Total
Return Bond Portfolio is to seek to maximize total return, consistent with
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 10% of its assets in fixed income
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. 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, such as Taiwan, South Korea and
Mexico). Investing in the securities of issuers in any foreign country involves
special risks. The Portfolio will limit its investments in newly industrialized
countries to 10% of its assets.
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; 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, such as Taiwan, South Korea
and Mexico). Investing in the securities of issuers in any foreign country
involves special risks. The Portfolio will limit its investments in newly
industrialized countries to 5% of its assets.
Neuberger&Berman Mid-Cap Value Portfolio: The investment objective of the
Neuberger&Berman Mid-Cap Value Portfolio is to seek capital growth. The
Portfolio seeks capital growth through an investment approach that is designed
to increase capital with reasonable risk. The Portfolio invests principally in
common stocks of medium to large capitalization established companies, using a
value-oriented investment approach. A value-oriented portfolio manager buys
stocks that are selling at a price that is lower than what the manager believes
they are worth. The Sub-advisor looks for securities believed to be undervalued
based on strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and the company's track record through all parts of the
market cycle. The Sub-advisor believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic value. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.
In addition to investing in the stocks of medium capitalization companies
("mid-cap companies") and large capitalization companies ("large-cap
companies"), investments may be made in smaller, less well-known companies
("small-cap companies"). Investments in small- and mid-cap company stocks may
present greater opportunities for capital appreciation than investments in
stocks of large-cap companies. However, small- and mid-cap company stocks may
have higher risk and volatility.
Although the Portfolio ordinarily invests primarily in common stocks, when
market conditions warrant it may invest in preferred stocks, securities
convertible into or exchangeable for common stocks, U.S. Government and agency
securities, debt securities, or money market instruments, or may retain assets
in cash or cash equivalents. Up to 15% of the Portfolio's net assets, measured
at the time of investment, may be invested in corporate debt securities that are
below investment grade or in comparable unrated securities ("junk bonds"). Such
securities are considered to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
assets in cash or cash equivalents, U.S. Government and agency securities,
commercial paper and certain other money market instruments, as well as
repurchase agreements collateralized by the foregoing. To the extent that the
Portfolio is invested in these temporary defensive instruments, it will not be
pursuing its investment objective.
Neuberger&Berman Mid-Cap Growth Portfolio: The investment objective of the
Neuberger&Berman Mid-Cap Growth Portfolio is to seek capital appreciation The
Portfolio invests in a diversified portfolio of common stocks believed to have
the maximum potential for long-term above-average capital appreciation. Under
normal conditions, the Portfolio primarily invests in the common stocks of
medium capitalization companies ("mid-cap companies"). Companies with equity
market capitalizations from $300 million to $10 billion at the time of
investment are considered mid-cap companies, although this definition may be
revised based on market conditions. Investments may also be made in the
securities of larger, widely traded companies ("large-cap companies") as well as
smaller, less well-known companies ("small-cap companies"). Investments in
small- and mid-cap company stocks may present greater opportunities for capital
appreciation than investments in stocks of large-cap companies. However, small-
and mid-cap company stocks may have higher risk and volatility. The Portfolio
does not seek to invest in securities that pay dividends or interest, and any
such income is incidental.
The Portfolio is normally managed using a growth-oriented investment approach. A
growth approach seeks stocks of companies that the Sub-advisor projects will
grow at above-average rates and faster than others expect. In selecting equity
securities for the Portfolio, the Sub-advisor will consider, among other
factors, an issuer's financial strength, competitive position, projected future
earnings, management strength and experience, reasonable valuations, and other
investment criteria. The Portfolio diversifies its investments among companies
and industries.
Although equity securities are normally the Portfolio's primary investment, when
market conditions warrant it may invest in preferred stocks, securities
convertible into or exchangeable for common stocks, U.S. Government and Agency
Securities, investment grade and non-investment grade debt securities, or money
market instruments, or may retain assets in cash or cash equivalents. The
Portfolio may invest up to 20% of its net assets in securities of issuers
organized and doing business principally outside the United States. Up to 10% of
the Portfolio's net assets, measured at the time of investment, may be invested
in corporate debt securities that are below investment grade or in comparable
unrated securities ("junk bonds"). Such securities are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
assets in cash or cash equivalents, U.S. Government and agency securities,
commercial paper and certain other money market instruments, as well as
repurchase agreements collateralized by the foregoing. To the extent that the
Portfolio is invested in these temporary defensive instruments, it will not be
pursuing its investment objective.
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.
Montgomery Variable Series
Emerging Markets Portfolio: The investment objective of the Emerging Markets
Portfolio is capital appreciation which, under normal conditions, it seeks by
investing at least 65% of its total assets in equity securities of emerging
markets companies. Under normal conditions, the Emerging Markets Portfolio
maintains investments in at least six emerging market countries at all times and
invests no more than 35% of its total assets in any one emerging market country.
The Manager currently regards the following to be emerging market countries:
Latin American (Argentina, Brazil, Chile, Colombia, Costa Rica, Jamaica, Mexico,
Peru, Trinidad and Tobago, Uruguay, Venezuela); Asia (Bangladesh, China/Hong
Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Singapore,
Sri Lanka, Taiwan, Thailand, Vietnam); southern and eastern Europe (Czech
Republic, Greece, Hungary, Kazakstan, Poland, Portugal, Romania, Russia,
Slovakia, Slovenia, Turkey, and Ukraine); the Middle East (Israel, Jordan); and
Africa (Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, South Africa,
Tunisia, Zimbabwe). In the future, the Portfolio may invest in other emerging
market countries.
This Portfolio 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. The Portfolio's aims are to
invest in those countries that are expected to have the highest risk/reward
trade-off when incorporated into a total portfolio context. 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 Portfolio invests primarily in common stock, but also may invest in other
types of equity and equity derivative 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.
This Portfolio may invest in certain debt securities issued by the governments
of emerging market countries that are, or may be eligible for, conversion into
investments in emerging market companies under debt conversion programs
sponsored by such governments. If such securities are convertible to equity
investments, the Portfolio deems them to be equity derivative securities.
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APPENDIX C - PRIOR CONTRACT
Prior to September, 1995, the Company issued a variable annuity which
is no longer being issued but under which Purchase Payments may continue to be
made ("prior contract"). This annuity was marketed as the Stagecoach Variable
Annuity - "SVA" contract, and was sold during the period from May, 1994 until
September, 1995. Assets supporting the SVA contracts are maintained in Class 1
Sub-accounts of Separate Account B.
The principal differences between the contracts offered by this
Prospectus - ("current contract") - marketed as the Stagecoach Variable Annuity
Plus - "SVAP" contract, and the prior contract relate to the investment options
available under the contract, charges made by the Company and death benefit
provisions.
DEFINITIONS
One of the definitions used in the SVA contract is slightly different
from the definitions used in SVAP contract.
The defined term of "Account Value" used in the SVAP prospectus is the same as
the defined term of "Cash Value" in the former SVA Prospectus, the first
sentence is replaced with the following:
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 the
assessment of any applicable contingent deferred sales charge and/or
any applicable maintenance fee.
Charges
There is no maintenance fee applicable to the SVAP. The maintenance fee
for SVA is $30 or 2% of your current Account Value which is deducted from
Account Value in the Sub-accounts annually and upon surrender. The fee is
limited to the Account Value in the Sub-accounts as of the Valuation Period such
fee is due. We assess the maintenance fee to cover the actual cost of
maintaining the Account Values allocated to Class 1 Sub-accounts and Separate
Account B itself. 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 representations contained in
the section "Administration Charge" are also applicable to the maintenance fee.
The maintenance fee can be increased only for Annuities issued subsequent to the
effective date of such change.
<PAGE>
Expense Examples
The Expense Examples for SVA are as follows:
<TABLE>
<CAPTION>
Examples
(amounts shown are rounded to the nearest dollar)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
WF Asset Allocation 95 136 170 277
WF U.S. Government Allocation 95 137 172 280
WF Growth 96 141 178 291
WF Equity Value 96 141 178 291
WF Strategic Growth 96 141 178 291
WF Money Market 94 133 165 267
JanCap Growth 96 139 175 287
T. Rowe Price International Equity 98 146 186 308
T. Rowe Price Small Company Value 97 143 181 298
Founders Capital Appreciation 97 142 179 294
INVESCO Equity Income 95 136 170 277
PIMCO Total Return Bond 94 133 165 267
PIMCO Limited Maturity Bond 94 134 167 270
Stein Roe Venture 99 148 190 315
Neuberger&Berman Mid-Cap Value 97 142 180 297
Neuberger&Berman Mid-Cap Growth 97 142 180 296
AA Growth 93 131 162 260
MV Emerging Markets 103 160 210 354
</TABLE>
If you do not surrender your contract you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
WF Asset Allocation 25 76 130 277
WF U.S. Government Allocation 25 77 132 280
WF Growth 26 81 138 291
WF Equity Value 26 81 138 291
WF Strategic Growth 26 81 138 291
WF Money Market 24 73 125 267
JanCap Growth 26 79 135 287
T. Rowe Price International Equity 28 86 146 308
T. Rowe Price Small Company Value 27 83 141 298
Founders Capital Appreciation 27 82 139 294
INVESCO Equity Income 25 76 130 277
PIMCO Total Return Bond 24 73 125 267
PIMCO Limited Maturity Bond 24 74 127 270
Stein Roe Venture 29 88 150 315
Neuberger&Berman Mid-Cap Value 27 82 140 297
Neuberger&Berman Mid-Cap Growth 27 82 140 296
AA Growth 23 71 122 260
MV Emerging Markets 33 100 170 354
</TABLE>
Breakpoints
The percentage of the breakpoints in SVA do not depend on the age of the oldest
of any Owner or the Annuitant.
The current breakpoints for SVA for qualifying for the Additional Units, and the
value of such Units on the Valuation Day they are allocated to the Sub-accounts
are as follows:
<TABLE>
<CAPTION>
Value of Additional Units
Premium received as a percentage of premium
<S> <C>
At least $500,000 but less than $1,000,000 1.25%
At least $1,000,000 but less than $5,000,000 3.00%
At least $5,000,000 or more 3.75%
</TABLE>
We currently plan to make such a program available. However, we reserve the
right to modify, suspend or terminate it at any time, or from time to time,
without notice.
Exchange Contracts:
Subparagraph (4) under the section entitled "Exchange Contracts" is replaced
with the following for SVA:
(4) The value of the Exchange Credits as of the date of the allocation
to the investment options equals the lesser of the Exchange Credit
Limit or the surrender charge you paid to surrender the Exchange
Contract. The Exchange Credit Limit currently is 5.5% of the net
amount payable upon surrender of the Exchange Contract (except for
Exchange Contracts which are purchased by retirement plans designed to
qualify under Section 401 of the Code, where the Exchange Credit Limit
is 5%), less the value of any Additional Amounts we may credit because
of the size of your initial Purchase Payment (see "Breakpoints"). It
is not based on any other Purchase Payment. We reserve the right at
any time and from time to time to increase or decrease the Exchange
Credit Limit. However, the Exchange Credit Limit in effect at any time
will apply to all purchases qualifying for the Exchange Program.
Auto Saver
The term "auto saver" used in SVAP is the same as the term "bank drafting" used
in SVA. For SVA, the minimum initial Purchase Payment that must be met within 12
months, when such a program is utilized, is $1,000, and additional Purchase
Payments can be as low as $50 if accompanied by Auto Saver authorization.
Additional Amounts in the Fixed Allocation
There is currently no provision regarding "Additional Amounts in the Fixed
Allocation" applicable to SVA.
Rebalancing Program
There is currently no "Rebalancing" available under the SVA contract.
Death Benefits
The amount of death benefit for SVA during the accumulation phase
differs from SVAP as follows:
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). For applicable deaths occurring prior to age 85
of the deceased, the death benefit is the greater of (a) or (b), less
any remaining contingent deferred sales charge if the deceased was age
75 or greater at the time of death, where, (a) is your Account Value in
any Sub-accounts plus the Interim Value of your Fixed Allocations; and
(b) is the minimum death benefit. In most jurisdictions, the minimum
death benefit is the total of each Purchase Payment growing daily at
the equivalent of 5% per year starting as to each Purchase Payment on
the date it is allocated to the Account Value, less the total of each
withdrawal, of any type, growing daily at the equivalent of 5% per
year, starting as of the date of each such withdrawal. However, this
minimum death benefit may not exceed 200% of (A) minus (B), where: (A)
is the total of all Purchase Payments received; and (B) is the total of
all withdrawals of any type. In jurisdictions where such minimum death
benefit described above is not available, the minimum death benefit is
the total of all Purchase Payments received for your Annuity less the
total of all withdrawals of any type from your Annuity. In all
jurisdictions, for applicable deaths occurring on or after age 85 of
the deceased, the death benefit is the Account Value less any remaining
contingent deferred sales charge.
The amount of the death benefit for SVA during the payout phase differs
from SVA as follows:
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. For Annuities
issued subsequent to our implementation of a change to commutation
rights, we do not guarantee any commutation rights unless required by
law. For Annuities issued prior to implementation of such change, we
will commute any remaining "certain" payments and pay a lump sum if
elected by you or, in the absence of specific instructions by you, by
the Beneficiary. To the extent permitted by law, we will commute any
"certain" payments pursuant to such Annuities using the same interest
rate assumed in determining the annuity payments then due.
In the payout phase, we distribute any payments due subsequent to the
death of any Owner at least as rapidly as under the method of
distribution in effect as of the date of such Owner's death.
Individual Retirement Programs and Tax Sheltered Annuities
With respect to Individual Retirement Programs such as an individual retirement
account or individual retirement annuity ("IRA"), IRAs generally may not provide
life insurance, but they may provide a de minimus death benefit. The SVA
contract provides an increasing minimum death benefit that might be deemed to be
other than a de minimus death benefit, and if so, might be deemed to be life
insurance. You are particularly cautioned to seek advice from your own tax
advisor on this matter. With respect to a tax sheltered annuity ("TSA"),
Purchasers of the SVA contracts for such purposes should seek competent advice
as to eligibility, limitations on permissible amounts of Purchase Payments and
other tax consequences associated with the contracts. In particular, purchasers
should consider that the contract provides an increasing minimum death benefit.
It is possible that such death benefit could be characterized as an incidental
death benefit. If the death benefit were so characterized, this could result in
currently taxable income to purchasers. In addition, there are limitations on
the amount of incidental death benefits that may be provided under a TSA. Even
if the death benefit under the contract were characterized as an incidental
death benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance contract as part of his or her TSA plan.
Annuity Payments
For SVA, there was a change in the minimum assumed interest rate used in
determining guaranteed minimum annuity rates and the minimum interest rate
applied from the date Cash Value is applied toward annuitization until the first
annuity payment. The Annuities first issued had a rate of 4% per year for these
purposes. Annuities issued after regulatory approval was obtained for a change
had a rate of 3% per year.
Performance Information
The calculation of performance information is set forth in the SVAP
Statement of Additional Information. The Non-standard Total return SVA and the
Standard Total Return for SVA Sub-accounts are as follows:
<TABLE>
<CAPTION>
Standard Total Return Non-standard Total Return
(Assuming maximum sales charge (Assuming maximum sales charge
and maximum maintenance fees) and no maintenance fees)
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>
WF Asset Allocation 12.10% 16.73% N/A N/A 13.73% 12.19% 16.81% N/A N/A 13.82%
WF U.S. Government Allocation -1.10% 5.15% N/A N/A 4.24% -1.03% 5.23% N/A N/A 4.33%
WF Growth 8.61% 19.67% N/A N/A 16.83% 8.69% 19.75% N/A N/A 16.93%
JanCap Growth 19.77% 28.39% 17.29% N/A 17.97% 19.86% 28.49% 17.37% N/A 18.07%
T. Rowe Price International Equity -7.13% 5.35% N/A N/A 2.78% -7.06% 5.43% N/A N/A 2.86%
T. Rowe Price Small Company Value 19.92% N/A N/A N/A 19.83% 20.01% N/A N/A N/A 20.01%
Founders Capital Appreciation -2.55% 15.79% N/A N/A 13.77% -2.47% 15.87% N/A N/A 13.85%
INVESCO Equity Income 14.52% 20.16% N/A N/A 13.82% 14.61% 20.25% N/A N/A 13.90%
PIMCO Total Return Bond 1.26% 7.16% N/A N/A 4.46% 1.33% 7.24% N/A N/A 4.54%
PIMCO Limited Maturity Bond -1.12% N/A N/A N/A 2.33% -1.05% N/A N/A N/A 2.41%
N&B Mid-Cap Value 1 17.57% 17.92% N/A N/A 10.99% 17.65% 18.00% N/A N/A 11.07%
N&B Mid-Cap Growth 2 7.97% 15.84% N/A N/A 14.80% 8.05% 15.92% N/A N/A 14.90%
AA Growth 16.90% 21.58% 17.10% N/A 17.72% 16.99% 21.67% 17.18% N/A 17.81%
MV Emerging Markets -9.04% N/A N/A N/A -2.01% -8.97% N/A N/A N/A -1.93%
</TABLE>
<TABLE>
<CAPTION>
Non-standard Total Return Non-standard Total Return
(Assuming no sales charge (Assuming no sales charge
and no maintenance fees) with maintenance fees)
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>
WF Asset Allocation 19.19% 18.25% N/A N/A 14.75% 19.10% 18.17% N/A N/A 14.67%
WF U.S. Government Allocation 5.97% 7.00% N/A N/A 5.52% 5.90% 6.93% N/A N/A 5.44%
WF Growth 15.69% 21.13% N/A N/A 17.79% 15.61% 21.04% N/A N/A 17.70%
JanCap Growth 26.86% 29.68% 17.79% N/A 18.36% 26.77% 29.59% 17.71% N/A 18.26%
T. Rowe Price International Equity -0.06% 7.19% N/A N/A 3.99% -0.13% 7.12% N/A N/A 3.92%
T. Rowe Price Small Company Value 27.01% N/A N/A N/A 27.01% 26.92% N/A N/A N/A 26.83%
Founders Capital Appreciation 4.53% 17.34% N/A N/A 14.70% 4.45% 17.26% N/A N/A 14.61%
INVESCO Equity Income 21.61% 21.61% N/A N/A 14.74% 21.52% 21.53% N/A N/A 14.66%
PIMCO Total Return Bond 8.33% 8.95% N/A N/A 5.62% 8.26% 8.87% N/A N/A 5.55%
PIMCO Limited Maturity Bond 5.95% N/A N/A N/A 4.53% 5.88% N/A N/A N/A 4.45%
Nr&B Mid-Cap Value 1 24.65% 19.42% N/A N/A 11.65% 24.57% 19.33% N/A N/A 11.57%
N&B Mid-Cap Growth 2 15.05% 17.39% N/A N/A 16.04% 14.97% 17.30% N/A N/A 15.94%
AA Growth 23.99% 23.00% 17.60% N/A 17.81% 23.90% 22.92% 17.52% N/A 17.72%
MV Emerging Markets -1.97% N/A N/A N/A 1.75% -2.04% N/A N/A N/A 1.68%
</TABLE>
(1) During the periods shown, Federated Investment Counseling served as
Sub-advisor to the Portfolio, then named the "Federated Utility Income
Portfolio." Effective May 1, 1998, Neuberger&Berman Management, Inc. became
Sub-Advisor to the Portfolio. As of May 1, 1998 various changes have been made
to the Portfolio's investment objective and to its fundamental and
non-fundamental investment restrictions.
(2) During the periods shown, Berger Associates, Inc. served as Sub-advisor to
the Portfolio, then named the "Berger Capital Growth Portfolio." Effective May
1, 1998, Neuberger&Berman Management, Inc. became Sub-Advisor to the Portfolio.
As of May 1, 1998 various changes have been made to the Portfolio's investment
objective and to its fundamental and non-fundamental investment restrictions.
<PAGE>
This prospectus contains a short description of the contents
of the Statement of Additional Information. You have the right
to receive from us such Statement of Additional Information.
To do so, please complete the following, detach it and forward
it to us at:
American Skandia Life Assurance Corporation
Attention: Stagecoach
For Written Requests:
P.O. Box 883
Shelton, Connecticut 06484
For Electronic Requests:
[email protected]
For Requests by Phone:
1-800-752-6342
- --------------------------------------------------------------------------------
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT
CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY
DESCRIBED IN PROSPECTUS WFV2-PROS (5/98).
- --------------------------------------------------------------------------------
-----------------------------------------------------------------
(print your name)
-----------------------------------------------------------------
(address)
-----------------------------------------------------------------
(city/state/zip code)
<PAGE>
ADDITIONAL INFORMATION: Inquiries will be answered by calling your
representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
at
P.O. Box 883
Shelton, Connecticut 06484
or
[email protected]
Issued by: Serviced by:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-680-8920 Telephone: 1-800-680-8920
http://www.American Skandia.com http://www.AmericanSkandia.com
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: 203-926-1888
http://www.AmericanSkandia.com
STATEMENT OF ADDITIONAL INFORMATION
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 INFORMATlON IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTlON WITH THE PROSPECTUS FOR THE
ANNUITY CONTRACTS ISSUED BY AMERICAN SKANDIA LIFE 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 1-800-680-8920. OUR ELECTRONIC MAIL ADDRESS IS
[email protected].
Date of Prospectus: May 1, 1998
Date of Statement of Additional Information: May 1, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Item Page
<S> <C>
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) 7
</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.")
serves as principal underwriter for the Annuities. We and ASM, Inc. are
wholly-owned subsidiaries of American Skandia Investment Holding Corporation.
WFV2-SAI-(5/98)
<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, 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. In addition, we may calculate Non-standard Total Return that does
not reflect deduction of the Annual Maintenance Fee.
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, 1997. "Standard" total
return and "Non-standard" total return figures, as described above, are shown.
Standard total return figures assume that all charges and fees are applicable.
Non-standard total return figures may not reflect all fees and charges, as noted
in the charts below. The "inception-to-date" figures shown below are based on
the inception date of an underlying mutual fund portfolio. "N/A" means "not
applicable" and indicates that the underlying mutual fund portfolio was not in
operation for the applicable period. 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>
Non-standard Total Return Non-standard Total Return
(Assuming maximum sales charge (Assuming no sales charge
and no maintenance fees) and no maintenance fees)
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>
WF Asset Allocation 12.19% 16.81% N/A N/A 13.82% 19.19% 18.25% N/A N/A 14.75%
WF U.S. Government Allocation -1.03% 5.23% N/A N/A 4.33% 5.97% 7.00% N/A N/A 5.52%
WF Growth and Income 8.69% 19.75% N/A N/A 16.93% 15.69% 21.13% N/A N/A 17.79%
JanCap Growth 19.86% 28.49% 17.37% N/A 18.07% 26.86% 29.68% 17.79% N/A 18.36%
T. Rowe Price International Equity -7.06% 5.43% N/A N/A 2.86% -0.06% 7.19% N/A N/A 3.99%
T. Rowe Price Small Company Value 20.01% N/A N/A N/A 20.01% 27.01% N/A N/A N/A 27.01%
Founders Capital Appreciation -2.47% 15.87% N/A N/A 13.85% 4.53% 17.34% N/A N/A 14.70%
INVESCO Equity Income 14.61% 20.25% N/A N/A 13.90% 21.61% 21.61% N/A N/A 14.74%
PIMCO Total Return Bond 1.33% 7.24% N/A N/A 4.54% 8.33% 8.95% N/A N/A 5.62%
PIMCO Limited Maturity Bond -1.05% N/A N/A N/A 2.41% 5.95% N/A N/A N/A 4.53%
N&B Mid-Cap Value 1 17.65% 18.00% N/A N/A 11.07% 24.65% 19.42% N/A N/A 11.65%
N&B Mid-Cap Growth 2 8.05% 15.92% N/A N/A 14.90% 15.05% 17.39% N/A N/A 16.04%
AA Growth 16.99% 21.67% 17.18% N/A 17.81% 23.99% 23.00% 17.60% N/A 17.81%
MV Emerging Markets -8.97% N/A N/A N/A -1.93% -1.97% N/A N/A N/A 1.75%
</TABLE>
(1) During the periods shown, Federated Investment Counseling served as
Sub-advisor to the Portfolio, then named the "Federated Utility Income
Portfolio." Effective May 1, 1998, Neuberger&Berman Management, Inc. became
Sub-Advisor to the Portfolio. As of May 1, 1998 various changes have been made
to the Portfolio's investment objective and to its fundamental and
non-fundamental investment restrictions.
(2) During the periods shown, Berger Associates, Inc. served as Sub-advisor to
the Portfolio, then named the "Berger Capital Growth Portfolio." Effective May
1, 1998, Neuberger&Berman Management, Inc. became Sub-Advisor to the Portfolio.
As of May 1, 1998 various changes have been made to the Portfolio's investment
objective and to its fundamental and non-fundamental investment restrictions.
Some of the underlying portfolios may be subject to an expense reimbursement or
waiver that in the absence of such reimbursement would reduce the portfolio's
performance.
The performance quoted in any advertising should not be considered a
representation of the performance of the 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 Internal Revenue
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 ADJUSTMENT: 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 annuities) 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 (
the "Remaining 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)/(1+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+.0010)]N/12 = [1.05/1.061]2 = 0.979372; and
(b) Account Value = Interim Value X MVA = $56,687.28.
INDEPENDENT AUDITORS: Ernst & Young LLP, Goodwin Square, 225 Asylum Street,
Hartford, Connecticut 06103, independent auditors, have audited the financial
statements of American Skandia Life Assurance Corporation and American Skandia
Life Assurance Corporation Variable Account B (Class 1 Sub-accounts) with
respect to the year ended December 31, 1997. Deloitte & Touche LLP, Two World
Financial Center, New York, New York 10281-1433, independent auditors, have
audited the financial statements of American Skandia Life Assurance Corporation
and American Skandia Life Assurance Corporation Variable Account B (Class 1
Sub-accounts) with respect to the years ended December 31, 1996, 1995, 1994 and
1993. Audited consolidated statements of financial condition of American Skandia
Life Assurance Corporation as of December 31, 1997 and 1996, 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, 1997 are included in
the Prospectus. The audited statement of assets, liabilities and contractowner's
equity for Variable Account B (Class 1 Sub-accounts) as of December 31, 1997 and
the related statement of operations for the periods then ended and statements of
changes in net assets for the periods ended December 31, 1997 and 1996 are
included herein. The financial statements included herein and in the Prospectus
have been audited by Ernst & Young LLP and Deloitte & Touche LLP, independent
auditors, as set forth in their respective reports thereon appearing elsewhere
herein and in the Prospectus, and are included in reliance upon such reports
given upon the authority of each firm 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) as of
December 31, 1997 and for the periods ended December 31, 1997 and 1996. There
are other Sub-accounts included in Variable Account B (Class 1) 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 of 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: Stagecoach, P.O. Box
883, Shelton, Connecticut 06484. Our phone number is 1-(800) 680-8920. You may
also forward such a request electronically to our Customer Service Department at
[email protected].
<PAGE>
Appendix A
Financial Statements for Separate Account B
(Class 1 Sub-accounts)
APPENDIX A
REPORT OF INDEPENDENT AUDITORS
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B - Class 1 Stagecoach and the
Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statement of assets and liabilities of the
twelve sub-accounts of American Skandia Life Assurance Corporation Variable
Account B - Class 1 Stagecoach, referred to in Note 1, at December 31, 1997, and
the related statements of operations and changes in net assets for the year then
ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of the twelve sub-accounts of
American Skandia Life Assurance Corporation Variable Account B - Class 1
Stagecoach, referred to in Note 1, at December 31, 1997, and the results of
their operations and changes in their net assets for the year then ended in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Ernst & Young LLP
Hartford, Connecticut
February 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B - Class 1 Stagecoach and the
Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statements of changes in net assets of the
twelve sub-accounts of American Skandia Life Assurance Corporation Variable
Account B - Class 1 Stagecoach, referred to in Note 1, for the year ended
December 31, 1996. 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
the confirmation of securities owned as of December 31, 1996 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 changes in net assets of the twelve sub-accounts of American
Skandia Life Assurance Corporation Variable Account B Class 1 Stagecoach,
referred to in Note 1, for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
February 24, 1997
<PAGE>
American Skandia Life Assurance Corporation
Variable Account B --- Class 1 Stagecoach
Statement of Assets, Liabilities, and Contractowner's Equity
As of December 31, 1997
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
Investment in mutual funds at market value ( Note 2 ):
Life & Annuity Trust ( LAT ):
<S> <C>
U.S. Government Allocation Fund - 2,185,153 shares ( cost $22,139,798 ) $ 22,441,524
Asset Allocation Fund - 7,211,544 shares ( cost $84,605,122 ) 86,466,401
Growth and Income Fund - 4,282,513 shares ( cost $65,380,051 ) 71,903,408
Money Market Fund - 14,757,862 shares ( cost $14,757,862 ) 14,757,861
American Skandia Trust ( AST ):
JanCap Growth Portfolio - 64,330,439 shares ( cost $1,277,764,349 ) 1,489,249,666
PIMCO Total Return Bond Portfolio - 46,801,863 shares ( cost $515,490,971 ) 548,517,832
PIMCO Limited Maturity Bond Portfolio - 25,546,735 shares ( cost $269,466,414 ) 281,525,018
Founders Capital Appreciation Portfolio - 14,230,090 shares ( cost $231,398,368 ) 253,437,901
INVESCO Equity Income Portfolio - 35,040,408 shares ( cost $501,493,440 ) 578,517,140
T. Rowe Price International Equity Portfolio - 36,531,153 shares ( cost $440,627,143 ) 441,661,639
Berger Capital Growth Portfolio - 10,944,182 shares ( cost $171,194,502 ) 181,782,867
The Alger American Fund ( AAF ):
Growth Portfolio - 16,016,251 shares ( cost $588,370,891 ) 684,854,905
--------------------------
Total Invested Assets $ 4,655,116,162
Receivable from American Skandia Trust $ 11,235,501
Receivable from Life and Annuity Trust 4,114,402
--------------------------
Total Assets $ 4,670,466,065
==========================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
American Skandia Life Assurance Corporation
Variable Account B --- Class 1 Stagecoach
Statement of Assets and Liabilities ( Concluded )
As of December 31, 1997
- --------------------------------------------------------------------------------
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Payable to The Alger American Fund $ 1,130,090
Payable to American Skandia Life Assurance Corporation 14,219,945
--------------------------
Total Liabilities $ 15,350,035
--------------------------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS
Unit
Contractowners' Equity Units Value
<S> <C> <C> <C>
LAT - U.S. Government Allocation 1,842,010 $12.18 $ 22,441,524
LAT - Asset Allocation 5,186,216 16.67 86,466,401
LAT - Growth & Income 3,907,919 18.40 71,903,408
LAT - Money Market 1,304,834 11.31 14,757,861
AST - JanCap Growth 62,486,302 23.83 1,489,249,666
AST - PIMCO Total Return Bond 44,098,036 12.44 548,517,832
AST - PIMCO Limited Maturity Bond 25,008,310 11.26 281,525,018
AST - Founders Capital Appreciation 14,662,728 17.28 253,437,901
AST - INVESCO Equity Income 33,420,274 17.31 578,517,140
AST - T. Rowe Price International Equity 37,784,426 11.69 441,661,507
AST - Berger Capital Growth 11,293,799 16.10 181,782,867
AAF - Growth 15,854,570 43.20 684,854,905
==========================
Total Net Assets $ 4,655,116,030
==========================
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1 STAGECOACH
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
LAT - U.S.
Gov't. Asset LAT - Asset LAT - Growth
Total Allocation Allocation & Income
-------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends 44,942,659 $ 1,060,557 $ 3,651,285 $ 632,238
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (58,254,733) (262,854) (1,002,704) (757,711)
------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (13,312,074) 797,703 2,648,581 (125,473)
-------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 1,647,117,665 4,021,304 6,979,405 2,063,401
Cost of Securities Sold 1,296,892,533 4,008,766 5,453,709 1,325,510
-------------------------------------------------------------------
Net Gain (Loss) 350,225,132 12,538 1,525,696 737,891
Capital Gain Distributions Received 69,607,343 37,839 7,389,870 3,827,017
-------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 419,832,475 50,377 8,915,566 4,564,908
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Year 304,956,141 6,971 808,437 4,098,350
End of Year 472,427,253 301,728 1,861,286 6,523,349
-------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 167,471,112 294,757 1,052,849 2,424,999
-------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 573,991,513 $ 1,142,837 $ 12,616,996 $ 6,864,434
==================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AST - PIMCO AST - PIMCO
LAT - Money AST - JanCap Total Return Limited Maturity
Market Market Bond Bond
-------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 786,866 $ 2,485,195 $ 14,621,203 $ 10,452,221
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (226,415) (18,217,028) (6,356,163) (3,563,672)
-------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 560,451 (15,731,833) 8,265,040 6,888,549
-------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 19,625,086 506,567,128 66,764,068 74,156,726
Cost of Securities Sold 19,625,086 328,245,259 63,342,779 72,465,594
-------------------------------------------------------------------
Net Gain (Loss) 0 178,321,869 3,421,289 1,691,132
Capital Gain Distributions Received 0 41,427,365 0 0
---------------------------------------------------------------
NET REALIZED GAIN (LOSS) 0 219,749,234 3,421,289 1,691,132
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Year 0 150,363,881 7,642,770 6,241,524
End of Year 0 211,485,317 33,026,862 12,058,605
-------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 0 61,121,436 25,384,092 5,817,081
-------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 560,451 $ 265,138,837 $ 37,070,421 $ 14,396,762
===================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Founders AST - T. Rowe
Capital AST - INVESCO Price International AST - Berger
Appreciation Equity Income Equity Capital Growth
-------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C> <C>
Dividends $ - $ 6,878,772 $ 2,237,660 $ 219,051
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (3,269,734) (6,643,613) (6,423,155) (2,400,505)
-------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (3,269,734) 235,159 (4,185,495) (2,181,454)
-------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 73,800,470 159,526,708 232,332,837 179,196,340
Cost of Securities Sold 68,456,403 117,892,184 186,329,920 165,413,913
-----------------------------------------------------------------
Net Gain (Loss) 5,344,067 41,634,524 46,002,917 13,782,427
Capital Gain Distributions Received 0 9,584,919 2,543,210 1,324,285
-----------------------------------------------------------------
NET REALIZED GAIN (LOSS) 5,344,067 51,219,443 48,546,127 15,106,712
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Year 11,743,492 43,431,421 43,722,755 4,175,910
End of Year 22,039,533 77,023,700 1,034,494 10,588,365
-------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 10,296,041 33,592,279 (42,688,261) 6,412,455
-------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 12,370,374 $ 85,046,881 $ 1,672,371 $ 19,337,713
===================================================================
</TABLE>
AAF - Growth
----------------
INVESTMENT INCOME:
Income
Dividends $ 1,917,611
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (9,131,179)
----------------
NET INVESTMENT INCOME (LOSS) (7,213,568)
----------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 322,084,192
Cost of Securities Sold 264,333,410
----------------
Net Gain (Loss) 57,750,782
Capital Gain Distributions Received 3,472,838
---------------
NET REALIZED GAIN (LOSS) 61,223,620
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Year 32,720,630
End of Year 96,484,014
---------------
NET UNREALIZED GAIN (LOSS) 63,763,384
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 117,773,436
================
- --------------------------------------------------------------------------------
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1 STAGECOACH
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LAT-U.S.
Gov't. Asset
Total Allocation
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (13,312,074) $ (17,727,288) $ 797,703 $ 350,664
Net Realized Gain (Loss) 419,832,475 212,811,235 50,377 6,224
Net Unrealized Gain (Loss) On Investments 167,471,112 114,852,381 294,757 (43,629)
Net Increase (Decrease) In Net Assets Resulting
From Operations 573,991,513 309,936,328 1,142,837 313,259
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 1,154,105,992 1,016,828,264 8,725,232 5,402,789
Net Transfers Between Sub-accounts 12,356,644 225,534,747 148,083 3,361,319
Surrenders $ (219,891,307) (124,738,797) $ (1,068,114) $ (393,293)
------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 946,571,329 1,117,624,214 7,805,201 8,370,815
------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,520,562,842 1,427,560,542 8,948,038 8,684,074
NET ASSETS:
Beginning of Year 3,134,553,188 1,706,992,646 13,493,486 4,809,412
End of Year $ 4,655,116,030 $ 3,134,553,188 $ 22,441,524 $ 13,493,486
=============================================================================
------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
LAT - Asset LAT - Growth
Allocation & Income
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 2,648,581 $ 1,539,807 $ (125,473) $ 15,169
Net Realized Gain (Loss) 8,915,566 2,776,389 4,564,908 959,466
Net Unrealized Gain (Loss) On Investments 1,052,849 (277,461) 2,424,999 3,113,680
Net Increase (Decrease) In Net Assets Resulting
From Operations 12,616,996 4,038,735 6,864,434 4,088,315
-------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 30,933,825 25,843,160 29,096,045 16,654,916
Net Transfers Between Sub-accounts (4,054,519) (1,308,047) 5,029,519 2,854,142
Surrenders $ (4,795,947) $ (2,155,712) $ (2,429,416) $ (1,101,157)
------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 22,083,359 22,379,401 31,696,148 18,407,901
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 34,700,355 26,418,136 38,560,582 22,496,216
NET ASSETS:
Beginning of Year 51,766,046 25,347,910 33,342,826 10,846,610
End of Year $ 86,466,401 $ 51,766,046 $ 71,903,408 $ 33,342,826
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAT - Money AST
Market JanCap Growth
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 560,451 $ 305,004 $ (15,731,$33) (8,457,292)
Net Realized Gain (Loss) 0 224 219,749,234 84,920,587
Net Unrealized Gain (Loss) On Investments 0 0 61,121,436 64,539,962
------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 560,451 305,228 265,138,837 141,003,257
-----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 24,560,389 16,416,163 357,518,408 235,255,068
Net Transfers Between Sub-accounts (20,755,493) (8,189,812) 53,165,095 107,524,396
Surrenders $ (2,246,100) $ (1,406,631) $ (65,442,768) $ (30,452,751)
----------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 1,558,796 6,819,720 345,240,735 312,326,713
----------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,119,247 7,124,948 610,379,572 453,329,970
NET ASSETS:
Beginning of Year 12,638,614 5,513,666 878,870,094 425,540,124
End of Year $ 14,757,861 $ 12,638,614 $ 1,489,249,666 $ 878,870,094
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AST - PIMCO AST - PIMCO
Total Return Bond Limited Maturity Bond
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 8,265,040 $ 1,773,137 $ 6,888,549 $ (1,939,107)
Net Realized Gain (Loss) 3,421,289 10,300,551 1,691,132 1,911,802
Net Unrealized Gain (Loss) On Investments 25,384,092 (3,650,525) 5,817,081 5,020,087
------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 37,070,421 8,423,163 14,396,762 4,992,782
-------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 144,822,399 130,563,351 82,870,960 89,566,304
Net Transfers Between Sub-accounts 47,516,207 4,424,850 (1,494,098) (37,919,850)
Surrenders $ (24,446,295) $ (14,513,344) $ (14,996,389) $ (12,088,981)
--------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 167,892,311 120,474,857 66,380,473 39,557,473
TOTAL INCREASE (DECREASE) IN NET ASSETS 204,962,732 128,898,020 80,777,235 44,550,255
NET ASSETS:
Beginning of Year 343,555,100 214,657,080 200,747,783 156,197,528
End of Year $ 548,517,832 $ 343,555,100 $ 281,525,018 $ 200,747,783
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AST - Founders Capital AST - INVESCO
Appreciation Equity Income
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (3,269,734) (1,364,713) $ 235,159 $ 21,908
Net Realized Gain (Loss) 5,344,067 22,028,365 51,219,443 17,777,044
Net Unrealized Gain (Loss) On Investments 10,296,041 (1,534,952) 33,592,279 19,057,807
---------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 12,370,374 19,128,700 85,046,881 36,856,759
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 69,525,280 62,459,429 146,350,336 102,080,456
Net Transfers Between Sub-accounts (20,261,235) 42,743,926 35,938,270 38,298,065
Surrenders $ (11,292,844) $ (6,133,359) $ (24,646,531) $ (12,612,263)
-----------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 37,971,201 99,069,996 157,642,075 127,766,258
TOTAL INCREASE (DECREASE) IN NET ASSETS 50,341,575 118,198,696 242,688,956 164,623,017
NET ASSETS:
Beginning of Year 203,096,326 84,897,630 335,828,184 171,205,167
End of Year $ 253,437,901 $ 203,096,326 $ 578,517,140 $ 335,828,184
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AST - T. Rowe Price AST - Berger
International Equity Capital Growth
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (4,185,495) (2,499,389) (2,181,454) (1,158,856)
Net Realized Gain (Loss) 48,546,127 3,665,748 15,106,712 11,800,508
Net Unrealized Gain (Loss) On Investments (42,688,261) 32,199,698 6,412,455 (62,122)
------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 1,672,371 33,366,057 19,337,713 10,579,530
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 113,487,492 119,850,340 45,571,232 60,915,574
Net Transfers Between Sub-accounts (34,286,178) 54,555,193 (8,116,215) 23,004,085
Surrenders $ (20,827,250) $ (12,524,490) $ (8,811,236) $ (5,328,150)
-------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 58,374,064 161,881,043 28,643,781 78,591,509
---------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 60,046,435 195,247,100 47,981,494 89,171,039
NET ASSETS:
Beginning of Year 381,615,072 186,367,972 133,801,373 44,630,334
End of Year $ 441,661,507 $ 381,615,072 $ 181,782,867 $ 133,801,373
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AAF
Growth
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income (Loss) $ (7,213,568) (6,313,620)
Net Realized Gain (Loss) 61,223,620 56,664,327
Net Unrealized Gain (Loss) On Investments 63,763,384 (3,510,164)
Net Increase (Decrease) In Net Assets Resulting
From Operations 117,773,436 46,840,543
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 100,644,394 151,820,714
Net Transfers Between Sub-accounts (40,472,792) (3,813,520)
Surrenders $ (38,888,417) $ (26,028,666)
-------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 21,283,185 121,978,528
------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 139,056,621 168,819,071
NET ASSETS:
Beginning of Year 545,798,284 376,979,213
End of Year $ 684,854,905 $ 545,798,284
==============================================
</TABLE>
American Skandia Life Assurance Corporation
Variable Account B - Class 1 Stagecoach
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION
American Skandia Life Assurance Corporation Variable Account B - Class 1
Stagecoach (the "Account") is a separate investment account of American
Skandia Life Assurance Corporation ("American Skandia" or "Company"). 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, 1997 the Account consisted of forty-eight sub-accounts.
These financial statements report on the twelve sub-accounts offered in
American Skandia's Stagecoach Variable Annuity and Stagecoach Variable
Annuity Plus. Each of the twelve sub-accounts invests only in a single
corresponding portfolio of either the Life & Annuity Trust, the American
Skandia Trust or The Alger American Fund. Wells Fargo Bank N.A. is the
investment manager for the Life & Annuity Trust, while Wells Fargo Nikko
Investment Advisors serves as a sub-advisor for the U.S. Government
Allocation Fund and Asset Allocation Fund. American Skandia Investment
Services, Incorporated is the investment manager for American Skandia
Trust, while Janus Capital Corporation, T. Rowe Price Associates, Inc.,
Founders Asset Management, Inc., INVESCO Trust Company, Pacific Investment
Management Company and Berger Associates are the sub-advisors. Fred Alger
Management, Inc. is the advisor for The Alger American Fund. The investment
advisors are paid fees for their services by the respective Trusts.
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. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
4. 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 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.
5. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period in which the investments,
on which the contract is based, are not adequately diversified. American
Skandia believes the Account satisfies the current regulations, and the
Company intends that the Account will continue to meet such requirements.
<PAGE>
American Skandia Life Assurance Corporation
Variable Account B - Class 1 Stagecoach
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
6. CONTRACT CHARGES
The following contract charges are paid to American Skandia which provides
administrative services to the account:
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 per contractowener
account is deducted at the end of each contract year and on surrender.
Contingent Deferred Sales Charges are computed as set forth in the
Stagecoach Variable Annuity prospectus and the Stagecoach Variable Annuity
Plus prospectus. 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.
7. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company's internally developed systems were designed from the start
with the correct four digit date fields. As a result, few technical
problems related to the year 2000 are anticipated. In addition, the Company
is working with external business partners and software providers to
request and review their year 2000 compliance status and plans. Any new,
externally developed software and all new service providers are evaluated
for year 2000 compliance before contracted.
Full internal compliance is anticipated by September 1998, followed by
continuous evaluation of internal systems, external business partners and
software providers until the year 2000.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1 STAGECOACH
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. CHANGES IN THE UNITS OUTSTANDING
<TABLE>
<CAPTION>
-----------------------------------------------------------
LAT-U.S. Gov't. LAT-Asset
Asset Allocation Allocation
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 1,173,664 428,889 3,700,609 1,991,150
Units Purchased 732,793 446,787 2,024,055 1,876,191
Units Transferred Between Sub-accounts 16,352 329,289 (246,553) (17,023)
Units Surrendered (80,799) (31,301) (291,895) (149,709)
-----------------------------------------------------------
===========================================================
Units Outstanding End of the Year 1,842,010 1,173,664 5,186,216 3,700,609
===========================================================
</TABLE>
<TABLE>
<CAPTION>
LAT-Growth LAT-Money
& Income Market
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 2,096,545 823,247 1,157,342 521,291
Units Purchased 1,668,486 1,099,567 2,187,695 1,497,200
Units Transferred Between Sub-accounts 273,711 245,781 (1,864,507) (806,761)
Units Surrendered (130,823) (72,050) (175,696) (54,388)
-----------------------------------------------------------
===========================================================
Units Outstanding End of the Year 3,907,919 2,096,545 1,304,834 1,157,342
===========================================================
</TABLE>
<TABLE>
<CAPTION>
AST AST-PIMCO Total
JanCap Growth Return Bond
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 46,779,164 28,662,737 29,921,643 19,061,840
Units Purchased 15,973,271 13,114,420 12,095,654 11,344,772
Units Transferred Between Sub-accounts 2,439,689 6,648,500 4,027,450 689,727
Units Surrendered (2,705,822) (1,646,493) (1,946,711) (1,174,696)
-----------------------------------------------------------
===========================================================
Units Outstanding End of the Year 62,486,302 46,779,164 44,098,036 29,921,643
===========================================================
</TABLE>
<TABLE>
<CAPTION>
AST-PIMCO AST-Founders
Limited Maturity Bond Capital Appreciation
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 18,894,375 15,058,644 12,282,211 6,076,373
Units Purchased 7,494,640 8,373,371 4,218,093 3,861,301
Units Transferred Between Sub-accounts (100,195) (3,519,513) (1,241,937) 2,701,906
Units Surrendered (1,280,510) (1,018,127) (595,639) (357,369)
-----------------------------------------------------------
===========================================================
Units Outstanding End of the Year 25,008,310 18,894,375 14,662,728 12,282,211
===========================================================
</TABLE>
<TABLE>
<CAPTION>
AST-INVESCO AST-T. Rowe
Equity Income Price International Equity
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 23,592,226 13,883,712 32,628,595 17,935,251
Units Purchased 8,977,974 7,302,485 9,274,838 10,259,617
Units Transferred Between Sub-accounts 2,263,991 3,284,543 (2,510,182) 5,502,860
Units Surrendered (1,413,917) (878,514) (1,608,825) (1,069,133)
-----------------------------------------------------------
===========================================================
Units Outstanding End of the Year 33,420,274 23,592,226 37,784,426 32,628,595
===========================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Berger
Capital Growth AAF-Growth
-----------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year 9,563,858 3,658,836 15,666,357 12,092,291
Units Purchased 2,991,384 4,305,448 2,460,916 4,426,269
Units Transferred Between Sub-accounts (727,315) 1,897,297 (1,327,006) (110,018)
Units Surrendered (534,128) (297,723) (945,697) (742,185)
-----------------------------------------------------------
============================================
Units Outstanding End of the Year 11,293,799 9,563,858 15,854,570 15,666,357
===========================================================
</TABLE>
WELLS 2
PART C
OTHER INFORMATION
<PAGE>
Item 24. Financial Statements and Exhibits:
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(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 No. 33-19363, filed December 30, 1987).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March 2, 1998.
(2) Not applicable. American Skandia Life Assurance Corporation
maintains custody of all assets.
(3) (a) Form of Revised Principal Underwriting Agreement between American Skandia Life Assurance Corporation and
American Skandia Marketing, Incorporated, formerly Skandia Life Equity Sales Corporation (previously
filed in Post-Effective Amendment No. 3 to Registration Statement No. 33-44436, filed April, 20, 1993).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(b) Form of Revised Dealer Agreement being filed via EDGAR with Post-Effective Amendment No. 7 to
Registration Statement No. 33-87010.
(4) Copy of the form of the Annuity (previously filed in
Pre-Effective Amendment No. 1 to this Registration Statement,
filed August 24, 1995). (i) Filed via EDGAR with
Post-Effective Amendment No. 3 to this Registration Statement
No. 33-59993, filed April 29, 1997.
(5) A copy of the form application used with the Annuity (previously filed in Pre-Effective Amendment No. 2 to
Registration Statement No. 33-71118, filed March 15, 1994).
FILED HEREWITH VIA EDGAR
(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).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(b) Copy of the By-Laws of American Skandia Life Assurance Corporation (previously filed in Pre-Effective
Amendment No. 2 to Registration Statement No. 33-19363, filed July 27, 1988).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(7) Not applicable.
(8) (a) 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).
(i) Filed via EDGAR with Post-effective Amendment No. 4 to Registration Statement No. 33-87010, filed
February 25, 1997
(b) Life & Annuity Trust Agreement (previously filed in Post-Effective Amendment No. 1
to Registration Statement No. 33-71118, filed February 17, 1995).
FILED HEREWITH VIA EDGAR
(c) The Alger American Fund (previously filed in Post-Effective Amendment No. 5 to
Registration Statement No. 33-19363, filed February 28, 1990).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(9) Opinion and consent of Werner & Kennedy. FILED HEREWITH
(10) (a) Consent of Ernst & Young LLP. FILED HEREWITH
(b) Consent of Deloitte & Touche LLP. FILED HEREWITH
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of
Performance (previously filed in initial Registration
Statement No. 33-59993, filed June 5, 1995)
(i) Filed via EDGAR with Post-Effective Amendment No.3 to this Registration Statement No. 33-59993, filed April
29, 1997
(14) Financial Data Schedule.
</TABLE>
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): 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."): 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 provides such
services in relation to marketing of certain public mutual
funds. It also has the power to carry on a general financial,
securities, distribution, advisory, or investment advisory
business; to act as a general agent or broker for insurance
companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial
efficiency and operation.
(3) American Skandia Investment Services, Incorporated ("ASISI"):
The organization is a general business corporation organized
in the state of Connecticut. The organization is authorized to
provide investment service and investment management advice in
connection with the purchasing, selling, holding or exchanging
of securities or other assets to insurance companies,
insurance-related companies, mutual funds or business trusts.
Its 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 American Skandia Life Assurance
Corporation was organized in March, 1995, and began operations
in July, 1995. It offers investment oriented life insurance
products designed for long-term savings through independent
banks and brokers.
Item 27. Number of Contract Owners: As of December 31, 1997, there were 8,548
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.
Item 29. Principal Underwriters:
(a) At present, ASM, Inc. acts as principal underwriter only for annuities
to be issued by ASLAC.
(b) Directors and officers of ASM, Inc.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Business Address Position and Offices with Underwriter
Gordon C. Boronow Deputy Chief Executive Officer
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kimberly A. Bradshaw Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Robert Brinkman Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chairman of the Board
American Skandia Life Assurance Corporation of Directors and
One Corporate Drive, P.O. Box 883 Chief Executive Officer
Shelton, Connecticut 06484-0883
Kathleen A. Chapman Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lucinda C. Ciccarello Vice President, Mutual Funds
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
William F. Cordner, Jr. Vice President, Customer Focus Teams
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Daniel R. Darst Senior Vice President,
American Skandia Life Assurance Corporation National Marketing Director
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Paul A. DeSimone Vice President, Corporate
American Skandia Life Assurance Corporation Controller and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President and Deputy Chief
American Skandia Life Assurance Corporation Executive Officer and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
Walter G. Kenyon Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lawrence Kudlow Senior Vice President,
American Skandia Life Assurance Corporation Chief Economist
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
N. David Kuperstock Vice President, Product Development
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Thomas M. Mazzaferro Executive Vice President,
American Skandia Life Assurance Corporation Chief Financial Officer
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Brian O'Connor Vice President, National Sales
American Skandia Life Assurance Corporation Manager, Internal Wholesaling
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
M. Patricia Paez Director
American Skandia Life Assurance Corporation
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
Hayward L. Sawyer Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Anders O. Soderstrom Executive Vice President and
American Skandia Life Assurance Corporation Chief Information Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Leslie S. Sutherland Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Amanda C. Sutyak Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
C. Ake Svensson Treasurer
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Christian Thwaites Vice President,
American Skandia Life Assurance Corporation Qualified Plans
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Mary Toumpas Vice President and
American Skandia Life Assurance Corporation Compliance Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Bayard F. Tracy Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
</TABLE>
Item 30. Location of Accounts and Records: Accounts and records are maintained
by ASLAC at its principal office in Shelton, Connecticut.
Item 31. Management Services: None
Item 32. Undertakings:
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old so long as payments under the annuity contracts may be accepted and
allocated to the Sub-accounts of Separate Account B.
(b) Registrant hereby undertakes to include either (1) as part of any enrollment
form or application to purchase a contract offered by the prospectus, a space
that an applicant or enrollee can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a Statement
of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this form promptly upon written or oral request.
(d) American Skandia Life Assurance Corporation ("Depositor") hereby represents
that the aggregate fees and charges under the annuity contracts are reasonable
in relation to the services rendered, the expenses expected to be incurred and
the risks assumed by the Depositor.
<PAGE>
EXHIBITS
As noted in Item 24 (b), various exhibits are incorporated by
reference, will be filed by amendment or are not applicable.
The exhibits included are as follows:
No. 5 Copy of the form application
No. 8(b) Copy of Life & Annuity Trust Agreement
No. 9 Opinion and consent of Werner & Kennedy
No. 10 (a) Consent of Ernst & Young LLP
(b) Consent of Deloitte & Touche LLP
No. 14 Financial Data Schedule
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 23rd day of April, 1998.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 1 SUB-ACCOUNTS)
Registrant
By: American Skandia Life Assurance Corporation
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature Title Date
(Principal Executive Officer)
Jan R. Carendi* Chief Executive Officer, April 23, 1998
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 23, 1998
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Vice President and April 23, 1998
David R. Monroe Controller
(Board of Directors)
Jan. R. Carendi* Gordon C. Boronow* Malcolm M. Campbell*
Jan. R. Carendi Gordon C. Boronow Malcolm M. Campbell
Henrik Danckwardt* Amanda C. Sutyak* Wade A. Dokken*
Henrik Danckwardt Amanda C. Sutyak Wade A. Dokken
Thomas M. Mazzaferro* Gunnar Moberg* Bayard F. Tracy*
Thomas M. Mazzaferro Gunnar Moberg Bayard F. Tracy
Anders Soderstrom* C. Ake Svensson* Lincoln R. Collins*
Anders Soderstrom C. Ake Svensson Lincoln R. Collins
Nancy F. Brunetti*
Nancy F. Brunetti
*By: /s/ Kathleen A. Chapman
Kathleen A. Chapman
<FN>
*Pursuant to Powers of Attorney filed with Initial Registration Statement No. 333-25733
</FN>
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Logo American Group Annuity Application
Skandia Life for Participant Group ID#
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
1. Participant(Applicant) 3. Annuitant(if other than Participant)
Name John Doe Name
Address 10 Any Street Address
Anytown, Anystate 12345
Sex X Male Female Date of Birth Sex Male Female Date of Birth
Social Security/Tax I.D. No. 123-45-6789 Social Security/Tax I.D. No.
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
2. Co-Participant(if applicable) 4. Contingent Annuitant(if applicable)
Name Name
Address Address
Sex Male Female Date of Birth Sex Male Female Date of Birth
Social Security/Tax I.D. No. Social Security/Tax I.D. No.
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
5. Beneficiary Designation (The Participant reserves the right to change the Beneficiaries unless indicated in No. 10.)
Primary Beneficiary Contingent Beneficiary
Name Jane Doe Relationship to Participant Name Susan Doe Relationship to Participant
Wife Daughter
- ---------------------------------------------------------------
6. Initial Premium -------------------------------------------------------------------
$10,000 9. Type of Plan
Type of Payment X Check/Wire 1035 Exchange
Trustee-to-Trustee Transfer X Non-qualified Qualified (indicate plan type):
IRA SEP/IRA IRA Rollover 401k 403b
Other
- ---------------------------------------------------------------
7. Investment Selection 10. Replacement
(Indicate your investment allocation below. Please use Is this annuity intended to replace (in whole or in part)
only whole number percentages. They must total 100%.) an existing life insurance or annuity? Yes X No
Variable Investment Options (if applicable) (If yes, please indicate carrier, contract no. and
X XX Money Market 100 % approximate premium amount in No. 11)
- --------------------------------------------------------------- -------------------------------------------------------------------
% 11. Special Instructions
%
%
Fixed Investment Options (if applicable)
YR % YR %
YR % YR %
- --------------------------------------------------------------- -------------------------------------------------------------------
8. Amendments to the Application(Home office use only). 12. Statement of Additional Information
Yes. Please send me a statement of additional information.
- --------------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
Agreement
I/We represent to the best of my/our knowledge and belief the statements made in
this application are true and complete; including, under penalty of perjury, the
Social Security or Tax ID numbers provided. It is indicated and agreed that the
only statements which are to be construed as the basis of the contract are those
contained in this application or in any amendment to this application. I/WE HAVE
ALSO RECEIVED A COPY OF THE PROSPECTUS AND I/WE UNDERSTAND THAT: (A) ANNUITY
PAYMENTS OR SURRENDER VALUES, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO A DOLLAR AMOUNT; AND (B)
ALL PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT ARE SUBJECT TO A MARKET VALUE
ADJUSTMENT FORMULA, THE OPERATION OF WHICH MAY RESULT IN EITHER AN UPWARD OR
DOWNWARD ADJUSTMENT.
Signatures
Participants X /s/John Doe
Proposed Annuitant (if other than Participant) X
Dated at (location) Anytown, Anystate Date 01/03/92
Signature of Agent X /s/ Robert Smith Agent Name (please print) Robert Smith
Name and Address of Firm
Agent Report
Do you have any reason to believe that the contract applied for is to replace
existing annuities or life insurance? Yes X No
GPAA-12-91
PARTICIPATION AGREEMENT
Between
LIFE & ANNUITY TRUST
And
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
THIS AGREEMENT, made and entered into this 6th day of April, 1994 by and
between American Skandia Life Assurance Corporation (hereinafter the "Company")
on its own behalf and on behalf of Separate Account B (hereinafter the
"Account"), a segregated asset account of the Company, and the Life & Annuity
Trust, an unincorporated business trust organized under the laws of Delaware
(hereinafter the "Trust") and Stephens Inc. (hereinafter the "Underwriter").
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (hereinafter the
"1940 Act") and its shares of beneficial interest ("shares") will be registered
under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Account has registered or will register certain variable
annuity contracts under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company to
set aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker/dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account intends to purchase shares in the Funds to fund certain
of the aforesaid variable annuity contracts and the Underwriter is authorized to
sell such shares to unit investment trusts such as the Account at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE I
Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Trust which the Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Trust or its designee of the
order for the shares of the Trust. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from the Account
and receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such order on the next following Business Day.
"Business Day" shall mean any day on which a Fund calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Account on those days on which the Trust calculates its net asset value pursuant
to rules of the Securities and Exchange Commission. Notwithstanding the
foregoing, the Board of Trustees of the Trust (hereinafter the "Trustees") may
refuse to sell shares of any Fund to any person, or suspend or terminate the
offering of shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Fund.
1.3 The Trust and the Underwriter agree that shares of the Trust will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Fund will be sold to the general public.
1.4 The Trust and the Underwriter will not sell Trust shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Trust for receipt of
requests for redemption from the Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of such
request for redemption on the next following Business Day.
1.6 The Company agrees to purchase and redeem the shares of each Fund
offered by the then current prospectus of the Trust and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts available
under the variable annuity contracts (the "Contracts") with the form number(s)
which are listed on Schedule A attached hereto and incorporated herein by,
reference, as such Schedule A may be amended from time to time hereafter by
mutual written agreement of all the parties hereto, shall be invested in the
Trust, in such other investment companies, or series thereof, advised by Wells
Fargo Bank ("the Adviser") as may be mutually agreed to in writing by the
parties hereto, or in the Company's general account, provided that such amounts
may also be invested in an investment company other than the Trust if (a) such
other investment company, or series thereof, has investment objectives or
policies that are substantially different from the investment objectives and
policies of all the Funds of the Trust; or (b) the Company gives the Trust and
the Underwriter forty-five (45) days' written notice of its intention to make
such other investment company available as a funding vehicle for the contracts;
or (c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Trust and the Underwriter prior to their signing this Agreement; or (d) the
Trust or Underwriter consents to the use of such other investment company.
1.7 The Account shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.8 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9 The Trust shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Trust's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Fund shares in additional shares of that Fund. The Company reserves the right to
revoke this election and to receive all such dividends and distributions in
cash. The Trust shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10 The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 5:30 p.m. Pacific time.
1.11 The Trust may apply for an order exempting it from certain
provisions of the 1940 Act and rules thereunder so that the Trust may be
available for investment by certain other entities, including, without
limitation, separate accounts funding variable life insurance policies, separate
accounts of insurance companies unaffiliated with the Company and trustees of
qualified pension and retirement plans ("mixed and shared funding").
ARTICLE II
Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state
insurance suitability requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the Account prior
to any issuance or sale thereof as a segregated asset account under Section
38a-433(a) of the General Statutes of Connecticut, Revision of 1958, as amended,
and has registered or, prior to any issuance or sale of the Contracts, will
register the Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts, and will amend the Separate Account's registration statements under
the 1933 Act and the 1940 Act to add the Trust as a funding vehicle for the
Contracts.
2.2 The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Trust is and shall
remain registered under the 1940 Act. The Trust shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Trust
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust or
the Underwriter.
2.3 The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated as
annuity contracts, under applicable provisions of the Code, as amended, and that
it will make every effort to maintain such treatment and that it will notify the
Trust and the Underwriter immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Trust represents that the Trust's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker/dealer with the Securities
and Exchange Commission. The Underwriter further represents that it will sell
and distribute the Trust shares in accordance with the laws of the State of
Delaware and all applicable state and federal securities laws, including without
limitation, the 1933 Act, the 1934 Act, and the 1940 Act.
2.7 The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.8 The Trust and Underwriter represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
$500,000. The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust, in an amount not less than $500,000. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.10 The Trust represents that it will provide the Company notice of 90
days prior to the effective date of any plan under Rule 12b-1 pursuant to the
1940 Act if, at the time such plan is adopted, the majority of the Trust's Board
does not consist of disinterested Trustees. The Trust also represents that it
understands that the Company may need to take whatever steps are necessary to
cease investing in the Trust as a result of the adoption of such a plan in order
to comply with the terms of certain orders for exemptive relief from provisions
of the 1940 Act given to the Company and certain of its separate accounts by the
Securities and Exchange Commission.
ARTICLE III
Prospectuses and Proxy Statement: Voting
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of its current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Trust shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Trust's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Trust is amended) to have the prospectus for the Contracts and the
Trust's prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Trust's prospectus shall state that the statement of additional
information for the Trust is available from the Underwriter (or in the Trust's
discretion, the prospectus shall state that such statement is available from the
Trust).
3.3 The Trust, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners and participants.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract Owners or participants;
(ii) vote the Trust shares in accordance with instructions received from
Contract owners or participants; and
(iii) vote Trust shares for which no instructions have been received in the
same proportion as Trust shares of such portfolio for which instructions have
been received:
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Trust
shares held in any segregated asset account or in its general account in its own
right, to the extent permitted by law.
3.5 The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Trust
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Trust will act
in accordance with the Securities and Exchange Commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV
Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or its investment adviser or the Underwriter is
named, at least five Business Days prior to its use unless such material is
substantially similar to material previously approved by the Trust or its
designee. No such material shall be used if the Trust or its designee object to
such use within five business days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the fund,
or in sales literature or other promotional material approved by the Trust or
its designee or by the Underwriter, except with the permission of the Trust or
the Underwriter or the designee of either.
4.3 The Trust, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its separate
account(s) is named at least five Business Days prior to its use unless such
material is substantially similar to material previously approved by the Company
or its designee. No such material shall be used if the Company or its designee
object to such use within five business days after receipt of such material.
4.4 The Trust and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners or participants,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company.
4.5 The Trust will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Trust or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6 The Company will provide to the Trust at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
the Account, contemporaneously with the filing of such document with the
Securities and Exchange Commission.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V
Fees and Expenses
5.1 The Trust and Underwriter shall pay no fee or other compensation to the
Company under this agreement.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Trust, in accordance with
applicable state laws prior to their sale. The Trust shall bear the expenses for
the cost of registration and qualification of the Trust's shares, preparation
and filing of the Trust's prospectus and registration statement, proxy materials
and reports, printing the prospectus and proxy materials and reports to
shareholders (including the annual report), the preparation of statements and
notices required by any federal or state law, all taxes on the issuance or
transfer of the Trust's shares, and any expenses permitted to be paid or assumed
by the Trust pursuant to a plan, if any, under Rule 12b-1.
5.3 The Company shall bear the expenses of printing and distributing the
Trust's prospectus to owners and participants of Contracts issued by the Company
and of distributing the Trust's proxy materials and reports to such Contract
owners or participants.
ARTICLE VI
Diversification
6.1 The Trust will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Trust will at all times comply with Section 817(h)
of the Code and the rules and regulations thereunder.
ARTICLE VII
Potential Conflicts
7.1 The Board of Trustees of the Trust (the "Board") will monitor the
Trust for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the
Trust. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under any mixed and/or shared funding exemptive order,
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Trust or any Fund and reinvesting such assets in a different investment
medium, including (but not limited) another Fund of the Trust, or submitting the
question whether such segregation should be implemented to a vote of all
affected contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) the vote in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the Account's investment
in the Trust and terminate this Agreement; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six months after the Trust gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Trust shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Trust.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement with six months
after the board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Trust shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Trust.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Trust
and terminate this Agreement within six months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII
Indemnification
8.1 Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Trust and each of
its Trustees and officers and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Contracts shares and: (i) arise out of or are based
upon any untrue statements or alleged untrue statements of any material fact
contained in the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of the Trust for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or (ii) arise out of or as a
result of statements or representations (other than statements or
representations contained in the Registration Statement, prospectus or sales
literature of the Trust not supplied by the Company, or persons under its
control) or wrongful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares; or (iii)
arise out of any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement, prospectus, or sales literature of the
Trust or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Trust by or on
behalf of the Company; or (iv) arise as a result of any failure by the Company
to provide the services and furnish the materials under the terms of this
Agreement; or (v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof. (b) The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Trust, whichever is applicable. (c) The Company
shall not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have
notified the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation. (d) The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust Shares or the Contracts or the operation
of the Trust.
8.2 Indemnification By the Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who control the
Company within the meaning of Section 1 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Trust (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter or Trust by
or on behalf of the Company for use in the Registration Statement or prospectus
for the Trust or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust shares;
or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not supplied by the Underwriter
or persons under its control) or wrongful conduct of the Trust, Underwriter or
persons under their control, with respect to the sale or distribution of the
Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to provide the services
and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Trust and/or Underwriter in this Agreement or arise
out of or result from any other material breach of this Agreement by the Trust
and/or Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise then
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Trust
(a) The Trust agrees to indemnify and hold harmless the Company, the
Underwriter and each of their respective directors and officers and each person,
if any, who controls the Company or the Underwriter within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements which: (i) are related to the sale or acquisition of the
Trust's shares and:
A. arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration Statement or
prospectus or sales literature for the Trust (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter or Trust by
or on behalf of the Company for use in the Registration Statement or prospectus
for the Trust or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust shares;
or
B. arise out of or as a result of statements or representations (other than
statements or representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not supplied by the Underwriter
or persons under its control) or wrongful conduct of the Trust, or persons under
its control, with respect to the sale or distribution of the Contracts or Trust
shares; or
C. arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust; or
(ii) are related to the operations of the Trust, results from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof and:
A. arise as a result of any failure by the Trust to provide the services
and furnish the materials under the terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this Agreement; or
B. arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust; as limited by and
in accordance with the provisions of Section 8.3(b) and 8.3(c) hereof.
(b) The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Trust, the Underwriter or the Account,
whichever is applicable.
(c) The Trust shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Trust in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Trust will be entitled to participate, at its own expense, in the defense
thereof. The Trust also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Trust to such party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Trust will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
d. The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Trust.
ARTICLE IX
Applicable Law
9.1 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of
Connecticut.
9.2 This Agreement shall be subject to the Provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X
Termination
10.1 This Agreement shall terminate:
(a) at the option of any party upon one year's advance written notice to
the other parties without the payment of any penalty; provided, however, such
notice may not be given earlier than one year following the date of this
Agreement; or
(b) at the option of the Company to the extent that shares of Funds are not
reasonably available to meet the requirements of the Contracts as determined by
the Company, provided however, that such termination shall apply only to the
Fund(s) not reasonably available; or
(c) at the option of the Trust in the event that formal administrative
proceedings are instituted against the Company by the National Association of
Securities Dealers, Inc. ("NASD"), the Securities and Exchange Commission, the
Insurance Commissioner or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the Contracts, the
operation of the Account, or the purchase of the Trust shares, provided,
however, that the Trust determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material adverse effect
upon the ability of the Company to perform its obligations under this Agreement;
or
(d) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or insurance
department or any other regulatory body, provided, however, that the Company
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust or Underwriter to perform its obligations under this Agreement; or
(e) upon requisite vote of the Contract owners having an interest in the
Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Fund shares of the Trust in accordance with the
terms of the Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Company will give 30 days' prior written
notice to the Trust of the date of any proposed vote to replace the Trust's
shares; or (f) at the option of the Company, in the event any of the Trust's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(g) at the option of the Trust, in the event the Contracts are not
registered, issued or sold in accordance with applicable state and/or federal
law; or
(h) at the option of the Company, if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(i) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI hereof; or
(j) at the option of either the Trust or the Underwriter, if (1) the Trust
or the Underwriter, respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company suffered a material adverse
change in the business or financial condition or is the subject of material
adverse publicity and such material adverse change or material adverse publicity
will have a material adverse impact upon the business and operations of either
the Trust or the Underwriter, (2) the Trust or the Underwriter shall notify the
Company in writing of such determination and its intent to terminate this
Agreement, and (3) after considering the actions taken by the Company and any
other changes in circumstances since the giving of such notice, such
determination of the Trust or the Underwriter shall continue to apply on the
sixtieth day following the giving of such notice, which sixtieth day shall be
the effective date of termination; or
(k) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Trust or
the Underwriter has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company, (2) the Company
shall notify the Trust and the Underwriter in writing of such determination and
its intent to terminate the Agreement, and (3) after considering the actions
taken by the Trust and/or the Underwriter and any other changes in circumstances
since the giving of such notice, such determination continue to apply on the
sixtieth day following the giving of such notice, which sixtieth day shall be
the effective date of termination; or
(l) at the option of either the Trust or the Underwriter, if the Company
gives the Trust and the Underwriter the written notice specified in Section
1.6(b) hereof and at the the time such notice was given there was no notice of
termination outstanding under any other provision of this Agreement; provided,
however any termination under this Section 10.1(1) shall be effective forty-five
days after the notice specified in Section 1.6(b) was given; or
(m) automatically in the event of its assignment, unless made with the
written consent of each party.
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), l0.l(j), 10.1(k) or 10.1(1) of
this Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) In the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be
given at least 90 days before the effective date of termination.
10.4 Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Trust pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Trust, redeem
investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5 Except as necessary to implement Contract Owner initiated
transactions, or as required by state and/or federal laws or regulations, the
Company shall not redeem Trust shares attributable to the Contracts (as opposed
to Trust shares attributable to the Company's assets held in the Accounts).
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a Fund
that was otherwise available under the Contracts without first giving the Trust
or the Underwriter ninety (90) days notice of its intention to do so.
ARTICLE XI
Notices
11.1 Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
111 Center Street
Little Rock, Arkansas 72201
Attention: Treasurer
If to the Company:
American Skandia Life Assurance Corporation
Attention: President
If to the Underwriter:
111 Center Street
Little Rock, Arkansas 72201
Attention: Treasurer
ARTICLE XII
Miscellaneous
12.1 All persons dealing with the Trust must look solely to
the property of the Trust for the enforcement of any claims against the Trust as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust.
12.2 Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names, and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7 The Trust shall own and control all records generated on
behalf of the Trust as a result of services provided under this Agreement. In
addition, the Trust shall have the right to inspect, audit, and/or copy all
records pertaining to the performance of services under this Agreement.
12.8 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified below.
Company:
AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION
By: /s/ Bayard F. Tracy
Date: 4-6-94
Trust:
LIFE & ANNUITY TRUST
By: /s/ Richard H. ____________
Date: 4-5-94
Underwriter:
STEPHENS INC.
By: /s/ Richard H. ___________
Date: 4-5-94
<PAGE>
Schedule A
Contracts
A-1
(212) 408-6900
April 17, 1998
American Skandia Life Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
Re: Post-effective Amendment No. 4 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.: 33-59993
Investment Company No.: 811-5438
Our File No. 74877-00-101
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.
33-59993, 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 Post-effective Amendment No. 1 on Form S-2 filed by American
Skandia Life Assurance Corporation, Registrant, Registration No.: 333-25761.
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 examinations, we have assumed to 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.
American Skandia
Life Assurance Corporation
Page 2
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 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,
WERNER & KENNEDY
/s/WERNER & KENNEDY
G:legal/Andrea/FinalN4consents/WELLS2
Wells II
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the captions "Independent
Auditors" and "Selected Financial Data" and to the use of our report dated
February 20, 1998 relating to American Skandia Life Assurance Corporation
included in the Registration Statement (Form N-4 No. 33-59993) and related
Prospectus, which is part of this Registration Statement, and to the use of our
report dated February 20, 1998 relating to American Skandia Life Assurance
Corporation Variable Account B - Class 1 appearing in the Statement of
Additional Information, which is also part of this Registration Statement.
We also consent to incorporation by reference herein of our report dated
February 20, 1998 with respect to the financial statements of American Skandia
Life Assurance Corporation for the year ended December 31, 1997 included in the
Annual Report (Form 10-K ) for 1997 filed with the Securities and Exchange
Commission.
/s/Ernst & Young LLP
Hartford, Connecticut
April 23, 1998
Wells 2
Exhibit 10(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-effective Amendment No. 4 to Registration
Statement No. 33-59993 of American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-Accounts) on Form N-4 of our report dated March 10, 1997,
included and incorporated by reference in the Annual Report on Form 10-K of
American Skandia Life Assurance Corporation for the year ended December 31,
1997, to the use of our report dated March 10, 1997 relating to American Skandia
Life Assurance Corporation appearing in the Prospectus, which is part of this
Registration Statement, and to the use of our report dated February 24, 1997
relating to American Skandia Life Assurance Corporation Variable Account B -
Class 1 appearing in the Statement of Additional Information, which is also part
of this Registration Statement. We also consent to the reference to us under the
headings "Independent Auditors" appearing in such Statement of Additional
Information and "Selected Financial Data" appearing in such Prospectus.
/s/ Deloitte & Touche LLP
New York, New York
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 108,323,668
<DEBT-CARRYING-VALUE> 117,690,339
<DEBT-MARKET-VALUE> 117,735,481
<EQUITIES> 6,710,851
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 125,088,457
<CASH> 81,974,204
<RECOVER-REINSURE> 3,120,221
<DEFERRED-ACQUISITION> 628,051,995
<TOTAL-ASSETS> 12,972,416,108 <F1>
<POLICY-LOSSES> 67,619,442
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 213,000,000
0
0
<COMMON> 2,000,000
<OTHER-SE> 182,421,044
<TOTAL-LIABILITY-AND-EQUITY> 12,972,416,108 <F2>
920,042
<INVESTMENT-INCOME> 8,181,073
<INVESTMENT-GAINS> 87,103
<OTHER-INCOME> 148,826,076 <F3>
<BENEFITS> 4,596,607
<UNDERWRITING-AMORTIZATION> 52,524,520
<UNDERWRITING-OTHER> 37,972,432
<INCOME-PRETAX> 38,025,279
<INCOME-TAX> 10,477,746
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,547,533
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Included in Total Assets are Assets Held in Separate Accounts
of $12,095,163.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $12,095,163,569.
<F3> Other income includes annuity charges and fees of $121,157,846 and
fee income of $27,587,231.
</FN>
</TABLE>
