Filed with the Securities and Exchange Commission on April 26, 1999
Registration No. 33-87010 Investment Company Act No. 811-5438
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-effective Amendment No. 8
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 1 SUB-ACCOUNTS)
(Exact Name of Registrant)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Name of Depositor)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484
(Address of Depositor's Principal Executive Offices)
(203) 926-1888
(Depositor's Telephone Number)
M. PRISCILLA PANNELL, CORPORATE SECRETARY
One Corporate Drive, Shelton, Connecticut 06484
(Name and Address of Agent for Service of Process)
Copy To:
T. RICHARD KENNEDY, ESQ.
WERNER & KENNEDY
1633 Broadway, New York, New York 10019 (212) 408-6900
Approximate Date of Proposed Sale to the Public:
MAY 3, 1999 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 3, 1999 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.
================================================================================
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
American Skandia Life Assurance
Corporation Annuity Contracts Indefinite* Indefinite* $
</TABLE>
================================================================================
*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 1998 was filed within
90 days of the close of the fiscal year.
- --------------------------------------------------------------------------------
ASAP2
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
N-4 Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions Glossary of Terms
3. Synopsis or Highlights What are Some of the Key Features of the Annuity?
Summary of Contract, Fees and Charges
4. Condensed Financial Information Condensed Financial Information About
Separate Accoount B
5. General Description of Registrant, Depositor Who Is American Skandia?
and Portfolio Companies What Are Separate Accounts?
6. Deductions Investment Options, Fees and Charges
7. General Description of Variable Annuity Contracts Purchasing Your Annuity, Why Would I
Choose to Purchase this Annuity?
What are Some of the Key Features of the Annuity?
8. Annuity Period Managing Your Account Value,
Access to Account Value
9. Death Benefit What Triggers the Payment of a Death Benefit?
What Options are Available to my Beneficiary upon my Death?
When Do You Determine the Death Benefit?
10. Purchases and Contract Value Managing Your Account Value
11. Redemptions Access to Account Value, Valuing Your Investment
12. Taxes Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Additional Information Available Information
SAI Heading
15. Cover Page Statement of Additional Information
16. Table of Contents Table of Contents
17. General Information and History General Information About American Skandia
18. Services Independent Auditors
19. Purchase of Securities Being Offered Noted in Prospectus under Managing Your
Account Value
20. Underwriters Principal Underwriter/Distribution
(Continued)
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
N-4 Item No. SAI Headings
21. Calculation of Performance Data How Performance Data is Calculated
22. Annuity Payments Noted in Prospectus under Access to Account Value
23. Financial Statements Appendix A
Part C Heading
24. Financial Statements and Exhibits Financial Statements
and Exhibits
25. Directors and Officers of the Depositor Noted in Prospectus under Executive
Officers and Directors
26. Persons Controlled by or Under Persons Controlled By or
Common Control with the Under Common Control with the
Depositor or Registrant Depositor or Registrant
27. Number of Contractowners Number of Contractowners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
</TABLE>
American Skandia Life Assurance Corporation
One Corporate Drive, Shelton, Connecticut 06484
This Prospectus describes a flexible premium deferred annuity (the "Annuity")
offered by American Skandia Life Assurance Corporation ("we", "our" or "us").
The Annuity may be offered as an individual annuity contract or as an interest
in a group annuity. This Prospectus describes the important features of the
Annuity and what you should consider before purchasing the Annuity. We have also
filed a Statement of Additional Information that is available from us, without
charge, upon your request. The contents of the Statement of Additional
Information are described on page 44. The Annuity or certain of its investment
options may not be available in all states. Various rights and benefits may
differ between states to meet applicable laws and/or regulations. In particular,
please refer to Appendix C for a description of certain provisions that apply to
Annuities sold to New York residents. Certain terms are capitalized in this
prospectus. Those terms are either defined in the Glossary of Terms or in the
context of the particular section.
WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for
retirement planning. It may be used as an investment vehicle for an IRA,
SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used for
other purposes that are not "qualified" investments. The Annuity allows you to
invest your money in a number of variable investment options as well as in one
or more fixed investment options. You are not taxed on any investment gains the
Annuity earns until you make a withdrawal from the Annuity or begin to receive
annuity payments. This feature, referred to as "tax-deferral", can be beneficial
to the growth of your Account Value because money that would otherwise be needed
to pay taxes on investment gains each year remains invested and can earn
additional money. However, because the Annuity is designed for long-term
retirement savings, a 10% penalty tax may be applied on withdrawals you make
before you reach age 59 1/2.
WHAT ARE SOME OF THE KEY FEATURES OF THE ANNUITY?
|X| The Annuity is a "flexible premium deferred annuity." It is called
"flexible premium" because you have considerable flexibility in the timing
and amount of premium payments. Generally, investors "defer" receiving
annuity payments until after an accumulation period.
|X| This Annuity offers both variable and fixed investment options. If you
allocate your Account Value to variable investment options, the value of
your Annuity will vary daily to reflect the investment performance of the
underlying investment options. Fixed investment options of different
durations are offered that are guaranteed by us, but may have a Market
Value Adjustment.
|X| The Annuity features two distinct phases - the accumulation period and the
payout period. During the accumulation period your Account Value is
allocated to one or more underlying investment options. The variable
investment options, each a Class 1 Sub-account of American Skandia Life
Assurance Corporation Variable Account B, invest in an underlying mutual
fund portfolio. Currently, portfolios of the following underlying mutual
funds are being offered: American Skandia Trust, The Alger American Fund,
Montgomery Variable Series, Wells Fargo LAT Trust and Rydex Variable Trust.
|X| During the payout period, commonly called "annuitization," you can elect to
receive fixed annuity payments (1) for life; (2) for life with a guaranteed
minimum number of payments; (3) based on joint lives; or (4) for a
guaranteed number of payments.
|X| The Annuity provides an additional 1% credit on Purchase Payments made
within the first year and may provide certain additional benefits if your
Account Value has not reached a Target Value on its 10th anniversary.
|X| This Annuity offers a basic Death Benefit. It also offers two Optional
Death Benefits that provide an enhanced level of protection for your
beneficiary(ies) for an additional charge.
|X| You are allowed to withdraw a certain amount of money from your Annuity on
an annual basis free of any charges. Other product features allow you to
access your Account Value as necessary, although a charge may apply.
|X| Transfers between investment options are tax-free. You may make twelve
transfers each year free of charge. We also offer several programs that
enable you to manage your Account Value as your financial needs and
investment performance change.
---------------------------------------------------------------------------
These annuities are NOT deposits or obligations of, or issued, guaranteed
or endorsed by, any bank, are NOT insured or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board or any other agency. An investment in this annuity involves
certain investment risks, including possible loss of principal.
---------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE
READ THIS PROSPECTUS AND THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS.
KEEP THEM FOR FUTURE REFERENCE.
<TABLE>
<CAPTION>
FOR FURTHER INFORMATION CALL 1-800-752-6342.
<S> <C>
Prospectus Dated: May 3, 1999 Statement of Additional Information Dated: May 3, 1999
ASAP2-PROS- (05/99) ASAPIIPROS
</TABLE>
<PAGE>
HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered
financial professionals. You must complete an application and submit a minimum
initial purchase payment of $1,000. We may allow you to make a lower initial
purchase payment provided that the purchase payments received in the first
Annuity Year total at least $1,000. There is no age restriction to purchase the
Annuity. However, the basic Death Benefit provides greater protection for
persons under age 90.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS..................................................................................................................5
SUMMARY OF CONTRACT FEES AND CHARGES...............................................................................................6
EXPENSE EXAMPLES...................................................................................................................8
INVESTMENT OPTIONS.................................................................................................................9
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?.............................................................10
WHAT ARE THE FIXED INVESTMENT OPTIONS?.........................................................................................15
FEES AND CHARGES..................................................................................................................15
WHAT ARE THE CONTRACT FEES AND CHARGES?........................................................................................15
WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?..................................................................17
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?...................................................................................17
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYOUT?..............................................................................17
PURCHASING YOUR ANNUITY...........................................................................................................17
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?..........................................................................17
MANAGING YOUR ANNUITY.............................................................................................................18
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?................................................................18
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?..................................................................................18
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.......................................................................................18
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?...................................................................18
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?...............................................................18
MANAGING YOUR ACCOUNT VALUE.......................................................................................................18
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?...................................................................................18
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?.....................................................19
DO YOU OFFER DOLLAR COST AVERAGING?............................................................................................19
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?...............................................................................20
DO YOU OFFER A PROGRAM TO BALANCE FIXED AND VARIABLE INVESTMENTS?..............................................................20
MAY I AUTHORIZE MY FINANCIAL REPRESENTATIVE TO MANAGE MY ACCOUNT?..............................................................20
HOW DO THE FIXED INVESTMENT OPTIONS WORK?......................................................................................21
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?..............................................................................21
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?.....................................................................................21
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?.................................................................................22
ADDITIONAL AMOUNTS IN THE FIXED ALLOCATIONS....................................................................................22
AMERICAN SKANDIA'S PERFORMANCE ADVANTAGE..........................................................................................23
ACCESS TO ACCOUNT VALUE...........................................................................................................24
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?...............................................................................24
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?..................................................................................24
CAN I WITHDRAW A PORTION OF MY ANNUITY?........................................................................................25
IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?....................................................................................25
CAN I MAKE WITHDRAWALS FROM MY ANNUITY WITHOUT A CDSC?.........................................................................25
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?..................................................................................25
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?...............................................26
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(T) OF THE INTERNAL REVENUE CODE?.......................................27
WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?.............................................................27
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?......................................................................................27
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?....................................................................27
WHAT TYPES OF ANNUITY PAYMENT OPTIONS ARE AVAILABLE UPON ANNUITIZATION?........................................................28
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?...........................................................................28
HOW ARE ANNUITY PAYMENTS CALCULATED?...........................................................................................28
DEATH BENEFIT.....................................................................................................................29
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?..................................................................................29
DEATH BENEFIT OPTIONS..........................................................................................................29
VALUING YOUR INVESTMENT...........................................................................................................32
HOW IS MY ACCOUNT VALUE DETERMINED?............................................................................................32
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?.....................................................................................32
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?....................................................................................32
HOW DO YOU VALUE FIXED ALLOCATIONS?............................................................................................32
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?....................................................................................32
TAX CONSIDERATIONS................................................................................................................33
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?...............................................................33
HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?......................................................................33
IN GENERAL, HOW ARE ANNUITIES TAXED?...........................................................................................33
HOW ARE DISTRIBUTIONS TAXED?...................................................................................................33
WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?...................................35
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?..........................................................................36
GENERAL TAX CONSIDERATIONS.....................................................................................................36
GENERAL INFORMATION...............................................................................................................37
HOW WILL I RECEIVE STATEMENTS AND REPORTS?.....................................................................................38
WHO IS AMERICAN SKANDIA?.......................................................................................................38
WHAT ARE SEPARATE ACCOUNTS?....................................................................................................38
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?...........................................................................39
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?.........................................................................40
AVAILABLE INFORMATION..........................................................................................................41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................................................41
HOW TO CONTACT US..............................................................................................................41
INDEMNIFICATION................................................................................................................41
LEGAL PROCEEDINGS..............................................................................................................41
EXECUTIVE OFFICERS AND DIRECTORS...............................................................................................42
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............................................................................44
APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA.........................................................................1
SELECTED FINANCIAL DATA ...........................................................................................................2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................................3
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OFAMERICAN SKANDIA LIFE ASSURANCE
CORPORATION........................................................................................................................1
APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B..............................................................1
APPENDIX C - SALE OF THE CONTRACTS TO RESIDENTS OF THE STATE OF NEW YORK...........................................................1
</TABLE>
<PAGE>
Glossary of Terms
Many terms used within this Prospectus are described within the text where they
appear. The description of those terms are not repeated in this Glossary of
Terms.
Account Value: The value of each allocation to a Sub-account or a Fixed
Allocation prior to the Annuity Date, plus any earnings, and/or less any losses,
distributions and charges. The Account Value is calculated before we assess any
applicable Contingent Deferred Sales Charge and/or any Annual Maintenance Fee.
The Account Value includes any additional amounts we applied to your Purchase
Payments that we are entitled to recover upon surrender of your Annuity. The
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.
The Account Value of each Fixed Allocation on other than its Maturity Date may
be calculated using a market value adjustment.
Annuity Date: The date you choose for annuity payments to commence. There may be
a maximum Annuity Date in certain states.
Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and
each successive 12-month period thereafter.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Fixed Allocation: An allocation of Account Value that is to be credited a fixed
rate of interest for a specified Guarantee Period during the accumulation
period.
Guarantee Period: A period of time during the accumulation period where we
credit a fixed rate of interest on a Fixed Allocation.
Interim Value: As of any particular date, the initial value allocated to the
Fixed Allocation plus all interest credited to the Fixed Allocation as of the
date calculated, less any transfers or withdrawals from the Fixed Allocation.
Issue Date: The effective date of your Annuity.
MVA: A market value adjustment used in the determination of Account Value of
each Fixed Allocation on a day other than such Fixed Allocation's Maturity Date.
Owner: With an Annuity issued as an individual annuity contract, the Owner is
either an eligible entity or person named as having ownership rights in relation
to the Annuity. With an Annuity issued as a certificate under a group annuity
contract, the "Owner" refers to the person or entity who has the rights and
benefits designated as to the "Participant" in the certificate.
Surrender Value: The value of your Annuity available upon surrender prior to the
Annuity Date. It equals the Account Value as of the date we price the surrender
minus any applicable CDSC and Annual Maintenance Fee and any additional amounts
we applied to your Purchase Payments that we are entitled to recover upon
surrender of your Annuity.
Unit: A measure used to calculate your Account Value in a Sub-account during the
accumulation period.
Valuation Day: Every day the New York Stock Exchange is open for trading or any
other day the Securities and Exchange Commission requires mutual funds or unit
investment trusts to be valued.
<PAGE>
Summary of Contract Fees and Charges
Below is a summary of the fees and expenses we charge for the Annuity. Some
charges are assessed against your Annuity while others are assessed against
assets allocated to the variable investment options. The charges that are
assessed against the Annuity include the Contingent Deferred Sales Charge,
Annual Maintenance Fee, Transfer Fee and the Tax Charge. The charge that is
assessed against the variable investment options is the Insurance Charge, which
is the combination of a mortality and expense risk charge and a charge for
administration of the Annuity. Each underlying mutual fund portfolio assesses a
charge for investment management and for other expenses. The prospectus for each
underlying mutual fund provides more detailed information about the expenses for
the underlying funds. In certain states, a premium tax charge may be applicable.
All of these fees and expenses are described in more detail within this
Prospectus.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Your Transaction Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------- ----------------------------------------------------------------- --------------------------------------
Amount Deducted/
Fee/Expense Description Of Charge When Deducted
- ------------------------- ----------------------------------------------------------------- --------------------------------------
- ------------------------- -------- ------- ------- -------- ------- ------- ------- ------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8+ Upon Surrender or
Charge Partial Withdrawal
e charge is a percentage of Applicable period measured from the
each applicable purchase date each purchase payment is
payment allocated
- -------------------------- -------- ------- ------- -------- ------- ------- ------- ------- --------------------------------------
- -------------------------- -------- ------- ------- -------- ------- ------- ------- ------- --------------------------------------
7.5% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
- -------------------------- -------- ------- ------- -------- ------- ------- ------- ------- --------------------------------------
- -------------------------- ----------------------------------------------------------------- --------------------------------------
Annual Maintenance Fee Smaller of $30 or 2% of Account Value Annually on the contract's
anniversary date or upon surrender
- -------------------------- ----------------------------------------------------------------- --------------------------------------
- -------------------------------
Transfer Fee $10.00 After the 12th transfer each annuity
year
- -------------------------- ----------------------------------------------------------------- --------------------------------------
- -------------------------- ----------------------------------------------------------------- --------------------------------------
Tax Charge Depends on the requirements of the applicable jurisdiction Various
- -------------------------- ----------------------------------------------------------------- --------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Expenses of the Sub-Accounts
(as a percentage of the average daily net assets of the Sub-accounts)
- -------------------------- ----------------------------------------------------------------- --------------------------------------
Mortality & Expense Risk
Charge 1.25%
Daily
Administration Charge 0.15%
Total Annual Expenses of the 1.40% per year of the value of each Sub-account Applies to Variable Investment
Sub-accounts* Options only
- -------------------------- ----------------------------------------------------------------- --------------------------------------
* The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge"
elsewhere in this prospectus.
- -----------------------------------------------------------------------------------------------------------------------------------
Optional Benefits
We offer two different Optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies). Please refer
to the section entitled "Death Benefit" for a complete discussion of the Optional Death Benefits we offer.
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------- -------------------------------------------- --------------------------------------------
Death Benefit Option Death Benefit equal to the greater of: Additional Charge (annually)
- ----------------------------------------- -------------------------------------------- --------------------------------------------
- ----------------------------------------- -------------------------------------------- --------------------------------------------
1. Account Value (no MVA)
2. Sum of Purchase Payments minus
OPTION 1 the proportional impact of 0.30% of the current Death Benefit
withdrawals increasing at 5.0%
annually
3. Highest Anniversary Value
- ----------------------------------------- -------------------------------------------- --------------------------------------------
- ----------------------------------------- -------------------------------------------- --------------------------------------------
1. Account Value (no MVA)
2. Sum of Purchase Payments minus
OPTION 2 the proportional impact of 0.50% of the current Death Benefit
withdrawals increasing at 7.2%
annually
3. Highest Anniversary Value
- ----------------------------------------- -------------------------------------------- --------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Underlying Mutual Fund Portfolio Annual Expenses
(as a percentage of the average net assets of the underlying Portfolios)
- -------------------------------------------------------------------------------
Below are the investment management fee, other expenses, and the total annual
expenses for each underlying Portfolio as of December 31, 1998. The total annual
expenses are the sum of the investment management fee and other expenses. Each
figure is stated as a percentage of the underlying Portfolio's average daily net
assets. For certain of the underlying Portfolios, a portion of the management
fee is being waived and/or other expenses are being partially reimbursed. "N/A"
indicates that no portion of the management fee and/or other expenses is being
waived and/or reimbursed. Any footnotes about expenses appear after the list of
all the portfolios. Those portfolios whose name includes the prefix "AST" are
portfolios of American Skandia Trust. The underlying mutual fund portfolio
information was provided by the underlying mutual funds and has not been
independently verified by us. See the prospectuses or statements of additional
information of the underlying Portfolios for further details.
<TABLE>
<CAPTION>
- ----------------------------------------- ----------------- ---------------- ------------------ ------------------ ----------------
Management Other Total Annual Fee Waivers Net Annual
UNDERLYING PORTFOLIO Fees Expenses Portfolio and Expense Fund
Operating Reimbursement Operating
Expenses Expenses
- ----------------------------------------- ----------------- ---------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
AST Founders Passport 1.00% 0.30% 1.30% N/A 1.30%
AST T. Rowe Price International Equity 1.00% 0.25% 1.25% N/A 1.25%
AST AIM International Equity(1) 0.87% 0.26% 1.13% N/A 1.13%
AST Janus Overseas Growth 1.00% 0.27% 1.27% N/A 1.27%
AST American Century International Growth 1.00% 0.65% 1.65% N/A 1.65%
AST Janus Small-Cap Growth(2) 0.90% 0.22% 1.12% N/A 1.12%
AST Kemper Small-Cap Growth(3) 0.95% 0.60% 1.55% 0.20% 1.35%
AST Lord Abbett Small Cap Value 0.95% 0.36% 1.31% N/A 1.31%
AST T. Rowe Price Small Company Value 0.90% 0.21% 1.11% N/A 1.11%
AST Neuberger Berman Mid-Cap Growth(4) 0.90% 0.17% 1.07% N/A 1.07%
AST Neuberger Berman Mid-Cap Value(5) 0.90% 0.15% 1.05% N/A 1.05%
AST T. Rowe Price Natural Resources 0.90% 0.26% 1.16% N/A 1.16%
AST Oppenheimer Large-Cap Growth(6) 0.90% 0.22% 1.12% N/A 1.12%
AST Marsico Capital Growth 0.90% 0.21% 1.11% N/A 1.11%
AST JanCap Growth 0.90% 0.14% 1.04% 0.02% 1.02%
AST Bankers Trust Enhanced 500 0.60% 0.26% 0.86% 0.06% 0.80%
AST Cohen & Steers Realty 1.00% 0.30% 1.30% N/A 1.30%
AST American Century Income & Growth(7) 0.75% 0.25% 1.00% N/A 1.00%
AST Lord Abbett Growth and Income 0.75% 0.16% 0.91% N/A 0.91%
AST INVESCO Equity Income 0.75% 0.18% 0.93% N/A 0.93%
AST AIM Balanced(8) 0.74% 0.26% 1.00% N/A 1.00%
AST American Century Strategic Balanced 0.85% 0.28% 1.13% N/A 1.13%
AST T. Rowe Price Asset Allocation 0.85% 0.24% 1.09% N/A 1.09%
AST T. Rowe Price International Bond 0.80% 0.31% 1.11% N/A 1.11%
AST Federated High Yield 0.75% 0.20% 0.95% N/A 0.95%
AST PIMCO Total Return Bond 0.65% 0.18% 0.83% N/A 0.83%
AST PIMCO Limited Maturity Bond 0.65% 0.21% 0.86% N/A 0.86%
AST Money Market 0.50% 0.16% 0.66% 0.06% 0.60%
The Alger American Fund - Growth 0.75% 0.04% 0.79% N/A 0.79%
portfolio
The Alger American Fund - MidCap Growth 0.80% 0.04% 0.84% N/A 0.84%
portfolio
Montgomery Variable Series - Emerging 1.25% 0.56% 1.81% 0.06% 1.75%
Markets portfolio
Wells Fargo LAT Trust - Equity Value 0.59% 1.93% 2.52% 1.43% 1.09%
portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
Rydex Variable Trust - Nova portfolio 0.74% 1.47% 2.21% 0.03% 2.18%
Rydex Variable Trust - Ursa portfolio 0.90% 1.57% 2.47% 0.17% 2.30%
Rydex Variable Trust - OTC portfolio 0.72% 1.24% 1.96% N/A 1.96%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Prior to May 3, 1999, the Investment Manager had engaged Putnam Investment
Management, Inc. as Sub-Advisor for the Portfolio (formerly the AST Putnam
Value Growth & Income portfolio).
2 Prior to January 1, 1999, the Investment Manager had engaged Founders Asset
Management, LLC as Sub-advisor for the Portfolio (formerly the Founders
Capital Appreciation portfolio).
3 This portfolio commenced operations in January 1999.
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 Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio (formerly, the
Federated Utility Income portfolio), for a total Investment Management fee
payable at the annual rate of .75% of the first $50 million of the average
daily net assets of the Portfolio, plus .60% of the Portfolio's average
daily net assets in excess of $50 million. As of May 1, 1998, the
Investment Manager engaged Neuberger Berman Management Incorporated as
Sub-advisor for the Portfolio, for a total Investment Management fee
payable at the annual rate of 0.90% of the first $1 billion of the average
daily net assets of the Portfolio plus .85% of the Portfolio's average
daily net assets in excess of $1 billion. The Management Fee in the above
chart reflects the current Investment Management fee payable to the
Investment Manager.
6 Prior to January 1, 1999, the Investment Manager had engaged Robertson,
Stephens & Company Investment Management, L.P. as Sub-advisor for the
Portfolio (formerly the Robertson Stephens Value + Growth portfolio), and
the total Investment Management fee was at the annual rate of 1.00% of the
average daily net assets of the Portfolio. As of January 1, 1998, the
Investment Manager engaged OppenheimerFunds, Inc. as Sub-advisor for the
Portfolio, and the Investment Management fee is payable at the annual rate
of 0.90% of the first $1 billion of the average daily net assets of the
Portfolio, plus .85% of the Portfolio's average daily net assets in excess
of $1 billion. The Management Fee in the above chart reflects the current
Investment Management fee payable to the Investment Manager.
7 Prior to May 3, 1999, the Investment Manager had engaged Putnam Investment
Management, Inc. as Sub-Advisor for the
Portfolio (formerly the AST Putnam International Equity portfolio).
8 Prior to May 3, 1999, the Investment Manager had engaged Putnam Investment
Management, Inc. as Sub-Advisor for the Portfolio (formerly the AST Putnam
Balanced portfolio).
Expense Examples
These examples are designed to assist you in understanding the various costs and
expenses you will incur with the Annuity over certain periods of time based on
specific assumptions. The examples reflect expenses of our Sub-accounts, as well
as those of the underlying mutual fund portfolios. The Securities and Exchange
Commission ("SEC") requires these examples.
The examples shown assume that: (a) you only allocate Account Value in the
Sub-accounts; (b) fees and expenses remain constant; (c) you make no withdrawals
of Account Value during the period shown; (d) you make no transfers,
withdrawals, surrender or other transaction that we charge 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 "Net Annual Fund
Operating Expenses," as shown above in the section entitled "Underlying Mutual
Fund Portfolio Annual Expenses." The examples do not reflect the charge for any
optional benefits that may be offered under the Annuity. The examples also do
not reflect the impact of any Target Value Credits that may be applied to
Purchase Payments within the first Annuity Year.
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Expense Examples
(amounts shown are rounded to the nearest dollar)
- -----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------- ------- ----------------------------------------
If you surrender your Annuity at the end of If you do not surrender your Annuity
the applicable time period, you would pay at the end of the applicable time
the following expenses on a $1,000 period or begin taking annuity
investment, assuming 5% annual return on payments at such time, you would pay
assets: the following expenses on a $1,000
investment, assuming 5% annual return
on assets:
---------------------------------------------- ------- ----------------------------------------
After: After:
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------- --------- ---------- --------- ---------- ------- ---------- --------- ---------- ---------
Sub-Account: 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
--------- ---------- --------- ---------- -- ---------- --------- ---------- ---------
- -------------------------------------------- --------- ---------- --------- ---------- -- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AST Founders Passport 103 146 187 310 28 86 147 310
AST T. Rowe Price International Equity 103 145 185 307 28 85 145 307
AST AIM International Equity 102 142 179 294 27 82 139 294
AST Janus Overseas Growth 103 146 186 308 28 86 146 308
AST American Century International Growth 107 157 205 344 32 97 165 344
AST Janus Small-Cap Growth 101 141 178 293 26 81 138 293
AST Kemper Small-Cap Growth 104 148 190 315 29 88 150 315
AST Lord Abbett Small Cap Value 103 147 188 311 28 87 148 311
AST T. Rowe Price Small Company Value 101 141 178 291 26 81 138 291
AST Neuberger Berman Mid-Cap Growth 101 139 175 287 26 79 135 287
AST Neuberger Berman Mid-Cap Value 101 139 175 286 26 79 135 286
AST T. Rowe Price Natural Resources 102 142 180 297 27 82 140 297
AST Oppenheimer Large-Cap Growth 101 141 178 293 26 81 138 293
AST Marsico Capital Growth 101 141 178 291 26 81 138 291
AST JanCap Growth 100 138 173 283 25 78 133 283
AST Bankers Trust Enhanced 500 98 131 162 260 23 71 122 260
AST Cohen & Steers Realty 103 146 187 310 28 86 147 310
AST American Century Income & Growth 100 137 172 280 25 77 132 280
AST Lord Abbett Growth and Income 99 134 167 270 24 74 127 270
AST INVESCO Equity Income 99 135 168 273 24 75 128 273
AST AIM Balanced 100 137 172 280 25 77 132 280
AST American Century Strategic Balanced 102 142 179 294 27 82 139 294
AST T. Rowe Price Asset Allocation 101 140 177 290 26 80 137 290
AST T. Rowe Price International Bond 101 141 178 291 26 81 138 291
AST Federated High Yield 100 136 170 276 25 76 130 276
AST PIMCO Total Return Bond 98 132 163 263 23 72 123 263
AST PIMCO Limited Maturity Bond 99 133 165 267 24 73 125 267
AST Money Market 96 125 152 240 21 65 112 240
AA Growth 98 131 162 260 23 71 122 260
AA MidCap Growth 99 133 164 265 24 73 124 265
MV Emerging Markets 108 160 209 353 33 100 169 353
WF LAT Trust Equity Value 101 140 177 290 26 80 137 290
Rydex Nova 112 173 231 392 37 113 191 392
Rydex Ursa 114 177 237 404 39 117 197 404
Rydex OTC 110 167 221 375 35 107 181 375
- -------------------------------------------- --------- ---------- --------- ---------- - ---------- --------- ---------- ---------
</TABLE>
Investment Options
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
Each variable investment option is a Class 1 Sub-account of American Skandia
Life Assurance Corporation Variable Account B (see "What are Separate Accounts"
for more detailed information.) Each Sub-account invests exclusively in one
Portfolio. You should carefully read the prospectus for any Portfolio in which
you are interested. The following chart classifies each of the Portfolios based
on our assessment of their investment style (as of the date of this Prospectus).
The chart also provides a short description of each Portfolio's investment
objective (in italics) and a short, summary description of their key policies to
assist you in determining which Portfolios may be of interest to you. The name
of the advisor/sub-advisor for each Portfolio appears next to the description.
Those portfolios whose name includes the prefix "AST" are portfolios of American
Skandia Trust. The investment manager for AST is American Skandia Investment
Services, Inc. ("ASISI"), an affiliated company. However, a sub-advisor, as
noted below, is engaged to conduct day-to-day investment decisions. Details
about the investment objectives, policies, risks, costs and management of the
Portfolios are found in the prospectuses for the underlying mutual funds. There
is no guarantee that any underlying mutual fund portfolio will meet its
investment objective.
Please refer to Appendix B for certain required financial information related to
the historical performance of the Sub-accounts.
<TABLE>
<CAPTION>
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
AST Money Market: seeks to maximize current income and
CAPITAL maintain high levels of liquidity. The Portfolio attempts to J.P. Morgan
PRESERVATION accomplish its objective by maintaining a dollar-weighted Investment
average maturity of not more than 90 days and by investing Management Inc.
in securities which have effective maturities of not more
than 397 days.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST PIMCO Limited Maturity Bond: seeks to maximize total
return, consistent with preservation of capital and prudent
SHORT-TERM investment management. The Portfolio will invest in a Pacific Investment
BOND diversified portfolio of fixed-income securities of varying Management
maturities. The average portfolio duration of the Portfolio Company
generally will vary within a one- to three-year time frame
based on the Sub-advisor's forecast for interest rates.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST PIMCO Total Return Bond: seeks to maximize total return
consistent with preservation of capital and prudent
investment management. The Portfolio will invest in a Pacific Investment
LONG-TERM diversified portfolio of fixed-income securities of varying Management
BOND maturities. The average portfolio duration of the Portfolio Company
generally will vary within a three- to six-year time frame
based on the Sub-advisor's forecast for interest rates.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST Federated High Yield: seeks high current income by
investing primarily in a diversified portfolio of fixed
income securities. The Portfolio will invest at least 65% of
its assets in lower-rated corporate fixed income securities Federated Investment
HIGH YIELD ("junk bonds"). These fixed income securities may include Counseling
BOND preferred stocks, convertible securities, bonds, debentures,
notes, equipment lease certificates and equipment trust
certificates. A fund that invests primarily in lower-rated
fixed income securities will be subject to greater risk and
share price fluctuation than a typical fixed income fund,
and may be subject to an amount of risk that is comparable
to or greater than many equity funds.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST T. Rowe Price International Bond: seeks to provide high
current income and capital growth by investing in
high-quality, non dollar-denominated government and
corporate bonds outside the United States. The Portfolio
will invest at least 65% of its assets in high-quality,
INTER- non-U.S. dollar denominated government and corporate bonds Rowe Price-Fleming
NATIONAL outside the United States. The Sub-advisor bases its International, Inc.
BOND investment decisions on fundamental market factors, currency
trends, and credit quality. The Portfolio generally invests
in countries where the combination of fixed-income returns
and currency exchange rates appears attractive, or, if the
currency trend is unfavorable, where the Sub-advisor
believes that the currency risk can be minimized through
hedging. The Portfolio may also invest up to 20% of its
assets in below investment-grade, high-risk bonds ("junk
bonds"), including bonds in default or those with the lowest
rating.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST T. Rowe Price Asset Allocation: seeks a high level of
total return by investing primarily in a diversified
portfolio of fixed income and equity securities. The
Portfolio normally invests approximately 60% of its total
ASSET assets in equity securities and 40% in fixed income T. Rowe Price
ALLOCATION securities. The Sub-advisor concentrates common stock Associates, Inc.
investments in larger, more established companies, but the
Portfolio may include small and medium-sized companies with
good growth prospects. The fixed income portion of the
Portfolio will be allocated among investment grade
securities, high yield or "junk" bonds, foreign high quality
debt securities and cash reserves.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST American Century Strategic Balanced: seeks capital
growth and current income. The Sub-advisor intends to
maintain approximately 60% of the Portfolio's assets in
equity securities and the remainder in bonds and other fixed
BALANCED income securities. Both the Portfolio's equity and fixed American Century
income investments will fluctuate in value. The equity Investment
securities will fluctuate depending on the performance of Management, Inc.
the companies that issued them, general market and economic
conditions, and investor confidence. The fixed income
investments will be affected primarily by rising or falling
interest rates and the credit quality of the issuers.
------------------------------------------------------------------------------------------------ ---------------
AST AIM Balanced: seeks to provide a well-diversified
portfolio of stocks and bonds that will produce both capital
growth and current income. The Portfolio attempts to meet
its objective by investing, normally, a minimum of 30% and a A I M Capital
maximum of 70% of its total assets in equity securities and Management, Inc.
a minimum of 30% and a maximum of 70% of its total assets in
non-convertible debt securities. The Sub-Advisor will
primarily purchase equity securities for growth of capital
and debt securities for income purposes.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST Cohen & Steers Realty: seeks to maximize total return
through investment in real estate securities. The Portfolio
pursues its investment objective by seeking, with
approximately equal emphasis, capital growth and current Cohen & Steers
REAL ESTATE income. Under normal circumstances, the Portfolio will Capital Management, Inc.
(REIT) invest substantially all of its assets in the equity
securities of real estate companies, i.e., a company that
derives at least 50% of its revenues from the ownership,
construction, financing, management or sale of real estate
or that has at least 50% of its assets in real estate. Real
estate companies may include real estate investment trusts
or REITs.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST INVESCO Equity Income: seeks high current income while
following sound investment practices. Capital growth
potential is an additional, but secondary, consideration in
EQUITY the selection of portfolio securities. The Portfolio seeks INVESCO Funds
INCOME to achieve its objective by investing in securities that Group, Inc.
will provide a relatively high yield and stable return and
that, over a period of years, may also provide capital
appreciation. The Portfolio normally will invest at least
65% of its assets in dividend-paying common stocks of
domestic and foreign issuers.
- ------------------ ------------------------------------------------------------------------------------------------ ----------------
AST Bankers Trust Enhanced 500: seeks to outperform the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
500(R)") through stock selection resulting in different
ENHANCED weightings of common stocks relative to the index. The
INDEX Portfolio will invest in the common stocks of companies Bankers Trust Company
included in the S&P 500(R). The majority of the issues held
by the Portfolio will have neutral weightings to the S&P
500, but approximately 100 will be over- or under-weighted
relative to the index.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST American Century Income & Growth: seeks capital growth
with current income as a secondary objective. The Portfolio
invests primarily in common stocks that offer potential for American Century
capital growth, and may, consistent with its investment Investment Management, Inc.
objectives, invest in stocks that offer potential for
current income. The Sub-adviser utilizes a quantitative
management technique with a goal of building an equity
portfolio that provides better returns than the S&P 500
Index without taking on significant additional risk and
while attempting to create a dividend yield that will be
greater than the S&P 500 Index.
------------------------------------------------------------------------------------------------ ---------------
GROWTH AST Lord Abbett Growth and Income: seeks long-term growth of
& capital and income while attempting to avoid excessive
INCOME fluctuations in market value. The Portfolio normally will
invest in common stocks (and securities convertible into
common stocks). The Sub-advisor will take a value-oriented Lord, Abbett & Co.
approach, in that it will try to keep the Portfolio's assets
invested in securities that are selling at reasonable prices
in relation to their value. The stocks that the Portfolio
will normally invest in are those of seasoned companies that
are expected to show above-average growth and that the
Sub-advisor believes are in sound financial condition.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST T. Rowe Price Natural Resources: seeks long-term capital
growth primarily through the common stocks of companies that
own or develop natural resources (such as energy products,
precious metals, and forest products) and other basic
NATURAL commodities. The Portfolio normally invests primarily (at T. Rowe Price
RESOURCES least 65% of its total assets) in the common stocks of Associates, Inc.
natural resource companies whose earnings and tangible
assets could benefit from accelerating inflation. The
Portfolio looks for companies that have the ability to
expand production, to maintain superior exploration programs
and production facilities, and the potential to accumulate
new resources.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST JanCap Growth: seeks 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 the Portfolio's investments, therefore,
will be incidental to the Portfolio's objective. The
Portfolio will pursue its objective by investing primarily
in common stocks of companies that the Sub-advisor believes Janus Capital
are experiencing favorable demand for their products and Corporation
services, and which operate in a favorable competitive and
regulatory environment. The Sub-advisor generally takes a
"bottom up" approach to choosing investments for the
Portfolio. In other words, the Sub-advisor seeks to identify
individual companies with earnings growth potential that may
not be recognized by the market at large.
------------------------------------------------------------------------------------------------ ---------------
AST Marsico Capital Growth: seeks capital growth. Income
realization is not an investment objective and any income
realized on the Portfolio's investments, therefore, will be
incidental to the Portfolio's objective. The Portfolio will
pursue its objective by investing primarily in common stocks
of larger, more established companies. In selecting Marsico Capital
investments for the Portfolio, the Sub-advisor uses an Management, LLC
approach that combines "top down" economic analysis with
"bottom up" stock selection. The "top down" approach
identifies sectors, industries and companies that should
benefit from the trends the Sub-advisor has observed. The
Sub-advisor then looks for individual companies with
earnings growth potential that may not be recognized by the
market at large. This is called "bottom up" stock selection.
------------------------------------------------------------------------------------------------ ---------------
AST Neuberger Berman Mid-Cap Growth: seeks capital growth.
The Portfolio primarily invests in the common stocks of
mid-cap companies, i.e., companies with equity market Neuberger Berman
capitalizations from $300 million to $10 billion at the time Management Incorporated
of investment. The Portfolio is normally managed using a
growth-oriented investment approach. The Sub-advisor looks
for fast-growing companies that are in new or rapidly
evolving industries.
------------------------------------------------------------------------------------------------ ---------------
AST Neuberger Berman Mid-Cap Value: seeks capital growth.
The Portfolio primarily invests in the common stocks of
mid-cap companies. Under the Portfolio's value-oriented
investment approach, the Sub-advisor looks for well-managed Neuberger Berman
GROWTH companies whose stock prices are undervalued and that may Management Incorporated
rise in price before other investors realize their worth.
Factors that the Sub-advisor may use to identify these
companies include strong fundamentals, including a low
price-to-earnings ratio, consistent cash flow, and a sound
track record through all phases of the market cycle.
------------------------------------------------------------------------------------------------ ---------------
AST Oppenheimer Large-Cap Growth: seeks capital growth. The
Portfolio seeks its investment objective by emphasizing
investment in common stocks issued by established
large-capitalization "growth companies" that, in the opinion
of the Sub-advisor, have above average earnings prospects OppenheimerFunds, Inc.
but are selling at below normal prices. At least 65% of the
Portfolio's assets normally will be invested in companies
that have market capitalizations greater than $3 billion,
and the Portfolio will normally maintain a median market
capitalization greater than $5 billion.
------------------------------------------------------------------------------------------------ ---------------
The Alger American Fund - Growth: seeks long-term capital
appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity Fred Alger
securities of companies that, at the time of purchase, have Management, Inc.
total market capitalization of $1 billion or greater.
------------------------------------------------------------------------------------------------ ---------------
Wells Fargo LAT Trust - Equity Value: 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 Wells Fargo Bank, N.A.
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.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
<PAGE>
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
The Alger American Fund - MidCap Growth: seeks long-term
capital appreciation. Except during temporary defensive
AGGRESSIVE periods, the Portfolio invests at least 65% of its total Fred Alger
GROWTH assets in equity securities of companies that, at the time Management, Inc.
of purchase of the securities, have total market
capitalization within the range of companies included in the
S&P MidCap 400 Index, updated quarterly.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST Janus Small-Cap Growth: seeks capital growth. The
Portfolio pursues its objective by normally investing at
least 65% of its total assets in the common stocks of
small-sized companies, i.e., those that have market
capitalizations of less than $1.5 billion or annual gross Janus Capital Corporation
revenues of less than $500 million. As a Portfolio that
invests primarily in smaller or newer issuers, the Portfolio
may be subject to greater risk of loss and share price
fluctuation than funds investing primarily in larger or more
established issuers.
------------------------------------------------------------------------------------------------ ---------------
AST Kemper Small-Cap Growth: seeks maximum growth of
investors' capital from a portfolio primarily of growth
stocks of smaller companies. At least 65% of the Portfolio's
total assets normally will be invested in the equity
securities of smaller companies, i.e., those having a market Scudder Kemper
capitalization of $1.5 billion or less at the time of Investments, Inc.
investment, many of which would be in the early stages of
their life cycle. The Portfolio seeks attractive areas for
investment that arise from factors such as technological
advances, new marketing methods, and changes in the economy
and population. Because of the Portfolio's focus on the
SMALL stocks of smaller growth companies, investment in the
CAPITALIZATION Portfolio may involve substantially greater than average
share price fluctuation and investment risk.
------------------------------------------------------------------------------------------------ ---------------
AST Lord Abbett Small Cap Value: seeks long-term capital
growth. The Portfolio will seek its objective through
investments primarily in equity securities that are believed
to be undervalued in the marketplace. The Portfolio
primarily seeks companies that are small-sized, based on the
value of their outstanding stock. Specifically, under normal Lord, Abbett & Co.
circumstances, at least 65% of the Portfolio's total assets
will be invested in common stocks issued by smaller, less
well-known companies (with market capitalizations of less
than $1 billion) selected on the basis of fundamental
investment analysis. The small capitalization companies in
which the Portfolio primarily invests may offer significant
appreciation potential. However, smaller companies may carry
more risk than larger companies.
------------------------------------------------------------------------------------------------ ---------------
AST T. Rowe Price Small Company Value: seeks to provide
long-term capital growth by investing primarily in
small-capitalization stocks that appear to be undervalued.
The Portfolio will normally invest at least 65% of its total
assets in stocks and equity-related securities of small T. Rowe Price
companies ($1 billion or less in market capitalization). Associates, Inc.
Reflecting a value approach to investing, the Portfolio will
seek the stocks of companies whose current stock prices do
not appear to adequately reflect their underlying value as
measured by assets, earnings, cash flow or business
franchises. Investing in small companies involves greater
risk of loss than is customarily associated with more
established companies.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
AST American Century International Growth: seeks capital
growth. The Portfolio will seek to achieve its investment
objective by investing primarily in equity securities of
international companies that the Sub-advisor believes will
increase in value over time. Under normal conditions, the
Portfolio will invest at least 65% of its assets in equity American Century
securities of issuers from at least three countries outside Investment
of the United States. The Sub-advisor uses a growth Management, Inc.
investment strategy it developed that looks for companies
with earnings and revenue growth. The Sub-advisor will
consider a number of other factors in making investment
selections, including the prospects for relative economic
growth among countries or regions, economic and political
conditions, expected inflation rates, currency exchange
fluctuations and tax considerations.
------------------------------------------------------------------------------------------------ ---------------
AST Founders Passport: seeks capital growth. The Portfolio
INTER-NATIONAL normally invests primarily in securities issued by foreign
EQUITY companies that have market capitalizations or annual
revenues of $1 billion or less. These securities may
represent companies in both established and emerging Founders Asset
economies throughout the world. At least 65% of the Management LLC
Portfolio's total assets normally will be invested in
foreign securities representing a minimum of three
countries. Foreign securities are generally considered to
involve more risk than those of U.S. companies, and
securities of smaller companies are generally considered to
be riskier than those of larger companies.
------------------------------------------------------------------------------------------------ ---------------
AST Janus Overseas Growth: seeks long-term growth of
capital. The Portfolio pursues its objective primarily
through investments in common stocks of issuers from at Janus Capital Corporation
least five different countries, excluding the United States.
Securities are generally selected without regard to any
defined allocation among countries, geographic regions or
industry sectors, or other similar selection procedure.
------------------------------------------------------------------------------------------------ ---------------
AST AIM International Equity: seeks capital growth. The
Portfolio seeks to meet its objective by investing,
normally, at least 70% of its assets in marketable equity
securities of foreign companies that are listed on a A I M Capital
recognized foreign securities exchange or traded in a Management, Inc.
foreign over-the-counter market. The Portfolio will normally
invest in a diversified portfolio that includes companies
from at least four countries outside the United States,
emphasizing counties of Western Europe and the Pacific
Basin.
------------------------------------------------------------------------------------------------ ---------------
AST T. Rowe Price International Equity: seeks total return
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 Rowe Price-Fleming
of both for the purpose of achieving a higher overall International, Inc.
return. The Sub-advisor expects to invest substantially all
of the Portfolio's assets (with a minimum of 65%) in
established foreign companies. Geographic diversification
will be wide, including both developed and developing
countries, and there will normally be at least three
different countries represented in the Portfolio.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
Montgomery Variable Series - Emerging Markets: seeks capital
appreciation, which under normal conditions it seeks by
investing at least 65% of its total assets in equity Montgomery Asset
EMERGING securities of companies in countries having emerging Management, L.P.
MARKETS markets. Under normal conditions, investments are maintained
in at least six emerging market countries at all times and
no more than 35% of total assets are invested in any one
emerging market country.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
The Nova, Ursa and OTC portfolios of the Rydex Variable Trust are available to
all Owners. However, the fund's advisor strongly recommends that only Owners who
engage a financial advisor to allocate their funds in strategic or tactical
asset allocation strategies invest in these portfolios. There can be no
assurance that any financial advisor will successfully predict market
fluctuations. Each of the Rydex portfolios invests in the securities of a
relatively few number of issuers. Since the assets of each portfolio are
invested in a limited number of issuers, the net asset value of the portfolio
may be more susceptible to a single adverse economic, political or regulatory
occurrence.
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
Rydex Variable Trust - Nova: seeks to provide investment
returns that are 150% of the S&P 500 Composite Stock Price
Index by investing to a significant extent in futures
contracts and options on securities, futures contracts and PADCO Advisors II,
stock indexes. If the Portfolio meets its objective the Inc.
value of its shares will tend to increase by 150% of the
value of any increase in the S&P 500 Index. However, when
the value of the S&P 500 Index declines, the value of its
shares should also decrease by 150% of the value of any
decrease in the S&P 500 Index.
------------------------------------------------------------------------------------------------ ---------------
Rydex Variable Trust - Ursa: seeks to provide investment
results that will inversely correlate (e.g. be the opposite)
to the performance of the S&P 500 Composite Stock Price
STRATEGIC OR Index by investing to a significant extent in futures
TACTICAL contracts and options on securities, futures contracts and PADCO Advisors II,
ALLOCATION stock indexes. The Portfolio will generally not invest in Inc.
the securities included in the S&P 500 Index. If the
Portfolio meets its objective the value of its shares will
tend to increase when the value of the S&P 500 Index is
decreasing. However, when the value of the S&P 500 Index is
increasing, the value of its shares should decrease by an
inversely proportional amount.
------------------------------------------------------------------------------------------------ ---------------
Rydex Variable Trust - OTC: seeks to provide investment
results that correspond to a benchmark for over-the-counter
securities, currently the NASDAQ 100 Index(TM), by investing
principally in the securities of companies included in that PADCO Advisors II,
Index. The Portfolio may also invest in other instruments Inc.
whose performance is expected to correspond to that of the
Index, and may engage in futures and options transactions.
If the Portfolio meets its objective the value of its shares
will tend to increase by the amount of the increase in the
NASDAQ 100 Index(TM). However, when the value of the NASDAQ
100 Index(TM)declines, the value of its shares should also
decrease by the amount of the decrease in the value of the
Index(TM).
- ------------------- ------------------------------------------------------------------------------------------------ ---------------
</TABLE>
"Standard & Poor's"R"," "S&P"R"," "S&P 500"R"," "Standard & Poor's 500," and
"500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed
for use by American Skandia Investment Services, Incorporated and Bankers Trust.
The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's
and Standard & Poor's makes no representation regarding the advisability of
investing in the Portfolio.
WHAT ARE THE FIXED INVESTMENT OPTIONS?
We offer fixed investment options of different durations during the accumulation
phase. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a
specified period of time, called the "Guarantee Period." In most states, we
offer Fixed Allocations with Guarantee Periods of 1, 2, 3, 5, 7 and 10 years. We
guarantee the fixed rate for the entire Guarantee Period. However, if you
withdraw or transfer Account Value before the end of the Guarantee Period, we
will adjust the value of your withdrawal or transfer based on a formula, called
a "Market Value Adjustment." The Market Value Adjustment can either be positive
or negative, depending on the rates that are currently being credited on Fixed
Allocations. Please refer to the section entitled "How does the Market Value
Adjustment Work?" for a description of the formula along with examples of how it
is calculated. You may allocate Account Value to more than one Fixed Allocation
at a time.
Fixed Allocations are currently not available in the state of Maryland, Nevada,
Oregon, Utah and Washington.
Fees and Charges
WHAT ARE THE CONTRACT FEES AND CHARGES?
(The Contingent Deferred Sales Charge is often referred to as a "Surrender
Charge" or "CDSC".)
Contingent Deferred Sales Charge: We may assess a Contingent Deferred Sales
Charge or CDSC if you surrender your Annuity or when you make a partial
withdrawal. The CDSC is calculated as a percentage of your Purchase Payment
being surrendered or withdrawn during the applicable Annuity Year. The amount of
the CDSC decreases over time, measured from the date the Purchase Payment is
applied. The CDSC percentages are shown below.
------------------ ------- ----- ------ ------ ------ ----- ------ ------
YEARS 1 2 3 4 5 6 7 8+
------------------ ------- ----- ------ ------ ------ ----- ------ ------
------------------ ------- ----- ------ ------ ------ ----- ------ ------
CHARGE (%) 7.5 7.0 6.0 5.0 4.0 3.0 2.0 0
------------------ ------- ----- ------ ------ ------ ----- ------ ------
Each Purchase Payment has its own CDSC period. When you make a withdrawal, we
assume that the oldest Purchase Payment is being withdrawn first so that the
lowest CDSC is deducted from the amount withdrawn. After seven (7) complete
years from the date you make a Purchase Payment, no CDSC will be assessed if you
withdraw or surrender that Purchase Payment.
Under certain circumstances you can withdraw a limited amount of Account Value
without paying a CDSC. This is referred to as a "Free Withdrawal." We may waive
the CDSC under certain medically-related circumstances or when taking a Minimum
Distribution under an Annuity issued in connection with a qualified contract.
Free Withdrawals, Medically-Related Waivers and Minimum Distributions are each
explained more fully in the section entitled "Access to Your Account Value".
Reductions to the Contingent Deferred Sales Charge
We may reduce the amount of the CDSC or the length of time it applies if we
determine that our sales expenses for a particular individual or group are lower
than expected. Some of the factors we might consider in making such a decision
are: (a) the size and type of group; (b) the amounts of Purchase Payments; (c)
present Owners making additional Purchase Payments; and/or (d) other
transactions where sales expenses are likely to be reduced. We will not
discriminate unfairly between Annuity purchasers if and when we reduce the
length or amount of the CDSC.
Exceptions to the Contingent Deferred Sales Charge
We do not apply the CDSC provision on Annuities owned 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, sub-advisor, transfer agent, custodian, auditing, legal or
administrative services provider that is providing investment management,
advisory, transfer agency, custodianship, auditing, legal and/or administrative
services to an underlying mutual fund or any affiliate of such firm; (e) a
director, officer, employee or registered representative of a broker-dealer or
insurance agency that has a then current selling agreement with us and/or with
American Skandia Marketing, Incorporated; (f) a director, officer, employee or
authorized representative of any firm providing us or our affiliates with
regular legal, actuarial, auditing, underwriting, claims, administrative,
computer support, marketing, office or other services; (g) the then current
spouse of any such person noted in (b) through (f), above; (h) the parents of
any such person noted in (b) through (g), above; (i) such person's child(ren) or
other legal dependent under the age of 21; and (j) the siblings of any such
persons noted in (b) through (h) above. We will not provide any Additional
Amounts for any such contracts (see "Additional Amounts in the Fixed
Allocations").
Annual Maintenance Fee: During the accumulation period we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $30.00 or 2% of your Account
Value invested in the variable investment options, whichever is less. This fee
will be deducted annually on the anniversary of the Issue Date of your Annuity
or, if you surrender your Annuity during the Annuity Year, the fee is deducted
at the time of surrender. We may increase the Annual Maintenance Fee. However,
any increase will only apply to Annuities issued after the date of the increase.
We may reduce or eliminate the amount of the Annual Maintenance Fee when
Annuities are sold to individuals or a group of individuals in a manner that
reduces our maintenance expenses. We would consider such factors as: (a) the
size and type of group; (b) the number of Annuities purchased by an Owner; (c)
the amount of Purchase Payments; and/or (d) other transactions where maintenance
expenses are likely to be reduced. We will not discriminate unfairly between
Annuity purchasers if and when we eliminate or reduce the Annual Maintenance
Fee.
Optional Death Benefits: If you elect to purchase one of the Optional Death
Benefits, we will deduct a charge from your Account Value on the anniversary of
your Annuity's Issue Date or, under certain circumstances on a date other than
the anniversary date. Please refer to the section entitled "Death Benefit" for a
description of the charge for each Optional Death Benefit.
Transfer Fee: You may make twelve (12) free transfers between investment options
each Annuity Year. We will charge $10.00 for each transfer after the twelfth in
each Annuity Year. We do not consider transfers made as part of a dollar cost
averaging program when we count the twelve free transfers. Transfers made as
part of a rebalancing, market timing or third party investment advisory service
will be subject to the twelve-transfer limit. However, all transfers made on the
same day will be treated as one (1) transfer. Renewals or transfers of Account
Value from a Fixed Allocation at the end of its Guarantee Period are not subject
to the Transfer Fee and are not counted toward the twelve free transfers.
Tax Charges: Several states and some municipalities charge premium taxes or
similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and
is subject to change. The tax charge currently ranges up to 3 1/2%. We generally
will deduct the amount of tax payable at the time the tax is imposed, but may
also decide to deduct tax charges from each Purchase Payment at the time of a
withdrawal or surrender of your Annuity or at the time you elect to begin
receiving annuity payments. We may assess a charge against the Sub-accounts and
the Fixed Allocations equal to any taxes which may be imposed upon the separate
accounts.
WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?
Insurance Charge: We deduct an Insurance Charge daily against the average daily
assets allocated to the Sub-accounts. The charge is equal to 1.40% on an annual
basis. This charge is for insurance benefits, including the Annuity's basic
death benefit that provides guaranteed benefits to your beneficiary even if the
market declines and the risk that persons we guarantee annuity payments to will
live longer than our assumptions. The charge also covers administrative costs
associated with providing the Annuity benefits, including preparation of the
contract, confirmation statements, annual account statements and annual reports,
legal and accounting fees as well as various related expenses. Finally, the
charge covers the risk that our assumptions about the administrative and
non-mortality expenses under this Annuity are incorrect. The Insurance Charge is
not deducted against assets allocated to a fixed investment option. We may
increase the portion of the Insurance Charge for administrative costs. However,
any increase will only apply to Annuities issued after the date of the increase.
We may reduce the portion of the Insurance Charge for administrative costs when
Annuities are sold to individuals or a group of individuals in a manner that
reduces our 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. We will not discriminate
unfairly between Annuity purchasers if and when we reduce the portion of the
Insurance Charge attributed to the charge covering administrative costs.
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
We take into consideration mortality, expense, administration, profit and other
factors in determining the interest rates we credit to Fixed Allocations. No
specific fee or expenses are deducted when determining the rate we credit. Any
CDSC or Tax Charge applies to amounts that are taken from the variable
investment options or the Fixed Allocations. A Market Value Adjustment may also
apply to transfers, certain withdrawals or surrender from a Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYOUT?
In certain states a tax is due if and when you exercise your right to receive
periodic annuity payments. We do not deduct any specific charges during the
payout period. However, the amount payable will depend on the applicable
jurisdiction and on the annuity payment option you select. If you select an
option that guarantees payment for life, then the payment amount also will
depend on your age and, where permitted by law, your gender. In all cases, the
amount of each payment will depend on the Account Value of your Annuity when you
elect to begin annuity payments.
Purchasing Your Annuity
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?
Minimum Initial Purchase Payment: You must make a minimum initial Purchase
Payment of $1,000. However, if you decide to make payments under a systematic
investment or "bank drafting" program, we will accept a lower initial Purchase
Payment provided that, within the first Annuity Year, you make at least $1,000
in total Purchase Payments.
Age Restrictions: There is no age restriction to purchase the Annuity. However,
the basic Death Benefit provides greater protection for persons under age 90.
Owner, Annuitant and Beneficiary Designations: On your Application, we will ask
you to name the Owner(s), Annuitant and one or more Beneficiaries for your
Annuity.
|X| Owner: The Owner(s) holds all rights under the Annuity. You may name more
than one Owner in which case all ownership rights are held jointly.
However, this Annuity does not provide a right of survivorship. Refer to
the Glossary of Terms for a complete description of the term "Owner."
|X| Annuitant: The Annuitant is the person we agree to make annuity payments to
and upon whose life we continue to make such payments. You must name an
Annuitant who is a natural person. We do not accept a designation of joint
Annuitants. Where allowed by law, you may name one or more Contingent
Annuitants. A Contingent Annuitant will become the Annuitant if the
Annuitant dies before the Annuity Date.
|X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive
the death benefit. If no beneficiary is named the death benefit will be
paid to you or your estate.
You should seek competent tax advice on the income, estate and gift tax
implications of your designations.
Managing Your Annuity
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?
You may change the Owner, Annuitant and Beneficiary designations by sending us 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:
|X| 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;
|X| a new Annuitant subsequent to the Annuity Date if the annuity option
selected includes a life contingency;
|X| a new Annuitant prior to the Annuity Date if the Annuity is owned by an
entity; and
|X| a change in Beneficiary if the Owner had previously made the designation
irrevocable.
Spousal Owners/Spousal Beneficiaries
If an Annuity is owned jointly by spouses, the death benefit will be payable
upon the death of the first spouse. However, if the sole primary Beneficiary is
designated as one of the following:
[X] "surviving spouse";
|X| each spouse named individually upon the death of the other; or
|X| a designation which we, in our sole discretion, determine to be of similar
intent; then upon the death of either Owner, the surviving spouse may elect
to be treated as the Owner and continue the Annuity, subject to its
existing terms and conditions, instead of taking the Death Benefit.
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?
(The right to return the Annuity is referred to as the "free-look" right or
"right to cancel.")
If after purchasing your Annuity you change your mind and decide that you do not
want it, you may return it to us within a certain period of time known as a
free-look period. Depending on the state in which you purchased your Annuity,
the free-look period may be ten (10) days, twenty-one (21) days or longer,
measured from the time that you received your Annuity. If you free-look your
Annuity, we will refund your current Account Value plus any tax charge deducted.
This amount may be higher or lower than your original Purchase Payment. Certain
states require that we return your current Account Value or the amount of your
initial Purchase Payment, whichever is greater. The same rule applies to an
Annuity that is purchased as an IRA. In those states where we are required to
return the greater of your Purchase Payment or Account Value, we will allocate
your Account Value to the AST Money Market Sub-account during the free-look
period and for a reasonable additional amount of time to allow for delivery of
your Annuity. If you free-look your Annuity, we will not return any additional
amounts we applied to your Annuity based on your Purchase Payments.
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?
The minimum amount that we accept as an additional Purchase Payment is $100
unless you participate in American Skandia's Systematic Investment Plan or a
periodic purchase payment program. An additional Purchase Payment will be
returned if we have not received written allocation instructions.
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?
You can make additional Purchase Payments to your Annuity by authorizing us to
deduct money directly from your bank account and applying it to your Annuity.
This type of program is often called "bank drafting". We call our bank drafting
program "American Skandia's Systematic Investment Plan." Purchase Payments made
through bank drafting may only be allocated to the variable investment options.
Bank drafting allows you to invest in an Annuity with a lower initial Purchase
Payment, as long as you authorize payments that will equal at least $1,000
during the first 12 months of your Annuity. We may suspend or cancel bank
drafting privileges if sufficient funds are not available from the applicable
financial institution on any date that a transaction is scheduled to occur.
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?
These types of programs are only available with certain types of plans. If your
employer sponsors such a program, we may agree to accept periodic Purchase
Payments through a salary reduction program as long as the allocations are made
only to variable investment options and the periodic Purchase Payments received
in the first year total at least $1,000.
Managing Your Account Value
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?
(See "Valuing Your Investment" for a description of our procedure for pricing
initial and subsequent Purchase Payments.)
Initial Purchase Payment: Once we accept your application, we invest your net
Purchase Payment in the Annuity. The net Purchase Payment is your initial
Purchase Payment minus any tax charges that may apply. On your application we
ask you to provide us with instructions for allocating your Account Value. You
can allocate Account Value to one or more variable investment options or Fixed
Allocations. In those states where we are required to return your Purchase
Payment if you elect to "free-look" your Annuity, we initially allocate all
amounts that you choose to allocate to the variable investment options to the
AST Money Market Sub-account. At the end of the "free-look" period we will
reallocate your Account Value according to your most recent allocation
instructions. Where permitted by law, we will allocate your Purchase Payments
according to your initial instructions, without temporarily allocating to the
AST Money Market Sub-account. To do this, we will ask that you execute our form
called a "return waiver" that authorizes us to allocate your Purchase Payment to
your chosen Sub-accounts immediately. If you submit the "return waiver" and then
decide to return your Annuity during the free-look period, you will receive your
current Account Value which may be more or less than your initial Purchase
Payment (see "May I Return the Annuity if I Change my Mind?").
Subsequent Purchase Payments: We will allocate any additional Purchase Payments
you make according to your most recent allocation instructions. If any
rebalancing, asset allocation or market timing programs are in effect, the
allocation must conform with such a program. We assume that your current
allocation instructions are valid for subsequent Purchase Payments until you
make a change to those allocations or request new allocations when you submit a
new Purchase Payment.
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?
During the accumulation period you may transfer Account Value between investment
options. Transfers are not subject to taxation. We currently limit the number of
Sub-accounts you can invest in at any one time to ten (10). However, you can
invest in an unlimited number of Fixed Allocations. We may require a minimum of
$500 in each Sub-account you allocate Account Value to at the time of any
allocation or transfer. If you request a transfer and, as a result of the
transfer, there would be less than $500 in the Sub-account, we may transfer the
remaining Account Value in the Sub-account pro rata to the other investment
options to which you transferred.
We will charge $10.00 for each transfer after the twelfth (12th) in each Annuity
Year, including transfers made as part of any rebalancing, market timing, asset
allocation or similar program which you have authorized. Transfers made as part
of a dollar cost averaging program do not count toward the twelve free transfer
limit. Renewals or transfers of Account Value from a Fixed Allocation at the end
of its Guarantee Period are not subject to the transfer charge.
We reserve the right to limit the number of transfers in any Annuity Year for
all existing or new Owners. We also reserve the right to limit the number of
transfers in any Annuity Year or to refuse any transfer request for an Owner or
certain Owners if: (a) we believe that excessive trading or a specific transfer
request or group of transfer requests may have a detrimental effect on Unit
Values or the share prices of the Portfolios; or (b) we are informed by one or
more of the Portfolios that the purchase or redemption of shares must be
restricted because of excessive trading or a specific transfer or group of
transfers is deemed to have a detrimental effect on the share prices of affected
Portfolios. Without limiting the above, the most likely scenario where either of
the above could occur would be if the aggregate amount of a trade or trades
represented a relatively large proportion of the total assets of a particular
Portfolio. Under such a circumstance, we will process transfers according to our
rules then in effect and provide notice if the transfer request was denied. If a
transfer request is denied, a new transfer request may be required.
DO YOU OFFER DOLLAR COST AVERAGING?
Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost
Averaging allows you to systematically transfer an amount each month from one
investment option to one or more other investment options. You can choose to
transfer earnings only, principal plus earnings or a flat dollar amount. Dollar
Cost Averaging allows you to invest regularly each month, regardless of the
current unit value (or price) of the Sub-account(s) you invest in. This enables
you to purchase more units when the market price is low and fewer units when the
market price is high. This may result in a lower average cost of units over
time. However, there is no guarantee that Dollar Cost Averaging will result in a
profit or protect against a loss in a declining market.
You must have a minimum Account Value of at least $10,000 to enroll in a Dollar
Cost Averaging program.
You can Dollar Cost Average from variable investment options or Fixed
Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number
of rules that include, but are not limited to the following:
|X| You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years.
|X| You may only Dollar Cost Average earnings or principal plus earnings. If
transferring principal plus earnings, the program must be designed to last
the entire Guarantee Period for the Fixed Allocation.
|X| Dollar Cost Averaging transfers from Fixed Allocations are not subject to a
Market Value Adjustment.
We may credit additional amounts to your Account Value if you allocate Purchase
Payments to Fixed Allocations as part of a dollar cost averaging program. Any
such offer is at our sole discretion and may be cancelled at any point. Specific
rules may also apply including a change to the MVA formula. For more information
see "Additional Amounts in the Fixed Allocation."
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?
Yes. During the accumulation period, we offer automatic rebalancing among the
variable investment options you choose. You can choose to have your Account
Value rebalanced quarterly, semi-annually, or annually. On the appropriate date,
your variable investment options are rebalanced to the allocation percentages
you request. For example, over time the performance of the variable investment
options will differ, causing your percentage allocations to shift. With
automatic rebalancing, we transfer the appropriate amount from the
"overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your
allocations to the percentages you request. If you request a transfer from or
into any variable investment option participating in the automatic rebalancing
program, we will assume that you wish to change your rebalancing percentages as
well, and will automatically adjust the rebalancing percentages in accordance
with the transfer unless we receive alternate instructions from you.
You must have a minimum Account Value of at least $10,000 to enroll in automatic
rebalancing. All rebalancing transfers made on the same day as part of an
automatic rebalancing program are considered as one transfer when counting the
number of
transfers each year toward the maximum of 12 free transfers.
DO YOU OFFER A PROGRAM TO BALANCE FIXED AND VARIABLE INVESTMENTS?
Some investors wish to invest in the variable investment options but also wish
to protect a portion of their investment from market fluctuations. We offer a
balanced investment program where a portion of your Purchase Payment is
allocated to a Fixed Allocation for a Guarantee Period that you select and the
remaining Account Value is allocated to the variable investment options that you
select. The amount that we allocate to the Fixed Allocation is the amount (not
including any additional amounts we applied to your Annuity based on your
Purchase Payments) that will grow to a specific "principal amount" such as your
initial Purchase Payment. We determine the amount based on the rates then in
effect for the Guarantee Period you choose. If no amounts are transferred or
withdrawn from the Fixed Allocation, at the end of the Guarantee Period, it will
have grown to equal the "principal amount". The remaining Account Value that was
not allocated to the Fixed Allocation can be allocated to any of the
Sub-accounts that you choose. Account Value allocated to the variable investment
options is subject to market fluctuations and may increase or decrease in value.
Example
Assume you have $100,000 to invest. You choose to allocate a portion of your
Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate
for the 10-year Guarantee Period is 4.24%*. Based on the chosen Guarantee Period
and interest rate, the factor for determining how much of your Account Value can
be allocated to the Fixed Allocation is 0.660170. That means that $66,017 will
be allocated to the Fixed Allocation and the remaining Account Value ($33,983)
will be allocated to the variable investment options. Assuming that you do not
make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the
end of the Guarantee Period. Of course we cannot predict the value of the
remaining Account Value that was allocated to the variable investment options.
* The rate in this example is hypothetical and may not reflect the current rate
for Guarantee Periods of this duration. The hypothetical values in this example
do not include the amount of any Target Value Credits that may apply.
We may credit additional amounts to Fixed Allocations if you allocate Purchase
Payments in accordance with the balanced investment program we offer. Any such
offer is at our sole discretion and may be cancelled at any point. Specific
rules may also apply, including a change to the MVA formula. For more
information see "Additional Amounts in the Fixed Allocations."
MAY I AUTHORIZE MY FINANCIAL REPRESENTATIVE TO MANAGE MY ACCOUNT?
You may authorize your financial representative to decide on the allocation of
your Account Value and to make financial transactions between investment
options, subject to our rules. However, we can suspend or cancel these
privileges at any time. We will notify you if we do. We may restrict the
available investment options if you authorize a financial representative to make
transfers for you. We do this so that no financial representative is in a
position to control transfers of large amounts of money for multiple clients
into or out of any of the underlying portfolios that have expressed concern
about movement of a large proportion of a portfolio's assets.
We may also establish different "cut-off times" by which we must receive all
financial transactions for certain underlying portfolios. Currently, only the
three portfolios of the Rydex Variable Trust are subject to this restriction.
Financial transactions involving a Rydex Sub-account must be received by us no
later than 3:00 p.m. Eastern time to be processed on the current Valuation Day.
If you request a transaction involving the purchase or redemption of Units in
one of the Rydex Sub-accounts after 3:00 p.m. Eastern time, we will deem your
request as received by us on the next Valuation Day.
We or an affiliate of ours may provide administrative support to financial
representatives who make transfers on your behalf. These financial
representatives may be firms or persons who also are appointed by us as
authorized sellers of the Annuity. However, we do not offer you advice about how
to allocate your Account Value under any circumstance. Any financial firm or
representative you engage to provide advice and/or make transfers for you is not
acting on our behalf. We are not responsible for any recommendations such
financial representatives make, any market timing or asset allocation programs
they choose to follow or any specific transfers they make on your behalf.
HOW DO THE FIXED INVESTMENT OPTIONS WORK?
(Fixed Allocations may not be available in all states and may not be available
in certain durations.)
Fixed Allocations currently are offered with Guarantee Periods of 1, 2, 3, 5, 7
and 10 years. We credit the fixed interest rate to the Fixed Allocation
throughout a set period of time called a "Guarantee Period." The interest rate
credited to a Fixed Allocation is the rate in effect when the Guarantee Period
begins and does not change during the Guarantee Period. The rates are an
effective annual rate of interest. We determine the interest rates for the
various Guarantee Periods. At the time that we confirm your Fixed Allocation, we
will advise you of the interest rate in effect and the date your Fixed
Allocation matures. We may change the rates we credit new Fixed Allocations at
any time. To inquire as to the current rates for Fixed Allocations, please call
1-800-766-4530.
A Guarantee Period for a Fixed Allocation begins:
|X| when all or part of a net Purchase Payment is allocated to that particular
Guarantee Period;
|X| upon transfer of any of your Account Value to a Fixed Allocation for that
particular Guarantee Period; or
|X| when a Guarantee Period attributable to a Fixed Allocation "renews" after
its Maturity Date.
To the extent permitted by law, we may increase interest rates offered to a
class of Owners who choose to participate in various services we make available.
This may include, but is not limited to, Owners who elect to use dollar cost
averaging from Fixed Allocations (see "Do You Offer Dollar Cost Averaging?") or
the balanced investment program (see "Do You Offer a Program to Balance Fixed
and Variable Investments?"). Any such program is at our sole discretion.
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?
We do not have a specific formula for determining the fixed interest rates for
Fixed Allocations. Generally the interest rates we offer for Fixed Allocations
will reflect the investment returns available on the types of investments we
make to support our fixed rate guarantees. These investment types may include
cash, debt securities guaranteed by the United States government and its
agencies and instrumentalities, money market instruments, corporate debt
obligations of different durations, private placements, asset-backed obligations
and municipal bonds. In determining rates we also consider factors such as the
length of the Guarantee Period for the Fixed Allocation, regulatory and tax
requirements, liquidity of the markets for the type of investments we make,
commissions, administrative and investment expenses, our insurance risks in
relation to the Fixed Allocations, general economic trends and competition.
We will credit interest on a new Fixed Allocation in an existing Annuity 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.
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?
If you transfer or withdraw Account Value from a Fixed Allocation before the end
of its Guarantee Period, we will adjust the value of your investment based on a
formula, called a "Market Value Adjustment" or "MVA". The Market Value
Adjustment formula compares the interest rates credited for Fixed Allocations at
the time you invested, to interest rates being credited when you make a transfer
or withdrawal. The amount of any Market Value Adjustment can be either positive
or negative, depending on the rates that are currently being credited on Fixed
Allocations.
MVA Formula
The MVA formula is applied separately to each Fixed Allocation. The formula is
as follows:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the fixed interest rate we guaranteed to credit to the
Fixed Allocation as of its starting date;
J is the fixed interest rate for your class of annuities at
the time of the withdrawal for a new Fixed Allocation with a
Guarantee Period equal to the remaining number of years in
your original Guarantee Period;
N is the number of months remaining in the original Guarantee
Period.
If you surrender your Annuity under the "free-look" provision, the MVA formula
is [(1 + I)/(1 + J)]N/12.
If the transfer or withdrawal does not occur on the yearly or monthly
anniversary of the beginning of the Fixed Allocation, the numbers used in 'J'
and 'N' will be rounded to the next highest integer.
MVA Examples
The following hypothetical examples show the effect of the MVA in determining
Account Value. Assume the following:
|X| You allocate $50,000 into a Fixed Allocation with a Guarantee Period of
5 years.
|X| The interest rate for your Fixed Allocation is 5.0% (I = 5.0%).
|X| You make no withdrawals or transfers until you decided to withdraw the
entire Fixed Allocation after exactly three (3) years, therefore 24
months remain before the Maturity Date (N = 24).
Example of Positive MVA
Assume that at the time you request the withdrawal, the fixed interest rate for
a new Fixed Allocation with a Guarantee Period of 24 months is 3.5% (J = 3.5%).
Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(I+J+0.0010)]N/12 = [1.05/1.036]2 = 1.027210
Interim Value = $57881.25
Account Value after MVA = Interim Value X MVA Factor = $59,456.20.
Example of Negative MVA
Guarantee Period of 24 months is 6.0% (J = 6.0%). Based on these assumptions,
the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]N/12 = [1.05/1.061)]2 = 0.979372
Interim Value = $57881.25
Account Value after MVA = Interim Value X MVA Factor = $56,687.28.
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee
Period. On the Maturity Date, you may choose to renew the Fixed Allocation for a
new Guarantee Period of the same or different length or you may transfer all or
part of that Fixed Allocation's Account Value to another Fixed Allocation or to
one or more Sub-accounts. If you do not specify how you want a Fixed Allocation
to be allocated on its Maturity Date, it will be renewed for a Fixed Allocation
of the same duration if then available. We will notify you 60 days before the
end of the Guarantee Period about the fixed interest rates that we are currently
crediting to all Fixed Allocations that are being offered. The rates being
credited to Fixed Allocations may change before the Maturity Date. We will not
charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or
transfer the Account Value to one or more variable investment options.
ADDITIONAL AMOUNTS IN THE FIXED ALLOCATIONS
If you allocate Account Value to the Fixed Allocations and participate in
certain programs we offer to help you to manage your Annuity's Account Value,
under certain circumstances we may apply Additional Amounts to your Account
Value allocated to the Fixed Allocation. Additional Amounts may be offered at
any time at our sole discretion. When offered, Additional Amounts are provided
from our general account.
Any program to provide Additional Amounts to Fixed Allocations are subject to
the following rules:
|X| Additional Amounts are only offered if you participate in a balanced
investment program (see "Do you offer a program to balance fixed and
variable investment options?") or dollar cost averaging (see " Do you
offer Dollar Cost Averaging?").
|X| Additional Amounts are only available on initial or additional Purchase
Payments. Account Value transferred to a Fixed Allocation for use in
the applicable programs will not receive the Additional Amounts.
Additional Amounts are not available on an Annuity that is issued
following an exchange of another annuity issued by us.
|X| You may not withdraw any Additional Amounts under the Free Withdrawal
provision without assessment of the contingent deferred sales charge
(see "Can I make withdrawals from my Annuity without a CDSC?).
|X| If Additional Amounts are applied to a Fixed Allocation, the MVA
formula is revised as follows:
[(1+I) / (1+J+0.0020)]N/12
Please refer to the section of the Prospectus entitled "How does the Market
Value Adjustment Work?" for a discussion of the MVA formula.
|X| We do not consider Additional Amounts as "investment in the contract"
for income tax purposes.
|X| We may require that you allocate Account Value to a Fixed Allocation
with a Guarantee Period of certain duration (i.e. 10 years).
|X| Specific rules apply in relation to the duration of the Guarantee
Period you must choose to be eligible to receive any Additional
Amounts, and the date on which we allocate any Additional Amounts to
the Fixed Allocation and begin crediting interest on the Additional
Amount.
American Skandia's Performance Advantage
- --------------------------------------------------------------------------------
This benefit is being offered as of May 15, 1999 in those jurisdictions where we
have received regulatory approvals. Certain terms and conditions may differ
between jurisdictions once approved.
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Do you provide any guarantees on my investment?
The Annuity provides variable investment options and fixed investment options.
Only the fixed investment options provide a guaranteed return on your
investment, subject to certain terms and conditions. However, your Annuity
includes a feature at no additional cost that provides certain benefits if your
Account Value has not reached or exceeded a "target value" on its 10th
anniversary. If, on the 10th anniversary of your Annuity's Issue Date, your
Account Value has not reached the target value (as defined below) you can choose
either of the following benefits:
|X| You may continue your Annuity without electing to receive Annuity
payments and receive an annual credit to your Account Value payable
until you begin receiving Annuity payments. The credit is equal to
0.25% of the average of your Annuity's Account Value for the preceding
four complete calendar quarters. This credit is applied to your
investment options pro-rata based on the allocation of your then
current Account Value.
|X| You may begin receiving Annuity payments within one year and accept a
one-time credit to your Annuity equal to 10% of the net of the Account
Value on the 10th anniversary of its Issue Date minus the sum of all
Purchase Payments allocated in the prior five years. The annuity option
you select must initially guarantee payments for not less than seven
years.
Following the 10th anniversary of your Annuity's Issue Date, we will inform you
if your Account Value did not meet or exceed the Target Value. We will assume
that you have elected to receive the annual credit to your Account Value unless,
not less than 30 days prior to the next anniversary of the Annuity, we receive
at our home office your election to begin receiving Annuity payments.
Certain provisions of this benefit and of the Target Value Credits described
below may differ if you purchase your Annuity as part of an exchange,
replacement or transfer, in whole or in part, from any other Annuity we issue.
What is the "Target Value" and how is it calculated?
The Target Value is a tool used to determine whether you are eligible to elect
either of the benefits described above. The Target Value does not impact the
Account Value available if you surrender your Annuity or make a partial
withdrawal and does not impact the Death Benefit available to your
Beneficiary(ies). The Target Value assumes a rate of return over ten (10)
Annuity Years that will allow your initial investment to double in value,
adjusted for any withdrawals and/or additional Purchase Payments you make during
the 10 year period. We calculate the "Target Value" as follows:
1. Accumulate the initial Purchase Payment at an annual interest rate of 7.2%
until the 10th anniversary of the Annuity's Issue Date; plus
2. Accumulate any additional Purchase Payments at an annual interest rate of
7.2% from the date applied until the 10th anniversary of the Annuity's
Issue Date; minus
3. Each "proportional reduction" resulting from any withdrawal, accumulating
at an annual interest rate of 7.2% from the date the withdrawal is
processed until the 10th anniversary of the Annuity's Issue Date. We
determine each "proportional reduction" by determining the percentage of
your Account Value then withdrawn and reducing the Target Value by that
same percentage. We include any withdrawals under your Annuity in this
calculation, as well as the charge we deduct for any optional benefits you
elect under the Annuity, but not the charge we deduct for the Annual
Maintenance Fee or the Transfer Fee.
Examples
1. Assume you make an initial Purchase Payment of $10,000 and make no further
Purchase Payments. The Target Value on the 10th anniversary of your
Annuity's Issue Date would be $20,042, assuming no withdrawals are made.
This is equal to $10,000 accumulating at an annual rate of 7.2% for the
10-year period.
2. Assume you make an initial Purchase Payment of $10,000 and make no further
Purchase Payments. Assume at the end of Year 6, your Account Value has
increased to $15,000 and you make a withdrawal of 10% or $1,500. The Target
Value on the 10th anniversary would be $18,722. This is equal to $10,000
accumulating at an annual rate of 7.2% for the 10-year period, minus the
proportional reduction accumulating at an annual interest rate of 7.2%.
Can I restart the 10-year Target Value calculation?
Yes, you can elect to lock in the growth in your Annuity by "restarting" the
10-year period on any anniversary of the Issue Date. If you elect to restart the
calculation period, we will treat your Account Value on the restart date as if
it was your Purchase Payment when determining if your Annuity's Account Value
meets or exceeds the Target Value on the appropriate tenth (10th) anniversary.
You may elect to restart the calculation more than once, in which case, the
10-year calculation period will begin on the date of the last restart date. We
must receive your election to restart the calculation at our home office not
later than 30 days after each anniversary of the Issue Date.
What are Target Value Credits?
Target Value Credits are additional amounts that we apply to your Account Value
to increase the likelihood that your Account Value will meet or exceed the
Target Value. Target Value Credits are payable on all Purchase Payments applied
before the first anniversary of the Issue Date of your Annuity.
The amount of the Target Value Credit is equal to 1.0% of each qualifying
Purchase Payment. Target Value Credits are only payable on qualifying Purchase
Payments if the Owner(s) of the Annuity is(are) less than age 81 on its Issue
Date. If the Annuity is owned by an entity, the age restriction applies to the
age of the Annuitant on the Issue Date. The Target Value Credit is payable from
our general account and is allocated to the investment options in the same ratio
that the qualifying Purchase Payment is allocated.
Target Value Credits will not be available if you purchase your Annuity as part
of an exchange, replacement or transfer, in whole or in part, of an Annuity we
issued that has the same or a similar benefit.
Recovery of Target Value Credits
We can recover the amount of any Target Value Credit under the following
circumstances:
1. If you surrender your Annuity before the 10th anniversary of the Issue
Date of the Annuity.
2. If you elect to begin receiving Annuity payments before the first
anniversary of the Issue Date.
3. If a person on whose life we pay the Death Benefit dies, or if a
"contingency event" occurs which triggers a medically-related surrender
(a) within 12 months after the date a Target Value Credit was allocated to
your Account Value; or
(b) within 10 years after the date a Target Value Credit was allocated to
your Account Value if any owner was over age 70 on the Issue Date, or, if
the Annuity was then owned by an entity, the Annuitant was over age 70 on
the Issue Date.
Access To Account Value
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?
During the accumulation phase you can access your Account Value through Partial
Withdrawals, Systematic Withdrawals, and where required for tax purposes,
Minimum Distributions. You can also surrender your Annuity at any time. We may
deduct a portion of the Account Value being withdrawn or surrendered as a CDSC
and we may also apply a Market Value Adjustment to any Fixed Allocations.
Certain amounts may be available to you each Annuity Year that are not subject
to a CDSC. These are called "Free Withdrawals." In addition, under certain
circumstances, we may waive the CDSC for surrenders made for qualified medical
reasons or for withdrawals made to satisfy Minimum Distribution requirements.
Unless you notify us differently, withdrawals are taken pro-rata based on the
Account Value in the investment options at the time we receive your withdrawal
request. Each of these types of distributions is described more fully below.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?
(For more information, see "Tax Considerations")
During the Accumulation Period A distribution during the accumulation period is
deemed to come first from any "gain" in your Annuity and second as a return of
your "tax basis", if any. Distributions from your Annuity are generally subject
to ordinary income taxation on the amount of any investment gain. If you take a
distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10%
penalty in addition to ordinary income taxes on any gain. You may wish to
consult a professional tax advisor for advice before requesting a distribution.
During the Annuitization Period
During the annuitization period, a portion of each annuity payment is taxed as
ordinary income at the tax rate you are subject to at the time you receive the
payment. The Code and regulations have "exclusionary rules" that we use to
determine what portion of each annuity payment should be treated as a return of
any tax basis you have in the Annuity. Once the tax basis in the Annuity has
been distributed, the remaining annuity payments are taxable as ordinary income.
The tax basis in the Annuity may be based on the tax-basis from a prior contract
in the case of a 1035 exchange or other qualifying transfer.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation phase. We call this a
"Partial Withdrawal." The amount that you may withdraw will depend on the
Annuity's Surrender Value. After any Partial Withdrawal, your Annuity must have
a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal
request as a request to fully surrender your Annuity. The minimum Partial
Withdrawal you may request is $100.
IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?
A CDSC may be assessed against a Partial Withdrawal. Whether a CDSC applies and
the amount to be charged depends on whether the Partial Withdrawal exceeds any
Free Withdrawal amount and, if so, the length of time that the Purchase Payment
being withdrawn has been invested in the Annuity.
If you request a Partial Withdrawal:
1. we determine if the amount you requested is available as a Free Withdrawal
(in which case it would not be subject to a CDSC);
Then if the amount requested exceeds the available Free Withdrawal amount:
2. we withdraw the amount from Purchase Payments that have been invested for
longer than the CDSC period (with your Annuity, seven (7) years), if any;
Then if the amount requested exceeds that amount:
3. we withdraw the remaining amount from the Purchase Payments that are still
subject to a CDSC. We withdraw the amount from the "oldest" of your Purchase
Payments, which will result in the lowest CDSC being applied to the amount
withdrawn.
Then if the amount requested exceeds Purchase Payments still subject to a CDSC:
4. we withdraw the remaining amount from other surrender value due to Target
Value Credits and any Additional Amounts in the Fixed Allocations.
CAN I MAKE WITHDRAWALS FROM MY ANNUITY WITHOUT A CDSC?
Yes. During the accumulation phase you may withdraw a limited amount of Account
Value each Annuity Year from which we do not deduct a CDSC. This amount is
called the "Free Withdrawal" amount. Free Withdrawals are available to meet
liquidity needs. The amount of any Free Withdrawal is not available at the time
an Annuity is surrendered. NOTE: Withdrawals of any type made prior to age 59
1/2 may be subject to a 10% tax penalty.
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?
The Free Withdrawal provision that applies to your Annuity depends on its Issue
Date and your residence state. We began offering a new Free Withdrawal provision
in most states as of May 1, 1996. The Free Withdrawal provision also varies
depending on whether your Annuity is used as a funding vehicle for a qualified
plan under Section 401 of the Code. As of the date of this Prospectus, we are no
longer offering the Annuity for use with Section 401 plans.
Annuities Issued on or after May 1, 1996
The maximum Free Withdrawal amount during any Annuity Year is the greater of:
1. the "Growth" in the Annuity; or
2. 10% of Purchase Payments that, as of the date of the withdrawal, have been
invested for less than the CDSC period (with your Annuity, seven (7)
years), minus any prior Free Withdrawals, or amounts deemed to come from
Free Withdrawals, during the then current Annuity Year.
3. The "emergency amount" available each Annuity Year minus any prior Free
Withdrawals or amounts deemed to come from Free Withdrawals. The "emergency
amount" on the Issue Date is 10% of the initial Purchase Payment. At the
beginning of each subsequent Annuity Year, the "emergency amount" is
increased by 10% of all Purchase Payments that have been invested for less
than the CDSC period, subject to a maximum of 50%. During any Annuity Year,
the "emergency amount" is increased by 10% of all Purchase Payments applied
during the Annuity Year.
Annuities Issued before May 1, 1996
The maximum Free Withdrawal amount during any Annuity Year is the greater of:
1. the "Growth" in the Annuity; or
2. 10% of Purchase Payments that, as of the date of the withdrawal, have been
invested for less than the CDSC period (with your Annuity, seven (7)
years), minus any prior Free Withdrawals, or amounts deemed to come from
Free Withdrawals, during the then current Annuity Year. 3. The "emergency
amount" available each Annuity Year on or after Annuity Year 1 is 35% of
all Purchase Payments that have been invested for less than the CDSC period
(with your Annuity, seven (7) years) minus the sum of all prior withdrawals
of any type.
Annuities used as funding vehicles for Section 401 Plans
The maximum Free Withdrawal amount during any Annuity Year is the same as above
based on the Issue Date of the Annuity. However, Item (2) of each provision is
as follows:
1. 20% of Purchase Payments that, as of the date of the withdrawal, have been
invested for less than the CDSC period (with your Annuity, seven (7) years),
minus any prior Free Withdrawals, or amounts deemed to come from Free
Withdrawals, during the then current Annuity Year.
Under each provision above, "Growth" equals the current Account Value less all
Purchase Payments that have been invested for less than the CDSC period and have
not been previously withdrawn. "Growth" does not include any additional amounts
we applied to your Annuity based on your Purchase Payments (see "Additional
Amounts in the Fixed Allocations" and "What are Target Value Credits").
NOTE: Free withdrawals do not reduce the amount of any CDSC that would apply
upon a partial withdrawal or subsequent surrender. The minimum Free Withdrawal
you may request is $100.
Examples
The following hypothetical examples assume that your Annuity was issued on or
after May 1, 1996.
1. Assume you make an initial Purchase Payment of $10,000 and make no additional
Purchase Payments. Assume that in Annuity Year 3, due to positive investment
performance, your Account Value is $12,500. If you have made no previous Free
Withdrawals, the maximum Free Withdrawal amount in Annuity Year 3 would be the
greater of Growth (Account Value minus Purchase Payments = $2,500), 10% of
Purchase Payments ($1,000) or 30% of Purchase Payments ($3,000). Your maximum
Free Withdrawal amount in Annuity Year 3 would be $3,000.
2. Assume you make an initial Purchase Payment of $10,000 and make no additional
Purchase Payments. Assume that in Annuity Year 3, due to positive investment
performance, your Account Value is $12,500. Assume you choose to withdraw the
Growth, equal to $2,500 in Annuity Year 3. Assume further that in Annuity Year
5, your Account Value has increased to $11,000 due to positive investment
performance. The maximum Free Withdrawal amount in Annuity Year 5 would be the
greater of Growth (Account Value minus Purchase Payments = $1,000), 10% of
Purchase Payments ($1,000) or 50% of Purchase Payments minus the sum of any
prior Free Withdrawals ($5,000 - $2,500 = $2,500).
3. Assume you make an initial Purchase Payment of $10,000 and make no additional
Purchase Payments. Assume that in Annuity Year 3, due to positive investment
performance, your Account Value is $12,500. Assume you take the maximum Free
Withdrawal amount in Annuity Year 3 ($3,000) as described in Item 1 above.
Further assume that in Annuity Year 4, you choose to surrender your Annuity.
Assume that your Account Value in Annuity Year 4 has increased to $10,500 due to
positive investment performance. Upon surrender, we will deduct a CDSC of 5%
based on the number of years that your Purchase Payment has been invested times
the amount of your Purchase Payment that has not been previously withdrawn. The
amount of the previous Free Withdrawal was not subject to a CDSC when withdrawn.
Therefore, upon surrender, the amount of the entire Purchase Payment is subject
to the CDSC (5.0% of $10,000 = $500). You would receive $10,400 minus the Annual
Maintenance Fee and any Target Value Credits.
These examples do not reflect the effect of any Target Value Credits. These
amounts are not available as a free withdrawal.
When we determine if a CDSC applies to Partial Withdrawals and Systematic
Withdrawals, we will first determine what, if any, amounts qualify as a Free
Withdrawal. Those amounts are not subject to the CDSC. Partial Withdrawal or
Systematic Withdrawal of amounts greater than the maximum Free Withdrawal amount
will be subject to a CDSC.
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?
Yes. We call these "Systematic Withdrawals." You can receive Systematic
Withdrawals of earnings only, principal plus earnings or a flat dollar amount.
Systematic Withdrawals may be subject to a CDSC. We will determine whether a
CDSC applies and the amount in the same way as we would for a Partial
Withdrawal.
Systematic Withdrawals can be made from Account Value allocated to the variable
investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly,
quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must
be at least $20,000 before we will allow you to begin a program of Systematic
Withdrawals.
The minimum amount for each Systematic Withdrawal is $100. If any scheduled
Systematic Withdrawal is for less than $100, we may postpone the withdrawal and
add the expected amount to the amount that is to be withdrawn on the next
scheduled Systematic Withdrawal.
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL
REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain
retirement plans that receive special tax treatment under Sections 401, 403(b)
or 408 of the Code, Section 72(t) of the Code may provide an exception to the
10% penalty tax on distributions made prior to age 59 1/2 if you elect to
receive distributions as a series of "substantially equal periodic payments".
Distributions received under this provision in any Annuity Year that exceed the
maximum amount available as a free withdrawal will be subject to a CDSC. To
request a program that complies with Section 72(t), you must provide us with
certain required information in writing on a form acceptable to us. We may
require advance notice to allow us to calculate the amount of 72(t) withdrawals.
The Surrender Value of your Annuity must be at least $20,000 before we will
allow you to begin a program for withdrawals under Section 72(t). The minimum
amount for any such withdrawal is $100.
WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?
(See "Tax Considerations" for a further discussion of Minimum Distributions.)
Minimum Distributions are a type of Systematic Withdrawal we allow to meet
distribution requirements under Sections 401, 403(b) or 408 of the Code. Under
the Code, you may be required to begin receiving periodic amounts from your
Annuity. In such case, we will allow you to make Systematic Withdrawals in
amounts that satisfy the minimum distribution rules under the Code. We do not
assess a CDSC on Minimum Distributions from your Annuity if you are required by
law to take such Minimum Distributions from your Annuity at the time it is
taken. However, a CDSC may be assessed on that portion of a Systematic
Withdrawal that is taken to satisfy the minimum distribution requirements in
relation to other savings or investment plans under other qualified retirement
plans not maintained with American Skandia.
If you request, we will calculate the annual required Minimum Distribution under
your Annuity. The amount of the required Minimum Distribution for your
particular situation may depend on other annuities, savings or investments. We
will only calculate the amount of your required Minimum Distribution based on
the value of your Annuity. We require three (3) days advance written notice to
calculate and process the amount of your payments. We may charge you for
calculating required Minimum Distributions. You may elect to have Minimum
Distributions paid out monthly, quarterly, semi-annually or annually. The $100
minimum that applies to Systematic Withdrawals does not apply to Minimum
Distributions.
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?
Yes. During the accumulation phase you can surrender your Annuity at any time.
Upon surrender, you will receive the Surrender Value. Upon surrender of your
Annuity, you will no longer have any rights under the Annuity.
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?
Where permitted by law, you may request to surrender your Annuity prior to the
Annuity Date without application of any CDSC upon occurrence of a
medically-related "Contingency Event". The amount payable will be your Account
Value minus the amount of any Target Value Credits under certain circumstances.
This waiver of any applicable CDSC is subject to our rules, including but not
limited to the following:
|X| the Annuitant must be alive as of the date we pay the proceeds of such
surrender request;
|X| if the Owner is one or more natural persons, all such Owners must also be
alive at such time;
|X| we must receive satisfactory proof of the Annuitant's confinement in a
Medical Care Facility or Fatal Illness in writing on a form satisfactory to
us; and
|X| this benefit is not available if the total Purchase Payments received
exceed $500,000 for all annuities issued by us with this benefit where the
same person is named as Annuitant.
For contracts issued before May 1, 1996 a "Contingency Event" occurs if the
Annuitant is:
|X| first confined in a "Medical Care Facility" while your Annuity is in force
and remains confined for at least 90 days in a row; or
|X| first diagnosed as having a "Fatal Illness" while your Annuity is in force.
For contracts issued on or after May 1, 1996, and where allowed by law, the
Annuitant must have been named or any change of Annuitant must have been
accepted by us, prior to the "Contingency Event" described above in order to
qualify for a medically-related surrender.
The definitions of "Medical Care Facility" and "Fatal Illness," as well as
additional terms and conditions, are provided in your Annuity. Specific details
and definitions in relation to this benefit may differ in certain jurisdictions.
WHAT TYPES OF ANNUITY PAYMENT OPTIONS ARE AVAILABLE UPON ANNUITIZATION?
Annuity payments can be guaranteed for the life of the Annuitant, for the life
of the Annuitant with a certain period guaranteed, or for a certain fixed period
of time with no life contingency. We currently make available fixed payments and
adjustable payments. However, adjustable annuity payments may not be available
on your Annuity Date.
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. You may change your
choices up to 30 days before the Annuity Date. Any change to these options must
be in writing. The Annuity Date must be the first or the fifteenth day of a
calendar month. A maximum Annuity Date may be required by law.
We currently offer the following Annuity Payment Options. Additional Annuity
Payment Options may be offered in the future.
Key Life: is the person or persons upon whose life annuity payments with a life
contingency are based.
Option 1
Payments for Life: Under this option, income is payable periodically until the
death of the "key life". No additional annuity payments are made after the death
of the key life. Since no minimum number of payments is guaranteed, this option
offers the largest amount 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.
Option 2
Payments for Life with 10, 15, or 20 Years Certain: Under this option, income is
payable until the death of the key life. However, if the key life dies before
the end of the period selected (10, 15, or 20 years), the remaining payments are
paid to the Beneficiary until the end of such period.
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 or
death benefits would be payable.
Option 4
Payments for a Certain Period: Under this option, income is payable periodically
for a specified number of years. If the payee dies 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
any assumptions of life expectancy. Therefore, that portion of the Insurance
Charge assessed to cover the risk that key lives outlive our expectations
provides no benefit to an Owner selecting this option.
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?
Unless prohibited by law, we require that you elect either a life annuity or an
annuity with a certain period of at least 5 years if any CDSC would apply were
you to surrender your Annuity on the Annuity Date. Therefore, making a purchase
payment within seven years of the Annuity Date limits your annuity payment
options.
If you have not provided us with your Annuity Date or Annuity Payment Option in
writing, then:
|X| the Annuity Date will be the first day of the calendar month following the
later of the Annuitant's 85th birthday or the fifth anniversary of our
receipt of your request to purchase an Annuity; and
|X| the Annuity Payments, where allowed by law, will be fixed monthly payments
for life with 10 years certain (See Option 2).
If you have not made an election prior to death benefit proceeds becoming due,
the Beneficiary may elect to receive the death benefit under one of the annuity
payment options. However, if you made an election, the Beneficiary may not alter
such election.
HOW ARE ANNUITY PAYMENTS CALCULATED?
The first annuity payment varies according to the annuity payment option and
payment frequency selected. The first payment is determined by multiplying the
Account Value plus any additional amounts applied by us under the Performance
Advantage benefit by the factor determined from our table of annuity rates. Your
Account Value will be determined as of the close of business on the fifteenth
day preceding the Annuity Date, plus interest at not less that 3% per year from
such date to the Annuity Date. The table of annuity rates differ based on the
type of annuity chosen and 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.
Death Benefit
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
The Annuity provides a Death Benefit during its accumulation phase. If the
Annuity is owned by one or more natural persons, the Death Benefit is payable
upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and
a Death Benefit will not be paid at that time. The person upon whose death the
Death Benefit is paid is referred to below as the "decedent."
DEATH BENEFIT OPTIONS
Your Annuity provides a "basic" Death Benefit at no additional charge and also
offers two different optional Death Benefits that can be purchased for an
additional charge. Under certain circumstances, your Death Benefit may be
reduced by the amount of any Target Value Credits we applied to your Purchase
Payments. (see "Recovery of Target Value Credits")
Basic Death Benefit
The basic Death Benefit depends on the decedent's age on the date of death:
If death occurs before the decedent's age 90: The Death Benefit is the greater
of:
|X| The sum of all Purchase Payments less the sum of all withdrawals; and
|X| The sum of your Account Value in the variable investment options and your
Interim Value in the Fixed Allocations.
If death occurs when the decedent is age 90 or older: The Death Benefit is
your Account Value.
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The Optional Death Benefits are being offered as of May 15, 1999 in those
jurisdictions where we have received regulatory approval. Certain terms and
conditions may differ between jurisdictions once approved.
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Optional Death Benefits
We offer two optional Death Benefits to provide an enhanced level of protection
for your beneficiaries. Currently, these benefits are only offered and must be
elected at the time that you purchase your Annuity. We may, at a later date,
allow existing Annuity Owners to purchase either of the optional Death Benefits
subject to our rules.
If the Annuity has one Owner, the Owner must be age 80 or less at the time
either optional Death Benefit is purchased. If the Annuity has joint Owners, the
oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the
Annuitant must be age 80 or less.
Key Terms Used with the Optional Death Benefits
|X| The Death Benefit Target Date is the contract anniversary on or after the
80th birthday of the current Owner, the oldest of either joint Owner or the
Annuitant, if entity owned.
|X| The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" on or before the earlier of the Owner's date of death
and the "Death Benefit Target Date".
|X| The Anniversary Value is the Account Value as of each anniversary of the
Issue Date plus the sum of all Purchase Payments on or after such
anniversary less the sum of all "Proportional Reductions" since such
anniversary.
|X| A Proportional Reduction is a reduction to the value being measured caused
by a withdrawal, equaling the percentage of the withdrawal as compared to
the Account Value as of the date of the withdrawal. For example, if your
Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will
reduce both your Anniversary Value and the amount determined by Purchase
Payments increasing at the appropriate interest rate by 20%.
|X| The Assumed Accumulation Rate is the rate of interest that we will apply to
your Purchase Payments only for purposes of calculating this benefit The
Assumed Accumulation Rate is different depending on which Optional Death
Benefit you select as shown below:
--------------------------- ------------------------
Option 1 Option 2
5.0% per year 7.2% per year
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Certain terms and conditions may differ if you purchase your Annuity as part of
an exchange, replacement or transfer, in whole or in part, from any other
Annuity we issue.
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Calculation of Optional Death Benefits
The optional Death Benefit calculations depend on whether death occurs before or
after the Death Benefit Target Date.
Annuities with one Owner
The optional Death Benefits are calculated as follows:
If the Owner dies before the Death Benefit Target Date, the Death Benefit equals
the greatest of:
1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed
Allocations (no MVA) as of the date we receive in writing "due proof of
death"; and
2. the sum of all Purchase Payments minus the sum of all Proportional
Reductions, each increasing daily until the Owner's date of death at the
applicable Assumed Accumulation Rate for the option you elect, subject to a
limit of 200% of the difference between the sum of all Purchase Payments
and the sum of all withdrawals as of the Owner's date of death; and
3. the "Highest Anniversary Value" on or immediately preceding the Owner's
date of death.
The amount determined by this calculation is increased by any Purchase Payments
received after the Owner's date of death and decreased by any Proportional
Reductions since such date. The amount calculated in Item 1 & 3 above may be
reduced by any Target Value Credits under certain circumstances.
If the Owner dies on or after the Death Benefit Target Date, the Death Benefit
equals the greater of:
1. the Account Value as of the date we receive in writing "due proof of death"
(an MVA may be applicable to amounts in any Fixed Allocations); and 2. the
greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum
of all Purchase Payments less the sum of all Proportional Reductions since
the Death Benefit Target Date.
The amount calculated in Item 1 above may be reduced by any Target Value Credits
under certain circumstances.
Annuities with joint Owners
For Annuities with Joint Owners, the Death Benefit is calculated as shown above
except that the age of the oldest of the Joint Owners is used to determine the
Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly,
we will pay the Death Benefit to the Beneficiary. If the sole primary
Beneficiary is the surviving spouse, then the surviving spouse can elect to
assume ownership of the Annuity.
Annuities owned by entities
For Annuities owned by an entity, the Death Benefit is calculated as shown above
except that the age of the Annuitant is used to determine the Death Benefit
Target Date. Payment of the Death Benefit is based on the death of the Annuitant
(or Contingent Annuitant, if applicable).
Examples of Optional Death Benefit Calculation
The following are examples of how the Optional Death Benefits are calculated.
Each example assumes that a $50,000 initial Purchase Payment is made and that no
withdrawals are made prior to the Owner's death. Each example assumes that there
is one Owner who is age 50 on the Issue Date and that all Account Value is
maintained in the variable investment options.
Example of market increase greater than Assumed Accumulation Rate Assume that
the Owner's Account Value has generally been increasing. On the date we receive
due proof of death (the Owner's 58th birthday), the Account Value is $90,000.
The Highest Anniversary Value at the end of any previous period is $72,000. The
Death Benefit would be the Account Value ($90,000) because it is greater than
the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments
increased by 5.0% annually ($73,872.77 - Option 1) or 7.2% annually for
($87,202.36 - Option 2).
Example of market decrease
Assume that the Owner's Account Value generally increased until the fifth
anniversary but generally has been decreasing since the fifth contract
anniversary. On the date we receive due proof of death (the Owner's 58th
birthday), the Account Value is $48,000. The Highest Anniversary Value at the
end of any previous period is $54,000. The Death Benefit would be the sum of
prior Purchase Payments increased by 5.0% annually ($73872.77 - Option 1) or
7.2% annually for ($87202.36 - Option 2) because it is greater than the Highest
Anniversary Value ($54,000) or the Account Value ($48,000).
Example of Highest Anniversary Value
Assume that the Owner's Account Value increased significantly during the first
six years following the Issue Date. On the sixth anniversary date the Account
Value was $90,000. During the seventh Annuity Year, the Account Value increases
to as high as $100,000 but then subsequently falls to $80,000 on the date we
receive due proof of death (the Owner's 58th birthday). The Death Benefit would
be the Highest Anniversary Value at the end of any previous period ($90,000),
which occurred on the sixth anniversary, although the Account Value was higher
during the subsequent period. The Account Value on the date we receive due proof
of death ($80,000) is lower, as is the sum of all prior Purchase Payments
increased by 5.0% annually ($73,872.77 - Option 1) or 7.2% annually for
($87,202.36 - Option 2).
How much do you charge for the optional death benefits?
We deduct a charge from your Account Value if you elect to purchase either
Optional Death Benefit. For Option 1, each deduction is 0.30% of the then
current Death Benefit when the deduction is taken. For Option 2, each deduction
is 0.50% of the then current Death Benefit when the deduction is taken. No
charge applies after the Annuity Date.
We deduct the charge:
1. on each anniversary of the Issue Date;
2. when Account Value is transferred to our general account prior to the
Annuity Date;
3. if you surrender your Annuity; and
4. if you choose to terminate the benefit.
If you surrender the Annuity, elect to begin receiving Annuity payments or
terminate the benefit on a date other than an anniversary of the Issue Date, the
charge will be prorated. During the first year after the Issue Date, the charge
would be prorated from the Issue Date. In all subsequent years, it would be
prorated from the last anniversary of the Issue Date.
We first deduct the amount of the charge pro-rata from the Account Value in the
variable investment options. We only deduct the charge pro-rata from the Fixed
Allocations to the extent there is insufficient Account Value in the variable
investment options to pay the charge. If your Annuity's Account Value is
insufficient to pay the charge, we may deduct your remaining Account Value and
terminate your Annuity. We will notify you if your Account Value is insufficient
to pay the charge and allow you to submit an additional Purchase Payment to
continue your Annuity.
Are there any exceptions to these rules for paying the Death Benefit?
Yes, there are exceptions that apply no matter how your Death Benefit is
calculated. There are exceptions to the Death Benefit if the decedent was not
the Owner or Annuitant as of the Issue Date and did not become the Owner or
Annuitant due to the prior Owner's or Annuitant's death. Any minimum Death
Benefit that applies will be suspended for a two-year period from the date he or
she first became Owner or Annuitant. After the two-year suspension period is
completed, the Death Benefit is the same as if this person had been an Owner or
Annuitant on the Issue Date.
What options are available to my Beneficiary upon my death?
|X| During the accumulation period, if you die and the sole Beneficiary is your
spouse, then your spouse may elect to be treated as the current Owner. The
Annuity can be continued, subject to its terms and conditions, in lieu of
receiving the death benefit. Your spouse may only assume ownership of the
Annuity if he or she is designated as the sole primary Beneficiary.
|X| In the event of your death, the death 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. Payments under this option must begin
within one year of the date of death.
When do you determine the Death Benefit?
We determine the amount of the death benefit as of the date we receive "due
proof of death" and any other written representations we require to determine
the proper payment of the Death Benefit to all Beneficiaries. "Due proof of
death" may include a certified copy of a death certificate, a certified copy of
a decree of a court of competent jurisdiction as to the finding of death or
other satisfactory proof of death.
We will require written acknowledgment of all named Beneficiaries before we can
determine the Death Benefit. During the period from the date of death until we
receive all required paper work, the amount of the Death Benefit may be subject
to market fluctuations.
Valuing Your Investment
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, the Annuity has an Account Value. The Account
Value is determined separately for each Sub-account allocation and for each
Fixed Allocation. The Account Value is the sum of the values of each Sub-account
allocation and the value of each Fixed Allocation. The Account Value does not
reflect any CDSC that may apply to a withdrawal or surrender. The Account Value
includes any additional amounts we applied to your Purchase Payments that we are
entitled to recover upon surrender of your Annuity. When determining the Account
Value on a day other than a Fixed Allocation's Maturity Date, the Account Value
may include any Market Value Adjustment that would apply to a Fixed Allocation
(if withdrawn or transferred) on that day.
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?
The Surrender Value of your Annuity is the value available to you on any day
during the accumulation period. The Surrender Value is equal to your Account
Value minus any CDSC, the Annual Maintenance Fee and any additional amounts we
applied to your Purchase Payments that we are entitled to recover upon surrender
of your Annuity. The Surrender Value will also include any Market Value
Adjustment that may apply.
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?
When you allocate Account Value to a Sub-Account, you are purchasing units of
the Sub-account. Each Sub-account invests exclusively in shares of an underlying
Portfolio. The value of the Units fluctuate with the market fluctuations of the
Portfolios. The value of the Units also reflect the daily accrual for the
Insurance Charge.
Each Valuation Day, we determine the price for a Unit of each Sub-account,
called the "Unit Price." The Unit Price is used for determining the value of
transactions involving Units of the Sub-accounts. We determine the number of
Units involved in any transaction by dividing the dollar value of the
transaction by the Unit Price of the Sub-account as of the Valuation Day.
Example
Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the
allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the
Sub-account. Assume that later, you wish to transfer $3,000 of your Account
Value out of that Sub-account and into another Sub-account. On the Valuation Day
you request the transfer, the Unit Price of the original Sub-account has
increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current
Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new
Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of
the new Sub-account.
HOW DO YOU VALUE FIXED ALLOCATIONS?
During the Guarantee Period, we use the concept of an Interim Value. The Interim
Value can be calculated on any day and is equal to the initial value allocated
to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the
date calculated. The Interim Value does not include the impact of any Market
Value Adjustment. If you made any transfers or withdrawals from a Fixed
Allocation, the Interim Value will reflect the withdrawal of those amounts and
any interest credited to those amounts before they were withdrawn. To determine
the Account Value of a Fixed Allocation on any day other than its Maturity Date,
we multiply the Account Value of the Fixed Allocation times the Market Value
Adjustment factor.
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?
Initial Purchase Payments: We are required to allocate your initial Purchase
Payment to the Sub-accounts within two (2) days after we receive all of our
requirements to issue the Annuity. If we do not have all the required
information to allow us to issue your Annuity, we may retain the Purchase
Payment while we try to reach you or your representative to obtain all of our
requirements. If we are unable to obtain all of our required information within
five (5) days, we are required to return the Purchase Payment to you at that
time, unless you specifically consent to our retaining the Purchase Payment
while we gather the required information. Once we obtain the required
information, we will invest the Purchase Payment and issue the Annuity within
two (2) days. During any period that we are trying to obtain the required
information, your money is not invested.
Additional Purchase Payments: We will apply any additional Purchase Payments on
the Valuation Day that we receive the Purchase Payment with satisfactory
instructions.
Scheduled Transactions: "Scheduled" transactions include transfers under a
Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic
Withdrawals, Minimum Distributions or Annuity payments. Scheduled transactions
are processed and valued as of the date they are scheduled, unless the scheduled
day is not a Valuation Day. In that case, the transaction will be processed and
valued on Valuation Day prior to the scheduled transaction date.
Unscheduled Transactions: "Unscheduled" transactions include any other
non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals
or Surrenders. Unscheduled transactions are processed and valued as of the
Valuation Day we receive the request at our Office in good order.
Medically-related Surrenders & Death Benefits: Medically-related surrender
requests and Death Benefit claims require our review and evaluation before
processing. We price such transactions as of the date we receive at our Office
all materials we require for such transaction and that are satisfactory to us.
Transactions in Rydex Sub-accounts: Any financial transactions involving the
Rydex Sub-accounts must be received by us no later than 3:00 p.m. Eastern time
to be processed on the current Valuation Day. If you request a transaction
involving the purchase or redemption of Units in one of the Rydex Sub-accounts
after 3:00 p.m. Eastern time, we will deem your request as received by us on the
next Valuation Day.
Tax Considerations
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?
Following is a brief summary of some of the Federal tax considerations relating
to this Annuity. However, since the tax laws are complex and tax consequences
are affected by your individual circumstances, this summary of our
interpretation of the relevant tax laws is not intended to be fully
comprehensive nor is it intended as tax advice. Therefore, you may wish to
consult a professional tax advisor for tax advice as to your particular
situation.
HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?
The Separate Accounts are taxed as part of American Skandia. American Skandia is
taxed as a life insurance company under Part I, subchapter L of the Code. No
taxes are due on interest, dividends and short-term or long-term capital gains
earned by the Separate Accounts with respect to the Annuities.
IN GENERAL, HOW ARE ANNUITIES TAXED?
Section 72 of the Code governs the taxation of annuities in general. Taxation of
the Annuity will depend in large part on:
1. whether the Annuity is used by:
|X| a qualified pension plan, profit sharing plan or other retirement
arrangement that is eligible for special treatment under the Code (for
purposes of this discussion, a "Qualified Contract"); OR
|X| an individual or a corporation, trust or partnership (a "Non-qualified
Contract"); and
2. whether the Owner is:
|X| an individual person or persons; or
|X| an entity including a corporation, trust or partnership.
Individual Ownership: If one or more individuals own an Annuity, the Owner of
the Annuity is generally not taxed on any increase in the value of the Annuity
until an amount is received (a "distribution"). This is commonly referred to as
"tax deferral". A distribution can be in the form of a lump sum payment
including payment of a Death Benefit, or in annuity payments under one of the
annuity payment options. Certain other transactions may qualify as a
distribution and be subject to taxation.
Entity Ownership: If the Annuity is owned by an entity and is not a Qualified
Contract, generally the Owner of the Annuity must currently include any increase
in the value of the Annuity during a tax year in its gross income. An exception
from current taxation applies for annuities held by a structured settlement
company, by an employer with respect to a terminated tax-qualified retirement
plan, a trust holding an annuity as an agent for a natural person, or by a
decedent's estate by reason of the death of the decedent. A tax-exempt entity
for Federal tax purposes will not be subject to income tax as a result of this
provision.
HOW ARE DISTRIBUTIONS TAXED?
Distributions from an Annuity are taxed as ordinary income and not as capital
gains.
Distributions Before Annuitization: Distributions received before annuity
payments begin are generally treated as coming first from "income on the
contract" and then as a return of the "investment in the contract". The amount
of any distribution that is treated as receipt of "income on the contract" is
includible in the taxpayer's gross income and taxable in the year it is
received. The amount of any distribution treated as a return of the "investment
in the contract" is not includible in gross income.
|X| "Income on the contract" is calculated by subtracting the taxpayer's
"investment in the contract" from the aggregate value of all "related
contracts" (discussed below).
|X| "Investment in the contract" is equal to total purchase payments for all
"related contracts" minus any previous distributions or portions of such
distributions from such "related contracts" that were 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. Unless "after-tax" or non-deductible contributions have been made to
a Qualified Contract, the "investment in the contract" for a Qualified
Contract will be considered zero for tax reporting purposes.
Distributions After Annuitization: A portion of each annuity payment received on
or after the Annuity Date will generally be taxable. The taxable portion of each
annuity payment is determined by a formula which establishes the ratio that the
"investment in the contract" bears to the total value of annuity payments to be
made. This is called the "exclusion ratio." The investment in the contract is
excluded from gross income. Any additional payments received that exceed the
exclusion ratio will be entirely includible in gross income. The formula for
determining the exclusion ratio differs between fixed and variable annuity
payments. When annuity payments cease because of the death of the person upon
whose life payments are based and, as of the date of death, the 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.
Penalty Tax on Distributions: Generally, any distribution from an annuity not
used in conjunction with a Qualified Contract (Qualified Contracts are discussed
below) is subject to a penalty equal to 10% of the amount includible in gross
income. This penalty does not apply to certain distributions, including:
|X| Distributions made on or after the taxpayer has attained age 59 1/2;
|X| Distributions made on or after the death of the contract owner, or, if the
owner is an entity, the death of the annuitant,;
|X| Distributions attributable to the taxpayer's becoming disabled;
|X| Distributions which are part of a 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);
|X| Distributions of amounts which are treated as "investments in the contract"
made prior to August 14, 1982;
|X| Payments under an immediate annuity as defined in the Code;
|X| Distributions under a qualified funding asset under Code Section 130(d); or
|X| 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.
Special rules applicable to "related contracts": Contracts issued by the same
insurer to the same contract owner within the same calendar year (other than
certain contracts owned in connection with a tax-qualified retirement
arrangement) are to be treated as one annuity contract when determining the
taxation of distributions before annuitization. We refer to these contracts as
"related contracts." In situations involving related contracts we believe that
the values under such contracts and the investment in the contracts will be
added together to determine the proper taxation of a distribution from any one
contract described under the section "Distributions before Annuitization."
Distributions will be treated as coming first from income on the contract until
all of the income on all such related contracts is withdrawn, and then as a
return of the investment in the contract. There is some uncertainty regarding
the manner in which the Internal Revenue Service would view related contracts
when one or more contracts are immediate annuities or are contracts that have
been annuitized. The Internal Revenue Service has not issued guidance clarifying
this issue as of the date of this Prospectus. You are particularly cautioned to
seek advice from your own tax advisor on this matter.
Special concerns regarding "substantially equal periodic payments": (also known
as "72(t) distributions") Any modification to a program of distributions which
are part of a series of substantially equal periodic payments that occur before
the later of the taxpayer reaching age 59 1/2 or 5 years from the first of such
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. This does not apply when the modification is due by reason of death or
disability. It is our understanding that the Internal Revenue Service may not
consider a scheduled series of distributions to qualify under Sections 72(q) or
72(t) 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, depending on how payments are structured.
Special concerns regarding immediate annuities: 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 a contract 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. It is unclear whether
the exception to the 10% penalty applies to annuity payments where the purchase
payment originates from a deferred annuity contract established as a result of
an exchange if: (a) purchase payments for the exchanged contract were
contributed or are 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.
Special rules in relation to tax-free exchanges under Section 1035: Section 1035
of the Code permits certain tax-free exchanges of a life insurance, annuity or
endowment contract for an annuity. If an annuity is purchased through a tax-free
exchange of a life insurance, annuity or endowment contract that was purchased
prior to August 14, 1982, then any distributions other than as annuity payments
will be considered to come:
|X| First, from the amount of "investment in the contract" made prior to August
14, 1982 and exchanged into the annuity;
|X| Then, from any "income on the contract" that is attributable to the
purchase payments made prior to August 14, 1982 (including income on such
original purchase payments after the exchange);
|X| Then, from any remaining "income on the contract"; and
|X| Lastly, from the remaining "investment in the contract."
Therefore, to the extent a distribution is equal to or less than the investment
in the contract made prior to August 14, 1982, such amounts are not included in
taxable income. Further, distributions received that are considered to be a
return of investment on the contract from purchase payments made prior to August
14, 1982, such distributions are not subject to the 10% tax penalty. In all
other respects, the general provisions of the Code apply to distributions from
annuities obtained as part of such an exchange.
WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR
QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various
types of tax-qualified retirement plans. We have provided summaries of the types
of tax-qualified retirement plans with which we may issue an Annuity. These
summaries provide general information about the tax rules and are not intended
to be complete discussions. The tax rules regarding qualified plans are complex.
These rules may include limitations on contributions and restrictions on
distributions, including additional taxation of distributions and additional
penalties. The terms and conditions of the tax-qualified retirement plan may
impose other limitations and restrictions that are in addition to the terms of
the Annuity. The application of these rules depends on individual facts and
circumstances. Before purchasing an Annuity for use in a qualified plan, you
should obtain competent tax advice, both as to the tax treatment and suitability
of such an investment. American Skandia does not offer all of its annuities to
all of these types of tax-qualified retirement plans.
Corporate Pension and Profit-sharing Plans: Annuities may be used to fund
employee benefits of various corporate pension and profit-sharing plans
established by corporate employers under Sections 401(a) and 401(k) of the Code.
Contributions to such plans are not taxable to the employee until distributions
are made from the retirement plan. The Code imposes limitations on the amount
that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code a tax sheltered
annuity ("TSA") is a contract into which contributions may be made by certain
qualifying employers such as public schools and certain charitable, educational
and scientific organizations specified in Section 501(c)(3) for the benefit of
their employees. Such contributions are not taxable to the employee until
distributions are made from the TSA. The Code imposes limits on contributions,
transfers and distributions. Nondiscrimination requirements also apply.
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Under a TSA, you may be prohibited from taking distributions from the contract
attributable to contributions made pursuant to a salary reduction agreement
unless the distribution is made:
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|X| After the participating employee attains age 59 1/2;
|X| Upon separation from service, death or disability; or
|X| In the case of financial hardship (subject to restrictions).
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.
Individual Retirement Programs or "IRAs": Section 408 of the Code allows
eligible individuals to maintain an individual retirement account or individual
retirement annuity ("IRA"). IRAs are subject to limitations on the amount that
may be contributed, the contributions that may be deducted from taxable income,
the persons who may be eligible to establish an IRA and the time when
distributions must commence. Further, an Annuity may be used to "roll-over"
distributions from certain tax-qualified retirement plans and maintain their
tax-deferral.
Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to
a Roth IRA are not tax deductible. However, distributions from a Roth IRA are
free from Federal income taxes and are not subject to 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 Federal income and penalty taxes.
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.
SEP IRAs: Eligible employers that meet specified criteria may establish
Simplified Employee Pensions or SEP IRAs. Employer contributions that may be
made to employee SEP IRAs are larger than the amounts that may be contributed to
other IRAs, and may be deductible to the employer.
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?
Distributions from Qualified Contracts are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the proportion of a distribution
representing any investment gain on the after-tax contributions. Generally, a
10% penalty tax applies to the taxable portion of a distribution from a
Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does
not apply when the distribution:
|X| is part of a properly executed transfer to another IRA or another eligible
qualified account;
|X| 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);
|X| is part of a series 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;
|X| is subsequent to a separation from service after the taxpayer attains age
55*;
|X| does not exceed the employee's allowable deduction in that tax year for
medical care*; and
|X| is made to an alternate payee pursuant to a qualified domestic relations
order*.
The exceptions above which are followed by an asterisk (*) do not apply to IRAs.
Minimum Distributions after age 70 1/2: A participant's interest in a Qualified
Contract must generally be distributed, or begin to be distributed, by the
"required beginning date". This is April 1st of the calendar year following the
later of:
|X| the calendar year in which the individual attains age 70 1/2; or
|X| the calendar year in which the individual retires from service with the
employer sponsoring the plan. The retirement option is not available to
IRAs.
The participant's entire interest must be distributed beginning no later than
the required beginning date over a period which may not extend beyond a maximum
of the life expectancy of the participant or the life expectancies of the owner
and a designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution amount" which is determined by dividing the account value
by the applicable life expectancy. The account balance is generally based upon
the Account Value as of the close of business on the last day of the previous
calendar year. A larger annual distribution may be required under certain
circumstances.
If the participant dies before reaching his or her "required beginning date",
his or her entire interest must generally be distributed within five years of
death. However, this rule will be deemed satisfied if distributions begin before
the close of the calendar year following death to a designated Beneficiary (or
over a period not extending beyond the life expectancy of the beneficiary). If
the Beneficiary is the individual's surviving spouse, distributions may be
delayed until the deceased owner would have attained age 70 1/2. A surviving
spouse would also have the option to assume the IRA as his or her own if he or
she is the sole designated beneficiary. If a participant dies after reaching his
or her required beginning date or after distributions have commenced, the
individual's interest must generally be distributed at least as rapidly as under
the method of distribution in effect at the time of the individual's death.
If the amount distributed is less than the minimum required distribution for the
year, the participant is subject to a 50% tax on the amount that was not
properly distributed.
GENERAL TAX CONSIDERATIONS
Diversification: Section 817(h) of the Code provides that a variable annuity
contract, in order to qualify as an annuity, must have an "adequately
diversified" segregated asset account (including investments in a mutual fund by
the segregated asset account of insurance companies). If the diversification
requirements under the Code are not met and the annuity is not treated as an
annuity, the taxpayer will be subject to income tax on the annual gain in the
contract. 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.
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.
Federal Income Tax Withholding: Section 3405 of the Code provides for Federal
income tax withholding on the portion of a distribution which is includible in
the gross income of the recipient. Amounts to be withheld depend upon the nature
of the distribution. However, under most circumstances a recipient may elect not
to have income taxes withheld or have income taxes withheld at a different rate
by filing a completed election form with us.
Certain distributions, including rollovers, from most Qualified Contracts, may
be subject to automatic 20% withholding for Federal income taxes. This will not
apply to:
|X| any portion of a distribution paid as Minimum Distributions;
|X| direct transfers to the trustee of another retirement plan;
|X| distributions from an individual retirement account or individual
retirement annuity;
|X| distributions made as substantially equal periodic payments for the life or
life expectancy of the participant in the retirement plan or the life or
life expectancy of such participant and his or her designated beneficiary
under such plan; and
|X| certain other distributions where automatic 20% withholding may not apply.
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
on or after the assignment or pledge of an entire annuity and 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 as Qualified
Contracts, 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 someone other than the spouse of the owner (or
former spouse incident to a divorce) is treated, for income tax purposes, as a
distribution.
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.
Considerations for Contingent Annuitants: There may be adverse tax consequences
if a contingent annuitant succeeds an annuitant when the Annuity is owned by a
trust that is neither tax exempt nor qualifies for preferred treatment under
certain sections of the Code. In general, the Code is designed to prevent
indefinite deferral of tax. 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.
General Information
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law or
regulation to you through our Internet Website at http://www.americanskandia.com
or any other electronic means, including diskettes or CD ROMs. We send a
confirmation statement to you each time a transaction is made affecting 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 to assure proper accounting to your Annuity. For transactions that are
confirmed immediately, we assume all transactions are accurate unless you notify
us otherwise within 10 days from the date you receive the confirmation. For
transactions that are only confirmed on the quarterly statement, we assume all
transactions are accurate unless you notify us within 10 days from the date you
receive the quarterly statement. All transactions confirmed immediately or by
quarterly statement are deemed conclusive after the applicable 10-day period. We
may also send an annual report and a semi-annual report containing applicable
financial statements, as of December 31 and June 30, respectively, to Owners or,
with your prior consent, make such documents available electronically through
our Internet Website or other electronic means.
WHO IS AMERICAN SKANDIA?
American Skandia Life Assurance Corporation ("American Skandia") is a stock life
insurance company domiciled in Connecticut with licenses in all 50 states and
the District of Columbia. American Skandia is a wholly-owned subsidiary of
American Skandia Investment Holding Corporation (the "Parent"), whose ultimate
parent is Skandia Insurance Company Ltd., a Swedish company. American Skandia
markets its products to broker-dealers and financial planners through an
internal field marketing staff. In addition, American Skandia markets through
and in conjunction with financial institutions such as banks that are permitted
directly, or through affiliates, to sell annuities.
American Skandia is in the business of issuing variable annuity and variable
life insurance contracts. American Skandia currently offers the following
products: (a) flexible premium deferred annuities and single premium fixed
deferred annuities that are registered with the SEC; (b) certain other fixed
deferred annuities that are not registered with the SEC; (c) certain group
variable annuities that are exempt from registration with the SEC that serve as
funding vehicles for various types of qualified pension and profit sharing
plans; (d) a single premium variable life insurance policy that is registered
with the SEC; and (e) a flexible premium life insurance policy that is
registered with the SEC.
WHAT ARE 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. We are the legal owner
of assets in the separate accounts. In the payout phase, assets supporting fixed
annuity payments and any adjustable annuity payments we make available are held
in our general account. Income, gains and losses from assets allocated to these
separate accounts are credited to or charged against each such separate account
without regard to other income, gains or losses of American Skandia or of any
other of our separate accounts. These assets may only be charged with
liabilities which arise from the annuity contracts issued by American Skandia
Life Assurance Corporation. The amount of our obligation in relation to
allocations to the Sub-accounts is based on the investment performance of such
Sub-accounts. However, the obligations themselves are our general corporate
obligations.
Separate Account B
During the accumulation phase, the assets supporting obligations based on
allocations to the variable investment options are held in Class 1 Sub-accounts
of American Skandia Life Assurance Corporation Variable Account B, also referred
to as "Separate Account B". Separate Account B consists of multiple
Sub-accounts. The name of each Sub-account generally corresponds to the name of
the underlying Portfolio. The names of each Sub-account are shown in the
Statement of Additional Information. Separate Account B was established by us
pursuant to Connecticut law. Separate Account B also holds assets of other
annuities issued by us with values and benefits that vary according to the
investment performance of Separate Account B. The Sub-accounts offered pursuant
to this Prospectus are 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. You will find additional information about
these underlying mutual funds and portfolios in the prospectuses for such funds.
Separate Account B is registered with the SEC under the Investment Company Act
of 1940 ("Investment Company Act") as a unit investment trust, which is a type
of investment company. This does not involve any supervision by the SEC of the
investment policies, management or practices of Separate Account B. Each
Sub-account invests only in a single mutual fund or mutual fund portfolio. We
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. Your
Account Value allocated to the Sub-accounts may increase or decrease. You bear
the entire investment risk.
Separate Account D
During the accumulation phase, assets supporting our obligations based on Fixed
Allocations are held in American Skandia Life Assurance Corporation Separate
Account D, also referred to as Separate Account D. Such obligations are based on
the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment gain
or loss on assets maintained in 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.
We have sole discretion over the investment managers retained to manage the
assets maintained in Separate Account D. We currently employ investment managers
for Separate Account D including, but not limited to, J.P. Morgan Investment
Management Inc. Each manager we employ is responsible for investment management
of a different portion 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).
We are not obligated to invest according to specific guidelines or strategies
except as may be required by Connecticut and other state insurance laws.
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?
Each underlying mutual fund is registered as an open-end management investment
company under the Investment Company Act. Shares of the underlying mutual fund
portfolios are sold to separate accounts of life insurance companies offering
variable annuity and variable life insurance products. The shares may also be
sold directly to qualified pension and retirement plans.
Voting Rights
We are the legal owner of the shares of the underlying mutual funds in which the
Sub-accounts invest. However, under SEC rules, you have voting rights in
relation to Account Value maintained in the Sub-accounts. If an underlying
mutual fund portfolio requests a vote of shareholders, we will vote our shares
in the manner directed by Owners with Account Value allocated to that
Sub-account. Owners have the right to vote an amount equal to the number of
shares attributable to their contracts. If we do not receive voting instructions
in relation to certain shares, we will vote those shares in the same manner and
proportion as the shares for which we have received instructions. We will
furnish those Owners who have Account Value allocated to a Sub-account whose
underlying mutual fund portfolio has requested a "proxy" vote with the necessary
forms to provide us with their instructions. Generally, you will be asked to
provide instructions for us to vote on matters such as changes in a fundamental
investment strategy, adoption of a new investment advisory agreement, or matters
relating to the structure of the underlying mutual fund that require a vote of
shareholders.
Material Conflicts
It is possible that differences may occur between companies that offer shares of
an underlying mutual fund portfolio to their respective separate accounts
issuing variable annuities and/or variable life insurance products. Differences
may also occur surrounding the offering of an underlying mutual fund portfolio
to variable life insurance policies and variable annuity contracts that we
offer. Under certain circumstances, these differences could be considered
"material conflicts," in which case we would take necessary action to protect
persons with voting rights under our variable annuity contracts and variable
life insurance policies against persons with voting rights under other insurance
companies' variable insurance products. If a "material conflict" were to arise
between owners of variable annuity contracts and variable life insurance
policies issued by us we would take necessary action to treat such persons
equitably in resolving the conflict. "Material conflicts" could arise due to
differences in voting instructions between owners of variable life insurance and
variable annuity contracts of the same or different companies. We monitor any
potential conflicts that may exist.
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of
American Skandia Investment Holding Corporation, is the distributor and
principal underwriter of the securities offered through this prospectus. ASM
acts as the distributor of a number of annuity and life insurance products we
offer and both American Skandia Trust and American Skandia Advisor Funds, Inc.,
a family of retail mutual funds. ASM's principal business address is One
Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer
under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of
the National Association of Securities Dealers, Inc. ("NASD").
The Annuity is offered on a continuous basis. ASM enters into distribution
agreements with independent broker-dealers who are registered under the Exchange
Act and with entities that may offer the Annuity but are exempt from
registration. Applications for the Annuity are solicited by registered
representatives of those firms. Such representatives will also be our appointed
insurance agents under state insurance law. In addition, ASM may offer the
Annuity directly to potential purchasers.
Compensation is paid to firms on sales of the Annuity according to one or more
schedules. The individual representative will receive a portion of the
compensation, depending on the practice of the firm. Compensation is generally
based on a percentage of Purchase Payments made, up to a maximum of 7.0%.
Alternative compensation schedules are available that provide a lower initial
commission plus ongoing annual compensation based on all or a portion of Account
Value. We may also provide compensation for providing ongoing service to you in
relation to the Annuity. Commissions and other compensation paid in relation to
the Annuity do not result in any additional charge to you or to the Separate
Account.
In addition, firms may receive separate compensation or reimbursement for, among
other things, training of sales personnel, marketing or other services they
provide to us or our affiliates. We or ASM may enter into compensation
arrangements with certain firms. These arrangements will not be offered to all
firms and the terms of such arrangements may differ between firms. Any such
compensation will be paid by us or ASM and will not result in any additional
charge to you. To the extent permitted by NASD rules and other applicable laws
and regulations, ASM may pay or allow other promotional incentives or payments
in the form of cash or other compensation.
Advertising: We may advertise certain information regarding the performance of
the investment options. Details on how we calculate performance for the
Sub-accounts are found in the Statement of Additional Information. This
information may help you review the performance of the investment options and
provide a basis for comparison with other annuities. It may be less useful when
comparing the performance of the investment options with other savings or
investment vehicles. Such other investments may not provide some of the benefits
of annuities, or may not be designed for long-term investment purposes.
Additionally other savings or investment vehicles may not be receive the
beneficial tax treatment given to annuities under the Code.
Performance information on the Sub-accounts is based on past performance only
and is not an indication or representation of future performance. Performance of
the Sub-accounts is not fixed. Actual performance will depend on the type,
quality and, for some of the Sub-accounts, the maturities of the investments
held by the underlying mutual funds or portfolios and upon prevailing market
conditions and the response of the underlying mutual funds to such conditions.
Actual performance will also depend on changes in the expenses of the underlying
mutual funds or portfolios. Such changes are reflected, in turn, in the
Sub-accounts which invest in such underlying mutual fund or portfolio. In
addition, the amount of charges assessed against each Sub-account will affect
performance.
Some of the underlying mutual fund portfolios existed prior to the inception of
these Sub-accounts. Performance quoted in advertising regarding such
Sub-accounts may indicate periods during which the Sub-accounts have been in
existence but prior to the initial offering of the Annuities, or periods during
which the underlying mutual fund portfolios have been in existence, but the
Sub-accounts have not. Such hypothetical performance is calculated using the
same assumptions employed in calculating actual performance since inception of
the Sub-accounts.
We may advertise the performance of the underlying mutual fund portfolios in the
form of "Standard" and "Non-standard" Total Returns. "Standard Total Return"
figures assume that all charges and fees are applicable, including any
contingent deferred sales charge that may apply for the period shown.
"Non-standard Total Return" figures may also be used that do not reflect all
fees and charges. Non-standard Total Returns are calculated in the same manner
as standardized returns except that the calculations may assume no redemption at
the end of the applicable periods, thus these figures may not take into
consideration the Annuity's contingent deferred sales charge. Any performance
advertisements will not reflect the impact of any Target Value Credits.
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.
Advertisements we distribute may also compare the performance of our
Sub-accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Shearson Lehman Bond Index, the Frank Russell non-U.S. Universal Mean, the
Morgan Stanley Capital International Index of Europe, Asia and Far East Funds,
and the Morgan Stanley Capital International World Index; and/or (b) other
management investment companies with investment objectives similar to the mutual
fund or portfolio underlying the Sub-accounts being compared. This may include
the performance ranking assigned by various publications, including but not
limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's, Business
Week, USA Today and statistical services, including but not limited to Lipper
Analytical Services Mutual Funds Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, SEI, the Morningstar Mutual Fund
Sourcebook and the Morningstar Variable Annuity/Life Sourcebook.
American Skandia Life Assurance Corporation may advertise its rankings and/or
ratings by independent financial ratings services. Such rankings may help you in
evaluating our ability to meet our obligations in relation to Fixed Allocations,
pay minimum death benefits, pay annuity payments or administer Annuities. Such
rankings and ratings do not reflect or relate to the performance of Separate
Account B.
AVAILABLE INFORMATION
A Statement of Additional Information is available from us without charge upon
your request. This Prospectus is part of the registration statement we filed
with the SEC regarding this offering. Additional information on us and this
offering is available in those registration statements and the exhibits thereto.
You may obtain copies of these materials at the prescribed rates from the SEC's
Public Reference Section, 450 Fifth Street N.W., Washington, D.C., 20549. You
may inspect and copy those registration statements and exhibits thereto at the
SEC's public reference facilities at the above address, Room 1024, and at the
SEC's Regional Offices, 7 World Trade Center, New York, NY, and the Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago, IL. These
documents, as well as documents incorporated by reference, may also be obtained
through the SEC's Internet Website (http://www.sec.gov) for this registration
statement as well as for other registrants that file electronically with the
SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
To the extent and only to the extent that any statement in a document
incorporated by reference into this Prospectus is modified or superseded by a
statement in this Prospectus or in a later-filed document, such statement is
hereby deemed so modified or superseded and not part of this Prospectus. The
Annual Report on Form 10-K for the year ended December 31, 1998 previously filed
by the Company with the SEC under the Exchange Act is incorporated by reference
in this Prospectus.
We will furnish you without charge a copy of any or all of the documents
incorporated by reference in this Prospectus, including any exhibits to such
documents which have been specifically incorporated by reference. We will do so
upon receipt of your written or oral request.
HOW TO CONTACT US
You can contact us by:
|X| calling our Concierge Desk at 1-800-752-6342; or
|X| writing to us at American Skandia Life Assurance Corporation, P.O. Box 883,
Shelton, Connecticut 06484-0883, Attention: Concierge Desk; or
|X| sending us an email to our electronic mail address at
[email protected]; or
|X| accessing information about your Annuity through our Internet Website at
americanskandia.com.
We may require that you present proper identification before performing
transactions over the telephone, email or through our Internet website. This may
include a Personal Identification Number or PIN that will be provided to you on
or about the time that your Annuity is issued. To the extent permitted by law,
we will not be responsible for any claims, loss, liability or expense in
connection with a transaction requested by telephone or other electronic means
if we acted on such transaction instructions after following reasonable
procedures to identify those persons authorized to perform transactions on your
Annuity using verification methods which may include a request for your Social
Security number, PIN or other form of electronic identification. We may be
liable for losses due to unauthorized or fraudulent instructions if we did not
follow such procedures.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the registrant
has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
LEGAL PROCEEDINGS
As of the date of this Prospectus, neither we nor ASM were involved in any
litigation outside of the ordinary course of business, and know of no material
claims.
<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
Robert M. Arena Vice President, Vice President,
30 Director of Product Director of Product Management:
Management American Skandia Life
Assurance Corporation
Mr. Arena joined us in 1995. He previously held an internship position with KPMG
Peat Marwick in 1994 and the position of Group Sales Representative with Paul
Revere Insurance from October, 1990 to August, 1993.
Gordon C. Boronow* President and President and
45 Deputy Chief Executive Officer Deputy Chief Executive Officer:
Director (since July, 1991) American Skandia Life
Assurance Corporation
Nancy F. Brunetti Executive Vice President Executive Vice President,
36 Director (since February, 1996) Chief Logistics Officer:
American Skandia Life
Assurance 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)
Y.K. Chan Senior Vice President and Senior Vice President and
41 Chief Information Officer Chief Information Officer:
American Skandia Life
Assurance Corporation
Mr. Chan joined us in 1999. He previously held the position of Chief Information
Officer with E.M. Warburg Pincus from January 1995 until April 1999 and the
position of Vice President, Client Server Application Development from January
1991 until January 1995.
Lincoln R. Collins Executive Vice President Executive Vice President,
37 Director (since February, 1996) Chief Operating Officer
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
Larisa Gromyko Director of Compliance Director of Compliance:
52 American Skandia Life
Assurance Corporation
Teresa Grove Vice President, Vice President,
44 Service Operations Service Operations:
American Skandia Information
Services and Technology Corporation
Ms. Grove joined us in 1996. She previously held the position of Account
Services Manager with Twentieth Century from January, 1992 until September,
1996.
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 Senior Vice President, Senior Vice President,
36 Treasurer and Treasurer and
Corporate Controller Corporate Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant Vice
President and Director at Allmerica Financial from August, 1994 to July, 1996
and Senior Manager at KPMG Peat Marwick from July, 1983 to July, 1994.
Polly Rae Vice President Vice President,
36 Key Account Operations Key Account Operations:
American Skandia Life
Assurance Corporation
Rodney D. Runestad Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Anders O. Soderstrom Executive Vice President Executive Vice President:
38 Director (since September, 1994) American Skandia Life
Assurance Corporation
William H. Strong Vice President, Vice President,
55 Product Innovation Product Innovation
American Skandia Life
Assurance Corporation
Mr. Strong joined us in 1997. He previously held the position of Vice President
with American Financial Systems from June 1994 to October 1997 and the position
of Actuary with Connecticut Mutual Life from June 1965 to June 1994.
Amanda C. Sutyak Executive Vice President Vice President:
40 Director (since July, 1991) American Skandia
Marketing, Incorporated
C. Ake Svensson Director (since December, 1994) Vice President,
47 Business Development:
American Skandia Investment
Holding Corporation
Mr. Svensson joined us in 1994. He previously held the position of Senior Vice
President with Nordenbanken.
Mary Toumpas Director of Advertising Compliance Vice President and
47 Compliance Director:
American Skandia
Marketing, Incorporated
Ms. Toumpas joined us in 1997. She previously held the position of Assistant
Vice President with Chubb Life/Chubb Securities.
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:
General Information about American Skandia
|X| American Skandia Life Assurance Corporation
|X| American Skandia Life Assurance Corporation Variable Account B (Class 1
Sub-accounts)
|X| American Skandia Life Assurance Corporation Separate Account D
Principal Underwriter/Distributor - American Skandia Marketing, Incorporated
How Performance Data is Calculated
|X| Current and Effective Yield
|X| Total Return
How the Unit Price is Determined
Additional Information on Fixed Allocations
|X| How We Calculate the Market Value Adjustment
General Information
|X| Voting Rights
|X| Modification
|X| Deferral of Transactions
|X| Misstatement of Age or Sex
|X| Ending the Offer
Independent Auditors
Legal Experts
Financial Statements
|X| Appendix A - American Skandia Life Assurance Corporation Variable Account B
(Class 1 Sub-accounts)
<PAGE>
Appendix A - Financial Information About American Skandia
<PAGE>
Selected Financial Data
The following table summarizes information with respect to the
operations of the Company. The selected financial data should be
read in conjunction with the financial statements and the notes
thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
(in thousands) FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Income Statement Data:
Revenues:
Annuity and life insurance
charges and fees* $ 186,211 $ 121,158 $ 69,780 $ 38,837 $ 24,780
Fee income 50,839 27,593 16,420 6,206 2,112
Net investment income 11,130 8,181 1,586 1,601 1,300
Premium income and
other revenues 1,360 1,082 265 45 92
------------- ------------- ------------ ----------- -----------
Total revenues $ 249,540 $ 158,014 $ 88,051 $ 46,689 $ 28,284
============= ============= ============ =========== ===========
Benefits and Expenses:
Annuity benefits $ 558 $ 2,033 $ 613 $ 555 $ 370
Change in annuity policy reserves 1,053 37 635 (6,779) 5,766
Cost of minimum death benefit
reinsurance 5,144 4,545 2,867 2,057 -
Return credited to contractowners (8,930) (2,018) 673 10,613 (517)
Underwriting, acquisition and
other insurance expenses 167,790 90,496 49,887 35,914 18,943
Interest expense 41,004 24,895 10,791 6,500 3,616
------------- ------------- ------------ ------------ ------------
Total benefits and expenses $ 206,619 $ 119,988 $ 65,466 $ 48,860 $ 28,178
============= ============= ============ ============ ============
Income tax expense (benefit)$ 8,154 $ 10,478 $ (4,038) $ 397 $ 247
============= ============= ============ ============ ============
Net income (loss) $ 34,767 $ 27,548 $ 26,623 $ (2,568) $ (141)
============= ============= ============ ============ ============
Balance Sheet Data:
Total Assets $ 18,848,273 $ 12,894,290 $ 8,268,696 $ 4,956,018 $ 2,824,311
============= ============= ============ ============ ============
Future fees payable
to parent $ 368,978 $ 233,034 $ 47,112 $ - $ -
============= ============= ============ ============ ============
Surplus Notes $ 193,000 $ 213,000 $ 213,000 $ 103,000 $ 69,000
============= ============= ============ ============ ============
Shareholder's Equity $ 250,417 $ 184,421 $ 126,345 $ 59,713 $ 52,206
============= ============= ============ ============ ============
</TABLE>
* On annuity and life insurance sales of $4,159,662, $3,697,990,
$2,795,114, $1,628,486, and $1,372,874, during the years ended
December 31, 1998, 1997, 1996, 1995, and 1994, respectively,
with contractowner assets under management of $17,854,761,
$12,119,191, $7,764,891, $4,704,044, and $2,661,161 as of
December 31, 1998, 1997, 1996, 1995 and 1994, respectively.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 is primarily in the business of issuing long-term
savings and retirement products to individuals, groups and
qualified pension plans. Since its business inception in 1988,
the Company has offered a wide array of annuities, including: 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) non-registered group variable annuities designed
as funding vehicles for various types of qualified retirement
plans; and d) fixed and adjustable immediate annuities.
In April 1998, the Company began offering a term life insurance
product in support of an affiliate's mutual fund products. In May
1998, the Company launched a single premium variable life
insurance product. In January 1999, the Company launched its
second variable life product, which was designed as a flexible
premium product.
The Company markets its products to independent financial
planners and broker-dealers 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 and
life insurance.
The Company has a 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. Skandia Vida,
S.A. de C.V had total shareholder's equity of $4,724,000 and
$1,509,000 as of December 31, 1998, and 1997, respectively and
has generated net losses of $2,514,000, $1,438,000 and $781,000
for the years ended December 31, 1998, 1997 and 1996,
respectively.
RESULTS OF OPERATIONS
Annuity and life insurance sales increased 12%, 32% and 72% in
1998, 1997 and 1996, respectively. The Company continues to show
significant growth in sales volume and ranked 6th highest in
variable annuity sales during 1998, according to the Variable
Annuity Research and Data Service. The Company's growth is a
result of innovative product development activities, the
recruitment and retention of top producers, and the success of
its highly rated customer service teams.
The Company offers and sells a wide range of deferred annuities
and variable life insurance 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. 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 46%, 56% and 66% in 1998, 1997 and 1996,
respectively. These increases were a direct result of the
substantial sales volume and market growth of the separate
account assets. The sales and market growth also drove increases
in deferred acquisition costs, as well as, fixed maturity
investments, in support of the Company's risk based capital
requirements. Liabilities grew 46%, 56%, and 65% in 1998, 1997
and 1996, respectively, as a result of the reserves required for
the increased sales activity along with the sale of future fees
and charges during these periods. These sales of future fees and
charges to the Parent are needed to fund the acquisition costs of
the Company's variable annuity and life insurance business.
The Company generated net income after tax of $34,767,000
$27,548,000 and $26,623,000 in 1998, 1997 and 1996, respectively.
The Company benefited in each of the past three years from strong
sales growth and favorable market conditions. In 1996, the
Company also benefited from the recognition of the reversal of
the deferred tax valuation allowance. Assets under management,
from which the Company derives a significant portion of its
revenues grew 47%, 56% and 65% in 1998, 1997 and 1996,
respectively.
REVENUES
As a result of the significant growth in sales and assets under
management, contractowner fees and charges and fees generated
from transfer agency-type activities increased dramatically over
the past three years:
(annual percentage growth) 1998 1997 1996
---- ---- ----
Annuity and life insurance
fees and charges 54% 74% 80%
==== ==== ====
Transfer agency fee income 84% 68% 165%
==== ==== ====
Net investment income increased 36% and 416% in 1998 and 1997,
respectively, and decreased slightly in 1996. The majority of the
income was generated from the bond holdings, which were increased
in 1998 and 1997 to meet risk based capital goals, which in turn,
have increased as a result of the growth in business.
Premium income represents premiums earned on sales of immediate
annuities with life contingencies, supplementary contracts with
life contingencies and certain life insurance products. Sales of
these ancillary products decreased slightly in 1998 and 1996 and
increased in 1997.
BENEFITS
Annuity benefits and the change in annuity policy reserves relate
to annuity contracts with mortality risks, these being immediate
annuity contracts with life contingencies and supplementary
contracts with life contingencies. Due to the age of these
policies in force and the relative insignificance of these
products to the Company's overall portfolio of products,
fluctuations in these benefits were of marginal importance to the
Company's total operations.
The Company reinsures the guaranteed minimum death benefit
exposure on most of the variable annuity contracts. The costs
(minimum guaranteed premium per reinsurance contracts) associated
with reinsuring the guaranteed minimum death benefit reserve
exceeded the change in the guaranteed minimum death benefit
reserve during 1998, 1997 and 1996. This cost increased in each
of the past three years by 13%, 59% and 39%, respectively.
Return credited to contractowners includes primarily revenues on
the variable and market value adjusted annuities and variable
life insurance, offset by the benefit payments and change in
reserves required on this business. The 1998 return credited to
contractowners in the amount of ($8,930,000) represented higher
than expected Separate Account investment returns on the market
value adjusted contracts in support of the benefits and required
reserves.
<PAGE>
The 1997 return credited to contractowners in the amount of
($2,018,000) represents a break-even year for the Company's
market value adjusted product line. The 1996 return credited to
contractowners in the amount of $673,000 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
$1,800,000. 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.
EXPENSES
Underwriting, acquisition and other insurance expenses for 1998,
1997 and 1996 were as follows:
(in thousands) 1998 1997 1996
---- ---- ----
Commissions $ 224,916 $ 186,920 $ 140,459
General expenses 117,678 94,640 63,375
Net capitalization of
deferred acquisition costs (174,804) (191,064) (153,947)
--------- --------- ---------
Underwriting, acquisition and
other insurance expenses $ 167,790 $ 90,496 $ 49,887
========= ========= =========
Commissions increased with the growth in sales. General expenses
increased with the growth in sales, along with start up costs
associated with the Company's entry into variable life insurance
and qualified plans. The net capitalization of deferred
acquisition costs decreased in 1998 as a result of increased
amortization.
Interest expense increased $16,109,000, $14,104,000 and
$4,291,000 in 1998, 1997 and 1996, respectively, as a result of
additional financing transactions, which consisted of the sale of
future fees to the Parent ("securitization transactions"). In
addition, the Company had outstanding surplus notes totaling
$213,000,000 throughout 1998 ($20,000,000 was retired on December
31, 1998). Surplus notes as of December 31, 1998 and 1997 totaled
$193,000,000 and $213,000,000, respectively.
The effective income tax rates for the years ended December 31,
1998, 1997 and 1996 were 19%, 28% and (18%), respectively. The
effective rate is lower than the corporate rate of 35% due to
permanent differences, with the most significant item being the
dividend received deduction. Additionally, the Company released
a deferred tax valuation allowance of $9,325,000 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
ASLAC's liquidity requirement 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.
Approximately 97% of 1998 sales (94% in 1997 and 1996) were
variable annuity and life insurance products, 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 to financing in the form of surplus notes, capital
contributions, the sale of certain rights to future fees and
modified coinsurance arrangements.
<PAGE>
- During 1996, the Company issued $110,000,000 of surplus notes to
its Parent.
- During December 1998 and 1997, the Company received
$2,600,000 and $27,700,000, respectively, from its Parent to
support the capital needs of its U.S. operations during the
current year along with the following year's anticipated
growth in business.
- Funds received from new securitization transactions amounted to
$169,881,000, $194,512,000 and $50,221,000 for 1998, 1997
and 1996, respectively.
- During 1998, 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 Company expects the continued use of reinsurance and
securitization transactions to fund the cash strain anticipated
from the acquisition costs on the coming years' sales volume.
As of December 31, 1998 and 1997, shareholder's equity was
$250,417,000 and $184,421,000, respectively. The increases were
driven by the previously mentioned capital contributions received
from the Parent and net income from operations.
ASLAC has long-term surplus notes and a short-term borrowings
with its Parent. No dividends have been paid to its Parent.
The National Association of Insurance Commissioners ("NAIC")
requires insurance companies to report information regarding
minimum Risk Based Capital ("RBC") requirements. These
requirements are intended to allow insurance regulators to
identify companies which may need regulatory attention. The RBC
model law requires that insurance companies apply various factors
to asset, premium and reserve items, all of which have inherent
risks. The formula includes components for asset risk, insurance
risk, interest risk and business risk. The Company has complied
with the NAIC's RBC reporting requirements and has total adjusted
capital well above required capital.
YEAR 2000 COMPLIANCE
The Company is continuing its ongoing assessment of the potential
impact of the Year 2000 issue on various aspects of its business.
The Company's computer support is provided by its affiliate,
American Skandia Information Services and Technology Corporation,
which also provides such support for the Company's affiliated
broker-dealer, American Skandia Marketing, Incorporated and the
Company's affiliated investment advisory firm, American Skandia
Investment Services, Incorporated. Because of the nature of the
Company's business, any assessment of the potential impact of the
Year 2000 issues on the Company must be an assessment of the
potential impact of these issues on all these companies, which
are referred to below as "American Skandia".
Business Partners
Management believes the area where the Company is most vulnerable
to Year 2000 issues is in its interfaces with computer systems of
investment managers, sub-advisors, third party administrators,
vendors and other business partners. The inability to properly
recognize date sensitive electronic information and transfer data
between systems could cause errors or even a complete systems failure
which would result in a temporary inability to process
transactions correctly or engage in normal business activities.
The American Skandia deferred annuity operational business
partners report that all critical interfaces are Year 2000
compliant. All investment managers and sub-advisors are required
by the Securities and Exchange Commission to publicly disclose
their Year 2000 status in December 1998 and June 1999.
<PAGE>
American Skandia has initiated formal communications with parties
that provide third party administration, record keeping and trust
services in connection with its life insurance and qualified
retirement plan annuities business. Management has already
received several written assurances that these firms will be Year
2000 compliant. The Company expects to have certifications from
all remaining parties by July 1999. American Skandia is currently
developing contingency plans in the event that these targets are
not met.
Information Technology Systems
American Skandia is a relatively young company whose internally
developed systems were designed from the start with four digit
year codes. The Company engaged an external information
technology specialist to review American Skandia's operating
systems and internally developed software. The assessment was
completed in December 1997 and the results were favorable.
Specific modifications were suggested, evaluated and implemented
for the annuity administration system. This project was completed
during 1998 and a certificate of compliance has been received.
Other non-critical internally developed applications in the
client/server area have already been or will be remediated during
1999. The costs associated with this aspect of Year 2000
compliance have not had, and are not expected to have, a
significant impact on the Company's results from operations.
Suppliers and Non-Information Technology Systems
Like most companies, American Skandia is reliant on network, and
desktop operating systems and software providers to release
compliant versions of their respective systems. American
Skandia's network is currently at the most compliant level
available. The standard desktop software will be replaced, as
fully compliant versions become available. In addition, the
Company is in the process of contacting the non-information
systems vendors and suppliers regarding their Year 2000
compliance status and will factor the results of these
assessments into its contingency plans.
Management believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. However, should
errors or disruptions in computer service occur, the Company
could realize losses. Given the nature and uncertainty of such
losses, the amounts cannot be reasonably determined.
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
At December 31, 1998, the Company held in its general account
$149,484,000 of fixed maturity investments that are sensitive to
changes in interest rates. These securities are held in support
of the Company's fixed immediate annuities and supplementary
contracts ($23,699,000 in reserves at December 31, 1998) and in
support of the Company's target solvency capital. With respect to
the insurance contracts, interest rate risk is managed through an
asset/liability matching program which takes into account the
risk variables of the insurance liabilities supported by the
assets. In addition, the Company has a conservative investment
philosophy, with all investments being investment grade corporate
securities, government agency or U.S. government securities.
In addition, the Company's deferred annuity products offer a
fixed option that subjects the Company to interest rate risk. The
fixed option guarantees a fixed rate of interest for a period of
time selected by the contract holder (options available range
from 1 to 10 years). Withdrawal of funds before the end of the
guarantee period subjects the contract holder to a market value
adjustment ("MVA"). In the event of rising interest rates, which
make the fixed maturity securities underlying the guarantee less
valuable, the market value adjustment could be negative. In the
event of falling interest rates, which make the fixed maturity
securities underlying the guarantee more valuable, the market
value adjustment could be positive. Should these contracts be
surrendered early, this increase or decrease in fair value would
be substantially offset through the application of the MVA and
its effect on contractholders choosing to withdraw. The risk to
the Company on these contracts relates to the ability to reinvest
proceeds from interest payments and other activity over the
guarantee term at interest rates required to meet interest rate
guarantees and the risk of default. This risk is managed through
an asset/liability matching program. At December 31, 1998, the
Company had $613,057,000 of contracts subject to MVA.
Equity Market Exposure
The Company has a small portfolio of equity investments; mutual
funds which are held in support of a deferred compensation
program. In the event of a decline in market values of underlying
securities, the value of the portfolio would decline, however the
accrued benefits payable under the related deferred compensation
program would decline by a corresponding amount.
The primary equity market risk to the Company comes from the
nature of the variable annuity and variable life products sold by
ASLAC. Various fees and charges earned by ASLAC are substantially
derived as a percentage of the market value of assets under
management. In a market decline, this income would be reduced.
This could be further compounded by customer withdrawals, net of
applicable surrender charge revenues, partially offset by
transfers to the fixed option discussed above. A 10% decline in
the market value of the assets under management at December 31,
1998, sustained throughout 1999, would result in a $28,000,000
drop in related fee income.
In addition, it is not clear what the impact of a prolonged
downturn in the equity markets would have on ongoing sales.
Customer's perceptions of a downturn in equity markets coupled
with rising interest rates could move them into financial
products other than variable annuities or variable life; however,
the Company's products might remain attractive to purchasers in
relation to other long-term savings vehicles even after such a
decline.
<PAGE>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the consolidated statements of financial condition of American
Skandia Life Assurance Corporation (the "Company" which is a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1998 and 1997,
and the related consolidated statements of income, shareholder's equity, and
cash flows for the years 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 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Skandia Life Assurance Corporation at December 31, 1998 and 1997, and
the consolidated results of its operations and cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young, LLP
- ----------------------
Hartford, Connecticut
February 20, 1999
<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 statements of operations,
shareholder's equity, and cash flows of American Skandia Life Assurance
Corporation and subsidiary (a wholly-owned subsidiary of Skandia Insurance
Company Ltd.) for the year 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 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, such consolidated financial statements present fairly, in all
material respects, the consolidated results of operations and cash flows of
American Skandia Life Assurance Corporation and subsidiary for the year 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
(in thousands)
AS OF DECEMBER 31,
1998 1997
---------- ----------
ASSETS
Investments:
Fixed maturities - at amortized cost $ 8,289 $ 9,367
Fixed maturities - at fair value 141,195 108,323
Investment in mutual funds - at fair value 8,210 6,711
Policy loans 569 687
---------- -----------
Total investments 158,263 125,088
Cash and cash equivalents 77,525 81,974
Accrued investment income 2,880 2,442
Fixed assets 328 356
Deferred acquisition costs 721,507 546,703
Reinsurance receivable 4,191 6,343
Receivable from affiliates 1,161 1,911
Income tax receivable - current - 1,048
Income tax receivable - deferred 38,861 26,174
State insurance licenses 4,413 4,563
Other assets 3,744 2,524
Separate account assets 17,835,400 12,095,164
---------- ----------
Total assets $18,848,273 $12,894,290
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Reserve for future contractowner benefits $ 37,508 $ 43,204
Policy reserves 25,545 24,415
Drafts outstanding 28,941 19,278
Accounts payable and accrued expenses 91,827 71,190
Income tax payable 6,657 -
Payable to affiliates - 584
Future fees payable to parent 368,978 233,034
Short-term borrowing 10,000 10,000
Surplus notes 193,000 213,000
Separate account liabilities 17,835,400 12,095,164
---------- ----------
Total liabilities 18,597,856 12,709,869
---------- ----------
Shareholders Equity:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 179,889 151,527
Retained earnings 64,993 30,226
Accumulated other comprehensive income 3,535 668
---------- ----------
Total shareholder's equity 250,417 184,421
---------- ----------
Total liabilities and shareholder's equity $18,848,273 $12,894,290
=========== ===========
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1998 1997 1996
------------ ------------- ------------
REVENUES
Annuity and life insurance charges and fees $186,211 $121,158 $69,780
Fee income 50,839 27,593 16,420
Net investment income 11,130 8,181 1,586
Premium income 874 920 125
Net realized capital gains 99 87 134
Other 387 75 6
------------ ------------- ------------
Total revenues 249,540 158,014 88,051
------------ ------------- ------------
BENEFITS AND EXPENSES
Benefits:
Annuity benefits 558 2,033 613
Change in annuity policy reserves 1,053 37 635
Cost of minimum death benefit reinsurance 5,144 4,545 2,867
Return credited to contractowners (8,930) (2,018) 673
------------ ------------- ------------
(2,175) 4,597 4,788
------------ ------------- ------------
Expenses:
Underwriting, acquisition and
other insurance expenses 167,640 90,346 49,737
Amortization of state insurance licenses 150 150 150
Interest expense 41,004 24,895 10,791
------------ ------------- ------------
208,794 115,391 60,678
------------ ------------- ------------
Total benefits and expenses 206,619 119,988 65,466
------------ ------------- ------------
Income from operations before income taxes 42,921 38,026 22,585
Income tax expense (benefit) 8,154 10,478 (4,038)
------------ ------------- ------------
Net income $34,767 $27,548 $26,623
============ ============= ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1998 1997 1996
----------- ----------- -----------
Common stock:
Beginning and ending balance $2,000 $ 2,000 $ 2,000
Additional paid in capital:
Beginning balance 151,527 122,250 81,875
Additional contributions 28,362 29,277 40,375
----------- ----------- ----------
Ending balance 179,889 151,527 122,250
Retained earnings (deficit):
Beginning balance 30,226 2,678 (23,945)
Net income 34,767 27,548 26,623
----------- ----------- ----------
Ending balance 64,993 30,226 2,678
Accumulated other comprehensive income:
Beginning balance 668 (584) (217)
Other comprehensive income 2,867 1,252 (367)
----------- ----------- -----------
Ending balance 3,535 668 (584)
----------- ----------- -----------
Total shareholder's equity $250,417 $184,421 $126,345
=========== =========== ===========
</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 FLOW
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1998 1997 1996
------------ ------------ ------------
Cash flow from operating activities:
Net income $ 34,767 $ 27,548 $ 26,623
Adjustments to reconcile net income to net cash
used in operating activities:
Increase in policy reserves 1,130 3,176 1,852
Amortization of bond discount 101 73 27
Amortization of insurance licenses 150 150 150
Change in receivable from/payable to affiliates 166 (1,321) 540
Change in income tax receivable/payable 7,704 (2,172) 1,688
Increase in other assets (1,191) (604) (661)
Increase in accrued investment income (438) (483) (1,764)
Decrease/(increase) in reinsurance receivable 2,152 (268) (676)
Increase in deferred acquisition costs, net (174,804) (190,969) (153,918)
Increase in income tax receivable - deferred (14,242) (9,631) (16,903)
Increase in accounts payable and accrued expenses 20,637 5,719 32,323
Increase in drafts outstanding 9,663 6,245 13,032
Change in foreign currency translation, net (22) (34) (77)
Realized gain on sale of investments (99) (87) (134)
------------ ------------ ------------
Net cash used in operating activities (114,326) (162,658) (97,898)
------------ ------------ ------------
Cash flow from investing activities:
Purchase of fixed maturity investments (31,828) (28,905) (96,813)
Proceeds from sale and maturity of fixed maturity investments 4,049 10,755 8,947
Purchase of shares in mutual funds (7,158) (5,595) (2,160)
Proceeds from sale of shares in mutual funds 6,086 1,415 1,274
Decrease/(increase) in policy loans 118 (528) (104)
------------ ------------ ------------
Net cash used in investing activities (28,733) (22,858) (88,856)
------------ ------------ ------------
Cash flow from financing activities:
Capital contributions from parent 8,362 29,277 40,375
Surplus notes - - 110,000
Increase in future fees payable to Parent 135,944 185,922 47,112
Net (withdrawals from)/deposits to contractowner accounts (5,696) 6,959 5,753
------------ ------------ ------------
Net cash provided by financing activities 138,610 222,158 203,240
------------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents (4,449) 36,642 16,486
------------ ------------ ------------
Cash and cash equivalents at beginning of year 81,974 45,332 28,846
------------ ------------ ------------
Cash and cash equivalents at end of year $ 77,525 $ 81,974 $ 45,332
============ ============ ============
Supplemental cash flow disclosure:
Income taxes paid $ 14,651 $ 22,308 $ 11,177
============ ============ ============
Interest paid $ 35,588 $ 16,916 $ 7,095
============ ============ ============
</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, 1998
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 long-term savings and retirement products which
are distributed through its affiliated broker/dealer company, American
Skandia Marketing, Incorporated ("ASM"). The Company currently issues
variable life insurance and variable, fixed, market value adjusted and
immediate annuities for individuals, groups and qualified pension
plans.
The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. 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. Skandia Vida, S.A. de C.V. had total
shareholder's equity of $4,724,000 and $1,509,000 as of December 31,
1998, and 1997, respectively, and has generated net losses of
$2,514,000, $1,438,000 and $781,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles. Intercompany transactions and balances have been
eliminated in consolidation.
Certain reclassifications have been made to prior year amounts
to conform with the current year presentation.
B. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard
("SFAS") 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging
activities. The standard requires that all derivatives be
carried on the balance sheets at fair value. The Company is
currently not involved in derivatives or hedging instruments
as part of its investment strategy. The Company is evaluating
the potential impact of a change in accounting for derivative
instruments embedded in certain products it issues. This
standard is effective for years beginning after June 15, 1999.
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Software Developed or Obtained
for Internal Use," which provides guidance for determining
when computer software developed or obtained for internal use
should be capitalized. It also provides guidance on the
amortization of capitalized costs and the recognition of
impairment. The Company is evaluating the potential impact of
adopting this SOP, which is effective for fiscal years
beginning after December 15, 1998.
<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 other comprehensive income.
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 other comprehensive income.
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 $6,000,000 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 $142,000 and $96,000 at
December 31, 1998 and 1997, respectively. Depreciation expense
for the years ended December 31, 1998, 1997 and 1996 was
$46,000 and $63,000 and $29,000, respectively.
G. Income Taxes
The Company is included in the consolidated federal income tax
return of Skandia U.S. Investment 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 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.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
H. Recognition of Revenue and Contract Benefits
Revenues for variable annuity contracts consist of charges
against contractowner account values for mortality and expense
risks, administration fees, surrender charges and an annual
maintenance fee per contract. Benefit reserves for variable
annuity contracts represent the account value of the contracts
and are included in the separate account liabilities.
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 are included in return credited to
contractowners. Benefit reserves for these contracts represent
the account value of the contracts, and are included in the
general account 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 6.25% to 8.25% and 6.5% to 8.25% at December 31, 1998 and
December 31, 1997, respectively.
Revenues for variable life insurance contracts consist of
charges against contractowner account values for the
maintenance and expense fees, cost of insurance fees and
surrender charges. Benefit reserves for variable life
insurance contracts represent the account value of the
contracts and are included in the separate account
liabilities.
I. Deferred Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
deferred net of reinsurance. These costs include commissions,
costs of contract issuance, and certain selling expenses that
vary with production. These costs are being amortized
generally in proportion to expected gross profits from
surrender charges, policy and asset based fees and mortality
and expense margins. This amortization is adjusted
retrospectively and prospectively when estimates of current
and future gross profits to be realized from a group of
products are revised.
Details of the deferred acquisition costs and related
amortization for the years ended December 31, are as follows:
(in thousands) 1998 1997 1996
---- ---- ----
Balance at beginning of year $546,703 $355,734 $201,816
Acquisition costs deferred
during the year 261,432 243,476 171,253
Acquisition costs amortized
during the year (86,628) (52,507) (17,335)
--------- --------- ---------
Balance at end of year $721,507 $546,703 $355,734
======== ======== ========
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
J. 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 and variable life insurance
business. The reinsurance is effected under quota share
contracts.
The company reinsures certain mortality risks relating to the
variable life insurance product, as well as, the guaranteed
minimum death benefit feature in the variable annuity product.
At December 31, 1998 and 1997, in accordance with the
provisions of a modified coinsurance agreement, the Company
accrued $1,976,000 and $0, respectively, for amounts
receivable from favorable reinsurance experience on a block of
variable annuity business.
K. Translation of Foreign Currency
The financial position and results of operations of the
Company's Mexican subsidiary are measured using local currency
as the functional currency. Assets and liabilities of the
subsidiary are translated at the exchange rate in effect at
each year-end. Statements of income and shareholder's equity
accounts are translated at the average rate prevailing during
the year. Translation adjustments arising from the use of
differing exchange rates from period to period are reported as
a component of other comprehensive income.
L. 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.
The carrying value of short-term borrowing approximates fair
value due to the short-term nature of these liabilities.
Fair values of certain financial instruments, such as future
fees payable to parent and surplus notes are not readily
determinable and are excluded from fair value disclosure
requirements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
M. Separate Accounts
Assets and liabilities in Separate Accounts are included as
separate captions in the consolidated statements of financial
condition. Separate Account assets consist principally of long
term bonds, investments in mutual funds, short-term securities
and cash and cash equivalents, all of which are carried at
fair value. The investments are managed predominately through
the Company's investment advisory affiliate, American Skandia
Investment Services, Inc. ("ASISI"), utilizing various fund
managers as sub-advisors. The remaining investments are
managed by independent investment firms. The contractowner has
the option of directing funds to a wide variety of mutual
funds. The investment risk on the variable portion of a
contract is borne by the contractowner. A fixed option with a
minimum guaranteed interest rate is also available. The
Company is responsible for the credit risk associated with
these investments.
Included in Separate Account liabilities are $771,195,000 and
$773,067,000 at December 31, 1998 and 1997, respectively,
relating to annuity contracts for which the contractowner is
guaranteed a fixed rate of return. Separate Account assets of
$771,195,000 and $773,067,000 at December 31, 1998 and 1997,
respectively, consisting of long term bonds, short term
securities, transfers due from general account and cash and
cash equivalents are held in support of these annuity
contracts, pursuant to state regulation.
N. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant
estimates and assumptions are related to deferred acquisition
costs and involve policy lapses, investment return and
maintenance expenses. Actual results could differ from those
estimates.
3. COMPREHENSIVE INCOME
As of January 1, 1998 the Company adopted SFAS 130, "Reporting
Comprehensive Income," which sets standards for the reporting and
display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's financial
position or net income. SFAS 130 requires unrealized gains and losses
on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported
separately in shareholder's equity, to be included in other
comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of SFAS 130.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The components of comprehensive income, net of tax, for the years ended
December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(in thousands) 1998 1997 1996
---- ---- ----
Net income $34,767 $27,548 $26,623
Other comprehensive income:
Unrealized investment gains/(losses) on
available for sale securities 2,751 1,288 (331)
Reclassification adjustment for realized
losses/(gains) included in investment income 138 (14) (99)
--------- --------- ----------
Net unrealized gains/(losses) on securities 2,889 1,274 (430)
Foreign currency translation (22) (22) 64
---------- ---------- ----------
Other comprehensive income 2,867 1,252 (367)
-------- -------- ----------
Comprehensive income $37,634 $28,800 $26,257
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
The components of accumulated other comprehensive income, net of tax,
as of December 31, 1998 and 1997 were as follows:
<S> <C> <C>
(in thousands) 1998 1997
---- ----
Unrealized investment gains $3,843 $954
Foreign currency translation (308) (286)
-------- -----
Accumulated other comprehensive income $3,535 $668
====== ====
</TABLE>
4. INVESTMENTS
The amortized cost, gross unrealized gains/losses and estimated fair
value of available-for-sale and held-to-maturity fixed maturities and
investments in mutual funds as of December 31, 1998 and 1997 are shown
below. All securities held at December 31, 1998 are publicly traded.
Investments in fixed maturities as of December 31, 1998 consisted of
the following:
<TABLE>
<CAPTION>
(in thousands) Held-to-Maturity
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government
obligations $3,774 $57 $ - $3,831
Corporate securities 4,515 34 - 4,549
------- ---- ----- -------
Totals $8,289 $91 $ - $8,380
====== === ==== ======
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
(in thousands) Available-for-Sale
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government
obligations $ 17,399 $ 678 $ - $ 18,077
Obligations of
state and political
subdivisions 253 7 - 260
Corporate securities 117,774 5,160 76 122,858
--------- ------- ---- -----------
Totals $135,426 $5,845 $76 $141,195
======== ====== === ========
</TABLE>
The amortized cost and fair value of fixed maturities, by contractual
maturity, at December 31, 1998 are shown below.
<TABLE>
<CAPTION>
(in thousands) Held-to-Maturity Available-for-Sale
<S> <C> <C> <C> <C>
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or less $4,927 $4,982 $ - $ -
Due after one through five years 3,362 3,398 54,789 56,850
Due after five through ten years - - 80,637 84,345
---------- ---------- ---------- ----------
Total $8,289 $8,380 $135,426 $141,195
====== ====== ======== ========
</TABLE>
Investments in fixed maturities as of December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
(in thousands) Held-to-Maturity
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government
obligations $3,790 $71 $9 $3,852
Obligations of
state and political
subdivisions 50 - - 50
Corporate
securities 5,527 2 19 5,510
------- ----- ---- -------
Totals $9,367 $73 $28 $9,412
====== === === ======
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
(in thousands) Available for Sale
------------------
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
obligations $ 14,999 $ 202 $ - $ 15,201
Obligations of
state and political
subdivisions 202 - - 202
Corporate
securities 91,470 1,505 55 92,920
---------- ------- ---- ----------
Totals $106,671 $1,707 $55 $108,323
======== ====== === ========
</TABLE>
Proceeds from sales of fixed maturities during 1998, 1997 and 1996 were
$999,000, $5,056,000 and $8,732,000, respectively. Proceeds from
maturities during 1998, 1997 and 1996 were $3,050,000, $5,700,000 and
$215,000, respectively.
The cost, gross unrealized gains/losses and fair value of investments
in mutual funds at December 31, 1998 and 1997 are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(in thousands) Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
------ ---------- ---------- ------
1998 $8,068 $416 $274 $8,210
====== ==== ==== ======
1997 $6,896 $ 43 $228 $6,711
====== ==== ==== ======
</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>
(in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ - $ 10 $ -
Gross losses (1) - -
Investment in mutual funds:
Gross gains 281 116 140
Gross losses (181) (39) (6)
------- ------ -----
Totals $ 99 $ 87 $134
====== ===== ====
</TABLE>
5. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31,
1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $ 8,534 $6,617 $ 836
Cash and cash equivalents 1,717 1,153 685
Investment in mutual funds 1,013 554 144
Policy loans 45 28 5
----------- --------- ----------
Total investment income 11,309 8,352 1,670
Investment expenses 179 171 84
---------- -------- ---------
Net investment income $11,130 $8,181 $1,586
======= ====== ======
</TABLE>
6. INCOME TAXES
The significant components of income tax expense (benefit) for the
years ended December 31, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current tax expense $22,384 $20,108 $12,865
Deferred tax benefit (14,230) (9,630) (16,903)
-------- --------- --------
Total income tax expense (benefit) $ 8,154 $10,478 ($ 4,038)
======== ======= =======
</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, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
---- ----
<S> <C> <C>
Deferred tax liabilities:
Deferred acquisition costs ($210,731) ($159,766)
Payable to reinsurers (25,585) (25,369)
Policy fees (859) (656)
Unrealized investment gains and losses (2,069) (514)
----------- -------------
Total (239,244) (186,305)
--------- ---------
Deferred tax assets:
Net separate account liabilities 225,600 175,872
Reserve for future contractowner benefits 13,128 15,121
Other reserve differences 25,335 10,534
Deferred compensation 9,619 7,187
Surplus notes interest 3,375 2,729
Foreign exchange translation 166 154
Other 882 882
------------ ------------
Total 278,105 212,479
--------- ---------
Income tax receivable - deferred $ 38,861 $ 26,174
========= =========
</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 $9,325,000 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>
(in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income (loss) before taxes
Domestic $45,435 $39,464 $23,366
Foreign (2,514) (1,438) (781)
--------- --------- ---------
Total 42,921 38,026 22,585
Income tax rate 35% 35% 35%
--------- --------- ---------
Tax expense at federal
statutory income tax rate 15,022 13,309 7,905
Tax effect of:
Change in valuation allowance - - (9,325)
Dividend received deduction (9,085) (4,585) (2,266)
Losses of foreign subsidiary 880 503 273
Meals and entertainment 487 340 43
State income taxes 673 577 356
Other 177 334 (1,024)
-------- ------- ---------
Income tax expense (benefit) $ 8,154 $10,478 ($ 4,038)
======== ======= =========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
7. RECEIVABLE FROM/PAYABLE TO AFFILIATES
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) have been charged to the Company at cost by
American Skandia Information Services and Technology Corporation
("ASIST"), an affiliated company; and likewise, the Company has charged
operating costs to ASISI. The total cost to the Company for these items
was $7,722,000, $5,572,000 and $11,581,000 for the years ended December
31, 1998, 1997 and 1996, respectively. Income received for these items
was $1,355,000, $3,225,000 and $1,148,000 for the years ended December
31, 1998, 1997 and 1996, respectively. Amounts receivable from
affiliates under these arrangements were $98,000 and $549,000 as of
December 31, 1998 and 1997, respectively. Amounts payable to affiliates
under these arrangements were $551,000 and $264,000 as of December 31,
1998 and 1997, respectively.
8. FUTURE FEES PAYABLE TO PARENT
In a series of transactions with its Parent, the Company sold certain
rights to receive future fees and contract charges expected to be
realized on variable portions of designated blocks of deferred annuity
contracts. The effective dates and issue periods these transactions
cover are as follows:
Closing Effective Contract Issue
Transaction Date Date Period
----------- -------- --------- -----------------
1996-1 12/16/96 9/1/96 1/1/94 - 6/30/96
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98
1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98
1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98
In connection with these transactions, the Parent 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 a percentage of future mortality and expense
charges and contingent deferred sales charges, after reinsurance,
expected to be realized over the remaining surrender charge period of
the designated contracts (6 to 8 years). The percentage is 100% on
transactions 1997-3 and 1998-3 and 80% on all other transactions.
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 as of the respective effective date was as follows:
<TABLE>
<CAPTION>
(in thousands)
Present
<S> <C> <C> <C>
Transaction Discount Rate Value
----------- ------------- -------
1996-1 7.5% $50,221
1997-1 7.5% 58,767
1997-2 7.5% 77,552
1997-3 7.5% 58,193
1998-1 7.5% 61,180
1998-2 7.0% 68,573
1998-3 7.0% 40,128
</TABLE>
Payments representing fees and charges in the aggregate amount of
$69,226,000, $22,250,000 and $0, were made by the Company to the Parent
for the years ended December 31, 1998, 1997 and 1996, respectively.
Related interest expense of $22,978,000, $6,842,000 and $42,000 has
been included in the statement of income for the years ended December
31, 1998, 1997 and 1996, respectively.
Expected payments of future fees payable to Parent as of December 31,
1998 are as follows:
Year Ended
(in thousands) December 31, Amount
------------ ----------
1999 $ 64,520
2000 68,403
2001 67,953
2002 64,238
2003 54,382
2004 35,601
2005 12,441
2006 1,440
----------
Total $ 368,978
==========
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)
9. LEASES
The Company leases office space under a lease agreement established in
1989 with ASIST. The lease expense for 1998, 1997 and 1996 was
$3,588,000, $2,428,000 and $1,583,000, respectively. Future minimum
lease payments per year and in aggregate as of December 31, 1998 are as
follows:
(in thousands) 1999 $ 3,619
2000 5,070
2001 5,070
2002 5,070
2003 5,070
2004 and thereafter 40,271
--------
Total $ 64,170
========
10. RESTRICTED ASSETS
To comply with certain state insurance departments' requirements, the
Company maintains cash, bonds and notes on deposit with various states.
The carrying value of these deposits amounted to $3,747,000 and
$3,757,000 as of December 31, 1998, and 1997, respectively. These
deposits are required to be maintained for the protection of
contractowners within the individual states.
11. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $285,553,000 and $294,586,000
at December 31, 1998 and 1997, respectively.
The statutory basis net loss was $13,152,000, $8,970,000 and $5,405,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
Under various state insurance laws, the maximum amount of dividends
that can be paid to shareholders without prior approval of the state
insurance department is subject to restrictions relating to statutory
surplus and net gain from operations. At December 31, 1998, no amounts
may be distributed without prior approval.
12. EMPLOYEE BENEFITS
The Company has a 401(k) plan for which substantially all employees are
eligible. Under this plan, the Company contributes 3% of salary for all
participating employees and matches employee contributions at a 50%
level up to an additional 3% Company contribution. Company
contributions to this plan on behalf of the participants were
$2,115,000, $1,220,000 and $850,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The Company has a deferred compensation plan, which is available to the
internal field marketing staff and certain officers. Company
contributions to this plan on behalf of the participants were $342,000,
$270,000 and $245,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
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, with a new plan
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 was $21,372,000 and $15,720,000
as of December 31, 1998 and 1997, respectively. Payments under this
plan were $2,407,000, $1,119,000 and $602,000 for the years ended
December 31, 1998, 1997, and 1996, respectively.
13. REINSURANCE
The effect of reinsurance for the years ended December 31, 1998, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
(in thousands) 1998
----
Policy Change in Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
<S> <C> <C> <C>
Gross $215,425 $ 691 ($8,921)
Ceded 29,214 (362) 9
-------- ------- -------
Net $186,211 $ 1,053 ($8,930)
======== ======= =======
1997
----
Policy Change in Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $144,417 $955 ($1,972)
Ceded 23,259 918 46
-------- ----- -------
Net $121,158 $ 37 ($2,018)
======== ===== ======
1996
----
Policy Change in Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $87,370 $815 $779
Ceded 17,590 180 106
-------- ----- -----
Net $69,780 $635 $673
======= ==== ====
</TABLE>
Such ceded reinsurance does not relieve the Company of its obligations
to policyholders. The Company remains liable to its policyholders for
the portion reinsured to the extent that any reinsurer does not meet
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)
14. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash.
Surplus notes outstanding as of December 31, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
(in thousands)
Interest for the
Interest 1998 1997 Years Ended December 31,
Issue Date Rate Amount Amount 1998 1997 1996
---------- ---- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
December 29, 1993 6.84% $ - $ 20,000 $ 1,387 $ 1,387 $ 1,391
February 18, 1994 7.28% 10,000 10,000 738 738 740
March 28, 1994 7.90% 10,000 10,000 801 801 803
September 30, 1994 9.13% 15,000 15,000 1,389 1,389 1,392
December 28, 1994 9.78% 14,000 14,000 1,388 1,388 1,392
December 19, 1995 7.52% 10,000 10,000 762 762 765
December 20, 1995 7.49% 15,000 15,000 1,139 1,139 1,142
December 22, 1995 7.47% 9,000 9,000 682 682 684
June 28, 1996 8.41% 40,000 40,000 3,411 3,411 1,747
December 30, 1996 8.03% 70,000 70,000 5,699 5,699 31
-------- -------- ------- ------- ------- -
Total $193,000 $213,000 $17,396 $17,396 $10,087
======== ======== ======= ======= =======
</TABLE>
The surplus note for $20,000,000 dated December 29, 1993 was converted
to additional paid-in capital on December 31, 1998.
All surplus notes mature seven years from the issue date.
Payment of interest and repayment of principal for these notes is
subject to certain conditions and require approval by the Insurance
Commissioner of the State of Connecticut. At December 31, 1998 and
1997, $9,644,000 and $7,796,000, respectively, of accrued interest on
surplus notes was not approved for payment under these criteria.
15. SHORT-TERM BORROWING
The Company had a $10 million short-term loan payable to the Parent at
December 31, 1998 and 1997. The total interest expense to the Company
was $622,000, $642,000 and $643,000 and for the years ended December
31, 1998, 1997 and 1996, respectively, of which $182,000 and $201,000
was payable as of December 31, 1998 and 1997, respectively.
16. CONTRACT WITHDRAWAL PROVISIONS
Approximately 99% of the Company's separate account liabilities are
subject to discretionary withdrawal by contractowners at market value
or with market value adjustment. Separate account assets which are
carried at fair value are adequate to pay such withdrawals which are
generally subject to surrender charges ranging from 10% to 1% for
contracts held less than 10 years.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
17. SEGMENT REPORTING
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards
for the way that public enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards related to disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for
financial statement periods beginning after December 15, 1997.
During 1998, to complement its annuity products, the Company launched
specific marketing and operational activities towards the release of
variable life insurance and qualified retirement plan annuity products.
As of December 31, 1998, sales were not significant enough to warrant
full segment disclosures. Sales, as measured by premium received, for
the year ended December 31, 1998 and assets under management as of
December 31, 1998, for the respective segments were as follows:
<TABLE>
<CAPTION>
(in thousands) Variable Variable Qualified
Annuity Life Plans Total
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
Sales $ 4,122,272 $1,188 $36,202 $ 4,159,662
=========== ====== ======= ===========
Assets under management $17,809,437 $1,295 $44,029 $17,854,761
=========== ====== ======= ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company on a quarterly basis:
<TABLE>
<CAPTION>
(in thousands) Three Months Ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1998
----
<S> <C> <C> <C> <C>
Premiums and other insurance
revenues $ 50,593 $ 57,946 $ 62,445 $ 67,327
Net investment income 3,262 2,410 2,469 2,989
Net realized capital gains (losses) 156 13 (46) (24)
-------- -------- -------- --------
Total revenues 54,011 60,369 64,868 70,292
Benefits and expenses 46,764 42,220 48,471 69,164
-------- -------- -------- --------
Pre-tax net income 7,247 18,149 16,397 1,128
Income taxes 1,175 4,174 2,223 582
-------- -------- -------- --------
Net income $ 6,072 $ 13,975 $ 14,174 $ 546
======== ======== ======== ========
1997
----
Premiums and other insurance
revenues $ 30,186 $ 34,056 $ 41,102 $ 44,402
Net investment income 1,369 2,627 2,031 2,154
Net realized capital gains 20 43 21 3
-------- -------- -------- --------
Total revenues 31,575 36,726 43,154 46,559
Benefits and expenses 18,319 30,465 31,179 40,025
-------- -------- -------- --------
Pre-tax net income 13,256 6,261 11,975 6,534
Income taxes 4,260 2,614 3,354 250
-------- -------- -------- --------
Net income $ 8,996 $ 3,647 $ 8,621 $ 6,284
======== ======== ======== ========
1996
----
Premiums and other insurance
revenues $ 16,606 $ 20,453 $ 22,366 $ 26,906
Net investment income 455 283 270 578
Net realized capital gains 92 13 6 23
-------- -------- -------- --------
Total revenues 17,153 20,749 22,642 27,507
Benefits and expenses 12,725 9,430 17,007 26,304
-------- --------- -------- --------
Pre-tax net income 4,428 11,319 5,635 1,203
Income taxes 1,769 3,624 3,096 (12,527)
-------- --------- -------- --------
Net income $ 2,659 $ 7,695 $ 2,539 $ 13,730
======== ========= ======== ========
</TABLE>
As described in Note 6, the valuation allowance relating to deferred
income taxes was released during the three months ended December 31,
1996.
<PAGE>
Appendix B - Condensed Financial Information About Separate Account B
The Unit Prices and number of Units in the Sub-accounts that commenced
operations prior to January 1, 1999 are shown below. All or some of these
Sub-accounts were available during the periods shown as investment options for
other variable annuities we offer pursuant to different prospectuses. The
Insurance Charge 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, 1999 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.
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AST Founders
Passport (1)
(1994)
Unit Price $12.54 11.46 11.39 10.23 - - - - - -
Number of Units 9,207,623 9,988,104 9,922,698 2,601,283 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
International Equity
(1994)
Unit Price $13.14 11.69 11.70 10.39 9.49 - - - - -
Number of Units 34,328,425 37,784,426 32,628,595 17,935,251 11,166,758 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST AIM
International Equity
(2)
(1989) $27.18 22.95 19.70 18.23 16.80 16.60 12.37 13.69 12.98 13.64
Unit Price 17,748,560 17,534,233 17,220,688 14,393,137 14,043,215 9,063,464 1,948,773 1,092,902 398,709 29,858
Number of Units
- -----------------------------------------------------------------------------------------------------------------------------------
AST Janus Overseas
Growth
(1997) - - - - - - - -
Unit Price $13.41 11.70 - - - - - - - -
Number of Units 43,711,763 21,405,891
- -----------------------------------------------------------------------------------------------------------------------------------
AST American Century
International Growth
(1997)
Unit Price $13.30 11.35 - - - - - - - -
Number of Units 5,670,336 2,857,188 - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
AST Janus Small-Cap
Growth (3)
(1994)
Unit Price $17.64 17.28 16.54 13.97 10.69 - - - - -
Number of Units 15,003,001 14,662,728 12,282,211 6,076,373 2,575,105 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Lord Abbett Small
Cap Value
(1998)
Unit Price $9.85 - - - - - - - - -
Number of Units 4,081,870 - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
Small Company Value
(1997)
Unit Price $11.20 12.70 - - - - - - - -
Number of Units 24,700,211 14,612,510 - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Neuberger
Berman
Mid-Cap Growth (4)
(1994)
Unit Price $19.15 16.10 13.99 12.20 9.94 - - - - -
Number of Units 13,389,289 11,293,799 9,563,858 3,658,836 301,267 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Neuberger
Berman
Mid-Cap Value (5)
(1993)
Unit Price $16.10 16.72 13.41 12.20 9.81 10.69 - - - -
Number of Units 16,410,121 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
Natural Resources
(1995)
Unit Price $12.57 14.46 14.19 11.01 - - - - - -
Number of Units 5,697,453 7,550,076 6,061,852 808,605 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Oppenheimer
Large-Cap Growth (6)
(1996)
Unit Price $15.48 12.33 10.89 - - - - - - -
Number of Units 19,009,242 18,736,994 4,324,161 - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
AST Marsico Capital
Growth
(1997)
Unit Price $14.00 10.03 - - - - - - - -
Number of Units 40,757,449 714,309 - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST JanCap Growth
(1992)
Unit Price $39.54 23.83 18.79 14.85 10.91 11.59 10.51 - - -
Number of Units 80,631,598 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 1,476,139 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
AST Bankers Trust
Enhanced 500
(1998)
Unit Price $12.61 - - - - - - - - -
Number of Units 22,421,754 - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers
Realty
(1998)
Unit Price $8.28 - - - - - - - - -
Number of Units ,771,461 - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST American Century
Income & Growth (7)
(1997)
Unit Price $13.35 12.06 - - - - - - - -
Number of Units 13,845,190 9,523,815 - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Lord Abbett
Growth and Income
(1992)
Unit Price $24.11 21.74 17.79 15.22 11.98 11.88 10.60 - - -
Number of Units 47,979,349 42,197,002 28,937,085 18,411,759 7,479,449 4,058,228 956,949 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST INVESCO Equity
Income
(1994)
Unit Price $19.34 17.31 14.23 12.33 9.61 - - - - -
Number of Units 40,994,187 33,420,274 23,592,226 13,883,712 6,633,333 - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
AST AIM Balanced (8)
(1993)
Unit Price $17.78 15.98 13.70 12.49 10.34 10.47 - - - -
Number of Units 22,634,344 22,109,373 20,691,852 20,163,848 13,986,604 8,743,758 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST American Century
Strategic Balanced
(1997)
Unit Price $13.37 11.18 - - - - - - - -
Number of Units 6,714,065 2,560,866 - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
Asset Allocation
(1994)
Unit Price $18.12 15.53 13.30 11.92 9.80 - - - - -
Number of Units 18,469,315 13,524,781 8,863,840 4,868,956 2,320,063 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
International Bond (9)
(1994)
Unit Price $11.82 10.45 10.98 10.51 9.59 - - - - -
Number of Units 12,007,692 12,089,872 8,667,712 4,186,695 1,562,364 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST Federated High
Yield
(1994)
Unit Price $14.30 14.13 12.62 11.27 9.56 - - - - -
Number of Units 40,170,144 29,663,242 15,460,522 6,915,158 2,106,791 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST PIMCO Total
Return Bond
(1994)
Unit Price $13.43 12.44 11.48 11.26 9.61 - - - - -
Number of Units 64,224,618 44,098,036 29,921,643 19,061,840 4,577,708 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
AST PIMCO Limited
Maturity Bond
(1995)
Unit Price $11.73 11.26 10.62 10.37 - - - - - -
Number of Units 28,863,932 25,008,310 18,894,375 15,058,644 - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
AST Money Market
(1992)
Unit Price $12.00 11.57 11.16 10.77 10.35 10.12 10.01 - - -
Number of Units 75,855,442 66,869,998 42,435,169 30,564,442 27,491,389 11,422,783 457,872 - - -
The Alger American
Fund - AA Growth
(1988)
Unit Price $63.07 43.20 34.84 31.18 23.18 23.18 19.19 17.32 12.51 12.19
Number of Units 17,168,792 15,854,570 15,666,357 12,092,291 5,614,760 2,997,458 1,482,037 559,779 82,302 6,900
- -----------------------------------------------------------------------------------------------------------------------------------
The Alger American
Fund - AA MidCap
Growth
(1993)
Unit Price $30.53 23.76 20.96 19.00 13.34 13.74 - - - -
Number of Units 17,559,963 14,687,032 14,528,945 8,299,743 4,308,374 1,450,892 - - - -
The Montgomery
Variable Series - MV
Emerging Markets
(1996)
Unit Price $6.19 10.05 10.25 - - - - - - -
Number of Units 10,534,383 10,371,104 2,360,940 - - - - - - -
Wells Fargo LAT
Trust - Equity
Value(10)
(1998) $9.53 - - - - - - - - -
Unit Price 1,148,849 - - - - - - - - -
Number of Units
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Effective October 15, 1996, Founders Asset Management, Inc. became
Sub-advisor of the Portfolio. Prior to October 15, 1996, Seligman Henderson
Co. served as the Sub-advisor of the Portfolio, then named the "Seligman
Henderson International Small Cap Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor from inception until October 15, 1996, and the
current Sub-advisor from October 15, 1996 through the current period.
2. Effective May 3, 1999, A I M Capital Management, Inc. became Sub-Advisor of
the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment
Management, Inc. served as Sub-advisor of the Portfolio, then named "AST
Putnam International Equity." Prior to October 15, 1996, Seligman Henderson
Co. served as the Sub-advisor of the Portfolio, then named the "Seligman
Henderson International Equity Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor(s) from inception through the current period.
3. Effective December 31, 1998 Janus Capital Corporation became Sub-advisor of
the Portfolio. Prior to December 31, 1998, Founders Asset Management, LLC
served as the Sub-advisor of the Portfolio. In connection with this change
the portfolio's name is changed to "AST Janus Small-Cap Growth." The
performance information provided in the above chart reflects that of the
Portfolio as sub-advised by the prior Sub-advisor from inception until
December 31, 1998.
4. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-Advisor
to the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as
Sub-advisor to the Portfolio, then named the "Berger Capital Growth
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.
5. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-Advisor
to the Portfolio. Prior to May 1, 1998, Federated Investment Counseling
served as Sub-advisor of the Portfolio, then named the "Federated Utility
Income 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.
6. Effective December 31, 1998 OppenheimerFunds, Inc. became Sub-advisor of
the Portfolio. Prior to December 31, 1998, Robertson, Stephens & Company
Investment Management, L.P. served as the Sub-advisor of the Portfolio. In
connection with this change the portfolio's name is changed to "AST
Oppenheimer Large Cap Growth." The performance information provided in the
above chart reflects that of the Portfolio as sub-advised by the prior
Sub-advisor from inception until December 31, 1998.
7. Effective May 3, 1999, American Century Investment Management, Inc. became
Sub-Advisor of the Portfolio. Between October 15, 1996 and May 3, 1999,
Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio,
then named "AST Putnam Value Growth & Income." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor from inception through the current period.
8. Effective May 3, 1999, A I M Capital Management, Inc. became Sub-Advisor of
the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment
Management, Inc. served as Sub-advisor of the Portfolio, then named "AST
Putnam International Equity." Prior to October 15, 1996, Phoenix Investment
Counsel, Inc. served as the Sub-advisor of the Portfolio, then named the
"AST Phoenix Balanced Asset Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor(s) from inception through the current period.
9. Effective May 1, 1996, Rowe Price-Fleming International, Inc. became
Sub-advisor of the Portfolio. Prior to May 1, 1996, Scudder, Stevens &
Clark, Inc. served as the Sub-advisor of the Portfolio, then named the "AST
Scudder International Bond Portfolio." The performance information provided
in the above chart reflects that of the Portfolio as sub-advised by the
prior Sub-advisor from inception until May 1, 1996, and the current
Sub-advisor from May 1, 1996 through the current period.
10. This Portfolio was first offered as a Sub-account on May 1, 1998.
Appendix C - Sale of the Contracts to Residents of the State of New York
Some of the provisions of the Annuity are different for contracts offered to
residents of the State of New York. These provisions are as follows:
Summary of Contract Fees and Expenses
Contingent Deferred Sales Charge:
The CDSC schedule is as follows:
------------------ ------- ----- ------ ------ ------ ----- ------ ------
YEARS 1 2 3 4 5 6 7 8+
------------------ ------- ----- ------ ------ ------ ----- ------ ------
------------------ ------- ----- ------ ------ ------ ----- ------ ------
CHARGE (%) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
------------------ ------- ----- ------ ------ ------ ----- ------ ------
Purchasing Your Annuity
Owner, Annuitant and Beneficiary Designations: The designation of Contingent
Participant is not allowed on the Annuity Date.
Managing Your Annuity
"May I Change the Owner, Annuitant and Beneficiary Designations?": The following
condition has been removed:
|X| A new Annuitant subsequent to the Annuity Date if the annuity option
selected includes a life contingency.
"May I Return the Annuity if I Change My Mind?": The "free-look" period is
within 21 days of receipt of the Annuity and within 10 days of receipt for IRAs.
The amount to be refunded is the Account Value in the Sub-accounts plus the
Interim Value of the Fixed Allocations and for IRAs the amount to be refunded is
the greater of Premium or Account Value.
Managing Your Account Value
"Are There Restrictions or Charges on Transfers Between Investment Options?":
A specific authorization form MUST be completed which authorizes us to accept
transfers via phone or through means such as electronic mail.
"Do You Offer Dollar Cost Averaging?": You must have a minimum Account Value of
at least $20,000 to enroll in a Dollar Cost Averaging program.
"Do You Offer any Automatic Rebalancing Programs?": You must have a minimum
Account Value of at least $20,000 to enroll in automatic rebalancing.
"How Does the Market Value Adjustment Work?": The definitions changed in this
section are as follows:
|X| "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 the Fixed Allocation's Guarantee Period.
|X| "N": is the number of months (rounded to the next higher integer when
occurring on other than a monthly anniversary of the beginning of the
Guarantee Period) remaining in the Fixed Allocation's Guarantee Period.
"What Happens When My Guarantee Period Matures?": We will notify you of the
Guarantee Periods available as of the date of such notice, at least 45 days and
not more than 60 days prior to the Maturity Date. No MVA applies to any amounts
allocated to a particular Fixed Allocation if you withdraw all or part of the
Account value in such Fixed Allocation within 30 days of maturity. If you are
age 55 or older you may invest in a Fixed Allocation with a Guarantee Period of
less than five years.
American Skandia's Performance Advantage
As of the date of this Prospectus, this benefit is not available.
Access To Account Value
"How Much Can I Withdraw as a Free Withdrawal?": The Minimum Distribution
provision is only available for annuities issued under Section 403(b) of the IRS
Code or for IRA's where Minimum Distributions are required. Minimum
Distributions are not available for any other contracts.
"What is a Medically-Related Surrender and How Do I Qualify?": This section is
deleted in its entirety.
"What Types of Annuity Payment Options are Available Upon Annuitization?": The
Annuity Date may not exceed the first day of the calendar month following the
Annuitant's 90th birthday. Additionally, the minimum annuity payment allowed is
$20 per month.
Death Benefit
As of the date of this Prospectus, the optional death benefits are not
available.
Valuing Your Investment
The following section is added:
Deferral of Transactions: If we defer a distribution or transfer from any Fixed
Allocation or any fixed annuity payout for more than 10 days, we pay interest
using our then current crediting rate for this purpose, which is not less than
3% per year on the amount deferred.
General Information
Separate Account B: We 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. In addition to obtaining prior
approval from the insurance department of our state of domicile before making
such a substitution, deletion or addition, any such changes are subject to the
approval of the Superintendent of Insurance for the State of New York.
American Skandia Life Assurance Corporation
Attention: Concierge Desk
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 ASAP2-PROS
(05/99).
- --------------------------------------------------------------------------------
_______________________________________________________
(print your name)
_______________________________________________________
(address)
_______________________________________________________
(city/state/zip code)
<PAGE>
ADDITIONAL INFORMATION: Inquiries will be answered by calling your
representative or by writing to: ADDITIONAL INFORMATION: Inquiries will be
answered by calling your representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
at
P.O. Box 883
Shelton, Connecticut 06484
or
[email protected]
Issued by: Serviced at:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 1-800-752-6342
http://www.AmericanSkandia.com http://www.AmericanSkandia.com
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: 203-926-1888
http://www.AmericanSkandia.com
ASAP2 - SAI (05/99)
STATEMENT OF ADDITIONAL INFORMATION
The variable investment options under the Annuity are issued by AMERICAN SKANDIA
LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B (CLASS 1 SUB-ACCOUNTS) and
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION. The variable investment options are
registered under the Securities Act of 1933 and the Investment Company Act of
1940. The fixed investment options under the Annuity are issued by AMERICAN
SKANDIA LIFE ASSURANCE CORPORATION. The assets supporting the fixed investment
options are maintained in AMERICAN SKANDIA LIFE ASSURANCE CORPORATION SEPARATE
ACCOUNT D, a non-unitized separate account, and registered solely under the
Securities Act of 1933.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ITEM PAGE
General Information about American Skandia 2
|X| American Skandia Life Assurance Corporation 2
|X| American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts) 2
|X| American Skandia Life Assurance Corporation Separate Account D 3
Principal Underwriter/Distributor - American Skandia Marketing, Incorporated 4
How Performance Data is Calculated 5
|X| Current and Effective Yield 5
|X| Total Return 5
How the Unit Price is Determined 8
Additional Information on Fixed Allocations 9
|X| How We Calculate the Market Value Adjustment 10
General Information 11
|X| Voting Rights 11
|X| Modification 11
|X| Deferral of Transactions 12
|X| Misstatement of Age or Sex 12
|X| Ending the Offer 12
Independent Auditors 12
Legal Experts 12
Financial Statements 12
|X| Appendix A - American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts) 14
</TABLE>
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATlON IS NOT A PROSPECTUS. YOU SHOULD READ
THIS INFORMATION ALONG WITH THE PROSPECTUS FOR THE ANNUITIES FOR WHICH IT
RELATES. THE PROSPECTUS CONTAINS INFORMATION THAT YOU SHOULD CONSIDER BEFORE
INVESTING. FOR A COPY OF THE PROSPECTUS SEND A WRITTEN REQUEST TO AMERICAN
SKANDIA LIFE ASSURANCE CORPORATION, P.O. BOX 883, SHELTON, CONNECTICUT 06484, OR
TELEPHONE 1-800-752-6342. OUR ELECTRONIC MAIL ADDRESS IS
[email protected].
- --------------------------------------------------------------------------------
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
<PAGE>
GENERAL INFORMATION ABOUT AMERICAN SKANDIA
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
("ASIHC"). ASIHC's 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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B (Class 1
Sub-accounts)
American Skandia Life Assurance Corporation Variable Account B (Class 1
Sub-accounts), also referred to as "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. Each Sub-account invests exclusively in an
underlying mutual fund or a portfolio of an underlying mutual fund. You will
find additional information about these underlying mutual funds and portfolios
in the prospectuses for such funds.
Separate Account B is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 (the "Investment Company Act") as a
unit investment trust, which is a type of investment company. 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. You bear the entire
investment risk.
During the accumulation phase, we offer a number of Sub-accounts as variable
investment options. 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. As of the date of the Prospectus and
Statement of Additional Information, our Sub-accounts and the underlying mutual
funds or portfolios in which they invest are as follows. Those portfolios whose
name includes the prefix "AST" are portfolios of American Skandia Trust.
<TABLE>
<CAPTION>
Separate Account B Sub-account Underlying Mutual Fund Portfolio
<S> <C> <C>
AST Founders Passport AST Founders Passport
AST T. Rowe Price International Equity AST T. Rowe Price International Equity
AST AIM International Equity AST AIM International Equity
AST Janus Overseas Growth AST Janus Overseas Growth
AST American Century International Growth AST American Century International Growth
AST Janus Small-Cap Growth AST Janus Small-Cap Growth
AST Kemper Small-Cap Growth AST Small Cap Growth
AST LA Small Cap Value AST Lord Abbett Small Cap Value
AST T. Rowe Price Small Company Value AST T. Rowe Price Small Company Value
AST NB Mid-Cap Growth AST Neuberger Berman Mid-Cap Growth
AST NB Mid-Cap Value AST Neuberger Berman Mid-Cap Value
AST T. Rowe Price Natural Resources AST T. Rowe Price Natural Resources
AST Oppenheimer Large Cap Growth AST Oppenheimer Large Cap Growth
AST Marsico Capital Growth AST Marsico Capital Growth
AST JanCap Growth AST JanCap Growth
AST Bankers Trust Enhanced 500 AST Bankers Trust Enhanced 500
AST Cohen & Steers Realty AST Cohen & Steers Realty
AST American Century Income & Growth AST American Century Income & Growth
AST LA Growth and Income AST Lord Abbett Growth and Income
AST INVESCO Equity Income AST INVESCO Equity Income
AST AIM Balanced AST AIM Balanced
AST American Century Strategic Balanced AST American Century Strategic Balanced
AST T. Rowe Price Asset Allocation AST T. Rowe Price Asset Allocation
AST T. Rowe Price International Bond AST T. Rowe Price International Bond
AST Fed High Yield AST Federated High Yield
AST PIMCO Total Return Bond AST PIMCO Total Return Bond
AST PIMCO Limited Maturity Bond AST PIMCO Limited Maturity Bond
AST Money Market AST Money Market
AA Growth Growth portfolio of The Alger American Fund
AA MidCap Growth MidCap Growth of The Alger American Fund
MV Emerging Markets Emerging Markets portfolio of Montgomery Variable Series
Rydex Nova Nova portfolio of Rydex Variable Trust
Rydex Ursa Ursa portfolio of Rydex Variable Trust
Rydex OTC OTC portfolio of Rydex Variable Trust
WF Equity Value Equity Value portfolio of LAT Trust
</TABLE>
A brief summary of the investment objectives and policies of each underlying
mutual fund portfolio is found in the Prospectuses. More detailed information
about 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.
Each underlying mutual fund is registered under the Investment Company Act of
1940, as amended as an open-end management investment company. Each underlying
mutual fund or portfolio thereof may or may not be diversified as defined in the
Investment Company Act. 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.
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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION SEPARATE ACCOUNT D
American Skandia Life Assurance Corporation Separate Account D, also referred to
as Separate Account D, was established by us pursuant to Connecticut law. During
the accumulation phase, assets supporting our obligations based on Fixed
Allocations are held in Separate Account D. Such obligations are based on the
fixed 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.
There are no units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment gain
or loss on assets maintained in 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.
We have sole discretion over the investment managers retained to manage the
assets maintained in Separate Account D. We currently employ investment managers
for Separate Account D including, but not limited to, J.P. Morgan Investment
Management Inc. Each manager we employ is responsible for investment management
of a different portion 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).
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. The assets in Separate Account D are accounted for at their market value,
rather than at book value.
4. 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.
We may or may not be able to obtain approval in the future in certain
jurisdictions of endorsements to individual or group annuities that include the
type of Fixed Allocations offered pursuant to this Prospectus. If such approval
is obtained, we may take those steps needed to make such Fixed Allocations
available to purchasers to whom Annuities were issued prior to the date of such
approval.
PRINCIPAL UNDERWRITER/DISTRIBUTOR - American Skandia Marketing, Incorporated
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of
ASIHC, is the distributor and principal underwriter of the securities offered
through this prospectus and Statement of Additional Information. American
Skandia Life Assurance Corporation and American Skandia Investment Services,
Incorporated ("ASISI"), the investment manager of American Skandia Trust and
American Skandia Advisor Funds, Inc., are also wholly-owned subsidiaries of
ASIHC. American Skandia Information Services and Technology Corporation
("ASIST"), also a wholly-owned subsidiary ASIHC, is a service company that
provides systems and information services to American Skandia Life Assurance
Corporation and its affiliated companies.
ASM acts as the distributor of a number of annuity and life insurance products
we offer and both American Skandia Trust and American Skandia Advisor Funds,
Inc., a family of retail mutual funds. ASM's principal business address is One
Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer
under the Securities and Exchange Act of 1934 ("Exchange Act") and is a member
of the National Association of Securities Dealers, Inc. ("NASD").
The Annuity is offered on a continuous basis. ASM enters into distribution
agreements with independent broker-dealers who are registered under the Exchange
Act and with entities that may offer the Annuity but are exempt from
registration. Applications for the Annuity are solicited by registered
representatives of those firms. Such representatives will also be our appointed
insurance agents under state insurance law. In addition, ASM may offer the
Annuity directly to potential purchasers.
Compensation is paid to firms on sales of the Annuity according to one or more
schedules. The individual representative will receive a portion of the
compensation, depending on the practice of the firm. Compensation is generally
based on a percentage of Purchase Payments made, up to a maximum of 7.0%.
Alternative compensation schedules are available that provide a lower initial
commission plus ongoing annual compensation based on all or a portion of Account
Value. We may also provide compensation for providing ongoing service to you in
relation to the Annuity. Commissions and other compensation paid in relation to
the Annuity do not result in any additional charge to you or to the Separate
Account.
In addition, firms may receive separate compensation or reimbursement for, among
other things, training of sales personnel, marketing or other services they
provide to us or our affiliates. We or ASM may enter into compensation
arrangements with certain firms. These arrangements will not be offered to all
firms and the terms of such arrangements may differ between firms. Any such
compensation will be paid by us or ASM and will not result in any additional
charge to you. To the extent permitted by NASD rules and other applicable laws
and regulations, ASM may pay or allow other promotional incentives or payments
in the form of cash or other compensation.
HOW PERFORMANCE DATA IS CALCULATED
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 (like the AST Money Market Sub-account) 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.
Current and Effective Yield
The current yield of a money market-type Sub-account is calculated based upon a
seven day period ending on the date of calculation. The current yield of such a
Sub-account is computed by determining the change (exclusive of capital changes)
in the Account Value of a hypothetical pre-existing allocation by an Owner to
such a Sub-account (the "Hypothetical Allocation") having a balance of one Unit
at the beginning of the period, subtracting a hypothetical maintenance fee, and
dividing such net change in the Account Value of the Hypothetical Allocation by
the Account Value of the Hypothetical Allocation at the beginning of the same
period to obtain the base period return, and multiplying the result by (365/7).
The resulting figure will be carried to at least the nearest l00th of one
percent.
We compute effective compound yield for a money market-type Sub-account
according to the method prescribed by the Securities and Exchange Commission.
The effective yield reflects the reinvestment of net income earned daily on
assets of such a Sub-account. Net investment income for yield quotation purposes
will not include either realized or capital gains and losses or unrealized
appreciation and depreciation.
Shown below are the current and effective yields for a hypothetical contract.
The yield is calculated based on the performance of the AST Money Market
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 charge against the Sub-account. Please note that
current and effective yield information will fluctuate. This information may not
provide a basis for comparisons with deposits in banks or other institutions
which pay a fixed yield over a stated period of time, or with investment
companies which do not serve as underlying funds for variable annuities.
Sub-account Current Yield Effective Yield
AST Money Market 3.34% 3.40%
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.
Many of the Sub-accounts offered as variable investment options for the
Annuities have been available as variable investment options in other annuities
we offer under one or more separate accounts of American Skandia Life Assurance
Corporation. In addition, some of the underlying mutual fund portfolios existed
prior to the inception of these Sub-accounts. Performance quoted in advertising
regarding any 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.
"Standard Total Return" figures assume that all charges and fees are applicable,
including any contingent deferred sales charge that may apply for the period
shown. "Non-standard Total Return" figures may also be used that do not reflect
all fees and charges. Non-standard Total Returns are calculated in the same
manner as standardized returns except that the calculations may assume no
redemption at the end of the applicable periods, thus these figures may not take
into consideration the Annuity's contingent deferred sales charge.
As described in the Prospectus, Annuities may be offered in certain situations
in which the contingent deferred sales charge or certain other charges or fees
may be eliminated or reduced. Advertisements of performance in connection with
the offer of such Annuities will be based on the charges applicable to such
Annuities.
Shown below are total return figures for the periods shown. Figures are shown
only for Sub-accounts operational as of December 31, 1998. 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>
-------------------------------------------------- -- ---------------------------------------------
Standard Total Return Non-Standard Total Return
-------------------------------------------------- -- ---------------------------------------------
-------------------------------------------------- -- ---------------------------------------------
(Assuming maximum CDSC and (Assuming no CDSC with maintenance fees)
maintenance fees)
-------------------------------------------------- -- ---------------------------------------------
- ---------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- --------- ----------
1 3 5 10 Inception 1 3 5 10 Inception
Year Years Years Years to Date Year Years Years Years to Date
- ---------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- --------- ----------
<S> <C> <C> <C> C> <C> <C> <C> <C> <C> <C>
AST Founders Passport 1 1.80% 5.14% N/A N/A 5.10% 9.30% 6.91% N/A N/A 6.28%
AST T. Rowe Price International 4.87% 6.32% 4.90% N/A 4.91% 12.37% 8.06% 5.55% N/A 5.57%
Equity
AST AIM International Equity 2 10.85% 12.59% 9.74% N/A 10.87% 18.35% 14.14% 10.29% N/A 10.87%
AST Janus Overseas Growth 7.02% N/A N/A N/A 13.09% 14.52% N/A N/A N/A 15.71%
AST American Century 9.57% N/A N/A N/A 12.57% 17.07% N/A N/A N/A 15.20%
International Growth
AST Janus Small-Cap Growth 3 -5.52% 6.25% 11.43% N/A 11.46% 1.98% 7.99% 11.94% N/A 11.97%
AST LA Small Cap Value -9.05% N/A N/A N/A -9.05% -1.55% N/A N/A N/A -1.55%
AST T. Rowe Price Small Company -19.34% N/A N/A N/A 2.88% -11.84% N/A N/A N/A 5.75%
Value
AST NB Mid-Cap Growth 4 11.39% 14.61% N/A N/A 16.06% 18.89% 16.10% N/A N/A 16.65%
AST NB Mid-Cap Value 5 -11.25% 7.92% 7.88% N/A 8.34% -3.75% 9.60% 8.47% N/A 8.71%
AST T. Rowe Price Natural -20.62% 2.60% N/A N/A 5.20% -13.12% 4.46% N/A N/A 6.37%
Resources
AST Oppenheimer Large-Cap 17.98% N/A N/A N/A 15.97% 25.48% N/A N/A N/A 17.70%
Growth 6
AST Marsico Capital Growth 32.03% N/A N/A N/A 31.91% 39.53% N/A N/A N/A 38.69%
AST JanCap Growth 58.31% 37.36% 27.42% N/A 24.85% 65.81% 38.41% 27.72% N/A 24.95%
AST Bankers Trust Enhanced 500 18.55% N/A N/A N/A 18.55% 26.05% N/A N/A N/A 26.05%
AST Cohen & Steers Realty -24.72% N/A N/A N/A -24.72% -17.22% N/A N/A N/A -17.22%
AST American Century Income & 3.13% N/A N/A N/A 12.81% 10.63% N/A N/A N/A 15.44%
Growth 7
AST LA Growth and Income 3.34% 14.96% 14.67% N/A 13.89% 10.84% 16.45% 15.13% N/A 14.03%
AST INVESCO Equity Income 4.18% 14.58% 13.55% N/A 13.59% 11.68% 16.08% 14.03% N/A 14.06%
AST AIM Balanced 8 3.71% 10.78% 10.57% N/A 10.29% 11.21% 12.38% 11.10% N/A 10.63%
AST American Century Strategic 12.02% N/A N/A N/A 12.91% 19.52% N/A N/A N/A 15.54%
Balanced
AST T. Rowe Price Asset 9.13% 13.33% 12.05% N/A 12.08% 16.63% 14.86% 12.55% N/A 12.58%
Allocation
AST T. Rowe Price International 5.54% 2.07% N/A N/A 2.83% 13.04% 3.95% N/A N/A 3.59%
Bond 9
AST Fed High Yield -6.39% 6.44% 6.73% N/A 6.75% 1.11% 8.17% 7.34% N/A 7.36%
AST PIMCO Total Return Bond 0.37% 4.15% 5.36% N/A 5.37% 7.87% 5.95% 6.00% N/A 6.02%
AST PIMCO Limited Maturity -3.32% 2.25% N/A N/A 3.15% 4.18% 4.12% N/A N/A 4.39%
Bond
AA Growth 38.41% 25.06% 21.72% 20.18% 20.29% 45.91% 26.32% 22.08% 20.18% 20.29%
AA MidCap Growth 20.90% 15.54% 16.81% N/A 21.48% 28.40% 17.02% 17.24% N/A 21.70%
MV Emerging Markets -45.94% N/A N/A N/A -17.34% -38.44% N/A N/A N/A -14.47%
WF Equity Value 10 N/A N/A N/A N/A -12.22% N/A N/A N/A N/A -4.72%
- ---------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- --------- ----------
</TABLE>
<PAGE>
1. Effective October 15, 1996, Founders Asset Management, Inc. became
Sub-advisor of the Portfolio. Prior to October 15, 1996, Seligman Henderson
Co. served as the Sub-advisor of the Portfolio, then named the "Seligman
Henderson International Small Cap Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor from inception until October 15, 1996, and the
current Sub-advisor from October 15, 1996 through the current period.
2. Effective May 3, 1999, A I M Capital Management, Inc. became Sub-Advisor of
the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment
Management, Inc. served as Sub-advisor of the Portfolio, then named "AST
Putnam International Equity." Prior to October 15, 1996, Seligman Henderson
Co. served as the Sub-advisor of the Portfolio, then named the "Seligman
Henderson International Equity Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor(s) from inception through the current period.
3. Effective December 31, 1998 Janus Capital Corporation became Sub-advisor of
the Portfolio. Prior to December 31, 1998, Founders Asset Management, LLC
served as the Sub-advisor of the Portfolio. In connection with this change
the portfolio's name is changed to "AST Janus Small-Cap Growth." The
performance information provided in the above chart reflects that of the
Portfolio as sub-advised by the prior Sub-advisor from inception until
December 31, 1998.
4. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-Advisor
to the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as
Sub-advisor to the Portfolio, then named the "Berger Capital Growth
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.
5. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-Advisor
to the Portfolio. Prior to May 1, 1998, Federated Investment Counseling
served as Sub-advisor of the Portfolio, then named the "Federated Utility
Income 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.
6. Effective December 31, 1998 OppenheimerFunds, Inc. became Sub-advisor of
the Portfolio. Prior to December 31, 1998, Robertson, Stephens & Company
Investment Management, L.P. served as the Sub-advisor of the Portfolio. In
connection with this change the portfolio's name is changed to "AST
Oppenheimer Large Cap Growth." The performance information provided in the
above chart reflects that of the Portfolio as sub-advised by the prior
Sub-advisor from inception until December 31, 1998.
7. Effective May 3, 1999, American Century Investment Management, Inc. became
Sub-Advisor of the Portfolio. Between October 15, 1996 and May 3, 1999,
Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio,
then named "AST Putnam Value Growth & Income." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor from inception through the current period.
8. Effective May 3, 1999, A I M Capital Management, Inc. became Sub-Advisor of
the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment
Management, Inc. served as Sub-advisor of the Portfolio, then named "AST
Putnam International Equity." Prior to October 15, 1996, Phoenix Investment
Counsel, Inc. served as the Sub-advisor of the Portfolio, then named the
"AST Phoenix Balanced Asset Portfolio." The performance information
provided in the above chart reflects that of the Portfolio as sub-advised
by the prior Sub-advisor(s) from inception through the current period.
9. Effective May 1, 1996, Rowe Price-Fleming International, Inc. became
Sub-advisor of the Portfolio. Prior to May 1, 1996, Scudder, Stevens &
Clark, Inc. served as the Sub-advisor of the Portfolio, then named the "AST
Scudder International Bond Portfolio." The performance information provided
in the above chart reflects that of the Portfolio as sub-advised by the
prior Sub-advisor from inception until May 1, 1996, and the current
Sub-advisor from May 1, 1996 through the current period.
10. This Portfolio was first offered as a Sub-account on May 1, 1998.
Some of the underlying portfolios may be subject to an expense reimbursement or
waiver that in the absence of such reimbursement or waiver would reduce the
portfolio's performance.
The performance quoted in any advertising should not be considered a
representation of the performance of these Sub-accounts in the future since
performance is not fixed. Actual performance will depend on the type, quality
and, for some of the Sub-accounts, the maturities of the investments held by the
underlying mutual funds and upon prevailing market conditions and the response
of the underlying mutual funds to such conditions. Actual performance will also
depend on changes in the expenses of the underlying mutual funds. In addition,
the amount of charges against each Sub-account will affect performance.
The information provided by these measures may be useful in reviewing the
performance of the Sub-accounts, and for providing a basis for comparison with
other annuities. These measures may be less useful in providing a basis for
comparison with other investments that neither provide some of the benefits of
such annuities nor are treated in a similar fashion under the Code.
HOW THE UNIT PRICE IS DETERMINED
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.
ADDITIONAL INFORMATION ON FIXED ALLOCATIONS
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those which were available
when your Annuity was issued. We also reserve the right at any time to stop
accepting new allocations, transfers or renewals for a particular Guarantee
Period. Such an action may have an impact on the MVA.
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.
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 insurance 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.
How We Calculate 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 annuity) being
credited to new Fixed Allocations with Guarantee Period
durations equal to the number of years (rounded to the next
higher integer when occurring on other than an anniversary of
the beginning of the Fixed Allocation's Guarantee Period)
remaining in your Fixed Allocation Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if you surrender the Annuity pursuant to the free-look
provision [(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.
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:
1. 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 .
2. 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.
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.
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.
GENERAL INFORMATION
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 Investment Company Act.
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 Investment Company Act; (f) operate Separate Account B as a
management investment company under the Investment Company 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 or the Investment Company 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.
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.
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.
INDEPENDENT AUDITORS
The consolidated financial statements of American Skandia Life Assurance
Corporation at December 31, 1998 and 1997, and for the years then ended, and the
financial statements of American Skandia Life Assurance Corporation Variable
Account B - Class 1 at December 31, 1998 and for the two years then ended,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors. The consolidated financial statements
of American Skandia Life Assurance Corporation for the year ended December 31,
1996, appearing in this Prospectus and Registration Statement, have been audited
by Deloitte & Touche LLP, independent auditors. The audits, as set forth in
their respective reports thereon appearing elsewhere herein, are included in
reliance upon such reports given upon the authority of such firms 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 American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-accounts)
The 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, 1998 and for the periods ended December 31, 1998 and 1997. There are other
Sub-accounts included in Variable Account B that are not available in the
product described in the applicable prospectus.
To the extent and only to the extent that any statement in a document
incorporated by reference into this Statement of Additional Information is
modified or superseded by a statement in this Statement of Additional
Information or in a later-filed document, such statement is hereby deemed so
modified or superseded and not part of this Statement of Additional Information.
We furnish you without charge a copy of any or all the documents incorporated by
reference in this Statement of Additional Information, including any exhibits to
such documents which have been specifically incorporated by reference. We do so
upon receipt of your written or oral request. Please address your request to
American Skandia Life Assurance Corporation, Attention: Concierge Desk, P.O. Box
883, Shelton, Connecticut, 06484. Our phone number is 1-800-752-6342. You may
also forward such a request electronically to our Customer Service Department at
[email protected].
APPENDIX A
Financial Statements for American Skandia Life Assurance Corporation
Variable Account B (Class 1 Sub-accounts)
American Skandia Life
Assurance Corporation
Variable Account B - Class 1
Years ended December 31, 1998 and 1997
<PAGE>
Independent Auditor's Report
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B - Class 1 and the
Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statement of assets, liabilities and
contractowners' equity of the forty-nine sub-accounts of American Skandia Life
Assurance Corporation Variable Account B - Class 1, referred to in Note 1, as of
December 31, 1998, the related statement of operations for the year then ended
and changes in net assets for the years ended December 31, 1998 and 1997. 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the forty-nine sub-accounts of
American Skandia Life Assurance Corporation Variable Account B - Class 1,
referred to in Note 1, at December 31, 1998, the results of their operations for
the year then ended, and their changes in net assets for the years ended
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
Hartford, Connecticut
February 20, 1999
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARAIBLE ACCOUNT B - CLASS 1
STATEMENT OF ASSETS, LIABILITIES, AND CONTRACTOWNERS' EQUITY
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investment in mutual funds at market value ( Note 2 ):
Neuberger & Berman Advisers Management Trust ( NBAMT ):
Partners Portfolio - 28,033,155 shares ( cost $542,052,859) $ 530,667,628
The Alger American Fund ( AAF ):
Small Capitalization Portfolio - 15,929,019 shares ( cost $648,094,483) 700,398,952
Growth Portfolio - 20,345,455 shares ( cost $881,216,700) 1,082,785,093
Midcap Growth Portfolio - 18,570,428 shares ( cost $449,853,404) 536,128,270
American Skandia Trust ( AST ):
Putnam International Equity Portfolio - 21,280,992 shares ( cost $430,751,657) 482,440,087
Putnam Balanced Portfolio - 28,480,355 shares ( cost $343,403,166) 402,427,412
Putnam Value Growth & Income Portfolio - 13,721,843 shares ( cost $167,015,659) 184,833,230
Lord Abbett Growth & Income Portfolio - 53,360,516 shares ( cost $986,006,769) 1,156,855,982
Lord Abbett Small Cap Value Portfolio - 4,025,006 shares ( cost $41,183,091) 40,209,815
JanCap Growth Portfolio - 86,170,244 shares ( cost $2,212,700,991) 3,188,299,017
Money Market Portfolio - 910,150,440 shares ( cost $910,150,440) 910,150,440
Neuberger & Berman Midcap Value Portfolio - 20,076,980 shares ( cost $263,026,696) 264,213,061
Neuberger & Berman Midcap Growth Portfolio - 14,854,306 shares ( cost $236,091,915) 256,385,317
Federated High Yield Portfolio - 45,397,159 shares ( cost $572,181,081) 574,274,059
T. Rowe Price Asset Allocation Portfolio - 19,155,962 shares ( cost $266,606,536) 334,654,659
T. Rowe Price International Equity Portfolio - 33,694,943 shares ( cost $422,542,562) 451,175,293
T. Rowe Price International Bond Portfolio - 12,389,529 shares ( cost $128,467,114) 141,984,005
T. Rowe Price Natural Resources Portfolio - 5,984,799 shares ( cost $87,540,541) 71,638,044
T. Rowe Price Small Company Value Portfolio - 24,211,730 shares ( cost $302,599,212) 276,740,076
Founders Capital Appreciation Portfolio - 15,026,873 shares ( cost $248,508,628) 264,623,225
Founders Passport Portfolio - 8,851,107 shares ( cost $113,327,776) 115,418,431
PIMCO Total Return Bond Portfolio - 71,731,766 shares ( cost $814,553,094) 862,215,824
PIMCO Limited Maturity Bond Portfolio - 30,542,337 shares ( cost $328,130,560) 338,714,522
INVESCO Equity Income Portfolio - 45,314,171 shares ( cost $716,634,079) 792,997,993
Oppenheimer Large-Cap Growth Portfolio - 18,307,631 shares ( cost $254,780,700) 294,203,629
Janus Overseas Growth Portfolio - 42,671,181 shares ( cost $568,947,416) 586,302,025
Twentieth Century Strategic Balanced Portfolio - 6,572,893 shares ( cost $77,889,573) 89,785,724
Twentieth Century International Growth Portfolio - 5,519,052 shares ( cost $75,005,122) 75,390,247
Marsico Capital Growth Portfolio - 40,177,534 shares ( cost $502,973,651) 570,520,978
Stein Roe Venture Portfolio - 1,063,308 shares ( cost $8,913,759) 8,719,122
Cohen & Steers Realty Portfolio - 3,718,894 shares ( cost $34,240,096) 31,238,708
Bankers Trust Enhanced 500 Portfolio - 22,109,855 shares ( cost $255,895,712) 282,785,043
Alliance Variable Products Series Fund (AVP):
Short Term Multi Market Portfolio - 15,155 shares ( cost $159,403) 153,067
Premier Growth Portfolio - 333,755 shares ( cost $5,630,080) 10,356,425
Growth & Income Portfolio - 334,590 shares ( cost $5,597,131) 7,307,448
U.S. Government / High Grade Securities Portfolio - 174,315 shares ( cost $2,017,315) 2,138,851
Total Return Portfolio - 198,842 shares ( cost $2,906,536) 3,591,082
International Portfolio - 177,002 shares ( cost $2,595,650) 2,862,119
Money Market Portfolio - 1,556,320 shares ( cost $1,556,320) 1,556,320
North American Government Income Portfolio - 11,494 shares ( cost $142,338) 144,252
Global Dollar Government Portfolio - 51,199 shares ( cost $637,706) 521,209
Utility Income Portfolio - 47,474 shares ( cost $614,729) 897,257
Global Bond Portfolio - 27,215 shares ( cost $306,366) 338,005
Conservative Investors Portfolio - 90,384 shares ( cost $1,102,091) 1,268,086
Growth Investors Portfolio - 85,518 shares ( cost $1,038,017) 1,396,501
Growth Portfolio - 248,152 shares ( cost $4,005,882) 6,762,153
Worldwide Privatization Portfolio - 82,833 shares ( cost $995,513) 1,226,757
Montgomery Variable Series ( Montgomery ):
Emerging Markets Fund - 9,894,293 shares ( cost $89,088,202) 65,203,388
Life & Annuity Trust (LAT):
Equity Value Fund - 1,146,928 shares ( cost $10,547,544) 10,953,160
-------------------
Total Invested Assets $16,015,851,991
Receivable from American Skandia Life Assurance Corporation 11,257,783
-------------------
Total Receivables $ 11,257,783
===================
Total Assets $16,027,109,774
===================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
<S> <C>
Payable to Neuberger & Berman Advisors Management Trust $ 1,764,702
Payable to Alger American Fund 1,653,078
Payable to American Skandia Trust 6,905,707
Payable to Alliance Capital Management 4,224
Payable to Montgomery Variable Series 930,400
Payable to Wells Capital Management 39
------------------
Total Liabilities $ 11,258,150
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS
Unit
Contractowners' Equity Units Value
<S> <C> <C> <C>
NBAMT - Partners 25,932,658 $20.46 $ 530,667,628
AAF - Small Capitalization 13,702,596 51.11 700,398,952
AAF - Growth 17,168,792 63.07 1,082,785,093
AAF - MidCap Growth 17,559,963 30.53 536,128,270
AST - Putnam International Equity 17,748,560 27.18 482,440,088
AST - Putnam Balanced 22,634,344 17.78 402,427,412
AST - Putnam Value Growth & Income 13,845,190 13.35 184,833,231
AST - Lord Abbett Growth & Income 47,979,349 24.11 1,156,855,982
AST - Lord Abbett Small Cap Value 4,081,870 9.85 40,209,815
AST - JanCap Growth 80,631,598 39.54 3,188,299,017
AST - Money Market 75,855,442 12.00 910,150,379
AST - Neuberger & Berman Midcap Value 16,410,121 16.10 264,213,061
AST - Neuberger & Berman Midcap Growth 13,389,289 19.15 256,385,317
AST - Federated High Yield 40,170,144 14.30 574,274,059
AST - T. Rowe Price Asset Allocation 18,469,315 18.12 334,654,659
AST - T. Rowe Price International Equity 34,328,425 13.14 451,175,293
AST - T. Rowe Price International Bond 12,007,692 11.82 141,984,005
AST - T. Rowe Price Natural Resources 5,697,453 12.57 71,638,045
AST - T. Rowe Price Small Company Value 24,700,211 11.20 276,740,076
AST - Founders Capital Appreciation 15,003,001 17.64 264,623,225
AST - Founders Passport 9,207,623 12.54 115,418,431
AST - PIMCO Total Return Bond 64,224,618 13.43 862,215,823
AST - PIMCO Limited Maturity Bond 28,863,932 11.73 338,714,522
AST - INVESCO Equity Income 40,994,187 19.34 792,997,992
AST - Oppenheimer Large-Cap Growth 19,009,242 15.48 294,203,629
AST - Janus Overseas Growth 43,711,763 13.41 586,302,025
AST - Twentieth Century Strategic Balanced 6,714,065 13.37 89,785,724
AST - Twentieth Century International Growth 5,670,336 13.30 75,390,247
AST - Marsico Capital Growth 40,757,449 14.00 570,520,978
AST - Stein Roe Venture 1,078,339 8.09 8,719,122
AST - Cohen & Steers Realty 3,771,461 8.28 31,238,708
AST - Bankers Trust Enhanced 500 22,421,754 12.61 282,785,043
AVP - Short Term Multi Market 12,965 11.81 153,067
AVP - Premier Growth 260,371 39.78 10,356,424
AVP - Growth & Income 261,372 27.96 7,307,448
AVP - U.S. Government / High Grade Securities 157,217 13.60 2,138,768
AVP - Total Return 184,713 19.44 3,591,082
AVP - International 175,687 16.29 2,862,120
AVP - Money Market 133,107 11.69 1,556,260
AVP - North American Government Income 10,548 13.67 144,240
AVP - Global Dollar Government 41,539 12.55 521,149
AVP - Utility Income 47,145 19.03 897,257
AVP - Global Bond 23,574 14.34 337,966
AVP - Conservative Investors 86,416 14.67 1,268,086
AVP - Growth Investors 78,648 17.76 1,396,447
AVP - Growth 240,261 28.14 6,762,153
AVP - Worldwide Privatization 80,265 15.28 1,226,758
Montgomery Emerging Markets 10,534,383 6.19 65,203,388
LAT - Equity Value 1,148,849 9.53 10,953,160
------------------
Total Contractowners' Equity $ 16,015,851,624
==================
Total Liabilities & Contractowners' Equity $ 16,027,109,774
==================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 Sub-account Investing In:
--------------------------------------------------------------------------
NBAMT AAF - Small
Total Partners Capitalization AAF - Growth
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 4,505,435 $ 2,559,893 $ - $ 1,945,542
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (30,070,742) (9,165,435) (8,878,543) (12,026,764)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (25,565,307) (6,605,542) (8,878,543) (10,081,222)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 1,163,049,245 248,237,285 485,415,506 429,396,454
Cost of Securities Sold 1,020,523,962 219,274,938 483,539,038 317,709,986
--------------------------------------------------------------------------
Net Gain (Loss) 142,525,283 28,962,347 1,876,468 111,686,468
Capital Gain Distributions Received 277,035,596 80,636,614 77,508,143 118,890,839
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 419,560,879 109,598,961 79,384,611 230,577,307
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 212,200,313 83,903,275 31,813,024 96,484,014
End of Period 242,487,631 (11,385,231) 52,304,469 201,568,393
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 30,287,318 (95,288,506) 20,491,445 105,084,379
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $424,282,890 $ 7,704,913 $ 90,997,513 $ 325,580,464
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AAF - MidCap AST - Putnam AST - Putnam AST - Putnam Value
Growth International Equity Balanced Growth & Income
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ - $ 12,769,813 $ 9,166,087 $ 673,080
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (5,885,234) (6,696,739) (5,550,683) (2,204,432)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (5,885,234) 6,073,074 3,615,404 (1,531,352)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 166,171,813 171,022,786 29,298,693 22,415,216
Cost of Securities Sold 138,030,126 137,621,296 23,144,277 18,843,243
--------------------------------------------------------------------------
Net Gain (Loss) 28,141,687 33,401,490 6,154,416 3,571,973
Capital Gain Distributions Received 32,280,336 37,257,380 21,435,073 1,857,665
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 60,422,023 70,658,870 27,589,489 5,429,638
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 30,855,949 55,497,428 49,951,695 7,226,887
End of Period 86,274,866 51,688,430 59,024,246 17,817,571
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 55,418,917 (3,808,998) 9,072,551 10,590,684
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $109,955,706 $ 72,922,946 $ 40,277,444 $ 14,488,970
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - Lord Abbett
AST - Lord Small Cap Value
Abbett Growth Jan. 2* thru AST - JanCap AST - Money
& Income Dec. 31, 1998 Growth Market
-------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 11,295,720 $ - $ 5,095,430 $ 44,696,124
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (15,012,219) (294,164) (30,095,977) (13,063,774)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (3,716,499) (294,164) (25,000,547) 31,632,350
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 138,309,895 10,001,399 905,379,148 3,478,041,119
Cost of Securities Sold 99,830,578 11,029,367 593,693,144 3,478,041,119
--------------------------------------------------------------------------
Net Gain (Loss) 38,479,317 (1,027,968) 311,686,004 -
Capital Gain Distributions Received 49,632,450 - 81,684,017 59,024
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 88,111,767 (1,027,968) 393,370,021 59,024
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 147,955,826 - 211,485,317 -
End of Period 170,849,213 (973,276) 975,598,025 -
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 22,893,387 (973,276) 764,112,708 -
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $107,288,655 $ (2,295,408)$ 1,132,482,182 $ 31,691,374
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - T. Rowe
AST - Neuberger & AST - Neuberger & AST - Federated Price Asset
Berman Midcap Value Berman Midcap Growth High Yield Allocation
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 4,306,872 $ 119,458 $ 26,693,455 $ 4,763,347
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (2,961,275) (2,995,806) (7,492,488) (3,811,663)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,345,597 (2,876,348) 19,200,967 951,684
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 115,273,133 148,760,949 190,641,441 17,564,334
Cost of Securities Sold 105,201,955 145,550,659 176,876,504 10,723,135
--------------------------------------------------------------------------
Net Gain (Loss) 10,071,178 3,210,290 13,764,937 6,841,199
Capital Gain Distributions Received 15,909,602 33,791,041 1,456,068 916,600
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 25,980,780 37,001,331 15,221,005 7,757,799
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 31,285,011 10,588,365 32,807,899 35,313,322
End of Period 1,186,365 20,293,402 2,092,978 68,048,123
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (30,098,646) 9,705,037 (30,714,921) 32,734,801
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,772,269) $ 43,830,020 $ 3,707,051 $ 41,444,284
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - T. Rowe AST - T. Rowe AST - T. Rowe
Price International Price International Price Natural AST - T. Rowe Price
Equity Bond Resources Small Company Value
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 5,109,747 $ 424,593 $ 1,007,430 $ 856,949
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (6,445,318) (1,967,185) (1,372,650) (3,569,821)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (1,335,571) (1,542,592) (365,220) (2,712,872)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 414,739,972 34,067,344 48,521,917 54,220,940
Cost of Securities Sold 392,795,825 32,865,835 48,882,038 49,630,087
--------------------------------------------------------------------------
Net Gain (Loss) 21,944,147 1,201,509 (360,121) 4,590,853
Capital Gain Distributions Received 8,313,578 1,000,505 6,100,113 928,133
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 30,257,725 2,202,014 5,739,992 5,518,986
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 1,034,494 (2,573,616) 1,417,021 13,821,124
End of Period 28,632,731 13,516,891 (15,902,496) (25,859,136)
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 27,598,237 16,090,507 (17,319,517) (39,680,260)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 56,520,391 $ 16,749,929 $ (11,944,745) $ (36,874,146)
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - Founders AST - PIMCO AST - PIMCO
Capital AST - Founders Total Return Limited Maturity
Appreciation Passport Bond Bond
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ - $ 241,295 $ 25,467,294 $ 14,005,432
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (3,422,151) (1,726,272) (10,204,105) (4,457,569)
------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (3,422,151) (1,484,977) 15,263,189 9,547,863
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 61,753,055 119,725,842 173,641,874 122,469,152
Cost of Securities Sold 54,739,569 109,276,501 162,043,097 117,900,481
--------------------------------------------------------------------------
Net Gain (Loss) 7,013,486 10,449,341 11,598,777 4,568,671
Capital Gain Distributions Received 11,912,470 - 11,904,291 -
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 18,925,956 10,449,341 23,503,068 4,568,671
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 22,039,533 272,536 33,026,862 12,058,605
End of Period 16,114,597 2,090,655 47,662,729 10,583,962
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (5,924,936) 1,818,119 14,635,867 (1,474,643)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 9,578,869 $ 10,782,483 $ 53,402,124 $ 12,641,891
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST
AST - INVESCO AST - Oppenheimer AST - Janus Twentieth Century
Equity Income Large-Cap Growth Overseas Growth Strategic Balanced
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 11,599,055 $ - $ 1,238,698 $ 230,642
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (9,885,162) (3,844,979) (6,149,049) (732,278)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,713,893 (3,844,979) (4,910,351) (501,636)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 194,753,108 107,316,589 313,218,801 5,405,116
Cost of Securities Sold 149,116,542 92,087,117 276,202,367 4,384,337
--------------------------------------------------------------------------
Net Gain (Loss) 45,636,566 15,229,472 37,016,434 1,020,779
Capital Gain Distributions Received 29,323,335 - - -
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 74,959,901 15,229,472 37,016,434 1,020,779
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 77,023,700 (8,079,563) 5,312,843 1,499,397
End of Period 76,363,914 39,422,929 17,354,609 11,896,151
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (659,786) 47,502,492 12,041,766 10,396,754
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 76,014,008 $ 58,886,985 $ 44,147,849 $ 10,915,897
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - Stein Roe AST - Cohen &
AST Venture Steers Realty
Twentieth Century AST - Marsico Jan. 8* thru Jan. 2* thru
International Growth Capital Growth Dec. 31, 1998 Dec. 31, 1998
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 64,332 $ 6,184 $ - $ -
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (796,726) (3,811,523) (60,801) (297,537)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (732,394) (3,805,339) (60,801) (297,537)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 51,544,903 94,871,335 1,703,209 4,959,154
Cost of Securities Sold 46,909,804 83,883,056 2,194,619 5,967,041
--------------------------------------------------------------------------
Net Gain (Loss) 4,635,099 10,988,279 (491,410) (1,007,887)
Capital Gain Distributions Received - - - -
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 4,635,099 10,988,279 (491,410) (1,007,887)
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period (256,236) 20,045 - -
End of Period 385,125 67,547,327 (194,637) (3,001,389)
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 641,361 67,527,282 (194,637) (3,001,389)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,544,066 $ 74,710,222 $ (746,848) $ (4,306,813)
==========================================================================
- - ----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AST - Bankers
Trust Enhanced 500
Jan. 2* thru AVP - Short Term AVP AVP
Dec. 31, 1998 Multi Market Premier Growth Growth & Income
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income $ - $ 17,125 $ 8,781 $ 51,093
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (1,811,494) (2,446) (129,016) (105,676)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (1,811,494) 14,679 (120,235) (54,583)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 132,604,597 41,480 1,734,559 2,235,834
Cost of Securities Sold 126,046,439 43,119 1,235,157 1,628,066
--------------------------------------------------------------------------
Net Gain (Loss) 6,558,158 (1,639) 499,402 607,768
Capital Gain Distributions Received - - - 646,078
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 6,558,158 (1,639) 499,402 1,253,846
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period - (1,234) 1,741,253 1,601,593
End of Period 26,889,330 (6,336) 4,726,345 1,710,317
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 26,889,330 (5,102) 2,985,092 108,724
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 31,635,994 $ 7,938 $ 3,364,259 $ 1,307,987
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AVP - US Govt /
High Grade AVP AVP AVP
Securities Total Return International Money Market
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 122,156 $ 64,908 $ 60,263 $ 71,204
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (36,793) (62,174) (45,381) (21,407)
------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 85,363 2,734 14,882 49,797
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 881,308 2,598,571 1,085,760 2,903,477
Cost of Securities Sold 842,404 1,825,362 906,023 2,903,477
--------------------------------------------------------------------------
Net Gain (Loss) 38,904 773,209 179,737 -
Capital Gain Distributions Received 14,018 299,473 89,931 -
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 52,922 1,072,682 269,668 -
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 98,935 1,133,350 191,042 -
End of Period 121,537 684,546 266,469 -
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 22,602 (448,804) 75,427 -
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 160,887 $ 626,612 $ 359,977 $ 49,797
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AVP - NA AVP - Global AVP AVP
Govt Income Dollar Govt Income Utility Income Global Bond
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 19,140 $ 46,031 $ 17,617 $ 4,468
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (3,820) (9,709) (13,079) (4,870)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 15,320 36,322 4,538 (402)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 256,679 180,486 297,627 85,463
Cost of Securities Sold 213,562 142,650 214,200 84,019
--------------------------------------------------------------------------
Net Gain (Loss) 43,117 37,836 83,427 1,444
Capital Gain Distributions Received 2,568 33,610 8,210 1,570
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 45,685 71,446 91,637 3,014
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 56,497 154,099 203,148 (4,552)
End of Period 1,914 (116,497) 282,528 31,639
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (54,583) (270,596) 79,380 36,191
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,422 $ (162,828) $ 175,555 $ 38,803
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
AVP - Conservative AVP AVP AVP - Worldwide
Investors Growth Investors Growth Privatization
--------------------------------------------------------------------------
INVESTMENT INCOME:
Income
Dividends $ 34,223 $ 14,720 $ 14,937 $ 16,530
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (18,080) (18,611) (90,980) (18,724)
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 16,143 (3,891) (76,043) (2,194)
--------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 387,683 140,462 1,478,863 208,529
Cost of Securities Sold 315,218 99,623 827,600 151,924
--------------------------------------------------------------------------
Net Gain (Loss) 72,465 40,839 651,263 56,605
Capital Gain Distributions Received 44,463 93,931 349,037 61,242
--------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 116,928 134,770 1,000,300 117,847
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 149,261 231,044 2,115,451 228,171
End of Period 165,995 358,484 2,756,270 231,244
--------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 16,734 127,440 640,819 3,073
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 149,805 $ 258,319 $ 1,565,076 $ 118,726
==========================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
</TABLE>
<TABLE>
<CAPTION>
LAT - Equity
Montgomery Value
Emerging May 4* thru
Markets Dec. 31, 1998
---------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C>
Dividends $ 125,282 $ 52,560
Expenses
Mortality and Expense Risk Charges and Administrative Fees
(Note 6) (1,153,998) (49,971)
---------------------------------------
NET INVESTMENT INCOME (LOSS) (1,028,716) 2,589
---------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 52,966,649 755,332
Cost of Securities Sold 79,559,261 794,496
---------------------------------------
Net Gain (Loss) (26,592,612) (39,164)
Capital Gain Distributions Received - -
---------------------------------------
NET REALIZED GAIN (LOSS) (26,592,612) (39,164)
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period (12,988,729) -
End of Period (23,884,814) 405,617
---------------------------------------
NET UNREALIZED GAIN (LOSS) (10,896,085) 405,617
---------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (38,517,413) $ 369,042
=======================================
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Class 1 Sub-account Investing In:
NBAMT
Total Partners
------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (25,565,307) $ (16,826,052) $ (6,605,542) $ (5,607,841)
Net Realized Gain (Loss) 419,560,879 707,721,191 109,598,961 59,620,965
Net Unrealized Gain (Loss) On
Investments 30,287,318 428,063,883 (95,288,506) 52,083,739
---------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting
From Operations
424,282,890 1,118,959,022 7,704,913 106,096,863
----------- ------------- --------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
3,925,207,325 3,445,529,005 87,465,544 176,664,891
Net Transfers Between Sub-accounts
7,342,232 19,559,790 (157,352,903) 90,481,810
Surrenders
(992,995,074) (571,654,483) (41,153,744) (23,279,602)
------------ ------------ ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting
From Capital Share Transactions
2,939,554,483 2,893,434,312 (111,041,103) 243,867,099
------------- ------------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
3,363,837,373 4,012,393,334 (103,336,190) 349,963,962
------------- ------------- ------------ -----------
NET ASSETS:
Beginning of Period 10,682,456,176 6,670,062,842 634,003,818 284,039,856
-------------- ------------- ----------- -----------
End of Period $ 14,046,293,549 $ 10,682,456,176 $ 530,667,628 $ 634,003,818
================ ================ ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AAF AAF
Small Capitalization Growth
-------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (8,878,543) $ (8,684,076) $ (10,081,222) $ (7,213,568)
Net Realized Gain (Loss) 79,384,611 23,270,097 230,577,307 61,223,620
Net Unrealized Gain (Loss) On
Investments 20,491,445 33,833,987 105,084,379 63,763,384
---------- ---------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations 90,997,513 48,420,008 325,580,464 117,773,436
---------- ---------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 59,278,851 83,217,544 122,856,808 100,644,395
Net Transfers Between Sub-accounts (25,557,564) (83,722,190) 9,590,556 (40,472,793)
Surrenders (46,512,568) (36,059,609) (60,097,640) (38,888,417)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting
From Capital Share Transactions
(12,791,281) (36,564,255) 72,349,724 21,283,185
----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
78,206,232 11,855,753 397,930,188 139,056,621
---------- ---------- ----------- -----------
NET ASSETS:
Beginning of Period 622,192,720 610,336,967 684,854,905 545,798,284
----------- ----------- ----------- -----------
End of Period $ 700,398,952 $ 622,192,720 $1,082,785,093 $ 684,854,905
============== ============== ============== =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AAF - MidCap AST - Putnam International
Growth Equity Portfolio
-----------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (5,885,234) $ (4,664,279) $ 6,073,074 $ (268,817)
Net Realized Gain (Loss)
60,422,023 21,857,328 70,658,870 28,038,483
Net Unrealized Gain (Loss) On
Investments 55,418,917 21,356,641 (3,808,998) 28,001,987
---------- ---------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
109,955,706 38,549,690 72,922,946 55,771,653
----------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
69,079,499 71,688,459 49,419,102 54,454,415
Net Transfers Between Sub-accounts
35,419,751 (47,662,236) (10,963,935) (22,219,098)
Surrenders
(27,349,646) (18,032,564) (31,428,155) (24,820,360)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
77,149,604 5,993,659 7,027,012 7,414,957
---------- --------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS
187,105,310 44,543,349 79,949,958 63,186,610
----------- ---------- ---------- ----------
NET ASSETS:
Beginning of Period
349,022,960 304,479,611 402,490,130 339,303,520
----------- ----------- ----------- -----------
End of Period $ 536,128,270 $ 349,022,960 $ 482,440,088 $ 402,490,130
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Putnam Balanced AST - Putnam Value
Portfolio Growth & Income
----------------------------------------
Year Ended Year Ended Year Ended Jan. 3* thru
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 3,615,404 $ 1,927,921 $ (1,531,352) $ (785,251)
Net Realized Gain (Loss)
27,589,489 34,437,373 5,429,638 915,315
Net Unrealized Gain (Loss) On
Investments 9,072,551 11,184,906 10,590,684 7,226,887
--------- ---------- ---------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
40,277,444 47,550,200 14,488,970 7,356,951
---------- ---------- ---------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
47,010,659 51,955,292 61,495,420 59,201,165
Net Transfers Between Sub-accounts
(8,129,551) (6,791,225) 2,422,664 50,302,376
Surrenders
(29,989,990) (22,938,279) (8,429,933) (2,004,382)
----------- ----------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
8,891,118 22,225,788 55,488,151 107,499,159
--------- ---------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
49,168,562 69,775,988 69,977,121 114,856,110
---------- ---------- ---------- -----------
NET ASSETS:
Beginning of Period
353,258,850 283,482,862 114,856,110 -
----------- ----------- -----------
End of Period $ 402,427,412 $ 353,258,850 $ 184,833,231 $ 114,856,110
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Lord Abbett AST - Lord Abbett
Growth & Income Small Cap Value
--------------------------------------------
Year Ended Year Ended Jan. 2,* thru
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998
---------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income (Loss) $ (3,716,499) $ (3,072,409) $ (294,164)
Net Realized Gain (Loss)
88,111,767 62,056,681 (1,027,968)
Net Unrealized Gain (Loss) On
Investments 22,893,387 71,259,890 (973,276)
---------- ---------- --------
Net Increase (Decrease) In Net Assets
Resulting From Operations
107,288,655 130,244,162 (2,295,408)
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
237,965,993 238,461,885 22,512,506
Net Transfers Between Sub-accounts
(35,068,954) 76,263,516 22,491,651
Surrenders
(70,712,992) (42,453,819) (2,498,934)
----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
132,184,047 272,271,582 42,505,223
----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
239,472,702 402,515,744 40,209,815
----------- ----------- ----------
NET ASSETS:
Beginning of Period
917,383,280 514,867,536 -
----------- -----------
End of Period $ 1,156,855,982 $ 917,383,280 $ 40,209,815
=============== ============== =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST AST
JanCap Growth Money Market
------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (25,000,547) $ (15,731,833) $ 31,632,350 $ 22,722,598
Net Realized Gain (Loss)
393,370,021 219,749,234 59,024 76,336
Net Unrealized Gain (Loss) On
Investments 764,112,708 61,121,436 - -
----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
1,132,482,182 265,138,837 31,691,374 22,798,934
------------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
414,857,558 357,518,531 1,052,415,158 938,643,230
Net Transfers Between Sub-accounts
279,794,860 53,164,973 (779,708,445) (538,655,399)
Surrenders
(128,085,250) (65,442,768) (168,120,490) (122,368,549)
------------ ----------- ------------ ------------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
566,567,168 345,240,736 104,586,223 277,619,282
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
1,699,049,350 610,379,573 136,277,597 300,418,216
------------- ----------- ----------- -----------
NET ASSETS:
Beginning of Period
1,489,249,667 878,870,094 773,872,782 473,454,566
------------- ----------- ----------- -----------
End of Period $ 3,188,299,017 $ 1,489,249,667 $ 910,150,379 $ 773,872,782
=============== =============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Neuberger & Berman AST - Neuberger & Berman
Midcap Value Midcap Growth
--------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 1,345,597 $ 1,603,341 $ (2,876,348) $ (2,181,454)
Net Realized Gain (Loss)
25,980,780 13,264,921 37,001,331 15,106,712
Net Unrealized Gain (Loss) On
Investments (30,098,646) 17,114,936 9,705,037 6,412,455
----------- ---------- --------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
(2,772,269) 31,983,198 43,830,020 19,337,713
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
76,489,166 20,576,636 47,822,905 45,571,231
Net Transfers Between Sub-accounts
8,248,593 30,806,277 (4,944,376) (8,116,216)
Surrenders
(14,121,421) (8,540,979) (12,106,097) (8,811,236)
----------- ---------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
70,616,338 42,841,934 30,772,432 28,643,779
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
67,844,069 74,825,132 74,602,452 47,981,492
---------- ---------- ---------- ----------
NET ASSETS:
Beginning of Period
196,368,992 121,543,860 181,782,865 133,801,373
----------- ----------- ----------- -----------
End of Period $ 264,213,061 $ 196,368,992 $ 256,385,317 $ 181,782,865
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Federated AST - T. Rowe Price
High Yield Asset Allocation
-------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 19,200,967 $ 5,757,092 $ 951,684 $ 159,622
Net Realized Gain (Loss)
15,221,005 9,367,133 7,757,799 4,504,396
Net Unrealized Gain (Loss) On
Investments (30,714,921) 18,931,613 32,734,801 19,546,502
----------- ---------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
3,707,051 34,055,838 41,444,284 24,210,520
--------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
200,925,802 147,096,252 80,815,034 63,473,427
Net Transfers Between Sub-accounts
(7,898,590) 59,270,813 21,057,862 12,983,888
Surrenders
(41,620,378) (16,316,085) (18,652,371) (8,563,806)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
151,406,834 190,050,980 83,220,525 67,893,509
----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
155,113,885 224,106,818 124,664,809 92,104,029
NET ASSETS:
Beginning of Period
419,160,174 195,053,356 209,989,850 117,885,821
----------- ----------- ----------- -----------
End of Period $ 574,274,059 $ 419,160,174 $ 334,654,659 $ 209,989,850
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - T. Rowe Price AST - T. Rowe Price
International Equity International Bond
-------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (1,335,571) $ (4,185,495) $ (1,542,592) $ (139,873)
Net Realized Gain (Loss)
30,257,725 48,546,127 2,202,014 2,830,437
Net Unrealized Gain (Loss) On
Investments 27,598,237 (42,688,261) 16,090,507 (7,585,146)
---------- ----------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
56,520,391 1,672,371 16,749,929 (4,894,582)
---------- --------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
46,380,644 113,487,493 23,183,329 37,403,284
Net Transfers Between Sub-accounts
(66,151,831) (34,286,179) (16,852,851) 4,640,885
Surrenders
(27,235,418) (20,827,250) (7,481,251) (6,024,192)
----------- ----------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(47,006,605) 58,374,064 (1,150,773) 36,019,977
----------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
9,513,786 60,046,435 15,599,156 31,125,395
--------- ---------- ---------- ----------
NET ASSETS:
Beginning of Period
441,661,507 381,615,072 126,384,849 95,259,454
----------- ----------- ----------- ----------
End of Period $ 451,175,293 $ 441,661,507 $ 141,984,005 $ 126,384,849
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - T. Rowe Price AST - T. RowePrice
Natural Resources Small Company Value
------------------------------------------------------
Year Ended Year Ended Year Ended Jan. 3* Thru
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (365,220) $ (1,143,616) $ (2,712,872) $ (1,046,184)
Net Realized Gain (Loss)
5,739,992 8,203,662 5,518,986 3,142,246
Net Unrealized Gain (Loss) On
Investments (17,319,517) (6,418,220) (39,680,260) 13,821,124
----------- ---------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
(11,944,745) 641,826 (36,874,146) 15,917,186
----------- ------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
10,700,131 41,756,457 102,452,405 69,028,994
Net Transfers Between Sub-accounts
(30,774,124) (14,150,361) 37,432,618 103,030,576
Surrenders
(5,540,643) (5,051,340) (11,861,604) (2,385,953)
---------- ---------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(25,614,636) 22,554,756 128,023,419 169,673,617
----------- ---------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(37,559,381) 23,196,582 91,149,273 185,590,803
----------- ---------- ---------- -----------
NET ASSETS:
Beginning of Period
109,197,426 86,000,844 185,590,803 -
----------- ---------- -----------
End of Period $ 71,638,045 $ 109,197,426 $ 276,740,076 $ 185,590,803
============= ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Founders Capital AST - Founders
Appreciation Passport
----------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (3,422,151) $ (3,269,734) $ (1,484,977) $ (998,990)
Net Realized Gain (Loss)
18,925,956 5,344,067 10,449,341 6,221,033
Net Unrealized Gain (Loss) On
Investments (5,924,936) 10,296,041 1,818,119 (3,976,715)
---------- ---------- --------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
9,578,869 12,370,374 10,782,483 1,245,328
--------- ---------- ---------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
36,385,240 69,525,280 12,658,016 28,247,953
Net Transfers Between Sub-accounts
(17,848,281) (20,261,235) (15,851,816) (23,013,880)
Surrenders
(16,930,504) (11,292,844) (6,647,007) (5,045,453)
----------- ----------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
1,606,455 37,971,201 (9,840,807) 188,620
--------- ---------- ---------- -------
TOTAL INCREASE (DECREASE) IN NET ASSETS
11,185,324 50,341,575 941,676 1,433,948
---------- ---------- ------- ---------
NET ASSETS:
Beginning of Period
253,437,901 203,096,326 114,476,755 113,042,807
----------- ----------- ----------- -----------
End of Period $ 264,623,225 $ 253,437,901 $ 115,418,431 $ 114,476,755
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - PIMCO AST - PIMCO
Total Return Bond Limited Maturity Bond
-------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 15,263,189 $ 8,265,040 $ 9,547,863 $ 6,888,549
Net Realized Gain (Loss)
23,503,068 3,421,289 4,568,671 1,691,132
Net Unrealized Gain (Loss) On
Investments 14,635,867 25,384,092 (1,474,643) 5,817,081
---------- ---------- ---------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
53,402,124 37,070,421 12,641,891 14,396,762
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
216,394,952 144,822,398 79,844,302 82,870,961
Net Transfers Between Sub-accounts
102,268,526 47,516,208 (7,724,284) (1,494,099)
Surrenders
(58,367,611) (24,446,295) (27,572,405) (14,996,389)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
260,295,867 167,892,311 44,547,613 66,380,473
----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
313,697,991 204,962,732 57,189,504 80,777,235
----------- ----------- ---------- ----------
NET ASSETS:
Beginning of Period
548,517,832 343,555,100 281,525,018 200,747,783
----------- ----------- ----------- -----------
End of Period $ 862,215,823 $ 548,517,832 $ 338,714,522 $ 281,525,018
============== ============== ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - INVESCO AST - Oppenheimer
Equity Income Large-Cap Growth
--------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 1,713,893 $ 235,159 $ (3,844,979) $ (2,130,901)
Net Realized Gain (Loss)
74,959,901 51,219,443 15,229,472 10,286,564
Net Unrealized Gain (Loss) On
Investments (659,786) 33,592,279 47,502,492 (10,296,890)
-------- ---------- ---------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
76,014,008 85,046,881 58,886,985 (2,141,227)
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
173,016,669 146,350,338 63,024,044 103,757,636
Net Transfers Between Sub-accounts
8,653,629 35,938,268 (42,885,074) 88,201,541
Surrenders
(43,203,454) (24,646,531) (15,785,444) (5,931,255)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
138,466,844 157,642,075 4,353,526 186,027,922
----------- ----------- --------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
214,480,852 242,688,956 63,240,511 183,886,695
----------- ----------- ---------- -----------
NET ASSETS:
Beginning of Period
578,517,140 335,828,184 230,963,118 47,076,423
----------- ----------- ----------- ----------
End of Period $ 792,997,992 $ 578,517,140 $ 294,203,629 $ 230,963,118
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Janus AST - Twentieth Century
Overseas Growth Strategic Balanced
------------------------------------------------------------
Year Ended Jan. 3* Thru Year Ended Jan. 3* Thru
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (4,910,351) $ (1,784,548) $ (501,636) $ (189,017)
Net Realized Gain (Loss)
37,016,434 6,683,077 1,020,779 122,616
Net Unrealized Gain (Loss) On
Investments 12,041,766 5,312,843 10,396,754 1,499,397
---------- --------- ---------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
44,147,849 10,211,372 10,915,897 1,432,996
---------- ---------- ---------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
161,955,466 114,767,294 35,726,369 19,017,480
Net Transfers Between Sub-accounts
153,831,178 129,101,250 16,908,109 8,740,443
Surrenders
(24,183,836) (3,528,548) (2,400,654) (554,916)
----------- ---------- ---------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
291,602,808 240,339,996 50,233,824 27,203,007
----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
335,750,657 250,551,368 61,149,721 28,636,003
----------- ----------- ---------- ----------
NET ASSETS:
Beginning of Period
250,551,368 - 28,636,003 -
----------- ----------
End of Period $ 586,302,025 $ 250,551,368 $ 89,785,724 $ 28,636,003
============== ============== ============= ============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST - Twentieth Century Marsico
International Growth Capital Growth
-------------------------------------------------------
Year Ended Jan. 3* Thru Year Ended Dec. 22* Thru
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (732,394) $ (221,199) $ (3,805,339) $ (2,901)
Net Realized Gain (Loss)
4,635,099 1,087,975 10,988,279 4,780
Net Unrealized Gain (Loss) On
Investments 641,361 (256,236) 67,527,282 20,045
------- -------- ---------- ------
Net Increase (Decrease) In Net Assets
Resulting From Operations
4,544,066 610,540 74,710,222 21,924
--------- ------- ---------- ------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
28,149,644 14,303,142 195,804,087 244,988
Net Transfers Between Sub-accounts
16,248,250 18,442,360 309,697,826 6,906,147
Surrenders
(6,036,911) (870,844) (16,853,192) (11,024)
---------- -------- ----------- -------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
38,360,983 31,874,658 488,648,721 7,140,111
---------- ---------- ----------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS
42,905,049 32,485,198 563,358,943 7,162,035
---------- ---------- ----------- ---------
NET ASSETS:
Beginning of Period
32,485,198 - 7,162,035 -
---------- ---------
End of Period $ 75,390,247 $ 32,485,198 $ 570,520,978 $ 7,162,035
============= ============= ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
Stein Roe Cohen & Steers Bankers Trust
Venture Realty Enhanced 500
-----------------------------------------------
Jan. 8* thru Jan. 2* thru Jan. 2* thru
Dec. 31, 1998 Dec. 31, 1998 Dec. 31, 1998
---------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income (Loss) $ (60,801) $ (297,537) $ (1,811,494)
Net Realized Gain (Loss)
(491,410) (1,007,887) 6,558,158
Net Unrealized Gain (Loss) On
Investments (194,637) (3,001,389) 26,889,330
-------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
(746,848) (4,306,813) 31,635,994
-------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
4,745,696 17,163,867 62,801,858
Net Transfers Between Sub-accounts
4,842,295 19,402,833 195,643,689
Surrenders
(122,021) (1,021,179) (7,296,498)
-------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
9,465,970 35,545,521 251,149,049
--------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
8,719,122 31,238,708 282,785,043
--------- ---------- -----------
NET ASSETS:
Beginning of Period
- - -
----------- ------------ ------------
End of Period $ 8,719,122 $ 31,238,708 $ 282,785,043
============= ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - Short Term AVP
Multi Market Premier Growth
--------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 14,679 $ 11,324 $ (120,235) $ (97,853)
Net Realized Gain (Loss)
(1,639) (2,021) 499,402 27,071
Net Unrealized Gain (Loss) On
Investments (5,102) (2,150) 2,985,092 2,066,050
------ ------ --------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
7,938 7,153 3,364,259 1,995,268
----- ----- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
- 9,650 77,249 174,594
Net Transfers Between Sub-accounts
5,001 (68,999) 244,890 (61,081)
Surrenders
(38,945) (6,559) (1,037,762) (1,107,887)
------- ------ ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(33,944) (65,908) (715,623) (994,374)
------- ------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(26,006) (58,755) 2,648,636 1,000,894
------- ------- --------- ---------
NET ASSETS:
Beginning of Period
179,073 237,828 7,707,788 6,706,894
------- ------- --------- ---------
End of Period $ 153,067 $ 179,073 $ 10,356,424 $ 7,707,788
============ ============ ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP - U.S. Govt/
Growth & Income High Grade Securities
----------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (54,583) $ (53,522) $ 85,363 $ 66,544
Net Realized Gain (Loss)
1,253,846 535,210 52,922 34,826
Net Unrealized Gain (Loss) On
Investments 108,724 1,185,423 22,602 55,013
------- --------- ------ ------
Net Increase (Decrease) In Net Assets
Resulting From Operations
1,307,987 1,667,111 160,887 156,383
--------- --------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
115,116 276,029 13,387 133,835
Net Transfers Between Sub-accounts
(654,741) 459,016 198,029 127,521
Surrenders
(1,279,378) (737,368) (682,177) (173,333)
---------- -------- -------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(1,819,003) (2,323) (470,761) 88,023
---------- ------ -------- ------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(511,016) 1,664,788 (309,874) 244,406
-------- --------- -------- -------
NET ASSETS:
Beginning of Period
7,818,464 6,153,676 2,448,642 2,204,236
--------- --------- --------- ---------
End of Period $ 7,307,448 $ 7,818,464 $ 2,138,768 $ 2,448,642
============= ============= ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP
Total Return International
--------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 2,734 $ 1,667 $ 14,882 $ (17,836)
Net Realized Gain (Loss)
1,072,682 291,938 269,668 135,014
Net Unrealized Gain (Loss) On
Investments (448,804) 533,306 75,427 (54,196)
-------- ------- ------ -------
Net Increase (Decrease) In Net Assets
Resulting From Operations
626,612 826,911 359,977 62,982
------- ------- ------- ------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
210,259 433,691 32,371 107,530
Net Transfers Between Sub-accounts
(353,823) 59,655 (634,830) (163,920)
Surrenders
(2,073,418) (374,263) (331,307) (281,974)
---------- -------- -------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(2,216,982) 119,083 (933,766) (338,364)
---------- ------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(1,590,370) 945,994 (573,789) (275,382)
---------- ------- -------- --------
NET ASSETS:
Beginning of Period
5,181,452 4,235,458 3,435,909 3,711,291
--------- --------- --------- ---------
End of Period $ 3,591,082 $ 5,181,452 $ 2,862,120 $ 3,435,909
============= ============= ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP - N.A.
Money Market Government Income
----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 49,797 $ 57,268 $ 15,320 $ 12,207
Net Realized Gain (Loss)
- - 45,685 15,697
Net Unrealized Gain (Loss) On
Investments - - (54,583) 2,437
------- ------------ ------- -----
Net Increase (Decrease) In Net Assets
Resulting From Operations
49,797 57,268 6,422 30,341
------ ------ ----- ------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
191,842 54,967 13,386 5,498
Net Transfers Between Sub-accounts
2,313,324 (234,453) (178,048) 37,275
Surrenders
(2,299,225) (429,198) (67,836) (45,412)
---------- -------- ------- -------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
205,941 (608,684) (232,498) (2,639)
------- -------- -------- ------
TOTAL INCREASE (DECREASE) IN NET ASSETS
255,738 (551,416) (226,076) 27,702
------- -------- -------- ------
NET ASSETS:
Beginning of Period
1,300,522 1,851,938 370,316 342,614
--------- --------- ------- -------
End of Period $ 1,556,260 $ 1,300,522 $ 144,240 $ 370,316
============= ============= ============ ==========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - Global Dollar AVP
Government Income Utility Income
-----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 36,322 $ 19,514 $ 4,538 $ 2,440
Net Realized Gain (Loss)
71,446 115,679 91,637 21,368
Net Unrealized Gain (Loss) On
Investments (270,596) (44,533) 79,380 154,428
-------- ------- ------ -------
Net Increase (Decrease) In Net Assets
Resulting From Operations
(162,828) 90,660 175,555 178,236
-------- ------ ------- -------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
16,035 4,475 21,773 15,678
Net Transfers Between Sub-accounts
(121,811) (5,437) (52,433) (44,379)
Surrenders
(42,332) (152,463) (138,283) (112,205)
------- -------- -------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(148,108) (153,425) (168,943) (140,906)
-------- -------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(310,936) (62,765) 6,612 37,330
-------- ------- ----- ------
NET ASSETS:
Beginning of Period
832,085 894,850 890,645 853,315
------- ------- ------- -------
End of Period $ 521,149 $ 832,085 $ 897,257 $ 890,645
============ ============ ============ ==========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP
Global Bond Conservative Investors
--------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (402) $ 12,493 $ 16,143 $ 10,596
Net Realized Gain (Loss)
3,014 (444) 116,928 6,338
Net Unrealized Gain (Loss) On
Investments 36,191 (14,975) 16,734 84,412
------ ------- ------ ------
Net Increase (Decrease) In Net Assets
Resulting From Operations
38,803 (2,926) 149,805 101,346
------ ------ ------- -------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
304 39,190 164,258 57,509
Net Transfers Between Sub-accounts
(22,876) (49,276) 89,784 3,871
Surrenders
(40,056) (18,555) (299,525) (44,281)
------- ------- -------- -------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(62,628) (28,641) (45,483) 17,099
------- ------- ------- ------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(23,825) (31,567) 104,322 118,445
------- ------- ------- -------
NET ASSETS:
Beginning of Period
361,791 393,358 1,163,764 1,045,319
------- ------- --------- ---------
End of Period $ 337,966 $ 361,791 $ 1,268,086 $ 1,163,764
============ ============ ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP
Growth Investors Growth
------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (3,891) $ (264) $ (76,043) $ (79,818)
Net Realized Gain (Loss)
134,770 28,441 1,000,300 604,151
Net Unrealized Gain (Loss) On
Investments 127,440 124,320 640,819 1,001,396
------- ------- ------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Operations
258,319 152,497 1,565,076 1,525,729
------- ------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
54,671 55,177 42,676 158,107
Net Transfers Between Sub-accounts
17,197 (5,898) (817,040) (64,356)
Surrenders
(124,107) (34,941) (532,941) (826,184)
-------- ------- -------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(52,239) 14,338 (1,307,305) (732,433)
------- ------ ---------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS
206,080 166,835 257,771 793,296
------- ------- ------- -------
NET ASSETS:
Beginning of Period
1,190,367 1,023,532 6,504,382 5,711,086
--------- --------- --------- ---------
End of Period $ 1,396,447 $ 1,190,367 $ 6,762,153 $ 6,504,382
============= ============= ============= ===========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP Montgomery Emerging
Worldwide Privatization Markets
-------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
--------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (2,194) $ (5,081) $ (1,028,716) $ (1,003,067)
Net Realized Gain (Loss)
117,847 77,528 (26,592,612) 3,537,353
Net Unrealized Gain (Loss) On
Investments 3,073 43,779 (10,896,085) (13,430,624)
----- ------ ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Operations
118,726 116,226 (38,517,413) (10,896,338)
------- ------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
1,267 18,224 15,292,607 49,233,800
Net Transfers Between Sub-accounts
(32,624) (40,124) (11,481,926) 44,663,955
Surrenders
(118,822) (191,761) (4,308,589) (2,984,810)
-------- -------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
(150,179) (213,661) (497,908) 90,912,945
-------- -------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
(31,453) (97,435) (39,015,321) 80,016,607
------- ------- ----------- ----------
NET ASSETS:
Beginning of Period
1,258,211 1,355,646 104,218,709 24,202,102
--------- --------- ----------- ----------
End of Period $ 1,226,758 $ 1,258,211 $ 65,203,388 $ 104,218,709
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
LAT - Equity
Value
-----
May. 4* thru
Dec. 31, 1998
-------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss) $ 2,589
Net Realized Gain (Loss)
(39,164)
Net Unrealized Gain (Loss) On
Investments 405,617
-------
Net Increase (Decrease) In Net Assets
Resulting From Operations
369,042
-------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits
8,163,400
Net Transfers Between Sub-accounts
2,581,848
Surrenders
(161,130)
--------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions
10,584,118
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS
10,953,160
----------
NET ASSETS:
Beginning of Period
-
----------
End of Period $ 10,953,160
=============
See Notes to Financial Statements.
* Date Operations Commenced.
American Skandia Life Assurance Corporation
Variable Account B - Class 1
Notes to Financial Statements
December 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION
American Skandia Life Assurance Corporation Variable Account B - Class 1 (the
"Account") is a separate investment account of American Skandia Life Assurance
Corporation ("American Skandia" 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, 1998, the Account consisted of fifty-four sub-accounts. These
financial statements report on forty-nine sub-accounts offered in the LifeVest
Personal Security Annuity, the American Skandia Advisors Plan Annuity, the
American Skandia Advisors Plan II Annuity, the Imperium Annuity, the American
Skandia Protector Annuity, the Emerald Choice Annuity, American Skandia XTra
Credit Annuity, American Skandia LifeVest Annuity and the Alliance Capital
Navigator Annuity. Each of the forty-nine sub-accounts invests only in a single
corresponding portfolio of either Neuberger Berman Advisers Management Trust,
The Alger American Fund, American Skandia Trust, Alliance Variable Products
Series Fund, Inc., Montgomery Variable Series, or Life & Annuity Trust (the
"Trusts"). Neuberger Berman Management, Incorporated is the advisor for the
Neuberger Berman Advisers Management Trust. Fred Alger Management, Inc. is the
advisor for The Alger American Fund. American Skandia Investment Services,
Incorporated, an affiliate, is the investment manager for American Skandia
Trust, while Putnam Investment Management, Inc., Lord Abbett & Co., Janus
Capital Corporation, J. P. Morgan Investment Management Inc., Neuberger Berman
Management Incorporated, Federated Investment Counseling, T. Rowe Price
Associates, Inc., Rowe Price-Fleming International, Inc., Founders Asset
Management, LLC, Pacific Investment Management Company, INVESCO Funds Group
Inc., OppenheimerFunds,Inc., American Century Investment Management, Inc.,
Marisco Capital Management LLC, Stein Roe & Farnham Inc., Cohen and Steers
Capital Management, Inc. and Bankers Trust Company, are the sub-advisors.
Alliance Capital Management L.P. is the advisor for the Alliance Variable
Products Series Fund, Inc., and Montgomery Asset Management, L.P. is the
investment advisor for the Montgomery Variable Series. Wells Fargo Bank N.A. is
the investment manager for the Life and Annuity Trust.
The investment advisors are paid fees for their services by the respective
Trusts.
The Lifevest Personal Security Annuity, the American Skandia Advisors Plan
Annuity, and the American Skandia Advisors Plan II Annuity, the Imperium
Annuity, the Emerald Choice Annuity, American Skandia XTra Credit Annuity, the
Alliance Capital Navigator Annuity, American Skandia LifeVest Annuity and the
American Skandia Protector Annuity are marketed through American Skandia
Marketing, Inc. an affiliate.
The following four sub-accounts became available for operations on January 2,
1998: the Lord Abbett Small Cap Value, the Stein Roe Venture, the Cohen and
Steers Realty, and the Bankers Trust Enhanced 500. The Life & Annuity Trust
Equity Value Fund became available for operations on May 1, 1998.
American Skandia Life Assurance Corporation
Variable Account B - Class 1
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 changes.
5. DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Internal Revenue 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 the insurance companies). If the diversification
requirements under the Internal Revenue Code are not met and the annuity is not
treated as an annuity, the taxpayer will be subject to income tax on the annual
gain in the contract. The Treasury Department's regulations prescribe the
diversification requirements for variable annuity contracts. We believe the
underlying mutual fund portfolios complied with the terms of these regulations.
American Skandia Life Assurance Corporation
Variable Account B - Class 1
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 contractowner account is
deducted at the end of each contract year and on surrender.
Contingent Deferred Sales Charges are computed as set forth in the respective
prospectus' of the LifeVest Personal Security Annuity, the American Skandia
Advisors Plan Annuity, the American Skandia Advisor Plan II Annuity, the
Imperium Annuity, the American Skandia Protector Annuity, the American Skandia
Xtra Credit Annuity, the American Skandia Emerald Choice Annuity, or The
Alliance Capital Navigator Annuity. These charges may be imposed on the full or
partial surrender of certain contracts. There is no contingent deferred sales
charge if all premiums were received at least eight complete years prior to the
date of the full or partial surrender.
7. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company is continuing its ongoing assessment of the potential impact of the
year 2000 issue on various aspects of its business. The Company's computer
support is provided by its affiliate, American Skandia Information Services and
Technology Corporation, which also provides such support for the Company's
affiliated broker-dealer, American Skandia Marketing, Incorporated, and the
Company's affiliated investment advisory firm, American Skandia Investment
Services, Incorporated. Because of the nature of the Company's business, any
assessment of the potential impact of the year 2000 issues on the Company must
be an assessment of the potential impact of these issues on all these companies,
which are referred to below as "American Skandia".
Business Partners
Management believes the Company is most vulnerable in its interfaces with
computer systems of investment managers, sub-advisors, third party
administrators, vendors and other business partners. The inability to properly
recognize date sensitive electronic information and transfer data between
systems could cause errors or even a complete systems failure which would result
in a temporary inability to process transactions correctly or engage in normal
business activities.
The American Skandia deferred annuity operational business partners report that
all critical interfaces are Year 2000 compliant.
American Skandia Life Assurance Corporation
Variable Account B - Class 1
Notes to Financial Statements
- --------------------------------------------------------------------------------
All investment managers and sub-advisors are required by the Securities and
Exchange Commission to publicly disclose their Year 2000 status in December 1998
and June 1999.
American Skandia has initiated formal communications with parties that provide
third party administration, record keeping and trust services in connection with
its life insurance and qualified retirement plan annuities business. Management
has already received several written assurances that these firms will be Year
2000 compliant. The Company expects to have certifications from all remaining
parties by July 1999. American Skandia is currently developing contingency plans
in the event that these targets are not met.
Information Technology Systems
American Skandia is a relatively young company whose internally developed
systems were designed from the start with four digit year codes. The Company
engaged an external information technology specialist to review American
Skandia's operating systems and internally developed software. The assessment
was completed in December 1997 and the results were favorable. Specific
modifications were suggested, evaluated and implemented for the annuity
administration system. This project was completed during 1998 and a certificate
of compliance has been received. Other non-critical internally developed
applications in the client/server area have already been or will be remediated
during 1999. The costs associated with this aspect of Year 2000 compliance have
not had, and are not expected to have, a significant impact on the Company's
results from operations.
Suppliers and Non-Information Technology Systems
Like most companies, American Skandia is reliant on network, and desktop
operating systems and software providers to release compliant versions of their
respective systems. American Skandia's network is currently at the most
compliant level available. The standard desktop software will be replaced, as
fully compliant versions become available. In addition, the Company is in the
process of contacting the non-information systems vendors and suppliers
regarding their Year 2000 compliance status and will factor the results of these
assessments into its contingency plans.
Management believes it has an effective program in place to resolve the Year
2000 issue in a timely manner. However, should errors or disruptions in computer
service occur, the Company could realize losses. Given the nature and
uncertainty of such losses, the amounts cannot be reasonably determined.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 1
NOTES TO FINANCIAL STATEMENTS
8. CHANGES IN THE UNITS
OUTSTANDING
<TABLE>
<CAPTION>
7 Class 1 Sub-accounts
Investing In:
NBAMT AAF-Small
Partners Capitalization
-------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 31,834,555 18,457,334 13,866,126 14,939,269
the Period
Units Purchased 4,105,063 9,679,244 1,245,613 1,933,994
Units Transferred Between (8,027,728) 4,875,366 (436,382) (2,187,695)
Sub-accounts
Units Surrendered (1,979,232) (1,177,389) (972,761) (819,442)
---------- ---------- -------- --------
Units Outstanding End of the 25,932,658 31,834,555 13,702,596 13,866,126
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AAF
AAF-Growth MidCap Growth
--------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 15,854,570 15,666,357 14,687,032 14,528,945
the Period
Units Purchased 2,331,363 2,460,915 2,575,065 3,129,612
Units Transferred Between 108,753 (1,327,005) 1,298,394 (2,236,547)
Sub-accounts
Units Surrendered (1,125,894) (945,697) (1,000,528) (734,978)
---------- -------- ---------- --------
Units Outstanding End of the 17,168,792 15,854,570 17,559,963 14,687,032
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST- Putnam AST-Putnam
International Equity Balanced Asset
-------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 17,534,233 17,220,688 22,109,373 20,691,852
the Period
Units Purchased 1,843,706 2,412,511 2,761,491 3,416,194
Units Transferred Between (449,181) (997,793) (485,362) (489,875)
Sub-accounts
Units Surrendered (1,180,198) (1,101,173) (1,751,158) (1,508,798)
---------- ---------- ---------- ----------
Units Outstanding End of the 17,748,560 17,534,233 22,634,344 22,109,373
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Putnam Value AST-Lord Abbett
Growth & Income Growth & Income
-----------------------------------------
Year Ended Jan. 3* thru Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 9,523,815 0 42,197,002 28,937,085
the Period
Units Purchased 4,822,989 5,163,022 10,235,556 11,603,965
Units Transferred Between 133,543 4,522,905 (1,521,585) 3,636,261
Sub-accounts
Units Surrendered (635,157) (162,112) (2,931,624) (1,980,309)
-------- -------- ---------- ----------
Units Outstanding End of the 13,845,190 9,523,815 47,979,349 42,197,002
========== ========= ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Lord AST
Abbett
Small Cap JanCap
Value Growth
-------------------
Jan. 2* thru Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31,
1998 1998 1997
------------------------------
<S> <C> <C> <C>
Units Outstanding Beginning of 0 62,486,302 46,779,164
the Period
Units Purchased 2,104,040 13,611,226 15,973,272
Units Transferred Between 2,073,342 8,705,025 2,439,688
Sub-accounts
Units Surrendered (95,512) (4,170,955) (2,705,822)
------- ---------- ----------
Units Outstanding End of the 4,081,870 80,631,598 62,486,302
========= ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST AST- Neuberger & Berman
Money Market Midcap Value
--------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 66,870,000 42,435,169 11,745,440 9,062,152
the Period
Units Purchased 87,759,186 80,965,954 4,805,522 1,402,045
Units Transferred Between (65,830,717) (47,392,033) 709,282 1,853,390
Sub-accounts
Units Surrendered (12,943,027) (9,139,090) (850,123) (572,147)
----------- ---------- -------- --------
Units Outstanding End of the 75,855,442 66,870,000 16,410,121 11,745,440
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST- Neuberger & Berman AST-Federated
Midcap Growth High Yield
-------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 11,293,799 9,563,858 29,663,242 15,460,522
the Period
Units Purchased 2,745,074 2,991,383 13,411,950 10,945,250
Units Transferred Between 29,773 (727,314) (542,547) 4,425,749
Sub-accounts
Units Surrendered (679,357) (534,128) (2,362,501) (1,168,279)
-------- -------- ---------- ----------
Units Outstanding End of the 13,389,289 11,293,799 40,170,144 29,663,242
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-T. Rowe Price AST-T. Rowe
Asset Allocation Price International
Equity
------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 13,524,781 8,863,840 37,784,426 32,628,595
the Period
Units Purchased 4,774,662 4,329,794 3,616,803 9,274,838
Units Transferred Between 1,240,495 887,193 (4,990,460) (2,510,182)
Sub-accounts
Units Surrendered (1,070,623) (556,046) (2,082,344) (1,608,825)
---------- -------- ---------- ----------
Units Outstanding End of the 18,469,315 13,524,781 34,328,425 37,784,426
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-T. Rowe AST-T. Rowe Price
Price International Bond Natural Resources
-----------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 12,089,872 8,677,712 7,550,076 6,061,852
the Period
Units Purchased 2,080,674 3,527,220 719,907 2,783,573
Units Transferred Between (1,532,040) 431,115 (2,215,406) (989,683)
Sub-accounts
Units Surrendered (630,814) (546,175) (357,124) (305,666)
-------- -------- -------- --------
Units Outstanding End of the 12,007,692 12,089,872 5,697,453 7,550,076
========== ========== ========= =========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-T.Rowe Price AST-Founders
Small Company Value Capital Appreciation
---------------------------------------------
Year Ended Jan. 3* thru Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 14,612,510 0 14,662,728 12,282,211
the Period
Units Purchased 8,268,339 5,872,306 2,138,530 4,218,093
Units Transferred Between 2,739,257 8,916,648 (852,642) (1,241,937)
Sub-accounts
Units Surrendered (919,895) (176,444) (945,615) (595,639)
-------- -------- -------- --------
Units Outstanding End of the 24,700,211 14,612,510 15,003,001 14,662,728
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Founders AST-PIMCO Total
Passport Return Bond
------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 9,988,104 9,922,698 44,098,036 29,921,643
the Period
Units Purchased 982,194 2,366,964 15,487,198 12,095,654
Units Transferred Between (1,248,789) (1,910,689) 7,951,018 4,027,450
Sub-accounts
Units Surrendered (513,886) (390,869) (3,311,634) (1,946,711)
-------- -------- ---------- ----------
Units Outstanding End of the 9,207,623 9,988,104 64,224,618 44,098,036
========= ========= ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-PIMCO AST-INVESCO
Limited Maturity Bond Equity Income
-------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 25,008,310 18,894,375 33,420,274 23,592,226
the Period
Units Purchased 6,819,143 7,494,640 9,297,421 8,977,974
Units Transferred Between (684,313) (100,195) 531,077 2,263,991
Sub-accounts
Units Surrendered (2,279,208) (1,280,510) (2,254,585) (1,413,917)
---------- ---------- ---------- ----------
Units Outstanding End of the 28,863,932 25,008,310 40,994,187 33,420,274
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Oppenheimer AST-Janus
Large-Cap Growth Overseas Growth
------------------------------------------
Year Ended Year Ended Year Ended Jan. 3* thru
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 18,736,994 4,324,161 21,405,891 0
the Period
Units Purchased 4,623,955 8,013,060 11,899,890 10,023,709
Units Transferred Between (3,230,217) 6,821,916 11,883,784 11,666,669
Sub-accounts
Units Surrendered (1,121,490) (422,143) (1,477,802) (284,487)
---------- -------- ---------- --------
Units Outstanding End of the 19,009,242 18,736,994 43,711,763 21,405,891
========== ========== ========== ==========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Twentieth Century AST-Twentieth Century
Strategic Balanced International Growth
---------------------------------------------
Year Ended Jan. 3* thru Year Ended Jan. 3* thru
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 2,560,866 0 2,857,188 0
the Period
Units Purchased 2,937,698 1,768,125 1,880,604 1,259,021
Units Transferred Between 1,389,668 832,332 1,128,158 1,673,026
Sub-accounts
Units Surrendered (174,167) (39,591) (195,614) (74,859)
-------- ------- -------- -------
Units Outstanding End of the 6,714,065 2,560,866 5,670,336 2,857,188
========= ========= ========= =========
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AST-Marsico AST - Stein AST - Cohen
Roe &
Capital Growth Venture Steers Realty
--------------------------------------------------
Year Ended Dec. 22* thru Jan. 8* thru Jan. 2* thru
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1998
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 714,309 0 0 0
the Period
Units Purchased 15,519,396 24,445 543,098 1,904,485
Units Transferred Between 25,482,134 690,432 547,131 1,980,757
Sub-accounts
Units Surrendered (958,390) (568) (11,890) (113,781)
-------- ---- ------- --------
Units Outstanding End of the 40,757,449 714,309 1,078,339 3,771,461
========== ======= ========= =========
Period
</TABLE>
* Date Operations Commenced.
AST - AVP - Short
Bankers Term
Trust Multi Market
Enhanced 500
------------ -------------
Jan. 2* thru Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31,
1998 1998 1997
------------------------------
Units Outstanding Beginning of 0 15,900 21,778
the Period
Units Purchased 5,538,994 (1) 878
Units Transferred Between 17,516,454 437 (6,154)
Sub-accounts
Units Surrendered (633,694) (3,371) (602)
-------- ------ ----
Units Outstanding End of the 22,421,754 12,965 15,900
========== ====== ======
Period
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - AVP - Growth
Premier
Growth & Income
---------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 282,732 324,710 333,337 333,181
the Period
Units Purchased 1,314 6,675 3,501 12,865
Units Transferred Between 7,195 (4,828) (25,574) 22,165
Sub-accounts
Units Surrendered (30,870) (43,825) (49,892) (34,874)
------- ------- ------- -------
Units Outstanding End of the 260,371 282,732 261,372 333,337
======= ======= ======= =======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - U.S. Govt / AVP - Total
High Grade Securities Return
---------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 192,058 185,268 307,432 300,093
the Period
Units Purchased 543 10,827 11,281 26,945
Units Transferred Between 15,479 10,432 (19,815) 3,595
Sub-accounts
Units Surrendered (50,863) (14,469) (114,185) (23,201)
------- ------- -------- -------
Units Outstanding End of the 157,217 192,058 184,713 307,432
======= ======= ======= =======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP - Money
International Market
-----------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 235,027 258,640 115,139 169,930
the Period
Units Purchased 1,791 6,974 15,966 504
Units Transferred Between (40,112) (11,547) 201,900 (20,893)
Sub-accounts
Units Surrendered (21,019) (19,040) (199,898) (34,402)
------- ------- -------- -------
Units Outstanding End of the 175,687 235,027 133,107 115,139
======= ======= ======= =======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - N.A. Govt AVP - Global
Income Dollar Govt Income
--------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 27,787 27,786 51,199 61,473
the Period
Units Purchased 510 443 747 290
Units Transferred Between (13,251) 2,955 (7,952) (465)
Sub-accounts
Units Surrendered (4,498) (3,397) (2,455) (10,099)
------ ------ ------ -------
Units Outstanding End of the 10,548 27,787 41,539 51,199
====== ====== ====== ======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - AVP - Global
Utility
Income Bond
-------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 57,174 67,898 28,395 30,644
the Period
Units Purchased 1,316 1,198 21 3,131
Units Transferred Between (3,007) (3,597) (1,751) (3,890)
Sub-accounts
Units Surrendered (8,338) (8,325) (3,091) (1,490)
------ ------ ------ ------
Units Outstanding End of the 47,145 57,174 23,574 28,395
====== ====== ====== ======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP - Conservative AVP - Growth
Investors Investors
-----------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 89,301 87,961 81,759 80,640
the Period
Units Purchased 11,911 4,662 3,501 4,202
Units Transferred Between 6,895 317 1,101 (450)
Sub-accounts
Units Surrendered (21,691) (3,639) (7,713) (2,633)
------- ------ ------ ------
Units Outstanding End of the 86,416 89,301 78,648 81,759
====== ====== ====== ======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
AVP AVP -
Worldwide
Growth Privatization
------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
-------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of 293,327 330,184 89,962 105,845
the Period
Units Purchased 663 8,471 84 1,350
Units Transferred Between (33,153) (3,289) (1,724) (3,070)
Sub-accounts
Units Surrendered (20,576) (42,039) (8,057) (14,163)
------- ------- ------ -------
Units Outstanding End of the 240,261 293,327 80,265 89,962
======= ======= ====== ======
Period
</TABLE>
* Date Operations Commenced.
<TABLE>
<CAPTION>
Montgomery LAT - Equity
Emerging Value Fund
Markets
-------
Year Ended Year Ended May 4,* thru
Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998
--------------------------------
<S> <C> <C> <C>
Units Outstanding Beginning of 10,371,104 2,360,940 0
the Period
Units Purchased 1,909,232 4,288,871 881,906
Units Transferred Between (1,222,281) 3,960,172 280,035
Sub-accounts
Units Surrendered (523,672) (238,879) (13,092)
-------- -------- -------
Units Outstanding End of the 10,534,383 10,371,104 1,148,849
========== ========== =========
Period
</TABLE>
* Date Operations Commenced.
VARIABLE ACCOUNT B - CLASS 1
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. SECURITIES TRANSACTIONS (CONT.)
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------------------------------------
<S> <C> <C>
NBAMT - Partners $ 211,227,219 $ 248,237,285
AAF - Small Capitalization 541,253,824 485,415,506
AAF - Growth 610,555,795 429,396,454
AAF - Midcap 269,716,519 166,171,813
AST - Putnam International Equity 221,380,219 171,022,786
AST - Putnam Balanced 63,240,290 29,298,693
AST - Putnam Value Growth & Income 78,229,679 22,415,216
AST - Lord Abbett Growth & Income 316,409,893 138,309,895
AST - Lord Abbett Small Cap Value 52,212,458 10,001,399
AST - JanCap Growth 1,528,629,786 905,379,148
AST - Money Market 3,614,317,083 3,478,041,119
AST - Neuberger & Berman Midcap Value 203,144,670 115,273,133
AST - Neuberger & Berman Midcap Growth 210,448,072 148,760,949
AST - Federated High Yield Bond 362,705,310 190,641,441
AST - T. Rowe Price Asset Allocation 102,653,143 17,564,334
AST - T. Rowe Price International Equity 374,711,243 414,739,972
AST - T. Rowe Price International Bond 32,374,496 34,067,344
AST - T. Rowe Price Natural Resources 28,642,174 48,521,917
AST - T. Rowe Price Small Company Value 180,459,620 54,220,940
AST - Founders Capital Appreciation 71,849,829 61,753,055
AST - Founders Passport 108,400,061 119,725,842
AST - Pimco Total Return Bond 461,105,221 173,641,874
AST - Pimco Limited Maturity Bond 176,564,627 122,469,152
AST - INVESCO Equity Income 364,257,181 194,753,108
AST - Oppenheimer Large-Cap Growth 107,825,138 107,316,589
AST - Janus Overseas Growth 599,911,272 313,218,801
AST - 20th Century Strategic Balanced 55,137,305 5,405,116
AST - 20th Century International Growth 89,202,065 51,544,903
AST - Marsico Capital Growth 579,714,969 94,871,335
AST - Stein Roe Venture 11,108,378 1,703,209
AST - Cohen & Steers Realty 40,207,137 4,959,154
AST - Bankers Trust Enhanced 500 381,942,151 132,604,597
Alliance Short Term Multi Market 22,125 41,480
Alliance Premium Growth 898,993 1,734,559
Alliance Growth & Income 1,008,621 2,235,834
Alliance U.S. Government 510,011 881,308
Alliance Total Return 683,996 2,598,571
Alliance International 256,938 1,085,760
Alliance Money Market 3,159,090 2,903,477
Alliance North American Government Income 42,052 256,679
Alliance Global Dollar Government Income 102,467 180,486
Alliance Utility Income 141,364 297,627
Alliance Global Bond 23,972 85,463
Alliance Conservative Investors 402,717 387,683
Alliance Growth Investors 178,224 140,462
Alliance Growth 444,799 1,478,863
Alliance World Privatization 117,299 208,529
Montgomery Variable Emerging Markets 51,440,033 52,966,649
LAT Equity Value 11,342,039 755,332
==========================================
$ 12,120,311,567 $ 8,559,684,841
==========================================
</TABLE>
PART C
OTHER INFORMATION
<PAGE>
Item 24. Financial Statements and Exhibits:
(a) All financial statements are included in Parts A & B of this Registration
Statement.
(b) Exhibits are attached as indicated.
(1) Copy of the resolution of the board of directors of Depositor
authorizing the establishment of the Registrant for Separate
Account B filed via EDGAR with Post-Effective Amendment No. 6
to Registration Statement No. 33-87010, filed March 2, 1998.
(2) Not applicable. American Skandia Life Assurance Corporation
maintains custody of all assets.
(3) (a) Form of revised Principal Underwriting Agreement
between American Skandia Life Assurance Corporation
and American Skandia Marketing, Incorporated,
formerly known as Skandia Life Equity Sales
Corporation filed via EDGAR with Post-Effective
Amendment No. 6 to Registration Statement No.
33-87010, filed March 2, 1998.
(b) Form of Revised Dealer Agreement filed via EDGAR with
Post-Effective Amendment No. 7 to Registration
Statement No. 33-87010, filed April 24, 1998.
(4) (a) Copy of the Form of Annuity filed via EDGAR with
Post-effective Amendment No. 3 to this Registration
Statement No. 33-87010, filed April 25, 1996.
(b) Copy of Guaranteed Minimum Death Benefit Endorsement
FILED HEREWITH
(c) Copy of Performance-related Benefits and First Year
Credits Endorsement
FILED HEREWITH
(5) A copy of the application form used with the Annuity filed via
EDGAR with Post-Effective Amendment No. 6 to Registration
Statement No. 33-87010, filed March 2, 1998.
(6) (a) Copy of the certificate of incorporation of American
Skandia Life Assurance Corporation filed via EDGAR
with Post-Effective Amendment No. 6 to Registration
Statement No. 33-87010, filed March 2, 1998.
(b) Copy of the By-Laws of American Skandia Life
Assurance Corporation filed via EDGAR with
Post-Effective Amendment No. 6 to Registration
Statement No. 33-87010, filed March 2, 1998.
(7) Annuity Reinsurance Agreements between Depositor and:
(a) Transamerica Occidental Life Assurance Company
effective May 1, 1995, filed via EDGAR with
Post-effective Amendment No. 3 to Registration
Statement No. 33-87010, filed April 25, 1996.
(b) PaineWebber Life Insurance Company effective January
1, 1995, filed via EDGAR with Post-effective
Amendment No. 3 to Registration Statement No.
33-87010, filed April 25, 1996.
(c) Connecticut General Life Insurance Company effective
January 1, 1995, filed via EDGAR with Post-effective
Amendment No. 3 to Registration Statement No.
33-87010, filed April 25, 1996.
(8) Agreements between Depositor and:
(a) Neuberger&Berman Advisers Management Trust filed via
EDGAR with Post-Effective Amendment No. 4 to
Registration Statement No. 33-87010, filed February
25, 1997
(b) The Alger American Fund filed via EDGAR with
Post-Effective Amendment No. 6 to Registration
Statement No. 33-87010, filed March 2, 1998.
(c) American Skandia Trust filed via EDGAR with
Post-Effective Amendment No. 4 to Registration
Statement No. 33-87010, filed February 25, 1997 (At
such time, what later became American Skandia Trust
was known as the Henderson Global Asset Trust).
(d) The Montgomery Funds III filed via EDGAR in the
Initial Registration Statement to Registration
Statement No. 333-08853, filed July 25, 1996.
(e) Rydex Variable Trust FILED HEREWITH
(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 filed via EDGAR with Post-effective Amendment No.
12 to Registration Statement No. 33-44436, filed April 29,
1996.
(14) Financial Data Schedule FILED HEREWITH
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 may provide such
services in relation to marketing of certain public mutual
funds. It also has the power to carry on a general financial,
securities, distribution, advisory, or investment advisory
business; to act as a general agent or broker for insurance
companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial
efficiency and operation.
(3) American Skandia Investment Services, Incorporated ("ASISI"):
The organization is a general business corporation organized
in the state of Connecticut. The organization is authorized to
provide investment service and investment management advice in
connection with the purchasing, selling, holding or exchanging
of securities or other assets to insurance companies,
insurance-related companies, mutual funds or business trusts.
It's primary role is expected to be as investment manager for
certain mutual funds [to be made available primarily through
the variable insurance products of American Skandia Life
Assurance Corporation.]
(4) Skandia Vida: This subsidiary of American Skandia Life
Assurance Corporation was organized in March, 1995, and began
operations in July, 1995. It offers investment oriented life
insurance designed for long-term savings products through
independent banks and brokers in Mexico.
Item 27. Number of Contract Owners: As of December 31, 1998, there were 104,469
owners of Annuities.
Item 28. Indemnification: Under Section 33-320a of the Connecticut General
Statutes, the Depositor must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses including
attorneys' fees, for actions brought or threatened to be brought against him in
his capacity as a director or officer when certain disinterested parties
determine that he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Depositor. In any criminal action or proceeding,
it also must be determined that the director or officer had no reason to believe
his conduct was unlawful. The director or officer must also be indemnified when
he is successful on the merits in the defense of a proceeding or in
circumstances where a court determines that he is fairly and reasonable entitled
to be indemnified, and the court approves the amount. In shareholder derivative
suits, the director or officer must be finally adjudged not to have breached
this duty to the Depositor or a court must determine that he is fairly and
reasonably entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the Registrants'
securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably
entitled to be indemnified and then for such amount as the court shall
determine. The By-Laws of American Skandia Life Assurance Corporation ("ASLAC")
also provide directors and officers with rights of indemnification, consistent
with Connecticut Law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of ASLAC and ASM, Inc. can also be indemnified pursuant
to indemnity agreements between each director and officer and American Skandia
Investment Holding Corporation, a corporation organized under the laws of the
state of Delaware. The provisions of the indemnity agreement are governed by
Section 45 of the General Corporation Law of the State of Delaware.
The directors and officers of ASLAC and ASM, Inc. are covered under a directors
and officers liability insurance policy issued by an unaffiliated insurance
company to Skandia Insurance Company Ltd., their ultimate parent. Such policy
will reimburse ASLAC or ASM, Inc., as applicable, for any payments that it shall
make to directors and officers pursuant to law and, subject to certain
exclusions contained in the policy, will pay any other costs, charges and
expenses, settlements and judgments arising from any proceeding involving any
director or officer of ASLAC or ASM, Inc., as applicable, in his or her past or
present capacity as such.
Registrant hereby undertakes as follows: Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid by a director,
officer or controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, unless in the opinion
of Registrant's counsel the matter has been settled by controlling precedent,
Registrant will submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
<TABLE>
<CAPTION>
Item 29. Principal Underwriters:
(a) At present, ASM, Inc. acts as principal underwriter only for annuities to be issued by ASLAC.
(b) Directors and officers of ASM, Inc.
<S> <C>
Name and Principal Business Address Position and Offices with Underwriter
Patricia J. Abram Senior Vice President and National
American Skandia Life Assurance Corporation Sales Manager, Variable Life
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Gordon C. Boronow Deputy Chief Executive Officer
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kimberly A. Bradshaw Vice President, National Sales
American Skandia Life Assurance Corporation Manager/Qualified Plans
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Robert Brinkman Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chairman of the Board
American Skandia Life Assurance Corporation of Directors and
One Corporate Drive, P.O. Box 883 Chief Executive Officer
Shelton, Connecticut 06484-0883
Y.K. Chan Senior Vice President and
American Skandia Life Assurance Corporation Chief Information Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kathleen A. Chapman Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lucinda C. Ciccarello Vice President, Mutual Funds
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President and Deputy Chief
American Skandia Life Assurance Corporation Executive Officer and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
Ian Kennedy Senior Vice President,
American Skandia Life Assurance Corporation Customer Service
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
Eileen S. McCann Vice President,
American Skandia Life Assurance Corporation Key Accounts Marketing
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
David R. Monroe Senior Vice President,
American Skandia Life Assurance Corporation Treasurer and
One Corporate Drive, P.O. Box 883 Corporate Controller
Shelton, Connecticut 06484-0883
Michael A. Murray Vice President,
American Skandia Life Assurance Corporation National Sales Manager/
One Corporate Drive, P.O. Box 883 American Skandia Advisor Funds
Shelton, Connecticut 06484-0883
Brian O'Connor Vice President, National Sales
American Skandia Life Assurance Corporation Manager, Internal Wholesaling
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
M. 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
Kathleen A. Pritchard Vice President,
American Skandia Life Assurance Corporation National Key Accounts/
One Corporate Drive, P.O. Box 883 Financial Institutions
Shelton, Connecticut 06484-0883
Hayward L. Sawyer Executive Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Anders O. Soderstrom Executive Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Leslie S. Sutherland Vice President,
American Skandia Life Assurance Corporation National Key Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Amanda C. Sutyak Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Christian Thwaites Senior Vice President,
American Skandia Life Assurance Corporation National Marketing Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Mary Toumpas Vice President and
American Skandia Life Assurance Corporation Compliance Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Bayard F. Tracy Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
Deborah G. Ullman Senior Vice President and
American Skandia Life Assurance Corporation Chief Operating Officer,
One Corporate Drive, P.O. Box 883 Finance and Business Operations
Shelton, Connecticut 06484-0883
</TABLE>
Item 30. Location of Accounts and Records: Accounts and records are maintained
by ASLAC at its principal office in Shelton, Connecticut.
Item 31. Management Services: None
Item 32. Undertakings:
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old so long as payments under the annuity contracts may be accepted and
allocated to the Sub-accounts of Separate Account B.
(b) Registrant hereby undertakes to include either (1) as part of any enrollment
form or application to purchase a contract offered by the prospectus, a space
that an applicant or enrollee can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a Statement
of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this form promptly upon written or oral request.
(d) American Skandia Life Assurance Corporation ("Depositor") hereby represents
that the aggregate fees and charges under the annuity contracts are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by the Depositor.
(e) With respect to the restrictions on withdrawals for Texas Optional
Retirement Programs and Section 403(b) plans, we are relying upon: 1) a
no-action letter dated November 28, 1988 from the staff of the Securities and
Exchange Commission to the American Council of Life Insurance with respect to
annuities issued under Section 403(b) of the code, the requirements of which
have been complied with by us; and 2) Rule 6c-7 under the 1940 Act with respect
to annuities made available through the Texas Optional Retirement Program, the
requirements of which have been complied with by us.
EXHIBITS
As noted in Item 24(b), various exhibits are incorporated by reference or are
not applicable. The exhibits included are as follows:
No. 4(b) Guaranteed Minimum Death Benefit Endorsement
No. 4(c) Performance-related Benefits and First Year Credits Endorsement
No. 8(e) Rydex Variable Trust
No. 9 Opinion and Consent of Werner & Kennedy
No. 10(a) Consent of Ernst & Young LLP
No. 10(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 26th day of April, 1999.
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 26, 1999
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 26, 1999
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Senior Vice President, Treasurer April 26, 1999
David R. Monroe and Corporate 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>
1
END-GDB(2/99)-01
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883,
Shelton, Connecticut 06484
Endorsement
Guaranteed Minimum Death Benefit
This Endorsement is attached to either an individual deferred annuity or to a
certificate representing interest in a group deferred annuity. If attached to a
certificate, the term "Owner" below is replaced by the term "Participant."
Effective Date: The effective date for the Death Benefit described in this
Endorsement is shown in the Schedule Supplement.
Deletion and Replacement: Any reference to a decedent's (the person upon whose
death the Death Benefit is payable) Cut Off Date in the Schedule Supplement is
hereby replaced with the field entitled Death Benefit Target Date in the
Schedule Supplement attached to this Endorsement.
The Death Benefit provision of the Annuity to which this Endorsement is attached
is hereby deleted and replaced with the following. Any other references to the
Death Benefit in other provisions of the Annuity are not deleted and replaced.
Death Benefit: In the Accumulation Period, a Death Benefit is payable. If there
is more than one Owner, such Owners being natural persons, the Death Benefit is
payable upon the first death of such Owners. If the Owner is an entity, the
Death Benefit is payable upon the Annuitant's death, if no Contingent Annuitant
is named. If a Contingent Annuitant was designated before the Annuitant's death
and the Annuitant dies, the Contingent Annuitant then becomes the Annuitant and
a Death Benefit is not currently payable.
Definitions: Shown below are certain terms describing how the Death Benefit is
calculated.
The "Highest Periodic Value" equals the greatest of all previous
"Periodic Values," on or before the earlier of the date of death and
the "Death Benefit Target Date."
The "Death Benefit Target Date" is as shown in the Schedule Supplement.
"Periodic Value" is the Account Value at the end of each "Applicable
Period," plus the sum of all Purchase Payments after the end of the
"Applicable Period" less the sum of all "Proportional Reductions"
applied against the Highest Periodic Value after the end of such
"Applicable Period" and less any "Credits."
The "Applicable Period" begins on the Initial Applicable Period
Beginning Date shown in the Schedule Supplement. Each Applicable Period
lasts for the amount of time shown as the Applicable Period in the
Schedule Supplement. Each Applicable Period after the first begins when
the previous one ends. However, if the Death Benefit has not become
payable, the last Applicable Period ends on the Death Benefit Target
Date.
A "Proportional Reduction" is a proportional reduction applied
separately to each of the "values being measured", caused by all
withdrawals and any charges for optional benefits other than the
deductions to pay for this benefit. The proportion equals the
proportionate reduction in the Account Value due to the withdrawal as
of that date. The "values being measured" are:
(1) Purchase Payments accumulated at the Assumed
Accumulation Rate shown in the Schedule Supplement
less any prior Proportional Reductions accumulated at
the Accumulated Interest Rate shown in the Schedule
Supplement, as described below in B(1);
(2) The Highest Periodic Value, as described below in
B(2); and
(3) The Minimum Death Benefit on the Death Benefit Target
Date plus subsequent Purchase Payments and less any
subsequent Proportional Reductions after the Death
Benefit Target Date, as described below in D.
"Credits" are amounts we provide pursuant to your Annuity that, in
accordance with its terms, are subject to recovery upon the death of
the decedent if death occurs within a time period specified in your
Annuity. Credits are recovered as provided in your Annuity or any
amendment thereto.
Calculation of the Death Benefit: The calculation of the Death Benefit depends
on how the Annuity is owned, as follows:
For Annuities with One Owner:
If the current Owner dies before the Death Benefit Target Date for One Owner as
shown in the Schedule Supplement, the Death Benefit equals the greater of A and
B, where:
A is the Account Value in the Sub-accounts plus the Interim Value in
the Fixed Allocations, if applicable, as of the date we receive "due
proof of death" and our requirements as described below in "Making a
Claim," less any Credits; and
B is the "Minimum Death Benefit," which is the greater of (1) and (2),
where:
(1) is the sum of all Purchase Payments minus the sum of all
Proportional Reductions, each increasing daily to the Owner's
date of death at the Assumed Accumulation Rate shown in the
Schedule Supplement, subject to a "cap." This "cap" is a
specified percentage of the difference between the sum of all
Purchase Payments and the sum of all withdrawals as of the
Owner's date of death. The specified percentage is shown in the
Schedule Supplement as the "Purchase Payments with Interest
Cap."
(2) is the Highest Periodic Value on or immediately preceding the
Owner's date of death less any Credits.
The Minimum Death Benefit is increased by any Purchase Payments
received after the Owner's date of death and decreased by any
Proportional Reductions after the Owner's date of death.
If the current Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of C and D, where:
C is the Account Value as of the date we receive "due proof of death"
and our requirements as described below in "Making a Claim" (an MVA may
be applicable to amounts in any applicable Fixed Allocations), less any
Credits; and
D is the Minimum Death Benefit as of the Death Benefit Target Date plus
the sum of all Purchase Payments on or after such date less the sum of
all Proportional Reductions on or after such date and less any Credits.
However, Credits will be subtracted only if the Minimum Death Benefit
on the Death Benefit Target Date was the Highest Periodic Value.
For Annuities with More Than One Owner
If there is more than one Owner, the Death Benefit is calculated according to
the rules set out above except that the Death Benefit Target Date is as shown in
the Schedule Supplement for More Than One Owner. As noted above, if there is
more than one Owner, such Owners being natural persons, the Death Benefit is
payable upon the first death of such Owners.
For Annuities Where the Owner is Not a Natural Person
If the Annuity Owner is not a natural person, the Death Benefit is calculated as
described above for Annuities with One Owner, except the term "Annuitant"
replaces the term "Owner" and the applicable Death Benefit Target Date is that
shown if The Owner is Not a Natural Person in the Schedule Supplement.
Cost of the Benefit: We deduct a charge in arrears for this Guaranteed Minimum
Death Benefit. The charge is a percentage of the Death Benefit as of the date
the charge is payable. The percentage is shown in the Schedule Supplement. This
charge is deducted from your Account Value:
(a) each anniversary of the Issue Date of your Annuity;
(b) as of the date we transfer your Account Value to our general account in
order to begin annuity payments; (c) as of the date of we receive your
request at our Office to surrender your Annuity; and (d) as of the date
of termination should you elect to end the benefit.
If surrender, annuitization or termination of the Death Benefit occur on other
than an anniversary of the Issue Date, the charge is prorated. In the first year
after the Issue Date, the charge is prorated from the Issue Date. In all later
years, the charge is prorated from the immediately preceding anniversary of the
Issue Date.
We deduct the amount of the charge pro-rata from the Account Value in the
variable investment options. We only deduct the charge pro-rata from any Fixed
Allocations to the extent that the Account Value in the variable investment
options is insufficient to pay the charge. If the Account Value is insufficient
to pay the entire charge then due, we notify you of a 30-day period in which you
can pay the amount due. This Guaranteed Minimum Death Benefit remains in effect
during that 30-day period. If the Account Value is still less than the amount
required to pay the charge by the end of this period, we will then reduce the
Account Value to zero and terminate this benefit.
There is no charge after the Annuity Date.
Effective Date after the Issue Date: For purpose of this Death Benefit only, if
the effective date shown in the Schedule Supplement is after the Annuity's Issue
Date:
(1) We treat your Account Value on the effective date of this
Endorsement as if it was a Purchase Payment;
(2) We ignore all Purchase Payments and withdrawals that occurred before this
Endorsement's effective date; and
(3) The charge for this benefit is prorated to the first
anniversary of the Issue Date from the effective date of this
Endorsement.
Changes After the Issue Date: For purposes of this provision, persons named
Owner or Annuitant within 60 days of the Issue Date are treated as if they were
Owner or Annuitant on the Issue Date. If a decedent was not named as 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 equals zero for a
two-year period from the date such person first became an Owner or Annuitant.
After the two-year period is completed, the Death Benefit is the same as if such
person had been an Owner or Annuitant on the Issue Date. However, this
Guaranteed Minimum Death Benefit provision will terminate if the applicable
Owner or Annuitant was older than the maximum issue age on the effective date of
this Endorsement.
Making a Claim: 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.
Distribution of the Death Benefit: In the event of an Owner's death, the Death
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 an Owner's death to be paid
under (b) above, must commence within one year of the date of death.
If the Death Benefit becomes payable prior to the Annuity Date due to an Owner's
death and the sole Beneficiary is the Owner's spouse, then in lieu of receiving
the Death Benefit, the spouse may elect to be treated as an Owner and continue
the Annuity.
During the Payout Period, we distribute any payments due subsequent to an
Owner's death or 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. If the Annuitant
dies before the Annuity Date, the Contingent Annuitant will become the
Annuitant. During the Payout Period, subsequent to the death of the Annuitant,
we continue to pay any "certain" payments (payments not contingent on the
continuance of any life) to the Beneficiary.
Termination of the Guaranteed Minimum Death Benefit. This benefit ends: (a) once
annuity payments begin; (b) upon termination of the Annuity due to surrender;
(c) as of the date a Death Benefit is payable pursuant to this Endorsement; and
(d) upon termination of this benefit. We must receive any request for voluntary
termination of this benefit at our Office In Writing. As of the date of such
termination, the Death Benefit provisions of your Annuity not contained in this
Endorsement apply.
- --------------------------------------------------------------------------------
President
END-PRB(2/99)-01
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484
Endorsement
Performance-related Benefits and First Year Credits
This Endorsement is attached to either an individual annuity or to a certificate
representing interest in a group deferred annuity. If attached to a certificate,
the term "Owner" below is replaced by the term "Participant." This Endorsement
is an addition to your Annuity, and does not replace any provision thereof.
Effective Date: This Endorsement is effective as of the Issue Date.
General: We provide certain benefits if the performance of your Annuity's
investment options does not result in your Account Value growing to a target
level as of a specified date. How this target level of Account Value is
calculated, the specified date and the benefits are described below.
We also may provide a credit to your Account Value in relation to each Purchase
Payment allocated to your Account Value before the first anniversary of the
Issue Date. However, we may recover an amount equal to such credits under a
number of specific circumstances, as described below.
Cost: There is no additional charge for these benefits.
Definitions:
Target Value: The Target Value is a measuring device for determining
eligibility for the performance-related benefits. It does not provide
any value available for distribution upon any surrender, partial
surrender or withdrawal of any type nor in the calculation of the death
benefit.
Target Date: The date we compare your Account Value to the Target
Value. Except as discussed below in "Performance-related Benefits in a
Prior Annuity," the Target Date is the later of the 10th anniversary of
your Annuity's Issue Date or the 10th anniversary of the latest of any
Restart Dates.
Proportional Reductions: These are reductions to Target Value caused by
withdrawals and charges for optional benefits.
Restart: This is an election by you to restart calculation of the
Target Value and reset the Target Date.
Restart Date: This is an anniversary of the Issue Date on which an
election to Restart takes effect.
Performance-related Benefits
Performance-related benefits: We compare your Account Value against the Target
Value as of the Target Date. If at that time, the Account Value is less than the
Target Value, your annuity is eligible for an annual addition to your Account
Value. We will inform you within 90 days of the applicable anniversary if your
Account Value did not meet or exceed the Target Value.
This addition to your Account Value will begin on the first anniversary of the
Target Date. Except as noted below, we allocate each addition pro-rata according
to your Account Values in the variable investment options as of the date the
addition is allocated. If none of your Account Value is in the variable
investment options at a time this benefit is payable, we allocate such addition
to a new Fixed Allocation with a Guarantee Period equal to the shortest
Guarantee Period in which you then maintain Account Value. Such additions
continue on each subsequent anniversary of the Target Date before annuity
payments begin. Such additions to Account Value end once Account Value is
transferred from the investment options in order to begin annuity payments.
The addition equals 0.25% of your average Account Value during the prior four
complete calendar quarters.
You may elect an alternative benefit in lieu of these additions to your Account
Value, subject to the rules provided below. This benefit is a one-time addition
to the amount applied to determine annuity payments. The addition equals 10% of
(A less B), where:
A is the Account Value as of the Target Date; and
B is the sum of all Purchase Payments allocated to your Account Value
in the five years prior to the Target Date.
We make this addition as of the date your Account Value is transferred from the
investment options to our general account in order to begin annuity payments.
Your election of this alternative benefit is subject to the following rules:
1. Annuity payments initially must be guaranteed to be paid for at
least seven years.
2. You must instruct us In Writing not later than 30 days before
the first anniversary of the Target Date that you wish annuity
payments to begin. Payments are available under one of our
then available annuity options, but must begin not later than
the first anniversary of the Target Date.
Calculation of the Target Value: We determine the Target Value as follows:
1. We accumulate each Purchase Payment with interest of 7.2% per
year, compounded yearly, from the date each Purchase Payment
is received. If you Restart the calculation, we treat your
Account Value as of the Restart Date as if it was your initial
Purchase Payment and ignore all prior Purchase Payments. We
then accumulate your Account Value as of the Restart Date,
plus any subsequent Purchase Payments with interest of 7.2%
per year, compounded yearly, from the date each Purchase
Payment is received.
2. We then subtract each Proportional Reduction accumulating with
interest of 7.2% per year, compounded yearly, from the date of
each withdrawal or charge for an optional benefit. However, if
you Restart the calculation, we ignore all Proportional
Reductions occurring before the Restart Date and accumulate
any Proportional Reductions on or after the Restart Date with
interest of 7.2% per year, compounded yearly, from the date of
each withdrawal or charge for an optional benefit.
Each Proportional Reduction is a percentage of the Target Value as of the date
of the applicable withdrawal or charge for an optional benefit. The percentage
equals the proportion of the Account Value then withdrawn or charged.
Performance-related Benefits in a Prior Annuity: You may have purchased the
Annuity to which this Endorsement is attached as a result of an exchange,
replacement or transfer, in whole or in part, of an Annuity issued by us or any
affiliate which included similar performance-related benefits. In order to
continue the prior annuity's performance-related benefits: (a) as of the Issue
Date of the Annuity to which this Endorsement is attached, the Target Date and
Target Value are the same as applied upon surrender to the Annuity that was
exchanged, replaced or transferred; and (b) the initial Purchase Payment for the
Annuity to which this Endorsement is attached is ignored for purposes of
calculating the Target Value.
First Year Credits
Benefit: Subject to the rules provided below, we allocate to your Account Value
a credit in relation to each Purchase Payment applied to Account Value before
the first anniversary of your Annuity's Issue Date. The credit equals 1% of each
applicable Purchase Payment. We allocate the credit among the investment options
in the same ratio as we allocate the applicable Purchase Payment.
Except as noted below in "Impact of a Prior Annuity," we provide credits:
1. When the Annuity is owned by a natural person and the Owner is
(or in the case of multiple Owners, all Owners are) below age
81 on your Annuity's Issue Date.
2. When the Annuity is owned by an entity and the Annuitant is
below age 81 on your Annuity's Issue Date.
Recovery of Credits: We may recover an amount equal to the sum of all credits
provided pursuant to this Endorsement in any of the circumstances provided
below:
1. Surrender of the Annuity before the 10th anniversary of your
Annuity's Issue Date.
2. Annuity payments begin before the 1st anniversary of your
Annuity's Issue Date.
3. A death upon which the Annuity's death benefit is payable
occurs either:
a. Within 12 months of the date we allocated the credit
to your Account Value; or
b. Within 10 years of the date we allocated the credit
to your Account Value, if, at the time we allocated
the credit:
(i) any Owner or any person who subsequently
became an Owner was over age 70, if the
Annuity is owned by a natural person; or
(ii) the Annuitant or any person who subsequently
became the Annuitant was over age 70, if the
Annuity is owned by an entity.
4. Surrender of your Annuity under any type of medically-related
surrender provision if the "contingency event" upon which such
a surrender is predicated occurs either:
a. Within 12 months of the date we allocated the credit
to your Account Value; or
b. Within 10 years of the date we allocated the credit
to your Account Value, if, at the time we allocated
the credit:
(i) any Owner or any person who subsequently
became an Owner was over age 70, if the
Annuity is owned by a natural person; or
(ii) the Annuitant or any person who subsequently
became the Annuitant was over age 70, if the
Annuity is owned by an entity.
5. You exercise the Annuity's "Right to Cancel" provision, but
only to the extent such recovery does not affect any
guaranteed return of Purchase Payments, if applicable.
Impact of a Prior Annuity: We do not provide credits pursuant to this
Endorsement if the Target Date and Target Value are continued as a result of an
exchange, replacement or transfer, in whole or in part, of an annuity issued by
us or any affiliate. In addition, we may recover an amount equal to the sum of
any first year credits provided pursuant to such annuity under the rules
provided above for recovery of credits, but only during the time periods that
would apply had no exchange, replacement or transfer occurred.
President
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 14th day April of 1999 (the
"Agreement") by and among American Skandia Life Assurance Corporation, organized
under the laws of the State of Connecticut (the "Company"), on behalf of itself
and each separate account of the Company named in Schedule A to this Agreement,
as may be amended from time to time (each account referred to as the "Account"
and collectively as the "Accounts"); Rydex Variable Trust, a Delaware business
trust (the "Fund"); PADCO Advisors II, Inc., a corporation organized under the
laws of the State of Maryland and investment adviser to the Fund (the
"Adviser"); and PADCO Financial Services, Inc., a corporation organized under
the laws of the State of Maryland and principal underwriter/distributor of the
Fund (the "Distributor").
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") and its
shares are registered under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies which have
entered into participation agreements substantially similar to this Agreement
(the "Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Company, as depositor, has established the Accounts to serve as
investment vehicles for certain variable annuity contracts and variable life
insurance policies and funding agreements offered by the Company set forth on
Schedule A (the "Contracts"); and
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolutions of the Board of Directors of the Company
under the insurance laws of the State of Connecticut, to set aside and invest
assets attributable to the Contracts; and WHEREAS, the Company has or will
register the Accounts as unit investment trusts under the 1940 Act, unless such
Account is exempt
from registration under an applicable provision of the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule B, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Accounts to fund the Contracts;
WHEREAS, Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, Distributor is registered as a broker-dealer under the Securities and
Exchange Act of 1934, as amended (the "1934 Act"), is a member in good standing
of the National Association of Securities Dealers, Inc. and serves as principal
underwriter/distributor of the Fund.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and the Distributor agree as follows:
ARTICLE I - SALE OF FUND SHARES
1.1 The Fund agrees to sell to the Company those shares of the Designated
Portfolios which each Account orders, executing such orders on a daily
basis at the net asset value (and with no sales charges) next computed
after receipt and acceptance by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the
Company will be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee will constitute receipt
by the Fund. To facilitate the Fund's daily trading procedures, the
Company has agreed to provide the Fund with an "estimated trade" and
other information relating to investments in the shares of the Fund, as
set forth in the Estimated Trading Procedures set forth in Exhibit A to
this Agreement. The "final trade" will be available to the Fund by no
later than 8:30 a.m. on the next following business day. "Business Day"
will mean any day on which the New York Stock Exchange is open for
trading and on which the Fund calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission (the
"Commission"). The Fund may net the notice of redemptions it receives
from the Company under Section 1.3 of this Agreement against the notice
of purchases it receives from the Company under this Section 1.1.
1.2 The Company will pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with Section 1.1.
Payment will be made in federal funds transmitted by wire. Upon receipt
by the Fund of the payment, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of
the Fund.
1.3 The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing
such requests on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its agent of the request
for redemption. For purposes of this Section 1.3, the Company will be
the designee of the Fund for receipt of requests for redemption from
each Account and receipt by such designee will constitute receipt by
the Fund. To facilitate the Fund's daily trading procedures, the
Company has agreed to provide the Fund with an "estimated trade" and
other information relating to investments in the shares of the Fund, as
set forth in the Estimated Trading Procedures set forth in Exhibit A to
this Agreement. The "final trade" will be available to the Fund by no
later than 8:30 a.m. on the next following business day. Payment will
be made in federal funds transmitted by wire to the Company's account
as designated by the Company in writing from time to time, on the same
Business Day the Fund receives notice of the redemption order from the
Company. After consulting with the Company, the Fund reserves the right
to delay payment of redemption proceeds, but in no event may such
payment be delayed longer than the period permitted under Section 22(e)
of the 1940 Act. The Fund will not bear any responsibility whatsoever
for the proper disbursement or crediting of redemption proceeds; the
Company alone will be responsible for such action. The Fund may net the
notice of purchases it receives from the Company under Section 1.1 of
this Agreement against the notice of redemptions it receives from the
Company under this Section 1.3.
1.4 The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share
by Participating Insurance Companies and their separate accounts on
those days on which the Fund calculates its Designated Portfolio net
asset value pursuant to rules of the Commission; provided, however,
that the Board of Trustees of the Fund (the "Fund Board") may refuse to
sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Fund Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary
in the best interests of the shareholders of such Portfolio.
1.5 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are
permitted under applicable provisions of the Internal Revenue Code of
1986, as amended, (the "Code"), and regulations promulgated thereunder,
the sale to which will not impair the tax treatment currently afforded
the Contracts. No shares of any Portfolio will be sold directly to the
general public.
1.6 The Fund will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially similar
to Sections 1.5, 3.2, 3.3, 4.4 and Article VII of this Agreement are in
effect to govern such sales.
1.7 The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or to any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate sub-account of
each Account.
1.9 The Fund will furnish same day notice (by facsimile) to the Company of
the declaration of any income, dividends or capital gain distributions
payable on each Designated Portfolio's shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on the Portfolio shares in the form of additional shares of that
Portfolio at the ex-dividend date net asset values. The Company
reserves the right to revoke this election and to receive all such
dividends and distributions in cash. The Fund will notify the Company
of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund will make the net asset value per share for each Designated
Portfolio available to the Company via electronic means on a daily
basis as soon as reasonably practical after the net asset value per
share is calculated and will use its best efforts to make such net
asset value per share available by 6:30 p.m., Eastern Time, each
business day. If the Fund provides the Company materially incorrect net
asset value per share information (as determined under SEC guidelines),
the Company shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value per share.
Any material error in the calculation or reporting of net asset value
per share, dividend or capital gain information shall be reported to
the Company upon discovery by the Fund.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act, or are exempt from registration
thereunder, and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws. 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 each Account as a separate account
under Section 38a-433 of the General Statutes of Connecticut and that
each Account is or will be registered as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, or is exempt from registration
thereunder, and that it will maintain such registration for so long as
any Contracts are outstanding, as applicable. The Company will amend
the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to
time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The
Company will register and qualify the Contracts for sale in accordance
with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2 The Company represents that the Contracts are currently and at the time
of issuance will be treated as annuity contracts and/or life insurance
policies (as applicable) under applicable provisions of the Code, and
that it will make every effort to maintain such treatment and that it
will notify the Fund and the Adviser 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.
2.3 The Company represents and warrants that it will not purchase shares of
the Designated Portfolio(s) with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in
connection with such plans.
2.4 The Fund represents and warrants that shares of the Designated
Portfolio(s) sold pursuant to this Agreement will be registered under
the 1933 Act and duly authorized for issuance in accordance with
applicable law and that the Fund is and will remain registered under
the 1940 Act for as long as such shares of the Designated Portfolio(s)
are sold. The Fund will 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 Fund will
register and qualify the shares of the Designated Portfolio(s) for sale
in accordance with the laws of the various states only if and to the
extent deemed advisable by the Fund.
2.5 The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may
apply to the Fund. The Fund represents that it will use its best
efforts to comply with any applicable state insurance laws or
regulations, to the extent specifically requested in writing by the
Company. If the Fund cannot comply with such state insurance laws or
regulations, it will so notify the Company in writing. The Fund makes
no other 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 any state.
The Company represents that it will use its best efforts to notify the
Fund of any restrictions imposed by state insurance laws that may
become applicable to the Fund as a result of the Accounts' investments
therein. The Fund and the Adviser agree that they will furnish the
information required by state insurance laws to assist Company in
obtaining the authority needed to issue the Contracts in various
states.
2.6 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have the trustees of its
Fund Board, a majority of whom are not "interested" persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7 The Fund represents that it is a business trust 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 applicable
provisions of the 1940 Act.
2.8 The Fund represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Fund are and continue to
be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
2.9 The Adviser represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws and
that it will perform its obligations for the Fund in accordance in all
material respects with the laws of the State of Maryland and any
applicable state and federal securities laws.
2.10 The Distributor represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws and
that it will perform its obligations for the Fund in accordance in all
material respects with the laws of the State of Maryland and any
applicable state and federal securities laws.
2.11 The Fund, the Adviser and the Distributor represent and warrant to the
Company that each has a Year 2000 compliance program in existence and
that each reasonably intends to be Year 2000 compliant so as to be able
perform all of the services and/or obligations contemplated by or under
this Agreement without interruption. The Fund, the Adviser and the
Distributor cannot guarantee that problems will not arise that were
unforeseen as of the date of the Agreement and that will interfere with
the services performed under the Agreement. The Fund, the Adviser and
the Distributor shall immediately notify the Company if it determines
that it will be unable perform all of the services and/or obligations
contemplated by or under this Agreement in a manner that is Year 2000
compliant.
ARTICLE III - FUND COMPLIANCE
3.1 The Fund and the Adviser acknowledge that any failure (whether
intentional or in good faith or otherwise) to comply with the
requirements of Subchapter M of the Code or the diversification
requirements of Section 817(h) of the Code may result in the Contracts
not being treated as variable contracts for federal income tax
purposes, which would have adverse tax consequences for Contract owners
and could also adversely affect the Company's corporate tax liability.
The Fund and the Adviser further acknowledge that any such failure may
result in costs and expenses being incurred by the Company in obtaining
whatever regulatory authorizations are required to substitute shares of
another investment company for those of the failed Fund or as well as
fees and expenses of legal counsel and other advisors to the Company
and any federal income taxes, interest or tax penalties incurred by the
Company in connection with any such failure.
3.2 The Fund represents and warrants that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that
it will 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.
3.3 The Fund represents that it 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; including, but not limited to, that the Fund will at all
times comply with Section 817(h) of the Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, and with Section 817(d) of the Code, relating to the
definition of a variable contract, and any amendments or other
modifications to such Section or Regulation. The Fund will notify the
Company immediately upon having a reasonable basis for believing that
the Fund or a Portfolio thereunder has ceased to comply with the
diversification requirements or that the Fund or Portfolio will cease
to comply with the diversification requirements in the future. In the
event of a breach of this representation by the Fund, it will take all
reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury Regulation
1.817-5.
3.4 The Adviser agrees to provide the Company with a certificate or
statement indicating compliance by each Portfolio of the Fund with
Section 817(h) of the Code, such certificate or statement to be sent to
the Company no later than thirty (30) days following the end of each
calendar quarter.
ARTICLE IV - PROSPECTUS AND PROXY STATEMENTS/VOTING
4.1 The Fund will provide the Company, at the Fund's expense, with as many
copies of the current Fund prospectus and any supplements thereto for
the Designated Portfolio(s) as the Company may reasonably request for
distribution to Contract owners at the time of Contract fulfillment and
confirmation. To the extent that the Designated Portfolio(s) are one or
more of several Portfolios of the Fund, the Fund shall bear the cost of
providing Company only with disclosure related to the Designated
Portfolio(s). The Fund will provide, at the Fund's expense, as many
copies of said prospectus as necessary for distribution, at the Fund's
expense, to existing Contract owners. The Fund will provide the copies
of said prospectus to the Company or to its mailing agent. The Company
will distribute the prospectus to existing Contract owners and will
bill the Fund for the reasonable cost of such distribution. If
requested by the Company, in lieu thereof, the Fund will provide such
documentation, including a final copy of a current prospectus set in
type at the Fund's expense, and other assistance as is reasonably
necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have
the new prospectus for the Contracts and the Fund's new prospectus
printed together, in which case the Fund agrees to pay its
proportionate share of reasonable expenses directly related to the
required disclosure of information concerning the Fund. The Fund will,
upon request, provide the Company with a copy of the Fund's prospectus
through electronic means to facilitate the Company's efforts to provide
Fund prospectuses via electronic delivery, in which case the Fund
agrees to pay its proportionate share of reasonable expenses related to
the required disclosure of information concerning the Fund.
4.2 The Fund's prospectus will state that the Statement of Additional
Information (the "SAI") for the Fund is available from the Company. The
Fund will provide the Company, at the Fund's expense, with as many
copies of the SAI and any supplements thereto as the Company may
reasonably request for distribution to prospective Contract owners and
applicants. To the extent that the Designated Portfolio(s) are one or
more of several Portfolios of the Fund, the Fund shall bear the cost of
providing the Company only with disclosure related to the Designated
Portfolio(s). The Fund will provide, at the Fund's expense, as many
copies of said SAI as necessary for distribution, at the Fund's
expense, to any existing Contract owner who requests such statement or
whenever state or federal law requires that such statement be provided.
The Fund will provide the copies of said SAI to the Company or to its
mailing agent. The Company will distribute the SAI as requested or
required and will bill the Fund for the reasonable cost of such
distribution.
4.3 The Fund, at its expense, will provide the Company or its mailing agent
with copies of its proxy material, if any, reports to
shareholders/Contract owners and other communications to
shareholders/Contract owners in such quantity as the Company will
reasonably require. The Company will distribute this proxy material,
reports and other communications to existing Contract owners and will
bill the Fund for the reasonable cost of such distribution.
4.4 If and to the extent required by law, the Company will:
(a) solicit voting instructions from Contract owners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from Contract
owners; and
(c) vote shares of the Designated Portfolios held in the Account
for which no timely instructions have been received, in the
same proportion as shares of such Designated Portfolio for
which instructions have been received from the Company's
Contract owners,
so long as and to the extent that the Commission continues to interpret
the 1940 Act to require pass-through voting privileges for variable
Contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent
permitted by law. The Company will be responsible for assuring that the
Accounts participating in the Fund calculates voting privileges in a
manner consistent with all legal requirements, including the Mixed and
Shared Funding Exemptive Order, as described in Section 7.1 and the
Proxy Voting Procedures set forth in Schedule C.
4.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide
for annual meetings (except insofar as the Commission may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the
Fund currently intends, to comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c)
of the 1940 Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE V - SALES MATERIAL AND INFORMATION
5.1 The Company will furnish, or will cause to be furnished, to the Fund or
the Adviser, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten (10)
Business Days prior to its use. No such material will be used if the
Fund or the Adviser reasonably objects to such use within five (5)
Business Days after receipt of such material.
5.2 The Company will not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or
SAI for Fund shares, as such registration statement, prospectus and SAI
may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or the Adviser
for distribution, or in sales literature or other material provided by
the Fund or by the Adviser, except with permission of the Fund or the
Adviser. The Fund and the Adviser agree to respond to any request for
approval on a prompt and timely basis.
5.3 The Fund or the Adviser will furnish, or will 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 is
named, at least ten (10) Business Days prior to its use. No such
material will be used if the Company reasonably objects to such use
within five (5) Business Days after receipt of such material.
5.4 The Fund and the Adviser will not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information
or representations contained in a registration statement, prospectus or
SAI for the Contracts, as such registration statement, prospectus and
SAI may be amended or supplemented from time to time, or in published
reports for each Account or the Contracts which are in the public
domain or approved by the Company for distribution to Contract owners,
or in sales literature or other material provided by the Company,
except with permission of the Company. The Company agrees to respond to
any request for approval on a prompt and timely basis.
5.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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 Fund or its shares, within a
reasonable time after the filing of each such document with the
Commission or the National Association of Securities Dealer, Inc.
(the "NASD").
5.6 The Company will provide to the Fund at least one complete copy of all
definitive prospectuses, definitive SAI, 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 each
Account, contemporaneously with the filing of each such document with
the Commission or the NASD (Except that with respect to post-effective
amendments to such prospectuses and SAIs and sales literature and
promotional material, only those prospectuses and SAIs and sales
literature and promotional material that relate to or refer to the Fund
will be provided.) In addition, the Company will provide to the Fund at
least one complete copy of (i) a registration statement that relates to
the Contracts or each Account, containing representative and relevant
disclosure concerning the Fund; and (ii) any post-effective amendments
to any registration statements relating to the Contracts or such
Account that refer to or relate to the Fund.
5.7 For purposes of this Article V, 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, (i.e., on-line networks such as the Internet or
other electronic messages)), 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, registration
statements, prospectuses, SAIs, shareholder reports, and proxy
materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
5.8 The Fund and the Adviser hereby consent to the use of the names Rydex
Variable Trust and PADCO Advisors II, Inc., as well as the names of the
Designated Portfolios set forth in Schedule B of this Agreement, in
connection with marketing the Contracts, subject to the terms of
Sections 5.1 and 5.2 of this Agreement. The Fund and the Adviser hereby
consent to the use by the Company of any logo or mark used by the Fund
or Adviser, subject to the Fund's and/or the Adviser's approval of such
use and in accordance with reasonable requirements of the Fund or the
Adviser. Such consent will terminate with the termination of this
Agreement. The Company agrees and acknowledges that either of the Fund,
the Adviser or the Distributor are the owner of the name, logo or mark
and that all use of any designation comprised in whole or in part of
the name, logo or mark under this Agreement shall inure to the benefit
of the Fund, Adviser and/or the Distributor.
5.9 The Company hereby consents to the use of the name American Skandia
Life Assurance Corporation, as well as the names of the Company's
Contracts set forth in Schedule A of this Agreement, subject to the
terms of Sections 5.1 and 5.2 of this Agreement. The Company hereby
consents to the use by the Fund, the Adviser and the Distributor of any
logo or mark used by the Company, subject to the Company's approval of
such use and in accordance with reasonable requirements of the Company.
Such consent will terminate with the termination of this Agreement. The
Fund, the Adviser and the Distributor agree and acknowledge that the
Company is the owner of the name, logo or mark and that all use of any
designation comprised in whole or in part of the name, logo or mark
under this Agreement shall inure to the benefit of the Company.
5.10 The Fund, the Adviser, the Distributor and the Company agree to adopt
and implement procedures reasonably designed to ensure that information
concerning the Company, the Fund, the Adviser or the Distributor,
respectively, and their respective affiliated companies, that is
intended for use only by brokers or agents selling the Contracts is
properly marked as "Not For Use With The Public" and that such
information is only so used.
ARTICLES VI - FEES, COSTS AND EXPENSES
6.1 The Fund will pay no fee or other compensation to the Company under
this Agreement, except as provided below: (a) if the Fund or any
Designated Portfolio adopts and implements a plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses, then,
subject to obtaining any required exemptive orders or other regulatory
approvals, the Fund may make payments to the Company or to the
underwriter for the Contracts if and in such amounts agreed to by the
Fund in writing; (b) the Fund may pay fees to the Company for
administrative services provided to Contract owners that are not
primarily intended to result in the sale of shares of the Designated
Portfolio or of underlying Contracts.
6.2 All expenses incident to performance by the Fund of this Agreement will
be paid by the Fund to the extent permitted by law. All shares of the
Designated Portfolios will be duly authorized for issuance and
registered in accordance with applicable federal law and, to the extent
deemed advisable by the Fund, in accordance with applicable state law,
prior to sale. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares, including without
limitation, the preparation of and filing with the SEC of Forms N-SAR
and Rule 24f-2 Notices and payment of all applicable registration or
filing fees with respect to shares of the Fund; preparation and filing
of the Fund's prospectus, SAI and registration statement, proxy
materials and reports; typesetting the Fund's prospectus; typesetting
and printing proxy materials and reports to Contract owners (except
that American Skandia shall pay for printing and mailing of the Fund's
annual report as provided in camera-ready form by the Fund to American
Skandia); the preparation of all statements and notices required by any
federal or state law; all taxes on the issuance or transfer of the
Fund's shares; any expenses permitted to be paid or assumed by the Fund
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act; and
other costs associated with preparation of prospectuses and SAIs for
the Designated Portfolios in electronic or typeset format, as well as
any distribution expenses as set forth in Article III of this
Agreement.
ARTICLE VII - MIXED & SHARED FUNDING RELIEF
7.1 The Fund represents and warrants that it has received an order from the
Commission granting Participating Insurance Companies and variable
annuity separate accounts and variable life insurance separate accounts
relief from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of
the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Fund to be sold to and
held by variable annuity separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans outside
of the separate account context (the "Mixed and Shared Funding
Exemptive Order"). The parties to this Agreement agree that the
conditions or undertakings specified in the Mixed and Shared Funding
Exemptive Order and that may be imposed on the Company, the Fund and/or
the Adviser by virtue of the receipt of such order by the Commission,
will be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent applicable
to each such party.
7.2 The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the Contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including, but not limited to: (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 Portfolio are being
managed; (e) a difference in voting instructions given by Participating
Insurance Companies or by variable annuity and variable life insurance
Contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Fund Board will promptly
inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof. A majority of the Fund
Board will consist of persons who are not "interested" persons of the
Fund.
7.3 The Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities, as delineated in the Mixed and
Shared Funding Exemptive Order, by providing the Fund Board with all
information reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an obligation by
the Company to inform the Fund Board whenever Contract owner voting
instructions are to be disregarded. The Fund Board will record in its
minutes, or other appropriate records, all reports received by it and
all action with regard to a conflict.
7.4 If it is determined by a majority of the Fund Board, or a majority of
its disinterested trustees, that an irreconcilable material conflict
exists, the Company and other Participating Insurance Companies will,
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: (a) withdrawing the assets allocable to
some or all of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be submitted to a vote of all
affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity Contract owners or
variable life insurance Contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a
change; and (b) establishing a new registered management investment
company or managed separate account.
7.5 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions, and such
disregard of voting instructions could conflict with the majority of
Contract owner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the
affected sub-account of the Account's investment in the Fund and
terminate this Agreement with respect to such sub-account; provided,
however, that such withdrawal and termination will be limited to the
extent required by the foregoing irreconcilable material conflict as
determined by a majority of the disinterested trustees of the Fund
Board. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place in
accordance with the Fund's Mixed and Shared Funding Exemptive Order.
During the period that any such withdrawal and termination are being
implemented, the Adviser and Fund will, to the extent permitted by law
and any exemptive relief previously granted to the Fund, continue to
accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 If an irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state insurance regulators, then the Company will
withdraw the affected sub-account of the Account's investment in the
Fund and terminate this Agreement with respect to such sub-account;
provided, however, that such withdrawal and termination will be limited
to the extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested directors of
the Fund Board. No charge or penalty will be imposed as a result of
such withdrawal. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice to the
Company that this provision is being implemented. Until the end of such
six-month period the Adviser and Fund will, to the extent permitted by
law and any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.7 For purposes of Sections 7.4 through 7.7 of this Agreement, a majority
of the disinterested members of the Fund Board will determine whether
any proposed action adequately remedies any irreconcilable material
conflict, but in no event, other than as specified in Section 7.4, will
the Fund be required to establish a new funding medium for the
Contracts. The Company will not be required by Section 7.4 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 affected by the
irreconcilable material conflict.
7.7 The Company will at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so
that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Mixed and Shared Funding Exemptive Order, and said
reports, materials and data will be submitted more frequently if deemed
appropriate by the Fund Board.
7.8 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 1940 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then: (a)
the Fund and/or the Participating Insurance Companies, as appropriate,
will take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 4.4, 4.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will 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 Fund,
the Adviser, the Distributor, and each person, if any, who
controls or is associated with the Fund, the Adviser, or the
Distributor within the meaning of such terms under the federal
securities laws and any director, trustee, officer, employee
or agent of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the
Company) or actions in respect thereof (including reasonable
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: (1) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement, prospectus or SAI for
the Contracts or contained in the Contracts or sales
literature or other promotional material 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 or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will 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
Fund, the Adviser, of the Distributor for use in the
registration statement, prospectus or SAI 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 Fund shares; or (2) arise out of or as a
result of statements or representations by or on behalf of the
Company (other than statements or representations contained in
the Fund registration statement, prospectus, SAI or sales
literature or other promotional material of the Fund, or any
amendment or supplement to the foregoing, 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 Fund shares; or (3)
arise out of untrue statement or alleged untrue statement of a
material fact contained in the Fund registration statement,
prospectus, SAI or sales literature or other promotional
material of the Fund (or amendment or supplement) or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make such
statements not misleading in light of the circumstances in
which they were made, if such a statement or omission was made
in reliance upon and in conformity with information furnished
to the Fund by or on behalf of the Company or persons under
its control; or (4) 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 (5) arise out of 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 by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section
8.1(a) if such loss, claim, damage, liability or action is due
to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement.
(c) The Indemnified Parties promptly will notify the Company of
the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Fund shares or the Contracts
or the operation of the Fund.
8.2 Indemnification by the Adviser & Distributor
(a) The Adviser and Distributor agree to indemnify and hold
harmless the Company and each person, if any, who controls or
is associated with the Company within the meaning of such
terms under the federal securities laws and any director,
officer, employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the
written consent of the Adviser and Distributor) or actions in
respect thereof (including reasonable 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: (1)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or SAI for the Fund or
sales literature or other promotional material of the Fund (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 or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will 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 Adviser or Fund by or on behalf
of the Company for use in the registration statement,
prospectus or SAI for the Fund or in sales literature of the
Fund (or any amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or (2) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Contracts or in the Contract or Fund
registration statements, prospectuses or statements of
additional information or sales literature or other
promotional material for the Contracts or of the Fund, or any
amendment or supplement to the foregoing, not supplied by the
Adviser or the Fund or persons under the control of the
Adviser or the Fund respectively) or wrongful conduct of the
Adviser or the Fund or persons under the control of the
Adviser or the Fund respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or (3) arise out
of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement,
prospectus, SAI or sales literature or other promotional
material covering the Contracts (or any amendment or
supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated or
necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Adviser or the Fund or persons under the control
of the Adviser or the Fund; or (4) arise as a result of any
failure by the Fund or the Adviser to provide the services and
furnish the materials under the terms of this Agreement; or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser or the Fund
in this Agreement, or arise out of or result from any other
material breach of this Agreement by the Adviser or the Fund
(including a failure, whether intentional or in good faith or
otherwise, to comply with the requirements of Subchapter M of
the Code specified in Article III, Section 3.2 of this
Agreement and the diversification requirements specified in
Article III, Section 3.3 of this Agreement); except to the
extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the
Adviser or Distributor otherwise may have.
(b) No party will be entitled to indemnification under Section
8.2(a) if such loss, claim, damage, liability or action is due
to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard or its
obligations or duties under this Agreement.
(c) The Indemnified Parties will promptly notify the Adviser and
the Fund of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them
in connection with the issuance or sale of the Contracts or
the operation of the Account.
8.3 Indemnification by the Fund
(a) The Fund agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the
Company within the meaning of such terms under the federal
securities laws and any director, officer, employee or agent
of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.3) against any and all losses,
claims, expenses, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or action
in respect thereof (including reasonable 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 operations of the Fund and: (1) arise as a
result of any failure by the Fund to provide the services and
furnish the materials under the terms of this Agreement; or
(2) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund (including a failure,
whether intentional or in good faith or otherwise, to comply
with the requirements of Subchapter M of the Code specified in
Article III, Section 3.2 of this Agreement and the
diversification requirements specified in Article III, Section
3.3 of this Agreement); or (3) arise out of or result from the
incorrect or untimely calculation or reporting of daily net
asset value per share or dividend or capital gain distribution
rate; except to the extent provided in Sections 8.3(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Fund otherwise may have.
(b) No party will be entitled to indemnification under Section
8.3(a) if such loss, claim, damage, liability or action is due
to the willful misfeasance, bad faith, or gross negligence in
the performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations and duties under this Agreement.
(c) The Indemnified Parties will promptly notify the Fund of the
commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Contracts or the operation of
the Account.
8.4 Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.4) will not be
liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification
under this Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim will have been served upon such Indemnified Party (or
after such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of the indemnification provision of
this Article VIII, except to the extent that the failure to notify
results in the failure of actual notice to the Indemnifying Party and
such Indemnifying Party is damaged solely as a result of failure to
give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party 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,
unless: (a) the Indemnifying Party and the Indemnified Party will have
mutually agreed to the retention of such counsel; or (b) the named
parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Indemnifying Party will not be liable for any settlement of
any proceeding effected without its written consent but if settled with
such consent or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement will be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive
any termination of this Agreement.
ARTICLE IX - APPLICABLE LAW
9.1 This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Maryland.
9.2 This Agreement will be subject to the provisions of the 1933 Act, the
1934 Act and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Commission may grant (including, but not limited to,
the Mixed and Shared Funding Exemptive Order) and the terms hereof will
be interpreted and construed in accordance therewith.
ARTICLE X - TERMINATION
10.1 This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to one, some or all of the Portfolios, upon six (6)
month's advance written notice to the other parties or, if
later, upon receipt of any required exemptive relief or orders
from the SEC, unless otherwise agreed in a separate written
agreement among the parties; or
(b) at the option of the Company, upon written notice to the other
parties, with respect to any Portfolio if shares of the
Portfolio are not reasonably available to meet the
requirements of the Contracts as determined in good faith by
the Company; or
(c) at the option of the Company, upon written notice to the other
parties, with respect to any Portfolio in the event any of the
Portfolio'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
Company; or
(d) at the option of the Fund, upon written notice to the other
parties, upon institution of formal proceedings against the
Company by the NASD, the Commission, the Insurance Commission
of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale
of the Contracts, the administration of the Contracts, the
operation of the Account, or the purchase of the Fund shares,
provided that the Fund determines in its sole judgment,
exercised in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to perform
its obligations under this Agreement; or
(e) at the option of the Company, upon written notice to the other
parties, upon institution of formal proceedings against the
Fund or the Adviser by the NASD, the Commission or any state
securities or insurance department or any other regulatory
body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding
would have a material adverse effect on the Fund's or the
Adviser's ability to perform its obligations under this
Agreement; or
(f) at the option of the Company, upon written notice to the other
parties, if the Fund 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 and in good faith believes that the Fund may fail
to so qualify; or
(g) at the option of the Company, upon written notice to the other
parties, with respect to any Portfolio if the Fund fails to
meet the diversification requirements specified in Section 3.3
hereof or if the Company reasonably and in good faith believes
the Fund may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith that either the Fund or
the Adviser has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other parties
of written notice of the election to terminate; or
(j) at the option of the Fund or the Adviser, if the Fund or
Adviser respectively, determines in its sole judgment
exercised in good faith that the Company has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
the Fund or the Adviser, such termination to be effective
sixty (60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract
owners having an interest in the Account (or any sub-account)
to substitute the shares of another investment company for the
corresponding Portfolio's shares of the Fund in accordance
with the terms of the Contracts for which those Portfolio
shares had been selected to serve as the underlying portfolio.
The Company will give sixty (60) days' prior written notice to
the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares or of the filing of any
required regulatory approval(s); or
(1) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of: (1) all
Contract owners of variable insurance products of all separate
accounts; or (2) the interests of the Participating Insurance
Companies investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately
upon such occurrence without notice.
10.2 Notice Requirement
(a) No termination of this Agreement, except a termination under
Section 10.1 (m) of this Agreement, will be effective unless
and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the
termination.
(b) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice
will be given in advance of the effective date of termination
as required by such provisions.
10.3 Effect of Termination
Notwithstanding any termination of this Agreement, the Fund, the
Adviser and the Distributor will, at the option of the Company,
continue to make available additional shares of the Fund 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 will be permitted to reallocate
investments in the Designated Portfolios (as in effect on such date),
redeem investments in the Designated Portfolios and/or invest in the
Designated Portfolios upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.3
will not apply to any terminations under Article VII and the effect of
such Article VII terminations will be governed by Article VII of this
Agreement.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive
and not be affected by any termination of this Agreement. In addition,
with respect to Existing Contracts, all provisions of this Agreement
also will survive and not be affected by any termination of this
Agreement.
ARTICLE XI - NOTICES
Any notice will be deemed duly 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
parties.
If to the Company:
American Skandia Life Assurance Corporation
1 Corporate Drive
P.O. Box 883
Shelton, Connecticut 08484-0883
Attn: Mr. Gordon C. Boronow
If to the Fund:
Rydex Variable Trust
6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852
Attn:
If to the Adviser:
PADCO Advisors II, Inc.
6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852
Attn:
If to the Distributor:
PADCO Financial Services, Inc.
6116 Executive Boulevard, Suite 400
Rockville, Maryland 20852
Attn:
ARTICLE XII - MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 The Fund and the Adviser acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 12.2), information
maintained regarding those customers, and all computer programs and
procedures developed by the Protected Parties or any of their employees
or agents in connection with the Company's performance of its duties
under this Agreement are the valuable property of the Protected
Parties. The Fund and the Adviser agree that if they come into
possession of any list or compilation of the identities of or other
information about the Protected Parties' customers, or any other
property of the Protected Parties, other than such information as may
be independently developed or compiled by the Fund or the Adviser from
information supplied to them by the Protected Parties' customers who
also maintain accounts directly with the Fund or the Adviser, the Fund
and the Adviser will hold such information or property in confidence
and refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Company' s prior
written consent; or (b) as required by law or judicial process. The
Fund and the Adviser acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable harm to the
Protected Parties for which there would be no adequate remedy at law
and agree that in the event of such a breach, the Protected Parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
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 will constitute one and the
same instrument.
12.5 If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
12.6 This Agreement will not be assigned by any party hereto without the
prior written consent of all the parties.
12.7 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 law.
12.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
12.9 Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation
the Commission, the NASD and state insurance regulators) and will
permit each other and 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.
12.10 Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as
applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.11 The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund or other applicable terms of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
AMERICAN SKANDIA I.IFE ASSURANCE
CORPORATION
By: ______________________________
Gordon C. Boronow
Deputy Chief Executive Officer and President
RYDEX VARIABLE TRUST
By: ______________________________
PADCO Advisors II, Inc.
By: ______________________________
PADCO Financial Services, Inc.
By: ______________________________
<PAGE>
<TABLE>
<CAPTION>
April 13, 1999
PARTICIPATION AGREEMENT
SCHEDULE A
The following Separate Accounts and Associated Contracts of American Skandia
Life Assurance Corporation are permitted in accordance with the provisions of
this Agreement to invest in Portfolios of the Fund shown in Schedule B:
<S> <C> <C> <C> <C> <C> <C>
Contracts Funded by Separate Account Name of Separate Account
American Skandia Advisor Plan (ASAPSM) American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-accounts)
American Skandia Advisor Plan IISM (ASAP II) American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-accounts)
American Skandia XTra CreditSM (ASXT) American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-accounts)
American Skandia LifeVest(R)(ASL(R)) American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-accounts)
American Skandia ProtectorSM (AS ProSM) American Skandia Life Assurance Corporation
Variable Account B (Class 1 Sub-accounts)
American Skandia Advisors Choice(R)2000 (Choice2000) American Skandia Life Assurance Corporation Variable
Account B (Class 2 Sub-accounts)
American Skandia Impact (AS ImpactSM) American Skandia Life Assurance Corporation Variable
Account B (Class 3 Sub-accounts)
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
SCHEDULE B
The Separate Account(s) shown on Schedule A may invest in the following
Portfolios of the Fund.
|X| Nova Fund
|X| Ursa Fund
|X| OTC Fund
<PAGE>
PARTICIPATION AGREEMENT
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Trust. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Trust as early as
possible before the date set by the Trust for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Trust will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call in
the number of Customers to the Trust , as soon as possible, but no later
than two weeks after the Record Date.
3. The Trust's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Trust will provide the last Annual
Report to the Company pursuant to the terms of Section 3.3 of the Agreement
to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Trust. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Trust or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
|X| name (legal name as found on account registration)
|X| address
|X| Trust or account number
|X| coding to state number of units
|X| individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
5. During this time, the Trust will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
|X| Voting Instruction Card(s)
|X| one proxy notice and statement (one document)
|X| return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
|X| "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Trust.)
|X| cover letter - optional, supplied by Company and reviewed and
approved in advance by the Trust
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Trust.
7. Package mailed by the Company.
* The Trust must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including,) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Trust in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card. Note: For Example, if the account registration is
under "John A. Smith, Trustee," then that is the exact legal name to be
printed on the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Trust receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Trust must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Trust on
the morning of the meeting not later than 10:00 a.m. Eastern time. The
Trust may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Trust will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Trust will be
permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
(212) 408-6900
April 23, 1999
American Skandia Life Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
Re: Post-effective Amendment No. 8 to Form N-4 filed by American Skandia
Life Assurance Corporation, Depositor, and American Skandia Life
Assurance Corporation Variable Account B (Class 1 Sub-Accounts),
Registrant
Registration No.: 33-87010
Investment Company No.: 811-5438
Our File No. 74877-00-101
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.
33-87010, Investment Company Act No. 811-5438, (the "Registration Statement") of
a certain Variable Annuity Contract (the "Contract") that will be issued by
American Skandia through American Skandia Variable Account B (Class 1
Sub-Accounts). We understand that the above registration is a combination
registration with Post-effective Amendment No. 3 on Form S-2 filed by American
Skandia Life Assurance Corporation, Registrant, Registration No.: 333-25733.
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,
/s/WERNER & KENNEDY
G:legal/Andrea/FinalN4consentsASAP2
ASAP2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated February 20, 1999 relating to American
Skandia Life Assurance Corporation included in the Registration Statement (Form
N-4 No. 33-87010) and related Prospectus, which is part of this Registration
Statement, and to the use of our report dated February 20, 1999 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, 1999 with respect to the financial statements of American Skandia
Life Assurance Corporation for the years ended December 31, 1998 and 1997
included in the Annual Report (Form 10-K) for 1998 filed with the Securities and
Exchange Commission.
/s/Ernst & Young LLP
Hartford, Connecticut
April 23, 1999
ASAP II
Exhibit 10(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-effective Amendment No. 8 to Registration
Statement No. 33-87010 of American Skandia Life Assurance Corporation Variable
Account B (Class 1 Sub-Accounts) on Form N-4 of our report dated March 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,
1998, 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 reference to us under the heading
"Independent Auditors" appearing in the Statement of Additional Information,
which is also part of this Registration Statement.
/s/Deloitte & Touche LLP
New York, New York
April 23, 1999
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 141,195
<DEBT-CARRYING-VALUE> 149,484
<DEBT-MARKET-VALUE> 149,575
<EQUITIES> 8,210
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 158,263
<CASH> 77,525
<RECOVER-REINSURE> 4,191
<DEFERRED-ACQUISITION> 721,507
<TOTAL-ASSETS> 18,848,273 <F1>
<POLICY-LOSSES> 63,053
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 203,000
0
0
<COMMON> 2,000
<OTHER-SE> 248,417
<TOTAL-LIABILITY-AND-EQUITY> 18,848,273 <F2>
874
<INVESTMENT-INCOME> 11,130
<INVESTMENT-GAINS> 99
<OTHER-INCOME> 237,437 <F3>
<BENEFITS> (2,175)
<UNDERWRITING-AMORTIZATION> 86,628
<UNDERWRITING-OTHER> 81,162
<INCOME-PRETAX> 42,921
<INCOME-TAX> 8,154
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,767
<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
$17,835,400.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $17,835,400.
<F3> Other income includes annuity charges and fees of $186,211 and fee
income of $50,839.
</FN>
</TABLE>
