Filed with the Securities and Exchange Commission on November 30, 2000
Registration No. 333-[ ] Investment Company Act No. 811-5438
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
Registration Statement under The Securities Act of 1933
and
Registration Statement under The Investment Company Act of 1940
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
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(CLASS 1 SUB-ACCOUNTS)
----------------------
(Exact Name of Registrant)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
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(Name of Depositor)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484
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(Address of Depositor's Principal Executive Offices)
(203) 926-1888
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(Depositor's Telephone Number)
M. PRISCILLA PANNELL, CORPORATE SECRETARY
One Corporate Drive, Shelton, Connecticut 06484
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(Name and Address of Agent for Service of Process)
Copy To:
SCOTT K. RICHARDSON, ESQ.
SENIOR COUNSEL
One Corporate Drive, Shelton, Connecticut 06484 (203) 925-3830
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Approximate Date of Proposed Sale to the Public:
JANUARY __, 2001 or AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
It is proposed that this filing become effective: (check appropriate space)
__ Reference source not found. immediately upon filing pursuant to paragraph (b) of Rule 485
__ Reference source not found. on ___________ pursuant to paragraph (b) of Rule 485
__ Reference source not found. 60 days after filing pursuant to paragraph (a) (i) of Rule 485
on _________ pursuant to paragraph (a) (i) of Rule 485
__ Reference source not found. 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:
__ Reference source not found. This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities to be Price Offering Registration
to be Registered Registered Per Unit Price Fee
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American Skandia Life Assurance
Corporation Annuity Contracts Indefinite* Indefinite* $
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*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 1999 was filed within 90 days of the close
of the fiscal year.
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Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter becomes
effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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ASXT II
a2 n4 cr
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
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N-4 Item No. Prospectus Heading
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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 Account 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
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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
30. Location of Accounts and Records Location of Accounts
and Records
31. Management Services Management Services
32. Undertakings Undertakings
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
One Corporate Drive, Shelton, Connecticut 06484
This Prospectus describes American Skandia XTra CreditSM II, 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 57. The Annuity
or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ
between states to meet applicable laws and/or regulations. 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.
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American Skandia offers several different annuities which your financial professional may be authorized to offer to you. Each
annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how
you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to
access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees
and charges may also be different between each annuity.
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If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider
any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a
contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your
need to access the annuity's account value and whether the annuity's liquidity features will satisfy that need.
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 "qualified" investments,
including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for
"non-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.
When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity
earns until you make a withdrawal 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. Annuities purchased as a non-qualified
investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to
required minimum distributions after age 701/2.
When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any additional tax
advantages to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An
Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer,
including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between
numerous variable investment options offered under the Annuity. You should consult with your financial professional as to whether
the overall benefits and costs of the Annuity are appropriate considering your overall financial plan.
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE READ THIS PROSPECTUS AND THE CURRENT PROSPECTUS FOR THE UNDERLYING
MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE.
FOR FURTHER INFORMATION CALL 1-800-752-6342
Prospectus Dated: January xx, 2001 Statement of Additional Information Dated: January xx, 2001
ASXT II-PROS- (01/2001) ASXT IIPROS
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 if you withdraw your Account Value before the maturity date.
|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,
Montgomery Variable Series, Wells Fargo Variable Trust, Rydex Variable Trust, INVESCO Variable Investment Funds, Inc.,
Evergreen Variable Annuity Trust, ProFund VP and First Defined Portfolio Fund LLC.
|X| During the payout period, commonly called "annuitization," you can elect to receive 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. We currently make annuity payments available on a fixed or variable basis.
|X| This Annuity offers two different types of Credits. We add a Credit to your Annuity with each Purchase Payment we
receive. We also provide an additional 1% credit on Purchase Payments made within the first year under a feature called
Performance Advantage that 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 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. Currently, you may make twenty 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.
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If you purchase this Annuity, we apply an additional amount (an XTra CreditSM) to your account value with each purchase payment
you make, including your initial purchase payment and any additional purchase payments.
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This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not
charge an additional amount for the XTra Credit feature. However, if you make a withdrawal that exceeds the annual free
withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher
and is deducted for a longer period of time as compared to our other variable annuities. As with any annuity that features a
CDSC, you should consider your need to access your account value during the CDSC period and whether the liquidity provision
under the Annuity will satisfy that need.
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The XTra CreditSM amount is included in your account value. However, American Skandia may take back the original XTra
CreditSM amount applied to your purchase payment if you die, or elect to withdraw all or a portion of your account value under
the medically-related waiver provision, within 12 months of having received an XTra CreditSM amount. In either situation, the
value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra CreditSM amount
will not be taken back. Additional conditions and restrictions apply.
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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 you establish a bank
drafting program under which purchase payments received in the first Annuity Year total at least $1,000. If the Annuity is owned
by an individual or individuals, the oldest of those persons must be age 80 or under. If the Annuity is owned by an entity, the
annuitant must be age 80 or under.
Mailing Addresses:
New Business/Additional Purchase Payments: Exchange Paperwork:
American Skandia Life Assurance Corporation American Skandia Life Assurance Corporation
P.O. Box 7040 P.O. Box 7039
Bridgeport, CT 06601-7040 Bridgeport, CT 06601-7039
All other correspondence: Express/Overnight Mail:
American Skandia Life Assurance Corporation American Skandia Life Assurance Corporation
P.O. Box 7038 Three Corporate Drive
Bridgeport, CT 06601-7038 Shelton, CT 06484
TABLE OF CONTENTS
GLOSSARY OF TERMS..................................................................................................................6
SUMMARY OF CONTRACT FEES AND CHARGES...............................................................................................7
EXPENSE EXAMPLES...................................................................................................................9
INVESTMENT OPTIONS................................................................................................................12
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?.............................................................12
WHAT ARE THE FIXED INVESTMENT OPTIONS?.........................................................................................22
FEES AND CHARGES..................................................................................................................22
WHAT ARE THE CONTRACT FEES AND CHARGES?........................................................................................22
WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?..................................................................23
WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?...................................................................................23
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?...................................................................................23
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYOUT?..............................................................................23
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES......................................................................................23
PURCHASING YOUR ANNUITY...........................................................................................................24
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?..........................................................................24
MANAGING YOUR ANNUITY.............................................................................................................24
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?................................................................24
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?..................................................................................25
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.......................................................................................25
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?...................................................................25
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?...............................................................25
MANAGING YOUR ACCOUNT VALUE.......................................................................................................25
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?...................................................................................26
HOW DO I RECEIVE CREDITS?......................................................................................................26
HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE?...................................................................................27
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?.....................................................28
DO YOU OFFER DOLLAR COST AVERAGING?............................................................................................29
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?...............................................................................29
DO YOU OFFER A PROGRAM TO BALANCE FIXED AND VARIABLE INVESTMENTS?..............................................................29
MAY I AUTHORIZE MY FINANCIAL REPRESENTATIVE TO MANAGE MY ACCOUNT?..............................................................30
HOW DO THE FIXED INVESTMENT OPTIONS WORK?......................................................................................30
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?..............................................................................30
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?.....................................................................................31
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?.................................................................................32
AMERICAN SKANDIA'S PERFORMANCE ADVANTAGE..........................................................................................32
ACCESS TO ACCOUNT VALUE...........................................................................................................33
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?...............................................................................33
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?..................................................................................34
CAN I WITHDRAW A PORTION OF MY ANNUITY?........................................................................................34
IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?....................................................................................34
CAN I MAKE WITHDRAWALS FROM MY ANNUITY WITHOUT A CDSC?.........................................................................34
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?..................................................................................34
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?...............................................35
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(T) OF THE INTERNAL REVENUE CODE?.......................................35
WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?.............................................................35
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?......................................................................................36
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?....................................................................36
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE UPON ANNUITIZATION?................................................................36
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?...........................................................................37
HOW ARE ANNUITY PAYMENTS CALCULATED?...........................................................................................38
DEATH BENEFIT.....................................................................................................................38
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?..................................................................................38
OPTIONAL DEATH BENEFITS........................................................................................................38
PAYMENT OF DEATH BENEFITS......................................................................................................40
VALUING YOUR INVESTMENT...........................................................................................................42
HOW IS MY ACCOUNT VALUE DETERMINED?............................................................................................42
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?.....................................................................................42
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?....................................................................................42
HOW DO YOU VALUE FIXED ALLOCATIONS?............................................................................................42
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?....................................................................................42
TAX CONSIDERATIONS................................................................................................................43
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?...............................................................43
HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?......................................................................43
IN GENERAL, HOW ARE ANNUITIES TAXED?...........................................................................................43
HOW ARE DISTRIBUTIONS TAXED?...................................................................................................43
WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED
CONTRACTS?..................................................................................................................45
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?..........................................................................46
GENERAL TAX CONSIDERATIONS.....................................................................................................47
GENERAL INFORMATION...............................................................................................................48
HOW WILL I RECEIVE STATEMENTS AND REPORTS?.....................................................................................48
WHO IS AMERICAN SKANDIA?.......................................................................................................48
WHAT ARE SEPARATE ACCOUNTS?....................................................................................................49
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?...........................................................................50
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?.........................................................................50
AVAILABLE INFORMATION..........................................................................................................52
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................................................52
HOW TO CONTACT US..............................................................................................................52
INDEMNIFICATION................................................................................................................53
LEGAL PROCEEDINGS..............................................................................................................53
EXECUTIVE OFFICERS AND DIRECTORS...............................................................................................53
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............................................................................57
APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA..........................................................................1
APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B..............................................................1
APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS................................................................................1
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 ("CDSC") 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.
Annuitization: The application of Account Value to one of the available annuity options to begin receiving periodic payments for
life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments.
Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply.
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: The value of the Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to 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 more than 30 days
prior to the Maturity Date of such Fixed Allocation.
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, Annual Maintenance Fee, Tax Charge, the charge for any optional
benefits 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.
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, the Tax Charge and any charge for
optional benefits. 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.
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YOUR TRANSACTION EXPENSES
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Amount Deducted/
FEE/EXPENSE Description Of Charge When Deducted
------------------------------- ----------------------------------------------------------------- --------------------------------------
------------------------------- ------- ------ ------ ------- ------ ------ ------- ------ ------ --------------------------------------
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr.
Contingent Deferred Sales 9+ Upon Surrender or
Charge Partial Withdrawal
------------------------------- ------- ------ ------ ------- ------ ------ ------- ------ ------ --------------------------------------
------------------------------- ------- ------ ------ ------- ------ ------ ------- ------ ------ --------------------------------------
8.5% 8.5% 8.5% 8.5% 7.0% 6.0% 5.0% 4.0% 0.0%
------------------------------- ------- ------ ------ ------- ------ ------ ------- ------ ------ --------------------------------------
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The charge is a percentage of each applicable purchase payment.
The period is measured from the date each purchase payment is
allocated.
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Annual Maintenance Fee Smaller of $35 or 2% of Account Value Annually on the contract's
anniversary date or upon surrender
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Transfer Fee $10.00 After the 20th transfer each annuity
year
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Tax Charge Depends on the requirements of the applicable jurisdiction Various
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ANNUAL EXPENSES OF THE SUB-ACCOUNTS
(as a percentage of the average daily net assets of the Sub-accounts)
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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
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* The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge"
elsewhere in this prospectus.
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OPTIONAL DEATH BENEFITS
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PERCENTAGE OF GAIN DEATH BENEFIT
We offer an Optional Death Benefit that provides an enhanced level of protection for your 0.25% of Account Value
beneficiary(ies) by providing additional amounts that can be used to offset federal and state taxes
payable on any taxable gains in your Annuity at the time of your death. (Amounts are deducted in
arrears each Annuity Year)
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GUARANTEED MINIMUM DEATH BENEFIT
We offer an Optional Death Benefit that provides an enhanced level of protection for your 0.30% of the current Death
beneficiary(ies) by providing the greater of the current Account Value, a 5.0% annual increase on Benefit
Purchase Payments minus proportional withdrawals or the Highest Anniversary Value. (Amounts are deducted in
arrears each Annuity Year)
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Please refer to the section entitled "Death Benefit" for a complete discussion of the optional Death Benefits, including restrictions
on the age of the Owner/ Annuitant and limits on the amount payable.
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UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
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Below are the investment management fees, other expenses, and the total annual expenses for each underlying Portfolio as of
December 31, 1999, except as noted. The total annual expenses are the sum of the investment management fee, other expenses and
any 12b-1 fees. 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.
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
Management Other 12b-1 Fees Total Annual Fee Net
Fees Expenses Portfolio Waivers Annual
UNDERLYING PORTFOLIO Operating and Fund
Expenses Expense Operating
Reimburse-mentExpenses
1
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
American Skandia Trust: 2
AST Founders Passport 1.00% 0.29% 0.00% 1.29% N/A 1.29%
AST Scudder Japan 3 1.00% 0.36% 0.04% 1.40% N/A 1.40%
AST AIM International Equity 0.87% 0.31% 0.04% 1.22% N/A 1.22%
AST American Century International Growth 1.00% 0.50% 0.00% 1.50% N/A 1.50%
AST MFS Global Equity 4 1.00% 1.11% 0.00% 2.11% 0.36% 1.75%
AST Kemper Small-Cap Growth 0.95% 0.19% 0.03% 1.17% N/A 1.17%
AST Federated Aggressive Growth 3 0.95% 0.23% 0.04% 1.22% N/A 1.22%
AST Lord Abbett Small Cap Value 0.95% 0.29% 0.00% 1.24% N/A 1.24%
AST Gabelli Small-CapValue 0.90% 0.21% 0.00% 1.11% N/A 1.11%
AST Janus Mid-Cap Growth 5 1.00% 0.22% 0.04% 1.26% N/A 1.26%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.23% 0.04% 1.17% N/A 1.17%
AST Neuberger Berman Mid-Cap Value 0.90% 0.23% 0.12% 1.25% N/A 1.25%
AST Alger All-Cap Growth 6 0.95% 0.22% 0.06% 1.23% N/A 1.23%
AST Gabelli All-Cap Value 3 0.95% 0.23% 0.04% 1.22% N/A 1.22%
AST Kinetics Internet 3 1.00% 0.23% 0.04% 1.27% N/A 1.27%
AST T. Rowe Price Natural Resources 0.90% 0.26% 0.01% 1.17% N/A 1.17%
AST Alliance Growth 0.90% 0.21% 0.00% 1.11% N/A 1.11%
AST MFS Growth 4 0.90% 0.45% 0.00% 1.35% N/A 1.35%
AST Marsico Capital Growth 0.90% 0.18% 0.04% 1.12% N/A 1.12%
AST JanCap Growth 0.90% 0.14% 0.01% 1.05% 0.04% 1.01%
AST Sanford Bernstein Managed Index 500 0.60% 0.19% 0.00% 0.79% N/A 0.79%
AST Janus Strategic Value 3 1.00% 0.23% 0.04% 1.27% N/A 1.27%
AST Cohen & Steers Realty 1.00% 0.27% 0.02% 1.29% N/A 1.29%
AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% N/A 0.98%
AST Alliance Growth and Income 0.75% 0.18% 0.08% 1.01% 0.01% 1.00%
AST MFS Growth with Income 4 0.90% 0.33% 0.00% 1.23% N/A 1.23%
AST INVESCO Equity Income 0.75% 0.18% 0.04% 0.97% N/A 0.97%
AST AIM Balanced 0.74% 0.26% 0.02% 1.02% N/A 1.02%
AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% N/A 1.10%
AST T. Rowe Price Asset Allocation 0.85% 0.22% 0.00% 1.07% N/A 1.07%
AST T. Rowe Price Global Bond 0.80% 0.31% 0.00% 1.11% N/A 1.11%
AST Federated High Yield 0.75% 0.19% 0.00% 0.94% N/A 0.94%
AST Lord Abbett Bond-Debenture 3 0.80% 0.23% 0.04% 1.07% N/A 1.07%
AST PIMCO Total Return Bond 0.65% 0.17% 0.00% 0.82% N/A 0.82%
AST PIMCO Limited Maturity Bond 0.65% 0.21% 0.00% 0.86% N/A 0.86%
AST Money Market 0.50% 0.15% 0.00% 0.65% 0.05% 0.60%
Montgomery Variable Series:
Emerging Markets 1.25% 0.50% 0.00% 1.75% N/A 1.75%
Wells Fargo Variable Trust:
Equity Income 0.55% 0.37% 0.25% 1.17% 0.17% 1.00%
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
Management Other 12b-1 Fees Total Annual Fee Net
Fees Expenses Portfolio Waivers Annual
UNDERLYING PORTFOLIO Operating and Fund
Expenses Expense Operating
Reimburse-mentExpenses
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
Rydex Variable Trust:
Nova 0.75% 0.80% 0.00% 1.55% N/A 1.55%
Ursa 0.90% 0.83% 0.00% 1.73% N/A 1.73%
OTC 0.75% 0.80% 0.00% 1.55% N/A 1.55%
INVESCO Variable Investment Funds, Inc.:
Technology 0.75% 0.78% 0.00% 1.53% 0.21% 1.32%
Health Sciences 0.75% 2.11% 0.00% 2.86% 1.37% 1.49%
Financial Services 0.75% 1.75% 0.00% 2.50% 1.09% 1.41%
Telecommunications 0.75% 0.55% 0.00% 1.30% 0.02% 1.28%
Dynamics 0.75% 1.53% 0.00% 2.28% 0.99% 1.29%
Evergreen Variable Annuity Trust:
Global Leaders 7 0.95% 0.25% 0.00% 1.20% 0.19% 1.01%
Special Equity 7 1.36% 2.35% 0.00% 3.71% 2.68% 1.03%
ProFund VP:
Europe 30 0.75% 1.39% 0.25% 2.39% 0.61% 1.78%
UltraSmall-Cap 0.75% 1.53% 0.25% 2.53% 0.83% 1.70%
UltraOTC 0.75% 0.97% 0.25% 1.97% 0.32% 1.65%
First Defined Portfolio Fund LLC:
First Trust(R)10 Uncommon Values 8 0.60% 144.82% 0.25% 145.67% 144.30% 1.37%
------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------------
1 The Investment Manager of American Skandia Trust has agreed to reimburse and/or waive fees for certain Portfolios until
at least April 30, 2001. The caption "Total Annual Fund Operating Expenses" reflects the Portfolios' fees and expenses before
such waivers and reimbursements, while the caption "Net Annual Fund Operating Expenses" reflects the effect of such waivers
and reimbursements.
2 American Skandia Trust (the "Trust") adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the
Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in
connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the
sale of shares of such Portfolios. The staff of the Securities and Exchange Commission takes the position that commission
amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Portfolios
would pay the same or comparable commission amounts irrespective of the Distribution Plan; accordingly, total returns for the
Portfolios are not expected to be adversely affected. The Distribution Fee estimates are derived from data regarding each
Portfolio's brokerage transactions, and the proportions of such transactions directed to selling dealers, for the period ended
December 31, 1999. However, it is not possible to determine with accuracy actual amounts that will be received under the
Distribution Plan. Such amounts will vary based upon the level of a Portfolio's brokerage activity, the proportion of such
activity directed under the Distribution Plan, and other factors.
3 These Portfolios commenced operations in October 2000. "Other Expenses" and "12b-1 Fees" shown are based on estimated
amounts for the fiscal year ending December 31, 2000.
4 These Portfolios commenced operations on October 18, 1999. "Other Expenses" are based on estimated amounts for the
fiscal year ending December 31, 2000.
5 This Portfolio commenced operations on May 1, 2000. "Other Expenses" are based on estimated amounts for the fiscal year
ending December 31, 2000.
6 This Portfolio commenced operations as of December 30, 1999. "Other Expenses" shown are based on estimated amounts for
the fiscal year ending December 31, 2000.
7 These portfolios commenced operations on September 30, 1999. Expenses have been estimated based upon current fund
contracts.
8 Included in the charge for Other Expenses is a fee of 0.325% of average daily net assets paid to American Skandia to
reimburse it for administrative costs. The percentages shown for the Portfolio are based on estimated amounts for the current
fiscal year. Actual expenses may be greater or lesser than those shown. The investment advisor has agreed to waive fees and
reimburse expenses through September 30, 2001 in order to prevent Total Annual Portfolio Operating Expenses (excluding
brokerage expenses and extraordinary expenses) from exceeding the amount shown above based on the average daily net asset
value of the respective 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) the Insurance Charge is assessed as
1.40% per year; (c) the Annual Maintenance Fee is reflected as a charge equal to 0.05% based on an assumed average contract size;
(d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other
transactions that we charge a fee during the period shown; (f) no tax charge applies; (g) 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"; and (h) the Credit applicable to your Annuity is 4% of Purchase Payments. The
Credit may be less when total Purchase Payments are less then $10,000 and may be more when total Purchase Payments are at least
$5,000,000 (see "How do I Receive Credits?").
These examples do not reflect the charge for either optional Death Benefit that is offered under the Annuity. If you purchase the
Annuity with an optional Death Benefit, this charge is deducted on an annual basis in arrears in addition to the amounts shown
below. Please see the example of how we charge for the optional Death Benefits following these tables. 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.
-----------------------------------------------------------------------------------------------------------------------------------------
Expense Examples
(amounts shown are rounded to the nearest dollar)
-----------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------- ------- -----------------------------------------
If you surrender your Annuity at the end If you do not surrender your Annuity at
of the applicable time period, you would the end of the applicable time period
pay the following expenses on a $1,000 or begin taking annuity payments at
investment, assuming 5% annual return on such time, you would pay the following
assets: 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
--------------------------------------------
-------------------------------------------- --------- ---------- --------- ---------- ------ ---------- ---------- --------- ----------
AST Founders Passport
AST Scudder Japan
AST AIM International Equity
AST American Century International Growth
AST MFS Global Equity
AST Kemper Small-Cap Growth
AST Federated Aggressive Growth
AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value
AST Janus Mid-Cap Growth
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman Mid-Cap Value
AST Alger All-Cap Growth
AST Gabelli All-Cap Value
AST Kinetics Internet
AST T. Rowe Price Natural Resources
AST Alliance Growth
AST MFS Growth
AST Marsico Capital Growth
AST JanCap Growth
AST Sanford Bernstein Managed Index 500
-------------------------------------------- --------- ---------- --------- ---------- ------ ---------- ---------- --------- ----------
After: After:
----------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------- --------- ---------- --------- ---------- ------ ---------- ---------- --------- ----------
Sub-Account: 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
-------------------------------------------- --------- ---------- --------- ---------- ------ ---------- ---------- --------- ----------
AST Janus Strategic Value
AST Cohen & Steers Realty
AST American Century Income & Growth
AST Alliance Growth and Income
AST MFS Growth with Income
AST INVESCO Equity Income
AST AIM Balanced
AST American Century Strategic Balanced
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST Federated High Yield
AST Lord Abbett Bond-Debenture
AST PIMCO Total Return Bond
AST PIMCO Limited Maturity Bond
AST Money Market
MV Emerging Markets
WFVT Equity Income
Rydex Nova
Rydex Ursa
Rydex OTC
INVESCO VIF Technology
INVESCO VIF Health Sciences
INVESCO VIF Financial Services
INVESCO VIF Telecommunications
INVESCO VIF Dynamics
Evergreen VA Global Leaders
Evergreen VA Special Equity
ProFund VP Europe 30
ProFund VP UltraSmall-Cap
ProFund VP UltraOTC
First Trust(R)10 Uncommon Values
-------------------------------------------- --------- ---------- --------- ---------- ------ ---------- ---------- --------- ----------
Expenses For Optional Death Benefits
Percentage of Gain Death Benefit
If you purchase the Percentage of Gain Death Benefit, an annual charge of 0.25% is deducted from your Annuity's Account Value. The
charge will be based on the Account Value of the Sub-accounts and any Fixed Allocations as of the date the charge is deducted.
Below is an example of how the charge for the Percentage of Gain Death Benefit is calculated.
Initial Purchase Payment: $10,000
Account Value on
Anniversary of Issue Date: $12,500
Cost of Optional Death Benefit 0.25% X $12,500 = $31.25 per year
Since charges for the Percentage of Gain Death Benefit are determined based on a percentage of Account Value, you will pay more
for this benefit if your Account Value increases. The value of the Percentage of Gain Death Benefit will also increase as the
Account Value increases. However, the Percentage of Gain Death Benefit is also subject to a maximum benefit. See the section
entitled "Death Benefits" for a description of the Percentage of Gain Death Benefit.
Guaranteed Minimum Death Benefit
If you purchase the Guaranteed Minimum Death Benefit, an annual charge of 0.30% is deducted from your Annuity's Account Value.
The charge will be based on the current Death Benefit under the Guaranteed Minimum Death Benefit as of the date the charge is
deducted. Below is an example of how the charge for the Guaranteed Minimum Death Benefit is calculated.
Initial Purchase Payment: $10,000
Account Value on
Anniversary of Issue Date: $12,500
Current Death Benefit: $13,000
Cost of Optional Death Benefit 0.30% X Current Death Benefit = $39.00 per year
The charge for optional Death Benefits is deducted in addition to the Insurance Charge which is deducted on a daily basis from the
Account Value allocated to the Sub-accounts. The charge for the optional Death Benefits is deducted in arrears on each
anniversary of the Issue Date of the Annuity or, if you terminate the optional Death Benefit or surrender your Annuity, on the
date the termination or surrender is effective.
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. There is no guarantee that any underlying mutual fund portfolio
will meet its investment objective.
The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those portfolios whose name includes the
prefix "AST" are portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services,
Incorporated ("ASISI"), an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct
day-to-day investment decisions.
Some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a
retail mutual fund that the Portfolio may have been modeled after at the Portfolio's inception. Certain retail mutual funds may
also have been modeled after a Portfolio. While the investment objective and policies of the funds may be substantially similar,
the actual investments made by the funds will differ to varying degrees. Differences in the performance of the funds can be
expected, and in some cases could be substantial. Details about the investment objectives, policies, risks, costs and management
of the Portfolios are found in the prospectuses for the underlying mutual funds.
Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Money Market: seeks to maximize current income and maintain high levels of liquidity. The
MONEY MARKET Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average J.P. Morgan
maturity of not more than 90 days and by investing in securities which have effective Investment Management
maturities of not more than 397 days. Inc.
------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity for capital
appreciation to produce a high total return. The Portfolio pursues its objective by normally
investing in high yield and investment grade debt securities, securities convertible into
common stock and preferred stocks. Under normal circumstances, the Portfolio invests at least
65% of its total assets in fixed income securities of various types. The Portfolio may find
good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and
frequently may have more than half of its assets invested in those securities. At least 20% Lord, Abbett & Co.
of the Portfolio's assets must be invested in any combination of investment grade debt
securities, U.S. Government securities and cash equivalents. The Portfolio may also make
significant investments in mortgage-backed securities. Although the Portfolio expects to
maintain a weighted average maturity in the range of seven to nine years, there are no
restrictions on the overall Portfolio or on individual securities.
BOND
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------ -----------------------
AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation
of capital and prudent investment management. The Portfolio will invest in a diversified Pacific Investment
portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management Company
the Portfolio generally will vary within a one- to three-year time frame based on the
Sub-advisor's forecast for interest rates.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of
capital and prudent investment management. The Portfolio will invest in a diversified Pacific Investment
portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management Company
the Portfolio generally will vary within a three- to six-year time frame based on the
Sub-advisor's forecast for interest rates.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Federated High Yield: seeks high current income by investing primarily in a diversified
portfolio of fixed income securities. The Portfolio will invest at least 65% of its assets in
lower-rated corporate fixed income securities ("junk bonds"). These fixed income securities
HIGH YIELD BOND may include preferred stocks, convertible securities, bonds, debentures, notes, equipment Federated Investment
lease certificates and equipment trust certificates. A fund that invests primarily in Counseling
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 Global Bond (f/k/a AST T. Rowe Price International Bond): seeks to provide
high current income and capital growth by investing in high-quality foreign and U.S.
government bonds. The Portfolio will invest at least 65% of its total assets in bonds issued
or guaranteed by the U.S. or foreign governments or their agencies and by foreign authorities,
provinces and municipalities. Corporate bonds may also be purchased. The Sub-advisor bases T. Rowe Price
GLOBAL BOND its investment decisions on fundamental market factors, currency trends, and credit quality. International, Inc.
The Portfolio generally invests in countries where the combination of fixed-income returns and
currency exchange rates appears attractive, or, if the currency trend is unfavorable, where
the Sub-advisor believes that the currency risk can be minimized through hedging. The
Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade,
high-risk bonds ("junk bonds").
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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
ASSET ALLOCA-TION invests approximately 60% of its total assets in equity securities and 40% in fixed income
securities. The Sub-advisor concentrates common stock investments in larger, more established T. Rowe Price
companies, but the Portfolio may include small and medium-sized companies with good growth Associates, Inc.
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.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
------------------- ------------------------------------------------------------------------------------------------ -----------------------
-------------------
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 maximum of 70% of its total assets in equity A I M Capital
securities and a minimum of 30% and a maximum of 70% of its total assets in non-convertible Management, Inc.
debt securities. The Sub-advisor will primarily purchase equity securities for growth of
capital and debt securities for income purposes.
BALANCED
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 income securities. Both the Portfolio's American Century
equity and fixed income investments will fluctuate in value. The equity securities will Investment
fluctuate depending on the performance of the companies that issued them, general market and Management, Inc.
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.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
-------------------
WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income.
The Portfolio pursues its objective primarily by investing in the common stocks of large,
high-quality domestic companies with above-average return potential based on current market
valuations and above-average dividend income. Under normal market conditions, the Portfolio Wells Fargo Bank, N.A.
invests at least 65% of its total assets in income producing equity securities and in issues
EQUITY INCOME of companies with market capitalizations greater than the median of the Russell 1000 Index.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST INVESCO Equity Income: seeks capital growth and current income while following sound
investment practices. The Portfolio seeks to achieve its objective by investing in securities
that are expected to produce relatively high levels of income and consistent, stable returns. INVESCO Funds Group,
The Portfolio normally will invest at least 65% of its assets in dividend-paying common and Inc.
preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be
invested in equity securities that do not pay regular dividends.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Alliance Growth and Income (f/k/a AST Lord Abbett Growth and Income): seeks long-term
growth of capital and income while attempting to avoid excessive fluctuations in market value.
The Portfolio normally will invest in common stocks (and securities convertible into common
stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Alliance Capital
Portfolio's assets invested in securities that are selling at reasonable prices in relation to Management L.P.
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.
GROWTH
&
INCOME
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 capital American Century
growth, and may, consistent with its investment objective, invest in stocks that offer Investment
potential for current income. The Sub-advisor utilizes a quantitative management technique Management, Inc.
with a goal of building an equity portfolio that provides better returns than the S&P 500
Index without taking on significant additional risk and while attempting to create a dividend
yield that will be greater than the S&P 500 Index.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------ -----------------------
AST MFS Growth with Income: seeks reasonable current income and long-term capital growth and
income. Under normal market conditions, the Portfolio invests at least 65% of its total
assets in common stocks and related securities, such as preferred stocks, convertible Massachusetts
securities and depositary receipts. The stocks in which the Portfolio invests generally will Financial Services
pay dividends. While the Portfolio may invest in companies of any size, the Portfolio Company
generally focuses on companies with larger market capitalizations that the Sub-advisor
believes have sustainable growth prospects and attractive valuations based on current and
expected earnings or cash flow. The Portfolio may invest up to 20% of its net assets in
foreign securities.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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
REAL ESTATE equal emphasis, capital growth and current income. Under normal circumstances, the Portfolio
(REIT) will invest substantially all of its assets in the equity securities of real estate companies, Cohen&Steers
i.e., a company that derives at least 50% of its revenues from the ownership, construction, Capital Management,
financing, management or sale of real estate or that has at least 50% of its assets in real Inc.
estate. Real estate companies may include real estate investment trusts or REITs.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
-------------------
AST Sanford Bernstein Managed Index 500 (f/k/a AST Bankers Trust Managed Index 500): seeks to
outperform the Standard&Poor's 500 Composite Stock Price Index (the "S&P 500(R)") through
stock selection resulting in different weightings of common stocks relative to the index. The
Portfolio will invest primarily in the common stocks of companies included in the S&P 500(R).
In seeking to outperform the S&P 500, the Sub-advisor starts with a portfolio of stocks
MANAGED INDEX representative of the holdings of the index. It then uses a set of fundamental quantitative Sanford C. Bernstein
criteria that are designed to indicate whether a particular stock will predictably perform &Co., Inc.
better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether
the Portfolio should over-weight, under-weight or hold a neutral position in the stock
relative to the proportion of the S&P 500 that the stock represents. In addition, the
Sub-advisor also may determine that based on the quantitative criteria, certain equity
securities that are not included in the S&P 500 should be held by the Portfolio.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Alliance Growth (f/k/a AST Oppenheimer Large-Cap Growth): seeks long-term capital growth.
The Portfolio invests at least 85% of its total assets in the equity securities of a limited
number of large, carefully selected, high-quality U.S. companies that are judged likely to Alliance Capital
achieve superior earnings growth. Normally, about 40-60 companies will be represented in the Management L.P.
Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting
approximately 70% of the Portfolio's net assets. An emphasis is placed on identifying
companies whose substantially above average prospective earnings growth is not fully reflected
in current market valuations.
LARGE CAP
EQUITY
------------------------------------------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------ -----------------------
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 Janus Capital
companies that the Sub-advisor believes are experiencing favorable demand for their products Corporation
and 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 Janus Strategic Value: seeks long-term growth of capital. The Portfolio pursues its
objective by investing primarily in common stocks with the potential for long-term growth of
capital using a "value" approach. This value approach emphasizes investments in companies the
Sub-advisor believes are undervalued relative to their intrinsic worth. Realization of income Janus Capital
is not a significant consideration when choosing investments for the Portfolio. The Portfolio Corporation
will generally focus on the securities of larger companies, however, it may invest in the
securities of smaller companies, including start-up companies offering emerging products or
services.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 investments
for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis Marsico Capital
with "bottom up" stock selection. The "top down" approach identifies sectors, industries and Management, LLC
companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor
LARGE CAP then looks for individual companies with earnings growth potential that may not be recognized
EQUITY by the market at large. This is called "bottom up" stock selection.
(Cont.)
------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST MFS Growth: seeks long-term capital growth and future income. Under normal market
conditions, the Portfolio invests at least 80% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and depositary receipts, Massachusetts
of companies that the Sub-advisor believes offer better than average prospects for long-term Financial Services
growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run Company
and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign
securities.
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 commodities. The Portfolio normally
NATURAL RESOURCES invests primarily (at least 65% of its total assets) in the common stocks of natural resource T. Rowe Price
companies whose earnings and tangible assets could benefit from accelerating inflation. The Associates, Inc.
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.
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AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in
equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in
the over-the-counter market. The Portfolio may invest in the equity securities of companies Fred Alger
of all sizes, and may emphasize either larger or smaller companies at a given time based on Management, Inc.
the Sub-advisor's assessment of particular companies and market conditions.
ALL-CAP
EQUITY
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AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its objective by
investing primarily in readily marketable equity securities including common stocks, preferred
stocks and securities that may be converted at a later time into common stock. The Portfolio
may invest in the securities of companies of all sizes, and may emphasize either larger or GAMCO Investors, Inc.
smaller companies at a given time based on the Sub-advisor's assessment of particular
companies and market conditions. The Portfolio focuses on companies that appear underpriced
relative to their private market value ("PMV"). PMV is the value that the Portfolio's
Sub-advisor believes informed investors would be willing to pay for a company.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Janus Mid-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in
common stocks, selected for their growth potential, and normally invests at least 65% of its
equity assets in medium-sized companies. For purposes of the Portfolio, medium-sized
companies are those whose market capitalizations (measured at the time of investment) fall Janus Capital
within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor Corporation
seeks to identify individual companies with earnings growth potential that may not be
MID-CAP EQUITY recognized by the market at large.
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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 capitalizations Neuberger Berman
from $300 million to $10 billion at the time of investment. The Portfolio is normally managed Management
using a growth-oriented investment approach. The Sub-advisor looks for fast-growing companies Incorporated
that are in new or rapidly evolving industries.
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PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 companies whose stock prices are undervalued Neuberger Berman
and that may rise in price before other investors realize their worth. Factors that the Management
Sub-advisor may use to identify these companies include strong fundamentals, including a low Incorporated
price-to-earnings ratio, consistent cash flow, and a sound track record through all phases of
the market cycle.
MID-CAP EQUITY
(Cont.)
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INVESCO Variable Investment Funds - Dynamics: seeks securities that will increase in value
over the long term. The Portfolio invests in a variety of securities which are believed to
present opportunities for capital growth - primarily common stocks of companies traded on U.S.
securities exchanges, as well as over-the-counter. The Portfolio also may invest in preferred
stocks and debt instruments that are convertible into common stocks, as well as in securities INVESCO Funds Group,
of foreign companies. In general, the Portfolio invests in securities of companies in Inc.
industries that are growing globally and usually avoids stocks of companies in cyclical,
mature or slow-growing industries or economic sectors. The Portfolio seeks to invest in stocks
of leading companies in attractive markets or industries, or emerging leaders that have
developed a new competitive advantage.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
--------------------------------------------------------------------------------------------------------------------------------------------
Although investments in securities of smaller companies are generally considered to offer greater opportunity for appreciation, they also
involve greater risk of depreciation than securities of larger companies. Smaller companies may lack depth of management, financial
resources, or they may be developing or marketing products or services for which there is not an established market. Additionally,
smaller companies normally have fewer shares outstanding and trade less frequently than large companies. Therefore, the securities of
smaller companies may be subject to wider price fluctuations.
--------------------------------------------------------------------------------------------------------------------------------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Federated Aggressive Growth: seeks capital growth. The Portfolio pursues its investment
objective by investing in equity securities of companies offering superior prospects for
earnings growth. The Portfolio focuses its investments on the equity securities of smaller
companies, but it is not subject to any specific market capitalization requirements. The Federated Investment
Portfolio may invest in foreign issuers through American Depositary Receipts. The Portfolio's Counseling
strategies with respect to security analysis, market capitalization and sector allocation are
designed to produce a portfolio of stocks whose long-term growth prospects are significantly
above those of the S&P 500 Index.
SMALL CAP
EQUITY
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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 capitalization of $1.5 billion or less at the time of investment, many of which would Scudder Kemper
be in the early stages of their life cycle. The Portfolio seeks attractive areas for Investments, Inc.
investment that arise from factors such as technological advances, new marketing methods, and
changes in the economy and population.
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AST Lord Abbett Small Cap Value: seeks long-term capital appreciation. The Portfolio will
seek its objective through investments primarily in equity securities that are believed to be
undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized,
based on the value of their outstanding stock. Specifically, under normal circumstances, at
least 65% of the Portfolio's total assets will be invested in common stocks issued by smaller, Lord, Abbett & Co.
less well-known companies (with market capitalizations of less than $2 billion) selected on
the basis of fundamental investment analysis.
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AST Gabelli Small-Cap Value (f/k/a 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 companies ($1 billion or less in market GAMCO
capitalization). Reflecting a value approach to investing, the Portfolio will seek the stocks Investors, Inc.
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.
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
Evergreen VA Special Equity: seeks capital growth. The Portfolio strives to provide a return
greater than broad stock market indices such as the Russell 2000(R)Index by investing
SMALL CAP principally in a diversified portfolio of common stocks of domestic companies. The
EQUITY Portfolio's investment advisor principally chooses companies which it expects will experience Meridian Investment
(Cont.) growth in earnings and price, and which have small market capitalizations (under $1 billion) Company
and medium market capitalizations (between $1 billion and $5 billion). The Portfolio may also
invest in companies that have large market capitalizations (over $5 billion).
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AST MFS Global Equity: seeks capital growth. Under normal market conditions, the Portfolio
invests at least 65% of its total assets in common stocks and related securities, such as
preferred stock, convertible securities and depositary receipts, of U.S. and foreign issuers Massachusetts
(including issuers in developing countries). The Portfolio generally seeks to purchase Financial Services
securities of companies with relatively large market capitalizations relative to the market in Company
which they are traded.
GLOBAL EQUITY
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Evergreen VA Global Leaders: seeks to provide investors with long-term capital growth. The
Portfolio normally invests at least 65% of its assets in a diversified portfolio of U.S. and
non-U.S. equity securities of companies located in the world's major industrialized
countries. The Portfolio will invest in no less than three countries, which may include the Evergreen Asset
U.S., but may invest more than 25% of its total assets in one country. The Portfolio invests Management Corp.
only in the best 100 companies, which are selected by the investment advisor based on
qualitative and quantitative criteria such as high return on equity, consistent earnings
growth and established market presence.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
Investments in securities of foreign issuers may involve risks that are not present with domestic investments. Some of these risks may be
fluctuations in currency exchange rates, less liquid and more volatile securities markets, unstable political and economic structures,
reduced availability of public information and lack of uniform financial reporting and regulatory practices compared to those that apply
to U.S. issuers.
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
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 recognized foreign securities exchange or traded in a foreign A I M Capital
over-the-counter market. The Portfolio will normally invest in a diversified portfolio that Management, Inc.
includes companies from at least four countries outside the United States, emphasizing
countries of Western Europe and the Pacific Basin.
INTER-NATIONAL
EQUITY
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AST American Century International Growth: seeks capital growth. The Portfolio will seek to
achieve its investment objective by investing primarily in equity securities of foreign
companies that the Sub-advisor believes will increase in value over time. Under normal
conditions, the Portfolio will invest at least 65% of its assets in equity securities of American Century
issuers from at least three countries outside of the United States. The Sub-advisor uses a Investment
growth investment strategy it developed that looks for companies with earnings and revenue Management, Inc.
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 normally invests primarily in
equity securities issued by foreign companies that have market capitalizations or annual
revenues of $1 billion or less. These securities may represent companies in both established
and emerging economies throughout the world. At least 65% of the Portfolio's total assets Founders Asset
normally will be invested in foreign securities representing a minimum of three countries. Management LLC
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.
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PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
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------------------------------------------------------------------------------------------------ -----------------------
ProFund VP Europe 30: seeks daily investment results that correspond to the performance of
the ProFunds Europe Index. The ProFunds Europe Index ("PEI") is a combined measure of
European stock performance created by the investment advisor from the leading stock indexes of
Europe's three largest economies giving equal weight to each index each day. The PEI averages
the daily results of The Financial Times Stock Exchange 100, The Deutsche Aktienindex and the
CAC-40. The Portfolio principally invests in futures contracts on stock indexes and options ProFund Advisors LLC
on futures contracts and financial instruments such as equity caps, collars, floors and
options on securities and stock indexes of large capitalization, widely traded, European
stocks. The Portfolio invests in financial instruments with values that reflect the
performance of stocks of European companies.
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AST Scudder Japan: seeks long-term capital growth. The Portfolio pursues its investment
objective by investing at least 80% of net assets in Japanese securities (those issued by
Japan-based companies or their affiliates, or by any company that derives more than half of Scudder Kemper
its revenues from Japan). The Portfolio may invest in stocks of any size, including up to 30% Investments, Inc.
of its net assets in smaller companies that are traded over-the-counter. The Portfolio's
focus on a single country could give rise to increased risk, as the Portfolio's investments
will not be diversified among countries having varying characteristics and market performance.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
------------------- ------------------------------------------------------------------------------------------------ -----------------------
Montgomery Variable Series - Emerging Markets: seeks capital appreciation, which under normal
EMERGING MARKETS conditions it seeks by investing at least 65% of its total assets in equity securities of Montgomery Asset
companies in countries having emerging markets. Under normal conditions, investments are Management, LLC
maintained in at least six emerging market countries at all times and no more than 25% of
total assets are invested in any one emerging market country.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
--------------------------------------------------------------------------------------------------------------------------------------------
Sector funds generally diversify their investments across particular economic sectors or a single industry. However, because those
investments are limited to a comparatively narrow segment of the economy, the Portfolios are generally not as diversified as other
Portfolios. Sector funds tend to be more volatile than other types of funds. The value of fund shares may go up and down more rapidly
than other funds. Each sector of the economy may also have different regulatory or other risk factors that can cause greater fluctuations
in the share price. Please read the prospectus for the Portfolios for further details about the risks of the particular sector of the
economy.
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
AST Kinetics Internet: seeks long-term growth of capital. Under normal circumstances, the
Portfolio invests at least 65% of its total assets in common stocks, convertible securities,
warrants and other equity securities having the characteristics of common stocks, such as
American Depositary Receipts and International Depositary Receipts, of domestic and foreign
companies that are engaged in the Internet and Internet-related activities. Portfolio Kinetics Asset
securities will be selected by the Sub-advisor from companies that are engaged in the Management, Inc.
development of hardware, software and telecommunications solutions that enable the transaction
of business on the Internet by individuals and companies, as well as companies that offer
SECTOR products and services primarily via the Internet. The Portfolio seeks to invest in the equity
securities of companies whose research and development efforts may result in higher stock
values.
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------------------------------------------------------------------------------------------------ -----------------------
INVESCO Variable Investment Funds - Financial Services: seeks capital appreciation. The
Portfolio normally invests at least 80% of its assets in the equity securities of companies
involved in the financial services sector. This sector includes, among others, banks
(regional and money-centers), insurance companies (life, property and casualty, and INVESCO Funds Group,
multiline), and investment and miscellaneous industries (asset managers, brokerage firms, and Inc.
government-sponsored agencies). The investment advisor seeks companies which it believes can
grow their revenues and earnings regardless of the interest rate environment - although
securities prices of financial services companies generally are interest rate-sensitive.
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
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------------------- ------------------------------------------------------------------------------------------------ -----------------------
INVESCO Variable Investment Funds - Health Sciences: seeks capital appreciation. The
Portfolio invests at least 80% of its assets in the equity securities of companies that
develop, produce or distribute products or services related to health care. These industries
include, but are not limited to, medical equipment or supplies, pharmaceuticals, health care INVESCO Funds Group,
facilities, and applied research and development of new products or services. The investment Inc.
advisor attempts to blend well-established healthcare firms with faster-growing, more dynamic
health care companies, which have new products or are increasing their market share of
existing products.
SECTOR
(Cont.)
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INVESCO Variable Investment Funds - Technology: seeks capital appreciation. The Portfolio
normally invests at least 80% of its assets in the equity securities of companies engaged in
technology-related industries. These include, but are not limited to, communications, INVESCO Funds Group,
computers, video, electronics, oceanography, office and factory automation, and robotics. A Inc.
core portion of the Portfolio's holdings are invested in market-leading technology companies
which the investment advisor believes will maintain or improve their market share regardless
of overall conditions.
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INVESCO Variable Investment Funds - Telecommunications: seeks capital appreciation. The
Portfolio normally invests at least 80% of its assets in the equity securities of companies
that are primarily engaged in the design, development, manufacture, distribution, or sale of
communications services and equipment, and companies that are involved in developing, INVESCO Funds Group,
constructing, or operating communications infrastructure projects throughout the world, or in Inc.
supplying equipment or services to such companies. The telecommunications sector includes
companies that offer telephone services, wireless communications, satellite communications,
television and movie programming and broadcasting. Normally, the Portfolio will invest at
least 65% of its assets in companies located in at least three different countries, although
U.S. issuers will often dominate the holdings.
------------------- ------------------------------------------------------------------------------------------------ -----------------------
The First Trust(R)10 Uncommon Values Portfolio of the First Defined Portfolio Fund LLC invests in the securities of a relatively few number
of issuers. Since the assets of the 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. The Portfolio may also be subject to additional market
risk due to its policy of investing based on an investment strategy and generally not buying or selling securities in response to market
fluctuations. The Portfolio's relative lack of diversity and limited ongoing management may subject Owners to greater market risk than
other portfolios.
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First Trust(R)10 Uncommon Values: seeks to provide above-average capital appreciation. The
Portfolio pursues its objective by investing primarily in the ten common stocks selected by
the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the
assistance of the Research Department of Lehman Brothers which, in their opinion have the
STRATEGY greatest potential for capital appreciation during the next year. The stock selection date First Trust Advisors
for the Portfolio is on or about July 1st of each year. The holdings for the Portfolio will L.P.
be adjusted annually on or about July 1st in accordance with the selections of Lehman
Brothers. At that time, the percentage relationship among the shares of each issuer held by
the Portfolio is established. Through the next one-year period that percentage will be
maintained as closely as practicable when the Portfolio makes subsequent purchases and sales
of the securities.
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PORTFOLIO
STYLE/ INVESTMENT OBJECTIVES/POLICIES ADVISOR/
TYPE SUB-ADVISOR
------------------- ------------------------------------------------------------------------------------------------ -----------------------
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The ProFund VP UltraOTC and UltraSmall-Cap portfolios and the Nova, Ursa and OTC portfolios of the Rydex Variable Trust are available to
all Owners. It is recommended that only those Owners who engage a financial advisor to allocate their funds in strategic or tactical
asset allocation strategies invest in these portfolios. There can be no assurance that any financial advisor will successfully predict
market fluctuations.
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ProFund VP UltraOTC: seeks daily investment results that correspond to twice (200%) the
performance of the NASDAQ 100 Index(TM). The Portfolio principally invests in futures contracts
on stock indexes and options on futures contracts and financial instruments such as equity
caps, collars, floors and options on securities and stock indexes of large capitalization ProFund Advisors LLC
companies. If the Portfolio is successful in meeting its objective, it should gain
approximately twice as much as the growth oriented NASDAQ 100 Index(TM)when the prices of the
securities in that index rise on a given day and should lose approximately twice as much when
such prices decline on that day.
STRATEGIC OR
TACTICAL
ALLOCA-TION
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ProFund VP UltraSmall-Cap (f/k/a ProFund VP Small Cap): seeks daily investment results that
correspond to twice (200%) the performance of the Russell 2000(R)Index. The Portfolio
principally invests in futures contracts on stock indexes and options on futures contracts and ProFund Advisors LLC
financial instruments such as equity caps, collars, floors and options on securities and stock
indexes of diverse, widely traded, small capitalization companies. If the Portfolio is
successful in meeting its objective, it should gain approximately twice as much as the growth
oriented Russell 2000(R)Index when the prices of the securities in that index rise on a given
day and should lose approximately twice as much when such prices decline on that day.
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Rydex Variable Trust - Nova: seeks to provide investment returns that are 150% of the daily
price movement of the S&P 500 Composite Stock Price Index by investing to a significant extent
in futures contracts and options on securities, futures contracts and stock indexes. If the PADCO Advisors II,
Portfolio meets its objective the value of its shares will tend to increase by 150% of the Inc.
daily value of any increase in the S&P 500 Index. However, when the value of the S&P 500
Index declines, the value of its shares should also decrease by 150% of the daily value of any
decrease in the S&P 500 Index.
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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 Index
by investing to a significant extent in futures contracts and options on securities, futures
contracts and stock indexes. The Portfolio will generally not invest in the securities PADCO Advisors II,
included in the S&P 500 Index. If the Portfolio meets its objective the value of its shares Inc.
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.
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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 Index. The Portfolio may also
invest in other instruments whose performance is expected to correspond to that of the Index, PADCO Advisors II,
and may engage in futures and options transactions. If the Portfolio meets its objective the Inc.
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).
------------------- ------------------------------------------------------------------------------------------------ -----------------------
"Standard & Poor's(R)," " &P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and
have been licensed for use by American Skandia Investment Services, Incorporated. The Portfolio is not sponsored, endorsed, sold
or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the
Portfolio.
The First Trust(R)10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman
Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the
"10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First
Trust(R)10 Uncommon Values 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 movement of applicable interest rates payable on Strips of the appropriate duration. 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 9+
------------------ ----- ------ ----- ----- ----- ----- ----- ----- -----
------------------ ----- ------ ----- ----- ----- ----- ----- ----- -----
CHARGE (%) 8.5 8.5 8.5 8.5 7.0 6.0 5.0 4.0 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 eight (8) 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 from
an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Waivers and Minimum Distributions are each
explained more fully in the section entitled "Access to Your Account Value".
Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00
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.
Optional Death Benefits: If you elect to purchase either optional Death Benefit, we will deduct the annual 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. Under certain circumstances, we may deduct a pro-rata portion of the annual charge for the optional Death Benefit. Please
refer to the section entitled "Death Benefit" for a description of the charge for the optional Death Benefit.
Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge
$10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost
averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party
investment advisory service will be subject to the twenty-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 twenty free transfers. We may reduce the number of free
transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of
electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted
electronically or through other means that reduce our processing costs.
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. The Insurance Charge is intended to compensate American Skandia for providing the insurance
benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries
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. 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.
American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance
obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the
Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American
Skandia incurs in distributing, issuing and administering the Annuity.
The Insurance Charge is not deducted against assets allocated to a fixed investment option. However, the amount we credit to
Fixed Allocations may also reflect similar assumptions about the insurance guarantees provide to Contract Owners under the Annuity.
WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?
We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an
investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. More detailed
information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by
Underlying Funds".
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same
reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration
mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. 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, surrender or annuitization 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. The amount payable will
depend on the applicable jurisdiction and on the annuity payment option you select. There is no specific charge deducted from
each fixed annuity payment; however, the amount of each payment reflects assumptions about our insurance expenses. If you select
a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity
and will continue to be subject to an insurance charge.
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES
We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For
example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual
Maintenance Fee or reduce the portion of the Insurance Charge for administrative costs. Generally, these types of changes will be
based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing
the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number
of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d)
other transactions where sales, maintenance or administrative 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.
PURCHASING YOUR ANNUITY
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?
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.
Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply
certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features
or the Death Benefit protection provided under the Annuity, changing the number of transfers allowable under the Annuity or
restricting the Sub-accounts that are available to the Contract Owner. Other limitations and/or restrictions may apply.
Age Restrictions: The Owner must be age 80 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the
oldest of the Owners must be age 80 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age
80 or under as of the Issue Date. You should consider your need to access the value in your contract and whether the Annuity's
liquidity features will satisfy that need. If you take a distribution prior to age 591/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain.
Additional Purchase Payments may be made at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the
Annuity is entity owned) is not over age 80.
Special Considerations for Purchasers of Bonus or Credit Products
|X| This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not
charge an additional amount for the XTra CreditSM feature. However, if you make a withdrawal that exceeds the annual free
withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher
and is deducted for a longer period of time as compared to our other variable annuities. If you expect that you will need to
access your Account Value during the CDSC period and the liquidity provisions are insufficient to satisfy that need, then
this Annuity may be more expensive than other variable annuities.
|X| The XTra CreditSM amount is included in your Account Value. However, American Skandia may take back the original XTra
CreditSM amount applied to your Purchase Payment if you die, or elect to withdraw all or a portion of your Account Value
under the medically-related waiver provision, within 12 months of having received an XTra CreditSM amount. In either
situation, the value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra
CreditSM amount will not be taken back. Additional conditions and restrictions apply.
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
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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
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payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during
the accumulation period. 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. Please refer to the discussion of "Considerations for
Contingent Annuitants" in the Tax Considerations section of the Prospectus.
|X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. If no beneficiary is
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named the death benefit will be paid to you or your estate.
Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment
that is given beneficial tax treatment under the Code. 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;
|X| for "non-qualified" investments, 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 co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an
alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal
Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death
Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any
required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the
rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of
determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase
Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the
assumption is effective will be subject to all provisions of the Annuity.
Spousal Contingent Annuitant
If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant,
the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the
Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal
relationship) will reflect the amount that would have been payable had a Death Benefit been paid.
MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?
(The right to return the Annuity is often 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 right to cancel period. Depending on the state in which you purchased your Annuity and, in some states,
whether you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days,
twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the
applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower
than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your
initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any
situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account
Value to the AST Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to
allow for delivery of your Annuity. If you exercise your right to cancel your Annuity, we will retain any XTra Credit amount or
Target Value Credits that we applied to 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. We will allocate any additional Purchase Payments you make
according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment.
Additional Purchase Payments may be made at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the
Annuity is entity owned) is not over age 80.
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
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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 when applied. 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 qualified investments. 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 exercise your right to
return the 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 right to cancel 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 right to cancel 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 current allocation
instructions. If any rebalancing or asset allocation programs are in effect, the allocation should 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.
HOW DO I RECEIVE CREDITS?
We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment. The amount of the Credit is payable
from our general account. The amount of the Credit depends on the cumulative amount of Purchase Payments you have made to your
Annuity, payable as a percentage of each specific Purchase Payment, according to the table below:
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Cumulative Purchase Payments Credit
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Between $1,000 and $9,999 1.5%
Between $10,000 and $4,999,999 4.0%
Greater than $5,000,000 5.0%
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Credits Applied to Purchase Payments for Designated Class of Annuity Owner
Where allowed by state law, on Annuities owned by a member of the class defined below, the table of Credits we apply to Purchase
Payments is deleted. The Credit applied to all Purchase Payments on such Annuities will be 8.5%.
The designated class of Annuity Owners includes: (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) the
child(ren) or other legal dependent under the age of 21 of any such person noted in (b) through (h); and (j) the siblings of any
such persons noted in (b) through (h) above.
All other terms and conditions of the Annuity apply to Owners in the designated class. Any Target Value Credits applied under the
Performance Advantage benefit are not affected by an Owner's inclusion in the designated class of Annuity Owners.
You must notify us at the time you apply for an Annuity if you are a member of the designated class. American Skandia is not
responsible for monitoring whether you qualify as a member of the designated class. Failure to inform us that you qualify as a
member of the designated class may result in your Annuity receiving lower Credits than would otherwise be applied to your Annuity.
HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE?
Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of
the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied.
Examples of Applying Credits
Initial Purchase Payment
Assume you make an initial Purchase Payment of $2,500. We would apply a 1.5% Credit to your Purchase Payment and allocate the
amount of the Credit ($375 = $2,500 X .015) to your Account Value in the proportion that your Account Value is allocated.
Additional Purchase Payment (at same breakpoint)
Assume that you make an additional Purchase Payment of $5,000. Because your cumulative Purchase Payments are less than the next
breakpoint ($10,000), we would apply a 1.5% Credit to your Purchase Payment and allocate the amount of the Credit ($750 = $5,000 X
.015) to your Account Value.
Additional Purchase Payment (at higher breakpoint)
Assume that you make an additional Purchase Payment of $50,000. Because your cumulative Purchase Payments are now $50,500
(greater than the next breakpoint), we would apply a 4.0% Credit to your Purchase Payment and allocate the amount of the Credit
($2,000 = $50,000 X .04) to your Account Value.
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This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an
additional amount for the XTra CreditSM feature. However, the amount of any Credits applied to your Account Value can be
recovered by American Skandia under certain circumstances:
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|X| any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be
recovered.
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|X| the amount available under the medically-related surrender portion of the Annuity will not include the amount of any
Credits payable on Purchase Payments made within 12 months of the date the Annuitant first became eligible for the
medically-related surrender.
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|X| if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits.
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The value of the XTra CreditSM amount will be substantially reduced if American Skandia recovers the XTra CreditSM amount under
these circumstances. However, any investment gain on the XTra CreditSM amount will not be taken back.
Examples of Recovering Credits
The following are hypothetical examples of how Credits could be recovered by American Skandia. These examples do not cover every
potential situation.
Recovery from payment of Death Benefits
1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000
in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If the
Death Benefit becomes payable in the 9th month after the Issue Date, the amount of the Death Benefit would be reduced by the
entire amount of the prior Credits ($2,400).
2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000
in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If death
occurs in the 16th month after the Issue Date, the amount of the Death Benefit would be reduced but only in the amount of
those Credits applied within the previous 12-months. Since the initial Purchase Payment (and the Credits that were applied)
occurred more than 12-months before the date of death, the Death Benefit would not be reduced by the amount of the Credits
applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the
date of death. Therefore, the amount of the Death Benefit would be reduced by the amount of the Credits payable on the
additional Purchase Payment ($400).
3. NOTE: If the Death Benefit would otherwise have been equal to your Purchase Payments minus any proportional withdrawals
because this amount exceeded your current Account Value, we will not reduce the amount of the Death Benefit by the amount of
the Credits as shown in Example 2 above.
Recovery from Medically-Related Surrenders
1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You receive a Credit of $2,000 ($50,000 X
.04). The Annuitant is diagnosed as terminally ill in the 6th month after the Issue Date and we grant your request to
surrender your Annuity under the medically-related surrender provision. Assuming the Credits were applied within 12-months of
the date of diagnosis of the terminal illness, the amount that would be payable under the medically-related surrender
provision would be reduced by the entire amount of the Credits ($2,000).
2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000
in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. The
Annuitant is diagnosed as terminally ill in the 16th month after the Issue Date and we grant your request to surrender your
Annuity under the medically-related surrender provision. Since the initial Purchase Payment (and the Credits that were
applied) occurred more than 12-months before the diagnosis, the amount that would be payable upon the medically-related
surrender provision would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the
$10,000 additional Purchase Payment was made within 12-months of the date of diagnosis. Therefore, the amount of the Death
Benefit would be reduced by the amount of the Credits payable on the additional Purchase Payment ($400).
Credits applied to estimated Purchase Payments
Under certain circumstances, we may determine the amount of Credits payable on two or more separate Purchase Payments based on the
Credit percentage that would have applied had all such Purchase Payments been made at the same time. To make use of this
procedure, often referred to as a "letter of intent", you must provide evidence of your intention to submit the cumulative
additional Purchase Payments within a 13-month period. A letter of intent must be provided to us prior to the Issue Date to be
effective. Acceptance of a letter of intent is at our sole discretion and may be subject to restrictions as to the minimum
initial Purchase Payment that must be submitted to receive the next higher breakpoint. Failure to inform us that you intend to
submit two or more Purchase Payments within a 13-month period may result in your Annuity receiving fewer Credits than would
otherwise be added to your Annuity.
If you submit a letter of intent and receive Credits on Purchase Payments at a higher Credit percentage than would have applied
BUT do not submit the required Purchase Payments during the 13-month period as required by your letter of intent, we may recover
the "excess" Credits. "Excess" Credits are Credits in excess of the Credits that would have been payable without the letter of
intent. If we determine that you have received "excess" Credits, any such amounts will be taken pro-rata from the investment
options based on your Account Values as of the date we act to recover the excess. If the amount of the recovery exceeds your then
current Surrender Value, we will recover all remaining Account Value and terminate your Annuity.
General Information about Credits
|X| We do not consider Credits to be "investment in the contract" for income tax purposes.
|X| You may not withdraw the amount of any Credits under the Free Withdrawal provision without assessment of the contingent
deferred sales charge (see "Can I make withdrawal from my Annuity without a CDSC?").
|X| These Credits are separate and distinct from the Target Value Credits discussed below in the section entitled "American
Skandia's Performance Advantage."
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 on
any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). 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 may impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment
restrictions. Currently, any financial transactions involving the Rydex or ProFund VP Sub-accounts must be received by us no
later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be
processed on the current Valuation Day. We may extend the "cut-off" time for financial transactions involving a Rydex or ProFund
VP Sub-account to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted
electronically through American Skandia's Internet website (www.americanskandia.com).
Currently, we charge $10.00 for each transfer after the twentieth (20th) 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 twenty 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 may reduce the number of free transfers
allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic
means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or
through other means that reduce our processing costs.
We reserve the right to limit the number of transfers in any Annuity Year for all existing or new Owners. We also reserve the
right to limit the number of transfers in any Annuity Year or to refuse any transfer request for an Owner or certain Owners if:
(a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect
on 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.
NOTE: If you elect to Dollar Cost Average from a Fixed Allocation, the fixed rate of interest we credit to your Account Value
will be applied to a declining amount due to the transfers of Account Value to the variable investment options during the
Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period.
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 number of 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 6.05%*. 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 0.555768. That means that
$55,557 will be allocated to the Fixed Allocation and the remaining Account Value ($44,443) 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 Credits or Target Value Credits that may apply.
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 while you are living, 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 impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment
restrictions. As of the date of this prospectus, we have established a different "cut-off time" by which we must receive all
financial transactions for the portfolios of Rydex Variable Trust and ProFund VP. Financial transactions involving a Rydex or
ProFund VP Sub-account must be received by us no later than one hour prior to any announced closing time of the applicable
securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for
financial transactions involving a Rydex or ProFund VP Sub-account will be extended to1/2 hour prior to any announced closing
(generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website
(www.americanskandia.com). If you request a transaction involving the purchase or redemption of Units in one of the Rydex or ProFund
VP Sub-accounts after the applicable "cut-off" time, we will deem your request as received by us on the next Valuation Day. You may
be required to submit a new request on the following day.
We or an affiliate of ours may provide administrative support to licensed, registered financial professionals or investment
advisors who make transfers on your behalf including electronic trading functionality through our Internet website
(www.americanskandia.com). These financial professionals 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 professionals 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 professionals 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 for certain durations.)
We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed
Allocations currently are offered with Guarantee Periods of 1, 2, 3, 5, 7 and 10 years. We may make Fixed Allocations of
different durations available in the future. 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. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the
change. 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 you "renew" a Fixed Allocation by electing a new Guarantee Period.
To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who
choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners
who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced
investment program (see "Do You Offer a Program to Balance Fixed and Variable Investments?"). The interest rate credited to Fixed
Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same
Guarantee Period but who do not participate in an optional investment program. 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. Some of these considerations are similar to those we consider in determining the Insurance Charge that we
deduct from Account Value allocated to the Sub-accounts.
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.
The interest rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional
Information.
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?
For purposes of this provision:
|X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are
separated from ownership of the underlying principal amount or corpus.
|X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities.
|X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options
on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year
Investment Grade Corporate Bond Index of Option-adjusted Spreads.
If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days 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 amount of any Market
Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an
Option-adjusted Spread between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal.
The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the
date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the
MVA is being calculated.
MVA Formula
The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a
particular date. The formula is as follows:
[(1+I) / (1+J+0.0010)]N/365
where:
I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at
the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no
Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing
at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no
Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
N is the number of days remaining in the original Guarantee Period.
If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365.
MVA Examples
The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following:
|X| On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity
Date is December 31, 2005).
|X| The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the
Option-adjusted Spread is 5.50% (I = 5.50%).
|X| You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3)
years, therefore 730 days remain before the Maturity Date (N = 730).
Example of Positive MVA
Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the
Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $59,448.56
Example of Negative MVA
Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the
Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $56,164.78.
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before 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. 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.
We will notify you 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.
If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account
Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the
Sub-accounts or to a new Fixed Allocation.
AMERICAN SKANDIA'S PERFORMANCE ADVANTAGE
Do you provide any guarantees on my investment?
The Annuity offers 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:
1. 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.
OR
2. 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. Target Value Credits are separate and distinct from other Credits we apply to all
Purchase Payments.
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.
====================================================================================================================================
The amount of any Target Value Credit can be recovered by American Skandia 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:
|X| within 12 months after the date a Target Value Credit was allocated to your Account Value; or
|X| 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. If you surrender your Annuity, in addition to any CDSC, we may deduct
the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. 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 unless the distribution qualifies as a non-taxable exchange or transfer. 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 of 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.
|X| You can withdraw a limited amount of your Account Value to meet liquidity needs during each of Annuity Year 1-8 without a
CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you
choose to surrender your Annuity. The minimum Free Withdrawal you may request is $100.
|X| You can also make withdrawals in excess of the Free Withdrawal amount. We call this a "Partial Withdrawal." The amount
that you may withdraw will depend on the Annuity's Surrender Value. The Surrender Value is equal to your Account Value
minus any CDSC, the Annual Maintenance Fee, the Tax Charge, any charges for optional benefits and any Market Value
Adjustment that may apply to any Fixed Allocations. 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.
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 Withdrawals or Systematic Withdrawals
of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC.
Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options.
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?
Annuity Year 1-8
The maximum Free Withdrawal amount during each of Annuity Year 1 through Annuity Year 8 (when a CDSC would otherwise apply to a
partial withdrawal or surrender of your initial Purchase Payment) is 10% of all Purchase Payments. The 10% Free Withdrawal amount
is not cumulative. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free
Withdrawal amount to the next Annuity Year.
Annuity Year 9+
After Annuity Year 8, the maximum Free Withdrawal amount is the sum of:
|X| 10% of any Purchase Payments applied to your Annuity after the Issue Date to which a CDSC would apply upon a partial
withdrawal or surrender.
|X| 100% of your initial Purchase Payment.
|X| 100% of any "growth" in the Annuity.
"Growth" equals the current Account Value minus all Purchase Payments that have not previously been withdrawn. For purposes of
this provision, any XTra Credit amount or Target Value Credits we applied to your Purchase Payments are not considered "growth"
and are not available as a Free Withdrawal.
NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the
first eight (8) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity.
Examples
1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free
Withdrawal amount during each of the first eight Annuity Years would be 10% of $10,000, or $1,000.
2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $15,000 in Annuity Year
2. The maximum Free Withdrawal amount during Annuity Year 3 through 8 would be 10% of $25,000, or $2,500. In Annuity Year 9,
the maximum Free Withdrawal amount would be 10% of the $15,000 Purchase Payment applied in Annuity Year 2 ($1,500) plus 100%
of the initial Purchase Payment ($10,000) and any "growth" under the Annuity.
IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?
A CDSC may be assessed against a Partial Withdrawal during the accumulation phase. 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 number of years that have
elapsed since the Purchase Payment being withdrawn has been invested in the Annuity.
1. If you request a Partial Withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which
case it would not be subject to a CDSC);
2. If the amount requested exceeds the available Free Withdrawal amount:
|X| First, we withdraw the amount from Purchase Payments that have been invested for longer than the CDSC period, if any
(with your Annuity, 8 years)
|X| Second, we withdraw the remaining amount from Purchase Payments that are still subject to a CDSC. We withdraw the
"oldest" of your Purchase Payments first so that the lowest CDSC will apply to the amount being withdrawn.
Any CDSC will only apply to the amount withdrawn that exceeds the Free Withdrawal amount.
3. If the amount requested exceeds the amounts available under Item #2 above, we withdraw the remaining amount from any
other Account Value.
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 1/2if 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.
You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means
of receiving income payments before age 59 1/2that are not subject to the 10% penalty.
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.
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.
You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means
of receiving income payments and satisfying the Minimum Distribution requirements under the Code.
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: (a) the amount of any
Credits applied within 12 months of the applicable "Contingency Event" as defined below; (b) the amount of any Credits added in
conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (i.e. Purchase
Payments received at such time pursuant to a salary reduction program; and (c) 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 named or any change of Annuitant must be accepted by us, prior to the "Contingency Event" described
below;
|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.
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.
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 OPTIONS ARE AVAILABLE UPON ANNUITIZATION?
We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed
options provide the same amount with each payment. Variable options provide a payment which may increase or decrease depending on
the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee
feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not
guarantee to make variable or adjustable annuity payment options available in the future. 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.
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. A maximum Annuity Date may be required by law.
Any change to these options must be in writing. The Annuity Date may depend on the annuity option you choose. Certain annuity
options may not be available depending on the age of the Annuitant.
Option 1
Payments for Life or Joint Lives: Under this option, income is payable periodically until the death of the "key life". The "key
life" (as used in this section) is the person or persons upon whose life annuity payments are based. 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. This Option is currently available on a fixed or variable basis.
Option 2
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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. This Option
is currently available on a fixed or variable basis.
Option 3
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Payments for Life with 5, 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. This Option is currently available on a fixed or variable basis.
Option 4
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Fixed 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.
Option 5
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Variable Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. The
number of years cannot be less than 5 or more than 50. Payments may increase or decrease depending on the investment performance
of the Sub-Accounts. 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.
Option 6
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Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key
life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash
value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile
investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment
each month, and positive investment performance does not automatically result in an increase in the annuity payment each month.
Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments.
Option 7
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Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 6;
except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal
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to the first annuity payment. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary
in a lump sum or as periodic payments. We charge an additional amount for this guarantee.
We may make additional annuity payment options available in the future.
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. Certain annuity payment options may not be available if your
Annuity Date occurs during the period that a CDSC would apply.
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 calculated on a fixed basis under Option 2, Payments for Life with 10
years certain.
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 fixed annuity payment options or any option we make available for death proceeds. 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. Generally, the first
annuity 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. 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 a2000 Individual Annuity Mortality Table 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."
The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct from Account Value allocated
to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the
Annuity. The Annuity also offers two different optional Death Benefits that can be purchased for an additional charge. The
additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death
Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the
impact of reducing the net performance of the investment options. Under certain circumstances, your Death Benefit may be reduced
by the amount of any Credits or Target Value Credits we applied to your Purchase Payments. (see "How are Credits Applied to My
Account Value" and "Recovery of Target Value Credits")
The basic Death Benefit is the greater of:
|X| The sum of all Purchase Payments less the sum of all proportional withdrawals.
|X| The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations.
For purposes of the basic and optional Death Benefits, "proportional withdrawals" are determined by calculating the percentage of
the Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would
be considered as a 50% reduction in Purchase Payments. The basic Death Benefit may be reduced by any Credits or Target Value
Credits under certain circumstances.
OPTIONAL DEATH BENEFITS
You can purchase either of two optional Death Benefits with your Annuity to provide an enhanced level of protection for your
beneficiaries. We do not currently offer the Annuity with both optional Death Benefits.
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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 and any changes or
restrictions in the benefits. 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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Percentage of Gain Death Benefit
The Percentage of Gain Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and
state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you
may depend on your particular circumstances, including other financial resources that your Beneficiary may have available to pay
taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the
Annuity Date.
The Percentage of Gain Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity
has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest
Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less.
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The Percentage of Gain Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain
terms and conditions may differ between jurisdictions once approved. The benefit is currently only offered to Owners who purchase
the Annuity as a "non-qualified" investment. We may make the benefit available to Owners who purchase the Annuity as an IRA or
other "qualified" investment at a later date. Please refer to the section entitled "Tax Considerations" for a discussion of
special tax considerations for purchasers of this benefit.
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Calculation of Percentage of Gain Death Benefit
If you purchase the Percentage of Gain Death Benefit, the Death Benefit is calculated as follows:
1. the basic Death Benefit described above
PLUS
2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals.
Death Benefit Amount includes your Account Value and any amounts added to your Account Value under the basic Death Benefit when
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the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is
less than Purchase Payments minus proportional withdrawals. The Percentage of Gain Death Benefit may be reduced by any Credits or
Target Value Credits under certain circumstances.
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The Percentage of Gain Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12
months prior to the death of the decedent that triggers the payment of the Death Benefit.
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See Appendix C for examples of how the Percentage of Gain Death Benefit is calculated.
Guaranteed Minimum Death Benefit
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 Guaranteed Minimum Death Benefit
|X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest
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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
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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
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on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary.
Calculation of Guaranteed Minimum Death Benefit
The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date.
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 a rate of 5.0%, 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.
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 Guaranteed Minimum Death Benefit may be reduced by any Credits or 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 and continue the contract instead of receiving the Death Benefit.
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).
Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances?
You can terminate the Percentage of Gain Death Benefit at any time. Upon termination, you will be required to pay a pro-rata
portion of the annual charge for the benefit. The Guaranteed Minimum Death Benefit cannot be terminated once it is elected. Both
optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate the optional Death Benefit if
necessary to comply with our interpretation of the Code and applicable regulations.
How much do you charge for the optional Death Benefit?
We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. 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 (Percentage of Gain Death Benefit only)
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 will 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.
Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit.
PAYMENT OF DEATH BENEFITS
Spousal Beneficiary - Assumption of Annuity
You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary
Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative
Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit
payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become
the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the
date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the
Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving
spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value.
However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of
the Annuity.
See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal
Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity.
Payment of Death Benefit to Beneficiary
Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed:
|X| as a lump sum amount at any time within five (5) years of the date of death; or
|X| 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. You can elect to receive payments as a series of
fixed annuity payments or under a variable option, as described below.
Payment under a Variable Option
A Beneficiary may elect to receive the Death Benefit proceeds as a series of payments over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Two payout options currently are available:
|X| benefits may increase or decrease depending on the investment performance of the Sub-Accounts. This option provides for
a "cushion" from volatile investment performance so that negative investment performance does not automatically result in
a decrease in the settlement payment each month, and positive investment performance does not automatically result in an
increase in the settlement payment each month.
|X| Income is payable as described above; except, that the settlement payment, while the key life is alive, will not be
less than a guaranteed amount, which is generally equal to the first settlement payment. We charge an additional amount
for this guarantee.
Inherited IRA Death Benefit Payout
The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified
investment" that requires Minimum Distributions. The available payment options will depend on whether the Owner died on or before
the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the
surviving spouse.
|X| If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in
either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated
Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse
is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments
beginning no earlier than December 31 of the year following the year of death or December 31st of the year in which the
deceased would have reached age 70 1/2, which ever is later.
|X| If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at
least as rapidly as under the method then in effect.
A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn,
amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including
amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a
professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From
Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2."
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.
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. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit
to the AST Money Market Sub-Account until we further determine the universe of eligible Beneficiaries. Once the universe of
eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit
to the Sub-Accounts according to our rules.
We may require written acknowledgment of all named Beneficiaries before we can pay 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 more than 30 days prior to 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, the charge for any optional Death Benefit 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 or within 30
days prior to 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 and ProFund VP Sub-accounts: Any financial transactions involving the Rydex or ProFund VP Sub-accounts must
be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00
p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for financial transactions involving a Rydex
or ProFund VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for
transactions submitted electronically through American Skandia's Internet website (americanskandia.com). However, the Internet
functionality is currently available only to Contract Owners who have authorized their financial representatives to make financial
transactions on their behalf. If you request a transaction involving the purchase or redemption of Units in one of the Rydex or
ProFund VP Sub-accounts after the applicable "cut-off" time, we will deem your request as received by us on the next Valuation
Day. You may be required to submit a new request on the following day.
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, endowment, 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 by the beneficiary 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 591/2;
|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)" or "72(q)" 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 1/2or five (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 annuity
starting date 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.
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 amount of any "investment in the contract" made after August 13, 1982.
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.
On November 22, 1999, the Internal Revenue Service issued an acquiescence in the decision of the United States Tax Court in Conway
v. Commissioner (111 T.C. 350 (1998)) that a taxpayer's partial surrender of a non-qualified annuity contract and direct transfer
of the resulting proceeds for the purchase of a new non-qualified annuity contract qualifies as a non-taxable exchange under
Section 1035 of the Internal Revenue Code. "Acquiescence" means that the IRS accepts the holding of the Court in a case and that
the IRS will follow it in disposing of cases with the same controlling facts. Prior to the Conway decision, industry practice has
been to treat a partial surrender of account value as fully taxable to the extent of any gain in the contract for tax reporting
purposes and to "step-up" the basis in the contract accordingly. However with the IRS' acquiescence in the Conway decision,
partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current
taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS reserved the right
to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations
after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a
non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a
reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance
companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the
extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution
penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the
transaction.
While the principles expressed in the Conway decision appear applicable to partial exchanges from life insurance, there is no
guidance from the Internal Revenue Service as to whether it concurs with non-recognition treatment under Section 1035 of the Code
for such transactions. We will continue to report a partial surrender of a life insurance policy as subject to current taxation
to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such
a transaction for the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance
under the Code for both the definition of life insurance and the definition of a modified endowment contract.
Special Considerations for Purchasers of the Percentage of Gain Death Benefit: As of the date of this Prospectus, it is our
understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report
them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to
current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for
the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected
to report them as such.
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 Section 401(a) of the Code including 401(k) plans. 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;
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|X| Upon separation from service, death or disability; or
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|X| In the case of financial hardship (subject to restrictions).
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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 established with "roll-over" distributions from certain tax-qualified
retirement plans and maintain the tax-deferred status of these amounts.
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
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(a) once the taxpayer is age 59 1/2or 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 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*;
|X| is made to an alternate payee pursuant to a qualified domestic relations order*; and
|X| is made pursuant to an IRS levy.
The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available.
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 or 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 or pursuant to an annuity payout. If the account balance is used, it
generally is based upon the Account Value as of the close of business on the last day of the previous calendar year.
If the participant dies before reaching his or her "required beginning date", his or her entire interest must generally be
distributed within five (5) 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 701/2. 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, Inc.,
formerly known as American Skandia Investment Holding Corporation, whose ultimate parent is Skandia Insurance Company Ltd., a
Swedish company. American Skandia markets its products to broker-dealers and financial planners through an internal field
marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that
are permitted directly, or through affiliates, to sell annuities.
American Skandia is in the business of issuing variable annuity and variable life insurance contracts. American Skandia currently
offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are
registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) certain group
variable annuities that are exempt from registration with the SEC that serve as funding vehicles for various types of qualified
pension and profit sharing plans; (d) a single premium variable life insurance policy that is registered with the SEC; 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.
American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its
investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of
the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder
approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized
in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI
and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders
following these types of changes.
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.
Fees Payable by Underlying Funds
American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the
underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the
Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under
the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the
arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts.
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and
principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and
life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail
mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in
connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying
investment options under the Annuity.
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. No compensation is payable on Annuities purchased by a
member of the designated class of Owners (see "Credits Applied to Purchase Payments for Designated Class of Annuity Owner").
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, including how we account for
Credits in these performance measures. This information may help you review the performance of the investment options and provide
a basis for comparison with other annuities. This information's usefulness may be limited because of the Credits, since, as of
the date of this Prospectus, we were not aware of many annuities with variable and/or market value adjusted fixed investment
options that included this type of feature. This information also 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 but it does not take into consideration any Credits. "Non-standard Total Return" figures
may also be used that do not reflect all fees and charges and may assume Credits of 1.5%, 4.0% or 5.0%, respectively, depending on
the cumulative amount of Purchase Payments being illustrated. The amount of credits illustrated may be more or less than the Credits
applicable to your Annuity (see "What are Credits and how do I Receive Them?"). 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. Standard and Non-Standard Total
returns will not reflect charges that apply to either Optional Death Benefit. 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 NASDAQ 100, the Shearson Lehman
Bond Index, the Frank Russell non-U.S. Universal Mean, the Morgan Stanley Capital International Index of Europe, Asia and Far East
Funds, and the Morgan Stanley Capital International World Index; and/or (b) other management investment companies with investment
objectives similar to the mutual fund or portfolio underlying the Sub-accounts being compared. This may include the performance
ranking assigned by various publications, including but not limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's,
Business Week, USA Today and statistical services, including but not limited to Lipper Analytical Services Mutual Funds Survey,
Lipper Annuity and Closed End Survey, the Variable Annuity Research Data Survey, SEI, the Morningstar Mutual Fund Sourcebook and the
Morningstar Variable Annuity/Life Sourcebook.
American Skandia Life Assurance Corporation may advertise its rankings and/or ratings by independent financial ratings services.
Such rankings may help you in evaluating our ability to meet our obligations in relation to 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, 1999 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 Customer Service Team at 1-800-752-6342 or our automated telephone access and response system (STARS) at
1-800-766-4530
|X| writing to us at American Skandia Life Assurance Corporation, Attention: Customer Service, P.O. Box 7038, Bridgeport,
Connecticut 06601-7038
|X| sending an email to [email protected] or visiting our Internet Website at www.americanskandia.com
|X| accessing information about your Annuity through our Internet Website at www.americanskandia.com
You can obtain account information through our automated telephone access and response system (STARS) and at
www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to
provide you with information about your account. You can request certain transactions through our telephone voice response
system, our Internet Website or through a customer service representative. You can provide authorization for a third party,
including your attorney-in-fact acting pursuant to a power of attorney or a financial professional, to access your account
information and perform certain transactions on your account. You will need to complete a form provided by us which identifies
those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party
to perform any such transactions. We require that you or your representative provide proper identification before performing
transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that
will be provided to you upon issue of your Annuity or you may establish or change your PIN through our automated telephone access
and response system (STARS) and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform
financial transactions on your account will be assigned a PIN for your account.
Transactions requested via telephone are recorded. 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.
American Skandia does not guarantee access to telephonic and electronic information or that we will be able to accept transaction
instructions via the telephone or electronic means at all times. American Skandia reserves the right to limit, restrict or
terminate telephonic and electronic transaction privileges at any time.
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.
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.
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
--- -------------------------- --------------------
Patricia J. Abram Senior Vice President Senior Vice President:
48 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Ms. Abram joined us in 1998. She previously held the position of Senior Vice President, Chief Marketing Officer with Mutual
Service Corporation. Ms. Abram was employed there since 1982.
Lori Allen Vice President Vice President:
30 American Skandia
Marketing, Incorporated
Kimberly Anderson Vice President Vice President:
American Skandia
Marketing, Incorporated
Robert M. Arena Vice President Vice President:
31 American Skandia Life
Assurance Corporation
Mr. Arena joined us in 1995. He previously held an internship position with KPMG Peat Marwick in 1994 and the position of Group
Sales Representative with Paul Revere Insurance from October, 1990 to August, 1993.
Gordon C. Boronow Deputy Chief Executive Officer Deputy Chief Executive Officer:
47 Director (since July, 1991) American Skandia Life
Assurance Corporation
Robert W. Brinkman Senior Vice President Senior Vice President:
35 American Skandia
Marketing, Incorporated
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
44 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Carl Cavaliere Vice President Vice President:
37 American Skandia Life
Assurance Corporation
Mr. Cavaliere joined us in 1998. He previously held the position of Director of Operations with Aetna, Inc. since 1989.
Y.K. Chan Senior Vice President Senior Vice President
42 and Director (since September, 2000) and Chief Information Officer:
American Skandia Information
Services and Technology Corporation
Mr. Chan joined us in 1999. He previously held the position of Chief Information Officer with E.M. Warburg Pincus from January
1995 until April 1999 and the position of Vice President, Client Server Application Development with Scudder, Stevens and Clark
from January 1991 until January 1995.
Lucinda C. Ciccarello Vice President Vice President:
41 American Skandia
Marketing, Incorporated
Ms. Ciccarello joined us in 1997. She previously held the position of Assistant Vice President with Phoenix Duff & Phelps since
1984.
Lincoln R. Collins Senior Vice President Senior Vice President:
39 Director (since February, 1996) American Skandia Life
Assurance Corporation
Tim Cronin Vice President Vice President:
34 American Skandia Life
Assurance Corporation
Mr. Cronin joined us in 1998. He previously held the position of Manager/Client Investor with Columbia Circle Investors since
1995.
Harold Darak Vice President Vice President:
39 American Skandia Life
Assurance Corporation
Mr. Darak joined us in 1999. He previously held the position of Consultant/Senior Manager with Deloitte & Touche since 1998 and
the positions of Second Vice President with The Guardian since 1996 and The Travelers from October, 1982 until December, 1995.
Wade A. Dokken President and Chief Executive Officer President and
40 Director (since July, 1991) Chief Executive Officer
American Skandia, Inc.
Elaine C. Forsyth Vice President Vice President:
38 American Skandia Life
Assurance Corporation
Larisa Gromyko Director, Insurance Compliance Director, Insurance Compliance:
53 American Skandia Life
Assurance Corporation
Maureen Gulick Director, Business Operations Director, Business Operations:
37 American Skandia Life
Assurance Corporation
Berthann Jones Vice President Vice President:
45 American Skandia Life
Assurance Corporation
Ms. Jones joined us in 1997. She previously held the position of Vice President/Trust Officer with Ridgefield Bank since 1996 and
Manager with Wright Investors Service since 1993.
Ian Kennedy Senior Vice President Senior Vice President:
52 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Mr. Ian Kennedy joined us in 1998. He previously was self-employed since 1996 and held the position of Vice President, Customer
Service with SunLife of Canada from September, 1968 to August, 1995.
N. David Kuperstock Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Robert K. Leach Vice President Vice President,
45 Chief Actuary:
American Skandia Life
Assurance Corporation
Mr. Robert K. Leach joined us in 2000. He previously was employed in the U.S. Retirement Products and Services Division of Sun
Life of Canada and held the position of vice President, Finance and Product.
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
47 Chief Financial Officer, Chief Financial Officer:
Director (since September, 1994) American Skandia Life
Assurance Corporation
Gunnar J. Moberg Director (since October, 1994) Director - Marketing and Sales,
45 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Senior Vice President, Senior Vice President,
38 Treasurer and Treasurer and
Corporate Controller Corporate Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant Vice President at Allmerica Financial since 1994.
Michael A. Murray Senior Vice President Senior Vice President:
31 American Skandia
Marketing, Incorporated
Polly Rae Vice President Vice President:
37 American Skandia Life
Assurance Corporation
Rebecca Ray Vice President Senior Vice President:
44 American Skandia
Marketing, Incorporated
Ms. Ray joined us in 1999. She previously held the position of First Vice President with Prudential Securities since 1997 and
Vice President with Merrill Lynch since 1995.
Rodney D. Runestad Vice President Vice President:
50 American Skandia Life
Assurance Corporation
Hayward L. Sawyer Senior Vice President Senior Vice President:
55 American Skandia
Marketing, Incorporated
Lisa Shambelan Vice President Vice President:
34 American Skandia Life
Assurance Corporation
Karen Stockla Vice President Vice President:
33 American Skandia Life
Assurance Corporation
Ms. Stockla joined us in 1998. She previously held the position of Manager, Application Development with Citizens Utilities
Company since 1996 and HRIS Tech Support Representative with Yale New Haven Hospital since 1993.
William H. Strong Vice President Vice President:
56 American Skandia Life
Assurance Corporation
Mr. Strong joined us in 1997. He previously held the position of Vice President with American Financial Systems from June 1994 to
October 1997 and the position of Actuary with Connecticut Mutual Life from June 1965 to June 1994.
Leslie S. Sutherland Vice President Vice President:
46 American Skandia
Marketing, Incorporated
Amanda C. Sutyak Vice President Vice President:
42 American Skandia Life
Assurance Corporation
Christian W. Thwaites Senior Vice President Senior Vice President:
42 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Mr. Thwaites joined us in 1996. He previously held the position of consultant with Monitor Company since October 1995 and Vice
President with Aetna, Inc. since 1995.
Mary Toumpas Vice President Vice President and
48 Compliance Director:
American Skandia
Marketing, Incorporated
Ms. Toumpas joined us in 1997. She previously held the position of Assistant Vice President with Chubb Life/Chubb Securities
since 1973.
Bayard F. Tracy Senior Vice President and Senior Vice President:
52 Director (since September, 1994) American Skandia
Marketing, Incorporated
Deborah G. Ullman Senior Vice President Senior Vice President:
45 and Director (since September, 2000) American Skandia Life
Assurance Corporation
Ms. Ullman joined us in 1998. She previously held the position of Vice President with Aetna, Inc. since 1977.
Jeffrey M. Ulness Vice President Vice President:
39 American Skandia Life
Assurance Corporation
Brett M. Winson Senior Vice President and Senior Vice President:
44 Director (since March 2000) American Skandia, Inc.
Mr. Winson joined us in 1998. He previously held the position of Senior Vice President with Sakura Bank, Ltd. since 1990.
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)
A-31
APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA
SELECTED FINANCIAL DATA
The following table summarizes information with respect to the operations of the Company:
(in thousands) For the Year Ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA
----------------------------
Revenues:
Annuity and life insurance
charges and fees* $ 289,989 $ 186,211 $ 121,158 $ 69,780 $ 38,837
Fee income 83,243 50,839 27,593 16,420 6,206
Net investment income 10,441 11,130 8,181 1,586 1,601
Premium income and
other revenues 3,688 1,360 1,082 265 45
---------------- ---------------- ---------------- -------------------------------
Total revenues $ 387,361 $ 249,540 $ 158,014 $ 88,051 $ 46,689
============= ============= ============= ============ ===========
Benefits and Expenses:
Annuity and life insurance benefits $ 612 $ 558 $ 2,033 $ 613 $ 555
Change in annuity policy reserves 3,078 1,053 37 635 (6,779)
Cost of minimum death benefit
reinsurance 2,945 5,144 4,545 2,867 2,057
Return credited to contractowners (1,639) (8,930) (2,018) 673 10,613
Underwriting, acquisition and
other insurance expenses 206,350 167,790 90,496 49,887 35,914
Interest expense 69,502 41,004 24,895 10,791 6,500
--------------- --------------- --------------- ---------------------------
Total benefits and expenses $ 280,848 $ 206,619 $ 119,988 $ 65,466 $ 48,860
============= ============= ============= ============ ============
Income tax expense (benefit) $ 30,344 $ 8,154 $ 10,478 $ (4,038) $ 397
============== =============== ============== ============== ==============
Net income (loss) $ 76,169 $ 34,767 $ 27,548 $ 26,623 $ (2,568)
============== ============== ============== ==========================
STATEMENT OF FINANCIAL CONDITION
--------------------------------
Total Assets $30,849,414 $18,848,273 $12,894,290 $8,268,696 $4,956,018
=========== =========== =========== ========== ==========
Future fees payable to parent $ 576,034 $ 368,978 $ 233,034 $ 47,112 $ -
============= ============= ============= ============ ================
Surplus Notes $ 179,000 $ 193,000 $ 213,000 $ 213,000 $ 103,000
============= ============= ============= =========== ===========
Shareholder's Equity $ 359,434 $ 250,417 $ 184,421 $ 126,345 $ 59,713
============= ============= ============= =========== ============
* On annuity and life insurance sales of $6,862,968, $4,159,662, $3,697,990, $2,795,114, and $1,628,486 during the years ended
December 31, 1999, 1998, 1997, 1996, and 1995, respectively, with contractowner assets under management of $29,396,693,
$17,854,761, $12,119,191, $7,764,891, and $4,704,044 as of December 31, 1999, 1998, 1997, 1996 and 1995, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction
with the financial statements and the notes thereto and Item 6, Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain
forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on estimates and assumptions that involve certain risks and uncertainties, therefore actual
results could differ materially due to factors not currently known. These factors include significant changes in
financial markets and other economic and business conditions, state and federal legislation and regulation,
ownership and competition.
Results of Operations
Annuity and life insurance sales increased 65%, 12%, and 32% in 1999, 1998 and 1997, respectively. The Company
continues to show significant growth in sales volume as 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 sales
growth was also attributable to the strong performance of the underlying mutual funds, which support the Separate
Account assets. All three major distribution channels achieved significant sales growth in 1999.
As a result of the significant growth in sales and assets under management, contractowner fees and charges and fees
generated from transfer agency-type and investment support activities increased considerably over the past three
years:
(annual percentage growth) 1999 1998 1997
---- ---- ----
Annuity and life insurance
charges and fees 56% 54% 74%
=== === ===
Fee income 64% 84% 68%
=== === ===
Net investment income decreased 6% in 1999, increased 36% and 416% in 1998 and 1997, respectively. The decrease in
1999 was the result of $1,036,000 of amortization of the premium paid on a derivative instrument purchased during
1999. As noted in Note 2C of Notes to Consolidated Financial Statements, the derivative instrument, an equity
put option, was purchased as a hedge against potential GMDB reserves increases. Excluding the derivative
amortization, 1999 net investment income increased 3% as a result of increased bond holdings in support of the
Company's risk-based capital initiatives. The increases in 1998 and 1997 were 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 sale of ancillary contracts; immediate annuities with life
contingencies, supplementary contracts with life contingencies and certain life insurance products. Sales of
supplementary contracts increased in 1999 and decreased in slightly in 1998 and 1997. There were no immediate
annuities sold in 1999 and sales in 1998 and 1997 were modest.
Annuity benefits, which represent immediate annuities, supplementary contracts and death benefits paid on annuity
contracts with mortality risks were not significant in each of the past three years due primarily to the age of the
policies in force.
The change in annuity policy reserves includes changes in reserves related to annuity contracts with mortality
risks as well as the Company's guaranteed minimum death benefit ("GMDB") liability. During the second quarter of
1999, the Company's agreement to reinsure substantially all of its exposure on the GMDB was terminated and the
business was recaptured, as the reinsurer had announced its intention to exit this market. The increase in
reserves resulting from this change was offset by a decrease in reserves associated with the change to reserve
methodology on the GMDB. The new reserve methodology complies with the National Association of Insurance
Commissioners Actuarial Guideline XXXIV. In the later half of 1999, the Company instituted a hedge program to
manage the market risk and reserve fluctuations associated with the GMDB policies through the use of equity put
options. The Company is currently continuing this program while evaluating alternative hedging strategies.
The reinsurance premium associated with the GMDB exposure is based on levels of assets under management. Due to
increased sales and account growth, this cost had increased in 1997 and 1998 and through May 1999. The termination
of the reinsurance treaty as of May 31, 1999 resulted in the year to year decrease in this benefit for the twelve
months ended December 31, 1999.
Return credited to contractowners consists of 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. Market
value adjusted annuity activity has the largest impact on this benefit. In 1999, the Separate Account investment
returns on these contracts did not meet the expected returns calculated in the reserves. In 1998, the actual
returns significantly outperformed the expected returns and in 1997, these expectations were met.
Underwriting, acquisition and other insurance expenses for 1999, 1998 and 1997 were as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Commissions and general expenses $ 576,649 $ 342,594 $ 281,560
Net capitalization of deferred
acquisition costs (370,299) (174,804) (191,064)
----------- ------------ ----------
Underwriting, acquisition and other
insurance expenses $ 206,350 $ 167,790 $ 90,496
========== ========== =========
Commissions, general operating expenses and the net deferral of acquisition costs have all increased in 1999, due
largely to record sales. Current sales trends have resulted in a shift to asset based commission agreements. This
coupled with increased asset levels from increased sales and equity market appreciation have led to the increase in
commissions and general expenses. In 1998, commissions and general expenses increased as a result of strong sales
and start up costs associated with the Company's entry into variable life insurance and qualified plans. The net
capitalization of acquisition costs decreased in 1998 as a result of increased amortization. In 1997, expense
increases were driven primarily from strong sales.
Interest expense increased $28,498,000, $16,109,000 and $14,104,000 in 1999, 1998 and 1997, 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 retired surplus notes on December 10, 1999 and December
31, 1998 of $14,000,000 and $20,000,000 respectively. Surplus notes outstanding as of December 31, 1999 and 1998
totaled $179,000,000 and $193,000,000, respectively.
The effective income tax rates for the years ended December 31, 1999, 1998 and 1997 were 28%, 19% and 28%,
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. Management believes that based on the taxable income
produced in the past two years, as well as the continued growth in annuity sales, the Company will produce
sufficient taxable income in future years to realize its deferred tax assets.
The Company generated net income after tax of $76,169,000, $34,767,000 and $27,548,000 in 1999, 1998 and 1997,
respectively. The Company benefited in each of the past three years from strong sales growth and favorable market
conditions. The Company considers Mexico an emerging market and has invested in the Skandia Vida operations with
the expectation of generating profits from long-term savings products in future years. As such, Skandia Vida has
generated net losses of $2,523,000, $2,514,000 and $1,438,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Total assets grew 64%, 46%, and 56% in 1999, 1998 and 1997, 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 held in support of the
Company's risk based capital requirements. Liabilities grew 64%, 46%, and 56% in 1999, 1998 and 1997, 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.
Liquidity and Capital Resources
The Company's liquidity requirement was met by cash from insurance operations, investment activities, borrowings
from its Parent and the sale of rights to future fees and charges to its Parent.
The majority of the operating cash outflow resulted from the sale of variable annuity and variable life products
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 charges as well as modified coinsurance
reinsurance arrangements:
o During 1999 and 1998, the Company received $34,800,000 and $22,600,000, respectively, from ASI to support the capital needs of
its U.S. operations during the current year along with the following year's anticipated growth in business. In addition, the
Company received $1,690,000 and $5,762,000 from ASI in 1999 and 1998 to support its investment in Skandia Vida.
o Funds received from new securitization transactions amounted to $265,710,000, $169,881,000, and $194,512,000 for 1999, 1998 and
1997, respectively (see Note 8 of the Notes to Audited Consolidated Financial Statements). In addition, $71,000,000 was
received from ASI in the fourth quarter of 1999 in advance of a securitization transaction completed in the first quarter of
2000.
o During 1999, 1998 and 1997, the Company extended its reinsurance agreements. 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, 1999 and 1998, shareholder's equity was $359,434,000 and $250,417,000, respectively. The
increases were driven by the previously mentioned capital contributions received from ASI and net income from
operations.
The Company has long-term surplus notes and short-term borrowings with ASI. No dividends have been paid to ASI.
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.
Effects of Inflation
The rate of inflation has not had a significant effect on the Company's financial statements.
Year 2000 Compliance
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".
The Company experienced no significant errors or disruptions in computer service, interfaces with computer systems
of investment managers, sub-advisors, third party administrators, vendors and other business partners on or after
January 1, 2000.
American Skandia engaged external information technology specialists to review its operating systems and internally
developed software. The costs associated with these assessments and Year 2000 related remediation was $1,400,000
in 1999 and $750,000 in 1998 and prior. The Company was allocated the majority of these costs.
American Skandia continues to review new and existing systems and has contingency plans in place as part of its
Business Continuity Plan. This plan involves virtually all aspects of the business and will continue to be a focus
of management beyond the Year 2000 event.
Outlook
The Company believes that it is well positioned to retain and enhance its position as a leading provider of
financial products for long-term savings and retirement purposes as well as to address the economic impact of
premature death, estate and business planning concerns and supplemental retirement needs. Strength in the areas of
investment options offered, innovative and leading edge product offerings and superior customer service are
expected to allow the Company to continue to grow market share in a marketplace which continues to grow.
Certain regulatory and legislative initiatives or proposed accounting standards, if adopted, could adversely impact
the Company, despite it's strong market position. Of particular importance is President Clinton's proposed budget
for 2001, which includes proposed revenue-raising tax changes such as the "DAC tax" on annuity and life products
that could further increase the Company's cash strain. In addition, the recently enacted Financial Services
Modernization Act, which allows banks and insurance companies to affiliate under a common holding company, may
create previously unseen competitive pressures that could impact the Company's ability to do business in the same
manner it has previously. Additionally, discussions on regulation of the Internet may impact on the way the
Company does business in the future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and
liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity
prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price
risk and describes strategies used to manage these risks. The discussion is limited to financial instruments
subject to market risks and is not intended to be a complete discussion of all of the risks the Company is exposed
to.
Interest Rate Risk
Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. The Company has
97% of assets held under management that are in non-guaranteed Separate Accounts for which the Company's exposure
is not significant as the contractowner assumes substantially all the investment risk. On the remaining 3% of
assets the interest rate risk from contracts that carry interest rate exposure, is managed through an
asset/liability matching program which takes into account the risk variables of the insurance liabilities supported
by the assets.
At December 31, 1999, the Company held in its general account $201,509,000 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 ($29,912,000 in reserves at December 31, 1999) and in support of the
Company's target solvency capital. The Company has a conservative investment philosophy with regard to these
investments. All investments are investment grade corporate securities, government agency or U.S. government
securities.
The Company's deferred annuity products offer a fixed option which subjects the Company to interest rate risk. The
fixed option guarantees a fixed rate of interest for a period of time selected by the contractowner. Guarantee
period 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 MVA could be negative. In the event
of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the
MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of
the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the
guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company
still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest
payments and the risk of failing to maintain the asset/liability matching program with respect to duration and
convexity. At December 31, 1999 the Company had $939,585,000 in fixed investment options subject to these risks.
Equity Market Exposure
The primary equity market risk to the Company comes from the nature of the variable annuity and variable life
products sold by the Company. Various fees and charges earned 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,
1999, sustained throughout 2000, would result in an approximate drop in related annual fee income of $48,178,000.
As discussed in Note 2 of the Consolidated Financial Statements, in 1999 the Company utilized derivative
instruments to hedge against the risk of significant decreases in equity markets which would expose the Company to
increases in guaranteed minimum death benefits liabilities. Prior to the implementation of this program the
Company utilized reinsurance to transfer this risk.
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.
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.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company"
which is a wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholder's equity, and cash flows for each of the three years in the period ended December
31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of American Skandia Life Assurance Corporation at December 31, 1999 and 1998, and the consolidated results of their
operations and cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/Ernst & Young LLP
Hartford, Connecticut
February 11, 2000, except for Note 18 as to which the date is March 22, 2000
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,
1999 1998
--------------- ----------------
ASSETS
------
Investments:
Fixed maturities - at amortized cost 3,360 $ 8,289 $
Fixed maturities - at fair value 198,165 141,195
Investment in mutual funds - at fair value 16,404 8,210
Derivative instruments 189
-
Policy loans 1,270 569
-------------- --------------
Total investments 219,388 158,263
Cash and cash equivalents 89,212 77,525
Accrued investment income 4,054 2,880
Deferred acquisition costs 1,087,705 721,507
Reinsurance receivable 4,062 4,191
Receivable from affiliates 1,161
-
Income tax receivable - deferred 51,726 38,861
State insurance licenses 4,263 4,413
Fixed assets 3,305 328
Other assets 4,533 3,744
Separate account assets 29,381,166 17,835,400
--------------- ----------------
Total assets $ 30,849,414 $ 18,848,273
=============== ================
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Liabilities:
Reserve for future contractowner benefits 11,215 $ 37,508 $
Policy reserves 29,912 25,545
Drafts outstanding 51,059 28,941
Accounts payable and accrued expenses 158,590 91,827
Income tax payable 24,268 6,657
Payable to affiliates 68,736
-
Future fees payable to parent 576,034 368,978
Short-term borrowing 10,000 10,000
Surplus notes 179,000 193,000
Separate account liabilities 29,381,166 17,835,400
--------------- ----------------
Total Liabilities 30,489,980 18,597,856
--------------- ----------------
Shareholder's equity:
Common stock, $100 and $80 par value, 25,000 shares
authorized, issued and outstanding 2,500 2,000
Additional paid-in capital 215,879 179,889
Retained earnings 141,162 64,993
Accumulated other comprehensive income (107) 3,535
--------------- ----------------
Total Shareholder's equity 359,434 250,417
--------------- ----------------
Total liabilities and shareholder's equity 30,849,414 $ 18,848,273 $
=============== ================
See notes to consolidated financial statements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Operations
(in thousands)
For the Year Ended December 31,
1999 1998 1997
-------------- ------------- -------------
REVENUES
--------
Annuity and life insurance charges and fees $ $ $
289,989 186,211 121,158
Fee income 83,243 50,839 27,593
Net investment income 10,441 11,130 8,181
Premium income 1,278 874 920
Net realized capital gains 578 99 87
Other 1,832 387 75
-------------- ------------- -------------
Total revenues 387,361 249,540 158,014
-------------- ------------- -------------
EXPENSES
--------
Benefits:
Annuity and life insurance benefits 612 558 2,033
Change in annuity and life insurance policy reserves 3,078 1,053 37
Cost of minimum death benefit reinsurance 2,945
5,144 4,545
Return credited to contractowners (1,639) (8,930) (2,018)
-------------- ------------- -------------
4,996 (2,175) 4,597
Expenses:
Underwriting, acquisition and other insurance
expenses 206,350 167,790 90,496
Interest expense 69,502 41,004 24,895
-------------- ------------- -------------
275,852 208,794 115,391
-------------- ------------- -------------
Total benefits and expenses 280,848 206,619 119,988
-------------- ------------- -------------
Income from operations before income tax 106,513 42,921 38,026
Income tax expense
30,344 8,154 10,478
-------------- ------------- -------------
Net income $ $ $
76,169 34,767 27,548
============== ============= =============
See notes to consolidated financial statements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Shareholder's Equity
(in thousands)
For the Year Ended December 31,
1999 1998 1997
-------------- -------------- --------------
Common stock:
Beginning balance $ $ $
2,000 2,000 2,000
Increase in par value
500 - -
-------------- -------------- --------------
Ending balance
2,500 2,000 2,000
-------------- -------------- --------------
Additional paid in capital:
Beginning balance 179,889 151,527 122,250
Transferred to common stock (500)
- -
Additional contributions 36,490 28,362 29,277
-------------- -------------- --------------
Ending balance 215,879 179,889 151,527
-------------- -------------- --------------
Retained earnings:
Beginning balance 64,993 30,226 2,678
Net income 76,169 34,767 27,548
-------------- -------------- --------------
Ending balance 141,162 64,993 30,226
-------------- -------------- --------------
Accumulated other comprehensive income:
Beginning balance
3,535 668 (584)
Other comprehensive income
(3,642) 2,867 1,252
-------------- -------------- --------------
Ending Balance
(107) 3,535 668
-------------- -------------- --------------
Total shareholder's equity $ $ $
359,434 250,417 184,421
============== ============== ==============
See notes to consolidated financial statements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Cash Flows
(in thousands)
For the Year Ended December 31,
1999 1998 1997
-------------- ------------- --------------
Cash flow from operating activities:
Net income $ $ $
76,169 34,767 27,548
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization and depreciation
1,495 251 223
Deferred tax expense
(10,903) (14,242) (9,631)
Change in unrealized losses on derivatives
3,749 - -
Increase in policy reserves
4,367 1,130 3,176
Change in receivable from/payable to affiliates
69,897 166 (1,321)
Change in income tax payable
17,611 7,704 (2,172)
Increase in other assets
(789) (1,173) (415)
Increase in accrued investment income
(1,174) (438) (483)
Decrease/(increase) in reinsurance receivable
129 2,152 (268)
Increase in deferred acquisition costs (174,804) (190,969)
(366,198)
Increase in accounts payable and accrued expenses
66,763 20,637 5,719
Increase in drafts outstanding
22,118 9,663 6,245
Change in foreign currency translation, net
701 (22) (34)
Realized capital gain
(578) (99) (87)
-------------- ------------- --------------
Net cash used in operating activities (114,308) (162,469)
(116,643)
-------------- ------------- --------------
Cash flow from investing activities:
Purchase of fixed maturity investments
(99,250) (31,828) (28,905)
Proceeds from sale and maturity of fixed
maturity investments
36,226 4,049 10,755
Purchase of derivatives
(4,974) - -
Purchase of shares in mutual funds
(17,703) (7,158) (5,595)
Proceeds from sale of shares in mutual funds 6,086
14,657 1,415
Purchase of fixed assets
(3,178) (18) (189)
Increase in policy loans 118
(701) (528)
-------------- ------------- --------------
Net cash used in investing activities
(74,923) (28,751) (23,047)
-------------- ------------- --------------
Cash flow from financing activities:
Capital contribution from parent
22,490 8,362 29,277
Increase in future fees payable to parent 207,056
135,944 185,922
Net withdrawals from contractowner accounts (26,293)
(5,696) 6,959
-------------- ------------- --------------
Net cash provided by financing activities
203,253 138,610 222,158
-------------- ------------- --------------
Net increase/(decrease) in cash and cash
equivalents 11,687 (4,449) 36,642
Cash and cash equivalents at beginning of
year 77,525 81,974 45,332
------------- ------------- --------------
Cash and cash equivalents at end of year $ 89,212 $ $
77,525 81,974
============== ============= ==============
Income taxes paid $ $ $
23,637 14,651 22,308
============== ============= ==============
Interest paid $ $ $
69,697 35,588 16,916
============== ============= ==============
See notes to consolidated financial statements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
December 31, 1999
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a wholly-owned subsidiary of American
Skandia, Inc. ("ASI", formerly known as American Skandia Investment Holding Corporation) whose ultimate
parent is Skandia Insurance Company Ltd., a Swedish Corporation.
The Company develops long-term savings and retirement products which are distributed through its
affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently
issues variable life insurance and variable, fixed, market value adjusted and immediate annuities for
individuals, groups and qualified pension plans.
The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida") which is a life insurance
company domiciled in Mexico. Skandia Vida had total shareholder's equity of $4,592,000 and $4,724,000 as
of December 31, 1999, and 1998, respectively. The Company considers Mexico an emerging market and has
invested in the Skandia Vida operations with the expectation of generating profits from long-term savings
products in future years. As such, Skandia Vida has generated net losses of $2,523,000, $2,514,000 and
$1,438,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
------------------
The accompanying consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions and balances have been
eliminated in consolidation.
Certain reclassifications have been made to prior year amounts to conform with the current year
presentation.
B. New Accounting Pronouncements
-----------------------------
In March 1998, the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Software Developed or Obtained for Internal
Use. The SOP, which has been adopted prospectively as of January 1, 1999, requires the
capitalization of certain costs incurred in connection with developing or obtaining internal use
software. Prior to the adoption of SOP 98-1, the Company expensed all internal use software
related costs as incurred. The Company has identified and capitalized $3,035,000 of costs
associated with internal use software during 1999 and is amortizing the applicable costs on a
straight-line basis over a three year period. At December 31, 1999, the unamortized balance was
$2,920,000 and is included in fixed assets.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS
133). Subsequently, in July 1999, FASB issued FAS 137 "Deferral of the Effective Date of FASB
Statement 133". The adoption date was delayed to fiscal years beginning after June 15, 2000.
The Company is currently evaluating the potential impact on its financial position.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
C. Investments
-----------
The Company has classified its fixed maturity investments as either held-to-maturity or
available-for-sale. Investments classified as held-to-maturity are investments that the Company
has the ability and intent to hold to maturity. Such investments are carried at amortized cost.
Those investments which are classified as available-for-sale are carried at fair value and
changes in unrealized gains and losses are reported as a component of other comprehensive income.
The Company has classified its mutual fund investments held in support of a deferred compensation
plan are available-for-sale. Such investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of other comprehensive income.
Derivative instruments are recorded consistent with hedged items. The Company hedges the market
value fluctuations of the guaranteed minimum death benefit ("GMDB") exposure embedded in its
policy reserves and as such, the portion of the derivative instrument which constitutes an
effective hedge is carried at market value. The cost associated with the portion of the
instrument which is not considered an effective hedge is amortized to investment income over the
life of the instrument.
Policy loans are carried at their unpaid principal balances.
Realized gains and losses on disposal of investments are determined by the specific
identification method and are included in revenues.
D. Derivative Instruments
----------------------
During the second quarter of 1999, the Company's agreement to reinsure substantially all of its
exposure on its GMDB liability was terminated and the business was recaptured, as the reinsurer
had recently announced its intention to exit this market. In response, the Company instituted a
hedge program to effectively manage the market risk associated with GMDB reserve fluctuations
using put options. The cash invested in the put options is at risk to the extent that the value
of the underlying index is less than the strike price at the exercise date. This would be offset
by a corresponding decrease in the hedged GMDB exposure.
E. Cash Equivalents
----------------
The Company considers all highly liquid time deposits, commercial paper and money market mutual
funds purchased with a maturity of three months or less to be cash equivalents.
F. Fair Values of Financial Instruments
------------------------------------
The methods and assumptions used to determine the fair value of financial instruments are as
follows:
Fair values of fixed maturities with active markets are based on quoted market prices. For fixed
maturities that trade in less active markets, fair values are obtained from an independent
pricing service.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair values of investments in mutual funds are based on quoted market prices.
The fair value of the portion of the derivative instrument which constitutes an effective hedge
is determined based on current value of the underlying index.
The carrying value of cash and cash equivalents approximates fair value due to the short-term
nature of these investments.
The carrying value of short-term borrowing approximates fair value due to the short-term nature
of these liabilities.
Fair values of certain financial instruments, such as future fees payable to parent and surplus
notes are not readily determinable and are excluded from fair value disclosure requirements.
G. State Insurance Licenses
------------------------
Licenses to do business in all states have been capitalized and reflected at the purchase price
of $6,000,000 less accumulated amortization. The cost of the licenses is being amortized on a
straight line basis over 40 years.
H. Income Taxes
------------
The Company is included in the consolidated federal income tax return and combined state income
tax return of an upstream company, Skandia AFS Development Holding Corporation and certain of its
subsidiaries. In accordance with the tax sharing agreement, the federal and state income tax
provisions are computed on a separate return basis as adjusted for consolidated items such as net
operating loss carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.
I. Recognition of Revenue and Contract Benefits
--------------------------------------------
Revenues for variable annuity contracts consist of charges against contractowner account values
for mortality and expense risks, administration fees, surrender charges and an annual maintenance
fee per contract. Benefit reserves for variable annuity contracts represent the account value of
the contracts and are included in the separate account liabilities.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues for market value adjusted fixed annuity contracts consist of separate account investment
income reduced by benefit payments and changes in reserves in support of contractowner
obligations, all of which are included in return credited to contractowners. Benefit reserves
for these contracts represent the account value of the contracts, and are included in the general
account reserve for future contractowner benefits to the extent in excess of the separate account
liabilities.
Revenues for immediate annuity contracts without life contingencies consist of net investment
income. Revenues for immediate annuity contracts with life contingencies consist of single
premium payments recognized as annuity considerations when received. Benefit reserves for these
contracts are based on the Society of Actuaries 1983 Table-a with assumed interest rates that
vary by issue year. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 1999 and
1998.
Revenues for variable life insurance contracts consist of charges against contractowner account
values for mortality and expense risk fees, cost of insurance fees, taxes and surrender charges.
Certain contracts also include charges against premium to pay state premium taxes. Benefit
reserves for variable life insurance contracts represent the account value of the contracts and
are included in the separate account liabilities.
J. Deferred Acquisition Costs
--------------------------
The costs of acquiring new business, which vary with and are primarily related to the production
of new business, are being deferred net of reinsurance. These costs include commissions, costs
of contract issuance, and certain selling expenses that vary with production. These costs are
being amortized generally in proportion to expected gross profits from surrender charges, policy
and asset based fees and mortality and expense margins. This amortization is adjusted
retrospectively and prospectively when estimates of current and future gross profits to be
realized from a group of products are revised.
Details of the deferred acquisition costs and related amortization for the years ended December
31, are as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Balance at beginning of year $721,507 $546,703 $355,734
-------- -------- --------
Acquisition costs deferred
during the year 450,059 261,432 243,476
Acquisition costs amortized
during the year (83,861) (86,628) (52,507)
--------- -------- --------
366,198 174,804 190,969
------- ------- -------
Balance at end of year $1,087,705 $721,507 $546,703
========== ======== ========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
K. Reinsurance
-----------
The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance
arrangements provide additional capacity for growth in supporting the cash flow strain from the
Company's variable annuity and variable life insurance business. The reinsurance is effected
under quota share contracts.
As noted in Note 2D, the Company reinsured its exposure to market fluctuations associated with
its GMDB liability in 1999, 1998 and the beginning of 1997. Under this reinsurance agreement,
the Company ceded premiums of $2,945,000, $5,144,000 and $4,545,000; received claim
reimbursements of $242,000, $9,000 and $46,000; and, recorded increases/(decreases) in reserves
of ($2,763,000), ($323,000) and $918,000 in each of the three years, respectively.
At December 31, 1999 and 1998, in accordance with the provisions of a modified coinsurance
agreement, the Company accrued $41,000 and $1,976,000, respectively, for amounts receivable from
favorable reinsurance experience on a block of variable annuity business.
L. Translation of Foreign Currency
-------------------------------
The financial position and results of operations of the Company's Mexican subsidiary are measured
using local currency as the functional currency. Assets and liabilities of the subsidiary are
translated at the exchange rate in effect at each year-end. Statements of income and
shareholder's equity accounts are translated at the average rate prevailing during the year.
Translation adjustments arising from the use of differing exchange rates from period to period
are reported as a component of other comprehensive income.
M. Separate Accounts
-----------------
Assets and liabilities in Separate Accounts are included as separate captions in the consolidated
statements of financial condition. Separate Account assets consist principally of long term
bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of
which are carried at fair value. The investments are managed predominately through the Company's
investment advisory affiliate, American Skandia Investment Services, Inc. ("ASISI"), utilizing
various fund managers as sub-advisors. The remaining investments are managed by independent
investment firms. The contractowner has the option of directing funds to a wide variety of
mutual funds. The investment risk on the variable portion of a contract is borne by the
contractowner. A fixed option with a minimum guaranteed interest rate is also available. The
Company is responsible for the credit risk associated with these investments.
Included in Separate Account liabilities are $896,205,000 and $771,195,000 at December 31, 1999
and 1998, respectively, relating to annuity contracts for which the contractowner is guaranteed a
fixed rate of return. Separate Account assets of $896,205,000 and $771,195,000 at December 31,
1999 and 1998, respectively, consisting of long term bonds, short term securities, transfers due
from the general account and cash and cash equivalents which are held in support of these annuity
contracts, pursuant to state regulation.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
N. Estimates
---------
The preparation of financial statements in conformity with generally accepted accounting
principles requires that management make estimates and assumptions that affect the reported
amount of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. The more significant estimates and
assumptions are related to deferred acquisition costs and involve policy lapses, investment
return and maintenance expenses. Actual results could differ from those estimates.
3. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, for the years ended December 31, 1998, 1997 and 1996
were as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Net income $76,169 $34,767 $27,548
Other comprehensive income:
Unrealized investment gains/(losses) on
available for sale securities (3,082) 2,751 1,288
Reclassification adjustment for realized
losses/(gains) included in investment income (1,016) 138 (14)
------- --------- ---------
Net unrealized gains/(losses) on securities (4,098) 2,889 1,274
Foreign currency translation 456 (22) (22)
--------- ---------- ----------
Other comprehensive income (3,642) 2,867 1,252
--------- -------- --------
Comprehensive income $72,527 $37,634 $28,800
======= ======= =======
The components of accumulated other comprehensive income, net of tax, as of December 31, 1999 and 1998
were as follows:
(in thousands) 1999 1998
---- ----
Unrealized investment gains ($255) $3,843
Foreign currency translation 148 (308)
------ -------
Accumulated other comprehensive income ($107) $3,535
====== ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS
The amortized cost, gross unrealized gains/losses and estimated fair value of available-for-sale and
held-to-maturity fixed maturities and investments in mutual funds as of December 31, 1999 and 1998 are
shown below. All securities held at December 31, 1999 and 1998 were publicly traded.
Investments in fixed maturities as of December 31, 1999 consisted of the following:
(in thousands) Held-to-Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government
obligations $1,105 $ - $ (1) $1,104
Corporate securities 2,255 - (15) 2,240
----- ---- ----- -------
Totals $3,360 $ - $(16) $3,344
====== ==== ===== ======
(in thousands) Available-for-Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government
obligations $ 81,183 $ - $ (678) $ 80,505
Obligations of
state and political
subdivisions 253 (3) 250
Corporate securities 121,859 - (4,449) 117,410
--------- ---- ------ ---------
Totals $203,295 $ - $ (5,130) $198,165
======== ==== ========= ========
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 1999 are
shown below.
(in thousands) Held-to-Maturity Available-for-Sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due in one year or less $3,107 $3,097 $ - $ -
Due after one through five years 253 247 130,284 128,250
Due after five through ten years - - 73,011 69,915
---------- ---------- ---------- ----------
Total $3,360 $3,344 $203,295 $198,165
====== ====== ======== ========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
Investments in fixed maturities as of December 31, 1998 consisted of the following:
(in thousands) Held-to-Maturity
----------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government
obligations $3,774 $57 $- $3,831
Obligations of
state and political
subdivisions - - - -
Corporate
securities 4,515 34 - 4,549
------- ---- --- -------
Totals $8,289 $91 $ - $8,380
====== === === ======
(in thousands) Available for Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government
obligations $ 17,399 $ 678 $ - $ 18,077
Obligations of
state and political
subdivisions 253 7 - 260
Corporate
securities 117,774 5,160 (76) 122,858
--------- ------- ------- ----------
Totals $135,426 $5,845 $ (76) $141,195
======== ====== ====== ========
Proceeds from sales of fixed maturities during 1999, 1998 and 1997 were $32,196,000, $999,000, and
$5,056,000, respectively. Proceeds from maturities during 1999, 1998 and 1997 were $4,030,000,
$3,050,000, and $5,700,000, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
The cost, gross unrealized gains/losses and fair value of investments in mutual funds at December 31, 1999 and 1998 are
shown below:
(in thousands) Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
1999 $11,667 $4,763 $ (26) $16,404
======= ====== ====== =======
1998 $8,068 $416 $ (274) $8,210
====== ==== ======= ======
Net realized investment gains (losses) were as follows for the years ended December 31:
(in thousands) 1999 1998 1997
------ ---- ----
Fixed maturities:
Gross gains $ 253 $ - $ 10
Gross losses (228) (1) -
Investment in mutual funds:
Gross gains 990 281 116
Gross losses (437) (181) (39)
------- ------ ------
Totals $ 578 $ 99 $ 87
====== ===== =====
5. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31, 1999, 1998 and 1997 were as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Fixed maturities $ 9,461 $ 8,534 $6,617
Cash and cash equivalents 2,159 1,717 1,153
Investment in mutual funds 32 1,013 554
Policy loans 31 45 28
Derivative Instruments (1,036) - -
--------- ---------- ---------
Total investment income 10,647 11,309 8,352
Investment expenses 206 179 171
---------- ---------- --------
Net investment income $10,441 $11,130 $8,181
======= ======= ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES
The significant components of income tax expense for the years ended December 31 were as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Current tax expense $41,248 $22,384 $20,108
Deferred tax benefit (10,904) (14,230) (9,630)
-------- -------- ---------
Total income tax expense $30,344 $ 8,154 $10,478
======= ======== =======
The tax effects of significant items comprising the Company's deferred tax balance as of December 31, 1999
and 1998, are as follows:
(in thousands) 1999 1998
---- ----
Deferred tax liabilities:
Deferred acquisition costs ($321,873) ($210,731)
Payable to reinsurers (26,733) (25,585)
Policy fees (1,146) (859)
Net unrealized gains (80) (2,069)
------------ -----------
Total (349,832) (239,244)
-------- ---------
Deferred tax assets:
Net separate account liabilities 333,521 225,600
Future contractowner benefits 3,925 13,128
Other reserve differences 39,645 25,335
Deferred compensation 18,844 9,619
Surplus notes interest 5,030 3,375
Foreign exchange translation 137 166
Other 456 882
----------- ------------
Total 401,558 278,105
-------- ---------
Income tax receivable - deferred $ 51,726 $ 38,861
========= =========
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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (continued)
The income tax expense was different from the amount computed by applying the federal statutory tax rate
of 35% to pre-tax income from continuing operations as follows:
(in thousands) 1999 1998 1997
---- ---- ----
Income (loss) before taxes
Domestic $109,036 $45,435 $39,464
Foreign (2,523) (2,514) (1,438)
---------- --------- ---------
Total 106,513 42,921 38,026
Income tax rate 35% 35% 35%
--------- --------- ---------
Tax expense at federal
statutory income tax rate 37,280 15,022 13,309
Tax effect of:
Dividend received deduction (9,572) (9,085) (4,585)
Losses of foreign subsidiary 883 880 503
Meals and entertainment 664 487 340
State income taxes 1,071 673 577
Other 18 177 334
---------- ---------- ----------
Income tax expense $ 30,344 $ 8,154 $10,478
========= ======== =======
7. RECEIVABLE FROM/PAYABLE TO AFFILIATES
Certain operating costs (including personnel, rental of office space, furniture, and equipment) have been
charged to the Company at cost by American Skandia Information Services and Technology Corporation
("ASIST"), an affiliated company; and likewise, the Company has charged operating costs to ASISI. The
total cost to the Company for these items was $11,136,000, $7,722,000, and $5,572,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. Income received for these items was $3,919,000,
$1,355,000 and $3,225,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company had a $10 million short-term loan payable to ASI at December 31, 1999 and 1998. The total
interest expense thereon to the Company was $585,000, $622,000 and $642,000 for the years ended December
31, 1999, 1998 and 1997 respectively, of which $182,000 was payable as of December 31, 1999 and 1998.
Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated
with the sales of business through an investment firm where ASM serves as an introducing broker dealer.
Under this agreement, the expenses reimbursed in 1999 were $1,441,000. As of December 31,1999, amounts
receivable under this agreement were $245,000.
As of December 31,1999, the Company had received $71,000,000 from ASI in advance of the sale of certain
rights to receive future fees and contract charges. This sale is expected to be completed in the first
quarter of 2000.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT
In a series of transactions with ASI, the Company sold certain rights to receive future fees and contract
charges expected to be realized on variable portions of designated blocks of deferred annuity contracts.
The effective dates and issue periods these transactions cover are as follows:
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
1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99
1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99
In connection with these transactions, ASI issued collateralized notes in a private placement which are
secured by the rights to receive future fees and charges purchased from the Company.
Under the terms of the Purchase Agreements, the rights sold provide for ASI to receive a percentage (80%
or 100% depending on the underlying commission option) of future mortality and expense charges and
contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender
charge period of the designated contracts (6 to 8 years).
The Company did not sell the right to receive future fees and charges after the expiration of the
surrender charge period.
The proceeds from the sales have been recorded as a liability and are being amortized over the remaining
surrender charge period of the designated contracts using the interest method. The present values of the
transactions as of the respective effective date were as follows:
Present
(in thousands) 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
1999-1 7.5% 120,632
1999-2 7.5% 145,078
Payments representing fees and charges in the aggregate amount of $131,420,000, $69,226,000 and
$22,250,000 were made by the Company to the Parent for the years ended December 31, 1999, 1998 and 1997,
respectively. Related interest expense of $52,840,000, $22,978,000 and $6,842,000 has been included in
the statement of income for the years ended December 31, 1999, 1998 and 1997, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT (continued)
Expected payments of future fees payable to ASI as of December 31, 1999 are as follows:
Year Ended
(in thousands) December 31, Amount
----------- ------
2000 $103,975
2001 107,262
2002 106,491
2003 97,550
2004 78,512
2005 51,839
2006 25,712
2007 4,693
----------------------
Total $576,034
========
The Commissioner of the State of Connecticut has approved the sale of future fees and charges; however, in
the event that the Company becomes subject to an order of liquidation or rehabilitation, the Commissioner
has the ability to stop the payments due to the Parent under the Purchase Agreement subject to certain
terms and conditions.
9. LEASES
The Company leases office space under a lease agreement established in 1989 with ASIST. The lease expense
for 1999, 1998 and 1997 was $5,003,000, $3,588,000 and $2,428,000 respectively. Future minimum lease
payments per year and in aggregate as of December 31, 1999 are as follows:
(in thousands) 2000 $ 7,004
2001 7,004
2002 6,854
2003 6,756
2004 6,929
2005 and thereafter 51,865
--------
Total $86,412
=======
10. RESTRICTED ASSETS
To comply with certain state insurance departments' requirements, the Company maintains cash, bonds and
notes on deposit with various states. The carrying value of these deposits amounted to $4,868,000 and
$3,747,000 as of December 31, 1999, and 1998, respectively. These deposits are required to be maintained
for the protection of contractowners within the individual states.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
11. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
On November 8, 1999, the Board of Directors authorized the Company to increase the par value of its
capital stock from $80 per share to $100 per share in order to comply with minimum capital levels as
required by the California Department of Insurance. This transaction resulted in a corresponding decrease
in paid in and contributed surplus of $500,000 and had no effect on capital and surplus.
Statutory basis shareholder's equity was $286,385,000 and $285,553,000 at December 31, 1999 and 1998,
respectively.
The statutory basis net loss was $17,672,000, $13,152,000 and $8,970,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders
without prior approval of the state insurance department is subject to restrictions relating to statutory
surplus and net gain from operations. At December 31, 1999, no amounts may be distributed without prior
approval.
12. EMPLOYEE BENEFITS
The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the
Company contributes 3% of salary for all participating employees and matches employee contributions at a
50% level up to an additional 3% Company contribution. Company contributions to this plan on behalf of
the participants were $3,164,000, $2,115,000 and $1,220,000 for the years ended December 31, 1999, 1998
and 1997, respectively.
The Company has a deferred compensation plan, which is available to the internal field marketing staff and
certain officers. Company contributions to this plan on behalf of the participants were $193,000,
$342,000 and $270,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company and an affiliate cooperatively have a long-term incentive program under which units are
awarded to executive officers and other personnel. The Company also has a profit sharing program which
benefits all employees below the officer level. These programs consist of multiple plans with new plans
instituted each year. Generally, participants must remain employed by the Company or its affiliates at
the time such units are payable in order to receive any payments under the program. The accrued liability
representing the value of these units was $42,619,000 and $21,372,000 as of December 31, 1999 and 1998,
respectively. Payments under this plan were $4,079,000, $2,407,000 and $1,119,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
13. REINSURANCE
The effect of reinsurance for the years ended December 31, 1999, 1998 and 1997 is as follows:
(in thousands) 1999
----
Annuity and Life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $326,670 $315 ($1,397)
Ceded (36,681) 2,763 (242)
----------- ------ ---------
Net $289,989 $3,078 ($1,639)
======== ====== ========
1998
----
Annuity and Life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $215,425 $ 691 ($8,921)
Ceded (29,214) 362 (9)
---------- ------ -----------
Net $186,211 $1,053 ($8,930)
======== ====== ======
1997
----
Annuity and life Annuity and Life
Insurance Insurance Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $144,417 $955 ($1,972)
Ceded (23,259) (918) (46)
---------- ------ -----------
Net $121,158 $ 37 ($2,018)
======== ===== ======
Such ceded reinsurance does not relieve the Company of its obligations to policyholders. The Company
remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not
meet its obligations assumed under the reinsurance agreements.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
14. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash. Surplus notes outstanding as of December 31,
1999 and 1998 were as follows:
(in thousands)
Interest for the
Interest 1999 1998 Years Ended December 31,
Issue Date Rate Amount Amount 1999 1998 1997
---------- ---- ------ ------ ---- ---- ----
December 29, 1993 6.84% - - - 1,387 1,387
February 18, 1994 7.28% 10,000 10,000 738 738 738
March 28, 1994 7.90% 10,000 10,000 801 801 801
September 30, 1994 9.13% 15,000 15,000 1,389 1,389 1,389
December 28, 1994 9.78% - 14,000 1,308 1,388 1,388
December 19, 1995 7.52% 10,000 10,000 762 762 762
December 20, 1995 7.49% 15,000 15,000 1,139 1,139 1,139
December 22, 1995 7.47% 9,000 9,000 682 682 682
June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,411
December 30, 1996 8.03% 70,000 70,000 5,698 5,699 5,699
---------- ------------ --------- --------- --------
Total $179,000 $193,000 $15,928 $17,396 $17,396
======== ======== ======= ======= =======
The surplus note for $14,000,000 dated December 28, 1994 was converted to additional paid-in capital on
December 10, 1999. A surplus note for $20,000,000 dated December 29, 1993 was converted to additional
paid-in capital on December 31, 1998. All surplus notes mature seven years from the issue date.
Payment of interest and repayment of principal for these notes is subject to certain conditions and
require approval by the Insurance Commissioner of the State of Connecticut. At December 31, 1999 and
1998, $14,372,000 and $9,644,000, respectively, of accrued interest on surplus notes was not approved for
payment under these criteria.
15. SHORT-TERM BORROWING
The Company had a $10 million short-term loan payable to the Parent at December 31, 1999 and 1998. The
total interest expense to the Company was $585,000, $622,000 and $642,000 and for the years ended December
31, 1999, 1998 and 1997, respectively, of which $197,000 and $182,000 was payable as of December 31, 1999
and 1998, respectively.
16. CONTRACT WITHDRAWAL PROVISIONS
Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by
contractowners at market value or with market value adjustment. Separate account assets which are carried
at fair value are adequate to pay such withdrawals which are generally subject to surrender charges
ranging from 10% to 1% for contracts held less than 10 years.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
17. SEGMENT REPORTING
During 1998, to complement its annuity products, the Company launched specific marketing and operational
activities towards the release of variable life insurance and qualified retirement plan annuity products.
Assets under management and sales for the products other than variable annuities have not been significant
enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information."
18. SUBSEQUENT EVENT
On March 22, 2000, the Company sold certain rights to receive future fees and contract charges expected to
be received on variable portions of deferred annuity contracts issued between August 1, 1999 and January
31, 2000. This transaction is the latest in a series of agreements with ASI, as described in Note 8.
This transaction has an effective date of March 22, 2000. The present value as of this date, discounted
at 7.5%, was $171,781,000.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the operations of the Company on a quarterly basis:
(in thousands) Three months Ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1999
----
Premiums and other insurance
revenues $78,412 $88,435 $97,955 $111,540
Net investment income 2,654 2,842 2,735 2,210
Net realized capital gains 295 25 206 52
---------- ----------- ---------- -----------
Total revenues 81,361 91,302 100,896 113,802
Benefits and expenses 64,107 67,803 71,597 77,341
-------- -------- -------- --------
Pre-tax net income 17,254 23,499 29,299 36,461
Income taxes 3,844 7,142 7,898 11,460
--------- --------- --------- -------
Net income $ 13,410 $ 16,357 $ 21,401 $25,001
======== ======== ======== =======
1998
----
Premiums and other insurance
revenues $50,593 $57,946 $62,445 $67,327
Net investment income 3,262 2,410 2,469 2,989
Net realized capital gains (losses) 156 13 (46) (24)
---------- ----------- ----------- -----------
Total revenues 54,011 60,369 64,868 70,292
Benefits and expenses 46,764 42,220 48,471 69,164
-------- -------- -------- --------
Pre-tax net income 7,247 18,149 16,397 1,128
Income taxes 1,175 4,174 2,223 582
--------- --------- -------- ---------
Net income $ 6,072 $13,975 $14,174 $ 546
======== ======= ======= ========
1997
----
Premiums and other insurance
revenues $30,186 $34,056 $41,102 $44,402
Net investment income 1,369 2,627 2,031 2,154
Net realized capital gains 20 43 21 3
----------- ----------- ----------- ------------
Total revenues 31,575 36,726 43,154 46,559
Benefits and expenses 18,319 30,465 31,179 40,025
-------- -------- -------- --------
Pre-tax net income 13,256 6,261 11,975 6,534
Income taxes 4,260 2,614 3,354 250
--------- --------- --------- ----------
Net income $ 8,996 $ 3,647 $ 8,621 $ 6,284
======== ======== ======== ========
C-7
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, 2001 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, 2001 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.
Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
-----------------------
---------------------------------------------------------------------------------------------------------------------------------------
AST Founders
Passport (1)
(1994)
Unit Price $23.45 12.54 11.46 11.39 10.23 - - - -
Number of Units 8,818,599 9,207,623 9,988,104 9,922,698 2,601,283 - - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST Scudder Japan (2)
(2000)
Unit Price - - - - - - - - -
Number of Units - - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST AIM
International Equity
(3)
(1989) $43.99 27.18 22.95 19.70 18.23 16.80 16.60 12.37 13.69
Unit Price 16,903,883 17,748,560 17,534,233 17,220,688 14,393,137 14,043,215 9,063,464 1,948,773 1,092,902
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST American Century
International Growth
(1997)
Unit Price $21.66 13.30 11.35 - - - - - -
Number of Units 6,855,601 5,670,336 2,857,188 - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
AST MFS Global
Equity
(1999)
Unit Price $11.01 - - - - - - - -
Number of Units 116,756 - - - - - - - -
------------------------------------------------------------------------------------------------------------------------------
AST Federated
Aggressive Growth (2)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
------------------------------------------------------------------------------------------------------------------------------
AST Kemper Small-
Cap Growth
(1999)
Unit Price $15.37 - - - - - - - -
Number of Units 53,349,003 - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------------------
AST Lord Abbett Small
Cap Value
(1998)
Unit Price $10.57 9.85 - - - - - - -
Number of Units 6,597,544 4,081,870 - - - - - - -
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AST Gabelli Small-Cap
Value (5)
(1997)
Unit Price $11.11 11.20 12.70 - - - - - -
Number of Units 21,340,168 24,700,211 14,612,510 - - - - - -
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AST Janus Mid-Cap
Growth (6)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST Neuberger
Berman
Mid-Cap Growth (7)
(1994)
Unit Price $28.58 19.15 16.10 13.99 12.20 9.94 - - -
Number of Units 13,460,525 13,389,289 11,293,799 9,563,858 3,658,836 301,267 - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST Neuberger
Berman
Mid-Cap Value (8)
(1993)
Unit Price $16.78 16.10 16.72 13.41 12.20 9.81 10.69 - -
Number of Units 37,864,586 16,410,121 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 - -
---------------------------------------------------------------------------------------------------------------------------------------
AST Alger All-Cap
Growth (9)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST Gabelli All-Cap
Value (2)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST Kinetics Internet
(2)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
Natural Resources
(1995)
Unit Price $15.88 12.57 14.46 14.19 11.01 - - - -
Number of Units 6,201,327 5,697,453 7,550,076 6,061,852 808,605 - - - -
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AST Alliance Growth
(9)
(1996) $20.44 15.48 12.33 10.89 - - - - -
Unit Price 17,059,819 19,009,242 18,736,994 4,324,161 - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------------------
AST MFS Growth
(1999)
Unit Price $11.27 - - - - - - - -
Number of Units 409,467 - - - - - - - -
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AST Marsico Capital
Growth
(1997)
Unit Price $21.06 14.00 10.03 - - - - - -
Number of Units 78,684,943 40,757,449 714,309 - - - - - -
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AST JanCap Growth
(1992)
Unit Price $60.44 39.54 23.83 18.79 14.85 10.91 11.59 10.51 -
Number of Units 94,850,623 80,631,598 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 1,476,139 -
---------------------------------------------------------------------------------------------------------------------------------------
AST Sanford Bernstein
Managed Index 500 (11)
(1998)
Unit Price $15.08 12.61 - - - - - - -
Number of Units 39,825,951 22,421,754 - - - - - - -
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AST Janus Strategic
Value (2)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST Cohen & Steers
Realty
(1998)
Unit Price $8.35 8.28 - - - - - - -
Number of Units 6,224,365 3,771,461 - - - - - - -
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AST American Century
Income & Growth (12)
(1997)
Unit Price $16.19 13.35 12.06 - - - - - -
Number of Units 21,361,995 13,845,190 9,523,815 - - - - - -
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AST Alliance Growth
and Income (13)
(1992)
Unit Price $27.60 24.11 21.74 17.79 15.22 11.98 11.88 10.60 -
Number of Units 52,766,579 47,979,349 42,197,002 28,937,085 18,411,759 7,479,449 4,058,228 956,949 -
---------------------------------------------------------------------------------------------------------------------------------------
AST MFS Growth with
Income
(1999)
Unit Price $10.49 - - - - - - - -
Number of Units 741,323 - - - - - - - -
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AST INVESCO Equity
Income
(1994)
Unit Price $21.31 19.34 17.31 14.23 12.33 9.61 - - -
Number of Units 46,660,160 40,994,187 33,420,274 23,592,226 13,883,712 6,633,333 - - -
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Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------------------
AST AIM Balanced (14)
(1993)
Unit Price $21.19 17.78 15.98 13.70 12.49 10.34 10.47 - -
Number of Units 23,102,272 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 $14.90 13.37 11.18 - - - - - -
Number of Units 13,944,535 6,714,065 2,560,866 - - - - - -
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AST T. Rowe Price
Asset Allocation
(1994)
Unit Price $19.70 18.12 15.53 13.30 11.92 9.80 - - -
Number of Units 22,002,028 18,469,315 13,524,781 8,863,840 4,868,956 2,320,063 - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
AST T. Rowe Price
Global Bond (15)
(1994)
Unit Price $10.69 11.82 10.45 10.98 10.51 9.59 - - -
Number of Units 12,533,037 12,007,692 12,089,872 8,667,712 4,186,695 1,562,364 - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
AST Federated High
Yield
(1994)
Unit Price $14.38 14.30 14.13 12.62 11.27 9.56 - - -
Number of Units 41,588,401 40,170,144 29,663,242 15,460,522 6,915,158 2,106,791 - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST Lord Abbett
Bond-Debenture (2)
(2000) - - - - - - - - -
Unit Price - - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
AST PIMCO Total
Return Bond
(1994)
Unit Price $13.09 13.43 12.44 11.48 11.26 9.61 - - -
Number of Units 73,530,507 64,224,618 44,098,036 29,921,643 19,061,840 4,577,708 - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST PIMCO Limited
Maturity Bond
(1995)
Unit Price $11.96 11.73 11.26 10.62 10.37 - - - -
Number of Units 32,560,943 28,863,932 25,008,310 18,894,375 15,058,644 - - - -
---------------------------------------------------------------------------------------------------------------------------------------
AST Money Market
(1992)
Unit Price $12.38 12.00 11.57 11.16 10.77 10.35 10.12 10.01 -
Number of Units 187,609,708 75,855,442 66,869,998 42,435,169 30,564,442 27,491,389 11,422,783 457,872 -
The Montgomery
Variable Series - MV
Emerging Markets
(1996)
Unit Price $10.06 6.19 10.05 10.25 - - - - -
Number of Units 12,060,036 10,534,383 10,371,104 2,360,940 - - - - -
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Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Variable
Trust - Equity Income
(1999)
Unit Price $9.96 - - - - - - - -
Number of Units 136,006 - - - - - - - -
Rydex Variable Trust
-
Nova
(1999) $10.82 - - - - - - - -
Unit Price 5,474,129 - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
Rydex Variable Trust
-
Ursa
(1999) $9.28 - - - - - - - -
Unit Price 1,803,669 - - - - - - - -
Number of Units
---------------------------------------------------------------------------------------------------------------------------------------
Rydex Variable Trust
-
OTC
(1999) $17.07 - - - - - - - -
Unit Price 18,520,440 - - - - - - - -
Number of Units
INVESCO VIF -
Technology
(1999)
Unit Price $16.52 - - - - - - - -
Number of Units 4,622,242 - - - - - - - -
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INVESCO VIF -
Health Sciences
(1999)
Unit Price $11.34 - - - - - - - -
Number of Units 786,518 - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
INVESCO VIF -
Financial Services
(1999)
Unit Price $11.41 - - - - - - - -
Number of Units 759,104 - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
INVESCO VIF -
Telecommunications
(1999)
Unit Price $15.17 - - - - - - - -
Number of Units 4,184,526 - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------------
INVESCO VIF -
Dynamics
(1999)
Unit Price $13.91 - - - - - - - -
Number of Units 2,022,585 - - - - - - - -
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Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------------------
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Evergreen VA - Global
Leaders
(1999)
Unit Price $11.72 - - - - - - - -
Number of Units 23,101 - - - - - - - -
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---------------------------------------------------------------------------------------------------------------------------------------
Evergreen VA -
Special Equity
(1999)
Unit Price $12.19 - - - - - - - -
Number of Units 152,342 - - - - - - - -
ProFund VP -
Europe 30
(1999)
Unit Price $12.24 - - - - - - - -
Number of Units 273,963 - - - - - - - -
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---------------------------------------------------------------------------------------------------------------------------------------
ProFund VP -
UltraSmall-Cap (16)
(1999)
Unit Price $11.96 - - - - - - - -
Number of Units 813,904 - - - - - - - -
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---------------------------------------------------------------------------------------------------------------------------------------
ProFund VP -
UltraOTC
(1999)
Unit Price $23.58 - - - - - - - -
Number of Units 2,906,024 - - - - - - - -
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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 Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap
Portfolio."
2. These Portfolios were first offered as Sub-account on October 23, 2000.
3. 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 Sub-advisor of the Portfolio, then named "Seligman Henderson
International Equity Portfolio."
4. Effective December 31, 1998 Janus Capital Corporation became Sub-advisor of the Portfolio. Prior to December 31, 1998, Founders
Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio."
5. Effective October 13, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 13, 2000, T. Rowe Price
Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio."
6. This Portfolio was first offered on May 1, 2000.
7. 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 "Berger Capital Growth Portfolio."
8. 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 "Federated Utility Income Portfolio."
9. This Portfolio was first offered on January 3, 2000.
10. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May
1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth
Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of
the Portfolio, then named "Robertson Stephens Value + Growth Portfolio."
11. Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers
Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio."
12. 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."
13. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord,
Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio."
14. 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 Balanced." Prior to
October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced
Asset Portfolio."
15. Effective October 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name
of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the
Portfolio, then named "AST Scudder International Bond Portfolio."
16. Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that
corresponded to the performance of the Russell 2000(R)Index.
B-2
APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS
Examples of Percentage of Gain Death Benefit Calculation
The following are examples of how the Percentage of Gain Death Benefit is 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 with market increase
Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of
death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals,
or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Percentage of Gain Death
Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less
Purchase Payments reduced by proportional withdrawals.
Purchase Payments = $50,000
Account Value = $75,000
Basic Death Benefit = $75,000
Death Benefit Amount = $75,000 - $50,000 = $25,000
Amount Payable Under Percentage Gain Death Benefit = $75,000 + $12,500 = $87,500
Examples with market decline
Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof
of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional
withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Percentage of
Gain Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount"
less Purchase Payments reduced by proportional withdrawals.
Purchase Payments = $50,000
Account Value = $40,000
Basic Death Benefit = $50,000
Death Benefit Amount = $50,000 - $50,000 = $0
Amount Payable Under Percentage Gain Death Benefit = $50,000 + $0 = $50,000
In this example you would receive no additional benefit from purchasing the Percentage of Gain Death Benefit.
Examples of Guaranteed Minimum Death Benefit Calculation
The following are examples of how the Guaranteed Minimum Death Benefit is 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
Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive
due proof of death, 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).
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 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 ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000).
Example of market increase followed by decrease
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 is $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 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).
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 ASXT-PROS (01/2001).
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
(print your name)
-------------------------------------------------------
(address)
-------------------------------------------------------
(city/state/zip code)
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
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 OF CONTENTS
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 4
Principal Underwriter/Distributor - American Skandia Marketing, Incorporated 5
How Performance Data is Calculated 5
|X| Current and Effective Yield 5
|X| Total Return 6
How the Unit Price is Determined 17
Additional Information on Fixed Allocations 17
|X| How We Calculate the Market Value Adjustment 18
General Information 19
|X| Voting Rights 19
|X| Modification 19
|X| Deferral of Transactions 20
|X| Misstatement of Age or Sex 20
|X| Ending the Offer 20
Independent Auditors 20
Legal Experts 20
Financial Statements 20
|X| Appendix A - American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts) 22
------------------------------------------------------------------------------------------------------------------------------------
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: January __, 2001 Date of Statement of Additional Information: January __, 2001
ASXTII - SAI (01/2001)
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, Inc. ("ASI"),
formerly known as American Skandia Investment Holding Corporation. ASI'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.
Separate Account B Sub-account Underlying Mutual Fund Portfolio
------------------------------ --------------------------------
AST Founders Passport AST Founders Passport
AST Scudder Japan AST Scudder Japan
AST AIM International Equity AST AIM International Equity
AST American Century International Growth AST American Century International Growth
AST MFS Global Equity AST MFS Global Equity
AST Kemper Small-Cap Growth AST Kemper Small Cap Growth
AST Federated Aggressive Growth AST Federated Aggressive Growth
AST Lord Abbett Small Cap Value AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value AST Gabelli Small-CapValue
AST Janus Mid-Cap Growth AST Janus Mid-Cap Growth
AST Neuberger Berman Mid-Cap Growth AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman Mid-Cap Value AST Neuberger Berman Mid-Cap Value
AST Alger All-Cap Growth AST Alger All-Cap Growth
AST Gabelli All-Cap Value AST Gabelli All-Cap Value
AST Kinetics Internet AST Kinetics Internet
AST T. Rowe Price Natural Resources AST T. Rowe Price Natural Resources
AST Alliance Growth AST Alliance Growth
AST MFS Growth AST MFS Growth
AST Marsico Capital Growth AST Marsico Capital Growth
AST JanCap Growth AST JanCap Growth
AST Sanford Bernstein Managed Index 500 AST Sanford Bernstein Managed Index 500
AST Janus Strategic Value AST Janus Strategic Value
AST Cohen & Steers Realty AST Cohen & Steers Realty
AST American Century Income & Growth AST American Century Income & Growth
AST Alliance Growth and Income AST Alliance Growth and Income
AST MFS Growth with Income AST MFS Growth with 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 Global Bond AST T. Rowe Price Global Bond
AST Federated High Yield AST Federated High Yield
AST Lord Abbett Bond-Debenture AST Lord Abbett Bond-Debenture
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
MV Emerging Markets Emerging Markets portfolio of Montgomery Variable Series
WFVT Equity Income Equity Income portfolio of Wells Fargo Variable Trust
Rydex Nova Nova portfolio of Rydex Variable Trust
Rydex Ursa Ursa portfolio of Rydex Variable Trust
Rydex OTC OTC portfolio of Rydex Variable Trust
INVESCO VIF Technology Technology portfolio of INVESCO Variable Investment Funds, Inc.
INVESCO VIF Health Sciences Health Sciences portfolio of INVESCO Variable Investment Funds, Inc.
INVESCO VIF Financial Services Financial Services portfolio of INVESCO Variable Investment Funds, Inc.
INVESCO VIF Telecommunications Telecommunications portfolio of
INVESCO Variable Investment Funds, Inc.
INVESCO VIF Dynamics Dynamics portfolio of INVESCO Variable Investment Funds, Inc.
Evergreen VA Global Leaders Global Leaders portfolio of Evergreen Variable Annuity Trust
Evergreen VA Special Equity Special Equity portfolio of Evergreen Variable Annuity Trust
ProFund VP Europe 30 Europe 30 portfolio of ProFund VP
ProFund VP UltraSmall-Cap UltraSmall-Cap portfolio of ProFund VP
ProFund VP UltraOTC UltraOTC portfolio of ProFund VP
First Trust(R)10 Uncommon Value 10 Uncommon Values portfolio of First Defined Portfolio Fund LLC
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 ASI, 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 ASI. American Skandia Information Services and
Technology Corporation ("ASIST"), also a wholly-owned subsidiary ASI, 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 also acts as an introducing broker-dealer through
which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of
American Skandia Trust which are offered as underlying investment options under the Annuity.
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. No compensation is payable on Annuities purchased by a
member of the designated class of Owners.
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 ____% ______%
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.
Non-standard Total Returns reflect the addition of Credits. The Non-standard Total Return numbers provided may assume Credits
equal to 1.5%, 4.0% or 5.0%, respectively, of Purchase Payments. The amount of the Credit applicable is described in detail in
the "How Do I Receive Credits?" section of the Prospectus. The percentage of the Credit depends on the age and the cumulative
amount of Purchase Payments received. In addition, the amount of the Credits may be deducted from the amount payable at death
under limited circumstances (see "Death Benefit"). The impact of Credits on Total Return is particularly pronounced for the
shorter durations for which Total Return is measured, such as one and three years. You should take this into considerations in
any comparison of Total Return between the Sub-accounts and investment options offered pursuant to other annuities.
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, 1999. 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.
-------------------------------------------------- -- ---------------------------------------------------
Standard Total Return Non-Standard Total Return
-------------------------------------------------- -- ---------------------------------------------------
-------------------------------------------------- -- -------------------------------------------------
(Assuming maximum CDSC and (Assuming maximum CDSC, with maintenance fees
maintenance fees) and a 1.5% Credit)
-------------------------------------------------- -- -------------------------------------------------
TO BE FILED BY AMENDMENT
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 10 Inception
Year Years Years Years to Date Year Years Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
AST Founders Passport 1
AST Scudder Japan 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST AIM International Equity 3
AST American Century
International Growth
AST MFS Global Equity
AST Kemper Small-Cap Growth
AST Federated Aggressive Growth 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value 4
AST Janus Mid-Cap Growth 5
AST NB Mid-Cap Growth 6
AST NB Mid-Cap Value 7
AST Alger All-Cap Growth 8
AST Gabelli All-Cap Value 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Kinetics Internet 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST T. Rowe Price Natural
Resources
AST Alliance Growth 9
AST MFS Growth
AST Marsico Capital Growth
AST JanCap Growth
AST Sanford Bernstein Managed
Index 500 10
AST Janus Strategic Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Cohen & Steers Realty
AST American Century Income &
Growth 11
AST Alliance Growth and Income 12
AST MFS Growth with Income
AST INVESCO Equity Income
AST AIM Balanced 13
AST American Century Strategic
Balanced
AST T. Rowe Price Asset
Allocation
AST T. Rowe Price Global Bond 14
AST Federated High Yield
AST Lord Abbett Bond-Debenture 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST PIMCO Total Return Bond
AST PIMCO Limited Maturity
Bond
MV Emerging Markets
WFVT Equity Income
Rydex Nova
Rydex Ursa
Rydex OTC
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 Years 10 Inception
Year Years Years Years to Date Year Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
INVESCO VIF Technology
INVESCO VIF Health Sciences
INVESCO VIF Financial Services
INVESCO VIF
Telecommunications
INVESCO VIF Dynamics
Evergreen VA Global Leaders
Evergreen VA Special Equity
ProFund VP Europe 30
ProFund VP UltraSmall-Cap 15
ProFund VP UltraOTC
First Trust(R)10 Uncommon Values N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
--------------------------------------------------- -- -------------------------------------------------
Non-Standard Total Return Non-Standard Total Return
--------------------------------------------------- -- -------------------------------------------------
--------------------------------------------------- -- -------------------------------------------------
(Assuming maximum CDSC, with maintenance fees (Assuming maximum CDSC, with maintenance fees
and a 4.0% Credit) and a 5.0% Credit)
--------------------------------------------------- -- -------------------------------------------------
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 10 Inception
Year Years Years Years to Date Year Years Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
AST Founders Passport 1
AST Scudder Japan 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST AIM International Equity 3
AST American Century
International Growth
AST MFS Global Equity
AST Kemper Small-Cap Growth
AST Federated Aggressive Growth 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value 4
AST Janus Mid-Cap Growth 5
AST NB Mid-Cap Growth 6
AST NB Mid-Cap Value 7
AST Alger All-Cap Growth 8
AST Gabelli All-Cap Value 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Kinetics Internet 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST T. Rowe Price Natural
Resources
AST Alliance Growth 9
AST MFS Growth
AST Marsico Capital Growth
AST JanCap Growth
AST Sanford Bernstein Managed
Index 500 10
AST Janus Strategic Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Cohen & Steers Realty
AST American Century Income &
Growth 11
AST Alliance Growth and Income 12
AST MFS Growth with Income
AST INVESCO Equity Income
AST AIM Balanced 13
AST American Century Strategic
Balanced
AST T. Rowe Price Asset
Allocation
AST T. Rowe Price Global Bond 14
AST Federated High Yield
AST Lord Abbett Bond-Debenture 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST PIMCO Total Return Bond
AST PIMCO Limited Maturity
Bond
MV Emerging Markets
WFVT Equity Income
Rydex Nova
Rydex Ursa
Rydex OTC
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 Years 10 Inception
Year Years Years Years to Date Year Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
INVESCO VIF Technology
INVESCO VIF Health Sciences
INVESCO VIF Financial Services
INVESCO VIF
Telecommunications
INVESCO VIF Dynamics
Evergreen VA Global Leaders
Evergreen VA Special Equity
ProFund VP Europe 30
ProFund VP UltraSmall-Cap 15
ProFund VP UltraOTC
First Trust(R)10 Uncommon Values N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
--------------------------------------------------- -- -------------------------------------------------
Non-Standard Total Return Non-Standard Total Return
--------------------------------------------------- -- -------------------------------------------------
--------------------------------------------------- -- -------------------------------------------------
(Assuming no CDSC, with maintenance fees (Assuming no CDSC, with maintenance fees
and a 1.5% Credit) and a 4.0% Credit)
--------------------------------------------------- -- -------------------------------------------------
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 Years 10 Inception
Year Years Years Years to Date Year Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
AST Founders Passport 1
AST Scudder Japan 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST AIM International Equity 3
AST American Century
International Growth
AST MFS Global Equity
AST Kemper Small-Cap Growth
AST Federated Aggressive Growth 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value 4
AST Janus Mid-Cap Growth 5
AST NB Mid-Cap Growth 6
AST NB Mid-Cap Value 7
AST Alger All-Cap Growth 8
AST Gabelli All-Cap Value 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Kinetics Internet 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST T. Rowe Price Natural
Resources
AST Alliance Growth 9
AST MFS Growth
AST Marsico Capital Growth
AST JanCap Growth
AST Sanford Bernstein Managed
Index 500 10
AST Janus Strategic Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST Cohen & Steers Realty
AST American Century Income &
Growth 11
AST Alliance Growth and Income 12
AST MFS Growth with Income
AST INVESCO Equity Income
AST AIM Balanced 13
AST American Century Strategic
Balanced
AST T. Rowe Price Asset
Allocation
AST T. Rowe Price Global Bond 14
AST Federated High Yield
AST Lord Abbett Bond-Debenture 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
AST PIMCO Total Return Bond
AST PIMCO Limited Maturity
Bond
MV Emerging Markets
WFVT Equity Income
Rydex Nova
Rydex Ursa
Rydex OTC
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
1 3 5 10 Inception 1 3 5 Years 10 Inception
Year Years Years Years to Date Year Years to Date
Years
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
INVESCO VIF Technology
INVESCO VIF Health Sciences
INVESCO VIF Financial Services
INVESCO VIF
Telecommunications
INVESCO VIF Dynamics
Evergreen VA Global Leaders
Evergreen VA Special Equity
ProFund VP Europe 30
ProFund VP UltraSmall-Cap 15
ProFund VP UltraOTC
First Trust(R)10 Uncommon Values N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------- -------- --------- --------- --------- ---------- -- --------- --------- --------- -------- ----------
---------------------------------------------------
Non-Standard Total Return
---------------------------------------------------
---------------------------------------------------
(Assuming no CDSC, with maintenance fees
and a 5.0% Credit)
---------------------------------------------------
---------------------------------- -------- --------- --------- --------- ----------
1 3 5 10 Inception
Year Years Years Years to Date
---------------------------------- -------- --------- --------- --------- ----------
AST Founders Passport 1
AST Scudder Japan 2 N/A N/A N/A N/A N/A
AST AIM International Equity 3
AST American Century
International Growth
AST MFS Global Equity
AST Kemper Small-Cap Growth
AST Federated Aggressive Growth 2 N/A N/A N/A N/A N/A
AST Lord Abbett Small Cap Value
AST Gabelli Small-Cap Value 4
AST Janus Mid-Cap Growth 5
AST NB Mid-Cap Growth 6
AST NB Mid-Cap Value 7
AST Alger All-Cap Growth 8
AST Gabelli All-Cap Value 2 N/A N/A N/A N/A N/A
AST Kinetics Internet 2 N/A N/A N/A N/A N/A
AST T. Rowe Price Natural
Resources
AST Alliance Growth 9
AST MFS Growth
AST Marsico Capital Growth
AST JanCap Growth
AST Sanford Bernstein Managed
Index 500 10
AST Janus Strategic Value N/A N/A N/A N/A N/A
AST Cohen & Steers Realty
AST American Century Income &
Growth 11
AST Alliance Growth and Income 12
AST MFS Growth with Income
AST INVESCO Equity Income
AST AIM Balanced 13
AST American Century Strategic
Balanced
AST T. Rowe Price Asset
Allocation
AST T. Rowe Price Global Bond 14
AST Federated High Yield
AST Lord Abbett Bond-Debenture 2 N/A N/A N/A N/A N/A
AST PIMCO Total Return Bond
AST PIMCO Limited Maturity
Bond
MV Emerging Markets
WFVT Equity Income
Rydex Nova
Rydex Ursa
Rydex OTC
---------------------------------- -------- --------- --------- --------- ----------
---------------------------------- -------- --------- --------- --------- ----------
1 3 5 10 Inception
Year Years Years Years to Date
---------------------------------- -------- --------- --------- --------- ----------
INVESCO VIF Technology
INVESCO VIF Health Sciences
INVESCO VIF Financial Services
INVESCO VIF
Telecommunications
INVESCO VIF Dynamics
Evergreen VA Global Leaders
Evergreen VA Special Equity
ProFund VP Europe 30
ProFund VP UltraSmall-Cap 15
ProFund VP UltraOTC
First Trust(R)10 Uncommon Values N/A N/A N/A N/A N/A
---------------------------------- -------- --------- --------- --------- ----------
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 Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap
Portfolio."
2. These Portfolios were first offered as Sub-accounts on October 23, 2000.
3. 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 Sub-advisor of the Portfolio, then named "Seligman Henderson
International Equity Portfolio."
4. Effective October 13, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 13, 2000, T. Rowe Price
Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio."
5. This Portfolio was first offered as a Sub-account on May 1, 2000.
6. 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 "Berger Capital Growth Portfolio."
7. 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 "Federated Utility Income Portfolio."
8. This Portfolio was first offered as a Sub-account in January 2000.
9. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May
1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth
Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of
the Portfolio, then named "Robertson Stephens Value + Growth Portfolio."
10. Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers
Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio."
11. 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."
12. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord,
Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio."
13. 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 Balanced." Prior to
October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced
Asset Portfolio."
14. Effective October 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name
of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the
Portfolio, then named "AST Scudder International Bond Portfolio."
15. Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that
corresponded to the performance of the Russell 2000(R)Index.
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.
For purposes of this provision:
|X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are
separated from ownership of the underlying principal amount or corpus.
|X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities.
|X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options
on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year
Investment Grade Corporate Bond Index of Option-adjusted Spreads.
The formula is:
[(1+I) / (1+J+0.0010)]N/365
where:
I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at
the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no
Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing
at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no
Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as
possible after the Guarantee Period ends.
N is the number of days remaining in the original Guarantee Period.
If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365.
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
Securities Exchange Act of 1934 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, 1999 and 1998, and for each
of the three years in the period ended December 31, 1999, and the financial statements of American Skandia Life Assurance
Corporation Variable Account B - Class 1 at December 31, 1999 and 1998 and for the years then ended, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
LEGAL EXPERTS
The General Counsel of American Skandia Life Assurance Corporation has passed on the legal matters with respect to Federal laws
and regulations applicable to the issue and sale of the Annuities and with respect to Connecticut law.
FINANCIAL STATEMENTS
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, 1999 and for the periods ended December 31, 1999 and 1998. 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:
Customer Service, P.O. Box 7038, Bridgeport, Connecticut 06601-7038. 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)
TO BE FILED BY AMENDMENT
ASXTII 11/29/2000
7
PART C
OTHER INFORMATION
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 TO BE FILED BY AMENDMENT
(5)
(b) Copy of Guaranteed Minimum Death Benefit Endorsement filed via EDGAR with Post-Effective Amendment No. 8 to
Registration Statement No. 33-87010, filed April 26, 1999.
(c) Copy of Performance-related Benefits and First Year Credits Endorsement filed via EDGAR with Post-Effective
Amendment No. 8 to Registration Statement No. 33-87010, filed April 26, 1999.
(d) Copy of Percent Death Benefit Endorsement TO BE FILED BY AMENDMENT
(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) Not applicable.
(8) Agreements between Depositor and:
(a) American Skandia Trust filed via EDGAR with Post-effective Amendment No. 4 to Registration Statement No.
33-87010, filed February 25, 1997 (At such time, what later became American Skandia Trust was known as
the Henderson Global Asset Trust).
(b) The Montgomery Funds III filed via EDGAR in the Initial Registration Statement to Registration Statement No.
333-08853, filed July 25, 1996.
(c) Rydex Variable Trust filed via EDGAR with Post-Effective Amendment No. 8 to Registration Statement No. 33-87010,
filed April 26, 1999.
(d) First Defined Portfolio Fund LLC filed via EDGAR with Post-Effective Amendment No. 7 to Registration Statement No.
33-86866, filed April 26, 2000.
(e) Evergreen Variable Annuity Trust filed via EDGAR with Post-Effective Amendment No. 9 to Registration Statement No.
33-87010, filed April 26, 2000.
(f) INVESCO Variable Investment Funds, Inc. filed via EDGAR with Post-Effective Amendment No. 9 to Registration
Statement No. 33-87010, filed April 26, 2000.
(g) ProFunds VP filed via EDGAR with Post-Effective Amendment No. 9 to Registration Statement No. 33-87010, filed April
26, 2000.
(h) Wells Fargo Variable Trust filed via EDGAR with Initial Registration Statement No. 333-49478, filed
November 7, 2000.
(9) Opinion and Consent of Counsel TO BE FILED BY AMENDMENT
(10) Consent of Ernst & Young LLP. TO BE FILED BY AMENDMENT
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of Performance filed via EDGAR with Post-Effective
Amendment No. 3 to this Registration Statement No. 33-62793, filed April 29, 1997.
(14) Financial Data Schedule
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, Inc.:
(1) American Skandia Information Services and Technology Corporation ("ASIST"): The organization is a general
--------------------------------------------------------------------------------
business corporation organized in the State of Delaware. Its primary purpose is to provide various types of
business services to American Skandia, Inc. 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 products designed for long-term
savings through independent banks and brokers in Mexico.
Item 27. Number of Contract Owners: There are currently no 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, Inc., a corporation organized under the laws of the state of Delaware. The provisions of the
indemnity agreement are governed by Section 45 of the General Corporation Law of the State of Delaware.
The directors and officers of ASLAC and ASM, Inc. are covered under a directors and officers liability insurance policy issued by
an unaffiliated insurance company to Skandia Insurance Company Ltd., their ultimate parent. Such policy will reimburse ASLAC or
ASM, Inc., as applicable, for any payments that it shall make to directors and officers pursuant to law and, subject to certain
exclusions contained in the policy, will pay any other costs, charges and expenses, settlements and judgments arising from any
proceeding involving any director or officer of ASLAC or ASM, Inc., as applicable, in his or her past or present capacity as such.
Registrant hereby undertakes as follows: Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer
or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, unless in the opinion of Registrant's counsel
the matter has been settled by controlling precedent, Registrant will submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 29. Principal Underwriters:
(a) At present, ASM, Inc. acts as principal underwriter only for annuities to be issued by ASLAC.
(b) Directors and officers of ASM, Inc.
Name and Principal Business Address Position and Offices with Underwriter
----------------------------------- -------------------------------------
Patricia J. Abram Senior Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lori Allen Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kimberly Anderson Vice President
American Skandia Life Assurance Corporation
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
Robert Brinkman Senior Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Carl Cavaliere Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
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 and Director
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
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lincoln R. Collins Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Timothy S. Cronin Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President and Chief Executive Officer
American Skandia Life Assurance Corporation and Chairman of the Board of Directors
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jacob Herchler Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Ian Kennedy Senior Vice President
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
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
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Carl E. Oberholtzer Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
William O'Loughlin Vice President
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
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Polly Rae Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Rebecca Ray Senior Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Hayward L. Sawyer Senior Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Leslie S. Sutherland Vice President
American Skandia Life Assurance Corporation
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 W. Thwaites Senior Vice President
American Skandia Life Assurance Corporation and 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 and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Deborah G. Ullman Senior Vice President
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Brett M. Winson Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
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.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly
caused this registration statement to be signed on its behalf, in the Town of Shelton and State of Connecticut, on
this 30th day of November, 2000.
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.
Signature Title Date
--------- ----- ----
(Principal Executive Officer)
Wade A. Dokken* President and Chief Executive Officer, November 30, 2000
---------------
Wade A. Dokken Chairman of the Board and Director
(Principal Financial Officer and Principal Accounting Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and November 30, 2000
Thomas M. Mazzaferro Chief Financial Officer
/s/ David R. Monroe Senior Vice President, Treasurer November 30, 2000
David R. Monroe and Corporate Controller
(Board of Directors)
Patricia Abram*** Gordon C. Boronow* Malcolm M. Campbell*
----------------- ------------------ --------------------
Patricia Abram Gordon C. Boronow Malcolm M. Campbell
Wade A. Dokken* Y.K. Chan*** Lincoln R. Collins*
--------------- ------------ -------------------
Wade A. Dokken Y.K. Chan Lincoln R. Collins
Ian Kennedy*** Thomas M. Mazzaferro* Gunnar Moberg*
-------------- --------------------- --------------
Ian Kennedy Thomas M. Mazzaferro Gunnar Moberg
Christian Thwaites*** Bayard F. Tracy* Deborah G. Ullman***
--------------------- ---------------- --------------------
Christian Thwaites Bayard F. Tracy Deborah G. Ullman
Brett M. Winson**
-----------------
Brett M. Winson
*/**/***By: /s/ Kathleen A. Chapman
-----------------------------
Kathleen A. Chapman
*Pursuant to Powers of Attorney previously filed with Initial Registration Statement No. 333-25733
**Pursuant to Power of Attorney filed with Post-Effective Amendment No. 4 to Registration Statement No. 333-25733
***Pursuant to Powers of Attorney filed with Post-Effective Amendment No. 11 to Registration Statement No. 33-87010
EXHIBITS
As noted in Item 24(b), various exhibits are incorporated by reference or are not applicable.
The exhibits included are as follows:
