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FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1995
REGISTRATION NO. 33-62953
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
63
(Primary Standard Industrial Classification Code Number)
06-1241288
(I.R.S. Employer Identification No.)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
M. PATRICIA PAEZ, CORPORATE SECRETARY
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy To:
JOHN T. BUCKLEY, ESQ.
WERNER & KENNEDY
1633 BROADWAY, NEW YORK, NEW YORK 10019 (212) 408-6900
Approximate date of commencement of proposed sale to the public:
DECEMBER 28, 1995 OR AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following: X .
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE** FEE
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Annuity Contracts $400,000,000.00 $80,000.00
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</TABLE>
**The proposed aggregate offering price is estimated solely for determining the
registration fee. The amount to be registered and the proposed maximum
offering price per unit are not applicable since these securities are not
issued in predetermined amounts or units.
===============================================================================
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 BECOME 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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ASAP4
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CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501
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S-1 ITEM NO. PROSPECTUS HEADING
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1. Forepart of the Registration Statement and Facing Page, Cross Reference Sheet,
Outside Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front Cover and Outside Back Cover of Prospectus Available Information,
Incorporation of Certain Documents by Reference,
Reports to You, Table of Contents
3. Summary Information, Risk Factors and Ratio of Earnings Highlights, Cover Page,
to Fixed Charges Separate Account D,
Insurance Aspects of the Annuity
4. Use of Proceeds Fixed Investment Options, Separate Accounts, Separate Account D
5. Determination of the Offering Price Fixed Investment Options
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution Sale of the Annuities
9. Description of Securities to be Registered Investment Options, Purchasing Annuities,
Account Value and Surrender Value,
Rights, Benefits and Services
10. Interests of named Expert and Counsel Executive Compensation
11. Information with Respect to the Registrant The Company
12. Disclosure of Commission Position on Indemnification for Indemnification
Securities Act Liabilities
Part II Heading
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13. Other Expenses of Issuance Other Expenses of Issuance
and Distribution and Distribution
14. Indemnification of Directors and Officers Indemnification of Directors and Officers
15. Recent Sales of Unregistered Securities Recent Sales of Unregistered Securities
16. Exhibits and Financial Statement Schedules Exhibits and Financial Statement Schedules
17. Undertakings Undertakings
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This Prospectus describes a type of annuity (the "Annuity") being offered by
American Skandia Life Assurance Corporation ("we", "our" or "us"), One Corporate
Drive, Shelton, Connecticut, 06484. This flexible premium Annuity may be offered
as individual annuity contracts or as interests in a group annuity. The Table of
Contents is on Page 4. Definitions applicable to this Prospectus are on page 6.
The highlights of this offering are described beginning on Page 8. This
Prospectus contains a detailed discussion of matters you should consider before
purchasing this Annuity. A Statement of Additional Information has been filed
with the Securities and Exchange Commission and is available from us without
charge upon request. The contents of the Statement of Additional Information are
described on page / /. THE ANNUITY OR CERTAIN OF ITS INVESTMENT OPTIONS MAY NOT
BE AVAILABLE IN ALL JURISDICTIONS. VARIOUS RIGHTS AND BENEFITS MAY DIFFER
BETWEEN JURISDICTIONS TO MEET APPLICABLE LAWS AND/OR REGULATIONS.
A Purchase Payment for this Annuity is assessed any applicable tax charge (see
"Tax Charges"). It is then allocated to the investment options you select,
except in certain jurisdictions, where allocations of Purchase Payments we
receive during the "free-look" period that you direct to any Sub-accounts are
temporarily allocated to a money-market type Sub-account (see "Allocation of Net
Purchase Payments"). You may transfer Account Value between investment options
(see "Investment Options" and "Transfers"). Account Value may be distributed as
periodic annuity payments in a "payout phase". Such annuity payments can be
guaranteed for life (see "Annuity Payments"). During the "accumulation phase"
(the period before any payout phase), you may surrender the Annuity for its
Account Value or make withdrawals (see "Distributions"). Such distributions may
be subject to tax, including a tax penalty (see "Certain Tax Considerations).
THERE IS A MINIMUM DEATH BENEFIT APPLICABLE FOR A LIMITED TIME DURING THE
ACCUMULATION PHASE (see "Death Benefit").
Account Value in the variable investment options increases or decreases daily to
reflect investment performance and the deduction of charges. No minimum amount
is guaranteed (see "Account Value in the Sub-accounts"). The variable investment
options are Class 1 Sub-accounts of American Skandia Life Assurance Corporation
Variable Account B ("Separate Account B")(see "Separate Accounts" and "Separate
Account B"). Each Sub-account invests exclusively in one portfolio of an
underlying mutual fund or in an underlying mutual fund. As of the date of this
Prospectus, the underlying mutual funds (and the portfolios of such underlying
mutual funds in which Sub-accounts offered pursuant to this Prospectus invest)
are: (a) American Skandia Trust (portfolios - JanCap Growth, Lord Abbett Growth
and Income, Seligman Henderson International Equity, Seligman Henderson
International Small Cap, Federated Utility Income, Federated High Yield, AST
Phoenix Balanced Asset, AST Money Market, T. Rowe Price Asset Allocation,
T. Rowe Price International Equity, T. Rowe Price Natural Resources, Founders
Capital Appreciation, INVESCO Equity Income, PIMCO Total Return Bond, PIMCO
Limited Maturity Bond, AST Scudder International Bond, Berger Capital Growth);
(b) The Alger American Fund (portfolios - Growth, Small Capitalization, MidCap
Growth); and (c) Neuberger & Berman Advisers Management Trust (portfolio -
Partners).
In most jurisdictions, Account Value may be allocated to a fixed investment
option during the accumulation phase. Account Value so allocated earns a fixed
rate of interest for a specified period of time referred to as a Guarantee
Period. Guarantee Periods of different durations may be offered (see "Fixed
Investment Options"). Such an allocation and the interest earned is guaranteed
by us only if held to its Maturity Date. You are cautioned that with respect to
the fixed investment options during the accumulation phase, we do not guarantee
any minimum amount, because the value may be increased or decreased by a market
value adjustment (see "Account Value of the Fixed Allocations"). Assets
supporting such allocations in the accumulation phase are held in American
Skandia Life Assurance Corporation Separate Account D ("Separate Account D")
(see "Separate Accounts" and "Separate Account D").
We guarantee fixed annuity payments. We also guarantee any adjustable annuity
payments we may make available (see "Annuity Payments").
(continued on Page 2)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE
READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
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FOR FURTHER INFORMATION CALL 1-800-752-6342.
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Prospectus Dated: December 28, 1995 Statement of Additional Information
ASAP 4 PROS-(12/95) Dated: December 28, 1995
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Taxes on gains during the accumulation phase may be deferred until you begin to
take distributions from your Annuity. Distributions before age 59 1/2 may be
subject to a tax penalty. In the payout phase, a portion of each annuity payment
may be treated as a return of your "investment in the contract" until it is
completely recovered. Transfers between investment options are not subject to
taxation. The Annuity may also qualify for special tax treatment under certain
sections of the Code, including, but not limited to, Sections 401, 403 or 408
(see "Certain Tax Considerations").
PURCHASE PAYMENTS UNDER THESE ANNUITIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR BANK SUBSIDIARY AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
3
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(This page has been purposely left blank.)
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<TABLE>
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TABLE OF CONTENTS
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DEFINITIONS ............................................................ 6
HIGHLIGHTS ............................................................. 8
AVAILABLE INFORMATION .................................................. 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................ 10
CONTRACT EXPENSE SUMMARY ............................................... 10
EXPENSE EXAMPLES ....................................................... 13
CONDENSED FINANCIAL INFORMATION ........................................ 13
Unit Prices And Numbers Of Units ............................... 14
Yields On Money Market Sub-account ............................. 15
INVESTMENT OPTIONS ..................................................... 15
Variable Investment Options .................................... 15
Fixed Investment Options ....................................... 17
OPERATIONS OF THE SEPARATE ACCOUNTS .................................... 18
Separate Accounts .............................................. 18
Separate Account B ............................................. 18
Separate Account D ............................................. 19
INSURANCE ASPECTS OF THE ANNUITY ....................................... 20
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY ..................... 20
Maintenance Fee ................................................ 20
Tax Charges .................................................... 20
Transfer Fee ................................................... 21
Allocation Of Annuity Charges .................................. 21
CHARGES ASSESSED AGAINST THE ASSETS .................................... 21
Administration Charge .......................................... 21
Mortality and Expense Risk Charges ............................. 21
CHARGES OF THE UNDERLYING MUTUAL FUNDS ................................. 22
PURCHASING ANNUITIES ................................................... 22
Uses Of The Annuity ............................................ 22
Application And Initial Payment ................................ 22
Periodic Purchase Payments ..................................... 22
Right to Return the Annuity .................................... 23
Allocation of Net Purchase Payments ............................ 23
Balanced Investment Program .................................... 23
Ownership, Annuitant and Beneficiary Designations .............. 23
ACCOUNT VALUE AND SURRENDER VALUE ...................................... 24
Account Value in the Sub-accounts .............................. 22
Account Value of the Fixed Allocations ......................... 22
Additional Amounts in the Fixed Allocations .................... 23
RIGHTS, BENEFITS AND SERVICES .......................................... 24
Additional Purchase Payments ................................... 24
Changing Revocable Designations ................................ 24
Allocation Rules ............................................... 24
Transfers ...................................................... 25
Renewals .............................................. 25
Dollar Cost Averaging ................................. 26
Rebalancing ........................................... 26
Distributions .................................................. 27
Surrender ............................................. 27
Partial Withdrawals ................................... 27
Systematic Withdrawals ................................ 27
Minimum Distributions ................................. 28
Death Benefit ......................................... 28
Annuity Payments ...................................... 29
Qualified Plan Withdrawal Limitations ................. 30
Pricing of Transfers and Distributions ......................... 31
Voting Rights .................................................. 31
Transfers, Assignments or Pledges .............................. 31
Reports to You ................................................. 32
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<TABLE>
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THE COMPANY ....................................................................... 32
Lines of Business ......................................................... 32
Selected Financial Data ................................................... 32
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................... 33
Results of Operations ............................................ 33
Liquidity and Capital Resources .................................. 34
Segment Information .............................................. 34
Reinsurance ............................................................... 34
Reserves .................................................................. 34
Competition ............................................................... 34
Employees ................................................................. 35
Regulation ................................................................ 35
Executive Officers and Directors .......................................... 36
Executive Compensation .................................................... 39
Summary Compensation Table ................................................ 39
Long-Term Incentive Plans - Awards in the Last Fiscal Year ....... 39
Compensation of Directors ........................................ 40
Compensation Committee Interlocks and Insider Participation ...... 40
CERTAIN TAX CONSIDERATIONS ........................................................ 40
Our Tax Considerations .................................................... 40
Tax Considerations Relating to Your Annuity ............................... 40
Non-natural Persons .............................................. 40
Natural Persons .................................................. 40
Distributions .................................................... 40
Assignments and Pledges .......................................... 41
Penalty on Distributions ......................................... 41
Annuity Payments ................................................. 41
Gifts ............................................................ 42
Tax Free Exchanges ............................................... 42
Transfers Between Investment Options ............................. 42
Generation-Skipping Transfers .................................... 42
Diversification .................................................. 42
Federal Income Tax Withholding ................................... 42
Tax Considerations When Using Annuities in Conjunction with
Qualified Plans ......................................................... 42
Individual Retirement Programs ................................... 43
Tax Sheltered Annuities .......................................... 43
Corporate Pension and Profit-sharing Plans ....................... 43
H.R. 10 Plans .................................................... 43
Tax Treatment of Distributions from Qualified Annuities .......... 43
Section 457 Plans ................................................ 43
SALE OF THE ANNUITIES ............................................................. 43
Distribution .............................................................. 43
Advertising ............................................................... 44
OTHER MATTERS ..................................................................... 45
Deferral of Transactions .................................................. 45
Resolving Material Conflicts .............................................. 45
Modification .............................................................. 45
Misstatement of Age or Sex ................................................ 46
Ending the Offer .......................................................... 46
Indemnification ........................................................... 46
Legal Proceedings ......................................................... 46
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ............................... 46
FINANCIAL STATEMENTS .............................................................. 46
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION ....................................................................... 47
APPENDIX B SHORT DESCRIPTION OF THE UNDERLYING MUTUAL FUNDS PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES ................................................ 47
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DEFINITIONS: The following are key terms used in this Prospectus. Other terms
are defined in this Prospectus as they appear.
ACCOUNT VALUE is the value of each allocation to a Sub-account or a Fixed
Allocation prior to the Annuity Date, plus any earnings, and/or less any losses,
distributions and charges thereon, before assessment of any applicable
maintenance fee. Account Value is determined separately for each Sub-account and
for each Fixed Allocation, and then totaled to determine Account Value for your
entire Annuity. Account Value of each Fixed Allocation on other than such Fixed
Allocation's Maturity Date may be calculated using a market value adjustment.
ANNUITANT is the person upon whose life your Annuity is written.
ANNUITY is the type of annuity being offered pursuant to this Prospectus. It is
also, if issued, your individual Annuity, or with respect to a group Annuity,
the certificate evidencing your participation in a group Annuity. It also
represents an account we set up and maintain to track our obligations to you.
ANNUITY DATE is the date annuity payments are to commence.
ANNUITY YEARS are continuous 12-month periods commencing on the Issue Date and
each anniversary of the Issue Date.
APPLICATION is the enrollment form or application form we may require you to
submit for an Annuity.
BENEFICIARY is a person designated as the recipient of the death benefit.
CODE is the Internal Revenue Code of 1986, as amended from time to time.
CONTINGENT ANNUITANT is the person named to become the Annuitant on the
Annuitant's death prior to the Annuity Date.
CURRENT RATES are the interest rates we offer to credit to Fixed Allocations for
the duration of newly beginning Guarantee Periods under this Annuity. Current
Rates are contained in a schedule of rates established by us from time to time
for the Guarantee Periods then being offered. We may establish different
schedules for different classes and for different annuities.
FIXED ALLOCATION is an allocation of Account Value that is to be credited a
fixed rate of interest for a specified Guarantee Period during the accumulation
phase and is to be supported by assets in Separate Account D.
GUARANTEE PERIOD is a period of time during the accumulation phase during which
we credit a fixed rate of interest on a Fixed Allocation.
IN WRITING is in a written form satisfactory to us and filed at the Office.
INTERIM VALUE is, as of any particular date, the initial value of a Fixed
Allocation plus all interest credited thereon, less the sum of all previous
transfers and withdrawals of any type from such Fixed Allocation of such Interim
Value and interest thereon from the date of each withdrawal or transfer.
ISSUE DATE is the effective date of your Annuity.
MVA is a market value adjustment used in the determination of Account Value of
each Fixed Allocation as of a date other than such Fixed Allocation's Maturity
Date, and, where required by law, the 30 days prior to the Maturity Date.
MATURITY DATE is the last day in a Guarantee Period.
MINIMUM DISTRIBUTIONS are minimum amounts that must be distributed each year
from an Annuity if used in relation to certain qualified plans under the Code.
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NET PURCHASE PAYMENT is a Purchase Payment less any applicable charge for taxes.
OFFICE is our business office, American Skandia Life Assurance Corporation, One
Corporate Drive, P.O. Box 883, Shelton, Connecticut 06484.
OWNER is either an eligible entity or person named as having ownership rights in
relation to an Annuity issued as an individual contract. An Annuity may be
issued as a certificate evidencing interest in a group annuity contract. If so,
the rights, benefits and requirements of and the events relating to an Owner, as
described in this Prospectus, will be the rights, benefits and requirements of
and events relating to the person or entity designated as the participant in
such certificate.
PURCHASE PAYMENT is a cash consideration you give to us for certain rights,
privileges and benefits provided under an Annuity according to its terms.
SUB-ACCOUNT is a division of Separate Account B. We use Sub-accounts to
calculate variable benefits under this Annuity.
SYSTEMATIC WITHDRAWAL is one of a plan of periodic withdrawals of Account Value
during the accumulation phase. Such a plan is subject to our rules.
UNIT is a measure used to calculate your Account Value in a Sub-account prior to
the Annuity Date.
UNIT PRICE is used for calculating: (a) the number of Units allocated to a
Sub-account; and (b) the value of transactions into or out of a Sub-account or
benefits based on Account Value in a Sub-account prior to the Annuity Date. Each
Sub-account has its own Unit Price which will vary each Valuation Period to
reflect the investment experience of that Sub-account.
VALUATION DAY is every day the New York Stock Exchange is open for trading or
any other day that the Securities and Exchange Commission requires mutual funds
or unit investment trusts to be valued.
VALUATION PERIOD is the period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"We", "us", "our" or the Company means American Skandia Life Assurance
Corporation.
"You" or "your" means the Owner.
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HIGHLIGHTS: The following are only the highlights of the Annuity being offered
pursuant to this Prospectus. A more detailed description follows these
highlights.
(1) INVESTMENT OPTIONS: We currently offer multiple variable and, in
most jurisdictions, fixed investment options.
During the accumulation phase, we currently offer a number of variable
investment options. Each of these investment options is a Class 1 Sub-account of
Separate Account B. Each Sub-account invests exclusively in one underlying
mutual fund, or a portfolio of an underlying mutual fund. The underlying mutual
fund portfolios are managed by various investment advisors, and in certain
cases, various sub-advisors. A short description of the investment objectives
and policies is found in Appendix B. Certain variable investment options may not
be available in all jurisdictions.
As of the date of this Prospectus, the underlying mutual funds (and the
portfolios of such underlying mutual funds in which Sub-accounts offered
pursuant to this Prospectus invest) are: (a) American Skandia Trust (portfolios
- - JanCap Growth, Lord Abbett Growth and Income, Seligman Henderson International
Equity, Seligman Henderson International Small Cap, Federated Utility Income,
Federated High Yield, AST Phoenix Balanced Asset, AST Money Market, T. Rowe
Price Asset Allocation, T. Rowe Price International Equity, T. Rowe Price
Natural Resources, Founders Capital Appreciation, INVESCO Equity Income, PIMCO
Total Return Bond, PIMCO Limited Maturity Bond, AST Scudder International Bond,
Berger Capital Growth); (b) The Alger American Fund (portfolios - Growth, Small
Capitalization, MidCap Growth); and (c) Neuberger & Berman Advisers Management
Trust (portfolio - Partners).
In most jurisdictions, we also offer the option during the accumulation phase of
earning one or more fixed rates of interest on all or a portion of your Account
Value. As of the date of this Prospectus, we offered the option to make
allocations at interest rates that could be guaranteed for 1, 2, 3, 5, 7 and 10
years. Each such Fixed Allocation earns the fixed interest rate applicable as of
the date of such allocation. The interest rate credited to a Fixed Allocation
does not change during its Guarantee Period. You may maintain multiple Fixed
Allocations. From time-to-time we declare Current Rates for Fixed Allocations
beginning a new Guarantee Period. The rates we declare are subject to a minimum,
but we may declare higher rates. The minimum is determined in relation to an
index that we do not control.
The end of a Guarantee Period for a specific Fixed Allocation is called its
Maturity Date. At that time, the Guarantee Period normally "renews" and we begin
crediting interest for a new Guarantee Period lasting the same amount of time as
the one just ended. That Fixed Allocation then earns interest during the new
Guarantee Period at a rate that is not less than the one then being earned by
Fixed Allocations for that Guarantee Period by new Annuity purchasers in the
same class. You also may choose a different Guarantee Period from among those we
are then currently making available or you may transfer that Account Value to a
variable Sub-account.
In the payout phase, you may elect fixed annuity payments based on our then
current annuity rates. We also may make available adjustable annuity rates.
For more information, see the section entitled Investment Options, including
the following subsections: (a) Variable Investment Options; and (b) Fixed
Investment Options.
(2) OPERATIONS OF THE SEPARATE ACCOUNTS: In the accumulation phase, the
assets supporting guarantees we make in relation to Fixed Allocations are held
in our Separate Account D. This is a "non-unitized" separate account. However,
values and benefits calculated on the basis of Fixed Allocations are guaranteed
by our general account. In the payout phase, fixed annuity payments and any
adjustable annuity payments we may make available are also guaranteed by our
general account, but the assets supporting such payments are not held in
Separate Account D.
In the accumulation phase, the assets supporting the Account Values maintained
in the Sub-accounts are held in our Separate Account B. These are Class 1
Sub-accounts of Separate Account B. Values and benefits based on these
Sub-accounts are not guaranteed and will vary with the investment performance of
the underlying mutual funds or fund portfolios, as applicable.
For more information, see the section entitled Operations of the Separate
Accounts, including the following subsections: (a) Separate Accounts; (b)
Separate Account B; and (c) Separate Account D.
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(3) INSURANCE ASPECTS OF THE ANNUITY: There are insurance risks which we
bear in relation to the Annuity. Formore information, see the section entitled
Insurance Aspects of the Annuity.
(4) CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY: The Annuity
charges which are assessed or may be assessable under certain circumstances are
the maintenance fee, a charge for taxes and a transfer fee. These charges are
allocated according to our rules. We may also charge for certain special
services. For more information, see the section entitled Charges Assessed or
Assessable Against the Annuity, including the following subsections: (a)
Maintenance Fee; (b) Tax Charges; (c) Transfer Fee; and (d) Allocation of
Annuity Charges.
(5) CHARGES ASSESSED AGAINST THE ASSETS: The charges assessed against
assets in the Sub-accounts are the administration charge and the mortality and
expense risk charges. There are no charges deducted from the assets supporting
Fixed Allocations. For more information, see the section entitled Charges
Assessed Against the Assets, including the following subsections: (a)
Administration Charge; and (b) Mortality and Expense Risk Charges.
(6) CHARGES OF THE UNDERLYING MUTUAL FUNDS: Each underlying mutual fund
assesses various charges, including charges for investment management and
investment advisory fees. These charges generally differ between portfolios
within the same underlying mutual fund. You will find additional details in each
fund prospectus and its statement of additional information.
(7) PURCHASING ANNUITIES: Annuities are available for multiple uses,
including as a funding vehicle for various retirement programs which qualify for
special treatment under the Code. We may require a properly completed
Application, an acceptable Purchase Payment, and any other materials under our
underwriting rules before we agree to issue an Annuity. You have the right to
return an Annuity within a "free-look" period if you are not satisfied with it.
In most jurisdictions, the initial Purchase Payment and any Purchase Payments
received during the "free-look" period are allocated according to your
instructions. In jurisdictions that require a "free-look" provision such that,
if the Annuity is returned under that provision, we must return at least your
Purchase Payments less any withdrawals, we temporarily allocate such Purchase
Payments to the AST Money Market Sub-account. Where permitted by law in such
jurisdictions, we will allocate such Purchase Payments according to your
instructions, without any temporary allocation to the AST Money Market
Sub-account, if you execute a return waiver. We offer a balanced investment
program in relation to your initial Purchase Payment. Certain designations must
be made, including an Owner and an Annuitant. You may also make certain other
designations that apply to the Annuity if issued. These designations include, a
contingent Owner, a Contingent Annuitant (Contingent Annuitants may be required
in conjunction with certain uses of the Annuity), a Beneficiary, and a
contingent Beneficiary. See the section entitled Purchasing Annuities ,
including the following subsections: (a) Uses of the Annuity; (b) Application
and Initial Payment; (c) Periodic Purchase Payments; (d) Right to Return the
Annuity; (e) Allocation of Net Purchase Payments; (f) Balanced Investment
Program; and (g) Ownership, Annuitant and Beneficiary Designations.
(8) ACCOUNT VALUE: In the accumulation phase your Annuity has an Account
Value. Your total Account Value as of a particular date is the sum of your
Account Value in each Sub-account and in each Fixed Allocation. To determine
your Account Value in each Sub-account we multiply the Unit Price as of the
Valuation Period for which the calculation is being made times the number of
Units attributable to you in that Sub-account as of that Valuation Period. We
also determine your Account Value separately for each Fixed Allocation. A Fixed
Allocation's Account Value as of a particular date is determined by multiplying
its then current Interim Value times the MVA. No MVA applies to a Fixed
Allocation as of its Maturity Date. Under certain circumstances, the MVA formula
may change. Upon surrender, the Account Value payable from any Sub-accounts is
reduced by the maintenance fee. For more information, see the section entitled
Account Value, including the following subsections: (a) Account Value in the
Sub-accounts; (b) Account Value of Fixed Allocations; and (c) Additional Amounts
in the Fixed Allocations.
(9) RIGHTS, BENEFITS AND SERVICES: You have a number of rights and
benefits under an Annuity once issued. We also currently provide a number of
services to Owners. These rights, benefits and services are subject to a number
of rules and conditions. These rights, benefits and services include, but are
not limited to, those described in this Prospectus. We accept additional
Purchase Payments during the accumulation phase. We support certain periodic
Purchase Payment programs, subject to our rules. You may change revocable
designations. You may transfer Account Values between investment options.
Transfers in excess of 12 per year
9
<PAGE> 13
are subject to a fee. We offer dollar cost averaging and rebalancing during the
accumulation phase. During the accumulationphase, surrender and partial
withdrawals are available. In the accumulation phase we offer Systematic
Withdrawals and, forAnnuities used in qualified plans, Minimum Distributions. We
offer fixed annuity options, and may offer adjustable annuity options, that can
guarantee payments for life. In the accumulation phase, a death benefit may be
payable. You may transfer or assign your Annuity unless such rights are limited
in conjunction with certain uses of the Annuity. You may exercise certain voting
rights in relation to the underlying mutual fund portfolios in which the
Sub-accounts invest. You have the right to receive certain reports periodically.
For additional information, see the section entitled Rights, Benefits and
Services including the following subsections: (a) Additional Purchase Payments;
(b) Changing Revocable Designations; (c) Allocation Rules; (d) Transfers; (e)
Renewals; (f) Dollar Cost Averaging; (g) Rebalancing (h) Distributions
(including: (i) Surrender; (ii) Partial Withdrawals; (iii) Systematic
Withdrawals; (iv) Minimum Distributions; (v) Death Benefit; (vi) Annuity
Payments; and (vii) Qualified Plan Withdrawal Limitations); (i) Pricing of
Transfers and Distributions (j) Voting Rights; (k) Transfers, Assignments and
Pledges; and (l) Reports to You.
(10) THE COMPANY: American Skandia Life Assurance Corporation is a
wholly owned subsidiary of American Skandia Investment Holding Corporation,
whose indirect parent is Skandia Insurance Company Ltd. Skandia Insurance
Company Ltd. is a Swedish company that holds a number of insurance companies in
many countries. The predecessor to Skandia Insurance Company Ltd. commenced
operations in 1855. For more information, see the section entitled The Company
and the following subsections: (a) Lines of Business; (b) Selected Financial
Data; (c) Management's Discussion and Analysis of Financial Condition and
Results of Operations (including: (i) Results of Operations; (ii) Liquidity and
Capital Resources; and (iii) Segment Information); (d) Reinsurance; (e)
Reserves; (f) Competition; (g) Employees; (h) Regulation; (i) Executive Officer
and Directors; and (j) Executive Compensation (including: (i) Summary
Compensation Table; (ii) Long Term Incentive Plans-Awards in the Last Fiscal
Year; (iii) Compensation of Directors; and (iv) Compensation Committee
Interlocks and Insider Participation).
AVAILABLE INFORMATION: A Statement of Additional Information is available from
us without charge upon request by writing American Skandia Life Assurance
Corporation, Concierge Desk, P.O. Box 883, Shelton, CT 06484. It includes
further information, as described in the section of this Prospectus entitled
"Contents of the Statement of Additional Information". This Prospectus is part
of the registration statements we filed with the Securities and Exchange
Commission ("SEC") regarding this offering. Additional information on us and
this offering is available in those registration statements and the exhibits
thereto. You may obtain copies of these materials at the prescribed rates from
the SEC's Public Reference Section, 450 Fifth Street N.W., Washington, D.C.,
20549. You may inspect and copy those registration statements and the exhibits
thereto at the SEC's public reference facilities at the above address, Rm. 1024,
and at the SEC's Regional Offices, 7 World Trade Center, New York, NY, and the
Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago, IL.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE: To the extent and only to the
extent that any statement in a document incorporated by reference into this
Prospectus is modified or superseded by a statement in this Prospectus or in a
later-filed document, such statement is hereby deemed so modified or superseded
and not part of this Prospectus.
We furnish you without charge a copy of any or all of the documents incorporated
by reference in this Prospectus, including any exhibits to such documents which
have been specifically incorporated by reference. We do so upon receipt of your
written or oral request. Please address your request to American Skandia Life
Assurance Corporation, Attention: Concierge Desk, P.O. Box 883, Shelton,
Connecticut, 06484. Our phone number is 1-(800) 752-6342.
CONTRACT EXPENSE SUMMARY: The summary provided below includes information
regarding the expenses for your Annuity, for the Sub-accounts and for the
underlying mutual fund portfolios. More detail regarding the expenses of the
underlying mutual funds and their portfolios may be found either in the
prospectuses for such mutual funds or in the annual reports of such mutual
funds. The expenses of our Sub-accounts (not those of the underlying mutual fund
portfolios in which our Sub-accounts invest) are the same no matter which
Sub-account you choose. Therefore, these expenses are only shown once below.
YOUR TRANSACTION EXPENSES
10
<PAGE> 14
<TABLE>
<S> <C>
Sales Charge None
Annual Maintenance Fee Smaller of $30 or 2% of Account Value
Tax Charges Dependent on the requirements of the applicable jurisdiction
Transfer Fee $10 for each transfer after the twelfth in any Annuity Year
</TABLE>
ANNUAL EXPENSES OF THE SUB-ACCOUNTS (AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges 1.25%
Administration Charge 0.15%
Total Annual Expenses of the Sub-accounts 1.40%
</TABLE>
11
<PAGE> 15
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Unless otherwise shown, the expenses shown below are for the year ending
December 31, 1994. "N/A" shown below indicates that no entity has agreed to
reimburse the particular expense indicated. "+" indicates that no reimbursement
was provided in 1994, but that the underlying mutual fund has indicated to us
that current arrangements (which may change) provide for reimbursement.
<TABLE>
<CAPTION>
Manage- Manage- Total Total
ment ment Other Other Annual Annual
Fee Fee Expenses Expenses Expense Expenses
after without after without after without
any any any any any any
applicable applicable applicable applicable applicable applicable
reimburse- reimburse- reimburse- reimburse- reimburse- reimburse
ment ment ment ment ment ment
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American Skandia Trust
JanCap Growth N/A 0.90% + 0.28% + 1.18%
Lord Abbett Growth
and Income N/A 0.75% + 0.31% + 1.06%
Seligman Henderson
International Equity(1) 0.90% 1.00% 0.32% 0.32% 1.22% 1.32%
Seligman Henderson
International Small Cap(2) N/A 1.00% 0.75% 1.58% 1.75% 2.58%
Federated Utility
Income N/A 0.71% + 0.28% + 0.99%
Federated High Yield(3) N/A 0.75% 0.40% 0.59% 1.15% 1.34%
T. Rowe Price
Asset Allocation(3) N/A 0.85% 0.40% 0.62% 1.25% 1.47%
T. Rowe Price
International Equity(3) N/A 1.00% 0.75% 0.77% 1.75% 1.77%
T. Rowe Price
Natural Resources(2) N/A 0.90% 0.45% 1.45% 1.35% 2.35%
Founders Capital Appreciation(3) N/A 0.90% 0.40% 0.65% 1.30% 1.55%
INVESCO Equity Income(3) N/A 0.75% + 0.39% + 1.14%
PIMCO Total Return Bond(3) N/A 0.65% + 0.37% + 1.02%
PIMCO Limited Maturity Bond(2) N/A 0.65% 0.40% 0.86% 1.05% 1.51%
AST Phoenix Balanced Asset N/A 0.71% + 0.28% + 0.99%
AST Money Market 0.49% 0.50% 0.15% 0.26% 0.64% 0.76%
AST Scudder International Bond(4) N/A 1.00% + 0.68% + 1.68%
Berger Capital Growth(5) N/A 0.75% 0.50% 0.95% 1.25% 1.70%
The Alger American Fund
Growth N/A 0.75% + 0.11% + 0.86%
Small Capitalization N/A 0.85% + 0.11% + 0.96%
MidCap Growth N/A 0.80% + 0.17% + 0.97%
Neuberger & Berman Advisers
Management Trust
Partners(6) N/A 0.80% + 0.50% + 1.30%
<FN>
(1) This portfolio was formerly known as the Henderson International Growth
Portfolio.
(2) These portfolios commenced operations on May 1, 1995, therefore expenses
are estimated and annualized.
(3) These portfolios commenced operations on January 4, 1994, therefore
expenses are annualized.
(4) This portfolio commenced operations in May, 1994, therefore expenses are
annualized.
(5) This portfolio commenced operations on October 20, 1994, therefore expenses
are annualized.
</TABLE>
12
<PAGE> 16
(6) This portfolio commenced operations on March 22, 1994, therefore expenses
are annualized.
The expenses of the underlying mutual fund portfolios either are currently being
partially reimbursed or may be partially reimbursed in the future. Management
Fees, Other Expenses and Total Annual Expenses are provided above on both a
reimbursed and not reimbursed basis, if applicable. See the prospectuses or
statements of additional information of the underlying mutual funds for details.
EXPENSE EXAMPLES: The examples which follow are designed to assist you in
understanding the various costs and expenses you will bear directly or
indirectly if you maintain Account Value in the Sub-accounts. The examples
reflect expenses of our Sub- accounts, as well as those for the underlying
mutual fund portfolios.
The examples shown assume that: (a) all your Account Value is maintained only in
Sub-accounts; (b) fees and expenses remain constant; (c) there are no
withdrawals of Account Value during the period shown; (d) there are no transfers
or other transactions subject to a fee during the period shown; (e) no tax
charge applies; and (f) the expenses throughout the period for the underlying
mutual fund portfolios will be the lower of the expenses without any applicable
reimbursement or expenses after any applicable reimbursement, as shown above in
the section entitled Contract Expense Summary.
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
Sub-accounts are referred to below by their specific names.
EXAMPLES (AMOUNTS SHOWN ARE ROUNDED TO THE NEAREST DOLLAR)
Whether or not you surrender your Annuity at the end of the applicable time
period or begin taking annuity payments at such time, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
After:
Sub-accounts
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
Seligman Henderson International Equity 28 85 144 304
Seligman Henderson International Small Cap 33 101 171 355
LA Growth and Income 26 80 136 288
JanCap Growth 27 83 142 300
Fed Utility Inc 25 77 132 280
Fed High Yield 27 83 141 298
AST Phoenix Balanced Asset 25 77 132 280
AST Money Market 22 67 115 246
T. Rowe Price Asset Allocation 28 86 146 308
T. Rowe Price International Equity 33 101 171 355
T. Rowe Price Natural Resources 29 89 151 318
Founders Capital Appreciation 28 87 148 311
INVESCO Equity Income 27 82 140 297
PIMCO Total Return Bond 26 79 134 284
PIMCO Limited Maturity Bond 26 79 135 287
AST Scudder International Bond 32 98 167 348
Berger Capital Growth 28 86 146 308
AA Small Capitalization 25 77 131 278
AA Growth 24 74 126 268
AA MidCap Growth 25 77 132 280
NB Partners 28 87 148 311
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units in the
Sub-accounts are shown below for all Sub-accounts that commenced operations
prior to 1995, as is yield information on the AST Money Market Sub-account. All
of these Sub- accounts were available during the periods shown as investment
options for other variable annuities we offer pursuant to different
prospectuses. The charges assessed against the
13
<PAGE> 17
Sub-accounts under the terms of those other variable annuities are the same as
the charges assessed against such Sub-accountsunder 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 were in operation prior to 1995 and are being offered
pursuant to this Prospectus or which we offer pursuant to certain other
prospectuses; and (b) the number of Units outstanding in each such Sub-account
as of the dates shown. The year in which operations commenced in each such
Sub-account is noted in parentheses. The portfolios in which a particular
Sub-account invests may or may not have commenced operations prior to the date
such Sub- account commenced operations. The initial offering price for each
Sub-account was $10.00.
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
AA Seligman
Small AA AST Henderson
Capitali- AA MidCap Money International JanCap
zation Growth Growth Market Equity* Growth
(1988) (1988) (1993) (1992) (1989) (1992)
---------- --------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/94 9,356,764 5,614,760 4,308,374 27,491,389 14,043,215 22,354,170
as of 12/31/93 7,101,658 2,997,458 1,450,892 11,422,783 9,063,464 13,603,637
as of 12/31/92 4,846,024 1,482,037 0 457,872 1,948,773 1,476,139
as of 12/31/91 2,172,189 559,779 0 0 1,092,902 0
as of 12/31/90 419,718 82,302 0 0 398,709 0
as of 12/31/89 35,438 6,900 0 0 29,858 0
as of 12/31/88 3,000 0 0 0 0 0
Unit Price
as of 12/31/94 $27.95 $23.18 $13.34 $10.35 $16.80 $10.91
as of 12/31/93 29.65 23.18 13.74 10.12 16.60 11.59
as of 12/31/92 26.54 19.19 0 10.01 12.37 10.51
as of 12/31/91 26.00 17.32 0 0 13.69 0
as of 12/31/90 16.74 12.51 0 0 12.98 0
as of 12/31/89 15.61 12.19 0 0 13.64 0
as of 12/31/88 9.63 9.96 0 0 0 0
<FN>
* Formerly known as the HI International Growth Sub-account.
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
LA AST T. Rowe T. Rowe
Growth Phoenix Fed Fed Price Price
and Balanced Utility High Asset International
Income Asset Income Yield Allocation Equity
(1992) (1993) (1993) (1994) (1994) (1994)
--------- ---------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/94 7,479,449 13,986,604 7,177,232 2,106,791 2,320,063 11,166,758
as of 12/31/93 4,058,228 8,743,758 5,390,887 0 0 0
as of 12/31/92 956,949 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0
Unit Price
as of 12/31/94 $11.98 $10.34 $9.81 $9.56 $9.80 $9.49
as of 12/31/93 11.88 10.47 10.69 0 0 0
as of 12/31/92 10.60 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0
</TABLE>
14
<PAGE> 18
<TABLE>
LA AST T. Rowe T. Rowe
Growth Phoenix Fed Fed Price Price
and Balanced Utility High Asset International
Income Asset Income Yield Allocation Equity
(1992) (1993) (1993) (1994) (1994) (1994)
--------- ---------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/90 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
PIMCO AST
Founders INVESCO Total Scudder Berger
Capital Equity Return International Capital
Appreciation Income Bond Bond Growth
(1994) (1994) (1994) (1994) (1994)
------------ --------- --------- ------------- -------
<S> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/94 2,575,105 6,633,333 4,577,708 1,562,364 301,267
as of 12/31/93 0 0 0 0 0
as of 12/31/92 0 0 0 0 0
as of 12/31/91 0 0 0 0 0
as of 12/31/90 0 0 0 0 0
as of 12/31/89 0 0 0 0 0
as of 12/31/88 0 0 0 0 0
Unit Price
as of 12/31/94 $10.69 $9.61 $9.61 $9.59 $9.94
as of 12/31/93 0 0 0 0 0
as of 12/31/92 0 0 0 0 0
as of 12/31/91 0 0 0 0 0
as of 12/31/90 0 0 0 0 0
as of 12/31/89 0 0 0 0 0
as of 12/31/88 0 0 0 0 0
</TABLE>
The financial statements of the Sub-accounts being offered to you are found in
the Statement of Additional Information.
YIELDS ON MONEY MARKET SUB-ACCOUNT: Shown below are the current and
effective yields for a hypothetical contract. The yield is calculated based on
the performance of the AST Money Market Sub-account during the last seven days
of the calendar year ending prior to the date of this Prospectus. At the
beginning of the seven day period, the hypothetical contract had a balance of
one Unit. The current and effective yields reflect the recurring charges
against the Sub-account. Please note that current and effective yield
information will fluctuate. This information may not provide a basis for
comparisons with deposits in banks or other institutions which pay a fixed
yield over a stated period of time, or with investment companies which do not
serve as underlying funds for variable annuities.
SUB-ACCOUNT CURRENT YIELD EFFECTIVE YIELD
----------- ------------- ---------------
AST Money Market 4.39% 4.49%
INVESTMENT OPTIONS: We offer a range of variable and fixed options as ways to
invest your Account Value. COMPENSATION TO YOUR REPRESENTATIVE MAY DEPEND ON THE
INVESTMENT OPTIONS SELECTED (SEE SALE OF THE ANNUITIES).
VARIABLE INVESTMENT OPTIONS: During the accumulation phase, we offer a
number of Sub-accounts as variable investment options. These are all Class 1
Sub-accounts of American Skandia Life Assurance Corporation Variable Account B
("Separate Account B"). Each of these Sub-accounts invests exclusively in one
underlying mutual fund, or a portfolio of an underlying mutual fund. As of the
date of this Prospectus, our Sub-accounts and the underlying mutual funds or
portfolios in which they invest are as follows:
<TABLE>
UNDERLYING MUTUAL FUND: THE ALGER AMERICAN FUND
Sub-account Underlying Mutual Fund Portfolio
----------- --------------------------------
<S> <C>
AA Small Capitalization Small Capitalization
AA Growth Growth
AA Midcap Growth MidCap Growth
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND: NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Sub-account Underlying Mutual Fund Portfolio
----------- --------------------------------
<S> <C>
NB Partners Partners
UNDERLYING MUTUAL FUND: AMERICAN SKANDIA TRUST
Sub-account Underlying Mutual Fund Portfolio
----------- --------------------------------
Seligman Henderson International Equity Seligman Henderson International Equity
Seligman Henderson International Seligman Henderson International
Small Cap Small Cap
LA Growth and Income Lord Abbett Growth and Income
JanCap Growth JanCap Growth
Fed Utility Inc Federated Utility Income
Fed High Yield Federated High Yield
AST Phoenix Balanced Asset AST Phoenix Balanced Asset
AST Money Market AST Money Market
T. Rowe Price Asset Allocation T. Rowe Price Asset Allocation
T. Rowe Price International Equity T. Rowe Price International Equity
T. Rowe Price Natural Resources T. Rowe Price Natural Resources
Founders Capital Appreciation Founders Capital Appreciation
INVESCO Equity Income INVESCO Equity Income
PIMCO Total Return Bond PIMCO Total Return Bond
PIMCO Limited Maturity Bond PIMCO Limited Maturity Bond
AST Scudder International Bond AST Scudder International Bond
Berger Capital Growth Berger Capital Growth
</TABLE>
Certain Sub-accounts may not be available in all jurisdictions. If and when we
obtain approval of the applicable authorities to make such variable investment
options available, we will notify Owners of the availability of such
Sub-accounts.
We may make other underlying mutual funds available by creating new
Sub-accounts. Additionally, new portfolios may be made available by the creation
of new Sub-accounts from time to time. Such a new portfolio of an underlying
mutual fund may be disclosed in its prospectus. However, addition of a portfolio
does not require us to create a new Sub-account to invest in that portfolio. We
may take other actions in relation to the Sub-accounts and/or Separate Account B
(see "Modifications").
Each underlying mutual fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment company.
Each underlying mutual fund or portfolio thereof may or may not be diversified
as defined in the 1940 Act. As of the date of this Prospectus, the portfolios in
which Sub-accounts offered pursuant to this Prospectus invest are those shown
above. A summary of the investment objectives and policies of such underlying
mutual fund portfolios is found in Appendix B. The trustees or directors, as
applicable, of an underlying mutual fund may add, eliminate or substitute
portfolios from time to time. Generally, each portfolio issues a separate class
of shares. Shares of the underlying mutual fund portfolios are available to
separate accounts of life insurance companies offering variable annuity and
variable life insurance products. The shares also may be made available, subject
to obtaining all required regulatory approvals, for direct purchase by various
pension and retirement savings plans that qualify for preferential tax treatment
under the Code.
The investment objectives, policies, charges, operations, the attendant risks
and other details pertaining to each underlying mutual fund portfolio are
described in the prospectus of each underlying mutual fund and the statements of
additional information for such underlying mutual fund. Also included in such
information is the investment policy of each mutual fund or portfolio regarding
the acceptable ratings by recognized rating services for bonds and other debt
obligations. There can be no guarantee that any underlying mutual fund or
portfolio will meet its investment objectives.
16
<PAGE> 20
Shares of the underlying mutual funds may be available to variable life
insurance and variable annuity separate accounts ofother insurance companies.
Possible consequences of this multiple availability are discussed in the
subsection entitled Resolving Material Conflicts.
The prospectus for any underlying mutual fund or funds being considered by you
should be read in conjunction herewith. A copy of each prospectus may be
obtained without charge from us by calling our Concierge Desk, 1-800-752-6342 or
writing to us at P.O. Box 883, Attention: Concierge Desk, Shelton, Connecticut,
06484-0883.
FIXED INVESTMENT OPTIONS: For the payout phase you may elect fixed
annuity payments based on our then current annuity rates. The discussion below
describes the fixed investment options in the accumulation phase.
As of the date of this Prospectus we offer in most jurisdictions in which the
Annuity is available Fixed Allocations with Guarantee Periods of 1, 2, 3, 5, 7
and 10 years. Each such Fixed Allocation is accounted for separately. Each Fixed
Allocation earns a fixed rate of interest throughout a set period of time called
a Guarantee Period. Multiple Fixed Allocations are permitted, subject to our
allocation rules. The duration of a Guarantee Period may be the same or
different from the duration of the Guarantee Periods of any of your prior Fixed
Allocations.
We may or may not be able to obtain approval in the future in certain
jurisdictions of endorsements to individual or group annuities that include the
type of Fixed Allocations offered pursuant to this Prospectus. If such approval
is obtained, we may take those steps needed to make such Fixed Allocations
available to purchasers to whom Annuities were issued prior to the date of such
approval.
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those which were available
when your Annuity was issued. We also reserve the right at any time to stop
accepting new allocations, transfers or renewals for a particular Guarantee
Period. Such an action may have an impact on the MVA (see "Account Value of the
Fixed Allocations").
A Guarantee Period for a Fixed Allocation begins: (a) when all or part of a Net
Purchase Payment is allocated for that particular Guarantee Period; (b) upon
transfer of any of your Account Value to a Fixed Allocation for that particular
Guarantee Period; or (c) when a Guarantee Period attributable to a Fixed
Allocation "renews" after its Maturity Date.
We declare the rates of interest applicable during the various Guarantee Periods
offered. Declared rates are effective annual rates of interest. The rate of
interest applicable to a Fixed Allocation is the one in effect when its
Guarantee Period begins. The rate is guaranteed throughout the Guarantee Period.
We inform you of the interest rate applicable to a Fixed Allocation, as well as
its Maturity Date, when we confirm the allocation. We declare interest rates
applicable to new Fixed Allocations from time-to-time. Any new Fixed Allocation
in an existing Annuity is credited interest at a rate not less than the rate we
are then crediting to Fixed Allocations for the same Guarantee Period selected
by new Annuity purchasers in the same class.
To the extent permitted by law, we reserve the right, from time to time, to
increase interest rates offered to the class of Owners who, during the term of
such offering, choose to participate in various services we make available. This
may include, but is not limited to, Owners who elect to use dollar cost
averaging from Fixed Allocations (see Dollar Cost Averaging) or the balanced
investment program (see Balanced Investment Program). We may do so at our sole
discretion.
The interest rates we credit are subject to a minimum. We may declare a higher
rate. The minimum is based on both an INDEX and a REDUCTION to the interest rate
determined according to the index.
The INDEX is based on the published rate for certificates of indebtedness
(bills, notes or bonds, depending on the term of indebtedness) of the United
States Treasury at the most recent Treasury auction held at least 30 days prior
to the beginning of the applicable Fixed Allocation's Guarantee Period. The term
(length of time from issuance to maturity) of the certificates of indebtedness
upon which the index is based is the same as the duration of the Guarantee
Period. If no certificates of indebtedness are available for such term, the next
shortest term is used. If the United States Treasury's auction program is
discontinued, we will substitute indexes which in our opinion are comparable. If
required, implementation of such substitute indexes will be subject to approval
by the Securities and Exchange Commission and the Insurance Department of the
jurisdiction in which your Annuity
17
<PAGE> 21
was delivered. (For Annuities issued as certificates of participation in a group
contract, it is our expectation thatapproval of only the jurisdiction in which
such group contract was delivered applies.)
The REDUCTION used in determining the minimum interest rate is two and one
quarter percent of interest (2.25%).
Where required by the laws of a particular jurisdiction, a specific minimum
interest rate, compounded yearly, will apply should the index less the reduction
be less than the specific minimum interest rate applicable to that jurisdiction.
WE MAY CHANGE THE INTEREST RATES WE CREDIT NEW FIXED ALLOCATIONS AT ANY TIME.
Any such change does not have an impact on the rates applicable to Fixed
Allocations with Guarantee Periods that began prior to such change. However,
such a change will affect the MVA (see "Account Value of the Fixed
Allocations").
We have no specific formula for determining the interest rates we declare. Rates
may differ between classes and between types of annuities we offer, even for
guarantees of the same duration starting at the same time. We expect our
interest rate declarations for Fixed Allocations to reflect the returns
available on the type of investments we make to support the various classes of
annuities supported by the assets in Separate Account D. However, we may also
take into consideration in determining rates such factors including, but not
limited to, the durations offered by the annuities supported by the assets in
Separate Account D, regulatory and tax requirements, the liquidity of the
secondary markets for the type of investments we make, commissions,
administrative expenses, investment expenses, our mortality and expense risks in
relation to Fixed Allocations, general economic trends and competition. OUR
MANAGEMENT MAKES THE FINAL DETERMINATION AS TO INTEREST RATES TO BE CREDITED. WE
CANNOT PREDICT THE RATES WE WILL DECLARE IN THE FUTURE.
OPERATIONS OF THE SEPARATE ACCOUNTS: The assets supporting our obligations under
the Annuities may be held in various accounts, depending on the obligation being
supported. In the accumulation phase, assets supporting Account Values are held
in separate accounts established under the laws of the State of Connecticut. In
the payout phase, assets supporting fixed annuity payments and any adjustable
annuity payments we make available are held in our general account.
SEPARATE ACCOUNTS: We are the legal owner of assets in the separate
accounts. Income, gains and losses, whether or not realized, from assets
allocated to these separate accounts, are credited to or charged against each
such separate account in accordance with the terms of the annuities supported by
such assets without regard to our other income, gains or losses or to the
income, gains or losses in any other of our separate accounts. We will maintain
assets in each separate account with a total market value at least equal to the
reserve and other liabilities we must maintain in relation to the annuity
obligations supported by such assets. These assets may only be charged with
liabilities which arise from such annuities. This may include Annuities offered
pursuant to this Prospectus or certain other annuities we may offer. The
investments made by separate accounts are subject to the requirements of
applicable state laws. These investment requirements may differ between those
for separate accounts supporting variable obligations and those for separate
accounts supporting fixed obligations.
SEPARATE ACCOUNT B: In the accumulation phase, the assets supporting
obligations based on allocations to the variable investment options are held in
our Separate Account B. Separate Account B consists of multiple Sub-accounts.
Separate Account B was established by us pursuant to Connecticut law. Separate
Account B also holds assets of other annuities issued by us with values and
benefits that vary according to the investment performance of Separate Account
B.
The Sub-accounts offered pursuant to this Prospectus are all Class 1
Sub-accounts of Separate Account B. Each class of Sub- accounts in Separate
Account B have a different level of charges assessed against such Sub-accounts.
The amount of our obligations in relation to allocations to the Sub-accounts is
based on the investment performance of such Sub-accounts. However, the
obligations themselves are our general corporate obligations.
Separate Account B is registered with the SEC under the 1940 Act as a unit
investment trust, which is a type of investment company. This does not involve
any supervision by the SEC of the investment policies, management
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<PAGE> 22
or practices of Separate Account B. Each Sub-account invests only in a single
mutual fund or mutual fund portfolio.
The only Sub-accounts available for allocation of your Account Value are those
offered pursuant to this Prospectus. Persons interested in our other annuities
may be offered the same or different Sub-accounts of Separate Account B or any
of our other separate accounts. Such sub-accounts may invest in some or all of
the same underlying mutual funds or portfolios of such underlying mutual funds
as the Sub-accounts offered pursuant to this Prospectus. As of the date of this
Prospectus, the Annuities offered pursuant to this Prospectus and annuities
offered pursuant to a number of other prospectuses maintained assets in Class 1
Sub-accounts. We may offer additional annuities that maintain assets in Class 1
Sub-accounts. In addition, some of the Class 1 Sub-accounts may invest in
underlying mutual funds or underlying mutual fund portfolios in which Sub-
accounts in other classes of Separate Account B invest.
You will find additional information about these underlying mutual funds and
portfolios in the prospectuses for such funds. Portfolios added to the
underlying mutual funds may or may not be offered through added Sub-accounts.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to add Sub-accounts,
eliminate Sub-accounts, to combine Sub-accounts, or to substitute underlying
mutual funds or portfolios of underlying mutual funds.
Values and benefits based on allocations to the Sub-accounts will vary with the
investment performance of the underlying mutual funds or fund portfolios, as
applicable. We do not guarantee the investment results of any Sub-account, nor
is there any assurance that the Account Value allocated to the Sub-accounts will
equal the amounts allocated to the Sub-accounts as of any time other than the
Valuation Period of such allocation. You bear the entire investment risk.
SEPARATE ACCOUNT D: In the accumulation phase, assets supporting our
obligations based on Fixed Allocations are held in Separate Account D, which is
a "non-unitized" separate account. Such obligations are based on the interest
rates we credit to Fixed Allocations and the terms of the Annuities. These
obligations do not depend on the investment performance of the assets in
Separate Account D. Separate Account D was established by us pursuant to
Connecticut law.
There are no discrete units in Separate Account D. No party with rights under
any annuity nor any group contract owner participates in the investment gain or
loss from assets belonging to Separate Account D. Such gain or loss accrues
solely to us. We retain the risk that the value of the assets in Separate
Account D may drop below the reserves and other liabilities we must maintain.
Should the value of the assets in Separate Account D drop below the reserve and
other liabilities we must maintain in relation to the annuities supported by
such assets, we will transfer assets from our general account to Separate
Account D to make up the difference. We have the right to transfer to our
general account any assets of Separate Account D in excess of such reserves and
other liabilities. We maintain assets in Separate Account D supporting a number
of annuities we offer.
The staff of the Securities and Exchange Commission have raised the issue of
whether the existence of a separate account supporting Fixed Allocations such as
Separate Account D, the assets of which are not chargeable with liabilities
arising out of any other business we conduct, is an investment company under the
1940 Act. If it is determined that Separate Account D is an investment company,
it will be required to register and comply with the requirements of the 1940 Act
unless Separate Account D seeks and obtains an exemption from such requirements.
We have applied for an exemption without prejudice to our position that Separate
Account D is not an investment company and that such exemptive relief is not
required. Such application for exemption may or may not be granted.
If you surrender, withdraw or transfer Account Value from a Fixed Allocation
before the end of its Guarantee Period, you bear the risk inherent in the MVA
(see "Account Value of the Fixed Allocations"). The Account Value of a Fixed
Allocation is guaranteed on its Maturity Date to be its then current Interim
Value.
We operate Separate Account D in a fashion designed to meet the obligations
created by Fixed Allocations. Factors affecting these operations include the
following:
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(1) The State of New York, which is one of the jurisdictions in which we
are licensed to do business, requiresthat we meet certain "matching"
requirements. These requirements address the matching of the durations of the
assets with the durations of obligations supported by such assets. We believe
these matching requirements are designed to control an insurer's ability to risk
investing in long-term assets to support short term interest rate guarantees. We
also believe this limitation controls an insurer's ability to offer unrealistic
rate guarantees.
(2) We employ an investment strategy designed to limit the risk of
default. Some of the guidelines of our current investment strategy for Separate
Account D include, but are not limited to, the following:
(a) Investments may be made in cash; debt securities issued by the
United States Government or its agencies and instrumentalities; money market
instruments; short, intermediate and long-term corporate obligations; 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 either
Standard & Poor's or Moody's Investor Services, Inc.
We are not obligated to invest according to the aforementioned guidelines or
any other strategy except as may be required by Connecticut and other state
insurance laws.
(3) We have the sole discretion to employ investment managers that we
believe are qualified, experienced and reputable to manage Separate Account D.
We currently employ investment managers for Separate Account D including, but
not limited to, J.P. Morgan Investment Management Inc. Each manager is
responsible for investment management of different portions of Separate Account
D. From time to time additional investment managers may be employed or
investment managers may cease being employed. We are under no obligation to
employ or continue to employ any investment manager(s).
(4) The assets in Separate Account D are accounted for at their market
value, rather than at book value.
(5) We are obligated by law to maintain our capital and surplus, as well
as our reserves, at the levels required by applicable state insurance law and
regulation.
INSURANCE ASPECTS OF THE ANNUITY: As an insurance company we bear the insurance
risk inherent in the Annuity. This includes the risks that mortality and
expenses exceed our expectations, and the investment and re-investment risks in
relation to the assets supporting obligations not based on the investment
performance of a separate account. We are subject to regulation that requires
reserving and other practices in a manner that minimizes the insurance risk (see
"Regulation").
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY: The Annuity charges which
are assessed or may be assessable under certain circumstances are the
maintenance fee, a charge for taxes and a transfer fee. These charges are
allocated according to our rules. The maintenance fee and transfer charge are
not assessed if no Account Value is maintained in the Sub-accounts at the time
such fee or charge is payable. However, we make certain assumptions regarding
maintenance and transfer expenses as part of the overall expense assumptions
used in determining the interest rates we credit to Fixed Allocations. Charges
are also assessed against the Sub-accounts and the underlying mutual funds. We
also may charge you for special services, such as dollar cost averaging,
rebalancing, Systematic Withdrawals, Minimum Distributions, and additional
reports. As of the date of this Prospectus, we do not charge you for any special
services.
MAINTENANCE FEE: A maintenance fee equaling the smaller of $30 or 2% of
your then current Account Value is deductible from the Account Values in the
Sub-accounts annually and upon surrender. The fee is limited to the Account
Values in the Sub-accounts as of the Valuation Period such fee is due. Certain
representations regarding the maintenance fee are found in the section entitled
Administration Charge.
TAX CHARGES: In several states a tax is payable. We will deduct the
amount of tax payable, if any, from your Purchase Payments if the tax is then
incurred or from your Account Value when applied under an annuity option if the
tax is incurred at that time. The amount of the tax varies from jurisdiction to
jurisdiction. It may also vary depending on whether the Annuity qualifies for
certain treatment under the Code. In each jurisdiction, the state legislature
may change the amount of any current tax, may decide to impose the tax,
eliminate it, or
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change the time it becomes payable. In those jurisdictions imposing such a tax,
the tax rates currently in effect range up to 3 1/2%. In addition to state
taxes, local taxes may also apply. The amounts of these taxes may exceed
those for state taxes.
TRANSFER FEE: We charge $10.00 for each transfer after the twelfth in
each Annuity Year. However, the fee is only charged if there is Account Value in
at least one Sub-account immediately subsequent to such transfer.
ALLOCATION OF ANNUITY CHARGES: The transfer fee is assessed against the
Sub-accounts in which you maintain Account Value immediately subsequent to such
transfer. The transfer fee is allocated on a pro-rata basis in relation to the
Account Values in such Sub-accounts as of the Valuation Period for which we
price the applicable transfer. No fee is assessed if there is no Account Value
in any Sub-account at such time. Tax charges are assessed against the entire
Purchase Payment or Account Value as applicable. The maintenance fee is assessed
against the Sub-accounts on a pro-rata basis in relation to the Account Values
in each Sub-account as of the Valuation Period for which we price the fee.
CHARGES ASSESSED AGAINST THE ASSETS: There are charges assessed against assets
in the Sub-accounts. These charges are described below. There are no charges
deducted from the Fixed Allocations. The factors we use in determining the
interest rates we credit Fixed Allocations are described above in the subsection
entitled Fixed Investment Options. No charges are deducted from assets
supporting fixed or adjustable annuity payments. The factors we use in
determining fixed or adjustable annuity payments include, but are not limited
to, our expected investment returns, costs, risks and profit targets. We reserve
the right to assess a charge against the Sub-accounts and the Fixed Allocations
equal to any taxes which may be imposed upon the separate accounts.
ADMINISTRATION CHARGE: We assess each Class 1 Sub-account, on a daily
basis, an administration charge. The charge is 0.15% per year of the average
daily total value of such Sub-account.
We assess the administration charge and the maintenance fee, described in the
subsection entitled Maintenance Fee, at amounts we believe necessary to recover
the actual costs of maintaining and administering the Account Values allocated
to the Class 1 Sub-accounts and Separate Account B itself. The administration
charge and maintenance fee can be increased only for Annuities issued subsequent
to the effective date of any such change.
A relationship does not necessarily exist between the portion of the
administration charge and the maintenance fee attributable to a particular
Annuity and the expenses attributable to that Annuity. However, we believe the
total administration charges made against the Class 1 Sub-accounts will not be
greater than the total anticipated costs. We allocate costs pro-rata between
classes in Separate Account B in proportion to the assets in various classes.
Types of expenses which might be incurred include, but are not necessarily
limited to, the expenses of: developing and maintaining a computer support
system for administering the Account Values in the Sub-accounts and Separate
Account B itself, preparing and delivering confirmations and quarterly
statements, processing transfer, withdrawal and surrender requests, responding
to Owner inquiries, reconciling and depositing cash receipts, calculating and
monitoring daily values of each Sub-account, reporting for the Sub-accounts,
including quarterly, semi-annual and annual reports, and mailing and tabulation
of shareholder proxy solicitations.
From time to time we may reduce the amount of the maintenance fee and/or the
administration charge. We may do so when Annuities are sold to individuals or a
group of individuals in a manner that reduces maintenance and/or administrative
expenses. We would consider such factors as: (a) the size and type of group; (b)
the number of Annuities purchased by an Owner; (c) the amount of Purchase
Payments; and/or (d) other transactions where maintenance and/or administration
expenses are likely to be reduced.
Any elimination of the maintenance fee and/or the administration charge or any
reduction of such charges will not discriminate unfairly between Annuity
purchasers. We will not make any changes to these charges where prohibited by
law.
MORTALITY AND EXPENSE RISK CHARGES: For Class 1 Sub-accounts, the
mortality risk charge is 0.90% per year and the expense risk charge is 0.35% per
year. These charges are assessed in combination each day against each
Sub-account at the rate of 1.25% per year of the average daily total value of
each Sub-account.
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With respect to the mortality risk charge, we assume the risk that the mortality
experience under the Annuities may be lessfavorable than our assumptions. This
could arise for a number of reasons, such as when persons upon whose lives
annuitypayments are based live longer than we anticipated, or when the
Sub-accounts decline in value resulting in losses in paying death benefits. If
our mortality assumptions prove to be inadequate, we will absorb any resulting
loss. Conversely, if the actual experience is more favorable than our
assumptions, then we will benefit from the gain. We also assume the risk that
the administration charge may be insufficient to cover our actual administration
costs. If we realize a profit from the mortality and expense risk charges, such
profit may be used to recover sales expenses incurred.
CHARGES OF THE UNDERLYING MUTUAL FUNDS: Each underlying mutual fund assesses
various charges for investment management and investment advisory fees. These
charges generally differ between portfolios within the same underlying mutual
fund. You will find additional details in the fund prospectuses and the
statements of additional information.
PURCHASING ANNUITIES: You may purchase an Annuity for various purposes. You must
meet our requirements before we issue an Annuity and it takes effect. Certain
benefits may be available to certain classes of purchasers. You have a
"free-look" period during which you may return your Annuity for a refund amount
which may be less or more than your Purchase Payment, except in specific
circumstances.
USES OF THE ANNUITY: The Annuity may be issued in connection with or
purchased as a funding vehicle for certain retirement plans designed to meet the
requirements of various sections of the Code. These include, but are not limited
to: (a) Sections 401 (corporate, association, or self-employed individuals'
retirement plans); (b) Section 403(b) (tax-sheltered annuities available to
employees of certain qualifying employers); and (c) Section 408 (individual
retirement accounts and individual retirement annuities - "IRAs"; Simplified
Employee Pensions).
We may require additional information regarding such plans before we issue an
Annuity to be used in connection with such retirement plans. We may also
restrict or change certain rights and benefits if, in our opinion, such
restrictions or changes are necessary for your Annuity to be used in connection
with such retirement plans. The Annuity may also be used in connection with
plans that do not qualify under the sections of the Code noted above. Some of
the potential tax consequences resulting from various uses of the Annuities are
discussed in the section entitled Certain Tax Consequences.
APPLICATION AND INITIAL PAYMENT: You must meet our underwriting
requirements and forward a Purchase Payment if you seek to purchase an Annuity.
These requirements may include a properly completed Application. Where permitted
by law, we may issue an Annuity without completion of an Application for certain
classes of Annuities.
The minimum initial Purchase Payment we accept is $25,000 unless you are
participating in a program of periodic Purchase Payments that we accept (see
Periodic Purchase Payments). The minimum initial Purchase Payment allowable
under such a program is lower if the total Purchase Payments in the first
Annuity Year are scheduled to equal at least $/ /. We may require that the
initial Purchase Payment be a check or a wire transfer. Our Office must give you
prior approval before we accept a Purchase Payment that would result in the
Account Value of all annuities you maintain with us exceeding $500,000. Multiple
annuities purchased from us within the same calendar year may be treated for tax
purposes as if they were a single annuity (see "Certain Tax Considerations").
We reserve the right to allocate your initial Net Purchase Payment to the
investment options up to two business days after we receive, at our Office, all
of our requirements for issuing the Annuity as applied for. We may retain the
Purchase Payment and not allocate the initial Net Purchase Payment to the
investment options for up to five business days while we attempt to obtain all
such requirements. We will try to reach you or any other party from whom we need
any information or materials. If the requirements cannot be fulfilled within
that time, we will: (a) attempt to inform you of the delay; and (b) return the
amount of the Purchase Payment, unless you specifically consent to our retaining
it until all our requirements are met. Once our requirements are met, the
initial Net Purchase Payment is applied to the investment options within two
business days. Once we accept your Purchase Payment and our requirements are
met, we issue an Annuity.
PERIODIC PURCHASE PAYMENTS: We may, from time-to-time, offer
opportunities to make Purchase Payments automatically on a periodic basis,
subject to our rules. These opportunities may include, but are not
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<PAGE> 26
limited to, certain salary reduction programs agreed to by an employer or
automatic periodic transfers to us from a bankaccount (bank drafting). As of
the date of this Prospectus, we only agree to accept Purchase Payments on such a
basis if: (a) we receive your request In Writing for a salary reduction program
or bank drafting program and we agree to accept Purchase Payments on this basis;
(b) the allocations are only to variable investment options or the frequency and
number of allocations to fixed investment options is limited in accordance with
our rules; and (c) the total of Purchase Payments in the first Annuity Year is
scheduled to equal at least our then currrent minimum requirements. We may also
require an initial Purchase Payment to be submitted by check or wire before
agreeing to such a program. Our minimum requirements may differ based on the
usage of the Annuity, such as whether it is being used in conjunction with
certain retirement plans.
RIGHT TO RETURN THE ANNUITY: You have the right to return the Annuity
within a certain period of time known as a "free-look" period. Depending on the
applicable legal and regulatory requirements, this period may be within ten days
of receipt, twenty-one days of receipt or longer. To exercise your right to
return the Annuity during the "free-look" period, you must return the Annuity.
The amount to be refunded is the then current Account Value plus any tax charge
deducted. This is the "standard refund". If necessary to meet Federal
requirements for IRAs or certain state law requirements, we return the greater
of the "standard refund" or the Purchase Payments received less any withdrawals
(see "Allocation of Net Purchase Payments"). We tell you how we determine the
amount payable under any such right at the time we issue your Annuity. Upon the
termination of the "free-look" period, if you surrender your Annuity, you may be
assessed the maintenance fee (see "Maintenance Fee").
ALLOCATION OF NET PURCHASE PAYMENTS: All allocations of Net Purchase
Payments are subject to our allocation rules (see "Allocation Rules").
Allocation of the portion of the initial Net Purchase Payment and any Net
Purchase Payments received during the free-look period that you wish to allocate
to any Sub-accounts are subject to an additional allocation rule if state law
requires return of at least your Purchase Payments should you return the Annuity
under such free-look provision. If such state law applies to your Annuity: (a)
we allocate any portion of any such Net Purchase Payments that you indicate you
wish to go into the Sub-accounts to the AST Money Market Sub-account; and (b) at
the end of such free-look period we reallocate Account Value according to your
then most recent allocation instructions to us, subject to our allocation rules.
However, where permitted by law in such jurisdictions, we will allocate such Net
Purchase Payments according to your instructions, without any temporary
allocation to the AST Money Market Sub-account, if you execute a return waiver
("Return Waiver"). Under the Return Waiver, you waive your right to the return
of the greater of the "standard refund" or the Purchase Payments received less
any withdrawals. Instead, you only are entitled to the return of the "standard
refund (see "Right to Return the Annuity").
Your initial Purchase Payments, as well as other Purchase Payments will be
allocated in accordance with the then current requirements of any rebalancing,
asset allocation or market timing program which you have authorized or have
authorized an independent third party to use in connection with your Annuity
(see "Allocation Rules").
BALANCED INVESTMENT PROGRAM: We offer a balanced investment program in
relation to your Purchase Payments, if Fixed Allocations are available under
your Annuity. If you choose this program, we commit a portion of your Net
Purchase Payments as a Fixed Allocation for the Guarantee Period you select.
This Fixed Allocation will have grown pre-tax to equal the exact amount of your
entire Purchase Payments at the end of its initial Guarantee Period if no
amounts are transferred or withdrawn from such Fixed Allocation. The rest of
your Net Purchase Payments is invested in the variable investment options you
select.
We reserve the right, from time to time, to credit additional amounts to Fixed
Allocations ("Additional Amounts") if you allocate Purchase Payments in
accordance with the balanced investment program we offer. We offer to do so at
our sole disccretion. Such an offer is subject to our rules, including but not
limited to, a change to the MVA formula. For more information, see "Additional
Amounts in the Fixed Allocations".
OWNERSHIP, ANNUITANT AND BENEFICIARY DESIGNATIONS: You make certain
designations that apply to the Annuity if issued. These designations are subject
to our rules and to various regulatory or statutory requirements depending on
the use of the Annuity. These designations include an Owner, a contingent Owner,
an Annuitant, a Contingent Annuitant, a Beneficiary, and a contingent
Beneficiary. Certain designations are required, as indicated below. Such
designations will be revocable unless you indicate otherwise or we endorse your
Annuity to indicate that such designation is irrevocable to meet certain
regulatory or statutory requirements. Changing the Owner or Annuitant
designations may affect the minimum death benefit (see "Death Benefits").
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Some of the tax implications of various designations are discussed in the
section entitled "Certain Tax Considerations". However, there are other tax
issues than those addressed in that section, including, but not limited to,
estate andinheritance tax issues. You should consult with a competent tax
counselor regarding the tax implications of various designations. You should
also consult with a competent legal advisor as to the implications of certain
designations in relation to an estate, bankruptcy, community property, where
applicable, and other matters.
An Owner must be named. You may name more than one Owner. If you do, all rights
reserved to Owners are then held jointly. We require the consent In Writing of
all joint Owners for any transaction for which we require the written consent of
Owners. Where required by law, we require the consent In Writing of the spouse
of any person with a vested interest in an Annuity. Naming someone other than
the payor of any Purchase Payment as Owner may have gift, estate or other tax
implications.
Where allowed by law, you may name a contingent Owner. However, this designation
takes effect only on or after the Annuity Date.
You must name an Annuitant. We do not accept a designation of joint Annuitants.
Where allowed by law, you may name one or more Contingent Annuitants.
There may be adverse tax consequences if a Contingent Annuitant succeeds an
Annuitant and the Annuity is owned by a trust that is neither tax exempt nor
does not qualify for preferred treatment under certain sections of the Code,
such as Section 401 (a "non-qualified trust"). In general, the Code is
designed to prevent the benefit of tax deferral from continuing for long
periods of time on an indefinite basis. Continuing the benefit of tax deferral
by naming one or more Contingent Annuitants when the Annuity is owned by a
non-qualified trust might be deemed an attempt to extend the tax deferral for
an indefinite period. Therefore, adverse tax treatment may depend on the terms
of the trust, who is named as Contingent Annuitant, as well as the particular
facts and circumstances. You should consult your tax advisor before naming a
Contingent Annuitant if you expect to use an Annuity in such a fashion.
Where allowed by law, you must name Contingent Annuitants according to our rules
when an Annuity is used as a funding vehicle for certain retirement plans
designed to meet the requirements of Section 401 of the Code.
You may name more than one primary and more than one contingent Beneficiary, and
if you do, the proceeds will be paid in equal shares to the survivors in the
appropriate beneficiary class, unless you have requested otherwise In Writing.
If the primary Beneficiary dies before death proceeds become payable, the
proceeds will become payable to the contingent Beneficiary. If no Beneficiary is
alive when death proceeds become payable or in the absence of any Beneficiary
designation, the proceeds will vest in you or your estate.
ACCOUNT VALUE: In the accumulation phase your Annuity has an Account Value. Your
total Account Value is the sum of your Account Value in each investment option.
However, upon surrender, the amount payable is the Account Value less any
applicable maintenance fee and less any Additional Amounts credited within a
year of the date of the surrender (see "Additional Amounts in the Fixed
Allocations").
ACCOUNT VALUE IN THE SUB-ACCOUNTS: We determine your Account Value
separately for each Sub-account. To determine the Account Value in each
Sub-account we multiply the Unit Price as of the Valuation Period for which the
calculation is being made times the number of Units attributable to you in that
Sub-account as of that Valuation Period. The method we use to determine Unit
Prices is shown in the Statement of Additional Information.
The number of Units attributable to you in a Sub-account is the number of Units
you purchased less the number transferred or withdrawn. We determine the number
of Units involved in any transaction specified in dollars by dividing the dollar
value of the transaction by the Unit Price of the effected Sub-account as of the
Valuation Period applicable to such transaction.
ACCOUNT VALUE OF THE FIXED ALLOCATIONS: We determine the Account Value
of each Fixed Allocation separately. A Fixed Allocation's Account Value as of a
particular date is determined by multiplying its then current Interim Value
times the MVA.
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A formula is used to determine the MVA. The formula is applied separately to
each Fixed Allocation. Values and timedurations used in the formula are as of
the date for which the Account Value is being determined. The formula is:
[(1+I)/(1+J+0.0010)] N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate (for your class of annuities) being
credited to new Fixed Allocations with Guarantee Period durations
equal to the number of years (rounded to the next higher integer
when occurring on other than an anniversary of the beginning of
the Fixed Allocation's Guarantee Period) remaining in your Fixed
Allocation's Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date. If we are not offering a Guarantee Period with a duration equal to the
number of years remaining in a Fixed Allocation's Guarantee Period, we calculate
a rate for "J" above using a specific formula. This formula is described in the
Statement of Additional Information.
Our Current Rates are expected to be sensitive to interest rate fluctuations,
thereby making each MVA equally sensitive to such changes. There would be a
downward adjustment when the applicable Current Rate plus 0.10 percent of
interest exceeds the rate credited to the Fixed Allocation and an upward
adjustment when the applicable Current Rate is more than 0.10 percent of
interest lower than the rate being credited to the Fixed Allocation. See the
Statement of Additional Information for an illustration of how the MVA works.
We reserve the right, from time to time, to determine the MVA using an interest
rate lower than the Current Rate for all transactions applicable to a class of
Annuities. We may do so at our sole discretion. This would benefit all such
Annuties if transactions to which the MVA applies occur while we use such lower
interest rate.
ADDITIONAL AMOUNTS IN THE FIXED ALLOCATIONS: To the extent permitted by
law, we reserve the right, from time to time, to allocate Additional Amounts to
Fixed Allocations. We may do so at our sole discretion. We may offer to allocate
such Additional Amounts only in relation to Fixed Allocations of specific
durations (i.e. 10 years) when used as part of certain programs we offer such as
the balanced investment program and dollar cost averaging (see "Balanced
Investment Program" and "Dollar Cost Averaging"). We would provide such
Additional Amounts with funds from our general account and allocate them to the
applicable Fixed Allocation. Such a program is subject to the following rules:
(1) The Additional Amounts are credited in relation to initial or
additional Purchase Payments, not to Account Value transferred to a Fixed
Allocation for use in the applicable programs. The Additional Amounts are not
allocated in relation to any exchange of another annuity issued by us for an
Annuity.
(2) The Additional Amounts are allocated as of the later of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation or
the 30th day after the Issue Date.
(3) Interest on the Additional Amounts is credited as of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation.
(4) The Additional Amounts are a percentage of the amount allocated to
the applicable Fixed Allocation. However, we may change the percentage from time
to time.
(5) There is an increase to any applicable "adjustment amount" in the
MVA formula, which otherwise is 0.0010, to 0.0020 (see "Account Value of the
Fixed Allocations"). This change would only apply to a
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transfer, surrender or withdrawal from the applicable Fixed Allocation, but not
to any payments of death benefit proceeds. This change could reduce your Account
Value.
(6) We do not consider Additional Amounts to be investment in the
contract for income tax purposes (see "Certain Tax Considerations").
(7) We determine if a Purchase Payment is received during the period we
are offering such credits based on the earlier of: (a) the date we receive at
our Office the applicable Purchase Payment; or (b) the date we receive at our
Office our requirements in relation to either an exchange of an existing annuity
issued by another insurer or a "rollover" or transfer of such an annuity
pursuant to specific sections of the Code.
(8) No Purchase Payment may be applied to more than one program
allocating Additional Amounts solely to a Fixed Allocation.
(9) We reduce the amount available upon surrender by any Additional
Amounts allocated within one year of the date of the surrender.
RIGHTS, BENEFITS AND SERVICES: The Annuity provides various rights, benefits and
services subsequent to its issuance and your decision to keep it beyond the
free-look period. A number of these rights, benefits and services, as well as
some of the rules and conditions to which they are subject, are described below.
These rights, benefits and services include, but are not limited to: (a) making
additional Purchase Payments; (b) changing revocable designations; (c)
transferring Account Values between investment options; (d) receiving lump sum
payments, Systematic Withdrawals or Minimum Distributions, annuity payments and
death benefits; (e) transferring or assigning your Annuity; (f) exercising
certain voting rights in relation to the underlying mutual funds in which the
Sub-accounts invest; and (g) receiving reports. These rights, benefits and
services may be limited, eliminated or altered when an Annuity is purchased in
conjunction with a qualified plan. We may require presentation of proper
identification, including a personal identification number ("PIN") issued by us,
prior to accepting any instruction by telephone. We forward your PIN to you
shortly after your Annuity is issued. To the extent permitted by law or
regulation, neither we nor any person authorized by us will be responsible for
any claim, loss, liability or expense in connection with a telephone transfer if
we or such other person acted on telephone transfer instructions in good faith
in reliance on your telephone transfer authorization and on reasonable
procedures to identify persons so authorized through verification methods which
may include a request for your Social Security number or a personal
identification number (PIN) as issued by us. We may be liable for losses due to
unauthorized or fraudulent instructions should we not follow such reasonable
procedures.
ADDITIONAL PURCHASE PAYMENTS: The minimum for any additional Purchase
Payment is $/ /, unless we authorize lower payments pursuant to a periodic
Purchase Payment program (see "Periodic Purchase Payments"), or less where
required by law. Additional Purchase Payments may be paid at any time before the
Annuity Date. Subject to our allocation rules, we allocate additional Net
Purchase Payments according to your instructions. Should no instructions be
received, we shall return your additional Purchase Payment.
CHANGING REVOCABLE DESIGNATIONS: Unless you indicated that a prior
choice was irrevocable or your Annuity has been endorsed to limit certain
changes, you may request to change Owner, Annuitant and Beneficiary designations
by sending a request In Writing. Where allowed by law, such changes will be
subject to our acceptance. Some of the changes we will not accept include, but
are not limited to: (a) a new Owner subsequent to the death of the Owner or the
first of any joint Owners to die, except where a spouse-Beneficiary has become
the Owner as a result of an Owner's death; (b) a new Annuitant subsequent to the
Annuity Date if the annuity option selected includes a life contingency; and (c)
a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity.
ALLOCATION RULES: In the accumulation phase, you may maintain Account
Value in up to ten Sub-accounts. You may also maintain an unlimited number of
Fixed Allocations. Should you request a transaction that would leave less than
any minimum amount we then require in an investment option, we reserve the
right, to the extent permitted by law, to add the balance of your Account Value
in the applicable Sub-account or Fixed Allocation to the transaction and close
out your balance in that investment option. We also reserve the right to limit
the amount you may allocate to any Fixed Allocation to $/ /.
Should you either: (a) request rebalancing services (see "Rebalancing"); (b)
authorize an independent third party to transact transfers on your behalf and
such third party arranges for rebalancing of any portion of your
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Account Value in accordance with any asset allocation strategy; or (c) authorize
an independent third party to transacttransfers in accordance with a market
timing strategy; then all Purchase Payments, including the initial Purchase
Payment,received while your Annuity is subject to such an arrangement are
allocated to the same investment options and in the same proportions as then
required pursuant to the applicable rebalancing, asset allocation or market
timing program, unless we have received alternate instructions. Such allocation
requirements terminate simultaneous to the termination of an authorization for
rebalancing or any authorization to a third party to transact transfers on your
behalf.
Withdrawals of any type are taken pro-rata from the investment options based on
the then current Account Values in such investment options unless we receive
instructions from you prior to such withdrawal. For this purpose only, the
Account Value in all your then current Fixed Allocations is deemed to be in one
investment option. If you transfer or withdraw Account Value from multiple Fixed
Allocations and do not provide instructions indicating the Fixed Allocations
from which Account Value should be taken: (a) we transfer Account Value first
from the Fixed Allocation with the shortest amount of time remaining to the end
of its Guarantee Period, and then from the Fixed Allocation with the next
shortest amount of time remaining to the end of its Guarantee Period, etc.; and
(b) if there are multiple Fixed Allocations with the same amount of time left in
each Guarantee Period, as between such Fixed Allocations we first take Account
Value from the Fixed Allocation that had the shorter Guarantee Period.
TRANSFERS: In the accumulation phase you may transfer Account Value
between investment options, subject to our allocation rules (see "Allocation
Rules"). Transfers are not subject to taxation (see "Transfers Between
Investment Options"). We charge $10.00 for each transfer after the twelfth in
each Annuity Year, including transfers transacted as part of a dollar cost
averaging program (see "Dollar Cost Averaging") or any rebalancing, market
timing, asset allocation or similar program which you employ or you authorize to
be employed on your behalf. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the transfer
charge and are not counted in determining whether other transfers may be subject
to the transfer charge (see "Renewals"). Your transfer request must be In
Writing or meet our requirements for accepting instructions we receive over the
phone.
We reserve the right to limit the number of transfers in any Annuity Year for
all existing or new Owners. We also reserve the right to limit the number of
transfers in any Annuity Year or to refuse any transfer request for an Owner or
certain Owners if we believe that: (a) excessive trading by such Owner or Owners
or a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the underlying mutual
funds; or (b) we are informed by one or more of the underlying mutual funds that
the purchase or redemption of shares is to be restricted because of excessive
trading or a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying mutual funds.
To the extent permitted by law, we may require up to 2 business days' notice of
any transfer into or out of a Fixed allocation if the market value of such
transfer is at least $1,000,000.00.
In order to help you determine whether you wish to transfer Account Values to a
Fixed Allocation, you may obtain our Current Rates by writing us or calling us
at 1-800-766-4530.
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf, subject to our rules. We may suspend or
cancel such acceptance at any time. We notify you of any such suspension or
cancellation. We may restrict the investment options that will be available for
transfers or allocations of Net Purchase Payments during any period in which you
authorize such third party to act on your behalf. We give the third party you
authorize prior notification of any such restrictions. However, we will not
enforce such a restriction if we are provided evidence satisfactory to us that:
(a) such third party has been appointed by a court of competent jurisdiction to
act on your behalf; or (b) such third party has been appointed by you to act on
your behalf for all your financial affairs.
We or an affiliate of ours may provide administrative or other support services
to independent third parties you authorize to conduct transfers on your behalf
or who provide recommendations as to how your Account Values should be
allocated. This includes, but is not limited to, rebalancing your Account Value
among investment options in accordance with various investment allocation
strategies such third party may employ, or transferring Account Values between
investment options in accordance with market timing strategies employed by such
third parties. Such independent third parties may or may not be appointed our
agents for the sale of Annuities. However, WE DO NOT ENGAGE ANY THIRD PARTIES TO
OFFER INVESTMENT ALLOCATION SERVICES OF ANY TYPE, SO THAT
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PERSONS OR FIRMS OFFERING SUCH SERVICES DO SO INDEPENDENT FROM ANY AGENCY
RELATIONSHIP THEY MAY HAVE WITH US FOR THE SALE OFANNUITIES. WE THEREFORE TAKE
NO RESPONSIBILITY FOR THE INVESTMENT ALLOCATIONS AND TRANSFERS TRANSACTED ON
YOUR BEHALF BY SUCH THIRD PARTIES OR ANY INVESTMENT ALLOCATION RECOMMENDATIONS
MADE BY SUCH PARTIES. We do not currently charge you extra for providing these
support services.
RENEWALS: A renewal is a transaction that occurs automatically as of the
last day of a Fixed Allocation's Guarantee Period unless we receive alternative
instructions. This day as to each Fixed Allocation is called its Maturity Date.
As of the end of a Maturity Date, the Fixed Allocation's Guarantee Period
"renews" and a new Guarantee Period of the same duration as the one just
completed begins. However, the renewal will not occur if the Maturity Date is on
the date we apply your Account Value to determine the annuity payments that
begin on the Annuity Date (see "Annuity Payments").
As an alternative to a renewal, you may transfer all or part of that Fixed
Allocation's Account Value to a different Fixed Allocation or you may transfer
such Account Value to one or more Sub-accounts, subject to our allocation rules.
To accomplish this, we must receive instructions from you In Writing at least
two business days before the Maturity Date. No MVA applies to transfers of a
Fixed Allocation's Account Value occurring as of its Maturity Date. An MVA will
apply in determining the Account Value of a Fixed Allocation at the time annuity
payments are determined, unless the Maturity Date of such Fixed Allocation is
the 15th day before the Annuity Date (see "Annuity Payments").
At least 30 days prior to a Maturity Date, or earlier if required by law or
regulation, we inform you of the Guarantee Periods available as of the date of
such notice. We do not provide a similar notice if the Fixed Allocation's
Guarantee Period is of less than a year's duration. Such notice may include an
example of the rates we are then crediting new Fixed Allocations as of the date
such notice is prepared. The rates actually credited to a Fixed Allocation as of
the date of any renewal or transfer immediately subsequent to the Maturity Date
may be more or less than any rates quoted in such notice.
If your Fixed Allocation's then ending Guarantee Period is no longer available
for new allocations and renewals or you choose a different Guarantee Period that
is no longer available on the date following the Maturity Date, we will try to
reach you so you may make another choice. If we cannot reach you, we will assign
the next shortest Guarantee Period then currently available for new allocations
and renewals to that Fixed Allocation.
DOLLAR COST AVERAGING: We offer dollar cost averaging in the
accumulation phase. Dollar cost averaging is a program designed to provide for
regular, approximately level investments over time. You may choose to transfer
earnings only, principal plus earnings or a flat dollar amount. We make no
guarantee that a dollar cost averaging program will result in a profit or
protect against a loss in a declining market. You may select this program by
submitting to us a request In Writing. You may cancel your participation in this
program In Writing or by phone if you have previously authorized our acceptance
of such instructions.
Dollar cost averaging is available from any of the investment options we choose
to make available for such a program. Your Annuity must have an Account Value of
not less than / / at the time we accept your request for a dollar cost averaging
program. Transfers under a dollar cost averaging program are counted in
determining the applicability of the transfer fee (see "Transfers"). We reserve
the right to limit the investment options into which Account Value may be
transferred as part of a dollar cost averaging program. We currently do not
permit dollar cost averaging programs where Account Value is transferred to
Fixed Allocations. We also reserve the right to charge a processing fee for this
service. Should we suspend or cancel the offering of this service, such
suspension or cancellation will not affect any dollar cost averaging programs
then in effect. Dollar cost averaging is not available while a rebalancing,
asset allocation or market timing type of program is used in connection with
your Annuity.
Dollar cost averaging from Fixed Allocations is subject to the following rules:
(a) you may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years; (b) such a program may only be selected in conjunction with and
simultaneous to a new or renewing Fixed Allocation; (c) only averaging of
earnings only or principal plus earnings is permitted; (d) a program averaging
principal plus earnings from a Fixed Allocation must be designed to last that
Fixed Allocation's entire current Guarantee Period; (e) dollar cost averaging
transfers from a Fixed Allocation are not subject to the MVA; (f) dollar cost
averaging may be done on a monthly basis only; and (g) you may not
simultaneously use Account Value in any Fixed Allocation to participate in
dollar cost averaging and receive Systematic Withdrawals or Minimum
Distributions from such Fixed Allocation (see "Systematic Withdrawals" and
"Minimum Distributions").
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We reserve the right, from time to time, to credit additional amounts (
Additional Amounts) if you allocate Purchase Paymentsto Fixed Allocations as
part of a dollar cost averaging program. Such an offer is at our sole discretion
and is subject to our rules, including but not limited to, a change to the MVA
formula. For more information see "Additional Amounts in the Fixed Allocations".
REBALANCING: We offer, during the accumulation phase, automatic
quarterly, semi-annual or annual rebalancing among the variable investment
options of your choice. This provides the convenience of automatic rebalancing
without having to provide us instructions on a periodic basis. Failure to choose
this option does not prevent you from providing us with transfer instructions
from time-to-time that have the effect of rebalancing. It also does not prevent
other requested transfers from being transacted.
Under this program, Account Values in variable investment options are rebalanced
quarterly, semi-annually or annually, as applicable, to the percentages you
request. The rebalancing may occur quarterly, semi-annually or annually based
upon the Issue Date. If a transfer is requested involving any investment option
participating in an automatic rebalancing program, we automatically alter the
rebalancing percentages going forward (unless we receive alternate instructions)
to the ratios between Account Values in the variable investment options as of
the effective date of such requested transfer once it has been processed.
Automatic rebalancing is delayed one quarter if Account Value is being
maintained in the AST Money Market Sub-account for the duration of your
Annuity's "free-look" period and rebalancing would otherwise occur during such
period (see "Allocation of Net Purchase Payments").
You may change the percentage allocable to each variable investment option at
any time. However, you may not choose to allocate less than 5% of Account Value
to any variable investment option.
We do not offer automatic rebalancing in connection with Fixed Allocations. The
Account Value of your Annuity must be at least $/ / when we receive your
automatic rebalancing request. We may require that all variable investment
options in which you maintain Account Value must be used in the rebalancing
program. You may maintain Account Value in at least two and not more than ten
variable investment options when using a rebalancing program. You may not
simultaneously participate in rebalancing and dollar cost averaging. Rebalancing
also is not available when a program of Systematic Withdrawals of earnings or
earnings plus principal is in effect.
For purposes of determining the number of transfers made in any Annuity Year,
all rebalancing transfers made on the same day are treated as one transfer. We
reserve the right to charge a processing fee for signing up for this service.
To elect to participate or to terminate participation in automatic rebalancing,
we may require instructions In Writing at our Office in a form satisfactory to
us.
DISTRIBUTIONS: Distributions available from your Annuity during the
accumulation phase include surrender, partial withdrawals, Systematic
Withdrawals, Minimum Distributions (in relation to qualified plans) and a death
benefit. In the payout phase we pay annuity payments. Distributions from your
Annuity generally are subject to taxation, and may be subject to a tax penalty
as well (see "Certain Tax Considerations"). You may wish to consult a
professional tax advisor for tax advice prior to exercising any right to an
elective distribution. During the accumulation phase, any distribution other
than a death benefit: (a) must occur prior to any death that would cause a death
benefit to become payable; and (b) will occur subsequent to our receipt of a
completed request In Writing.
SURRENDER: Surrender of your Annuity is permitted during the
accumulation phase. The amount payable is the then current Account Value less
any applicable maintenance fee and less any Additional Amounts credited within
one year of the date of the surrender (see "Additional Amounts in the Fixed
Allocations"). We reserve the right to require that your Annuity accompany your
surrender request.
PARTIAL WITHDRAWALS: You may withdraw part of your Account Value.
The minimum partial withdrawal is $100. The Account Value that must remain in
the Annuity as of the date of this transaction is $1,000. If the amount of the
partial withdrawal request exceeds the maximum amount available, we reserve the
right to treat your request as one for a full surrender.
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SYSTEMATIC WITHDRAWALS: We offer Systematic Withdrawals of
earnings only, principal plus earnings or a flat dollar amount. Systematic
Withdrawals from Fixed Allocations are limited to earnings accrued after the
program of Systematic Withdrawals begins, or payments of fixed dollar amounts
that do not exceed such earnings. A program of Systematic Withdrawals begins on
the date we accept, at our Office, your request for such a program.
A Systematic Withdrawal from a Fixed Allocation is not subject to the MVA. We
calculate the Fixed Allocation's credited interest since the prior withdrawal as
A minus B, plus C, where:
A is the Interim Value of the applicable Fixed Allocation as of the date
of the Systematic Withdrawal;
B is the Interim Value of the applicable Fixed Allocation as of the
later of the beginning of its then current Guarantee Period or
the beginning of the Systematic Withdrawal program; and
C is the total of all partial or free withdrawals and any transfers
from such Fixed Allocation since the later of the beginning of
its then current Guarantee Period or the beginning of the
Systematic Withdrawal program.
Systematic Withdrawals are available on a monthly, quarterly, semi-annual or
annual basis. You may not simultaneously receive Systematic Withdrawals from a
Fixed Allocation and participate in a dollar cost averaging program under which
Account Value is transferred from the same Fixed Allocation (see "Dollar Cost
Averaging"). Systematic Withdrawals are not available while you are taking any
Minimum Distributions (see "Minimum Distributions"). Systematic Withdrawals of
earnings or earnings plus principal are not available while any rebalancing or
asset allocation program is in effect in relation to your Annuity.
The Account Value of your Annuity must be at least / / when we accept your
request for a program of Systematic Withdrawals. The minimum for each Systematic
Withdrawal is $100. For any scheduled Systematic Withdrawal other than the last
that does not meet this minimum, we reserve the right to defer such a withdrawal
and add the amount that would have been withdrawn to the amount that is to be
withdrawn at the next Systematic Withdrawal.
We reserve the right to charge a processing fee for this service. Should we
suspend or cancel offering Systematic Withdrawals, such suspension or
cancellation will not affect any Systematic Withdrawal programs then in effect.
MINIMUM DISTRIBUTIONS: You may elect to have us calculate Minimum
Distributions annually if your Annuity is being used for certain qualified
purposes under the Code. We calculate such amounts assuming the Minimum
Distribution amount is based solely on the value of your Annuity. The required
Minimum Distribution amounts applicable to your particular situation may depend
on other annuities, savings or investments of which we are unaware, so that the
required amount may be greater than the Minimum Distribution amount we calculate
based on the value of your Annuity. We reserve the right to charge a fee for
each annual calculation. Minimum Distributions are not available if you are
taking Systematic Withdrawals (see "Systematic Withdrawals"). You may elect to
have Minimum Distributions paid out monthly, quarterly, semi-annually or
annually.
Each Minimum Distribution will be taken from the investment options you select.
However, the portion of any Minimum Distribution that can be taken from any
Fixed Allocations may not exceed the then current ratio between your Account
Value in all Fixed Allocations you maintain and your total Account Value. No MVA
applies to any portion of Minimum Distributions taken from Fixed Allocations.
Minimum Distributions are not available from any Fixed Allocations if such Fixed
Allocation is being used in a dollar cost averaging program (see "Dollar Cost
Averaging").
DEATH BENEFIT: In the accumulation phase, a death benefit is
payable. IF THE ANNUITY IS OWNED BY ONE OR MORE NATURAL PERSONS, IT IS PAYABLE
UPON THE FIRST DEATH OF SUCH OWNERS. If the Annuity is owned by an entity, the
death benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. If a Contingent Annuitant was designated before the Annuitant's death
and the Annuitant dies, the Contingent
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Annuitant then becomes the Annuitant. There may be adverse tax consequences for
certain entity Owners if they name a Contingent Annuitant (see "Ownership,
Annuitant and Beneficiary Designations").
The person upon whose death the death benefit is payable is referred to below as
the "decedent". For purposes of this death benefit provision, "withdrawals"
means withdrawals of any type (partial withdrawals, Systematic Withdrawals,
Minimum Distributions) after any applicable MVA. For purposes of this
provision, persons named Owner or Annuitant within 60 days of the Issue Date
are treated as if they were an Owner or Annuitant on the Issue Date.
The death benefit is as follows, and is subject to the conditions described in
(1),(2) and (3) below:
(1) If death occurs before the earlier of the decedent's age 90 or the
end of the tenth Annuity Year: the death benefit is the greater of (a) or (b),
where:
(a) is your Account Value in Sub-accounts plus the Interim Value of
any Fixed Allocations; or
(b) the minimum death benefit ("Minimum Death Benefit"). The Minimum
Death Benefit is the sum of all Purchase Payments less the sum of all
withdrawals.
(2) If death occurs after the earlier of the decedent's age 90 or the
tenth Annuity Year: the death benefit is your Account Value.
(3) If a decedent was not named an Owner or Annuitant as of the Issue
Date and did not become such as a result of a prior Owner's or Annuitant s
death: the Minimum Death Benefit is suspended as to that person for a two year
period from the date he or she first became an Owner or Annuitant. After the
suspension period is completed, the death benefit is the same as if such person
had been an Owner or Annuitant on the Issue Date. During the supension period:
(a) If that person's death occurs before the earlier of the decedent
s age 90 or the end of the tenth Annuity Year, the death benefit is your Account
Value in the Sub-accounts plus the Interim Value of any Fixed Allocation.
(b) If that person's death occurs after the earlier of the decedent
s age 90 or the tenth Annuity Year, the death benefit is your Account Value.
The amount of the death benefit is determined as of the date we receive In
Writing: (a) due proof of death ; (b) all representations we require or which
are mandated by applicable law or regulation in relation to the death claim and
the payment of death proceeds; and (c) any applicable election of the mode of
payment of the death benefit, if not previously elected by the Owner. The death
benefit is reduced by any annuity payments made prior to the date we receive In
Writing such due proof of death. The following constitutes "due proof of death":
(a) a certified copy of a death certificate; (b) a certified copy of a decree of
a court of competent jurisdiction as to the finding of death; or (c) any other
proof satisfactory to us.
If the death benefit becomes payable prior to the Annuity Date due to the death
of the Owner and the Beneficiary is the Owner's spouse, then in lieu of
receiving the death benefit, such Owner's spouse may elect to be treated as an
Owner and continue the Annuity.
In the event of your death, the benefit must be distributed within: (a) five
years of the date of death; or (b) over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Distribution
after your death to be paid under (b) above, must commence within one year of
the date of death.
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If the Annuitant dies before the Annuity Date, the Contingent Annuitant will
become the Annuitant. Where allowed by law, ifthe Annuity is owned by one or
more natural persons, the oldest of any such Owners not named as the Annuitant
immediatelybecomes the Contingent Annuitant if: (a) the Contingent Annuitant
predeceases the Annuitant; or (b) if you do not designate a Contingent
Annuitant.
In the payout phase, we continue to pay any "certain" payments (payments not
contingent on the continuance of any life) to the Beneficiary subsequent to the
death of the Annuitant.
ANNUITY PAYMENTS: Annuity payments can be guaranteed for life,
for a certain period, or for a certain period and life. We make available fixed
payments, and as of the date of this Prospectus, adjustable payments (payments
which may or may not be changed on specified adjustment dates based on annuity
purchase rates we are then making available to annuities of the same class). We
may or may not be making adjustable annuities available on the Annuity Date. To
the extent there is any tax basis in the annuity, a portion of each annuity
payment is treated for tax purposes as a return of such basis until such tax
basis is exhausted. The amount deemed such a return of basis is determined in
accordance with the requirements of the Code (see "Certain Tax Considerations").
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments when you purchase an Annuity, or at a later date. Your choice of
Annuity Date and annuity option may be limited depending on your use of the
Annuity and the applicable jurisdiction. Subject to our rules, you may choose an
Annuity Date, option and frequency of payments suitable to your needs and
circumstances. You should consult with competent tax and financial advisors as
to the appropriateness of any such choice. Should Annuities subject to New York
law be made available, the Annuity Date for such Annuities may not exceed the
first day of the calendar month following the Annuitant's 85th birthday. Other
jurisdictions may impose similar requirements.
You may change your choices at any time up to 30 days before the earlier of: (a)
the date we would have applied your Account Value to an annuity option had you
not made the change; or (b) the date we will apply your Account Value to an
annuity option in relation to the new Annuity Date you are then selecting. You
must request this change In Writing. The Annuity Date must be the first or the
fifteenth day of a calendar month.
In the absence of an election In Writing: (a) the Annuity Date is the first day
of the calendar month first following the later of the Annuitant's 85th birthday
or the fifth anniversary of our receipt at our Office of your request to
purchase an Annuity; and (b) where allowed by law, fixed monthly payments will
commence under option 2, described below, with 10 years certain. Should
Annuities subject to New York law be made available, for such Annuities, in the
absence of an election In Writing: (a) the Annuity Date is the first day of the
calendar month following the Annuitant's 85th birthday; and (b) fixed monthly
payments will commence under Option 2, described below, with 10 years certain.
Other jurisdictions may impose similar requirements. The amount to be applied is
your Annuity's Account Value 15 business days prior to the Annuity Date. In
determining your annuity payments, we credit interest using our then current
crediting rate for this purpose, which is not less than 3% of interest per year,
between the date Account Value is applied to an annuity option and the Annuity
Date. Annuity options in addition to those shown are available with our consent.
The minimum initial amount payable is the minimum initial annuity amount we
allow under our then current rules. Should you wish to receive a lump sum
payment, you must request to surrender your Annuity prior to the Annuity Date
(see "Surrender").
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below, but only to the extent selecting such
an option does not alter the tax status of the Annuity. Except where a lower
amount is required by law, the minimum monthly annuity payment is $100.
If you have not made an election prior to proceeds becoming due, the Beneficiary
may elect to receive the death benefit under one of the annuity options.
However, if you made an election, the Beneficiary may not alter such election.
For purposes of the annuity options described below, the term "key life" means
the person or persons upon whose life any payments dependent upon the
continuation of life are based.
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(1) Option 1 - Payments for Life: Under this option, income is
payable periodically prior to the death of thekey life, terminating with the
last payment due prior to such death. Since no minimum number of payments is
guaranteed, thisoption offers the maximum level of periodic payments of the life
contingent annuity options. It is possible that only one payment will be
payable if the death of the key life occurs before the date the second payment
was due, and no other payments nor death benefits would be payable.
(2) Option 2 - Payments for Life with 10, 15, or 20 Years Certain:
Under this option, income is payable periodically for 10, 15, or 20 years, as
selected, and thereafter until the death of the key life. Should the death of
the key life occur before the end of the period selected, the remaining payments
are paid to the Beneficiary to the end of such period.
(3) Option 3 - Payments Based on Joint Lives: Under this option,
income is payable periodically during the joint lifetime of two key lives, and
thereafter during the remaining lifetime of the survivor, ceasing with the last
payment prior to the survivor's death. No minimum number of payments is
guaranteed under this option. It is possible that only one payment will be
payable if the death of all the key lives occurs before the date the second
payment was due, and no other payments nor death benefits would be payable.
(4) Option 4 - Payments for a Certain Period: Under this option,
income is payable periodically for a specified number of years. The number of
years is subject to our then current rules. Should the payee die before the end
of the specified number of years, the remaining payments are paid to the
Beneficiary to the end of such period. Note that under this option, payments
are not based on how long we expect any key life to live. Therefore, that
portion of the mortality risk charge assessed to cover the risk that key lives
outlive our expectations provides no benefit to an Owner selecting this option.
The first payment varies according to the annuity options and payment frequency
selected. The first periodic payment is determined by multiplying the Account
Value (expressed in thousands of dollars) as of the close of business on the
fifteenth day preceding the Annuity Date, plus interest at not less than 3% per
year from such date to the Annuity Date, by the amount of the first periodic
payment per $1,000 of value obtained from our annuity rates for that type of
annuity and for the frequency of payment selected. Our rates will not be less
than our guaranteed minimum rates. These guaranteed minimum rates are derived
from the 1983a Individual Annuity Mortality Table with ages set back one year
for males and two years for females and with an assumed interest rate of 3% per
annum. Where required by law or regulation, such annuity table will have rates
that do not differ according to the gender of the key life. Otherwise, the
rates will differ according to the gender of the key life.
QUALIFIED PLAN WITHDRAWAL LIMITATIONS: The Annuities are
endorsed such that there are surrender or withdrawal limitations when used in
relation to certain retirement plans for employees which qualify under various
sections of the Code. These limitations do not affect certain roll-overs or
exchanges between qualified plans. Distribution of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in Code
section 403(b)), or attributable to transfers to a tax sheltered annuity from a
custodial account (as defined in Code section 403(b)(7)), is restricted to the
employee's: (a) separation from service; (b) death; (c) disability (as defined
in Section 72(m)(7) of the Code); (d) reaching age 59 1/2; or (e) hardship.
Hardship withdrawals are restricted to amounts attributable to salary reduction
contributions, and do not include investment results. In the case of tax
sheltered annuities, these limitations do not apply to certain salary reduction
contributions made and investment results earned prior to dates specified in the
Code. In addition, the limitation on hardship withdrawals does not apply to
salary reduction contributions made and investment results earned prior to dates
specified in the Code which have been transferred from custodial accounts.
Rollovers from the types of plans noted to another qualified plan or to an
individual retirement account or individual retirement annuity are not subject
to the limitations noted. Certain distributions, including rollovers, that are
not transferred directly to the trustee of another qualified plan, the custodian
of an individual retirement account or the issuer of an individual retirement
annuity may be subject to automatic 20% withholding for Federal income tax. This
may also trigger withholding for state income taxes (see "Certain Tax
Considerations").
We may make annuities available through the Texas Optional Retirement Program
subsequent to receipt of the required regulatory approvals and implementation.
In addition to the restrictions required for such Annuities to qualify under
Section 403(b) of the Code, Annuities issued in the Texas Optional Retirement
Program are amended as follows: (a) no benefits are payable unless you die
during, or are retired or terminated from, employment in all Texas institutions
of higher education; and (b) if a second year of participation in such
33
<PAGE> 37
program is not begun, the total first year State of Texas' contribution will be
returned, upon its request, to the appropriateinstitute of higher education.
With respect to the restrictions on withdrawals set forth above, we are relying
upon: 1) a no-action letter dated November 28, 1988 from the staff of the
Securities and Exchange Commission to the American Council of Life Insurance
with respect to annuities issued under Section 403(b) of the Code, the
requirements of which have been complied with by the us; and 2) Rule 6c-7 under
the 1940 Act with respect to annuities made available through the Texas
Optional Retirement Program, the requirements of which have been complied with
by the us.
PRICING OF TRANSFERS AND DISTRIBUTIONS: We "price" transfers and
distributions on the dates indicated below.
(1) We price "scheduled" transfers and distributions as of the date
such transactions are so scheduled. "Scheduled" transactions include transfers
under a dollar cost averaging program, Systematic Withdrawals, Minimum
Distributions, transfers previously scheduled with us at our Office pursuant to
any on-going rebalancing, asset allocation or similar program, and annuity
payments.
(2) We price "unscheduled" transfers and partial withdrawals as of
the date we receive at our Office the request for such transactions.
"Unscheduled" transfers include any transfers processed in conjunction with any
market timing program, or transfers not previously scheduled with us at our
Office pursuant to any rebalancing, asset allocation or similar program which
you employ or you authorize to be employed on your behalf. "Unscheduled"
transfers received pursuant to an authorization to accept transfers over the
phone are priced as of the Valuation Period we receive the request at our Office
for such transactions.
(3) We price surrenders and death benefits as of the date we receive
at our Office all materials we require for such transactions and such materials
are satisfactory to us (see "Surrenders" and "Death Benefits").
The pricing of transfers and distributions involving Sub-accounts includes the
determination of the applicable Unit Price for the Units transferred or
distributed. The pricing of transfers and distributions involving Fixed
Allocations includes the determination of any applicable MVA. Any applicable
MVA alters the amount available when all the Account Value in a Fixed
Allocation is being transferred or distributed. Any applicable MVA alters the
amount of Interim Value needed when only a portion of the Account Value is
being transferred or distributed. Unit Prices may change each Valuation Period
to reflect the investment performance of the Sub-accounts. The MVA applicable
to each Fixed Allocation changes once each month and also each time we declare
a different rate for new Fixed Allocations. Payment is subject to our right to
defer transactions for a limited period (see "Deferral of Transactions").
VOTING RIGHTS: You have voting rights in relation to Account Value
maintained in the Sub-accounts. You do not have voting rights in relation to
Account Value maintained in any Fixed Allocations or in relation to fixed or
adjustable annuity payments.
We will vote shares of the underlying mutual funds or portfolios in which the
Sub-accounts invest in the manner directed by Owners. Owners give instructions
equal to the number of shares represented by the Sub-account Units attributable
to their Annuity. We will vote the shares attributable to assets held in the
Sub-accounts solely for us rather than on behalf of Owners, or any share as to
which we have not received instructions, in the same manner and proportion as
the shares for which we have received instructions. We will do so separately
for each Sub-account from various classes that may invest in the same
underlying mutual fund portfolio.
The number of votes for an underlying mutual fund or portfolio will be
determined as of the record date for such underlying mutual fund or portfolio
as chosen by its board of trustees or board of directors, as applicable. We
will furnish Owners with proper forms and proxies to enable them to instruct us
how to vote.
You may instruct us how to vote on the following matters: (a) changes to the
board of trustees or board of directors, as applicable; (b) changing the
independent accountant; (c) approval of changes to the investment advisory
agreement or adoption of a new investment advisory agreement; (d) any change in
the fundamental investment policy; and (e) any other matter requiring a vote of
the shareholders.
With respect to approval of changes to the investment advisory agreement,
approval of a new investment advisory agreement or any change in fundamental
investment policy, only Owners maintaining Account Value as
34
<PAGE> 38
of the record date in a Sub-account investing in the applicable underlying
mutual fund portfolio will instruct us how to vote on the matter, pursuant to
the requirements of Rule 18f-2 under the 1940 Act.
TRANSFERS, ASSIGNMENTS OR PLEDGES: Generally, your rights in an
Annuity may be transferred, assigned or pledged for loans at any time. However,
these rights may be limited depending on your use of the Annuity. These
transactions may be subject to income taxes and certain penalty taxes (see
"Certain Tax Considerations"). You may transfer, assign or pledge your rights
to another person at any time, prior to any death upon which the death benefit
is payable. You must request a transfer or provide us a copy of the assignment
In Writing. A transfer or assignment is subject to our acceptance. Prior to
receipt of this notice, we will not be deemed to know of or be obligated under
any assignment prior to our receipt and acceptance thereof. We assume no
responsibility for the validity or sufficiency of any assignment. Transfer of
all or a portion of ownership rights may affect the minimum death benefit (see
"Death Benefits").
REPORTS TO YOU: We mail to Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Owners should therefore give us prompt notice of any address change. We send a
confirmation statement to Owners each time a transaction is made affecting
Account Value, such as making additional Purchase Payments, transfers,
exchanges or withdrawals. Quarterly statements are also mailed detailing the
activity affecting your Annuity during the calendar quarter. You may request
additional reports. We reserve the right to charge up to $50 for each such
additional report. Instead of immediately confirming transactions made
pursuant to some type of periodic transfer program (such as a dollar cost
averaging program) or a periodic Purchase Payment program, such as a salary
reduction arrangement, we may confirm such transactions in quarterly
statements. You should review the information in these statements carefully.
All errors or corrections must be reported to us at our Office immediately to
assure proper crediting to your Annuity. For transactions for which we
immediately send confirmations, we assume all transactions are accurate unless
you notify us otherwise within 30 days after the date of the transaction. For
transactions that are only confirmed on the quarterly statement, we assume all
transactions are accurate unless you notify us within 30 days of the end of the
calendar quarter. We also send to Owners each year an annual report and a
semi-annual report containing financial statements for the applicable
Sub-accounts, as of December 31 and June 30, respectively.
THE COMPANY: American Skandia Life Assurance Corporation is a wholly owned
subsidiary of American Skandia Investment Holding Corporation, whose indirect
parent is Skandia Insurance Company Ltd. Skandia Insurance Company Ltd. is
part of a group of companies whose predecessor commenced operations in 1855.
Two of our affiliates, American Skandia Marketing, Incorporated, formerly
Skandia Life Equity Sales Corporation, and American Skandia Information
Services and Technology Corporation, formerly American Skandia Business
Services Corporation, may undertake certain administrative functions on our
behalf. Our affiliate, American Skandia Investment Services, Incorporated,
formerly American Skandia Life Investment Management, Inc., currently acts as
the investment manager to the American Skandia Trust. We currently engage
Skandia Investment Management, Inc., an affiliate whose indirect parent is
Skandia Insurance Company Ltd., as investment manager for our general account.
We are under no obligation to engage or continue to engage any investment
manager.
LINES OF BUSINESS: As of the date of this Prospectus, we offer: (a)
certain deferred annuities that are registered with the Securities and Exchange
Commission, including variable annuities, fixed interest rate annuities that
include a market value adjustment feature, and annuities that offer both
variable and fixed investment options, such as the Annuities offered pursuant
to this Prospectus; (b) certain other fixed deferred annuities that are not
registered with the Securities and Exchange Commission; and (c) fixed and
adjustable immediate annuities. We may, in the future, offer other annuities,
life insurance and other forms of insurance.
SELECTED FINANCIAL DATA: The following selected financial data are
qualified by reference to, and should be read in conjunction with, the
financial statements, including related notes thereto, and Management s
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Prospectus. The selected financial data as of and
for each of the five years ended December 31, 1994, 1993, 1992, 1991 and 1990
has been audited by Deloitte & Touche LLP, independent auditors whose report
thereon is included herein. The selected financial data as of and for the
nine-month period ended September 30, 1995 and 1994 are taken or derived from
the Company's unaudited interim financial statements included elsewhere in the
Registration Statement and, in the opinion of management, have been prepared on
the same basis as the audited financial statements included herein and include
all adjustments consisting only of normal
35
<PAGE> 39
recurring adjustments necessary for a fair presentation of such data. The
results of operations for an interim period are notnecessarily indicative of
the results for the full year or any other interim period.
{Interim financials to be filed by amendment}
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Net investment income $ 1,300,217 $ 692,758 $ 892,053 $ 723,253 $ 846,522
Annuity premium income 70,000 101,643 1,304,629 2,068,452 1,268,612
Annuity charges and fees* 24,779,785 11,752,984 4,846,134 1,335,079 220,362
Net realized capital gains (losses) (1,942) 330,024 195,848 4,278 (60,167)
Fee income 2,111,801 938,336 125,179 0 0
Other income 24,550 1,269 15,119 45,010 18,890
-------------- -------------- ------------ ------------ -----------
Total revenues $ 28,284,411 $ 13,817,014 $ 7,378,962 $ 4,176,072 $ 2,294,219
============== ============== ============ ============ ===========
BENEFITS AND EXPENSES:
Return credited to contractowners (516,730) 252,132 560,243 235,470 454,212
Annuity benefits 369,652 383,515 276,997 107,536 16,425
Increase in annuity policy reserves 5,766,003 1,208,454 1,331,278 2,045,722 1,253,859
Underwriting, acquisition and
other insurance expenses 18,942,720 9,547,951 11,338,765 7,294,400 6,796,317
Interest expense 3,615,845 187,156 0 0 0
-------------- -------------- ------------ ------------ -----------
Total benefits and expenses $ 28,177,490 $ 11,579,208 $ 13,507,283 $ 9,683,128 $ 8,520,813
============== ============== ============ ============ ===========
Income tax $ 247,429 $ 182,965 $ 0 $ 0 $ 0
============== ============== ============ ============ ===========
Net income (loss) $ (140,508) $ 2,054,841 $ (6,128,321) ($ 5,507,056) ($ 6,226,594)
============== ============== ============ ============ ===========
BALANCE SHEET DATA:
Total Assets $2,864,416,329 $1,558,548,537 $552,345,206 $239,435,675 $76,259,603
============== ============== ============ ============ ===========
Surplus Notes $ 69,000,000 $ 20,000,000 $ 0 $ 0 $ 0
============== ============== ============ ============ ===========
Shareholder's Equity $ 52,205,524 $ 52,387,687 $ 46,332,846 $ 14,292,772 $12,848,857
============== ============== ============ ============ ===========
<FN>
*On annuity sales of $[ ], $[ ], $1,372,874,000, $890,640,000, $287,596,000, $141,017,000 and
$53,218,000 during the years ended December 31, 1994, 1993, 1992, 1991, and 1990, respectively, with contractowner assets under
management of $[ ], $[ ], $2,661,161,000, $1,437,554,000, $495,176,000, $217,425,000 and $60,633,000 as
of September 30, 1995 and December 31, 1994, 1993, 1992, 1991, and 1990 respectively.
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and the notes thereto.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS {to be completed, upon amendment, to reflect results for the
interim period ending 9/30/95}
RESULTS OF OPERATIONS: The Company's long term business plan was
developed reflecting the current sales and marketing approach. Sales volume for
the nine month periods ended September 30, 1995 and 1994 was $[ ] and
$[ ], respectively. Sales volume for the first three quarters of 1995
represents a [ ] compared to the same period in 1994. Assets grew
$[ ] or [ ]% since December 31, 1994. This increase was a result
primarily of the sales volume increasing separate account assets and deferred
acquisition costs. Liabilities grew $[ ] or [ ]% primarily as a result
of the reserves required for the increased sales activity and increased
reinsurance to support the acquisition costs of the Company's variable annuity
business.
The Company experienced [
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<PAGE> 40
].
Increasing volume of annuity sales results in higher assets under management.
The fees realized on assets under management have resulted in annuity charges
and fees to increase [ ]% and [ ]%% over the periods ended September 30,
1995 and 1994, respectively.
Net investment income increased [ ]% and [ ]% over the periods and September
30, 1995 and 1994, respectively. This was a result of the increase in the
Company's bonds and short-term investments throughout the periods.
Fee income has increased [ ]% and [ ]% for the periods ended September 30,
1995 and 1994, respectively, as a result of income from transfer agency type
activities.
Return credited to contractowners represents revenues on the variable and market
value adjusted annuities offset by the benefit payments and change in reserves
required on this business. Also included are the benefit payments and change in
reserves on immediate annuity contracts without significant mortality risks. The
amount for the period ended September 30, 1995 [ ] separate account investment
return on the market value adjusted contracts being in support of the benefits
and required reserves.
Annuity benefits represent payments on annuity contracts with mortality risks,
this being the immediate annuity with life contingencies and supplementary
contracts with life contingencies.
Increase in annuity policy reserves represent change in reserves for the
immediate annuity with life contingencies, supplementary contracts with life
contingencies and minimum death benefit. [The significant decrease for the
period ended September 30, 1995 reflects a decrease in the minimum death benefit
reserve on variable annuity contracts. This decrease covers the escalating
death benefit in certain products, which is reduced due to the good performance
of the underlying mutual funds within the variable annuity contracts.
Underwriting, acquisition and other insurance expenses are made up of $[ ]
million of commissions and $[ ] million of general expenses offset by the net
capitalization of deferred acquisition costs totaling $[ ] million for the
nine month period ending September 30, 1995. This compares to the same period
last year of $[ ] million of commissions and $[ ] million of general
expenses offset by the net capitalization of deferred acquisition costs totaling
$[ ] million.
Interest expense increased [ ]% million over the same period last year as a
result of the increase in surplus notes.
LIQUIDITY AND CAPITAL RESOURCES: The liquidity requirement of
the Company was met by cash from insurance operations, investment activities and
borrowings from its parent.
The Company had significant growth during the first three quarters of 1995. The
sales volume of $[ ] was made up of approximately [ ]% variable
annuities which carry a contingent deferred sales charge. This type of product
causes a temporary cash strain in that 100% of the proceeds are invested in
separate accounts supporting the product leaving a cash (but not capital) strain
caused by the acquisition cost for the new business. This cash strain required
the Company to look beyond the insurance operations and investments of the
Company. The Company extended its reinsurance agreements (initiated in 1993 and
1994) with a large reinsurer in support of its cash needs. The reinsurance
agreements are modified coinsurance arrangements where the reinsurer shares in
the experience of a specific book of business. The income and expense items
presented above are net of reinsurance.
The Company is reviewing various options to fund the cash strain anticipated
from the acquisition costs on the expected future sales volume.
The tremendous growth of this young organization has depended on capital support
from its parent. In 1992 and 1993, the parent contributed the capital needed to
provide a capital base for the Company's planned future growth.
37
<PAGE> 41
As of September 30, 1995 and December 31, 1994, shareholder's equity was
$[ ] and $52,205,524 respectively, whichincludes the carrying value of
the state insurance licenses in the amount of $[ ] and
$5,012,500 respectively.
The Company has long term surplus notes with its parent and a short term
borrowing with its parent. No dividends have been paid to its parent company.
SEGMENT INFORMATION: As of the date of this Prospectus, we
offered only variable and fixed deferred annuities and immediate annuities.
REINSURANCE: We have entered into two reinsurance agreements with a
large reinsurer. These reinsurance agreements are modified coinsurance
arrangements with the reinsurer sharing in the experience of a specific block of
business which may include the annuities described in this Prospectus. We also
have entered into a separate reinsurance arrangement by which the risks
associated with the minimum death benefit on a specific block of business, which
may include the Annuities described in this Prospectus, have been ceded to a
large reinsurer.
RESERVES: We are obligated to carry on our statutory books, as
liabilities, actuarial reserves to meet our obligations on outstanding annuity
or life insurance contracts. This is required by the life insurance laws and
regulations in the jurisdictions in which we do business. Such reserves are
based on mortality and/or morbidity tables in general use in the United States.
In general, reserves are computed amounts that, with additions from premiums to
be received, and with interest on such reserves compounded at certain assumed
rates, are expected to be sufficient to meet our policy obligations at their
maturities if death occurs in accordance with the mortality tables employed. In
the accompanying Financial Statements these reserves for policy obligations are
determined in accordance with generally accepted accounting principles and are
included in the liabilities of our separate accounts and the general account
liabilities for future benefits of annuity or life insurance contracts we issue.
COMPETITION: We are engaged in a business that is highly competitive
due to the large number of insurance companies and other entities competing in
the marketing and sale of insurance products. There are approximately 2300
stock, mutual and other types of insurers in the life insurance business in the
United States.
EMPLOYEES: As of December 31, 1994, we had 158 direct salaried
employees. An affiliate, American Skandia Information Services and Technology
Corporation, formerly American Skandia Business Services Corporation, that
provides services almost exclusively to us, had 52 direct salaried employees.
REGULATION: We are organized as a Connecticut stock life insurance
company, and are subject to Connecticut law governing insurance companies. We
are regulated and supervised by the Connecticut Commissioner of Insurance. By
March 1 of every year, we must prepare and file an annual statement, in a form
prescribed by the Connecticut Insurance Department, which covers our operations
for the preceding calendar year, and must prepare and file our statement of
financial condition as of December 31 of such year. The Commissioner and his or
her agents have the right at all times to review or examine our books and
assets. A full examination of our operations will be conducted periodically
according to the rules and practices of the National Association of Insurance
Commissioners ("NAIC"). We are subject to the insurance laws and various
federal and state securities laws and regulations and to regulatory agencies,
such as the Securities and Exchange Commission (the "SEC") and the Connecticut
Banking Department, which administer those laws and regulations.
We can be assessed up to prescribed limits for policyholder losses incurred by
insolvent insurers under the insurance guaranty fund laws of most states. We
cannot predict or estimate the amount any such future assessments we may have to
pay. However, the insurance guaranty laws of most states provide for deferring
payment or exempting a company from paying such an assessment if it would
threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their affiliates
under insurance holding company laws and regulations. This applies to us and
our affiliates. Under such laws, inter-company transactions, such as dividend
payments to parent companies and transfers of assets, may be subject to prior
notice and approval, depending on factors such as the size of the transaction in
relation to the financial position of the companies.
38
<PAGE> 42
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative,regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the anti-trust laws; (e) the barriers preventing most banks from selling or
underwriting insurance: and (f) any initiatives directed toward improving the
solvency of insurance companies. We would also be affected by federal
initiatives that have impact on the ownership of or investment in United States
companies by foreign companies or investors.
39
<PAGE> 43
EXECUTIVE OFFICERS AND DIRECTORS:
Our executive officers and directors, their ages, positions with us and
principal occupations are indicated below. Theimmediately preceding work
experience is provided for officers that have not been employed by us or an
affiliate for at least five years as of the date of this Prospectus.
<TABLE>
<CAPTION>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
- --- ------------------------------ --------------------
<S> <C> <C>
Alan Blank Vice President, Vice President,
46 National Sales Manager, National Sales Manager, Banking:
Banking American Skandia Life
Assurance Corporation
Mr. Blank joined us in 1994. He previously held the position of Vice-Chairman at Liberty Securities.
Gordon C. Boronow**
42 President President and
and Chief Chief Operating Officer:
Operating Officer, American Skandia Life
Director (since July, 1991) Assurance Corporation
Nancy F. Brunetti Vice President, Vice President, Business and
33 Business and Application Application Development:
Development American Skandia Life
Assurance Corporation
Ms. Brunetti joined us in 1992. She previously held the position of Senior Business Analyst at Monarch
Life Insurance Company.
Malcolm M. Campbell Director (since April, 1991) Director of Operations,
39 Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi* Chief Executive Executive Vice President and
50 Officer and Member of Corporate Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
Lincoln R. Collins Senior Vice President, Senior Vice President, Product Management:
35 Product Management American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
41 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
</TABLE>
- ----------
*Trustees of American Skandia Trust, one of the underlying mutual funds in which
the Sub-accounts offered pursuant to this Prospectus invest.
40
<PAGE> 44
<TABLE>
<S> <C> <C>
Wade A. Dokken Executive Vice President Executive Vice President
35 and Chief and Chief
Marketing Officer Marketing Officer:
Director (since July, 1991) American Skandia Life
Assurance Corporation;
President and
Chief Operating Officer:
American Skandia Marketing, Incorporated
N. David Kuperstock Vice President, Vice President,
44 Product Development Product Development:
American Skandia Life
Assurance Corporation
Christopher J. Luise Vice President, Vice President,
28 Systems Management/ Systems Management/
Research and Development Research and Development:
American Skandia Life
Assurance Corporation
Mr. Luise joined us in 1995. He previously held the position of Vice President of Adnet Technologies,
Inc.
Thomas M. Mazzaferro Senior Vice President and Senior Vice President and
42 Chief Financial Officer, Chief Financial Officer:
Director (since October, 1994) American Skandia Life
Assurance Corporation
Dianne Michael Vice President, Vice President,
40 Concierge Desk Concierge Desk:
American Skandia Life
Assurance Corporation
Ms. Michael joined us in 1995. She previously held the position of Vice President with J. P. Morgan
Investment Management Inc.
Gunnar Moberg Director (since November, 1994) Director - Marketing and Sales,
40 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
M. Patricia Paez Assistant Vice President, Assistant Vice President,
34 and Corporate Secretary Corporate Secretary:
American Skandia Life
Assurance Corporation
Rodney D. Runestad Vice President and Vice President and
45 Valuation Actuary Valuation Actuary:
American Skandia Life
Assurance Corporation
</TABLE>
41
<PAGE> 45
<TABLE>
<S> <C> <C>
Hayward Sawyer Vice President and Vice President and
50 National Sales Manager, National Sales Manager,
Financial Planners Financial Planners:
American Skandia Life
Assurance Corporation
Mr. Sawyer joined us in 1994. He previously held the position of Regional Vice President with AIM
Distributors, Inc.
Robert B. Seaberg Vice President and Vice President and
47 National Marketing Director National Marketing Director:
American Skandia Life
Assurance Corporation
Mr. Seaberg joined us in 1993. He previously held the position of Senior Vice President with USF&G
Investor Life Services.
Todd L. Slade Vice President, Vice President,
37 Applications Development Applications Development:
American Skandia Life
Assurance Corporation
Anders O. Soderstrom Director (since October, 1994) President and
35 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Executive Vice President
37 and Deputy Chief and Deputy Chief
Operating Officer, Operating Officer:
Director (since July, 1991) American Skandia Life
Assurance Corporation
C. Ake Svensson Treasurer, Vice President, Treasurer
44 Director (since December, 1994) and Corporate Controller:
American Skandia Investment
Holding Corporation
Bayard F. Tracy Senior Vice President, Senior Vice President,
47 Institutional Sales and Institutional Sales and Marketing:
Marketing, American Skandia Life
Director (since October, 1994) Assurance Corporation
Jeffrey M. Ulness Vice President, Vice President,
35 Securities and Marketing Counsel Securities and Marketing Counsel:
American Skandia Life
Assurance Corporation
Mr. Ulness joined us in 1994. He previously held positions of Counsel at North American Security Life
Insurance Company from March, 1991 to July, 1994 and Associate at LeBoeuf, Lamb, Leiby, Green and MacRae
LLP from January, 1990 to March 1991.
</TABLE>
42
<PAGE> 46
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE: The summary table below summarizes
the compensation payable to our Chief Executive Officer and to the most highly
compensated of our executive officers whose compensation exceeded $100,000 in
the fiscal year immediately preceding the date of this Prospectus.
<TABLE>
<CAPTION>
Name and Principal Annual Annual Other Annual
Position Year Salary Bonus Compensation
($) ($) ($)
<S> <C> <C> <C> <C>
Jan R. Carendi - 1994 $170,569
Chief Executive 1993 214,121
Officer 1992 124,078 0 $46,803
Alan Blank - 1994 $265,125
Vice President and 1993 0
National Sales Manager, 1992 0
Banking
Wade A. Dokken - 1994 $558,299
Executive Vice President 1993 318,637
and Chief Marketing 1992 343,975
Officer
*Kevin J. Hart 1994 $671,804
Vice President and 1993 334,992
National Sales Manager, 1992 0
Wirehouses
Robert Seaberg 1994 $207,625
Vice President, 1993 54,075 0 $21,575
Marketing 1992 0
</TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN THE LAST FISCAL YEAR:
The following table provides information regarding our long-term incentive plan.
Units are awarded to executive officers and other personnel. The table shows
units awarded to our Chief Executive Officer and the most highly compensated of
our executive officers whose compensation exceeded $100,000 in the fiscal year
immediately preceding the date of this Prospectus. This program is designed to
induce participants to remain with the company over long periods of time and to
tie a portion of their compensation to the fortunes of the company. Currently,
the program consists of multiple plans. A new plan may be instituted each year.
Participants are awarded units at the beginning of a plan. Generally,
participants must remain employed by the company or its affiliates at the time
such units are payable in order to receive any payments under the plan. There
are certain exceptions, such as in cases of retirement or death.
Changes in the value of units reflect changes in the "embedded value" of the
company. "Embedded value" is the net asset value of the company (valued at
market value and not including the present value of future profits), plus the
present value of the anticipated future profits (valued pursuant to state
insurance law) on its existing contracts. Units will not have any value for
participants if the embedded value does not increase by certain target
percentages during the first four years of a plan. The target percentages may
differ between each plan. Any amounts available under a plan are paid out in
the fifth through eighth years of a plan. Payments are postponed if the payment
would exceed 20% of any profit (as determined under state insurance law) earned
by the company in the prior fiscal year. Amounts otherwise payable as of the
end of 1994 were so postponed. The amount to be received by a participant at
the time any payment is due will be the then current number of units payable
multiplied by the then current value of such units.
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<PAGE> 47
<TABLE>
<CAPTION>
------Estimated Future Payouts------
Name Number of Units Period Until Payout Threshold Target Maximum
(#) ($) ($) ($)
<S> <C> <C> <C> <C>
Jan R. Carendi 70,000 Various $207,830
Alan Blank 4,583 Various 0
Wade A. Dokken 64,270 Various $542,495
*Kevin J. Hart 15,500 Various $ 14,738
Robert Seaberg 5,000 Various 0
</TABLE>
*Mr. Hart is no longer employed by the Company; the units noted are no longer
payable.
COMPENSATION OF DIRECTORS: The following directors were
compensated as shown below in 1994:
<TABLE>
<S> <C> <C> <C>
Malcolm M. Campbell $3,500 Gunnar Moberg $1,250
Henrik Danckwardt $4,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: The
compensation committee of our board of directors as of December 31, 1994
consisted of Malcolm M. Campbell and Henrik Danckwardt.
CERTAIN TAX CONSIDERATIONS: The following is a brief summary of certain
Federal income tax laws as they are currently interpreted. No one can be
certain that the laws or interpretations will remain unchanged or that agencies
or courts will always agree as to how the tax law or regulations are to be
interpreted. This discussion is not intended as tax advice. You may wish to
consult a professional tax advisor for tax advice as to your particular
situation.
OUR TAX CONSIDERATIONS: We are taxed as a life insurance company under
Part I, subchapter L, of the Code.
TAX CONSIDERATIONS RELATING TO YOUR ANNUITY: Section 72 of the Code
governs the taxation of annuities in general. Taxation of an annuity is largely
dependent upon: (a) whether it is used in a qualified pension or profit sharing
plan or other retirement arrangement eligible for special treatment under the
Code; and (b) the status of the beneficial owner as either a natural or
non-natural person (when the annuity is not used in a retirement plan eligible
for special tax treatment). Non-natural persons include corporations, trusts,
and partnerships, except where these entities own an annuity for the benefit of
a natural person. Natural persons are individuals.
NON-NATURAL PERSONS: Any increase during a tax year in the value
of an annuity if not used in a retirement plan eligible for special treatment
under the Code is currently includible in the gross income of a non-natural
person that is the contractholder. There are exceptions if an annuity is held
by: (a) a structured settlement company; (b) an employer with respect to a
terminated pension plan; (c) entities other than employers, such as a trust,
holding an annuity as an agent for a natural person; or (d) a decedent's estate
by reason of the death of the decedent.
NATURAL PERSONS: Increases in the value of an annuity when the
contractholder is a natural person generally are not taxed until distribution
occurs. Distribution can be in a lump sum payment or in annuity payments under
the annuity option elected. Certain other transactions may be deemed to be a
distribution. The provisions of Section 72 of the Code concerning these
distributions are summarized briefly below.
DISTRIBUTIONS: Distributions received before the annuity
payments begin are treated as being derived first from "income on the contract"
and includible in gross income. The amount of the distribution exceeding
"income on the contract" is not included in gross income. "Income on the
contract" for an annuity is computed by subtracting from the value of all
"related contracts" (our term, discussed below) the taxpayer's "investment in
the contract": an amount equal to total purchase payments for all "related
contracts" less any previous distributions or portions of such distributions
from such "related contracts" not includible in gross
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<PAGE> 48
income. "Investment in the contract" may be affected by whether an annuity or
any "related contract" was purchased aspart of a tax-free exchange of life
insurance or annuity contracts under Section 1035 of the Code.
"Related contracts" may mean all annuity contracts or certificates evidencing
participation in a group annuity contract for which the taxpayer is the
beneficial owner and which are issued by the same insurer within the same
calendar year, irrespective of the named annuitants. It is clear that "related
contracts" include contracts prior to when annuity payments begin. However,
there may be circumstances under which "related contracts" may include contracts
recognized as immediate annuities under state insurance law or annuities for
which annuity payments have begun. In a ruling addressing the applicability of
a penalty on distributions, the Internal Revenue Service treated distributions
from a contract recognized as an immediate annuity under state insurance law
like distributions from a deferred annuity. The situation addressed by such
ruling included the fact that: (a) the immediate annuity was obtained pursuant
to an exchange of contracts; and (b) the purchase payments for the exchanged
contract were contributed more than one year prior to the first annuity payment
payable under the immediate annuity. This ruling also may or may not imply that
annuity payments from a deferred annuity on or after its annuity date may be
treated the same as distributions prior to the annuity date if such deferred
annuity was: (a) obtained pursuant to an exchange of contracts; and (b) the
purchase payments for the exchanged contract were made or may be deemed to have
been made more than one year prior to the first annuity payment.
If "related contracts" include immediate annuities or annuities for which
annuity payments have begun, then "related contracts" would have to be taken
into consideration in determining the taxable portion of each annuity payment
(as outlined in the "Annuity Payments" subsection below) as well as in
determining the taxable portion of distributions from an annuity or any "related
contracts" before annuity payments have begun. We cannot guarantee that
immediate annuities or annuities for which annuity payments have begun could not
be deemed to be "related contracts". You are particularly cautioned to seek
advice from your own tax advisor on this matter.
ASSIGNMENTS AND PLEDGES: Any assignment or pledge of any portion
of the value of an annuity before annuity payments have begun are treated as a
distribution subject to taxation under the distribution rules set forth above.
Any gain in an annuity subsequent to the assignment or pledge of an entire
annuity while such assignment or pledge remains in effect is treated as "income
on the contract" in the year in which it is earned. For annuities not issued
for use as qualified plans (see "Tax Considerations When Using Annuities in
Conjunction with Qualified Plans"), the cost basis of the annuity is increased
by the amount of any assignment or pledge includible in gross income. The cost
basis is not affected by any repayment of any loan for which the annuity is
collateral or by payment of any interest thereon.
PENALTY ON DISTRIBUTIONS: Subject to certain exceptions, any
distribution is subject to a penalty equal to 10% of the amount includible in
gross income. This penalty does not apply to certain distributions, including:
(a) distributions made on or after the taxpayer's age 59 1/2; (b) distributions
made on or after the death of the holder of the contract, or, where the holder
of the contract is not a natural person, the death of the annuitant; (c)
distributions attributable to the taxpayer's becoming disabled; (d)
distributions which are part of a scheduled series of substantially equal
periodic payments for the life (or life expectancy) of the taxpayer (or the
joint lives of the taxpayer and the taxpayer's Beneficiary); (e) distributions
of amounts which are allocable to "investments in the contract" made prior to
August 14, 1982; (f) payments under an immediate annuity as defined in the Code;
(g) distributions under a qualified funding asset under Code Section 130(d); or
(h) distributions from an annuity purchased by an employer on the termination of
a qualified pension plan that is held by the employer until the employee
separates from service.
Any modification, other than by reason of death or disability, of distributions
which are part of a scheduled series of substantially equal periodic payments as
noted in (d), above, that occur before the taxpayer's age 59 1/2 or within 5
years of the first of such scheduled payments will result in the requirement to
pay the taxes that would have been due had the payments been treated as subject
to tax in the years received, plus interest for the deferral period. It is our
understanding that the Internal Revenue Service does not consider a scheduled
series of distributions to qualify under (d), above, if the holder of the
annuity retains the right to modify such distributions at will, even if such
right is not exercised, or, for a variable annuity, if the distributions are not
based on a substantially equal number of Units, rather than a substantially
equal dollar amount.
The Internal Revenue Service has ruled that the exception to the 10% penalty
described above for "non-qualified" immediate annuities as defined under the
Code may not apply to annuity payments under a contract recognized as an
immediate annuity under state insurance law obtained pursuant to an exchange of
contracts if: (a) purchase payments for the exchanged contract were contributed
or deemed to be contributed more than one
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<PAGE> 49
year prior to the first annuity payment payable under the immediate annuity; and
(b) the annuity payments under the immediateannuity do not meet the requirements
of any other exception to the 10% penalty. This ruling may or may not imply
that theexception to the 10% penalty may not apply to annuity payments paid
pursuant to a deferred annuity obtained pursuant to an exchange of contract if:
(a) purchase payments for the exchanged contract were contributed or may be
deemed to be contributed more than one year prior to the first annuity payment
pursuant to the deferred annuity contract; or (b) the annuity payments pursuant
to the deferred annuity do not meet the requirements of any other exception to
the 10% penalty.
ANNUITY PAYMENTS: The taxable portion of each payment is
determined by a formula which establishes the ratio that "investment in the
contract" bears to the total value of annuity payments to be made. However, the
total amount excluded under this ratio is limited to the "investment in the
contract". The formula differs between fixed and variable annuity payments.
Where the annuity payments cease because of the death of the person upon whose
life payments are based and, as of the date of death, the amount of annuity
payments excluded from taxable income by the exclusion ratio does not exceed the
investment in the contract, then the remaining portion of unrecovered investment
is allowed as a deduction in the tax year of such death.
GIFTS: The gift of an annuity to other than the spouse of the
contract holder (or former spouse incident to a divorce) is treated for tax
purposes as a distribution.
TAX FREE EXCHANGES: Section 1035 of the Code permits certain
tax-free exchanges of a life insurance, annuity or endowment contract for an
annuity. If an annuity is obtained by a tax-free exchange of a life insurance,
annuity or endowment contract purchased prior to August 14, 1982, then any
distributions other than as annuity payments which do not exceed the portion of
the "investment in the contract" (purchase payments made into the other
contract, less prior distributions) prior to August 14, 1982, are not included
in taxable income. In all other respects, the general provisions of the Code
apply to distributions from annuities obtained as part of such an exchange.
TRANSFERS BETWEEN INVESTMENT OPTIONS: Transfers between
investment options are not subject to taxation. The Treasury Department may
promulgate guidelines under which a variable annuity will not be treated as an
annuity for tax purposes if persons with ownership rights have excessive control
over the investments underlying such variable annuity. Such guidelines may or
may not address the number of investment options or the number of transfers
between investment options offered under a variable annuity. It is not known
whether such guidelines, if in fact promulgated, would have retroactive effect.
It is also not known what effect, if any, such guidelines may have on transfers
between the investment options of the Annuity offered pursuant to this
Prospectus. We will take any action, including modifications to your Annuity or
the Sub- accounts, required to comply with such guidelines if promulgated.
GENERATION-SKIPPING TRANSFERS: Under the Code certain taxes may
be due when all or part of an annuity is transferred to or a death benefit is
paid to an individual two or more generations younger than the contract holder.
These taxes tend to apply to transfers of significantly large dollar amounts. We
may be required to determine whether a transaction must be treated as a direct
skip as defined in the Code and the amount of the resulting tax. If so required,
we will deduct from your Annuity or from any applicable payment to be treated as
a direct skip any amount we are required to pay as a result of the transaction.
DIVERSIFICATION: Section 817(h) of the Code provides that a
variable annuity contract, in order to qualify as an annuity, must have an
"adequately diversified" segregated asset account (including investments in a
mutual fund by the segregated asset account of insurance companies). The
Treasury Department's regulations prescribe the diversification requirements for
variable annuity contracts. We believe the underlying mutual fund portfolios
should comply with the terms of these regulations.
FEDERAL INCOME TAX WITHHOLDING: Section 3405 of the Code
provides for Federal income tax withholding on the portion of a distribution
which is includible in the gross income of the recipient. Amounts to be
withheld depend upon the nature of the distribution. However, under most
circumstances a recipient may elect not to have income taxes withheld or have
income taxes withheld at a different rate by filing a completed election form
with us.
Certain distributions, including rollovers, from most retirement plans, may be
subject to automatic 20% withholding for Federal income taxes. This will not
apply to: (a) any portion of a distribution paid as Minimum Distributions; (b)
direct transfers to the trustee of another retirement plan; (c) distributions
from an individual
46
<PAGE> 50
retirement account or individual retirement annuity; (d) distributions made as
substantially equal periodic payments for thelife or life expectancy of the
participant in the retirement plan or the life or life expectancy of such
participant and hisor her designated beneficiary under such plan; and (e)
certain other distributions where automatic 20% withholding may not apply.
TAX CONSIDERATIONS WHEN USING ANNUITIES IN CONJUNCTION WITH QUALIFIED
PLANS: There are various types of qualified plans for which an annuity may be
suitable. Benefits under a qualified plan may be subject to that plan's terms
and conditions irrespective of the terms and conditions of any annuity used to
fund such benefits ("qualified contract"). We have provided below general
descriptions of the types of qualified plans in conjunction with which we may
issue an Annuity. These descriptions are not exhaustive and are for general
informational purposes only. We are not obligated to make or continue to make
new Annuities available for use with all the types of qualified plans shown
below.
The tax rules regarding qualified plans are complex. The application of these
rules depend on individual facts and circumstances. Before purchasing an
Annuity for use in funding a qualified plan, you should obtain competent tax
advice, both as to the tax treatment and suitability of such an investment.
Qualified contracts include special provisions changing or restricting certain
rights and benefits otherwise available to non- qualified annuities. You should
read your Annuity carefully to review any such changes or limitations. The
changes and limitations may include, but may not be limited to, restrictions on
ownership, transferability, assignability, contributions, distributions, as well
as reductions to the minimum allowable purchase payment for an annuity and any
subsequent annuity you may purchase for use as a qualified contract.
Additionally, various penalty and excise taxes may apply to contributions or
distributions made in violation of applicable limitations.
INDIVIDUAL RETIREMENT PROGRAMS: Eligible individuals may
maintain an individual retirement account or individual retirement annuity
("IRA"). Subject to limitations, contributions of certain amounts may be
deductible from gross income. Purchasers of IRAs are to receive a special
disclosure document, which describes limitations on eligibility, contributions,
transferability and distributions. It also describes the conditions under which
distributions from IRAs and other qualified plans may be rolled over or
transferred into an IRA on a tax-deferred basis. Eligible employers that meet
specified criteria may establish simplified employee pensions for employees
using the employees IRAs. These arrangements are known as SEP-IRAs. Employer
contributions that may be made to SEP-IRAs are larger than the amounts that may
be contributed to other IRAs, and may be deductible to the employer.
TAX SHELTERED ANNUITIES: A tax sheltered annuity ("TSA") under
Section 403(b) of the Code is a contract into which contributions may be made
for the benefit of their employees by certain qualifying employers: public
schools and certain charitable, educational and scientific organizations. Such
contributions are not taxable to the employee until distributions are made from
the TSA. The Code imposes limits on contributions, transfers and distributions.
Nondiscrimination requirements apply as well.
CORPORATE PENSION AND PROFIT-SHARING PLANS: Annuities may be
used to fund employee benefits of various retirement plans established by
corporate employers. Contributions to such plans are not taxable to the
employee until distributions are made from the retirement plan. The Code
imposes limitations on contributions and distributions. The tax treatment of
distributions is subject to special provisions of the Code, and also depends on
the design of the specific retirement plan. There are also special requirements
as to participation, nondiscrimination, vesting and nonforfeitability of
interests.
H.R. 10 PLANS: Annuities may also be used to fund benefits of
retirement plans established by self-employed individuals for themselves and
their employees. These are commonly known as "H.R. 10 Plans" or "Keogh Plans".
These plans are subject to most of the same types of limitations and
requirements as retirement plans established by corporations. However, the
exact limitations and requirements may differ from those for corporate plans.
TAX TREATMENT OF DISTRIBUTIONS FROM QUALIFIED ANNUITIES: A 10%
penalty tax applies to the taxable portion of a distribution from a qualified
contract unless one of the following exceptions apply to such distribution: (a)
it is part of a properly executed transfer to another IRA, an individual
retirement account or another eligible qualified plan; (b) it occurs on or after
the taxpayer's age 59 1/2; (c) it is subsequent to the death or disability of
the taxpayer (for this purpose disability is as defined in Section 72(m)(7) of
the Code); (d) it is
47
<PAGE> 51
part of substantially equal periodic payments to be paid not less frequently
than annually for the taxpayer's life or lifeexpectancy or for the joint lives
or life expectancies of the taxpayer and a designated beneficiary; (e) it is
subsequent to aseparation from service after the taxpayer attains age 55; (f) it
does not exceed the employee's allowable deduction in that tax year for medical
care; and (g) it is made to an alternate payee pursuant to a qualified domestic
relations order. The exceptions stated above in (e), (f) and (g) do not apply
to IRAs.
SECTION 457 PLANS: Under Section 457 of the Code, deferred
compensation plans established by governmental and certain other tax exempt
employers for their employees may invest in annuity contracts. The Code limits
contributions and distributions, and imposes eligibility requirements as well.
Contributions are not taxable to employees until distributed from the plan.
However, plan assets remain the property of the employer and are subject to the
claims of the employer's general creditors until such assets are made available
to participants or their beneficiaries.
SALE OF THE ANNUITIES: American Skandia Marketing, Incorporated (ASM, Inc.), a
wholly-owned subsidiary of American Skandia Investment Holding Corporation, acts
as the principal underwriter of the Annuities. ASM, Inc.'s principal business
address is One Corporate Drive, Shelton, Connecticut 06484. ASM, Inc. is a
member of the National Association of Securities Dealers, Inc. ("NASD").
DISTRIBUTION: ASM, Inc. will enter into distribution agreements with
certain broker-dealers registered under the Securities and Exchange Act of 1934
or with entities which may otherwise offer the Annuities that are exempt from
such registration. Under such distribution agreements such broker-dealers or
entities may offer Annuities to persons who have established an account with the
broker-dealer or entity. In addition, ASM, Inc. may offer Annuities directly to
potential purchasers. Concessions will be paid based on Account Value. The
maximum concession to be paid in connection with the sale is [ ]% per year of
the Account Value. We reserve the right to base concessions from time-to-time
on the investment options chosen by Annuity Owners, including investment options
that may be deemed our "affiliates" or "affiliates" of ASM, Inc. under the
Investment Company Act of 1940.
As of the date of this Prospectus, we expect to pay an on-going service fee in
relation to providing certain statistical information upon request by Owners
about the variable investment options and the underlying mutual fund portfolios.
The fee is payable to the service providers based on your Annuity s Account
Value maintained in the variable investment options. No fee is payable based on
any Account Values maintained in any Fixed Allocations. Under most
circumstances, we will engage the broker-dealer of record for your Annuity, or
the entity of record if such entity could offer Annuities with registration as a
broker-dealer (i.e. certain banks), to be your resource for the statistical
information, and to be available upon your request to both provide and explain
such information to you. The broker-dealer of record or the entity of record is
the firm which sold you the Annuity, unless later changed. Some portion of the
fee we pay for this service may be payable to your representative. Therefore,
YOUR REPRESENTATIVE MAY RECEIVE ON-GOING SERVICE FEE COMPENSATION, BUT ONLY IN
RELATION TO ACCOUNT VALUES MAINTAINED IN VARIABLE INVESTMENT OPTIONS.
We reserve the right to promote the sale of our products and the solicitation of
additional purchase payments, where applicable, for our products, including
Annuities offered pursuant to this Prospectus, through a program of non-cash
rewards to registered representatives of participating broker-dealers. We may
withdraw or alter this promotion at any time.
ADVERTISING: We may advertise certain information regarding the
performance of the investment options. Details on how we calculate performance
measures for the Sub-accounts are found in the Statement of Additional
Information. This performance information may help you review the performance
of the investment options and provide a basis for comparison with other
annuities. This information may be less useful when comparing the performance
of the investment options with other savings or investment vehicles. Such other
investments may not provide some of the benefits of annuities, or may not be
designed for long-term investment purposes. Additionally other savings or
investment vehicles may not be treated like annuities under the Code.
The information we may advertise regarding the Fixed Allocations may include the
then current interest rates we are crediting to new Fixed Allocations.
Information on Current Rates will be as of the date specified in such
advertisement. Rates will be included in advertisements to the extent permitted
by law. Given that the actual rates applicable to any Fixed Allocation are as
of the date of any such Fixed Allocation's Guarantee Period begins, the rate
credited to a Fixed Allocation may be more or less than those quoted in an
advertisement.
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<PAGE> 52
Performance information on the Sub-accounts is based on past performance only
and is no indication of future performance. Performance of the Sub-accounts
should not be considered a representation of the performance of such
Sub-accounts in the future. Performance of the Sub-accounts is not fixed.
Actual performance will depend on the type, quality and, for some of the
Sub-accounts, the maturities of the investments held by the underlying mutual
funds or portfolios and upon prevailing market conditions and the response of
the underlying mutual funds to such conditions. Actual performance will also
depend on changes in the expenses of the underlying mutual funds or portfolios.
Such changes are reflected, in turn, in the Sub- accounts which invests in such
underlying mutual fund or portfolio. In addition, the amount of charges
assessed against each Sub-account will affect performance.
Some of the underlying mutual fund portfolios existed prior to the inception of
these Sub-accounts. Performance quoted in advertising regarding such
Sub-accounts may indicate periods during which the Sub-accounts have been in
existence but prior to the initial offering of the Annuities, or periods during
which the underlying mutual fund portfolios have been in existence, but the
Sub-accounts have not. Such hypothetical performance is calculated using the
same assumptions employed in calculating actual performance since inception of
the Sub-accounts.
Advertisements we distribute may also compare the performance of our
Sub-accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Shearson Lehman Bond Index, the Frank Russell non-U.S. Universal Mean, the
Morgan Stanley Capital International Index of Europe, Asia and Far East Funds,
and the Morgan Stanley Capital International World Index; and/or (b) other
management investment companies with investment objectives similar to the mutual
fund or portfolio underlying the Sub-accounts being compared. This may include
the performance ranking assigned by various publications, including but not
limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's, Business
Week, USA Today and statistical services, including but not limited to Lipper
Analytical Services Mutual Funds Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, SEI, the Morningstar Mutual Fund
Sourcebook and the Morningstar Variable Annuity/Life Sourcebook.
American Skandia Life Assurance Corporation may advertise its rankings and/or
ratings by independent financial ratings services. Such rankings may help you
in evaluating our ability to meet our obligations in relation to Fixed
Allocations, pay minimum death benefits, pay annuity payments or administer
Annuities. Such rankings and ratings do not reflect or relate to the
performance of Separate Account B.
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<PAGE> 53
OTHER MATTERS: Outlined below are certain miscellaneous matters you should know
before investing in an Annuity.
DEFERRAL OF TRANSACTIONS: We may defer any distribution or transfer
from a Fixed Allocation or an annuity payout for a period not to exceed the
lesser of 6 months or the period permitted by law. If we defer a distribution
or transfer from any Fixed Allocation or any annuity payout for more than thirty
days, or less where required by law, we pay interest at the minimum rate
required by law but not less than 3% per year on the amount deferred. We may
defer payment of proceeds of any distribution from any Sub-account or any
transfer from a Sub-account for a period not to exceed 7 calendar days from the
date the transaction is effected. Any deferral period begins on the date such
distribution or transfer would otherwise have been transacted (see "Pricing of
Transfers and Distributions").
All procedures, including payment, based on the valuation of the Sub-accounts
may be postponed during the period: (1) the New York Stock Exchange is closed
(other than customary holidays or weekends) or trading on the New York Stock
Exchange is restricted as determined by the SEC; (2) the SEC permits
postponement and so orders; or (3) the SEC determines that an emergency exists
making valuation or disposal of securities not reasonably practical.
RESOLVING MATERIAL CONFLICTS: Underlying mutual funds or portfolios may
be available to registered separate accounts offering either or both life and
annuity contracts of insurance companies not affiliated with us. We also may
offer life insurance and/or annuity contracts that offer different variable
investment options from those offered under this Annuity, but which invest in
the same underlying mutual funds or portfolios. It is possible that differences
might arise between our Separate Account B and one or more accounts of other
insurance companies which participate in a portfolio. It is also possible that
differences might arise between a Sub-account offered under this Annuity and
variable investment options offered under different life insurance policies or
annuities we offer, even though such different variable investment options
invest in the same underlying mutual fund or portfolio. In some cases, it is
possible that the differences could be considered "material conflicts". Such a
"material conflict" could also arise due to changes in the law (such as state
insurance law or Federal tax law) which affect either these different life and
annuity separate accounts or differing life insurance policies and annuities. It
could also arise by reason of differences in voting instructions of persons with
voting rights under our policies and/or annuities and those of other companies,
persons with voting rights under annuities and those with rights under life
policies, or persons with voting rights under one of our life policies or
annuities with those under other life policies or annuities we offer. It could
also arise for other reasons. We will monitor events so we can identify how to
respond to such conflicts. If such a conflict occurs, we will take the
necessary action to protect persons with voting rights under our life policies
or annuities vis-a-vis those with rights under life policies or annuities
offered by other insurance companies. We will also take the necessary action to
treat equitably persons with voting rights under this Annuity and any persons
with voting rights under any other life policy or annuity we offer.
MODIFICATION: We reserve the right to any or all of the following: (a)
combine a Sub-account with other Sub- accounts; (b) combine Separate Account B
or a portion thereof with other "unitized" separate accounts; (c) terminate
offering certain Guarantee Periods for new or renewing Fixed Allocations; (d)
combine Separate Account D with other "non-unitized" separate accounts; (e)
deregister Separate Account B under the Investment Company Act of 1940; (f)
operate Separate Account B as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law; (g) make
changes required by any change in the Securities Act of 1933, the Exchange Act
of 1934 or the Investment Company Act of 1940; (h) make changes that are
necessary to maintain the tax status of your Annuity under the Code; and (i)
make changes required by any change in other Federal or state laws relating to
retirement annuities or annuity contracts.
Also, from time to time, we may make additional Sub-accounts available to you.
These Sub-accounts will invest in underlying mutual funds or portfolios of
underlying mutual funds we believe to be suitable for the Annuity. We may or
may not make a new Sub-account available to invest in any new portfolio of one
of the current underlying mutual funds should such a portfolio be made available
to Separate Account B.
We may eliminate Sub-accounts, combine two or more Sub-accounts or substitute
one or more new underlying mutual funds or portfolios for the one in which a
Sub-account is invested. Substitutions may be necessary if we believe an
underlying mutual fund or portfolio no longer suits the purpose of the Annuity.
This may happen due to a change in laws or regulations, or a change in the
investment objectives or restrictions of an underlying mutual fund or portfolio,
or because the underlying mutual fund or portfolio is no longer available for
50
<PAGE> 54
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 theSEC so long as required by law, and any other required
approvals before making such a substitution, deletion or addition.
We reserve the right to transfer assets of Separate Account B, which we
determine to be associated with the class of contracts to which your Annuity
belongs, to another "unitized" separate account. We also reserve the right to
transfer assets of Separate Account D which we determine to be associated with
the class of contracts to which your annuity belongs, to another "non-unitized"
separate account. We notify you (and/or any payee during the payout phase) of
any modification to your Annuity. We may endorse your Annuity to reflect the
change.
MISSTATEMENT OF AGE OR SEX: If there has been a misstatement of the age
and/or sex of any person upon whose life annuity payments or the minimum death
benefit are based, we make adjustments to conform to the facts. As to annuity
payments: (a) any underpayments by us will be remedied on the next payment
following correction; and (b) any overpayments by us will be charged against
future amounts payable by us under your Annuity.
ENDING THE OFFER: We may limit or discontinue offering Annuities.
Existing Annuities will not be affected by any such action.
INDEMNIFICATION: Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
LEGAL PROCEEDINGS: As of the date of this Prospectus, neither we nor
ASM, Inc. were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION: The following are the
contents of the Statement of Additional Information:
(1) General Information Regarding American Skandia Life Assurance
Corporation
(2) Principal Underwriter
(3) Calculation of Performance Data
(4) Unit Price Determinations
(5) Calculating the Market Value Adjustment
(6) Independent Auditors
(7) Legal Experts
(8) Appendix A - Financial Statements for Separate Account B
(Class 1 Sub-accounts)
FINANCIAL STATEMENTS: The financial statements which follow in Appendix A are
those of American Skandia Life Assurance Corporation for the years ended
December 31, 1994, 1993 and 1992, respectively. Also included are the unaudited
financial statements for the period ending September 30, 1995. Financial
statements for the Class 1 Sub-accounts of Separate Account B are found in the
Statement of Additional Information.
51
<PAGE> 55
APPENDIXES
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION
APPENDIX B SHORT DESCRIPTION OF THE UNDERLYING MUTUAL FUNDS PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
<PAGE> 56
APPENDIX A
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
1
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statements of financial condition of American
Skandia Life Assurance Corporation (a wholly-owned subsidiary of its ultimate
parent, Skandia Insurance Company Ltd.) as of December 31, 1994 and 1993, and
the related statements of operations, shareholder's equity, and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of American Skandia Life Assurance Corporation
as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 15, 1995
2
<PAGE> 58
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1994 1993
--------------- ------------------
<S> <C> <C>
ASSETS
- ------
Investments:
Fixed maturities - at amortized cost $ 9,621,865 $ 9,664,709
Investment in mutual funds - at market value 840,637 0
Short-term investments - at amortized cost 24,000,000 19,400,000
--------------- ------------------
Total investments 34,462,502 29,064,709
Cash and cash equivalents 23,909,463 9,834,854
Accrued investment income 173,654 128,807
Deferred acquisition costs 174,009,609 90,023,536
Receivable from affiliates 459,960 728,095
State insurance licenses 5,012,500 5,162,500
Other assets 1,261,513 519,472
Separate account assets 2,625,127,128 1,423,086,564
--------------- ------------------
Total Assets $ 2,864,416,329 $ 1,558,548,537
=============== ==================
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
LIABILITIES:
Reserve for future contractowner benefits $ 11,422,381 $ 4,323,811
Annuity policy reserves 24,054,255 18,049,652
Income tax payable 36,999 13,626
Accounts payable and accrued expenses 31,753,380 18,343,252
Payable to affiliates 261,552 272,908
Payable to reinsurer 40,105,406 11,550,216
Short-term borrowing-affiliate 10,000,000 10,000,000
Surplus notes 69,000,000 20,000,000
Deferred contract charges 449,704 520,821
Separate account liabilities 2,625,127,128 1,423,086,564
--------------- ------------------
Total Liabilities 2,812,210,805 1,506,160,850
--------------- ------------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 71,623,932 71,623,932
Unrealized investment gains and losses (41,655) 0
Accumulated deficit (21,376,753) (21,236,245)
--------------- ------------------
Total Shareholder's Equity 52,205,524 52,387,687
--------------- ------------------
Total Liabilities and Shareholder's Equity $ 2,864,416,329 $ 1,558,548,537
=============== ==================
</TABLE>
See notes to financial statements
3
<PAGE> 59
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
-------------- -------------- ---------------
<S> <C> <C> <C>
REVENUES:
- --------
Net investment income $ 1,300,217 $ 692,758 $ 892,053
Annuity premium income 70,000 101,643 1,304,629
Annuity charges and fees 24,779,785 11,752,984 4,846,134
Net realized capital gains/(losses) (1,942) 330,024 195,848
Fee Income 2,111,801 938,336 125,179
Other 24,550 1,269 15,119
-------------- -------------- ---------------
Total Revenues 28,284,411 13,817,014 7,378,962
-------------- -------------- ---------------
BENEFITS AND EXPENSES:
- ---------------------
Benefits:
Return credited to contractowners (516,730) 252,132 560,243
Annuity benefits 369,652 383,515 276,997
Increase in annuity policy reserves 5,766,003 1,208,454 1,331,278
-------------- -------------- ---------------
5,618,925 1,844,101 2,168,518
-------------- -------------- ---------------
Expenses:
Underwriting, acquisition and other insurance expenses 18,792,720 9,397,951 11,188,765
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 3,615,845 187,156 0
-------------- -------------- ---------------
22,558,565 9,735,107 11,338,765
-------------- -------------- ---------------
Total Benefits and Expenses 28,177,490 11,579,208 13,507,283
-------------- -------------- ---------------
Income (loss) from operations before federal income taxes 106,921 2,237,806 (6,128,321)
Income tax 247,429 182,965 0
-------------- -------------- ---------------
Net income (loss) $ (140,508) $ 2,054,841 $ (6,128,321)
============== ============== ===============
</TABLE>
See notes to financial statements
4
<PAGE> 60
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
---------------- --------------- ---------------
<S> <C> <C> <C>
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
---------------- --------------- ---------------
Additional paid-in capital:
Balance at beginning of year 71,623,932 67,623,932 29,455,537
Additional contributions 0 4,000,000 38,168,395
---------------- --------------- ---------------
Balance at end of year 71,623,932 71,623,932 67,623,932
---------------- --------------- ---------------
Unrealized investment gains and losses:
Balance at beginning of year 0 0 0
Change in unrealized investment gains and losses (41,655) 0 0
---------------- --------------- ---------------
Balance at end of year (41,655) 0 0
---------------- --------------- ---------------
Accumulated deficit:
Balance at beginning of year (21,236,245) (23,291,086) (17,162,765)
Net income (loss) (140,508) 2,054,841 (6,128,321)
---------------- --------------- ---------------
Balance at end of year (21,376,753) (21,236,245) (23,291,086)
---------------- --------------- ---------------
TOTAL SHAREHOLDER'S EQUITY $ 52,205,524 $ 52,387,687 $ 46,332,846
================ =============== ===============
</TABLE>
See notes to financial statements
5
<PAGE> 61
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
--------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (140,508) $ 2,054,841 $ (6,128,321)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Increase in annuity policy reserves 6,004,603 4,223,289 4,642,056
Increase/(decrease) in policy and contract claims 0 (52,400) 52,400
Amortization of bond (discount)/premium 21,964 6,754 (3,028)
Amortization of state insurance licenses 150,000 150,000 150,000
Increase in receivables and other assets (473,906) (550,486) (368,781)
(Increase)/decrease in accrued investment income (44,847) 154,902 (117,211)
Increase in accounts payables and accrued expenses 13,422,145 13,939,151 2,183,766
Change in deferred acquisition costs (83,986,073) (57,387,042) (20,333,049)
Change in deferred contract charges (71,117) 13,898 79,549
Realized loss/(gain) on sale of investments 1,942 (330,024) (195,848)
--------------- --------------- -------------
Net cash used in operating activities (65,115,797) (37,777,117) (20,038,467)
--------------- --------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (1,989,120) (6,847,630) (28,893,029)
Proceeds from sale and maturity of fixed maturity investments 2,010,000 10,971,574 25,076,925
Purchase of shares in mutual funds (922,822) 0 0
Proceeds from sale of shares in mutual funds 38,588 0 0
Purchase of short-term investments (513,100,000) (1,207,575,307) (226,075,687)
Sale of short-term investments 508,500,000 1,202,333,907 211,916,764
Investments in separate accounts (1,365,775,177) (890,125,018) (286,852,200)
--------------- --------------- -------------
Net cash used in investing activities (1,371,238,531) (891,242,474) (304,827,227)
--------------- --------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 0 4,000,000 38,168,395
Surplus notes 49,000,000 20,000,000 0
Short-term borrowing 0 10,000,000 0
Increase in payable to reinsurer 28,555,190 11,550,216 0
Proceeds from annuity sales 1,372,873,747 890,639,947 287,595,902
--------------- --------------- -------------
Net cash provided by financing activities 1,450,428,937 936,190,163 325,764,297
--------------- --------------- -------------
Net increase in cash and cash equivalents 14,074,609 7,170,572 898,603
Cash and cash equivalents at beginning of year 9,834,854 2,664,282 1,765,679
Cash and cash equivalents at end of year $ 23,909,463 $ 9,834,854 $ 2,664,282
=============== =============== =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 161,398 $ 169,339 $ 0
=============== =============== =============
Interest paid $ 557,639 $ 111,667 $ 0
=============== =============== =============
</TABLE>
See notes to financial statements
6
<PAGE> 62
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), which in turn is a wholly-owned subsidiary
of Skandia Insurance Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, Skandia Life Equity Sales
Corporation. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles.
B. Investments
Investments in fixed maturities are reported at amortized cost.
Investments in mutual funds are reported at market value.
Short-term investments are reported at cost which approximates
market value.
Realized gains and losses on disposal of investments are
determined by the specific identification method and are
included in revenues.
C. Cash Equivalents
The Company considers all highly liquid time deposits purchased
with a maturity of three months or less to be cash equivalents.
D. Licenses
Licenses to do business in all states have been capitalized and
reflected at the purchase price of $6 million less accumulated
amortization. The cost of the licenses is being amortized over
40 years.
7
<PAGE> 63
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
3. NET INVESTMENT INCOME
Additional information with respect to net investment income for the
years ended December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Fixed Maturities $ 616,987 $409,552 $836,885
Mutual Funds 12,049 0 0
Short-Term Investments 142,421 394,545 105,846
Cash and Cash Equivalents 633,298 15,034 23,844
Interest on Policy Loans 1,275 1,015 0
---------- -------- --------
Total Investment Income 1,406,030 820,146 966,575
Investment Expenses 105,813 127,388 74,522
---------- -------- --------
Net investment income $1,300,217 $692,758 $892,053
========== ======== ========
</TABLE>
4. INVESTMENTS
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", effective January 1, 1994.
The Company has classified its debt securities as held-to-maturity in
that it has the explicit intent to hold these securities to maturity.
Therefore, these securities are carried at amortized cost.
The Company has classified its mutual fund investments as
available-for-sale. Therefore, these investments are carried at
market value and changes in unrealized gains and losses are reported
as a component of shareholder's equity.
The adoption of SFAS No. 115 had no impact on the Company's financial
statements.
The carrying value (amortized cost), gross unrealized gains (losses)
and estimated market value of investments in fixed maturities by
category as of December 31, 1994 and 1993 are shown below. All
securities are publicly traded for which market values were obtained
from an independent pricing service.
8
<PAGE> 64
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
Investments in fixed maturities as of December 31, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1994
----
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government
Obligations $3,796,390 $2,119 $156,759 $3,641,750
Obligations of
State and Political
Subdivisions 261,852 0 9,156 252,696
Corporate
Securities 5,563,623 0 547,023 5,016,600
---------- ------ -------- ----------
Totals $9,621,865 $2,119 $712,938 $8,911,046
========== ====== ======== ==========
</TABLE>
The amortized cost and market value of fixed maturities, by contractual
maturity, at December 31, 1994 are shown below.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
---- -----
<S> <C> <C>
Due in one year or less $ 100,112 $ 101,000
Due after one through five years 6,251,719 5,905,746
Due after five through ten years 3,270,034 2,904,300
---------- ----------
$9,621,865 $8,911,046
========== ==========
</TABLE>
9
<PAGE> 65
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
1993
----
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S.
Government
Obligations $3,823,900 $119,184 $1,144 $3,941,940
Obligations of
State and
Political
Subdivisions 267,331 0 428 266,903
Corporate
Securities 5,573,478 0 21,079 5,552,399
---------- -------- ------- ----------
Totals $9,664,709 $119,184 $22,651 $9,761,242
========== ======== ======= ==========
</TABLE>
Proceeds from maturities and sales of investments in debt securities
during 1994, 1993 and 1992 were $2,010,000, 10,971,574, and $25,076,925,
respectively.
Gross gains and gross losses realized were as follows:
<TABLE>
<CAPTION>
Gross Gross
Gains Losses
----- ------
<S> <C> <C>
1994 $ 0 $ 0
1993 $ 329,000 $ 0
1992 $ 498,790 $ 301,596
</TABLE>
Investments in mutual funds at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Mutual Funds $882,292 $4,483 $46,138 $840,637
</TABLE>
Proceeds from sales of investments in mutual funds during 1994 were
$38,588. Gross losses were $1,942.
10
<PAGE> 66
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
5. RECOGNITION OF REVENUE AND CONTRACT BENEFITS
Annuity contracts without significant mortality risk, as defined by
Financial Accounting Standard No. 97, are classified as investment
contracts (variable, market value adjusted and certain immediate
annuities) and those with mortality risk (immediate annuities) as
insurance products. The policy of revenue and contract benefit
recognition is described below.
Revenues for variable annuity contracts consist of charges against
contractowner account values for mortality and expense risks and
administration fees and an annual maintenance fee per contract.
Benefit reserves for variable annuity contracts represent the account
value of the contracts, and are included in the separate account
liabilities.
Revenues for market value adjusted annuity contracts consist of
separate account investment income reduced by benefit payments and
change in reserves in support of contractowner obligations, all of
which is included in return credited to contractowners. Benefit
reserves for these contracts represent the account value of the
contracts, and are included in the general account liability for
future contractowner benefits to the extent in excess of the separate
account liabilities.
Revenues for immediate annuity contracts without life contingencies
consist of net investment income. Revenues for immediate annuity
contracts with life contingencies consist of single premium payments
recognized as annuity considerations when received. Benefit reserves
for these contracts are based on the Society of Actuaries 1983 - a
Table with an assumed interest rate of 8.25%.
Annuity sales were $1,372,874,000, $890,640,000, $287,596,000 for
1994, 1993 and 1992, respectively. Annuity contract assets under
management were $2,661,161,000, $1,437,554,000, and $495,176,000 at
December 31, 1994, 1993 and 1992, respectively.
6. DEFERRED ACQUISITION COSTS
The costs of acquiring new business, which vary with and are primarily
related to the production of new business, are being amortized in
relation to the present value of estimated gross profits. These costs
include commissions, cost of contract issuance, and certain selling
expenses that vary with production. Details of the deferred
acquisition costs for the years ended December 31 follow:
11
<PAGE> 67
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 90,023,536 $32,636,494 $12,303,445
Acquisition costs deferred
during the year 85,801,180 59,676,296 21,406,981
Acquisition costs amortized
during the year 1,815,107 2,289,254 1,073,932
------------ ----------- -----------
Balance at end of year $174,009,609 $90,023,536 $32,636,494
============ =========== ===========
</TABLE>
7. DEFERRED CONTRACT CHARGES
Certain contracts are assessed a front-end fee at the time of issue.
These fees are deferred and recognized in income in relation to the
present value of estimated gross profits of the related contracts.
Details of the deferred contract charges for the years ended December
31 follow:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $520,821 $506,923 $427,374
Contract charges deferred
during the year 87,114 144,537 168,091
Contract charges amortized
during the year 158,231 130,639 88,542
-------- -------- --------
Balance at end of year $449,704 $520,821 $506,923
======== ======== ========
</TABLE>
12
<PAGE> 68
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
8. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109 "Accounting for Income Taxes", effective January 1,
1993. The Company previously accounted for income taxes in accordance
with Accounting Principles Board Opinion ("APB") No. 11. There was no
cumulative effect of adopting SFAS No. 109 on the Company's financial
statements on the date of adoption.
The Company files a separate federal income tax return. As of
December 31, 1994, the Company has a net operating tax loss
carryforward of $4,182,332, which expires in 2007.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The
tax effects of significant items comprising the Company's deferred tax
balance as of December 31, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred Tax (Liabilities):
Deferred acquisition costs ($37,885,053) ($23,152,548)
Payable to reinsurer (12,754,591) (3,824,435)
Other (214,505) (101,517)
----------- -----------
Total ($50,854,149) ($27,078,500)
----------- -----------
Deferred Tax Assets:
Deferred contract charge $ 157,396 $ 182,287
Net separate account liabilities 51,637,155 27,935,015
Reserve for future contractowner benefits 3,997,833 1,513,334
Net operating loss carryforward 1,813,670 4,536,790
Other 878,030 190,300
----------- -----------
Total $58,484,084 $34,357,726
----------- -----------
Net before valuation allowance $ 7,629,935 $ 7,279,226
Valuation allowance (7,629,935) (7,279,226)
----------- -----------
Net deferred tax balance $ 0 $ 0
----------- -----------
</TABLE>
13
<PAGE> 69
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
The significant components of tax expense are as follows:
<TABLE>
<CAPTION>
Federal State
------- -----
1994 1993 1994
---- ---- ----
<S> <C> <C> <C>
Current tax expense $184,771 $182,965 $62,658
Deferred tax expense (benefit):
(exclusive of the effects of
the change in valuation allowance) (350,709) (404,480) 0
Change in valuation allowance 350,709 404,480 0
-------- -------- -------
Total deferred tax expense 0 0 0
-------- -------- -------
Total income tax expense $184,771 $182,965 $62,658
</TABLE>
The income tax expense was different from the amount computed by
applying the federal statutory tax rate of 35% to pre-tax income from
continuing operations as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Income before taxes $ 106,921 $2,237,806
Income tax rate 35% 35%
---------- ----------
Tax expense at federal
statutory income tax rate 37,422 783,232
Tax effect of:
Permanent tax differences (82,188) 63,535
Difference between financial
statement and taxable income 3,161,331 2,414,254
Utilization of net operating
loss carryforwards (3,116,565) (3,261,021)
Alternative minimum tax 184,771 182,965
---------- ----------
Income tax expense $ 184,771 $ 182,965
========== ==========
</TABLE>
14
<PAGE> 70
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
9. RELATED PARTY TRANSACTIONS
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) and investment expenses have been charged to
the Company at cost by American Skandia Business Services Corporation,
an affiliated company; and likewise, the Company has charged operating
costs to American Skandia Life Investment Management, Inc., an
affiliated company. Income received for these items was $248,799 and
$146,134 for the years ended December 31, 1994 and 1993, respectively.
The total cost to the Company for these items was $8,524,840,
$3,537,566 and $3,244,582 for the years ended December 31, 1994, 1993,
and 1992 respectively. Amounts receivable from affiliates under this
arrangement were $317,285 and $446,388 as of December 31, 1994 and
1993, respectively. Amounts payable to affiliates under this
arrangement were $261,552 and $272,615 as of December 31, 1994 and
1993, respectively.
10. LEASES
The Company leases office space under a lease agreement established in
1989 with an affiliate (American Skandia Business Services
Corporation). The lease expense for 1994, 1993 and 1992 was $961,080,
$280,363 and $222,948, respectively. Future minimum lease payments
per year and in aggregate as of December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 $900,896
1996 900,896
1997 900,896
1998 900,896
1999 and thereafter 6,122,817
----------
Total $9,726,401
==========
</TABLE>
11. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains bonds/notes on deposit with
various states. The carrying value of these deposits amounted to
$3,410,135 and $3,015,949 as of December 31, 1994 and 1993,
respectively. These deposits are required to be maintained for the
protection of contractowners within the individual states.
15
<PAGE> 71
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
12. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $95,001,971, $60,666,243, and
$36,468,375, at December 31, 1994, 1993 and 1992, respectively.
The statutory basis net income(loss) was ($9,789,297), $387,695, and
($9,390,154) for the years ended December 31, 1994, 1993 and 1992,
respectively.
Under state insurance laws, the maximum amount of dividends that can
be paid to shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. No amounts may be distributed without
approval at December 31, 1994.
13. SEPARATE ACCOUNTS
Assets and liabilities in Separate Account are shown as separate
captions in the statement of financial condition. The assets consist
of long-term bonds, investments in mutual funds and short-term
securities, all of which are carried at market value.
Included in Separate Account liabilities is $259,556,863 and
$86,056,159 at December 31, 1994 and 1993, respectively, relating to
annuity contracts for which the contractholder is guaranteed a fixed
rate of return. Separate Account assets of $269,488,557 and
$86,079,532 at December 31, 1994 and 1993, respectively, consisting of
long term bonds, short term securities, transfers due from general
account and cash are in support of these annuity contracts, as
pursuant to state regulation.
Effective January 1, 1994 the Company has reclassified from revenues
the separate account investment return. Separate Account investment
return represents investment income and realized/unrealized gains and
losses earned in the separate accounts. The Separate Account
investment return is now being netted against a similar amount
included in benefits and expenses which represents separate account
investment return credited to the contractowner; consequently having
no effect on the net income (loss) of the Company. Such amounts were
($20.3) million, $101.3 million, and $27 million for the years ended
December 31, 1994, 1993 and 1992, respectively. Prior to 1994, the
Separate Account investment return was reported as revenue. Since
this revenue is directly credited to the reserve for the Company's
obligation to contractowners, it was netted in return credited to
contractowners under benefits and expenses.
16
<PAGE> 72
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
The Company analyzed the presentation of the Separate Account
operations and believes a better presentation is to offset the
separate account investment return directly against the return
credited to contractowners. This is based on the fact that the
Separate Account investment return does not benefit the Company but
constitutes a credit (charge) to the contractowners. This is a
presentation change and has no effect on the net income (loss)
reported by the Company. The related revenue and expense categories
on the Statement of Operations for the years ended December 31, 1993
and 1992, respectively, have been reclassified to reflect this
presentation change.
14. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities are
subject to discretionary withdrawal with market value adjustment by
contractholders. Separate account assets which are carried at market
value are adequate to pay such withdrawals which are generally subject
to surrender charges ranging from 7.5% to 1% for contracts held less
than 7 years.
15. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Company contributions to this plan on
behalf of the participants were $431,559, $250,039, and $195,785 for
the years ended December 31, 1994, 1993, and 1992, respectively.
The Company has a long-term incentive plan where units are awarded to
executive officers and other personnel. The program consists of
multiple plans. A new plan is instituted each year. Generally,
participants must remain employed by the Company or its affiliates at
the time such units are payable in order to receive any payments under
the plan. The accrued liability representing the value of these units
is $1,564,407 and $496,235 as of December 31, 1994 and 1993,
respectively.
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$106,882.
16. REINSURANCE
The Company cedes reinsurance under a modified co-insurance
arrangement. The reinsurance arrangement provides additional capacity
for growth in supporting the cash flow strain from the Company's
variable annuity business. The reinsurance is effected under a quota
share contract. The Company did not reinsure any of its business
prior to 1993.
17
<PAGE> 73
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
The effect of the reinsurance agreement on the Company's operations
was to reduce annuity charges and fee income for 1994 and 1993 as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Gross $30,116,166 $12,446,277
Ceded 5,336,381 693,293
----------- -----------
Net $24,779,785 $11,752,984
=========== ===========
</TABLE>
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreement.
17. SURPLUS NOTES
During 1994, the Company received $49 million from its parent in
exchange for four surplus notes, two in the amount of $10 million, one
in the amount of $15 million and one in the amount of $14 million, at
interest rates of 7.28%, 7.90%, 9.13% and 9.78%, respectively.
Interest payable at December 31, 1994 for these notes is $1,618,504.
During 1993, the Company received $20 million from its parent in
exchange for a surplus note in the amount of $20 million at a 6.84%
interest rate. Interest payable at December 31, 1994 is $1,398,400.
Payment of interest and repayment of principal for these notes was not
approved by the Insurance Commissioner of the State of Connecticut.
18. SHORT TERM BORROWING
During 1993, the Company received a $10 million loan payable from
Skandia AB, a Swedish affiliate. The loan matures on March 6, 1995
and bears interest at 7.225%. The total interest expense to the
Company was $569,618 and $149,861 for the years ended December 31,
1994 and 1993, respectively, of which $50,174 and $38,194 was payable
as of December 31, 1994 and 1993, respectively.
18
<PAGE> 74
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
NOTES TO FINANCIAL STATEMENTS (continued)
19. QUARTERLY FINANCIAL DATA (Unaudited)
The following table summarizes information with respect to the
operations of the Company. The 1993 information has been reclassified
as discussed in Note 13.
<TABLE>
<CAPTION>
Three Months Ended
------------------
1994 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Premiums and other insurance
revenues $5,594,065 $6,348,777 $7,411,686 $7,631,608
Net investment income 252,914 336,149 264,605 446,549
Net realized capital gains (losses)
0 (30,829) 25,914 2,973
---------- ---------- ---------- ----------
Total revenues $5,846,979 $6,654,097 $7,702,205 $8,081,130
========== ========== ========== ==========
Benefits and expenses $5,701,460 $7,883,829 $8,157,535 $6,434,666
========== ========== ========== ==========
Net income (loss) $ 104,636 ($1,257,768) ($503,793) $1,516,417
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
------------------
1993 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Premiums and other insurance
revenues $2,022,274 $2,809,431 $3,440,822 $4,521,705
Net investment income 296,167 156,692 90,177 149,722
Net realized capital gains (losses) 329,000 (640) 1,664 0
---------- ---------- ---------- ----------
Total revenues $2,647,441 $2,965,483 $3,532,663 $4,671,427
========== ========== ========== ==========
Benefits and expenses $1,878,923 $2,186,773 $3,371,426 $4,142,086
========== ========== ========== ==========
Net income $ 735,444 $ 757,619 $ 94,582 $ 467,196
========== ========== ========== ==========
</TABLE>
19
<PAGE> 75
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION
[TO BE FILED BY AMENDMENT]
2
<PAGE> 76
APPENDIX B
SHORT DESCRIPTION OF THE
UNDERLYING MUTUAL FUNDS PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES
The investment objectives for each underlying mutual fund are in bold face.
Please refer to the prospectuses of each underlying mutual fund for more
complete details and risk factors applicable to certain portfolios..
AMERICAN SKANDIA TRUST
SELIGMAN HENDERSON INTERNATIONAL EQUITY PORTFOLIO: THE INVESTMENT OBJECTIVE OF
SELIGMAN HENDERSON INTERNATIONAL EQUITY PORTFOLIO IS LONG-TERM CAPITAL
APPRECIATION CONSISTENT WITH PRESERVATION OF CAPITAL PRIMARILY THROUGH
INVESTMENT IN SECURITIES OF NON-UNITED STATES ISSUERS. The portfolio may
invest in securities of issuers domiciled in any country but under normal
conditions investments may be made in two principal regions: The United
Kingdom and Continental Europe; and the Pacific Basin Countries. Continental
European countries may include, from time to time, Austria, Belgium, Denmark,
Federal Republic of Germany, Finland, France, Greece, Ireland, Italy,
Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.
Countries in the Pacific Basin may include Australia, Hong Kong, India, Japan,
Korea, Malaysia, New Zealand, People's Republic of China, Philippines,
Singapore, Taiwan, and Thailand. The portfolio believes that it will usually
have assets invested in both of these regions. Although under normal market
conditions the portfolio will invest in a minimum of five countries, it may
have assets invested in many of the above countries. Investments will not
normally be made in securities of issuers located in the United States or
Canada.
SELIGMAN HENDERSON INTERNATIONAL SMALL CAP PORTFOLIO: THE INVESTMENT OBJECTIVE
OF THE SELIGMAN HENDERSON INTERNATIONAL SMALL CAP PORTFOLIO IS LONG-TERM
CAPITAL APPRECIATION. The portfolio seeks to achieve this objective primarily
by making international investments in securities of companies with small to
medium market capitalizations. The portfolio may invest in securities of
issuers domiciled in any country. Under normal conditions investments will be
made in three principal regions: The United Kingdom/Continental Europe; the
Pacific Basin; and Latin American. Under normal market conditions, the
portfolio's assets will be invested in securities of issuers located in at
least three different countries. Investments will not normally be made in
securities of issuers located in the United States or Canada. Some of the
countries in which the portfolio may invest may be considered to be developing
and may involve special risks. The portfolio may invest in all types of
securities, most of which will be denominated in currencies other than the U.S.
dollar. The portfolio will normally invest its assets in equity securities,
including common stock, securities convertible into common stock, depository
receipts for these securities and warrants. The portfolio may, however, invest
up to 25% of its assets in preferred stock and debt securities if the Sub-
advisor believes that the capital appreciation available from an investment in
such securities will equal or exceed the capital appreciation available from an
investment in equity securities. In extraordinary circumstances, the portfolio
may invest for temporary defensive purposes, without limit, in large
capitalization companies or increase its investments in debt securities.
Equity securities in which the portfolio will invest may be listed on a foreign
stock exchange or traded in foreign over-the- counter markets. Under normal
market conditions, the portfolio will invest at least 65% of its total assets
in securities of small-to medium-sized companies with market capitalizations up
to $750 million, although up to 35% of its total assets may be invested in
securities of companies with market capitalizations over $750 million There is
no requirement that the debt securities in which the portfolio may invest be
rated by a recognized rating agency. However, it is the portfolio's policy
that investments in debt securities, whether rated or unrated, will be made
only if they are "investment grade" securities or are, in the opinion of the
Sub-advisor, of equivalent quality to "investment grade" securities. The
portfolio may also invest in securities represented by European Depository
Receipts ("EDRs") or American Depository Receipts ("ADRs"). Investments in
small companies may involve greater risks, such as limited product lines,
markets and financial or managerial resources. Less frequently-traded
securities may be subject to more abrupt price movements than securities of
larger companies.
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<PAGE> 77
LORD ABBETT GROWTH AND INCOME PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE LORD
ABBETT GROWTH AND INCOME PORTFOLIO IS LONG-TERM GROWTH OF CAPITAL AND INCOME
WHILE ATTEMPTING TO AVOID EXCESSIVE FLUCTUATIONS IN MARKET VALUE. This
objective will be pursued by investing in securities which are selling at
reasonable prices in relation to value. Normally, investments will be made in
common stocks of large, seasoned companies which are in sound financial
condition and are expected to show above-average growth.
AST MONEY MARKET PORTFOLIO: THE INVESTMENT OBJECTIVES OF THE AST MONEY MARKET
PORTFOLIO ARE TO MAXIMIZE CURRENT INCOME AND MAINTAIN HIGH LEVELS OF LIQUIDITY.
This portfolio attempts to accomplish its objectives by maintaining a
dollar-weighted average maturity of not more than 90 days and by investing in
the types of securities described below which have effective maturities of not
more than 397 days. Investments may include obligations of the United States
government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances of certain financial institutions which have
more than $2 billion in total assets; commercial paper and corporate bonds;
asset-backed securities; and repurchase and reverse repurchase agreements.
Securities may be purchased on a when-issued or delayed delivery basis.
Subject to applicable investment restrictions, the AST Money Market Portfolio
also may lend its securities.
T. ROWE PRICE ASSET ALLOCATION PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE T.
ROWE PRICE ASSET ALLOCATION PORTFOLIO IS TO SEEK A HIGH LEVEL OF TOTAL RETURN
BY INVESTING PRIMARILY IN A DIVERSIFIED GROUP OF FIXED INCOME AND EQUITY
SECURITIES. The portfolio is designed to balance the potential appreciation of
common stocks with the income and principal stability of bonds over the long
term. Under normal market conditions over the long-term, the portfolio expects
to allocate its assets (other than cash reserves) so that approximately 40% of
such assets will be in fixed income securities and approximately 60% in equity
securities.
The portfolio's fixed income securities will be allocated among investment
grade, high yield and non-dollar debt securities. The weighted average
maturity for this portion of the portfolio is generally expected to be between
four and nine years, although it may vary significantly. High-yielding,
income-producing debt securities (commonly referred to as "junk bonds") and
preferred stocks including convertible securities may be purchased without
regard to maturity, however, the average maturity of the bonds is expected to
be approximately 10 years, although it may vary if market conditions warrant.
Quality will generally range from lower-medium to low and the portfolio may
also purchase bonds in default if, in the opinion of the Sub-advisor, there is
significant potential for capital appreciation.
The portfolio's equity securities will be allocated among large and small-cap
U.S. and non-dollar equity securities. Large- cap will be stocks in the S&P
500 and stocks of well-established companies which can produce increasing
dividend income. Small-cap will be common stocks of small companies or
companies which offer the possibility of accelerated earnings growth because of
rejuvenated management, new products or structural changes in the economy.
Current income is not a factor in the selection of these stocks.
The portfolio will generally trade in securities (either common stocks or
bonds) for short-term profits, but, when circumstances warrant, securities may
be purchased and sold without regard to the length of time held.
T. ROWE PRICE INTERNATIONAL EQUITY PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE
T. ROWE PRICE INTERNATIONAL EQUITY PORTFOLIO IS TO SEEK TOTAL RETURN ON ITS
ASSETS THROUGH INVESTMENTS IN COMMON STOCKS OF ESTABLISHED, NON-U.S. COMPANIES.
Investments may be made solely for capital appreciation or solely for income or
any combination of both for the purpose of achieving a higher overall return.
Total return consists of capital appreciation or depreciation, dividend income,
and currency gains or losses. The portfolio intends to diversify investments
broadly among countries and to normally have at least three different countries
represented in the portfolio. The portfolio may invest in countries of the Far
East and Western Europe as well as South Africa, Australia, Canada and other
areas (including developing countries). Under unusual circumstances, the
portfolio may invest substantially all of its assets in one or two countries.
T. ROWE PRICE NATURAL RESOURCES PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE T.
ROWE PRICE NATURAL RESOURCES PORTFOLIO IS TO SEEK LONG-TERM GROWTH OF CAPITAL
THROUGH INVESTMENT PRIMARILY IN COMMON STOCKS OF COMPANIES WHICH OWN OR DEVELOP
NATURAL RESOURCES AND OTHER BASIC COMMODITIES. Current income is not a factor
in the selection of stocks for investment by the portfolio. Total return will
consist primarily of capital appreciation (or depreciation). The portfolio
will invest substantially all of its assets in common stocks of companies which
own or develop natural resources and other basic commodities. However, it may
also purchase other types of securities, such as selected, non-resource growth
companies, foreign
2
<PAGE> 78
securities, convertible securities and warrants, when considered consistent with
the portfolio s investment objective and policies. The portfolio may also engage
in a variety of investment management practices, such as buying and selling
futures and options.
Some of the most important factors evaluated by the Sub-advisor in selecting
natural resource companies are the capability for expanded production, superior
exploration programs and production facilities, and the potential to accumulate
new resources. The portfolio expects to invest in those natural resource
companies which own or develop energy sources (such as oil, gas, coal and
uranium), precious metals, forest products, real estate, nonferrous metals,
diversified resources, and other basiccommodities which, in the opinion of the
Sub-advisor, can be produced and marketed profitably during periods of rising
laborcosts and prices. However, the percentage of the portfolio s assets
invested in natural resource and related businesses versus the percentage
invested in non-resource companies may vary greatly depending upon economic
monetary conditions and the outlook for inflation. The earnings of natural
resource companies may be expected to follow irregular patterns, because these
companies are particularly influenced by the forces of nature and international
politics. Companies which own or develop real estate might also be subject to
irregular fluctuations of earnings, because these companies are affected by
changes in the availability of money, interest rates, and other factors.
The portfolio may invest up to 50% of its total assets in foreign securities.
These include non-dollar denominated securities traded outside of the U.S. and
dollar denominated securities traded in the U.S. (such as ADRs). Some of the
countries in which the portfolio may invest may be considered to be developing
and may involve special risks The portfolio will not purchase a
non-investment grade debt security (or junk bond) if immediately after such
purchase the portfolio would have more than 10% of its total assets invested in
such securities. Junk bonds are regarded as predominantly speculative and high
risk. The portfolio may invest up to 10% of its total assets in hybrid
instruments. Such instruments may take a variety of forms, such as debt
instruments with interest or principal payments determined by reference to the
value of a currency, security index or commodity at a future point in time.
FOUNDERS CAPITAL APPRECIATION PORTFOLIO: THE INVESTMENT OBJECTIVE OF FOUNDERS
CAPITAL APPRECIATION PORTFOLIO IS CAPITAL APPRECIATION. The portfolio will
normally invest at least 65% of its total assets in common stocks of U.S.
companies with market capitalizations of $1.5 billion or less. These stocks
normally will be traded in the over-the-counter market. Since it may engage in
short-term trading, the portfolio normally will have annual portfolio turnover
rates in excess of 100%.
INVESCO EQUITY INCOME PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE INVESCO
EQUITY INCOME PORTFOLIO IS TO SEEK HIGH CURRENT INCOME WHILE FOLLOWING SOUND
INVESTMENT PRACTICES. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio securities. The
portfolio seeks to achieve its objective by investing in securities which will
provide a relatively high-yield and stable return and which, over a period of
years, may also provide capital appreciation. The portfolio normally will
invest between 60% and 75% of its assets in dividend-paying, marketable common
stocks of domestic and foreign industrial issuers. The portfolio also will
invest in convertible bonds, preferred stocks and debt securities. The
portfolio may depart from the basic investment objective and assume a defensive
position with a large portion of its assets temporarily invested in high
quality corporate bonds, or notes and government issues, or held in cash. The
portfolio's investments in common stocks may decline in value. To minimize the
risk this presents, the portfolio only invests in dividend-paying common stocks
of domestic and foreign industrial issuers which are marketable, and will not
invest more than 5% of the portfolio's assets in the securities of any one
company or more than 25% of the portfolio's assets in any one industry. The
portfolio's investments in debt securities will generally be subject to both
credit risk and market risk. There are no fixed-limitations regarding
portfolio turnover. The rate of portfolio turnover may fluctuate as a result
of constantly changing economic conditions and market circumstances.
Securities initially satisfying the portfolio's basic objectives and policies
may be disposed of when they are no longer suitable. As a result, it is
anticipated that the portfolio's annual portfolio turnover rate may be in
excess of 100%, and may be higher than that of other investment companies
seeking current income with capital growth as a secondary consideration.
Increased portfolio turnover would cause the portfolio to incur greater
brokerage costs than would otherwise be the case.
PIMCO TOTAL RETURN BOND PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE PIMCO TOTAL
RETURN BOND PORTFOLIO IS TO SEEK TO MAXIMIZE TOTAL RETURN. A secondary
objective is preservation of capital. The Sub-advisor will seek to employ
prudent investment management techniques, especially in light of the broad
range of investment instruments in which the portfolio may invest. The
proportion of the portfolio's assets committed to investment in securities with
particular characteristics (such as maturity, type and coupon rate) will vary
based on
3
<PAGE> 79
the outlook for the U.S. and foreign economies, the financial markets and other
factors. The portfolio will invest at least 65% of its assets in the following
types of securities which may be issued by domestic or foreign entities and
denominated in U.S. dollars or foreign currencies: securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; corporate
debt securities; corporate commercial paper; mortgage and other asset-backed
securities; variable and floating rate debt securities; bank certificates of
deposit; fixed time deposits and bankers' acceptances; repurchase agreements and
reverse repurchase agreements; obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies or
supranational entities; and foreign currency exchange- related securities,
including foreign currency warrants. The portfolio will invest in a diversified
portfolio of fixed-income securities of varying maturities with a portfolio
duration from three to six years. The portfolio may invest up to 20% of assets
in corporate debt securities that are rated below investment grade (i.e., rated
below Baa by Moody's or BBB by S&P or, if unrated, determined by the Sub-advisor
to be of comparable quality). These securities are regarded as high risk and
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments (see the underlying fund prospectus for
details).
PIMCO LIMITED MATURITY BOND PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE PIMCO
LIMITED MATURITY BOND PORTFOLIO IS TO SEEK TO MAXIMIZE TOTAL RETURN, CONSISTENT
WITH PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. The portfolio
will invest at least 65% of its total assets in the following types of
securities, which may be issued by domestic or foreign entities and denominated
in U.S. dollars or foreign currencies: securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities ("U.S. Government
securities"); corporate debt securities; corporate commercial paper; mortgage
and other asset-backed securities; variable and floating rate debt securities;
bank certificates of deposit, fixed time deposits and bankers' acceptances;
repurchase agreements and reverse repurchase agreements; obligations of foreign
governments or their subdivisions, agencies and instrumentalities,
international agencies or supranational entities; and foreign currency
exchange- related securities, including foreign currency warrants.
The portfolio may hold different percentages of its assets in these various
types of securities, and may invest all of its assets in derivative instruments
or in mortgage- or asset-backed securities. There are special risks involved
in these instruments. The portfolio will invest in a diversified portfolio of
fixed income securities of varying maturities with a portfolio duration from
one to three years. The portfolio may invest up to 10% of its assets in
corporate debt securities that are rated below investment grade but rated B or
higher by Moody's or S&P (or, if unrated, determined by the Sub-advisor to be
of comparable quality). The portfolio may also invest up to 20% of its assets
in securities denominated in foreign currencies. The "total return" sought by
the portfolio will consist of interest and dividends from underlying
securities, capital appreciation reflected in unrealized increases in value of
portfolio securities (realized by the shareholder only upon selling shares) or
realized from the purchase and sale of securities, and use of futures and
options, or gains from favorable changes in foreign currency exchange rates
The portfolio may invest directly in U.S. dollar- or foreign
currency-denominated fixed income securities of non-U.S. issuers. The
portfolio will limit its foreign investments to securities of issuers based in
developed countries (including Newly Industrialized Countries, "NICs", such as
Taiwan, South Korea and Mexico). Investing in the securities of issuers in any
foreign country involves special risks.
JANCAP GROWTH PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE JANCAP GROWTH
PORTFOLIO IS GROWTH OF CAPITAL IN A MANNER CONSISTENT WITH THE PRESERVATION OF
CAPITAL. Realization of income is not a significant investment consideration
and any income realized on investments, therefore, will be incidental to this
objective. The objective will be pursued by emphasizing investments in common
stocks. Common stock investments will be in industries and companies that the
portfolio's sub-advisor believes are experiencing favorable demand for their
products and services, and which operate in a favorable competitive and
regulatory environment. Investments may be made to a lesser degree in
preferred stocks, convertible securities, warrants, and debt securities of U.S.
issuers, when the JanCap Growth Portfolio perceives an opportunity for capital
growth from such securities or so that a return may be received on its idle
cash. Debt securities which the portfolio may purchase include corporate bonds
and debentures (not to exceed 5% of net assets in bonds rated below investment
grade), mortgage-backed and asset-backed securities, zero-coupon bonds,
indexed/structured notes, high-grade commercial paper, certificates of deposit
and repurchase agreements. Securities of foreign issuers, including securities
of foreign governments and Euromarket securities, also may be purchased.
Although it is the general policy of the JanCap Growth Portfolio to purchase
and hold securities for capital growth, changes will be made whenever the
portfolio's sub-advisor believes they are advisable. Because investment
changes usually will be made without reference to the length of time a security
has been held, a significant number of short-term transactions may result.
4
<PAGE> 80
Investments also may be made in "special situations" from time to time. A
"special situation" arises when, in the opinion of the portfolio's sub-advisor,
the securities of a particular company will be recognized and appreciate in
value due to a specific development, such as a technological breakthrough,
management change or a new product at that company. Subject to certain
limitations, the JanCap Growth Portfolio may purchase and write options on
securities (including index options) and options on foreign currencies, and may
invest in futures contracts for the purchase or sale of instruments based on
financial indices, including interest rates or an index of U.S. Government or
foreign government securities or equity or fixed-income securities, futures
contracts on foreign currencies and fixed income securities ("futures
contracts"), options on futures contracts, forward contracts and swaps and
swap-related products. These instruments will be used primarily for hedging
purposes. Investment of up to 15% of the JanCap Growth Portfolio's total
assets may be made in securities that are considered illiquid because of the
absence of a readily available market or due to legal or contractual
restrictions.
FEDERATED UTILITY INCOME PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE FEDERATED
UTILITY INCOME PORTFOLIO IS TO ACHIEVE HIGHCURRENT INCOME AND MODERATE CAPITAL
APPRECIATION BY INVESTING PRIMARILY IN A PROFESSIONALLY MANAGED AND DIVERSIFIED
PORTFOLIOOF EQUITY AND DEBT SECURITIES OF UTILITY COMPANIES. The portfolio
intends to achieve its investment objective by investing in equity and debt
securities of utility companies that produce, transmit or distribute gas and
electric energy as well as those companies that provide communications
facilities, such as telephone and telegraph companies. As a matter of investment
policy that can be changed without shareholder vote, the portfolio will invest
at least 65% of its total assets in securities of utility companies.
FEDERATED HIGH YIELD PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE FEDERATED HIGH
YIELD PORTFOLIO IS TO SEEK HIGH CURRENT INCOME BY INVESTING PRIMARILY IN A
DIVERSIFIED PORTFOLIO OF FIXED INCOME SECURITIES. The portfolio will invest 65%
of its assets in lower-rated fixed income bonds. Lower-rated debt obligations
are generally considered to be high-risk investments. The corporate debt
obligations in which the portfolio invests are usually not in the three highest
rating categories of a nationally recognized rating organization (AAA, AA, or A
for Standard & Poor's and Aaa, Aa or A for Moody's) but are in the lower rating
categories or are unrated but are of comparable quality and have speculative
characteristics or are speculative. Lower-rated or unrated bonds are commonly
referred to as "junk bonds". There is no minimal acceptable rating for a
security to be purchased or held in the portfolio, and the portfolio may, from
time to time, purchase or hold securities rated in the lowest rating category.
Under normal circumstances, the portfolio will not invest more than 10% of the
value of its total assets in equity securities. The fixed income securities in
which the portfolio may invest include, but are not limited to: preferred
stocks, bonds, debentures, notes, equipment lease certificates and equipment
trust certificates. The portfolio will invest primarily in fixed rate
corporate debt obligations.
AST PHOENIX BALANCED ASSET PORTFOLIO: THIS AST PHOENIX BALANCED ASSET
PORTFOLIO SEEKS AS ITS INVESTMENT OBJECTIVE REASONABLE INCOME, LONG-TERM
CAPITAL GROWTH AND CONSERVATION OF CAPITAL. The portfolio intends to invest
based on combined considerations of risk, income, capital enhancement and
protection of capital value. The portfolio may invest in any type or class of
security. Normally, the portfolio will invest in common stocks and fixed
income securities; however, it may also invest in securities convertible into
common stocks. At least 25% of the value of its assets will be invested in
fixed income senior securities. The portfolio may also engage in certain
options transactions and enter into financial futures contracts and related
options for hedging purposes and may invest in deferred or zero coupon debt
obligations. In implementing the investment objective of the portfolio, the
sub-advisor will select securities believed to have potential for the
production of current income, with emphasis on securities that also have
potential for capital enhancement. In an effort to protect its assets against
major market declines, or for other temporary defensive purposes, the portfolio
may actively pursue a policy of retaining cash or investing part or all of its
assets in cash equivalents, such as government securities and high grade
commercial paper.
AST SCUDDER INTERNATIONAL BOND PORTFOLIO: THE AST SCUDDER INTERNATIONAL BOND
PORTFOLIO SEEKS TO PROVIDE INCOME PRIMARILY BY INVESTING IN A MANAGED PORTFOLIO
OF HIGH-GRADE DEBT SECURITIES DENOMINATED IN FOREIGN CURRENCIES ("INTERNATIONAL
BONDS"). As a secondary objective, the portfolio seeks protection and possible
enhancement of principal value by actively managing currency, bond market and
maturity exposure and by security selection. The portfolio is intended for
long-term investors who can accept the risks associated with investing in
international bonds. Total return from investment in the portfolio will
consist of income after expenses, bond price gains (or losses) in terms of the
local currency and currency gains (or losses). For tax purposes, realized
gains and losses on currency are regarded as ordinary income and loss and
could, under certain circumstances, have an impact on distributions. The value
of the portfolio will fluctuate in response to
5
<PAGE> 81
various economic factors, the most important of which are fluctuations in
foreign currency exchange rates and interest rates.
The portfolio will normally invest at least 65% of its total assets in bonds
denominated in foreign currencies. Because the portfolio's investments are
primarily denominated in foreign currencies, exchange rates are likely to have
a significant impact on total portfolio performance. For example, a fall in
the U.S. dollar's value relative to the Japanese yen will increase the U.S.
dollar value of a Japanese bond held in the portfolio, even though the price of
that bond in yen terms remains unchanged. Conversely, if the U.S. dollar rises
in value relative to the yen, the U.S. dollar value of a Japanese bond will
fall. Investors should be aware that exchange rate movements can be
significant and endure for long periods of time.
Because of the portfolio's long-term investment objective, investors should not
rely on an investment in the portfolio for their short-term financial needs and
should not view the portfolio as a vehicle for playing short-term swings in the
international bond and foreign exchange markets. Shares of the portfolio alone
should not be regarded as a complete investment program. Also, investors
should be aware that investing in international bonds may involve a higher
degree of risk than investing in U.S. bonds.
BERGER CAPITAL GROWTH PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE PORTFOLIO IS TO
ACHIEVE LONG-TERM CAPITAL APPRECIATION. The of income return is not an
investment objective, any income produced will be a by-product of the effort to
achieve the portfolio's objective. In selecting its portfolio securities, the
sub-advisor places primary emphasis on established companies which it believes
to have favorable growth prospects. Common stocks usually constitute all or most
of the portfolio's investment holdings, but the portfolio remains free to invest
in securities other than common stocks, and may do so when deemed substantial
positions in securities convertible into common stocks, and it may also purchase
government securities, preferred stocks and other senior securities if the
sub-advisor believes these are likely to be the best suited at that time to
achieve th portfolio s objective. The portfolio's policy of investing in
securities believed to have a potential for capital growth means that the assets
of the portfolio generally may be subject to greater fluctuation in value than
if the portfolio invested in other securities.
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO IS LONG-TERM CAPITAL APPRECIATION.
Income is a consideration in the selection of investments but is not an
investment objective of the portfolio. It seeks to achieve this objective by
investing its assets in equity securities, such as common or preferred stocks
that are listed on a national securities exchange, or securities convertible
into or exchangeable for equity securities, including warrants and rights, often
selected by the investment manager on the basis of original research produced by
its research analysts. Except during temporary defensive periods, the portfolio
invests least 65 percent of its total assets in equity securities of companies
that, at the time of purchase, have "total market capitalization" - present
market value per share multiplied by the total number of shares outstanding - of
less than $1 billion. Investing in smaller, newer issuers generally involves
greater risk than investing in larger, more established issuers.
ALGER AMERICAN GROWTH PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE ALGER
AMERICAN GROWTH PORTFOLIO IS LONG-TERM CAPITAL APPRECIATION. Income may be a
consideration in the selection of investments but is not an investment
objective of the portfolio. It seeks to achieve its objective by investing in
equity securities, such as common or preferred stocks that are listed on a
national securities exchange, or securities convertible into or exchangeable
for equity securities, including warrants and rights, often selected by the
investment manager on the basis of original research produced by its research
analysts. Except during temporary defensive periods, the portfolio invests at
least 65 percent of its total assets in equity securities of companies that, at
the time of purchase, have total market capitalization of $1 billion or
greater.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO: THE INVESTMENT OBJECTIVE OF THE ALGER
AMERICAN MIDCAP GROWTH PORTFOLIO IS LONG-TERM CAPITAL APPRECIATION. Income is a
consideration in the selection of investments but is not an investment objective
of the portfolio. It seeks to achieve its objective by investing in equity
securities, such as common or preferred stocks that are listed on a national
securities exchange, or securities convertible into or exchangeable for equity
securities, including warrants and rights, often selected by the investment
manager on the basis of original research produced by its research analysts.
Except during
6
<PAGE> 82
temporary defensive periods, the portfolio invests at least 65 percent of its
total assets in equity securities of companies that, at the time of purchase, of
the securities, have total market capitalization between $750 million and $3.5
billion.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
(Each portfolio of the Neuberger & Berman Advisers Management Trust invests
exclusively in a corresponding series of Advisers Managers Trust in what is
sometimes known as a master/feeder fund structure. Therefore, the investment
objective of each portfolio matches that of the series of the Advisers Managers
Trust in which the portfolio invests. Therefore, the following information is
presented in terms of the applicable series of the Advisers Management Trust).
AMT PARTNERS INVESTMENTS: THE INVESTMENT OBJECTIVE OF THE AMT PARTNERS
INVESTMENTS IS TO SEEK CAPITAL GROWTH. This investment objective is
non-fundamental.
The AMT Partners Investments invests primarily in common stocks of established
companies, using the value-oriented investment approach. The series seeks
capital growth through an investment approach that is designed to increase
capital with reasonablerisk. Its investment program seeks securities believed to
be undervalued based on strong fundamentals such as low price-to-earnings
ratios, consistent cash flow, and support from asset values.
Up to 15% of the series net assets may be invested in corporate debt
securities rated below investment grade or in comparable unrated securities.
Securities rated below investment grade as well as unrated securities are often
considered to be speculative and usually entail greater risk.
<PAGE> 83
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ATTENTION: CONCIERGE DESK
P.O. BOX 883
SHELTON, CONNECTICUT
=======================================================
PLEASE SEND ME A STATEMENT OF ADDITIONAL
INFORMATION THATCONTAINS FURTHER DETAILS
ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED
IN PROSPECTUS [ ]-PROS ([ ]).
_______________________________________________________
(print your name)
_______________________________________________________
(address)
_______________________________________________________
(city/state/zip code)
=======================================================
<PAGE> 84
ADDITIONAL INFORMATION: Inquiries will be answered by calling your
representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
P.O. Box 883
Shelton, Connecticut 06484
Issued by: Serviced at:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 1-800-752-6342
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: (203) 926-1888
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION: Not Applicable.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS: Under Section 33-320a of
the Connecticut General Statutes, the Registrant 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 Registrant.
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
Registrant 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 American Skandia Marketing, Incorporated,
("ASM, Inc."), formerly Skandia Life Equity Sales Corporation, can also be
indemnified pursuant to Indemnity Agreements between each director and officer
and American Skandia Investment Holding Corporation, a corporation organized
under the laws of the state of Delaware. The provisions of the Indemnity
Agreement are governed by Section 45 of the General Corporation Law of the
State of Delaware.
The directors and officers of ASLAC and ASM, Inc. are covered under a directors
and officers liability insurance policy issued by an unaffiliated insurance
company and an insurance policy issued 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES: ASLAC has not offered or
sold any unregistered securities.
1
<PAGE> 86
<TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
<CAPTION>
Exhibits Page
-------- ----
<S> <C> <C>
Underwriting agreement incorporated by reference to Post-Effective Amendment 1
No. 1 to Registration Statement No. 33-26122, filed March 1, 1990
Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable 2
Articles of incorporation and by-laws incorporated by reference to Pre-Effective 3
Amendment No. 2 to Registration Statement No. 33-19363, filed July 27, 1988
Instruments defining the rights of security holders, including indentures, incorporated by 4
reference to simultaneously submitted in Post-effective Amendment No. 1 to Registration
Statement No. 33-87010, filed on Form N-4
Opinion re legality (included as Exhibit 23b) 5
Not applicable 6 - 9
Material contracts (Investment Management Agreement) 10
Agreement with J.P. Morgan Investment Management Inc. incorporated by reference to (a)
Post-Effective Amendment No. 5 to Registration Statement No. 33-26122, filed April 23, 1991
Agreement with Fleet Investment Advisors Inc., incorporated by reference to the initial (b)
filing of Registration Statement No. 33-86918 filed December 1, 1994
Not applicable 11 - 22
Consent of Deloitte & Touche LLP (to be filed by amendment) 23a
Opinion & Consent of Werner & Kennedy (to be filed by amendment) 23b
Power of Attorney 24
(a) For Directors Boronow, Campbell, Carendi, Danckwardt, Dokken and Sutyak -
incorporated by reference to Post-Effective Amendment No. 10 to Registration
Statement No. 33-19363, filed February 28, 1992
(b) For Directors Mazzaferro, Moberg, Soderstrom and Tracy incorporated by reference
to initial Registration Statement No. 33-86918, filed December 1, 1994
(c) For Director Svensson incorporated by reference to initial Registration Statement
No. 33-88360, filed January 10, 1995 25 - 28
Not applicable
<FN>
- --------------------------------------------------------------------------------------------------------
An index to the financial statement schedules is omitted because it is not required or is not applicable.
</TABLE>
2
<PAGE> 87
ITEM 17. UNDERTAKINGS: The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendments to this registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the 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 is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the 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, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, 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.
- -------------------------------------------------------------------------------
LEGAL EXPERTS: Counsel with respect to Federal laws and regulations applicable
to the issue and sale of the Annuities and with respect to Connecticut law is
Werner & Kennedy, 1633 Broadway, New York, New York 10019.
3
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Shelton, State of
Connecticut, on November 13, 1995
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
REGISTRANT
By:/s/M. Patricia Paez Attest:/s/Diana D. Steigauf
M. Patricia Paez, Corporate Secretary Diana D. Steigauf
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
(PRINCIPAL EXECUTIVE OFFICER)
Jan R. Carendi* Chief Executive Officer, November 13, 1995
--------------- Chairman of the Board and Director
Jan R. Carendi
(PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER)
/s/Thomas M. Mazzaferro Senior Vice President and November 13, 1995
Thomas M. Mazzaferro Chief Financial Officer
(BOARD OF DIRECTORS)
Jan. R. Carendi* Gordon C. Boronow* Malcolm M. Campbell*
---------------- ------------------ --------------------
Jan. R. Carendi Gordon C. Boronow Malcolm M. Campbell
Henrik Danckwardt* Amanda C. Sutyak* Wade A. Dokken*
------------------ ----------------- ---------------
Henrik Danckwardt Amanda C. Sutyak Wade A. Dokken
Thomas M. Mazzaferro** Gunnar Moberg** Bayard F. Tracy**
- ---------------------- --------------- -----------------
Thomas M. Mazzaferro Gunnar Moberg Bayard F. Tracy
Anders Soderstrom** C. Ake Svensson***
------------------- ------------------
Anders Soderstrom C. Ake Svensson
*/**/***By:/s/M. Patricia Paez
M. Patricia Paez
</TABLE>
*Pursuant to Powers of Attorney previously filed with Post-Effective Amendment
No. 10 to Registration Statement No. 33-19363
**Pursuant to Powers of Attorney previously filed with the initial filing of
Registration Statement No. 33-86918.
***Pursuant to Power of Attorney previously filed with the initial filing of
Registration Statement No. 33-88630.
<PAGE> 89
<TABLE>
EXHIBITS
<S> <C>
Exhibit 23a (to be filed by amendment)
Exhibit 23b (to be filed by amendment)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,263,070,101
<RECEIVABLES> 0
<ASSETS-OTHER> 5,823,258
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,268,893,359
<PAYABLE-FOR-SECURITIES> 5,562,466
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 261,125
<TOTAL-LIABILITIES> 5,823,591
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,263,069,768
<DIVIDEND-INCOME> 24,115,361
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (26,420,267)
<NET-INVESTMENT-INCOME> (2,304,906)
<REALIZED-GAINS-CURRENT> 56,558,361
<APPREC-INCREASE-CURRENT> (101,980,777)
<NET-CHANGE-FROM-OPS> (47,727,322)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 972,712,245
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 0 0
<DEBT-CARRYING-VALUE> 9,621,865 9,664,709
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 840,637 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 34,462,502 29,064,709
<CASH> 23,909,463 9,834,854
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 174,009,609 90,023,536
<TOTAL-ASSETS> 2,864,416,329<F1> 1,558,548,537<F1>
<POLICY-LOSSES> 35,476,636<F2> 22,373,463<F2>
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 79,000,000 30,000,000
<COMMON> 2,000,000 2,000,000
0 0
0 0
<OTHER-SE> 50,205,524 50,387,687
<TOTAL-LIABILITY-AND-EQUITY> 2,864,416,329 1,558,548,537
70,000 101,643
<INVESTMENT-INCOME> 1,300,217 692,758
<INVESTMENT-GAINS> (1,942) 330,024
<OTHER-INCOME> 26,916,136 12,692,589
<BENEFITS> 5,618,925 1,844,101
<UNDERWRITING-AMORTIZATION> 18,942,720 9,547,951
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> 106,921 2,237,806
<INCOME-TAX> 247,429 182,965
<INCOME-CONTINUING> (140,508) 2,054,841
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (140,508) 2,054,841
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
<FN>
<F1> Included in Total Assets are assets held in Separate Accounts of
$2,625,127,128 and $1,423,086,564 as of December 31, 1994 and December 31,
1993, respectively.
<F2> Included in Total Liability and Equity are liabilities related to
Separate Accounts of $2,625,127,128 and $1,42,086,564 as of December 31, 1994
and December 31, 1993, respectively.
</TABLE>
