Supplement to Prospectus Dated May 1, 1996
Supplement dated October 15, 1996
The following changes were approved by a vote of shareholders on
October 11, 1996 regarding the following portfolios of the American Skandia
Trust ("AST"), one of the underlying mutual funds whose portfolios are made
available as variable investment options under your Annuity:
I. Changes in the AST Phoenix Balanced Asset Portfolio: Reappointed
American Skandia Investment Services, Incorporated (the "Manager") as investment
manager; increased the investment management fee on average daily net assets
over $75 million; appointed Putnam Investment Management, Inc. ("Putnam
Management") as new portfolio subadviser; changed the portfolio's investment
objective and certain fundamental investment restrictions; and changed the
portfolio's name to the "AST Putnam Balanced Portfolio." The "Total Annual
Expenses without any applicable reimbursement" for this portfolio will increase
from 0.94% to 0.99%, resulting in a corresponding increase of approximately $1,
$2, $3, and $6 per $1000 investment in the 1, 3, 5 and 10 year Expense Examples
for the portfolio.
II. Changes in the Seligman Henderson International Equity Portfolio:
Reappointed the Manager as investment manager; appointed Putnam Management as
new portfolio subadviser; changed the portfolio's investment objective and
certain fundamental investment restrictions; and changed the portfolio's name to
the "AST Putnam International Equity Portfolio."
III. Changes in the Seligman Henderson International Small Cap Portfolio:
Reappointed the Manager as investment manager; appointed Founders Asset
Management, Inc. as new portfolio subadviser; changed the portfolio's investment
objective and certain fundamental investment restrictions; and changed the
portfolio's name to the "Founders Passport Portfolio."
The above changes are described more fully in the October 15, 1996 Supplement to
the May 1, 1996 AST Prospectus, which is available upon request by calling
1-800-SKANDIA.
The name of the AST Phoenix Balanced Asset, Seligman Henderson International
Equity and Seligman Henderson International Small Cap Sub-accounts are changed
to "AST Putnam Balanced," "AST Putnam International Equity," and "Founders
Passport" Sub-accounts, respectively.
The following short descriptions of the AST Putnam Balanced Portfolio, AST
Putnam International Equity Portfolio and Founders Passport Portfolio replace
the short descriptions of the AST Phoenix Balanced Asset Portfolio, Seligman
Henderson International Equity Portfolio and the Seligman Henderson
International Small Cap Portfolio contained in an Appendix to the Prospectus:
AST Putnam Balanced Portfolio: The investment objective of the AST Putnam
Balanced Portfolio is to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds which will produce both capital
growth and current income. In seeking its objective, the Portfolio may invest in
almost any type of security or negotiable instrument, including cash or money
market instruments. The Portfolio's portfolio will include some securities
selected primarily to provide for capital protection, others selected for
dependable income and still others for growth in value. The proportion invested
in each type of security is not fixed, although ordinarily no more than 75% of
the Portfolio's assets consist of common stocks and that portion of convertible
securities attributable to conversion rights. The Portfolio may, however, at
times invest more than 75% of its assets in such securities if the Sub-advisor
determines that unusual market or economic conditions make it appropriate to do
so. At least 25% of the value of the Portfolio's assets will normally be
invested in fixed income securities. The Portfolio may invest up to 20% of its
assets in equity securities principally traded in foreign markets or in fixed
income securities denominated in foreign currencies. The Portfolio may also
purchase Eurodollar certificates of deposit without regard to the 20% limit. The
Portfolio may invest in securities principally traded in, or issued by issuers
located in, underdeveloped and developing nations, which are sometimes referred
to as "emerging markets" which may entail special risks.
The Portfolio may buy or sell foreign currencies and foreign currency forward
contracts for hedging purposes in connection with its foreign investments. The
Portfolio may invest in both higher-rated and lower-rated fixed-income
securities. The Portfolio will not
ASAP2/ASAP/ASL/AX/AC/AD/AS
invest in securities rated at the time of purchase lower than B by Moody's or
S&P, or in unrated securities which the Sub-advisor determines are of comparable
quality. Securities rated B are predominantly speculative and have large
uncertainties or major risk exposures to adverse conditions. The Portfolio may
invest in so-called zero coupon bonds whose values are subject to greater
fluctuation in response to changes in market interest rates than bonds that pay
interest currently. The Portfolio may buy and sell futures contracts. The
Portfolio may seek to increase its current return by writing covered call and
put options on securities it owns or in which it may invest.
AST Putnam International Equity Portfolio: The investment objective of the AST
Putnam International Equity Portfolio is to seek capital appreciation. The
Portfolio seeks its objective by investing primarily in equity securities of
companies located in a country other than the United States. The Portfolio's
investments will normally include common stocks, preferred stocks, securities
convertible into common or preferred stocks, and warrants to purchase common or
preferred stocks. The Portfolio may also invest to a lesser extent in debt
securities and other types of investments if the Sub-advisor believes purchasing
them would help achieve the Portfolio's objective. The Portfolio will, under
normal circumstances, invest at least 65% of its total assets in issuers located
in at least three different countries other than the United States.
The Portfolio may invest in securities of issuers in emerging markets, as well
as more developed markets. Investing in emerging markets generally involves more
risks than in investing in developed markets. The Portfolio may invest in
companies, large or small, whose earnings are believed to be in a relatively
strong growth trend, or in companies in which significant further growth is not
anticipated but whose market value per share is thought to be undervalued. Since
foreign securities are normally denominated and traded in foreign currencies,
the values of portfolio assets may be affected favorably or unfavorably by
currency exchange rates relative to the U.S. dollar as well as other risks. The
Portfolio may engage in a variety of transactions involving the use of options
and futures contracts and in foreign currency exchange transactions for purposes
of increasing its investment return or hedging against market changes. Options
and futures transactions involve certain special risks. The Portfolio may engage
in foreign currency exchange transactions to protect against uncertainty in the
level of future exchange rates. The Sub-advisor may engage in foreign currency
exchange transactions in connection with the purchase and sale of portfolio
securities ("transaction hedging") and to protect against changes in the value
of specific portfolio positions ("position hedging").
Founders Passport Portfolio: The investment objective of the Founders Passport
Portfolio is capital appreciation. To achieve its objective, the Portfolio
invests primarily in securities issued by foreign companies which have market
capitalizations or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world. At least 65% of the Portfolio's total assets will normally be invested in
foreign securities representing a minimum of three countries. The Portfolio may
invest in larger foreign companies or in U.S.-based companies if, in the
Sub-advisor's opinion, they represent better prospects for capital appreciation.
The Portfolio normally will invest a significant proportion of its assets in the
securities of small and medium-sized companies. As used with respect to this
Portfolio, small and medium-sized companies are those which are still in the
developing stages of their life cycles and are attempting to achieve rapid
growth in both sales and earnings.
The Portfolio may invest in convertible securities, preferred stocks, bonds,
debentures, and other corporate obligations when the Sub-advisor believes that
these investments offer opportunities for capital appreciation. Current income
will not be a substantial factor in the selection of these securities. The
Portfolio will only invest in bonds, debentures, and corporate obligations
(other than convertible securities and preferred stock) rated investment grade
(BBB or higher) at the time of purchase. Bonds in the lowest investment grade
category (BBB) have speculative characteristics. Convertible securities and
preferred stocks purchased by the Portfolio may be rated in medium and lower
categories by Moody's or S&P (Ba or lower by Moody's and BB or lower by S&P),
but will not be rated lower than B. The Portfolio may also invest in unrated
convertible securities and preferred stocks in instances in which the
Sub-advisor believes that the financial condition of the issuer or the
protection afforded by the terms of the securities limits risk to a level
similar to that of securities eligible for purchase by the Portfolio rated in
categories no lower than B. The Portfolio may invest without limit in American
Depository Receipts and may invest in foreign securities. Foreign investments of
the Portfolio may include securities issued by companies located in countries
not considered to be major industrialized nations, which involve certain risks.
The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may engage in short-term trading and therefore normally will have
annual portfolio turnover rates in excess of 100%.
ASAP2/ASAP/ASL/AX/AC/AD/AS - (10/96)
