Filed with the Securities and Exchange Commission on February 25, 1997
Registration No. 333-00941
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
Registration Statement Under The Securities Act of 1933*
Post-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
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Approximate date of commencement of proposed sale to the public:
May 1, 1997 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
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Annuity Contracts $ $
- ---------------------------------------------------------------------------------------------------------------------------------
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*The prospectus contained in this Registration Statement also relates to annuity
contracts which are covered by our earlier registration statements, including
Registration File Numbers 33-86918 and 33-91402.
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**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.
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ASAP2/GAL4
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CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501
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S-1 Item No. Prospectus Heading
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
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 47. 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 the AST [GAL] Money Market Sub-account (see "Allocation
of Net Purchase Payments"). You may transfer Account Value between investment
options (see "Investment Options" and "Transfers"). Account Value may be
distributed as periodic annuity payments in a "payout phase". Such annuity
payments can be guaranteed for life (see "Annuity Payments"). During the
"accumulation phase" (the period before any payout phase), you may surrender the
Annuity for its Surrender Value or make withdrawals (see "Distributions"). Such
distributions may be subject to tax, including a tax penalty, and any applicable
contingent deferred sales charges (see "Contingent Deferred Sales Charge"). A
death benefit may be payable during the accumulation phase (see "Death
Benefit").
Account Value in the variable investment options increases or decreases daily to
reflect investment performance and the deduction of charges. No minimum amount
is guaranteed (see "Account Value in the Sub-accounts"). The variable investment
options are Class 1 Sub-accounts of American Skandia Life Assurance Corporation
Variable Account B ("Separate Account B")(see "Separate Accounts" and "Separate
Account B"). Each Sub-account invests exclusively in one 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, AST Janus Overseas
Growth, Lord Abbett Growth and Income, Federated Utility Income, Federated High
Yield, AST Money Market, T. Rowe Price Asset Allocation, T. Rowe Price
International Equity, T. Rowe Price Natural Resources, T. Rowe Price
International Bond, T. Rowe Price Small Company Value, Founders Capital
Appreciation, Founders Passport, INVESCO Equity Income, PIMCO Total Return Bond,
PIMCO Limited Maturity Bond, Berger Capital Growth, Robertson Stephens Value +
Growth, AST Putnam Value Growth & Income, AST Putnam International Equity, AST
Putnam Balanced, Twentieth Century Strategic Balanced, Twentieth Century
International Growth); (b) The Alger American Fund (portfolios - Growth, Small
Capitalization, MidCap Growth); (c) Neuberger & Berman Advisers Management Trust
(portfolio - Partners); and (d) Montgomery Variable Series (portfolio - Emerging
Markets).
[Galaxy VIP Fund (portfolios - Money Market, Equity, High Quality Bond, Asset
Allocation]
In most jurisdictions, Account Value may be allocated to a fixed
investment option during the accumulation phase. Account Value so allocated
earns a fixed rate of interest for a specified period of time referred to as a
Guarantee Period. Guarantee Periods of different durations may be offered (see
"Fixed Investment Options"). Such an allocation and the interest earned is
guaranteed by us only if held to its Maturity Date, and, where required by law,
the 30 days prior to the Maturity Date. You are cautioned that with respect to
the Fixed Investment Options during the accumulation phase, we do not guarantee
any 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.
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION CALL 1-800-752-6342 [1-800-444-3970].
Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
ASAP2/GAL4 PROS-(05/97)
<PAGE>
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, are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency and are not insured by the Securities Investor Protection
Corporation ("SIPC") as to the loss of the principal amount invested. Purchase
Payments allocated to the variable investment options are subject to investment
risks, including possible loss of principal.
[Broker-dealers or entities which may offer variable annuities without
registration as broker-dealers may offer Annuities to persons or entities who
have established an account with such broker-dealer or entity. Such eligible
persons or eligible entities also will be customers of one or more subsidiaries
of Fleet Financial Group, Inc. Fleet Investment Advisors Inc., one of the
investment advisers of one of the underlying mutual funds, is a subsidiary of
Fleet Financial Group, Inc. In certain cases, the broker-dealer may also be an
affiliate of one of the investment advisers of one of the underlying mutual
funds.
================================================================================
Annuities:
Are NOT FDIC insured, or insured by the Federal Reserve Board or any other
agency
Are NOT obligations of Fleet Bank or its Affiliates Are NOT guaranteed or
endorsed by Fleet Bank or its Affiliates DO involve risks, including
possible loss of principal amount invested ]
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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..................................................................................................................12
CONDENSED FINANCIAL INFORMATION.........................................................................ERROR! BOOKMARK NOT DEFINED.
Unit Prices And Numbers Of Units...............................................................................................14
Yields On Money Market Sub-account.............................................................................................16
INVESTMENT OPTIONS................................................................................................................16
Variable Investment Options....................................................................................................16
Fixed Investment Options.......................................................................................................18
OPERATIONS OF THE SEPARATE ACCOUNTS...............................................................................................19
Separate Accounts..............................................................................................................19
Separate Account B.............................................................................................................19
Separate Account D.............................................................................................................20
INSURANCE ASPECTS OF THE ANNUITY..................................................................................................21
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY................................................................................21
Contingent Deferred Sales Charge...............................................................................................21
Maintenance Fee................................................................................................................22
Tax Charges....................................................................................................................22
Transfer Fee...................................................................................................................22
Allocation Of Annuity Charges..................................................................................................22
CHARGES ASSESSED AGAINST THE ASSETS...............................................................................................22
Administration Charge..........................................................................................................22
Mortality and Expense Risk Charges.............................................................................................23
CHARGES OF THE UNDERLYING MUTUAL FUNDS............................................................................................23
PURCHASING ANNUITIES..............................................................................................................23
Uses Of The Annuity............................................................................................................23
Application And Initial Payment................................................................................................23
Skandia's Systematic Investment Plan ("bank drafting").........................................................................24
Periodic Purchase Payments.....................................................................................................24
Right to Return the Annuity....................................................................................................24
Allocation of Net Purchase Payments............................................................................................24
Balanced Investment Program....................................................................................................25
Ownership, Annuitant and Beneficiary Designations..............................................................................25
ACCOUNT VALUE AND SURRENDER VALUE.................................................................................................25
Account Value in the Sub-accounts..............................................................................................25
Account Value of the Fixed Allocations.........................................................................................26
Additional Amounts in the Fixed Allocations....................................................................................26
RIGHTS, BENEFITS AND SERVICES.....................................................................................................27
Additional Purchase Payments...................................................................................................27
Changing Revocable Designations................................................................................................27
Allocation Rules...............................................................................................................27
Transfers......................................................................................................................28
Renewals.....................................................................................................................29
Dollar Cost Averaging........................................................................................................29
Rebalancing..................................................................................................................29
Distributions..................................................................................................................30
Surrender....................................................................................................................30
Medically-Related Surrender..................................................................................................30
Free Withdrawals.............................................................................................................31
Partial Withdrawals..........................................................................................................32
Systematic Withdrawals.......................................................................................................32
Minimum Distributions........................................................................................................33
Death Benefit................................................................................................................33
Annuity Payments.............................................................................................................34
Qualified Plan Withdrawal Limitations........................................................................................35
Pricing of Transfers and Distributions.........................................................................................36
Voting Rights..................................................................................................................36
Transfers, Assignments or Pledges..............................................................................................37
Reports to You.................................................................................................................37
SALE OF THE ANNUITIES.............................................................................................................37
Distribution...................................................................................................................37
Advertising....................................................................................................................37
CERTAIN TAX CONSIDERATIONS........................................................................................................38
Our Tax Considerations.........................................................................................................38
Tax Considerations Relating to Your Annuity....................................................................................38
Non-natural Persons..........................................................................................................38
Natural Persons..............................................................................................................39
Distributions................................................................................................................39
Assignments and Pledges......................................................................................................39
Penalty on Distributions.....................................................................................................39
Annuity Payments.............................................................................................................40
Gifts........................................................................................................................40
Tax Free Exchanges...........................................................................................................40
Transfers Between Investment Options.........................................................................................40
Generation-Skipping Transfers................................................................................................40
Diversification..............................................................................................................40
Federal Income Tax Withholding...............................................................................................40
Tax Considerations When Using Annuities in Conjunction with Qualified Plans....................................................41
Individual Retirement Programs...............................................................................................41
Tax Sheltered Annuities......................................................................................................41
Corporate Pension and Profit-sharing Plans...................................................................................41
H.R. 10 Plans................................................................................................................41
Tax Treatment of Distributions from Qualified Annuities......................................................................41
Section 457 Plans............................................................................................................41
OTHER MATTERS.....................................................................................................................42
Deferral of Transactions.......................................................................................................42
Resolving Material Conflicts...................................................................................................42
Modification...................................................................................................................42
Misstatement of Age or Sex.....................................................................................................43
Ending the Offer...............................................................................................................43
Indemnification................................................................................................................43
Legal Proceedings..............................................................................................................43
THE COMPANY.............................................................................................ERROR! BOOKMARK NOT DEFINED.
Lines of Business..............................................................................................................43
Selected Financial Data........................................................................................................43
Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................44
Results of Operation...........................................................................................................44
Liquidity and Capital Resources................................................................................................45
Segment Information..........................................................................................................46
Reinsurance....................................................................................................................46
Surplus Notes..................................................................................................................46
Reserves.......................................................................................................................46
Competition....................................................................................................................46
Employees......................................................................................................................46
Regulation.....................................................................................................................47
Executive Officers and Directors...............................................................................................47
Executive Compensation.........................................................................................................50
Summary Compensation Table...................................................................................................50
Long-Term Incentive Plans - Awards in the Last Fiscal Year...................................................................50
Compensation of Directors....................................................................................................51
Compensation Committee Interlocks and Insider Participation..................................................................51
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...............................................................................51
FINANCIAL STATEMENTS..............................................................................................................51
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION....................................................................................................................52
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES.............................................................................................52
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<PAGE>
DEFINITIONS: The following are key terms used in this Prospectus. Other terms
are defined in this Prospectus as they appear.
ACCOUNT VALUE is the value of each allocation to a Sub-account or a Fixed
Allocation prior to the Annuity Date, plus any earnings, and/or less any losses,
distributions and charges thereon, before assessment of any applicable
contingent deferred sales charge and/or 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 a specific type of Systematic Withdrawal such that the
amounts payable are not less than the minimum amounts that must be distributed
each year from an Annuity if used in relation to certain qualified plans under
the Code.
NET PURCHASE PAYMENT is a Purchase Payment less any applicable charge for taxes.
OFFICE is our business office, American Skandia Life Assurance Corporation, One
Corporate Drive, P.O. Box 883, Shelton, Connecticut 06484.
OWNER is either an eligible entity or person named as having ownership rights in
relation to an Annuity issued as an individual contract. An Annuity may be
issued as a certificate evidencing interest in a group annuity contract. If so,
the rights, benefits and requirements of and the events relating to an Owner, as
described in this Prospectus, will be the rights, benefits and requirements of
and events relating to the person or entity designated as the participant in
such certificate.
PURCHASE PAYMENT is a cash consideration you give 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.
SURRENDER VALUE is the value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender less any applicable contingent deferred sales charge and any
applicable maintenance fee.
SYSTEMATIC WITHDRAWAL is one of a plan of periodic withdrawals of Surrender
Value during the accumulation phase. Such a plan is subject to our rules.
UNIT is a measure used to calculate your Account Value in a Sub-account prior to
the Annuity Date.
UNIT PRICE is used for calculating: (a) the number of Units allocated to a
Sub-account; and (b) the value of transactions into or out of a Sub-account or
benefits based on Account Value in a Sub-account prior to the Annuity Date. Each
Sub-account has its own Unit Price which will vary each Valuation Period to
reflect the investment experience of that Sub-account.
VALUATION DAY is every day the New York Stock Exchange is open for trading or
any other day that the Securities and Exchange Commission requires mutual funds
or unit investment trusts to be valued.
VALUATION PERIOD is the period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"We", "us", "our" or "the Company" means American Skandia Life Assurance
Corporation.
"You" or "your" means the Owner.
<PAGE>
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, AST Janus Overseas Growth, Lord Abbett Growth and Income,
Federated Utility Income, Federated High Yield, AST Money Market, T. Rowe Price
Asset Allocation, T. Rowe Price International Equity, T. Rowe Price Natural
Resources, T. Rowe Price International Bond, T. Rowe Price Small Company Value,
Founders Capital Appreciation, Founders Passport, INVESCO Equity Income, PIMCO
Total Return Bond, PIMCO Limited Maturity Bond, Berger Capital Growth, Robertson
Stephens Value + Growth, AST Putnam Value Growth & Income, AST Putnam
International Equity, AST Putnam Balanced, Twentieth Century Strategic Balanced,
Twentieth Century International Growth); (b) The Alger American Fund (portfolios
- - Growth, Small Capitalization, MidCap Growth); (c) Neuberger & Berman Advisers
Management Trust (portfolio - Partners); and (d) Montgomery Variable Series
(portfolio - Emerging Markets).
[Galaxy VIP Fund (portfolios - Money Market, Equity, High Quality Bond, Asset
Allocation)]
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.
(3) Insurance Aspects of the Annuity: There are insurance risks which
we bear in relation to the Annuity. For more information, see the section
entitled Insurance Aspects of the Annuity.
(4) Charges Assessed or Assessable Against the Annuity: The Annuity
charges which are assessed or may be assessable under certain circumstances are
the contingent deferred sales charge, the maintenance fee, a charge for taxes
and a transfer fee. These charges are allocated according to our rules. We may
also charge for certain special services. For more information, see the section
entitled Charges Assessed or Assessable Against the Annuity, including the
following subsections: (a) Contingent Deferred Sales Charge; (b) Maintenance
Fee; (c) Tax Charges; (d) Transfer Fee; and (e) 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 [GAL] 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 [GAL] 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) Skandia's Systematic Investment Plan; (d) Periodic Purchase
Payments; (e) Right to Return the Annuity; (f) Allocation of Net Purchase
Payments; (g) Balanced Investment Program; and (h) Ownership, Annuitant and
Beneficiary Designations.
(8) Account Value and Surrender Value: In the accumulation phase your
Annuity has an Account Value. Your total Account Value as of a particular date
is the sum of your Account Value in each Sub-account and in each Fixed
Allocation. Surrender Value is the Account Value less any applicable contingent
deferred sales charge and any applicable maintenance fee. To determine your
Account Value in each Sub-account we multiply the Unit Price as of the Valuation
Period for which the calculation is being made times the number of Units
attributable to you in that Sub-account as of that Valuation Period. We also
determine your Account Value separately for each Fixed Allocation. A Fixed
Allocation's Account Value as of a particular date is determined by multiplying
its then current Interim Value times the MVA. No MVA applies to a Fixed
Allocation as of its Maturity Date, and, where required by law, the 30 days
prior to the Maturity Date. Under certain circumstances, the MVA formula may
change. For more information, see the section entitled Account Value and
Surrender Value, including the following subsections: (a) Account Value in the
Sub-accounts; (b) Account Value of Fixed Allocations; and (c) Additional Amounts
in the Fixed Allocations.
(9) Rights, Benefits and Services: You have a number of rights and
benefits under an Annuity once issued. We also currently provide a number of
services to Owners. These rights, benefits and services are subject to a number
of rules and conditions. These rights, benefits and services include, but are
not limited to, those described in this Prospectus. We accept additional
Purchase Payments during the accumulation phase. You may use bank drafting to
make Purchase Payments. We support certain Periodic Purchase Payment programs
subject to our rules. You may change revocable designations. You may transfer
Account Values between investment options. Transfers in excess of 12 per Annuity
Year are subject to a fee. We offer dollar cost averaging and rebalancing during
the accumulation phase. During the accumulation phase, surrender, free
withdrawals and partial withdrawals are available, as are medically-related
surrenders under which the contingent deferred sales charge is waived under
specified circumstances. In the accumulation phase we offer Systematic
Withdrawals and, for Annuities used in qualified plans, Minimum Distributions.
We offer fixed annuity options, and may offer adjustable annuity options, that
can guarantee payments for life. In the accumulation phase, a death benefit may
be payable. You may transfer or assign your Annuity unless such rights are
limited in conjunction with certain uses of the Annuity. You may exercise
certain voting rights in relation to the underlying mutual fund portfolios in
which the Sub-accounts invest. You have the right to receive certain reports
periodically.
For additional information, see the section entitled Rights, Benefits and
Services including the following subsections: (a) Additional Purchase Payments;
(b) Skandia's Systematic Investment Plan; (c) Changing Revocable Designations;
(d) Allocation Rules; (e) Transfers; (f) Renewals; (g) Dollar Cost Averaging;
(h) Rebalancing; (i) Distributions (including: (i) Surrender; (ii)
Medically-Related Surrender; (iii) Free Withdrawals; (iv) Partial Withdrawals;
(v) Systematic Withdrawals; (vi) Minimum Distributions; (vii) Death Benefit;
(viii) Annuity Payments; and (ix) Qualified Plan Withdrawal Limitations); (j)
Pricing of Transfers and Distributions (k) Voting Rights; (l) Transfers,
Assignments and Pledges; and (m) Reports to You.
(10) The Company: American Skandia Life Assurance Corporation is a
wholly owned subsidiary of American Skandia Investment Holding Corporation,
whose indirect parent is Skandia Insurance Company Ltd. Skandia Insurance
Company Ltd. is a Swedish company that holds a number of insurance companies in
many countries. The predecessor to Skandia Insurance Company Ltd. commenced
operations in 1855. For more information, see the section entitled The Company
and the following subsections: (a) Lines of Business; (b) Selected Financial
Data; (c) Management's Discussion and Analysis of Financial Condition and
Results of Operations (including: (i) Results of Operations; (ii) Liquidity and
Capital Resources; and (iii) Segment Information); (d) Reinsurance; (e)
Reserves; (f) Competition; (g) Employees; (h) Regulation; (i) Executive Officers
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 filling in the coupon at the end of this
Prospectus and sending it (or a written request) to American Skandia Life
Assurance Corporation, Concierge Desk, [Galaxy Annuity Customer Service,] P.O.
Box 883, Shelton, CT 06484 You also may forward such a request electronically to
our Customer Service Department. Our electronic mail address is
[email protected]. It includes further information, as described in
the section of this Prospectus entitled "Contents of the Statement of Additional
Information". This Prospectus is part of the registration statements we filed
with the Securities and Exchange Commission ("SEC") regarding this offering.
Additional information on us and this offering is available in those
registration statements and the exhibits thereto. You may obtain copies of these
materials at the prescribed rates from the SEC's Public Reference Section, 450
Fifth Street N.W., Washington, D.C., 20549. You may inspect and copy those
registration statements and the exhibits thereto at the SEC's public reference
facilities at the above address, Rm. 1024, and at the SEC's Regional Offices, 7
World Trade Center, New York, NY, and the Everett McKinley Dirksen Building, 219
South Dearborn Street, Chicago, IL. These documents, as well as documents
incorporated by reference, may also be obtained through the SEC's Internet
Website (http://www.sec.gov) for this registration statement as well as for
other registrants that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE: 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, [Galaxy Annuity Customer
Service], P.O. Box 883, Shelton, Connecticut, 06484. Our phone number is 1-(800)
752-6342 [1-(800) 444-3970]. Our electronic mail address is
[email protected].
CONTRACT EXPENSE SUMMARY: The summary provided below includes information
regarding the expenses for your Annuity, for the Sub-accounts and for the
underlying mutual fund portfolios. The only expense applicable if you allocate
all your Account Value to Fixed Allocations would be the contingent deferred
sales charge. More detail regarding the expenses of the underlying mutual funds
and their portfolios may be found either in the prospectuses for such mutual
funds or in the annual reports of such mutual funds. The expenses of our
Sub-accounts (not those of the underlying mutual fund portfolios in which our
Sub-accounts invest) are the same no matter which Sub-account you choose.
Therefore, these expenses are only shown once below. In certain states, premium
taxes may be applicable.
<TABLE>
<CAPTION>
Your Transaction Expenses
<S> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge, as a Year 1 -7.5%; year 2 - 7.0%; year 3- 6.0%; year 4 - 5.0% year 5 - 4.0%;
percentage of Purchase Payments liquidated, year 6 - 3.0%; year 7 - 2.0% year 8 and thereafter - 0% of each
outside New York State Purchase Payment as measured from the date it was allocated to Account Value
Contingent Deferred Sales Charge, as a Year 1 -7.0%; year 2 - 6.0%; year 3- 5.0%; year 4 - 4.0% year 5 - 3.0%;
percentage of Purchase Payments liquidated, year 6 - 2.0%; year 7 - 1.0% year 8 and thereafter - 0% of each
in New York State Purchase Payment as measured from the date it was allocated to Account
Value
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
Annual Expenses of the Sub-accounts (as a percentage of average daily net assets)
Mortality and Expense Risk Charges 1.25%
Administration Charge 0.15%
-----
Total Annual Expenses of the Sub-accounts 1.40%
Underlying Mutual Fund Portfolio Annual Expenses (as a percentage of average net assets)
</TABLE>
Unless otherwise shown, the expenses shown below are for the year ending
December 31, 1996. "N/A" shown below indicates that no entity has agreed to
reimburse the particular expense indicated.
<TABLE>
<CAPTION>
Total Total
Annual Annual
Management Management Other Other Expenses Expenses
Fee Fee Expenses Expenses after any without any
after any without any after any without any applicable applicable
Portfolio: voluntary voluntary any applicable applicable waiver or waiver or
waiver waiver reimbursement reimbursement reimbursement reimbursement
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
American Skandia Trust
JanCap Growth
AST Janus Overseas Growth
Lord Abbett Growth and Income TO BE FILED BY AMENDMENT
Federated Utility Income
Federated High Yield
AST Money Market
T. Rowe Price Asset Allocation
T. Rowe Price International Equity
T. Rowe Price Natural Resources
T. Rowe Price International Bond
T. Rowe Price Small Company Value
Founders Capital Appreciation
Founders Passport
INVESCO Equity Income
PIMCO Total Return Bond
PIMCO Limited Maturity Bond
Berger Capital Growth
Robertson Stephens Value + Growth
AST Putnam Value Growth & Income
AST Putnam International Equity
AST Putnam Balanced
Twentieth Century Strategic Balanced
Twentieth Century International Growth
The Alger American Fund
Growth
Small Capitalization
MidCap Growth
Neuberger & Berman Advisers
Management Trust
Partners
Montgomery Variable Series
Emerging Markets
[The Galaxy VIP Fund
Money Market
Equity
High Quality Bond
Asset Allocation]
</TABLE>
[INSERT NEW FOOTNOTES]
The underlying mutual fund portfolio information was provided by the underlying
mutual funds. The Company has not independently verified such information.
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 of 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)
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you surrender your Annuity at the end of the If you do not surrender your Annuity at the end of
applicable time period, you would pay the following the applicable time period or begin taking annuity
expenses on a $1,000 investment, assuming return on assets: payments at such time, you would pay the
following expenses on a $1,000 investment, assuming
5% annual return on assets:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
After: After:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sub-accounts 1 yr. 3 yr. 5 yr. 10 yr. 1 yr. 3 yr. 5 yr. 10 yr.
- ------------
JanCap Growth
AST Janus Overseas Growth
LA Growth and Income
Fed Utility Inc
Fed High Yield TO BE FILED BY AMENDMENT
AST Money Market
T. Rowe Price Asset Allocation
T. Rowe Price International Equity
T. Rowe Price Natural Resources
T. Rowe Price International Bond
T. Rowe Price Small Company Value
Founders Capital Appreciation
Founders Passport
INVESCO Equity Income
PIMCO Total Return Bond
PIMCO Limited Maturity Bond
Berger Capital Growth
RS Value + Growth
AST Putnam Value Growth & Income
AST Putnam International Equity
AST Putnam Balanced
Twentieth Century Strategic Balanced
Twentieth Century International Growth
AA Growth
AA Small Capitalization
AA MidCap Growth
NB Partners
MV Emerging Markets
[Money Market
Equity
High Quality Bond
Asset Allocation]
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units in the
Sub-accounts that commenced operations prior to December 31, 1996 are shown
below, as is yield information on the AST [GAL] Money Market Sub-account. All or
some of these Sub-accounts were available during the periods shown as investment
options for other variable annuities we offer pursuant to different
prospectuses. The charges assessed against the Sub-accounts under the terms of
those other variable annuities are the same as the charges assessed against such
Sub-accounts under the Annuity offered pursuant to this Prospectus.
Unit Prices And Numbers Of Units: The following table shows: (a) the
Unit Price as of the dates shown for Units in each of the Class 1 Sub-accounts
of Separate Account B that commenced operations prior to 1997 and are being
offered pursuant to this Prospectus or which we offer pursuant to certain other
prospectuses; and (b) the number of Units outstanding in each such Sub-account
as of the dates shown. The year in which operations commenced in each such
Sub-account is noted in parentheses. The portfolios in which a particular
Sub-account invests may or may not have commenced operations prior to the date
such Sub-account commenced operations. The initial offering price for each
Sub-account was $10.00.
<TABLE>
<CAPTION>
Sub-account and the Year Sub-account Operations Commenced
AA AST
Small AA AST Putnam
Capitali- AA MidCap Money International Founders JanCap
zation Growth Growth Market Equity Passport Growth
(1988) (1988) (1993) (1992) (1989) (1995) (1992)
------ ------ ------ ------ ------ ------ ------
No. of Units
as of 12/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
as of 12/31/95 12,317,364 12,092,291 8,299,743 30,564,442 14,393,137 2,601,283 28,662,737
as of 12/31/94 9,356,764 5,614,760 4,308,374 27,491,389 14,043,215 0 22,354,170
as of 12/31/93 7,101,658 2,997,458 1,450,892 11,422,783 9,063,464 0 13,603,637
as of 12/31/92 4,846,024 1,482,037 0 457,872 1,948,773 0 1,476,139
as of 12/31/91 2,172,189 559,779 0 0 1,092,902 0 0
as of 12/31/90 419,718 82,302 0 0 398,709 0 0
as of 12/31/89 35,438 6,900 0 0 29,858 0 0
as of 12/31/88 3,000 0 0 0 0 0 0
Unit Price
as of 12/31/96
as of 12/31/95 39.78 31.18 19.00 10.77 18.23 10.23 14.85
as of 12/31/94 27.95 23.18 13.34 10.35 16.80 0 10.91
as of 12/31/93 29.65 23.18 13.74 10.12 16.60 0 11.59
as of 12/31/92 26.54 19.19 0 10.01 12.37 0 10.51
as of 12/31/91 26.00 17.32 0 0 13.69 0 0
as of 12/31/90 16.74 12.51 0 0 12.98 0 0
as of 12/31/89 15.61 12.19 0 0 13.64 0 0
as of 12/31/88 9.63 9.96 0 0 0 0 0
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
LA T. Rowe T. Rowe T. Rowe
Growth AST Fed Fed Price Price Price
and Putnam Utility High Asset International Natural
Income Balanced Income Yield Allocation Equity Resources
(1992) (1993) (1993) (1994) (1994) (1994) (1995)
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/96
as of 12/31/95 18,411,759 20,163,848 8,642,186 6,915,158 4,868,956 17,935,251 808,605
as of 12/31/94 7,479,449 13,986,604 7,177,232 2,106,791 2,320,063 11,166,758 0
as of 12/31/93 4,058,228 8,743,758 5,390,887 0 0 0 0
as of 12/31/92 956,949 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
Unit Price
as of 12/31/96
as of 12/31/95 15.22 12.49 12.20 11.27 11.92 10.39 11.01
as of 12/31/94 11.98 10.34 9.81 9.56 9.80 9.49 0
as of 12/31/93 11.88 10.47 10.69 0 0 0 0
as of 12/31/92 10.60 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
T. Rowe PIMCO PIMCO
Price Founders INVESCO Total Limited Berger
International Capital Equity Return Maturity Capital NB
Bond Appreciation Income Bond Bond Growth Partners
(1994) (1994) (1994) (1994) (1995) (1994) (1995)
------ ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
No. of Units
as of 12/31/96
as of 12/31/95 4,186,695 6,076,373 13,883,712 19,061,840 15,058,644 3,658,836 7,958,498
as of 12/31/94 1,562,364 2,575,105 6,633,333 4,577,708 0 301,267 0
as of 12/31/93 0 0 0 0 0 0 0
as of 12/31/92 0 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
Unit Price
as of 12/31/96
as of 12/31/95 10.51 13.97 12.33 11.26 10.37 12.20 12.05
as of 12/31/94 9.59 10.69 9.61 9.61 0 9.94 0
as of 12/31/93 0 0 0 0 0 0 0
as of 12/31/92 0 0 0 0 0 0 0
as of 12/31/91 0 0 0 0 0 0 0
as of 12/31/90 0 0 0 0 0 0 0
as of 12/31/89 0 0 0 0 0 0 0
as of 12/31/88 0 0 0 0 0 0 0
</TABLE>
Sub-account and the Year Sub-account Operations Commenced
RS MV
Value + Emerging
Growth Markets
(1996) (1996)
No. of Units
as of 12/31/96
as of 12/31/95 0 0
as of 12/31/94 0 0
as of 12/31/93 0 0
as of 12/31/92 0 0
as of 12/31/91 0 0
as of 12/31/90 0 0
as of 12/31/89 0 0
as of 12/31/88 0 0
Unit Price
as of 12/31/96
as of 12/31/95 0 0
as of 12/31/94 0 0
as of 12/31/93 0 0
as of 12/31/92 0 0
as of 12/31/91 0 0
as of 12/31/90 0 0
as of 12/31/89 0 0
as of 12/31/88 0 0
[Sub-account and the Year Sub-account Operations Commenced
<TABLE>
<CAPTION>
GAL GAL GAL
Money GAL High Quality Asset
Market Equity Bond Allocation
(1995) (1995) (1995) (1995)
<S> <C> <C> <C> <C>
No. of Units
as of 12/31/96
as of 12/31/95 290,495 205,306 94,895 199,741
Unit Price
as of 12/31/96 $ $ $ $
as of 12/31/95 10.29 11.38 11.32 11.62 ]
</TABLE>
Information is not shown above for Sub-accounts that had not commenced
operations prior to December 31, 1996.
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 [GAL]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 [GAL] Money Market [ ]% [ ]%
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>
<CAPTION>
<S> <C> <C>
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Growth Growth
AA Small Capitalization Small Capitalization
AA MidCap Growth MidCap Growth
Underlying Mutual Fund: Neuberger & Berman Advisers
Management Trust
Sub-account Underlying Mutual Fund Portfolio
NB Partners Partners
Underlying Mutual Fund: American Skandia Trust
Sub-account Underlying Mutual Fund Portfolio
JanCap Growth JanCap Growth
AST Janus Overseas Growth AST Janus Overseas Growth
LA Growth and Income Lord Abbett Growth and Income
Fed Utility Inc Federated Utility Income
Fed High Yield Federated High Yield
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
T. Rowe Price International Bond T. Rowe Price International Bond
T. Rowe Price Small Company Value T. Rowe Price Small Company Value
Founders Capital Appreciation Founders Capital Appreciation
Founders Passport Founders Passport
INVESCO Equity Income INVESCO Equity Income
PIMCO Total Return Bond PIMCO Total Return Bond
PIMCO Limited Maturity Bond PIMCO Limited Maturity Bond
Berger Capital Growth Berger Capital Growth
RS Value + Growth Robertson Stephens Value + Growth
AST Putnam Value Growth & Income AST Putnam Value Growth & Income
AST Putnam International Equity AST Putnam International Equity
AST Putnam Balanced AST Putnam Balanced
Twentieth Century Strategic Balanced Twentieth Century Strategic Balanced
Twentieth Century International Growth Twentieth Century International Growth
Underlying Mutual Fund: Montgomery Variable Series
Sub-account Underlying Mutual Fund Portfolio
MV Emerging Markets Montgomery Variable Series: Emerging Markets
[Underlying Mutual Fund: Galaxy VIP Fund
GAL Money Market Money Market Portfolio
GAL Equity Equity Portfolio
GAL High Quality Bond High Quality Bond Portfolio
GAL Asset Allocation Asset Allocation Portfolio]
</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 may also be made available, subject
to obtaining all required regulatory approvals, for direct purchase by various
pension and retirement savings plans that qualify for preferential tax treatment
under the Code.
The investment objectives, policies, charges, operations, the attendant risks
and other details pertaining to each underlying mutual fund portfolio are
described in the prospectus of each underlying mutual fund and the statements of
additional information for such underlying mutual fund. Also included in such
information is the investment policy of each mutual fund or portfolio regarding
the acceptable ratings by recognized rating services for bonds and other debt
obligations. There can be no guarantee that any underlying mutual fund or
portfolio will meet its investment objectives.
Shares of the underlying mutual funds may be available to variable life
insurance and variable annuity separate accounts of other insurance companies.
Possible consequences of this multiple availability are discussed in the
subsection entitled Resolving Material Conflicts.
The prospectus for any underlying mutual fund or funds being considered by you
should be read in conjunction herewith. A copy of each prospectus may be
obtained without charge from us by calling our Concierge Desk, [Galaxy Annuity
Customer Service,] 1-800-752-6342 [1-800-444-3970] or writing to us at either
P.O. Box 883, Attention: Concierge Desk ,[Galaxy Annuity Customer Service,]
Shelton, Connecticut, 06484-0883, or to our electronic mail address which is
[email protected].
Fixed Investment Options: For the payout phase you may elect fixed
annuity payments based on our then current annuity rates. The discussion below
describes the fixed investment options in the accumulation phase.
As of the date of this Prospectus we offer in most jurisdictions in which the
Annuity is available Fixed Allocations with Guarantee Periods of 1, 2, 3, 5, 7
and 10 years. Each such Fixed Allocation is accounted for separately. Each Fixed
Allocation earns a fixed rate of interest throughout a set period of time called
a Guarantee Period. Multiple Fixed Allocations are permitted, subject to our
allocation rules. The duration of a Guarantee Period may be the same or
different from the duration of the Guarantee Periods of any of your prior Fixed
Allocations.
We may or may not be able to obtain approval in the future in certain
jurisdictions of endorsements to individual or group annuities that include the
type of Fixed Allocations offered pursuant to this Prospectus. If such approval
is obtained, we 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 was delivered. (For Annuities issued as
certificates of participation in a group contract, it is our expectation that
approval of only the jurisdiction in which such group contract was delivered
applies.)
The reduction used in determining the minimum interest rate is two and one
quarter percent of interest (2.25%).
Where required by the laws of a particular jurisdiction, a specific minimum
interest rate, compounded yearly, will apply should the index less the reduction
be less than the specific minimum interest rate applicable to that jurisdiction.
WE MAY CHANGE THE INTEREST RATES WE CREDIT NEW FIXED ALLOCATIONS AT ANY TIME.
Any such change does not have an impact on the rates applicable to Fixed
Allocations with Guarantee Periods that began prior to such change. However,
such a change will affect the MVA (see "Account Value of the Fixed
Allocations").
We have no specific formula for determining the interest rates we declare. Rates
may differ between classes and between types of annuities we offer, even for
guarantees of the same duration starting at the same time. We expect our
interest rate declarations for Fixed Allocations to reflect the returns
available on the type of investments we make to support the various classes of
annuities supported by the assets in Separate Account D. However, we may also
take into consideration in determining rates such factors including, but not
limited to, the durations offered by the annuities supported by the assets in
Separate Account D, regulatory and tax requirements, the liquidity of the
secondary markets for the type of investments we make, commissions,
administrative expenses, investment expenses, our mortality and expense risks in
relation to Fixed Allocations, general economic trends and competition. OUR
MANAGEMENT MAKES THE FINAL DETERMINATION AS TO INTEREST RATES TO BE CREDITED. WE
CANNOT PREDICT THE RATES WE WILL DECLARE IN THE FUTURE.
OPERATIONS OF THE SEPARATE ACCOUNTS: The assets supporting our obligations under
the Annuities may be held in various accounts, depending on the obligation being
supported. In the accumulation phase, assets supporting Account Values are held
in separate accounts established under the laws of the State of Connecticut. In
the payout phase, assets supporting fixed annuity payments and any adjustable
annuity payments we make available are held in our general account.
Separate Accounts: We are the legal owner of assets in the separate
accounts. Income, gains and losses, whether or not realized, from assets
allocated to these separate accounts, are credited to or charged against each
such separate account in accordance with the terms of the annuities supported by
such assets without regard to our other income, gains or losses or to the
income, gains or losses in any other of our separate accounts. We will maintain
assets in each separate account with a total market value at least equal to the
reserve and other liabilities we must maintain in relation to the annuity
obligations supported by such assets. These assets may only be charged with
liabilities which arise from such annuities. This may include Annuities offered
pursuant to this Prospectus or certain other annuities we may offer. The
investments made by separate accounts are subject to the requirements of
applicable state laws. These investment requirements may differ between those
for separate accounts supporting variable obligations and those for separate
accounts supporting fixed obligations.
Separate Account B: In the accumulation phase, the assets supporting
obligations based on allocations to the variable investment options are held in
our Separate Account B. Separate Account B consists of multiple Sub-accounts.
Separate Account B was established by us pursuant to Connecticut law. Separate
Account B also holds assets of other annuities issued by us with values and
benefits that vary according to the investment performance of Separate Account
B.
The Sub-accounts offered pursuant to this Prospectus are all Class 1
Sub-accounts of Separate Account B. Each class of Sub-accounts in Separate
Account B 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 or practices
of Separate Account B. Each Sub-account invests only in a single mutual fund or
mutual fund portfolio.
The only Sub-accounts available for allocation of your Account Value are those
offered pursuant to this Prospectus. Persons interested in our other annuities
may be offered the same or different Sub-accounts of Separate Account B or any
of our other separate accounts. Such sub-accounts may invest in some or all of
the same underlying mutual funds or portfolios of such underlying mutual funds
as the Sub-accounts offered pursuant to this Prospectus. As of the date of this
Prospectus, the Annuities offered pursuant to this Prospectus and annuities
offered pursuant to a number of other prospectuses maintained assets in Class 1
Sub-accounts. We may offer additional annuities that maintain assets in Class 1
Sub-accounts. In addition, some of the Class 1 Sub-accounts may invest in
underlying mutual funds or underlying mutual fund portfolios in which
Sub-accounts in other classes of Separate Account B invest.
You will find additional information about these underlying mutual funds and
portfolios in the prospectuses for such funds. Portfolios added to the
underlying mutual funds may or may not be offered through added Sub-accounts.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to add Sub-accounts,
eliminate Sub-accounts, to combine Sub-accounts, or to substitute underlying
mutual funds or portfolios of underlying mutual funds.
Values and benefits based on allocations to the Sub-accounts will vary with the
investment performance of the underlying mutual funds or fund portfolios, as
applicable. We do not guarantee the investment results of any Sub-account, nor
is there any assurance that the Account Value allocated to the Sub-accounts will
equal the amounts allocated to the Sub-accounts as of any time other than the
Valuation Period of such allocation. You bear the entire investment risk.
Separate Account D: In the accumulation phase, assets supporting our
obligations based on Fixed Allocations are held in Separate Account D, which is
a "non-unitized" separate account. Such obligations are based on the interest
rates we credit to Fixed Allocations and the terms of the Annuities. These
obligations do not depend on the investment performance of the assets in
Separate Account D. Separate Account D was established by us pursuant to
Connecticut law.
There are no discrete units in Separate Account D. No party with rights under
any annuity nor any group contract owner participates in the investment gain or
loss from assets belonging to Separate Account D. Such gain or loss accrues
solely to us. We retain the risk that the value of the assets in Separate
Account D may drop below the reserves and other liabilities we must maintain.
Should the value of the assets in Separate Account D drop below the reserve and
other liabilities we must maintain in relation to the annuities supported by
such assets, we will transfer assets from our general account to Separate
Account D to make up the difference. We have the right to transfer to our
general account any assets of Separate Account D in excess of such reserves and
other liabilities. We maintain assets in Separate Account D supporting a number
of annuities we offer.
If you surrender, withdraw or transfer Account Value from a Fixed Allocation
before the end of its Guarantee Period, you bear the risk inherent in the MVA
(see "Account Value of the Fixed Allocations"). The Account Value of a Fixed
Allocation is guaranteed on its Maturity Date (and, where required by law, the
30 days prior to the Maturity Date) to be its then current Interim Value.
We operate Separate Account D in a fashion designed to meet the obligations
created by Fixed Allocations. Factors affecting these operations include the
following:
(1) The State of New York, which is one of the jurisdictions in which
we are licensed to do business, requires that we meet certain "matching"
requirements. These requirements address the matching of the durations of the
assets with the durations of obligations supported by such assets. We believe
these matching requirements are designed to control an insurer's ability to risk
investing in long-term assets to support short term interest rate guarantees. We
also believe this limitation controls an insurer's ability to offer unrealistic
rate guarantees.
(2) We employ an investment strategy designed to limit the risk of
default. Some of the guidelines of our current investment strategy for Separate
Account D include, but are not limited to, the following:
(a) Investments may include cash; debt securities issued by
the United States Government or its agencies and instrumentalities; money market
instruments; short, intermediate and long-term corporate obligations; private
placements; asset-backed obligations; and municipal bonds.
(b) At the time of purchase, fixed income securities will be
in one of the top four generic lettered rating classifications as established by
a nationally recognized statistical rating organization ("NRSRO") such as
Standard & Poor's or Moody's Investor Services, Inc.
We are not obligated to invest according to the aforementioned guidelines or any
other strategy except as may be required by Connecticut and other state
insurance laws.
(3) We have the sole discretion to employ investment managers that we
believe are qualified, experienced and reputable to manage Separate Account D.
We currently employ investment managers for Separate Account D including, but
not limited to, J.P. Morgan Investment Management Inc. [Fleet Investment
Advisers, 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 contingent
deferred sales charge, 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.
Contingent Deferred Sales Charge: Although we incur sales expenses in
connection with the sale of contracts (for example, preparation of sales
literature, expenses of selling and distributing the contracts, including
commissions, and other promotional costs), we do not deduct any charge from your
Purchase Payments for such expenses. However, a contingent deferred sales charge
may be assessed. We assess a contingent deferred sales charge against the
portion of any withdrawal or surrender that is deemed to be a liquidation of
your Purchase Payments paid within the preceding seven years. The contingent
deferred sales charge applies to each Purchase Payment that is liquidated. It is
a decreasing percentage of each Purchase Payment being liquidated. The charge
decreases as the Purchase Payment ages. The aging of a Purchase Payment is
measured from the date it is applied to your Account Value. The charge for
Annuities issued for delivery in all jurisdictions except New York is: year 1
- -7.5%; year 2 - 7.0%; year 3 - 6.0%; year 4 - 5.0%; year 5 - 4.0%; year 6 -
3.0%; year 7 - 2.0%; year 8 and thereafter - 0%. The charge for Annuities issued
for delivery in New York is: year 1 - 7.0%; year 2 - 6.0%; year 3 - 5.0%; year 4
- - 4.0%; year 5 - 3.0%; year 6 - 2.0%; year 7 - 1.0%; year 8 and thereafter - 0%.
Each Annuity Year in the accumulation phase you may withdraw a limited amount of
Account Value without application of any contingent deferred sales charge (see
"Free Withdrawal"). However, for purposes of the contingent deferred sales
charge, amounts withdrawn as a free withdrawal are not considered a liquidation
of Purchase Payments. Account Value is deemed withdrawn according to specific
rules in determining how much, if any, contingent deferred sales charge applies
to a partial withdrawal (see "Partial Withdrawal"). There is no contingent
deferred sales charge on Purchase Payments that were applied at least 7 years
prior to the date of either a full surrender or a partial withdrawal. Where
permitted by law, any contingent deferred sales charge applicable to a full
surrender is waived if such full surrender qualifies under our rules as a
medically-related withdrawal (see "Medically-Related Surrenders").
From time to time we may reduce the amount of the contingent deferred sales
charge, the period during which it applies, or both, when Annuities are sold to
individuals or a group of individuals in a manner that reduces sales expenses.
We would consider such factors as: (a) the size and type of group; (b) the
amount of Purchase Payments; (c) present Owners making additional Purchase
Payments; and/or (d) other transactions where sales expenses are likely to be
reduced.
No contingent deferred sales charge is imposed when any group annuity contract
or any Annuity issued pursuant to this Prospectus is owned on its Issue Date by:
(a) any parent company, affiliate or subsidiary of ours; (b) an officer,
director, employee, retiree, sales representative, or in the case of an
affiliated broker-dealer, registered representative of such company; (c) a
director or trustee of any underlying mutual fund; (d) a director, officer or
employee of any investment manager or sub-advisor providing investment
management and/or advisory services to an underlying mutual fund or any
affiliate of such investment manager or sub-advisor; (e) a director, officer,
employee or registered representative of a broker-dealer that has a then current
selling agreement with American Skandia Marketing, Incorporated; (f) the then
current spouse of any such person noted in (b) through (e), above; (g) the
parents of any such person noted in (b) through (f), above; and (h) such
person's child or other legal dependent under the age of 21.
No contingent deferred sales charge is assessed on Minimum Distributions, to the
extent such Minimum Distributions are required from your Annuity at the time it
is taken. However, the charge may be assessed for any partial withdrawal taken
in excess of the Minimum Distribution, even if such amount is taken to meet
minimum distribution requirements in relation to other savings or investments
held pursuant to various retirement plans designed to qualify for preferred tax
treatment under various sections of the Code (see "Minimum Distributions").
Any elimination of the contingent deferred sales charge or any reduction to the
amount or duration of such charges will not discriminate unfairly between
Annuity purchasers. We will not make any such changes to this charge where
prohibited by law.
Maintenance Fee: A maintenance fee equaling the smaller of $30 or 2% of
your then current Account Value is deducted 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.
Tax Charges: In several states a tax is payable. We will deduct the
amount of tax payable, if any, from your Purchase Payments if the tax is then
incurred or from your Account Value when applied under an annuity option if the
tax is incurred at that time. The amount of the tax varies from jurisdiction to
jurisdiction. It may also vary depending on whether the Annuity qualifies for
certain treatment under the Code. In each jurisdiction, the state legislature
may change the amount of any current tax, may decide to impose the tax,
eliminate it, or change the time it becomes payable. In those jurisdictions
imposing such a tax, the tax rates currently in effect range up to 31/2% and are
subject to change. In addition to state taxes, local taxes may also apply. The
amounts of these taxes may exceed those for state taxes.
Transfer Fee: We charge $10.00 for each transfer after the twelfth in
each Annuity Year. However, the fee is only charged if there is Account Value in
at least one Sub-account immediately subsequent to such transfer.
Allocation Of Annuity Charges: Charges applicable to a surrender are
used in calculating Surrender Value. Charges applicable to any type of
withdrawal are taken from the investment options in the same ratio as such a
withdrawal is taken from the investment options (see "Allocation Rules"). The
transfer fee is assessed against the Sub-accounts in which you maintain Account
Value immediately subsequent to such transfer. The transfer fee is allocated on
a pro-rata basis in relation to the Account Values in such Sub-accounts as of
the Valuation Period for which we price the applicable transfer. No fee is
assessed if there is no Account Value in any Sub-account at such time. Tax
charges are assessed against the entire Purchase Payment or Account Value as
applicable. 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.
The administration charge and maintenance fee can be increased only for
Annuities issued subsequent to the effective date of any such change.
From time to time we may reduce the amount of the 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.
With respect to the mortality risk charge, we assume the risk that the mortality
experience under the Annuities may be less favorable than our assumptions. This
could arise for a number of reasons, such as when persons upon whose lives
annuity payments are based live longer than we anticipated, or when the
Sub-accounts decline in value resulting in losses in paying death benefits. If
our mortality assumptions prove to be inadequate, we will absorb any resulting
loss. Conversely, if the actual experience is more favorable than our
assumptions, then we will benefit from the gain. We also assume the risk that
the administration charge may be insufficient to cover our administration costs.
CHARGES OF THE UNDERLYING MUTUAL FUNDS: Each underlying mutual fund assesses
various charges for investment management and investment advisory fees. These
charges generally differ between portfolios within the same underlying mutual
fund. You will find additional details in 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. We may elect to no longer offer Annuities
in connection with various retirement plans. Currently, the Annuity is not
offered in connection with Section 401 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 Considerations".
Application And Initial Payment: You must meet our underwriting
requirements and forward a Purchase Payment if you seek to purchase an Annuity.
[One requirement is that, at the time of issue of your Annuity, you must be a
customer of one or more subsidiaries of Fleet Financial Group, Inc.] These
requirements [also] 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 $1,000 unless you authorize
the use of bank drafting to make Purchase Payments (see "Skandia's Systematic
Investment Plan"). If you choose bank drafting, we will accept a lower initial
Purchase Payment provided that the Purchase Payments received in the first year
total at least $1,000. The initial Purchase Payment must be paid by check or by
wire transfer. It cannot be made through bank drafting. Our Office must give you
prior approval before we accept a Purchase Payment that would result in the
Account Value of all annuities you maintain with us exceeding $500,000. We
confirm each Purchase Payment in writing. Multiple annuities purchased from us
within the same calendar year may be treated for tax purposes as if they were a
single annuity (see "Certain Tax Considerations").
We reserve the right to allocate your initial Net Purchase Payment to the
investment options up to two business days after we receive, at our Office, all
of our requirements for issuing the Annuity as applied for. We may retain the
Purchase Payment and not allocate the initial Net Purchase Payment to the
investment options for up to five business days while we attempt to obtain all
such requirements. We will try to reach you or any other party from whom we need
any information or materials. If the requirements cannot be fulfilled within
that time, we will: (a) attempt to inform you of the delay; and (b) return the
amount of the Purchase Payment, unless you specifically consent to our retaining
it until all our requirements are met. Once our requirements are met, the
initial Net Purchase Payment is applied to the investment options within two
business days. Once we accept your Purchase Payment and our requirements are
met, we issue an Annuity.
Skandia's Systematic Investment Plan ("bank drafting"): You may make
Purchase Payments to your Annuity using bank drafting, but only for allocations
to variable investment options. However, you must pay at least one prior
Purchase Payment by check or wire transfer. We will accept an initial Purchase
Payment lower than our standard minimum Purchase Payment requirement of $1,000
if you also furnish bank drafting instructions that provide amounts that will
meet a $1,000 minimum Purchase Payment requirement to be paid within 12 months.
We will accept an initial Purchase Payment in an amount as low as $100, but it
must be accompanied by a bank drafting authorization form allowing monthly
Purchase Payments of at least $75.
Periodic Purchase Payments: We may, from time-to-time, offer
opportunities to make Purchase Payments automatically on a periodic basis,
subject to our rules. These opportunities may include, but are not limited to,
certain salary reduction programs agreed to by an employer. As of the date of
this Prospectus, we only agree to accept Purchase Payments on such a basis if:
(a) we receive your request In Writing for a salary reduction program and we
agree to accept Purchase Payments on this basis; (b) the allocations are only to
variable investment options or the frequency and number of allocations to fixed
investment options is limited in accordance with our rules; and (c) the total
amount of Purchase Payments in the first Annuity Year is scheduled to equal at
least our then current minimum requirements. We may also require an initial
Purchase Payment to be submitted by check or wire before agreeing to such a
program. Our minimum requirements may differ based on the usage of the Annuity,
such as whether it is being used in conjunction with certain retirement plans.
Right to Return the Annuity: You have the right to return the Annuity
within a specified period known as a "free-look" period. Depending on the
applicable legal and regulatory requirements, this period may be within ten days
of receipt, twenty-one days of receipt or longer. To exercise your right to
return the Annuity during the "free-look" period, you must return the Annuity.
The amount to be refunded is the then current Account Value, plus any tax charge
deducted. 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 certain charges (see "Charges Assessed or Assessable Against the
Annuity").
For annuities subject to New York law, notice given by mail and return of the
Annuity by mail are effective on being postmarked, properly addressed and
postage prepaid. If the Annuity is returned to the agent, other than by mail,
the effective date of surrender of the Annuity will be the date the Annuity is
received by the agent. The amount payable as to any amounts allocated to the
variable investment options equals the Account Value plus any fees or charges
deducted as of the date the cancellation request is either postmarked or
returned to the agent. If you choose to allocate any portion of your Purchase
Payment to the variable investment options, you bear the investment risk during
this period. The amount payable as to any amounts allocated to the fixed
investment options equals the greater of (i) the Purchase Payment, less any
withdrawals, or (ii) the current Account Value of the Annuity plus any fees or
charges deducted on the date the cancellation request is either postmarked or
returned to the agent.
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 [GAL] 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 [GAL] Money Market Sub-account, if you execute a return
waiver ("Return Waiver"). Under the Return Waiver, you waive your right to the
return of the greater of the "standard refund" or the Purchase Payments received
less any withdrawals. Instead, you only are entitled to the return of the
"standard refund" (see "Right to Return the Annuity").
Your initial Purchase Payment, as well as other Purchase Payments will be
allocated in accordance with the then current requirements of any rebalancing,
asset allocation or market timing program which you have authorized or have
authorized an independent third party to use in connection with your Annuity
(see "Allocation Rules"). You must provide us with new written allocation
instructions if you wish to change your current allocations when making
subsequent Purchase Payments To the extent permitted by law, allocation of Net
Purchase Payments paid by check may be delayed until such time as the check has
cleared the applicable financial institution upon which such check was drawn.
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 discretion. Such an offer is subject to our rules, including but not
limited to, a change to the MVA formula. For more information, see "Additional
Amounts in the Fixed Allocations".
Ownership, Annuitant and Beneficiary Designations: You make certain
designations that apply to the Annuity if issued. These designations are subject
to our rules and to various regulatory or statutory requirements depending on
the use of the Annuity. These designations include an Owner, a contingent Owner,
an Annuitant, a Contingent Annuitant, a Beneficiary, and a contingent
Beneficiary. Certain designations are required, as indicated below. Such
designations will be revocable unless you indicate otherwise or we endorse your
Annuity to indicate that such designation is irrevocable to meet certain
regulatory or statutory requirements. Changing the Owner or Annuitant
designations may affect the minimum death benefit (see " Death Benefits").
Some of the tax implications of various designations are discussed in the
section entitled "Certain Tax Considerations". However, there are other tax
issues than those addressed in that section, including, but not limited to,
estate and inheritance tax issues. You should consult with a competent tax
counselor regarding the tax implications of various designations. You should
also consult with a competent legal advisor as to the implications of certain
designations in relation to an estate, bankruptcy, community property, where
applicable, and other matters.
An Owner must be named. You may name more than one Owner. If you do, all rights
reserved to Owners are then held jointly. We require the consent In Writing of
all joint Owners for any transaction for which we require the written consent of
Owners. Where required by law, we require the consent In Writing of the spouse
of any person with a vested interest in an Annuity. Naming someone other than
the payor of any Purchase Payment as Owner may have gift, estate or other tax
implications.
Where allowed by law, you may name a contingent Owner. However, this designation
takes effect only on or after the Annuity Date.
You must name an Annuitant. We do not accept a designation of joint Annuitants.
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
qualifies for preferred treatment under certain sections of the Code, such as
Section 401 (a "non-qualified" trust). In general, the Code is designed to
prevent the benefit of tax deferral from continuing for long periods of time on
an indefinite basis. Continuing the benefit of tax deferral by naming one or
more Contingent Annuitants when the Annuity is owned by a non-qualified trust
might be deemed an attempt to extend the tax deferral for an indefinite period.
Therefore, adverse tax treatment may depend on the terms of the trust, who is
named as Contingent Annuitant, as well as the particular facts and
circumstances. You should consult your tax advisor before naming a Contingent
Annuitant if you expect to use an Annuity in such a fashion.
Where allowed by law, you must name Contingent Annuitants according to our rules
when an Annuity is used as a funding vehicle for certain retirement plans
designed to meet the requirements of Section 401 of the Code.
You may name more than one primary and more than one contingent Beneficiary, and
if you do, the proceeds will be paid in equal shares to the survivors in the
appropriate beneficiary class, unless you have requested otherwise In Writing.
If the primary Beneficiary dies before death proceeds become payable, the
proceeds will become payable to the contingent Beneficiary. If no Beneficiary is
alive when death proceeds become payable or in the absence of any Beneficiary
designation, the proceeds will vest in you or your estate.
ACCOUNT VALUE AND SURRENDER VALUE: In the accumulation phase your Annuity has an
Account Value. Your total Account Value is the sum of your Account Value in each
investment option. Surrender Value is the Account Value less any applicable
contingent deferred sales charge and any applicable maintenance fee.
Account Value in the Sub-accounts: We determine your Account Value
separately for each Sub-account. To determine the Account Value in each
Sub-account we multiply the Unit Price as of the Valuation Period for which the
calculation is being made times the number of Units attributable to you in that
Sub-account as of that Valuation Period. The method we use to determine Unit
Prices is shown in the Statement of Additional Information.
The number of Units attributable to you in a Sub-account is the number of Units
you purchased less the number transferred or withdrawn. We determine the number
of Units involved in any transaction specified in dollars by dividing the dollar
value of the transaction by the Unit Price of the effected Sub-account as of the
Valuation Period applicable to such transaction.
Account Value of the Fixed Allocations: We determine the Account Value
of each Fixed Allocation separately. A Fixed Allocation's Account Value as of a
particular date is determined by multiplying its then current Interim Value
times the MVA.
A formula is used to determine the MVA. The formula is applied separately to
each Fixed Allocation. Values and time durations used in the formula are as of
the date for which the Account Value is being determined. The formula is:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate for your class of annuities for new
Fixed Allocations with Guarantee Periods of 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 such
Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if amounts are surrendered pursuant to the right to
return the Annuity is [(1 + I)/(1 + J)]N/12.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date, and, where required by law, the 30 days prior to the Maturity Date. If we
are not offering a Guarantee Period with a duration equal to the number of years
remaining in a Fixed Allocation's Guarantee Period, we calculate a rate for "J"
above using a specific formula. This formula is described in the Statement of
Additional Information.
Our Current Rates are expected to be sensitive to interest rate fluctuations,
thereby making each MVA equally sensitive to such changes. There would be a
downward adjustment when the applicable Current Rate plus 0.10 percent of
interest exceeds the rate credited to the Fixed Allocation and an upward
adjustment when the applicable Current Rate is more than 0.10 percent of
interest lower than the rate being credited to the Fixed Allocation. See the
Statement of Additional Information for an illustration of how the MVA works.
We reserve the right, from time to time, to determine the MVA using an interest
rate lower than the Current Rate for all transactions applicable to a class of
Annuities. We may do so at our sole discretion. This would benefit all such
Annuities if transactions to which the MVA applies occur while we use such lower
interest rate.
Additional Amounts in the Fixed Allocations: To the extent permitted by
law, we reserve the right, from time to time, to credit Additional Amounts to
Fixed Allocations. We may do so at our sole discretion. We may offer to credit
such Additional Amounts only in relation to Fixed Allocations of specific
durations (i.e. 10 years) when used as part of certain programs we offer such as
the balanced investment program and dollar cost averaging (see "Balanced
Investment Program" and "Dollar Cost Averaging"). We would provide such
Additional Amounts with funds from our general account and credit them to the
applicable Fixed Allocation. Such a program is subject to the following rules:
(1) The Additional Amounts are credited in relation to initial or
additional Purchase Payments, not to Account Value transferred to a Fixed
Allocation for use in the applicable programs. The Additional Amounts are not
credited in relation to any exchange of another annuity issued by us for an
Annuity.
(2) The Additional Amounts are credited as of the later of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation or
the 30th day after the Issue Date.
(3) Interest on the Additional Amounts is credited as of the date the
applicable Purchase Payment is allocated to the applicable Fixed Allocation.
(4) The Additional Amounts are a percentage of the amount credited to
the applicable Fixed Allocation. However, we may change the percentage from time
to time.
(5) There is an increase to any applicable "adjustment amount" in the
MVA formula, which otherwise is 0.0010, to 0.0020 (see "Account Value of the
Fixed Allocations"). This change would only apply to a transfer, surrender or
withdrawal from the applicable Fixed Allocation, but not to any payments of
death benefit proceeds or a medically-related surrender (see "Medically-Related
Surrender"). This change could reduce your Account Value.
(6) We do not consider Additional Amounts to be "investment in the
contract" for income tax purposes (see "Certain Tax Considerations").
(7) Additional Amounts credited are not included in any amounts you may
withdraw without assessment of the contingent deferred sales charge pursuant to
the Free Withdrawal provision (see "Free Withdrawals").
(8) We determine if a Purchase Payment is received during the period we
are offering such credits based on the earlier of: (a) the date we receive at
our Office the applicable Purchase Payment; or (b) the date we receive at our
Office our requirements in relation to either an exchange of an existing annuity
issued by another insurer or a "rollover" or transfer of such an annuity
pursuant to specific sections of the Code.
(9) No Purchase Payment may be applied to more than one program
crediting Additional Amounts solely to a Fixed Allocation.
RIGHTS, BENEFITS AND SERVICES: The Annuity provides various rights, benefits and
services subsequent to its issuance and your decision to keep it beyond the
free-look period. A number of these rights, benefits and services, as well as
some of the rules and conditions to which they are subject, are described below.
These rights, benefits and services include, but are not limited to: (a) making
additional Purchase Payments; (b) changing revocable designations; (c)
transferring Account Values between investment options; (d) receiving lump sum
payments, Systematic Withdrawals or Minimum Distributions, annuity payments and
death benefits; (e) transferring or assigning your Annuity; (f) exercising
certain voting rights in relation to the underlying mutual funds in which the
Sub-accounts invest; and (g) receiving reports. These rights, benefits and
services may be limited, eliminated or altered when an Annuity is purchased in
conjunction with a qualified plan. We may require presentation of proper
identification, including a personal identification number ("PIN") issued by us,
prior to accepting any instruction by telephone or other electronic means. 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
telephonic or electronic transfer if we or such other person acted on such
transfer instructions in good faith in reliance on your authorization of
telephone and/or electronic transfers and on reasonable procedures to identify
persons so authorized through verification methods which may include a request
for your Social Security number or a personal identification number (PIN) as
issued by us. We may be liable for losses due to unauthorized or fraudulent
instructions should we not follow such reasonable procedures.
Additional Purchase Payments: The minimum for any additional Purchase
Payment is $100, except as part of a bank drafting program (see "Skandia's
Systematic Investment Plan"), or unless we authorize lower payments pursuant to
a Periodic Purchase Payment program (see "Periodic Purchase Payments"), or less
where required by law. Additional Purchase Payments may be paid at any time
before the Annuity Date. Subject to our allocation rules, we allocate additional
Net Purchase Payments according to your written allocation instructions. Should
no written instructions be received with an additional Purchase Payment, we
shall return your additional Purchase Payment.
Changing Revocable Designations: Unless you indicated that a prior
choice was irrevocable or your Annuity has been endorsed to limit certain
changes, you may request to change Owner, Annuitant and Beneficiary designations
by sending a request In Writing. Where allowed by law, such changes will be
subject to our acceptance. Some of the changes we will not accept include, but
are not limited to: (a) a new Owner subsequent to the death of the Owner or the
first of any joint Owners to die, except where a spouse-Beneficiary has become
the Owner as a result of an Owner's death; (b) a new Annuitant subsequent to the
Annuity Date if the annuity option selected includes a life contingency; and (c)
a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity.
Allocation Rules: As of the date of this Prospectus, during the
accumulation phase, you may maintain Account Value in multiple Sub-accounts and
an unlimited number of Fixed Allocations. We reserve the right, to the extent
permitted by law, to limit the number of Sub-accounts or the amount you may
allocate to any Fixed Allocation. As of the date of this Prospectus, we limited
the number of Sub-accounts available at any one time to ten. Should you request
a transaction that would leave less than any minimum amount we then require in
an investment option, we reserve the right, to the extent permitted by law, to
add the balance of your Account Value in the applicable Sub-account or Fixed
Allocation to the transaction and close out your balance in that investment
option.
Should you either: (a) request rebalancing services (see "Rebalancing"); (b)
authorize an independent third party to transact transfers on your behalf and
such third party arranges for rebalancing of any portion of your Account Value
in accordance with any asset allocation strategy; or (c) authorize an
independent third party to transact transfers in accordance with a market timing
strategy; then all Purchase Payments, including the initial Purchase Payment,
received while your Annuity is subject to such an arrangement are allocated to
the same investment options and in the same proportions as then required
pursuant to the applicable rebalancing, asset allocation or market timing
program, unless we have received alternate instructions. Such allocation
requirements terminate simultaneous to the termination of an authorization for
rebalancing or any authorization to a third party to transact transfers on your
behalf. Upon termination of any of the above arrangements, you must provide us
with written allocation instructions for all subsequent Purchase Payments.
Withdrawals of any type are taken pro-rata from the investment options based on
the then current Account Values in such investment options unless we receive
instructions from you prior to such withdrawal. For this purpose only, the
Account Value in all your then current Fixed Allocations is deemed to be in one
investment option. If you transfer or withdraw Account Value from multiple Fixed
Allocations and do not provide instructions indicating the Fixed Allocations
from which Account Value should be taken: (a) we transfer Account Value first
from the Fixed Allocation with the shortest amount of time remaining to the end
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 any rebalancing,
market timing, asset allocation or similar program which you employ or you
authorize to be employed on your behalf. Transfers transacted as part of a
dollar cost averaging program are not counted in determining the applicability
of the transfer fee. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the transfer
charge and are not counted in determining whether other transfers may be subject
to the transfer charge (see "Renewals"). Your transfer request must be In
Writing or meet our requirements for accepting instructions we receive over the
phone or through means such as electronic mail.
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 [1-800-444-3970] or contact our customer service department
electronically at [email protected]. When calling us by phone, please
have readily available your Annuity number and your PIN number. When contacting
us electronically, please provide your PIN number, social security number and
the Annuity contract number.
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf, subject to our rules. We may suspend or
cancel such acceptance at any time. We notify you of any such suspension or
cancellation. We may restrict the investment options that will be available for
transfers or allocations of Net Purchase Payments during any period in which you
authorize such third party to act on your behalf. We give the third party you
authorize prior notification of any such restrictions. However, we will not
enforce such a restriction if we are provided evidence satisfactory to us that:
(a) such third party has been appointed by a court of competent jurisdiction to
act on your behalf; or (b) such third party has been appointed by you to act on
your behalf for all your financial affairs.
We or an affiliate of ours may provide administrative or other support services
to independent third parties you authorize to conduct transfers on your behalf
or who provide recommendations as to how your Account Values should be
allocated. This includes, but is not limited to, 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 persons or firms
offering such services do so independent from any agency relationship they may
have with us for the sale of Annuities. We therefore take no responsibility for
the investment allocations and transfers transacted on your behalf by such third
parties or any investment allocation recommendations made by such parties. We do
not currently charge you extra for providing these support services.
Renewals: A renewal is a transaction that occurs automatically as of
the last day of a Fixed Allocation's Guarantee Period unless we receive
alternative instructions. This day as to each Fixed Allocation is called its
Maturity Date. As of the end of a Maturity Date, the Fixed Allocation's
Guarantee Period "renews" and a new Guarantee Period of the same duration as the
one just completed begins. However, the renewal will not occur if the Maturity
Date 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, and, where required by law, the 30
days prior to 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 $10,000 at the time we accept your request for a dollar cost
averaging program. Transfers under a dollar cost averaging program are not
counted in determining the applicability of the transfer fee (see "Transfers").
We reserve the right to limit the investment options into which Account Value
may be transferred as part of a dollar cost averaging program. We currently do
not permit dollar cost averaging programs where Account Value is transferred to
Fixed Allocations. We also reserve the right to charge a processing fee for this
service. Should we suspend or cancel the offering of this service, such
suspension or cancellation will not affect any dollar cost averaging programs
then in effect. Dollar cost averaging is not available while a rebalancing,
asset allocation or market timing type of program is used in connection with
your Annuity.
Dollar cost averaging from Fixed Allocations are subject to the following rules:
(a) you may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years; (b) such a program may only be selected in conjunction with and
simultaneous to a new or renewing Fixed Allocation; (c) only averaging of
earnings only or principal plus earnings is permitted; (d) a program averaging
principal plus earnings from a Fixed Allocation must be designed to last that
Fixed Allocation's entire current Guarantee Period; (e) dollar cost averaging
transfers from a Fixed Allocation are not subject to the MVA; (f) dollar cost
averaging may be done on a monthly basis only; and (g) you may not
simultaneously use Account Value in any Fixed Allocation to participate in
dollar cost averaging and receive Systematic Withdrawals or Minimum
Distributions from such Fixed Allocation (see "Systematic Withdrawals" and
"Minimum Distributions").
We reserve the right, from time to time, to credit additional amounts
("Additional Amounts") if you allocate Purchase Payments to Fixed Allocations as
part of a dollar cost averaging program. Such an offer is at our sole discretion
and is subject to our rules, including but not limited to, a change to the MVA
formula. For more information see "Additional Amounts in the Fixed Allocations".
Rebalancing: We offer, during the accumulation phase, automatic
quarterly, semi-annual or annual rebalancing among the variable investment
options of your choice. This provides the convenience of automatic rebalancing
without having to provide us instructions on a periodic basis. Failure to choose
this option does not prevent you from providing us with transfer instructions
from time-to-time that have the effect of rebalancing. It also does not prevent
other requested transfers from being transacted.
Under this program, Account Values in variable investment options are rebalanced
quarterly, semi-annually or annually, as applicable, to the percentages you
request. The rebalancing may occur quarterly, semi-annually or annually based
upon the Issue Date. If a transfer is requested involving any investment option
participating in an automatic rebalancing program, we automatically alter the
rebalancing percentages going forward (unless we receive alternate instructions)
to the ratios between Account Values in the variable investment options as of
the effective date of such requested transfer once it has been processed.
Automatic rebalancing is delayed one quarter if Account Value is being
maintained in the AST [GAL] Money Market Sub-account for the duration of your
Annuity's "free-look" period and rebalancing would otherwise occur during such
period (see "Allocation of Net Purchase Payments").
You may change the percentage allocable to each variable investment option at
any time. However, you may not choose to allocate less than 5% of Account Value
to any variable investment option.
We do not offer automatic rebalancing in connection with Fixed Allocations. The
Account Value of your Annuity must be at least $10,000 when we receive your
automatic rebalancing request. We may require that all variable investment
options in which you maintain Account Value must be used in the rebalancing
program. You may maintain Account Value in at least two and not more than ten
variable investment options when using a rebalancing program. You may not
simultaneously participate in rebalancing and dollar cost averaging. Rebalancing
also is not available when a program of Systematic Withdrawals of earnings or
earnings plus principal is in effect.
For purposes of determining the number of transfers made in any Annuity Year,
all rebalancing transfers made on the same day are treated as one transfer. We
reserve the right to charge a processing fee for signing up for this service.
To elect to participate or to terminate participation in automatic rebalancing,
we may require instructions In Writing at our Office in a form satisfactory to
us.
Distributions: Distributions available from your Annuity during the
accumulation phase include surrender, medically-related surrender, free
withdrawals, partial withdrawals, Systematic Withdrawals, (including Minimum
Distributions in relation to qualified plans) and a death benefit. In the payout
phase we pay annuity payments. Distributions from your Annuity generally are
subject to taxation, and may be subject to a tax penalty as well (see "Certain
Tax Considerations"). You may wish to consult a professional tax advisor for tax
advice prior to exercising any right to an elective distribution. During the
accumulation phase, any distribution other than a death benefit: (a) must occur
prior to any death that would cause a death benefit to become payable; and (b)
will occur subsequent to our receipt of a completed request In Writing.
Distributions from your Annuity of any amounts derived from Purchase Payments
paid by personal check may be delayed until such time as the check has cleared
the applicable financial institution upon which such check was drawn.
Surrender: Surrender of your Annuity for its Surrender Value is
permitted during the accumulation phase. A contingent deferred sales charge may
apply to such surrender (see "Contingent Deferred Sales Charge"). Your Annuity
must accompany your surrender request.
Medically-Related Surrender: Where permitted by law, you may apply to
surrender your Annuity prior to the Annuity Date without application of any
contingent deferred sales charge, upon occurrence of a "Contingency Event". This
waiver of any applicable contingent deferred sales charge is subject to our
rules, including but not limited to the following: (a) the Annuitant must be
alive as of the date we pay the proceeds of such surrender request; (b) if the
Owner is one or more natural persons, all such Owners must also be alive at such
time; (c) we must receive satisfactory proof of the Annuitant's confinement or
Fatal Illness In Writing; and (d) this benefit is not available if the total
Purchase Payments received exceed $500,000.00 for all annuities issued by us
with this benefit for which the same person is named as Annuitant.
For contracts issued before May 1, 1996, a "Contingency Event" occurs if the
Annuitant is:
(1) First confined in a "Medical Care Facility" while your Annuity is
in force and remains confined for at least 90 days in a row; or
(2) First diagnosed as having a "Fatal Illness" while your Annuity is
in force.
For contracts issued on or after May 1, 1996, and where allowed by law, the
Annuitant must have been named or any change of Annuitant must have been
accepted by us, prior to the "Contingent Event" described above, in order to
qualify for a medically-related surrender.
"Medical Care Facility" means any state licensed facility providing medically
necessary in-patient care which is prescribed by a licensed "Physician" in
writing and based on physical limitations which prohibit daily living in a
non-institutional setting. "Fatal Illness" means a condition diagnosed by a
licensed "Physician" which is expected to result in death within 2 years for 80%
of the diagnosed cases. "Physician" means a person other than you, the Annuitant
or a member of either your or the Annuitant's families who is state licensed to
give medical care or treatment and is acting within the scope of that license.
Specific details and definitions of terms in relation to this benefit may differ
in certain jurisdictions.
Free Withdrawals: Each Annuity Year in the accumulation phase
you may withdraw a limited amount of Account Value without application of any
applicable contingent deferred sales charge. Such free withdrawals are available
to meet liquidity needs. Free withdrawals are not available at the time of a
surrender of an Annuity. Withdrawals of any type made prior to age 59 1/2 may be
subject to a 10% tax penalty (see "Penalty on Distributions").
The minimum amount available as a free withdrawal is $100. Amounts received as
Systematic Withdrawals or as Minimum Distributions are deemed to come first from
the amount available under this Free Withdrawal provision (see "Systematic
Withdrawals" and "Minimum Distributions"). You may also request to receive as a
lump sum any free withdrawal amount not already received that Annuity Year under
a plan of Systematic Withdrawals or as Minimum Distributions.
The maximum amount available as a free withdrawal depends on its Issue Date and
the jurisdiction in which your Annuity is delivered.
(1) For Annuities used in connection with retirement plans designed to
meet the requirements of Section 401 of the Code, the maximum amount available
as a free withdrawal, where permitted by law, is the greater of (a), (b) or (c),
where:
(a) is the then current "emergency withdrawal amount" (defined
below);
(b) is the Annuity's "growth" (defined below); and
(c) is 20% of "new" Purchase Payments ("new" Purchase Payments
are defined below) less prior free withdrawals or amounts deemed to come from
free withdrawals during the then current Annuity Year.
(2) For all other Annuities, the maximum amount available as a free
withdrawal is the greater of (a), (b) or (c), where:
(a) is the then current "emergency withdrawal amount" (defined
below);
(b) is the Annuity's "growth" (defined below); and
(c) is 10% of "new" Purchase Payments ("new" Purchase Payments
are defined below) less prior free withdrawals or amounts deemed to come from
free withdrawals during the then current Annuity Year.
The "emergency withdrawal amount" depends on the jurisdiction in which your
Annuity is issued and the date it is issued, as follows:
(i) For Annuities purchased before May 1, 1996, the "emergency
withdrawal amount" in the first Annuity Year is zero. Thereafter, it equals 35%
of "new" Purchase Payments, less the sum of all prior withdrawals of any type.
(ii) For Annuities purchased on or after May 1, 1996, in most
jurisdictions, a new, revised emergency withdrawal provision applies. In certain
jurisdictions, approval to use this revised emergency withdrawal provision was
granted and implemented at a later date. Under this revised provision, the
"emergency withdrawal amount" on the Issue Date is 10% of the initial Purchase
Payment. It is subsequently increased by 10% of each additional "new" Purchase
Payments and by 10% of all "new" Purchase Payments at the start of each Annuity
Year, to a maximum of 50% of all "new" Purchase Payments. It is then reduced by
an amount equal to the sum of all prior free withdrawals or amounts deemed to
come from free withdrawals. For example, assuming an initial Purchase Payment of
$10,000, no subsequent Purchase Payments and no prior free withdrawals, the
emergency withdrawal amount in Annuity Year 4 would be 40% of the initial
Purchase Payment, which would be $4,000. However, assuming there had been prior
free withdrawals totaling $2,500, the maximum emergency withdrawal amount in
Annuity Year 4 would be $1,500 ($4,000 minus the $2,500 prior free withdrawals).
Assuming further, that no additional free withdrawals were made in Annuity Year
4, and no additional Purchase Payments were made, the emergency withdrawal
amount in Annuity Year 5 would be $2,500 ($5,000 minus the $2,500 prior free
withdrawals).
"Growth" equals the then current Account Value less all "unliquidated" Purchase
Payments and less the value at the time credited of any exchange credits or
Additional Amounts (see "Additional Amounts in the Fixed Allocations").
"Unliquidated" means not previously surrendered or withdrawn. "New" Purchase
Payments are those received in the seven (7) years prior to the date as of which
a free withdrawal occurs. For purposes of the contingent deferred sales charge,
amounts withdrawn as a free withdrawal are not considered a liquidation of
Purchase Payments. Therefore, any free withdrawal will not reduce the amount of
any applicable contingent deferred sales charge upon any partial withdrawal or
subsequent surrender.
Partial Withdrawals: You may withdraw part of your Surrender
Value. The minimum partial withdrawal is $100. The Surrender Value that must
remain in the Annuity as of the date of this transaction is $1,000. If the
amount of the partial withdrawal request exceeds the maximum amount available,
we reserve the right to treat your request as one of a full surrender.
On a partial withdrawal, the contingent deferred sales charge is assessed
against any "unliquidated" "new" Purchase Payments withdrawn. "Unliquidated"
means not previously surrendered or withdrawn. For these purposes, amounts are
deemed to be withdrawn in the following order:
(1) From any amount then available as a free withdrawal; then from
(2) "Old" Purchase Payments (Purchase Payments allocated to Account
Value more than seven years prior to the partial withdrawal); then from
(3) "New" Purchase Payments (If there are multiple "new" Purchase
Payments, the one received earliest is liquidated first, then the one received
next earliest, and so forth); then from
(4) Other Surrender Value.
Systematic Withdrawals: We offer Systematic Withdrawals of
earnings only, principal plus earnings or a flat dollar amount. Systematic
Withdrawals from Fixed Allocations are limited to earnings accrued after the
program of Systematic Withdrawals begins, or payments of fixed dollar amounts
that do not exceed such earnings. A program of Systematic Withdrawals begins on
the date we accept, at our Office, your request for such a program. Systematic
Withdrawals are deemed to be withdrawn from Surrender Value in the same order as
partial withdrawals for purposes of determining if the contingent deferred sales
charge applies. Penalties may apply (see "Free Withdrawals".)
A Systematic Withdrawal from a Fixed Allocation is not subject to the MVA. We
calculate the Fixed Allocation's credited interest since the prior withdrawal as
A minus B, plus C, where:
A is the Interim Value of the applicable Fixed Allocation as of the
date of the Systematic Withdrawal;
B is the Interim Value of the applicable Fixed Allocation as of the
later of the beginning of its then current Guarantee Period or the beginning of
the Systematic Withdrawal program; and
C is the total of all partial or free withdrawals and any transfers
from such Fixed Allocation since the later of the beginning of its then current
Guarantee Period or the beginning of the Systematic Withdrawal program.
Systematic Withdrawals are available on a monthly, quarterly, semi-annual or
annual basis. You may not simultaneously receive Systematic Withdrawals from a
Fixed Allocation and participate in a dollar cost averaging program under which
Account Value is transferred from the same Fixed Allocation (see "Dollar Cost
Averaging"). Systematic Withdrawals are not concurrently available while you are
taking any Minimum Distributions (see "Minimum Distributions"). Systematic
Withdrawals of earnings or earnings plus principal are not available while any
rebalancing or asset allocation program is in effect in relation to your
Annuity.
The Surrender Value of your Annuity must be at least $20,000 when we accept your
request for a program of Systematic Withdrawals. The minimum for each Systematic
Withdrawal is $100. For any scheduled Systematic Withdrawal other than the last
that does not meet this minimum, we reserve the right to defer such a withdrawal
and add the amount that would have been withdrawn to the amount that is to be
withdrawn at the next Systematic Withdrawal.
If your Annuity is used as a funding vehicle for certain retirement plans that
receive special tax treatment under Sections 401, 408, or 403(b) of the Code,
Section 72(t) of the Code may provide an exception to the 10% penalty tax on
distributions made prior to age 59 1/2 if you elect to receive distributions as
a series of "substantially equal periodic payments". Payments received under
this provision are subject to contingent deferred sales charges and the MVA, if
Rapplicable. To receive distributions in the form of "substantially equal
periodic payments" in accordance with the exception to the 10% penalty tax found
in Section 72(t) of the Code, you must provide us with certain required
information In Writing on a form acceptable to us.
We reserve the right to charge a processing fee for this service. Should we
suspend or cancel offering Systematic Withdrawals, such suspension or
cancellation will not affect any Systematic Withdrawal programs then in effect.
Minimum Distributions: Minimum Distributions are a specific type of
Systematic Withdrawal program. Minimum Distributions are subject to all the
rules applicable to Systematic Withdrawals unless we specifically indicate that
one or more of such rules do not apply. In addition, certain rules apply only to
Minimum Distributions.
You may elect to have us calculate Minimum Distributions annually if your
Annuity is being used for certain qualified purposes under the Code. Requests to
calculate a Minimum Distribution amount must be made three (3) days prior to the
date that your Minimum Distribution payment is processed to allow for
calculation and processing of the required amount. We calculate such amounts
assuming the Minimum Distribution amount is based solely on the value of your
Annuity. The required Minimum Distribution amounts applicable to your particular
situation may depend on other annuities, savings or investments of which we are
unaware, so that the required amount may be greater than the Minimum
Distribution amount we calculate based on the value of your Annuity. We reserve
the right to charge a fee for each annual calculation. Minimum Distributions are
not concurrently available with any other programs of Systematic Withdrawals.
You may elect to have Minimum Distributions paid out monthly, quarterly,
semi-annually or annually. The $100 minimum for Systematic Withdrawals does not
apply to Minimum Distributions.
Each Minimum Distribution will be taken from the investment options you select.
However, the portion of any Minimum Distribution that can be taken from any
Fixed Allocations may not exceed the then current ratio between your Account
Value in all Fixed Allocations you maintain and your total Account Value. No MVA
applies to any portion of Minimum Distributions taken from Fixed Allocations.
Minimum Distributions are not available from any Fixed Allocations if such Fixed
Allocation is being used in a dollar cost averaging program (see "Dollar Cost
Averaging"). Minimum Distributions from Fixed Allocations are not subject to the
limitation on Systematic Withdrawals that limits a program of Systematic
Withdrawals from Fixed Allocations only to earnings accrued after program
inception.
No contingent deferred sales charge is assessed against amounts withdrawn as a
Minimum Distribution, but only to the extent of the Minimum Distribution
required from your Annuity at the time it is taken. The contingent deferred
sales charge may apply to additional amounts withdrawn to meet minimum
distribution requirements in relation to other retirement programs you may
maintain.
Amounts withdrawn as Minimum Distributions are considered to come first from the
amounts available as a free withdrawal (see "Free Withdrawals") as of the date
of the yearly calculation of the Minimum Distribution amount. Minimum
Distributions over that amount are not deemed to be a liquidation of Purchase
Payments (see "Partial Withdrawals").
Death Benefit: In the accumulation phase, a death benefit is
payable. If the Annuity is owned by one or more natural persons, it is payable
upon the first death of such Owners. If the Annuity is owned by an entity, the
death benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. If a Contingent Annuitant was designated before the Annuitant's death
and the Annuitant dies, the Contingent Annuitant then becomes the Annuitant.
There may be adverse tax consequences for certain entity Owners if they name a
Contingent Annuitant (see "Ownership, Annuitant and Beneficiary Designations").
The person upon whose death the death benefit is payable is referred to below as
the "decedent". For purposes of this death benefit provision, "withdrawals"
means withdrawals of any type (free withdrawals, partial withdrawals, Systematic
Withdrawals, Minimum Distributions) before assessment of any applicable
contingent deferred sales charge and after any applicable MVA. For purposes of
this provision, persons named Owner or Annuitant within 60 days of the Issue
Date are treated as if they were an Owner or Annuitant on the Issue Date.
The death benefit is as follows, and is subject to the conditions described in
(1),(2) and (3) below:
(1) If death occurs prior to the decedent's age 90: the death benefit
is the greater of your Account Value in Sub-accounts plus the Interim Value of
any Fixed Allocations, or the minimum death benefit ("Minimum Death Benefit").
The Minimum Death Benefit is the sum of all Purchase Payments less the sum of
all withdrawals.
(2) If death occurs when the decedent is age 90 or older: the death
benefit is your Account Value.
(3) If a decedent was not named an Owner or Annuitant as of the Issue
Date and did not become such as a result of a prior Owner's or Annuitant's
death: the Minimum Death Benefit is suspended as to that person for a two year
period from the date he or she first became an Owner or Annuitant. If that
person's death occurs during the suspension period and prior to age 90, the
death benefit is your Account Value in Sub-accounts plus the Interim Value of
any Fixed Allocations. If death occurs during the suspension period when such
decedent is age 90 or older, the death benefit is your Account Value. After the
suspension period is completed, the death benefit is the same as if such person
had been an Owner or Annuitant on the Issue Date.
The amount of the death benefit is determined as of the date we receive In
Writing: (a) "due proof of death"; (b) all representations we require or which
are mandated by applicable law or regulation in relation to the death claim and
the payment of death proceeds; and (c) any applicable election of the mode of
payment of the death benefit, if not previously elected by the Owner. The death
benefit is reduced by any annuity payments made prior to the date we receive In
Writing such due proof of death. The following constitutes "due proof of death":
(a) a certified copy of a death certificate; (b) a certified copy of a decree of
a court of competent jurisdiction as to the finding of death; or (c) any other
proof satisfactory to us.
If the death benefit becomes payable prior to the Annuity Date due to the death
of the Owner and the Beneficiary is the Owner's spouse, then in lieu of
receiving the death benefit, such Owner's spouse may elect to be treated as an
Owner and continue the Annuity.
In the event of your death, the benefit must be distributed within: (a) five
years of the date of death; or (b) over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Distribution
after your death to be paid under (b) above, must commence within one year of
the date of death.
If the Annuitant dies before the Annuity Date, the Contingent Annuitant will
become the Annuitant. Where allowed by law, if the Annuity is owned by one or
more natural persons, the oldest of any such Owners not named as the Annuitant
immediately becomes the Contingent Annuitant if: (a) the Contingent Annuitant
predeceases the Annuitant; or (b) if you do not designate a Contingent
Annuitant.
In the payout phase, we continue to pay any "certain" payments (payments not
contingent on the continuance of any life) to the Beneficiary subsequent to the
death of the Annuitant.
Annuity Payments: Annuity payments can be guaranteed for life, for a
certain period, or for a certain period and life. We make available fixed
payments, and as of the date of this Prospectus, adjustable payments (payments
which may or may not be changed on specified adjustment dates based on annuity
purchase rates we are then making available to annuities of the same class). We
may or may not be making adjustable annuities available on the Annuity Date. To
the extent there is any tax basis in the annuity, a portion of each annuity
payment is treated for tax purposes as a return of such basis until such tax
basis is exhausted. The amount deemed such a return of basis is determined in
accordance with the requirements of the Code (see "Certain Tax Considerations").
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments when you purchase an Annuity, or at a later date. Your choice of
Annuity Date and annuity option may be limited depending on your use of the
Annuity and the applicable jurisdiction. Subject to our rules, you may choose an
Annuity Date, option and frequency of payments suitable to your needs and
circumstances. You should consult with competent tax and financial advisors as
to the appropriateness of any such choice. For Annuities subject to New York
law, the Annuity Date for such Annuities may not exceed the first day of the
calendar month following the Annuitant's 90th birthday.
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. For Annuities
subject to New York law, in the absence of an election In Writing: (a) the
Annuity Date is the first day of the calendar month following the Annuitant's
90th birthday; and (b) fixed monthly payments will commence under Option 2,
described below, with 10 years certain. The amount to be applied is your
Annuity's Account Value 15 business days prior to the Annuity Date. In
determining your annuity payments, we credit interest using our then current
crediting rate for this purpose, which is not less than 3% of interest per year,
between the date Account Value is applied to an annuity option and the Annuity
Date. If there is any remaining contingent deferred sales charge applicable as
of the Annuity Date, then the annuity option you select must include a certain
period of not less than 5 years' duration. As a result of this rule, making
additional Purchase Payments within seven years of the Annuity Date will prevent
you from choosing an annuity option with a certain period of less than 5 years'
duration. Annuity options in addition to those shown are available with our
consent. The minimum initial amount payable is the minimum initial annuity
amount we allow under our then current rules. Should you wish to receive a lump
sum payment, you must request to surrender your Annuity prior to the Annuity
Date (see "Surrender").
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below, but only to the extent selecting such
an option does not alter the tax status of the Annuity. Except where a lower
amount is required by law, the minimum monthly annuity payment is $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.
(1) Option 1 - Payments for Life: Under this option, income is payable
periodically prior to the death of the key life, terminating with the last
payment due prior to such death. Since no minimum number of payments is
guaranteed, this option offers the maximum level of periodic payments of the
life contingent annuity options. It is possible that only one payment will be
payable if the death of the key life occurs before the date the second payment
was due, and no other payments nor death benefits would be payable.
(2) Option 2 - Payments for Life with 10, 15, or 20 Years Certain:
Under this option, income is payable periodically for 10, 15, or 20 years, as
selected, and thereafter until the death of the key life. Should the death of
the key life occur before the end of the period selected, the remaining payments
are paid to the Beneficiary to the end of such period.
(3) Option 3 - Payments Based on Joint Lives: Under this option, income
is payable periodically during the joint lifetime of two key lives, and
thereafter during the remaining lifetime of the survivor, ceasing with the last
payment prior to the survivor's death. No minimum number of payments is
guaranteed under this option. It is possible that only one payment will be
payable if the death of all the key lives occurs before the date the second
payment was due, and no other payments nor death benefits would be payable.
(4) Option 4 - Payments for a Certain Period: Under this option, income
is payable periodically for a specified number of years. The number of years is
subject to our then current rules. Should the payee die before the end of the
specified number of years, the remaining payments are paid to the Beneficiary to
the end of such period. Note that under this option, payments are not based on
how long we expect any key life to live. Therefore, that portion of the
mortality risk charge assessed to cover the risk that key lives outlive our
expectations provides no benefit to an Owner selecting this option.
The first payment varies according to the annuity options and payment frequency
selected. The first periodic payment is determined by multiplying the Account
Value (expressed in thousands of dollars) as of the close of business on the
fifteenth day preceding the Annuity Date, plus interest at not less than 3% per
year from such date to the Annuity Date, by the amount of the first periodic
payment per $1,000 of value obtained from our annuity rates for that type of
annuity and for the frequency of payment selected. Our rates will not be less
than our guaranteed minimum rates. These guaranteed minimum rates are derived
from the 1983a Individual Annuity Mortality Table with ages set back one year
for males and two years for females and with an assumed interest rate of 3% per
annum. Where required by law or regulation, such annuity table will have rates
that do not differ according to the gender of the key life. Otherwise, the rates
will differ according to the gender of the key life.
Qualified Plan Withdrawal Limitations: The Annuities are endorsed such
that there are surrender or withdrawal limitations when used in relation to
certain retirement plans for employees which are designed to qualify under
various sections of the Code. These limitations do not affect certain roll-overs
or exchanges between qualified plans. Distribution of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in Code
section 403(b)), or attributable to transfers to a tax sheltered annuity from a
custodial account (as defined in Code section 403(b)(7)), is restricted to the
employee's: (a) separation from service; (b) death; (c) disability (as defined
in Section 72(m)(7) of the Code); (d) reaching age 59 1/2; or (e) hardship.
Hardship withdrawals are restricted to amounts attributable to salary reduction
contributions, and do not include investment results. In the case of tax
sheltered annuities, these limitations do not apply to certain salary reduction
contributions made and investment results earned prior to dates specified in the
Code. In addition, the limitation on hardship withdrawals does not apply to
salary reduction contributions made and investment results earned prior to dates
specified in the Code which have been transferred from custodial accounts.
Rollovers from the types of plans noted to another qualified plan or to an
individual retirement account or individual retirement annuity are not subject
to the limitations noted. Certain distributions, including rollovers, that are
not transferred directly to the trustee of another qualified plan, the custodian
of an individual retirement account or the issuer of an individual retirement
annuity may be subject to automatic 20% withholding for Federal income tax. This
may also trigger withholding for state income taxes (see "Certain Tax
Considerations").
We may make annuities available through the Texas Optional Retirement Program
subsequent to receipt of the required regulatory approvals and implementation.
In addition to the restrictions required for such Annuities to qualify under
Section 403(b) of the Code, Annuities issued in the Texas Optional Retirement
Program are amended as follows: (a) no benefits are payable unless you die
during, or are retired or terminated from, employment in all Texas institutions
of higher education; and (b) if a second year of participation in such program
is not begun, the total first year State of Texas' contribution will be
returned, upon its request, to the appropriate institute of higher education.
With respect to the restrictions on withdrawals set forth above, we are relying
upon: 1) a no-action letter dated November 28, 1988 from the staff of the
Securities and Exchange Commission to the American Council of Life Insurance
with respect to annuities issued under Section 403(b) of the Code, the
requirements of which have been complied with by the us; and 2) Rule 6c-7 under
the 1940 Act with respect to annuities made available through the Texas Optional
Retirement Program, the requirements of which have been complied with by the us.
Pricing of Transfers and Distributions: We "price" transfers and
distributions on the dates indicated below.
(1) We price "scheduled" transfers and distributions as of the date
such transactions are so scheduled. "Scheduled" transactions include transfers
under a dollar cost averaging program, Systematic Withdrawals, Minimum
Distributions, transfers previously scheduled with us at our Office pursuant to
any on-going rebalancing, asset allocation or similar program, and annuity
payments.
(2) We price "unscheduled" transfers, partial withdrawals and free
withdrawals as of the date we receive at our Office the request for such
transactions. "Unscheduled" transfers include any transfers processed in
conjunction with any market timing program, or transfers not previously
scheduled with us at our Office pursuant to any rebalancing, asset allocation or
similar program which you employ or you authorize to be employed on your behalf.
"Unscheduled" transfers received pursuant to an authorization to accept
transfers, using voice or data transmission over the phone are priced as of the
Valuation Period we receive the request at our Office for such transactions.
(3) We price surrenders, medically-related surrenders and death
benefits as of the date we receive at our Office all materials we require for
such transactions and such materials are satisfactory to us (see "Surrenders",
"Medically-related Surrenders" and "Death Benefits").
The pricing of transfers and distributions involving Sub-accounts includes the
determination of 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 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 may 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.
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. [Such eligible persons also will be customers of one or
more subsidiaries of Fleet Financial Group, Inc. Fleet Investment Advisers,
Inc., one of the investment advisers of one of the underlying mutual funds, is a
subsidiary of Fleet Financial Group, Inc.] In addition, ASM, Inc. may offer
Annuities directly to potential purchasers. The maximum initial concession to be
paid on premiums received is 7.0% and a portion of compensation may be paid from
time to time based on all or a portion of 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. Currently, no fee is
payable based on any Account Values maintained in any Fixed Allocations.
However, the service fee may be payable in the future based on Account Values of
new Purchase Payments allocated to the Fixed Allocations after implementation of
such service fee. 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, currently only in relation to Account Values maintained in
variable investment options but, at a later date, on Account Values maintained
in the Fixed Allocations.
From time to time, we may 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 programs of non-cash
rewards to registered representatives of participating broker-dealers. We may
withdraw or alter such promotions 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.
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 invest in such
underlying mutual fund or portfolio. In addition, the amount of charges assessed
against each Sub-account will affect performance.
Some of the underlying mutual fund portfolios existed prior to the inception of
these Sub-accounts. Performance quoted in advertising regarding such
Sub-accounts may indicate periods during which the Sub-accounts have been in
existence but prior to the initial offering of the Annuities, or periods during
which the underlying mutual fund portfolios have been in existence, but the
Sub-accounts have not. Such hypothetical performance is calculated using the
same assumptions employed in calculating actual performance since inception of
the Sub-accounts.
As part of any advertisement of Standard Total Return, we may advertise the
"Non-standard Total Return" of the Sub-accounts. Non-standard Total Return does
not take into consideration the Annuity's contingent deferred sales charge
and/or the Annual Maintenance Fee.
Advertisements we distribute may also compare the performance of our
Sub-accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Shearson Lehman Bond Index, the Frank Russell non-U.S. Universal Mean, the
Morgan Stanley Capital International Index of Europe, Asia and Far East Funds,
and the Morgan Stanley Capital International World Index; and/or (b) other
management investment companies with investment objectives similar to the mutual
fund or portfolio underlying the Sub-accounts being compared. This may include
the performance ranking assigned by various publications, including but not
limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's, Business
Week, USA Today and statistical services, including but not limited to Lipper
Analytical Services Mutual Funds Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, SEI, 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.
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 income. "Investment in the contract" may be
affected by whether an annuity or any "related contract" was purchased as part
of a tax-free exchange of life insurance or annuity contracts under Section 1035
of the Code.
"Related contracts" may mean all annuity contracts or certificates evidencing
participation in a group annuity contract for which the taxpayer is the
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 year prior to the first annuity
payment payable under the immediate annuity; and (b) the annuity payments under
the immediate annuity do not meet the requirements of any other exception to the
10% penalty. This ruling may or may not imply that the exception to the 10%
penalty may not apply to annuity payments paid pursuant to a deferred annuity
obtained pursuant to an exchange of contract if: (a) purchase payments for the
exchanged contract were contributed or may be deemed to be contributed more than
one year prior to the first annuity payment pursuant to the deferred annuity
contract; or (b) the annuity payments pursuant to the deferred annuity do not
meet the requirements of any other exception to the 10% penalty.
Annuity Payments: The taxable portion of each payment 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 retirement account or individual retirement annuity; (d)
distributions made as substantially equal periodic payments for the life or life
expectancy of the participant in the retirement plan or the life or life
expectancy of such participant and his or her designated beneficiary under such
plan; and (e) certain other distributions where automatic 20% withholding may
not apply.
Tax Considerations When Using Annuities in Conjunction with Qualified
Plans: There are various types of qualified plans for which an annuity may be
suitable. Benefits under a qualified plan may be subject to that plan's terms
and conditions irrespective of the terms and conditions of any annuity used to
fund such benefits ("qualified contract"). We have provided below general
descriptions of the types of qualified plans in conjunction with which we may
issue an Annuity. These descriptions are not exhaustive and are for general
informational purposes only. We are not obligated to make or continue to make
new Annuities available for use with all the types of qualified plans shown
below.
The tax rules regarding qualified plans are complex. The application of these
rules 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 savings incentive match plans for employees
using the employees' IRAs. These arrangements are known as Simple-IRAs. Employer
contributions that may be made to Simple-IRAs are larger than the amounts that
may be contributed to other IRAs, and may be deductible to the employer.
Tax Sheltered Annuities: A tax sheltered annuity ("TSA")
under Section 403(b) of the Code is a contract into which contributions may be
made for the benefit of their employees by certain qualifying employers: public
schools and certain charitable, educational and scientific organizations. Such
contributions are not taxable to the employee until distributions are made from
the TSA. The Code imposes limits on contributions, transfers and distributions.
Nondiscrimination requirements apply as well.
Corporate Pension and Profit-sharing Plans: Annuities may be
used to fund employee benefits of various retirement plans established by
corporate employers. Contributions to such plans are not taxable to the employee
until distributions are made from the retirement plan. The Code imposes
limitations on contributions and distributions. The tax treatment of
distributions is subject to special provisions of the Code, and also depends on
the design of the specific retirement plan. There are also special requirements
as to participation, nondiscrimination, vesting and nonforfeitability of
interests.
H.R. 10 Plans: Annuities may also be used to fund benefits of
retirement plans established by self-employed individuals for themselves and
their employees. These are commonly known as "H.R. 10 Plans" or "Keogh Plans".
These plans are subject to most of the same types of limitations and
requirements as retirement plans established by corporations. However, the exact
limitations and requirements may differ from those for corporate plans.
Tax Treatment of Distributions from Qualified Annuities: A
10% penalty tax applies to the taxable portion of a distribution from a
qualified contract unless one of the following exceptions apply to such
distribution: (a) it is part of a properly executed transfer to another IRA, an
individual retirement account or another eligible qualified plan; (b) it occurs
on or after the taxpayer's age 59 1/2; (c) it is subsequent to the death or
disability of the taxpayer (for this purpose disability is as defined in Section
72(m)(7) of the Code); (d) it is part of substantially equal periodic payments
to be paid not less frequently than annually for the taxpayer's life or life
expectancy or for the joint lives or life expectancies of the taxpayer and a
designated beneficiary; (e) it is subsequent to a separation from service after
the taxpayer attains age 55; (f) it does not exceed the employee's allowable
deduction in that tax year for medical care; and (g) it is made to an alternate
payee pursuant to a qualified domestic relations order. The exceptions stated
above in (e), (f) and (g) do not apply to IRAs.
Section 457 Plans: Under Section 457 of the Code, deferred
compensation plans established by governmental and certain other tax exempt
employers for their employees may invest in annuity contracts. The Code limits
contributions and distributions, and imposes eligibility requirements as well.
Contributions are not taxable to employees until distributed from the plan.
However, plan assets remain the property of the employer and are subject to the
claims of the employer's general creditors until such assets are made available
to participants or their beneficiaries.
OTHER MATTERS: Outlined below are certain miscellaneous matters you should know
before investing in an Annuity.
Deferral of Transactions: We may defer any distribution or transfer
from a Fixed Allocation or an annuity payout for a period not to exceed the
lesser of 6 months or the period permitted by law. If we defer a distribution or
transfer from any Fixed Allocation or any annuity payout for more than thirty
days, or less where required by law, we pay interest at the minimum rate
required by law but not less than 3%, or at least 4% if required by your
contract, per year on the amount deferred. We may defer payment of proceeds of
any distribution from any Sub-account or any transfer from a Sub-account for a
period not to exceed 7 calendar days from the date the transaction is effected.
Any deferral period begins on the date such distribution or transfer would
otherwise have been transacted (see "Pricing of Transfers and Distributions").
All procedures, including payment, based on the valuation of the Sub-accounts
may be postponed during the period: (1) the New York Stock Exchange is closed
(other than customary holidays or weekends) or trading on the New York Stock
Exchange is restricted as determined by the SEC; (2) the SEC permits
postponement and so orders; or (3) the SEC determines that an emergency exists
making valuation or disposal of securities not reasonably practical.
Resolving Material Conflicts: Underlying mutual funds or portfolios may
be available to registered separate accounts offering either or both life and
annuity contracts of insurance companies not affiliated with us. We also may
offer life insurance and/or annuity contracts that offer different variable
investment options from those offered under this Annuity, but which invest in
the same underlying mutual funds or portfolios. It is possible that differences
might arise between our Separate Account B and one or more accounts of other
insurance companies which participate in a portfolio. It is also possible that
differences might arise between a Sub-account offered under this Annuity and
variable investment options offered under different life insurance policies or
annuities we offer, even though such different variable investment options
invest in the same underlying mutual fund or portfolio. In some cases, it is
possible that the differences could be considered "material conflicts". Such a
"material conflict" could also arise due to changes in the law (such as state
insurance law or Federal tax law) which affect either these different life and
annuity separate accounts or differing life insurance policies and annuities. It
could also arise by reason of differences in voting instructions of persons with
voting rights under our policies and/or annuities and those of other companies,
persons with voting rights under annuities and those with rights under life
policies, or persons with voting rights under one of our life policies or
annuities with those under other life policies or annuities we offer. It could
also arise for other reasons. We will monitor events so we can identify how to
respond to such conflicts. If such a conflict occurs, we will take the necessary
action to protect persons with voting rights under our life policies or
annuities vis-a-vis those with rights under life policies or annuities offered
by other insurance companies. We will also take the necessary action to treat
equitably persons with voting rights under this Annuity and any persons with
voting rights under any other life policy or annuity we offer.
Modification: We reserve the right to any or all of the following: (a)
combine a Sub-account with other Sub-accounts; (b) combine Separate Account B or
a portion thereof with other "unitized" separate accounts; (c) terminate
offering certain Guarantee Periods for new or renewing Fixed Allocations; (d)
combine Separate Account D with other "non-unitized" separate accounts; (e)
deregister Separate Account B under the 1940 Act; (f) operate Separate Account B
as a management investment company under the 1940 Act or in any other form
permitted by law; (g) make changes required by any change in the Securities Act
of 1933, the Exchange Act of 1934 or the 1940 Act; (h) make changes that are
necessary to maintain the tax status of your Annuity under the Code; 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
investment, or for some other reason. We would obtain prior approval from the
insurance department of our state of domicile, if so required by law, before
making such a substitution, deletion or addition. We also would obtain prior
approval from the SEC so long as required by law, and any other required
approvals before making such a substitution, deletion or addition.
We reserve the right to transfer assets of Separate Account B, which we
determine to be associated with the class of contracts to which your Annuity
belongs, to another "unitized" separate account. We also reserve the right to
transfer assets of Separate Account D which we determine to be associated with
the class of contracts to which your annuity belongs, to another "non-unitized"
separate account. We notify you (and/or any payee during the payout phase) of
any modification to your Annuity. We may endorse your Annuity to reflect the
change.
Misstatement of Age or Sex: If there has been a misstatement of the age
and/or sex of any person upon whose life annuity payments or the minimum death
benefit are based, we make adjustments to conform to the facts. As to annuity
payments: (a) any underpayments by us will be remedied on the next payment
following correction; and (b) any overpayments by us will be charged against
future amounts payable by us under your Annuity.
Ending the Offer: We may limit or discontinue offering Annuities.
Existing Annuities will not be affected by any such action.
Indemnification: Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
Legal Proceedings: As of the date of this Prospectus, neither we nor
ASM, Inc. were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
[UPDATE COMPANY INFO.]
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, 1996, we had 312 direct
salaried employees. An affiliate, American Skandia Information Services and
Technology Corporation, which provides services almost exclusively to us, had 54
direct salaried employees.
Regulation: We are organized as a Connecticut stock life insurance
company, and are subject to Connecticut law governing insurance companies. We
are regulated and supervised by the Connecticut Commissioner of Insurance. By
March 1 of every year, we must prepare and file an annual statement, in a form
prescribed by the Connecticut Insurance Department, which covers our operations
for the preceding calendar year, and must prepare and file our statement of
financial condition as of December 31 of such year. The Commissioner and his or
her agents have the right at all times to review or examine our books and
assets. A full examination of our operations will be conducted periodically
according to the rules and practices of the National Association of Insurance
Commissioners ("NAIC"). We are subject to the insurance laws and various federal
and state securities laws and regulations and to regulatory agencies, such as
the Securities and Exchange Commission (the "SEC") and the Connecticut Banking
Department, which administer those laws and regulations.
We can be assessed up to prescribed limits for policyholder losses incurred by
insolvent insurers under the insurance guaranty fund laws of most states. We
cannot predict or estimate the amount any such future assessments we may have to
pay. However, the insurance guaranty laws of most states provide for deferring
payment or exempting a company from paying such an assessment if it would
threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their affiliates
under insurance holding company laws and regulations. This applies to us and our
affiliates. Under such laws, inter-company transactions, such as dividend
payments to parent companies and transfers of assets, may be subject to prior
notice and approval, depending on factors such as the size of the transaction in
relation to the financial position of the companies.
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the anti-trust laws; (e) the barriers preventing most banks from selling or
underwriting insurance: and (f) any initiatives directed toward improving the
solvency of insurance companies. We would also be affected by federal
initiatives that have impact on the ownership of or investment in United States
companies by foreign companies or investors.
Executive Officers and Directors:
<TABLE>
<CAPTION>
Our executive officers, directors and certain significant employees, their ages,
positions with us and principal occupations are indicated below. The immediately
preceding work experience is provided for officers that have not been employed
by us or an affiliate for at least five years as of the date of this Prospectus.
<S> <C> <C> <C>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
Gordon C. Boronow* President President and
44 and Chief Chief Operating Officer:
Operating Officer, American Skandia Life
Director (since July, 1991) Assurance Corporation
Nancy F. Brunetti Senior Vice President, Senior Vice President, Customer
35 Customer Service and Service and Business Operations:
Business Operations American Skandia Life
Director (since February, 1996) 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,
41 Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi* Chief Executive Executive Vice President and
52 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,
36 Product Management Product Management:
Director (since February, 1996) American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
43 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Wade A. Dokken Director (since July, 1991) Director:
37 and Employee American Skandia Life
Assurance Corporation;
President, Chief Operating Officer
and Chief Marketing Officer:
American Skandia Marketing, Incorporated
Teresa Grove Vice President, Vice President,
41 Customer Service Customer Service:
American Skandia Life
Assurance Corporation
Ms. Grove joined us in 1996. She previously held positions of Operations
Manager at Twentieth Century/Benham from January, 1992 to September, 1996 and
Operations Manager at Lateef Management Association from January, 1989 to June,
1991.
N. David Kuperstock Vice President, Vice President,
45 Product Development Product Development:
American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
44 Chief Financial Officer, Chief Financial Officer:
Director (since October, 1994) American Skandia Life
Assurance Corporation
Gunnar Moberg Director (since November, 1994) Director - Marketing and Sales,
42 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Vice President and Vice President and
35 Controller Controller:
American Skandia Life
Assurance Corporation
Mr. Monroe joined us in 1996. He previously held positions of Assistant
Vice President and Director at Allmerica Financial from August, 1994 to July,
1996 and Senior Manager at KPMG Peat Marwick from July, 1983 to July, 1994.
Don Thomas Peck Employee Senior Vice President and
53 National Sales Manager:
American Skandia
Marketing, Incorporated
Mr. Peck joined us in 1995. He previously held the position of Regional Vice President with MFS Financial Services Inc.
Rodney D. Runestad Vice President and Vice President and
47 Valuation Actuary Valuation Actuary:
American Skandia Life
Assurance Corporation
Hayward Sawyer Employee Senior Vice President and
52 National Sales Manager:
American Skandia
Marketing, Incorporated
Mr. Sawyer joined us in 1994. He previously held the position of Regional Vice President with AIM Distributors, Inc.
Todd L. Slade Vice President Vice President:
39 American Skandia Information
Services and Technology
Corporation
Anders O. Soderstrom Director (since October, 1994) President and
37 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Executive Vice President
39 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
46 Director (since December, 1994) and Corporate Controller:
American Skandia Investment
Holding Corporation
Mr. Svensson joined us in 1994. He previously held the position of Senior Vice President with Nordenbanken.
Bayard F. Tracy Director (since October, 1994) Senior Vice President
49 and National Sales Manager:
American Skandia
Marketing, Incorporated
Jeffrey M. Ulness Vice President, Vice President,
36 Product Management Product Management:
American Skandia Life
Assurance Corporation
Mr. Ulness joined us in 1994. He previously held the positions of Counsel at
North American Security Life Insurance Company from March, 1991 to July, 1994
and Associate at LeBoeuf, Lamb, Leiby, Green and MacRae from January, 1990 to
March 1991.
</TABLE>
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
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>
Jan R. Carendi - 1996
Chief Executive 1995 200,315
Officer 1994 170,569
1993 214,121
Gordon C. Boronow - 1996
President and 1995 157,620
Chief Operating 1994 129,121
Officer 1993 123,788
Lincoln R. Collins - 1996
Senior Vice President 1995 156,550
Product Management 1994 92,700
1993 72,100
N. David Kuperstock 1996
Vice President, 1995 133,120
Product Development 1994 103,000
1993 88,864
Bayard F. Tracy 1996
Senior Vice President, 1995 168,052
National Sales Manager 1994 127,050
1993 123,363
</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 $100,000 in the fiscal year
immediately preceding the date of this Prospectus. This program is designed to
induce participants to remain with the company over long periods of time and to
tie a portion of their compensation to the fortunes of the company. Currently,
the program consists of multiple plans. A new plan may be instituted each year.
Participants are awarded units at the beginning of a plan. Generally,
participants must remain employed by the company or its affiliates at the time
such units are payable in order to receive any payments under the plan. There
are certain exceptions, such as in cases of retirement or death.
Changes in the value of units reflect changes in the "embedded value" of the
company. "Embedded value" is the net asset value of the company (valued at
market value and not including the present value of future profits), plus the
present value of the anticipated future profits (valued pursuant to state
insurance law) on its existing contracts. Units will not have any value for
participants if the embedded value does not increase by certain target
percentages during the first four years of a plan. The target percentages may
differ between each plan. Any amounts available under a plan are paid out in the
fifth through eighth years of a plan. Payments will be postponed if the payment
would exceed 20% of any profit (as determined under state insurance law) earned
by the company in the prior fiscal year or 30% of the individual's current
salary year. The amount to be received by a participant at the time any payment
is due will be the then current number of units payable multiplied by the then
current value of such units.
<TABLE>
<CAPTION>
---------Estimated Future Payouts---------
Name Number of Units Period Until Payout Threshold Target Maximum
(#) ($) ($) ($)
<S> <C> <C> <C>
Jan R. Carendi 120,000 Various $648,060
Gordon C. Boronow 110,000 Various $561,558
Lincoln R. Collins 36,750 Various $198,807
N. David Kuperstock 32,000 Various $200,968
Bayard E. Tracy 52,500 Various $286,263
</TABLE>
Compensation of Directors: The following directors were compensated as
shown below in 1996:
Malcolm M. Campbell $[ ] Gunnar Moberg $[ ]
Henrik Danckwardt $[ ]
Compensation Committee Interlocks and Insider Participation: The
compensation committee of our board of directors as of December 31, 1996
consisted of Malcolm M. Campbell and Henrik Danckwardt.
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, 1996, 1995, and 1994, respectively. Financial statements for the
Class 1 Sub-accounts of Separate Account B are found in the Statement of
Additional Information.
<PAGE>
APPENDIXES
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN
SKANDIA LIFE ASSURANCE CORPORATION
(To be filed by Amendment)
APPENDIX B SHORT DESCRIPTIONS
OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES
APPENDIX B
SHORT DESCRIPTIONS 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
JanCap Growth Portfolio: The investment objective of the JanCap Growth Portfolio
is growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on investments, therefore, will be incidental to this objective.
The objective will be pursued by emphasizing investments in common stocks.
Common stock investments will be in industries and companies that the
portfolio's sub-advisor believes are experiencing favorable demand for their
products and services, and which operate in a favorable competitive and
regulatory environment. Investments may be made to a lesser degree in preferred
stocks, convertible securities, warrants, and debt securities of U.S. issuers,
when the portfolio's sub-advisor perceives an opportunity for capital growth
from such securities or so that a return may be received on the portfolio's idle
cash. Debt securities which the portfolio may purchase include corporate bonds
and debentures (not to exceed 5% of net assets in bonds rated below investment
grad0e), 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.
Investments also may be made in "special situations" from time to time. A
"special situation" arises when, in the opinion of the portfolio's sub-advisor,
the securities of a particular company will be recognized and appreciate in
value due to a specific development, such as a technological breakthrough,
management change or a new product at that company. Subject to certain
limitations, the JanCap Growth Portfolio may purchase and write options on
securities (including index options) and options on foreign currencies, and may
invest in futures contracts on securities, financial indices and foreign
currencies, ("futures contracts"), options on futures contracts, forward
contracts and swaps and swap-related products. These instruments will be used
primarily for hedging purposes. Investment of up to 15% of the JanCap Growth
Portfolio's total assets may be made in securities that are considered illiquid
because of the absence of a readily available market or due to legal or
contractual restrictions.
AST Janus Overseas Growth Portfolio: The investment objective of the AST Janus
Overseas Growth Portfolio is to seek long-term growth of capital. The Portfolio
pursues its objective primarily through investments in common stocks of issuers
located outside the United States. The Portfolio normally invests at least 65%
of its total assets in securities of issuers from at least five different
countries, excluding the United States; however, it may at times invest in U.S.
issuers and it may at times invest all of its assets in fewer than five
countries or even a single country. The Portfolio invests primarily in common
stocks of foreign issuers selected for their growth potential. The Portfolio may
invest to a lesser degree in other types of securities, including preferred
stocks, warrants, convertible securities and debt securities. The Portfolio may
also invest in short-term debt securities, including money market funds managed
by the Sub-advisor, as a means of receiving a return on idle cash.
When the Sub-advisor believes that market conditions are not favorable for
profitable investing or when the Sub-advisor is otherwise unable to locate
favorable investment opportunities, the Portfolio's investments may be hedged to
a greater degree and/or its cash or similar investments may increase; therefore,
it does not always stay fully invested in stocks and bonds. The Portfolio may
invest in "special situations" from time to time. A special situation arises
when, in the opinion of the Sub-advisor, the securities of a particular issuer
will be recognized and appreciate in value due to a specific development with
respect to that issuer. Investment in special situations may carry an additional
risk of loss in the event that the anticipated development does not occur or
does not attract the expected attention.
The Sub-advisor generally takes a "bottom up" approach to building the
Portfolio. In other words, the Sub-advisor seeks to identify individual
companies with earnings growth potential that may not be recognized by the
market at large regardless of country of organization or place of principal
business activity.
The Portfolio may use options, futures and other types of derivatives as well as
forward foreign currency contracts for hedging purposes or as a means of
enhancing return. The Portfolio intends to use most derivative instruments
primarily to hedge the value of its portfolio against potential adverse
movements in securities prices, foreign currency markets or interest rates.
Although the Sub-advisor believes the use of derivative instruments will benefit
the Portfolio, the Portfolio's performance could be worse than if the Portfolio
had not used such instruments if the Sub-advisor's judgment proves incorrect.
The Portfolio may invest up to 15% of its net assets in illiquid investments,
including restricted securities or private placements that are not deemed to be
liquid by the Sub-advisor. The Portfolio may invest up to 35% of its net assets
in corporate debt securities that are rated below investment grade (securities
rated BB or lower by Standard & Poor's Ratings Services ("Standard & Poor's") or
Ba or lower by Moody's Investors Services, Inc. ("Moody's") (commonly referred
to as "junk bonds")). The Portfolio may also invest in unrated debt securities
of foreign and domestic issuers. The Portfolio generally intends to purchase
securities for long-term investment rather than short-term gains.
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 seasoned companies which are expected to show above-average growth and which
the Sub-advisor believes to be in sound financial condition.
Federated Utility Income Portfolio: The investment objective of the Federated
Utility Income Portfolio is to achieve high current income and moderate capital
appreciation by investing primarily in a professionally managed and diversified
portfolio of 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 at
least 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 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 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 intermediate,
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 generally be stocks of
well-established companies with capitalization over $1 billion 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
from long-term growth of capital and income, principally through investments in
common stocks of established, non-U.S. companies. Investments may be made solely
for capital appreciation or solely for income or any combination of both for the
purpose of achieving a higher overall return. Total return consists of capital
appreciation or depreciation, dividend income, and currency gains or losses. The
Portfolio intends to diversify investments broadly among countries and to
normally have at least three different countries represented in the Portfolio.
The Portfolio may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). Under unusual circumstances, the Portfolio may invest substantially
all of its assets in one or two countries.
T. Rowe Price Natural Resources: 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
primarily (at least 65% of its total 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 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 basic commodities which, in the opinion of the
Sub-advisor, can be produced and marketed profitably during periods of rising
labor costs 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.
T. Rowe Price International Bond Portfolio: The T. Rowe Price International Bond
Portfolio seeks to provide high current income and capital appreciation by
investing in high-quality, non dollar-denominated government and corporate bonds
outside the United States. The Portfolio is intended for long-term investors who
can accept the risks associated with investing in international bonds. Total
return consists of income after expenses, bond price gains (or losses) in terms
of the local currency and currency gains (or losses). The value of the Portfolio
will fluctuate in response to various economic factors, the most important of
which are fluctuations in foreign currency exchange rates and interest rates.
The Portfolio will invest at least 65% of its assets in high-quality, non
dollar-denominated government and corporate bonds outside the United States.
Because the Portfolio's investments are primarily denominated in foreign
currencies, exchange rates are likely to have a significant impact on total
Portfolio performance. Investors should be aware that exchange rate movements
can be significant and endure for long periods of time.
The Portfolio may also invest up to 20% of its assets in below investment-grade,
high-risk bonds, including bonds in default or those with the lowest rating.
Defaulted bonds are acquired only if the Sub-advisor foresees the potential for
significant capital appreciation. Securities rated below investment-grade are
commonly referred to as "junk bonds" and involve greater price volatility and
higher degrees of speculation with respect to the payment of principal and
interest than higher quality fixed-income securities.
The Portfolio may also invest more than 5% of its assets in the fixed-income
securities of individual foreign governments. The Portfolio generally will not
invest more than 5% of its assets in any individual corporate issuer. Since, as
a nondiversified investment company, the Portfolio is permitted to invest a
greater proportion of its assets in the securities of a smaller number of
issuers, the Portfolio may be subject to greater credit risk with respect to its
portfolio securities than an investment company that is more broadly
diversified.
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.
T. Rowe Price Small Company Value Portfolio: The investment objective of the T.
Rowe Price Small Company Value Portfolio is to provide long-term capital
appreciation by investing primarily in small-capitalization stocks that appear
to be undervalued. Reflecting a value approach to investing, the Portfolio will
seek the stocks of companies whose current stock prices do not appear to
adequately reflect their underlying value as measured by assets, earnings, cash
flow, or business franchises. The Portfolio will invest at least 65% of its
total assets in companies with a market capitalization of $1 billion or less
that appear undervalued by various measures, such as price/earnings or
price/book value ratios. Although the Portfolio will invest primarily in U.S.
common stocks, it may also purchase other types of securities, for example,
foreign securities, convertible stocks and bonds, and warrants when considered
consistent with the Portfolio's investment objective and policies. Small
companies--those with a capitalization (market value) of $1 billion or less--may
offer greater potential for capital appreciation since they are often overlooked
or undervalued by investors. Investing in small companies involves greater risk,
as well as greater opportunity, than is customarily associated with more
established companies.
The Portfolio may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. The Portfolio may invest up to 20% of its
total assets (excluding reserves) in foreign securities. These include
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Some of the countries in which the Portfolio may invest may be considered
to be developing and may involve special risks. Investors in foreign securities
may "hedge" their exposure to potentially unfavorable currency changes by
purchasing a contract to exchange one currency for another on some future date
at a specified exchange rate. The Portfolio may invest in debt securities of any
type without regard to quality or rating. The Portfolio will not purchase a
noninvestment-grade debt security (or junk bond) if immediately after such
purchase the Portfolio would have more than 5% of its total assets invested in
such securities.
The Portfolio may invest up to 10% of its total assets in hybrid instruments.
Hybrids can have volatile prices and limited liquidity and their use by the
Portfolio may not be successful. These instruments (a type of potentially
high-risk derivative) can combine the characteristics of securities, futures,
and options. The Portfolio may acquire illiquid securities; however, the
Portfolio will not invest more than 15% of its net assets in illiquid
securities, and not more than 10% of its total assets in restricted securities
(other than Rule 144A securities). The Portfolio will hold a certain portion of
its assets in U.S. and foreign dollar-denominated money market securities,
including repurchase agreements, in the two highest rating categories, maturing
in one year or less.
The Portfolio may enter into futures contracts (or options thereon) to hedge all
or a portion of its portfolio against changes in prevailing levels of interest
rates or currency exchange rates, or as an efficient means of adjusting its
exposure to the bond, stock, and currency markets. The Portfolio will limit its
use of futures contracts so that initial margin deposits and premiums on such
contracts used for non-hedging purposes will not equal more than 5% of the
Portfolio's net assets. The Portfolio may also write call and put options and
purchase put and call options on securities, financial indices, and currencies.
The aggregate market value of the Portfolio's securities or currencies covering
call or put options will not exceed 25% of the Portfolio's net assets. The
Portfolio will not generally trade in securities for short-term profits, but,
when circumstances warrant, securities may be purchased and sold without regard
to the length of time held.
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 may have annual portfolio turnover rates in
excess of 100%.
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%.
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 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.
Berger Capital Growth Portfolio: The investment objective of the Berger Capital
Growth Portfolio is long-term capital appreciation. The Portfolio seeks to
achieve this objective by investing primarily in common stocks of established
companies which the Sub-advisor believes offer favorable growth prospects.
Current income is not an investment objective of the Portfolio, and any income
produced will be a by-product of the effort to achieve the Portfolio's
objective.
In general, investment decisions for the Portfolio are based on an approach
which seeks out successful companies because they are believed to be more apt to
become profitable investments. To evaluate a prospective investment, the
Sub-advisor analyzes information from various sources, including industry
economic trends, earnings expectations and fundamental securities valuation
factors to identify companies which in the Sub-advisor's opinion are more likely
to have predictable, above average earnings growth, regardless of the company's
size and geographic location. The Sub-advisor also takes into account a
company's management and its innovations in products and services in evaluating
its prospects for continued or future earnings growth.
In selecting its portfolio securities, the Portfolio 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 appropriate by the Sub-advisor to
achieve the objective of the Portfolio. The Portfolio may, from time to time,
take substantial positions in securities convertible into common stocks, and it
may also purchase government securities, preferred stocks and other senior
securities if its Sub-advisor believes these are likely to be the best suited at
that time to achieve the Portfolio's objective. The Portfolio's policy of
investing in securities believed to have a potential for capital growth means
that a Portfolio share may be subject to greater fluctuations in value than if
the Portfolio invested in other securities.
Robertson Stephens Value + Growth Portfolio: The investment objective of the
Robertson Stephens Value + Growth Portfolio is to seek capital appreciation. The
Portfolio will invest primarily in growth companies believed by the Sub-advisor
to have favorable relationships between price/earnings ratios and growth rates
in sectors offering the potential for above-average returns.
In selecting investments for the Portfolio, the Sub-advisor's primary emphasis
is typically on evaluating a company's management, growth prospects, business
operations, revenues, earnings, cash flows, and balance sheet in relationship to
its share price. The Sub-advisor may select stocks which it believes are
undervalued relative to the current stock price. When the Sub-advisor
anticipates that the price of a security will decline, it may sell the security
short and borrow the same security from a broker or other institution to
complete the sale.
The Portfolio may invest a substantial portion of its assets in securities
issued by small companies. Such companies may offer greater opportunities for
capital appreciation than larger companies, but investments in such companies
may involve certain special risks such as limited product lines, markets and
financial or managerial resources. These securities may be less frequently
traded and the values may fluctuate more sharply than other securities.
The Portfolio may invest up to 35% of its net assets in securities principally
traded in foreign markets. The Portfolio may buy or sell foreign currencies and
options and futures contracts on foreign currencies for hedging purposes in
connection with its foreign investments. The Portfolio may also at times invest
a substantial portion of their assets in securities of issuers in developing
countries. Although many of the securities in which the Portfolio may invest are
traded on securities exchanges, the Portfolio may trade in limited volume, and
the exchanges may not provide all of the conveniences or protections provided by
securities exchanges in more developed markets.
At times, the Portfolio may invest more than 25% of its assets in securities of
issuers in one or more market sectors such as, for example, the technology
sector. A market sector may be made up of companies in a number of related
industries. The Portfolio would only concentrate its investments in a particular
market sector if the Sub-advisor were to believe the investment return available
from concentration in that sector justifies any additional risk associated with
concentration in that sector.
AST Putnam Value Growth & Income Portfolio: The primary investment objective of
the AST Putnam Value Growth & Income Portfolio is to seek capital growth.
Current income is a secondary investment objective. The Portfolio invests
primarily in common stocks that offer potential for capital growth, and may,
consistent with its investment objectives, invest in stocks that offer potential
for current income. The Portfolio may also purchase corporate bonds, notes and
debentures, preferred stocks, or convertible securities (both debt securities
and preferred stocks) or U.S. government securities, if the Sub-advisor
determines that their purchase would help further the Portfolio's investment
objectives. The Portfolio may invest up to 20% of its assets in securities
denominated in foreign currency. 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." The Portfolio may buy or sell foreign currencies, foreign
currency futures contracts and foreign currency forward contracts for hedging
purposes in connection with its foreign investments.
The Portfolio may invest a portion of its assets in fixed-income securities,
including lower-rated fixed-income securities, which are commonly known as "junk
bonds," without limitation as to credit rating. The Portfolio may invest in zero
coupon bonds and payment-in-kind bonds. The Portfolio may buy and sell stock
index futures contracts. The Portfolio may buy and sell call and put options on
index futures or on stock indices in addition to or as an alternative to
purchasing or selling index futures or, to the extent permitted by applicable
law, to earn additional income. 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. The Portfolio may also buy and sell put and call options for
hedging purposes. The aggregate value of the securities underlying the options
may not exceed 25% of Portfolio assets. The Portfolio may enter into repurchase
agreements. The Portfolio may purchase securities for future delivery, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date.
The length of time the Portfolio has held a particular security is not generally
a consideration in investment decisions. As a result of the Portfolio's
investment policies, under certain market conditions the Portfolio's turnover
rate may be higher than that of other mutual funds.
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 then 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").
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 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.
Twentieth Century Strategic Balanced Portfolio: The investment objective of the
Twentieth Century Strategic Balanced Portfolio is to seek capital growth and
current income. It is the Sub-advisor's intention to maintain approximately 60%
of the Portfolio's assets in common stocks that are considered by the
Sub-advisor to have better-than-average prospects for appreciation and the
remainder in bonds and other fixed income securities. With the equity portion of
the Portfolio, the Sub-advisor seeks capital growth by investing in securities,
primarily common stocks, that meet certain fundamental and technical standards
of selection (relating primarily to earnings and revenue acceleration) and have,
in the opinion of the Sub-advisor, better-than-average potential for
appreciation. So long as a sufficient number of such securities are available,
the Sub-advisor intends to keep the equity portion of the Portfolio fully
invested in these securities regardless of the movement of stock prices
generally. The Portfolio may purchase securities only of companies that have a
record of at least three years continuous operation.
The Sub-advisor intends to maintain approximately 40% of the Portfolio's assets
in fixed income securities, approximately 80% of which will be invested in
domestic fixed income securities and approximately 20% of which will be invested
in foreign fixed income securities. This percentage will fluctuate from time to
time. The fixed income portion of the Portfolio will include U.S. Treasury
securities, securities issued or guaranteed by the U.S. government or a foreign
government, or an agency or instrumentality of the U.S. or a foreign government,
and non-convertible debt obligations issued by U.S. or foreign corporations. The
Portfolio may also invest in mortgage-related and other asset-backed securities.
Debt securities that comprise part of the Portfolio's fixed income portfolio
will primarily be limited to "investment grade" obligations. However, the
Portfolio may invest up to 10% of its fixed income assets in "high yield"
securities. Under normal market conditions, the maturities of fixed-income
securities in which the Portfolio invests will range from 2 to 30 years.
The Portfolio may invest up to 25% of its assets in the securities of foreign
issuers, including debt securities of foreign governments and their agencies
primarily from developed markets, when these securities meet its standards of
selection. Some of the foreign securities held by the Portfolio may be
denominated in foreign currencies. To protect against adverse movements in
exchange rates between currencies, the Portfolio may, for hedging purposes only,
enter into forward currency exchange contracts and buy put and call options
relating to currency futures contracts.
The Portfolio may purchase mortgage-related and other asset-backed securities.
The Portfolio may also invest in collateralized mortgage obligations (CMOs). The
Portfolio may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the Portfolio. To
the extent permitted by its investment objectives and policies, the Portfolio
may invest in securities that are commonly referred to as "derivative"
securities. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. The
Portfolio may not invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the Portfolio.
There are a range of risks associated with derivative investments. The Portfolio
may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the Portfolio's criteria
for selection. The portfolio turnover of the Portfolio may be higher than other
mutual funds with similar investment objectives.
Twentieth Century International Growth Portfolio: The investment objective of
the Twentieth Century International Growth Portfolio is to seek capital growth.
The Portfolio will seek to achieve its investment objective by investing
primarily in securities of foreign issuers that meet certain fundamental and
technical standards of selection (relating primarily to acceleration of earnings
and revenues) and have, in the opinion of the Sub-advisor, potential for
appreciation. The Portfolio will invest primarily in issuers in developed
markets. The Portfolio will invest primarily in equity securities (defined to
include equity equivalents) of such issuers. The Portfolio will attempt to stay
fully invested in such securities, regardless of the movement of stock prices
generally. The Portfolio may also invest in other types of securities consistent
with the accomplishment of the Portfolio's objectives. When the Sub-advisor
believes that the total return potential of other securities equals or exceeds
the potential return of equity securities, the Portfolio may invest up to 35% in
such other securities. The other securities the Portfolio may invest in are
bonds, notes and debt securities of companies and obligations of domestic or
foreign governments and their agencies. The Portfolio will limit its purchases
of debt securities to investment grade obligations.
The Portfolio may also invest in other equity securities and equity equivalents.
Examples of other equity securities and equity equivalents are preferred stock,
convertible preferred stock and convertible debt securities. Equity equivalents
may also include securities whose value or return is derived from the value or
return of a different security. Under normal conditions, the Portfolio will
invest at least 65% of its assets in equity and equity equivalent securities of
issuers from at least three countries outside of the United States. While
securities of U.S. issuers may be included in the Portfolio from time to time,
it is the primary intent of the Sub-advisor to diversify investments across a
broad range of foreign issuers.
In order to achieve maximum investment flexibility, the Portfolio has not
established geographic limits on asset distribution, on either a
country-by-country or region-by-region basis. The Sub-advisor expects to invest
both in issuers in developed markets (such as Germany, the United Kingdom and
Japan) and in issuers in emerging market countries. Subject to certain
restrictions contained in the Investment Company Act, the Portfolio may invest
up to 10% of its assets in certain foreign countries indirectly through
investment funds and registered investment companies authorized to invest in
those countries. Some of the securities held by the Portfolio will be
denominated in foreign currencies. To protect against adverse movements in
exchange rates between currencies, the Portfolio may, for hedging purposes only,
enter into forward currency exchange contracts.
Notwithstanding the Portfolio's investment objective of capital growth, under
exceptional market or economic conditions, the Portfolio may temporarily invest
all or a substantial portion of its assets in cash or investment-grade
short-term securities (denominated in U.S. dollars or foreign currencies). The
Portfolio may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the Portfolio. The
Portfolio will not invest more than 15% of its assets in repurchase agreements
maturing in more than seven days. The Portfolio may, from time to time, purchase
Rule 144A securities when they present attractive investment opportunities that
otherwise meet the Portfolio's criteria for selection.
The portfolio turnover may be higher than other mutual funds with similar
investment objectives. Investments in the Portfolio should not be considered a
complete investment program and may not be appropriate for an individual with
limited investment resources or who is unable to tolerate fluctuations in the
value of the investment.
The Alger American Fund
Alger American Growth Portfolio: The investment objective of the Alger American
Growth Portfolio is long-term capital appreciation. Income is a consideration in
the selection of investments but is not an investment objective of the
portfolio. It seeks to achieve its objective by investing in equity securities,
such as common or preferred stocks that are listed on a national securities
exchange, or securities convertible into or exchangeable for equity securities,
including warrants and rights, often selected by the investment manager on the
basis of original research produced by its research analysts. Except during
temporary defensive periods, the portfolio invests at least 65 percent of its
total assets in equity securities of companies that, at the time of purchase,
have total market capitalization of $1 billion or greater.
Alger American Small Capitalization Portfolio: The investment objective of the
Portfolio is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities, have
total market capitalization within the range of companies included in the
Russell 2000 Growth Index, updated quarterly. The Russell 2000 Growth Index is
designed to track the performance of small capitalization companies. At the date
of this Prospectus, the range of market capitalization of these companies was
$20 million to $3.0 billion. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time of purchase, have
total market capitalization outside the range of companies included in the
Russell 2000 Growth Index and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Alger American MidCap Growth Portfolio: The investment objective of the
Portfolio is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities, have
total market capitalization within the range of companies included in the S&P
MidCap 400 Index, updated quarterly. The S&P MidCap 400 Index is designed to
track the performance of medium capitalization companies. At the date of this
Prospectus, the range of market capitalization of these companies was $153
million to $8.9 billion. The Portfolio may invest up to 35% of its total assets
in equity securities of companies that, at the time of purchase, have total
market capitalization outside the range of companies included in the S&P MidCap
400 Index and in excess of that amount (up to 100% of its assets) during
temporary defensive periods.
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 reasonable risk. 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.
Montgomery Variable Series
Emerging Markets Fund: The investment objective of the Montgomery Variable
Series Emerging Markets Fund is capital appreciation, which under normal
conditions it seeks by investing at least 65% of its total assets in equity
securities of companies in countries having emerging markets. For these
purposes, the Fund defines an emerging market country as having an economy that
is or would be considered by the World Bank or the United Nations to be emerging
or developing. This Fund considers emerging market companies to be companies the
securities of which are principally traded in the capital market of an emerging
market country, companies that derive at least 50% of their total revenue from
either goods produced or services rendered in emerging market countries or from
sales made in such emerging market countries, regardless of where the securities
of such companies are principally traded, or companies organized under the laws
of, and with a principal office in, an emerging market country.
This Fund uses a proprietary, quantitative asset allocation model created by the
Manager. This model employs mean-variance optimization, a process used in
developed markets based on modern portfolio theory and statistics. Mean-variance
optimization helps determine the percent of assets to invest in each country to
maximize expected returns for a given risk level. This Fund's aims are to invest
in those countries that are expected to have the highest risk/reward tradeoff
when incorporated into a total portfolio context and to construct a portfolio of
emerging market investments approximating the risk level of an internationally
diversified portfolio of securities in developed markets. This "top-down"
country selection is combined with "bottom-up" fundamental industry analysis and
stock selection based on original research, publicly available information, and
company visits.
This Fund invests primarily in common stock but also may invest in other types
of equity and equity derivatives securities. It may invest up to 35% of its
total assets in debt securities, including up to 5% in debt securities rated
below investment grade. The Fund has the right to purchase securities in foreign
countries. Accordingly, shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. While the Fund may invest in mature suppliers of products and
services, and technologies, the Fund also may invest in smaller companies that
may benefit from the development of new products and services. These smaller
companies may present greater opportunities for capital appreciation but may
involve greater risk than larger, mature issuers. The Fund is authorized to
invest in medium quality (rated or equivalent to BBB by S&P or Baa by Moody's)
and in limited amounts of high risk, lower quality debt securities, sometimes
called "junk bonds," (i.e., securities rated below BBB or Baa) or, if unrated,
deemed to be of equivalent investment quality as determined by the Manager.
Medium quality debt securities have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt securities.
[Galaxy VIP Fund
GAL Money Market Fund: The Money Market Fund's investment objective is to seek
as high a level of current income as is consistent with liquidity and stability
of principal. The Fund seeks to achieve its objective by investing in "money
market" instruments that are determined by the investment adviser to present
minimal credit risk and meet certain rating criteria. Instruments that may be
purchased by the Money Market Fund include obligations of domestic and foreign
banks (including negotiable certificates of deposit, non-negotiable time
deposits, savings deposits, and bankers' acceptances); commercial paper
(including variable and floating rate notes); obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; and repurchase
agreements issued by financial institutions such as banks and broker/dealers.
These instruments have remaining maturities of thirteen months or less (except
for certain variable and floating rate notes and securities underlying certain
repurchase agreements).
In accordance with a rule promulgated by the Securities and Exchange Commission,
the Money Market Fund will purchase only those instruments which meet the
applicable quality requirements described below. The Money Market Fund will not
purchase a security (other than a U.S. Government security) unless the security
or the issuer with respect to comparable securities (i) is rated by at least two
nationally recognized statistical rating organizations ("Rating Organizations")
(such as S&P or Moody's) in the highest category for short-term debt securities,
(ii) is rated by the only Rating Organization that has issued a rating in such
Rating Organization's highest category for short-term debt, or (iii) if not
rated, the security is determined to be of comparable quality. Determinations of
comparable quality will be made in accordance with procedures established by the
Board of Trustees.
GAL Equity Fund: The Equity Fund's investment objective is to seek long-term
growth by investing in companies that the Fund's investment adviser believes
have above-average earnings potential. The Fund seeks to achieve its investment
objective by investing, under normal market and economic conditions, at least
75% of its total assets in a broadly diversified portfolio of equity securities
such as common stock, preferred stock, common stock warrants and securities
convertible into common stock of companies that the investment adviser believes
will increase future earnings to a level above the average earnings of similar
issuers. Such companies often retain their earnings to finance current and
future growth and, for this reason, generally pay little or no dividends. Equity
securities in which the Fund invests are selected based on analyses of trends in
industries and companies, earning power, growth features, quality and depth of
management, marketing and manufacturing skills, financial conditions and other
investment criteria. By investing in convertible securities, the Fund will seek
the opportunity, through the conversion feature, to participate in the capital
appreciation of the common stock into which the securities are convertible.
All debt obligations, including convertible bonds, purchased by the Fund will be
rated at the time of purchase in one of the four highest rating categories by
S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and Baa) or, if not rated, will
be determined to be of an equivalent quality by the investment adviser. Debt
securities rated BBB by S&P or Baa by Moody's are generally considered to be
investment grade securities although they may have speculative characteristics
and changes in economic conditions or circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case for
higher grade debt obligations.
The Equity Fund may invest indirectly in foreign securities through the purchase
of American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs"). In addition, the Fund may invest in securities issued by foreign
branches of U.S. banks and foreign banks, Canadian commercial paper and Canadian
securities listed on a national securities exchange, and Europaper (U.S.
dollar-denominated commercial paper of foreign issuers). The Fund may also write
covered call options.
As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments and obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities at such times and in such
proportions as, in the opinion of the investment adviser, prevailing market or
economic conditions warrant.
GAL High Quality Bond Fund: The High Quality Bond Fund's investment objective is
to seek a high level of current income consistent with prudent risk of capital.
The Fund invests its assets in corporate debt obligations such as bonds,
debentures, obligations convertible into common stock, "money market"
instruments such as bank obligations and commercial paper, in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, and in
debt obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples of these include The
International Bank for Reconstruction and Development ("World Bank"), The Asian
Development Bank and The InterAmerican Development Bank. Obligations of
supranational entities may be supported by appropriated but unpaid commitments
of their member countries, and there is no assurance that these commitments will
be undertaken or met in the future. The failure by a member country to honor
such commitments could adversely affect the payment of principal and interest on
these obligations. The Fund may also invest, from time to time, in obligations
issued by state and local governmental issuers ("Municipal Securities"). The
purchase of Municipal Securities may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the performance of such
securities, on a pretax basis, is comparable to that of corporate or U.S. debt
obligations. The High Quality Bond Fund may enter into interest rate futures
contracts to hedge against changes in market values of fixed-income instruments
that the Fund holds or intends to purchase. At least 65% of the Fund's total
assets will be invested in non-convertible bonds. Any common stock received
through the conversion of convertible debt obligations will be sold in an
orderly manner as soon as possible.
Under normal market and economic conditions, the Fund will invest at least 80%
of its assets in high quality debt obligations that are rated, at the time of
purchase, within the two highest ratings of S&P (AAA and AA) or Moody's (Aaa and
Aa) (or which, if unrated, are determined by the investment adviser to be of
comparable quality) and in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and other "money market"
instruments. Unrated securities will be determined to be of comparable quality
to high quality debt obligations if, among other things, other outstanding
obligations of the issuers of such securities are rated AA or A-2/P-2 or better.
When, in the opinion of the investment adviser, a defensive investment posture
is warranted, the Fund may invest temporarily and without limitation in high
quality, short-term "money market" instruments.
The Fund may also invest up to 5% of its total assets in dollar-denominated high
quality debt obligations of U.S. companies issued outside the United States. In
addition, the Fund may acquire high quality obligations issued by Canadian
Provincial Governments which are similar to U.S. Municipal Securities except
that the income derived therefrom is fully subject to U.S. Federal taxation.
These instruments are denominated in either Canadian or U.S. dollars and have an
established over-the-counter market in the United States.
The Fund seeks to provide a current yield greater than that generally available
from a portfolio of high quality short-term obligations. The High Quality Bond
Fund's average weighted maturity will vary from time to time depending on, among
other things, current market and economic conditions and the comparative yields
on instruments with different maturities. The Fund adjusts its average weighted
maturity and its holdings of corporate and U.S. Government debt securities in a
manner consistent with the investment adviser's assessment of prospective
changes in interest rates. The success of this strategy depends upon the
investment adviser's ability to predict changes in interest rates.
The value of the Fund's portfolio securities will generally vary inversely with
changes in prevailing interest rates. The high quality credit criteria applied
to the selection of portfolio securities are intended to reduce adverse price
changes due to credit considerations.
GAL Asset Allocation Fund: The investment objective of the Asset Allocation Fund
is to seek a high total return by providing both a current level of income that
is greater than that provided by the popular stock market averages as well as
long-term growth in the value of the Fund's assets. The Fund seeks to achieve
its investment objective and at the same time reduce volatility by allocating
its assets among short-term obligations, common stock, preferred stock and
bonds. The proportion of the Fund's assets invested in each type of security
will vary from time to time as a result of the investment adviser's
interpretation of economic and market conditions. However, at least 25% of the
Fund's total assets will at all times be invested in fixed-income senior
securities, including debt securities and preferred stocks. Debt securities
purchased by the Fund will be rated at the time of purchase in one of the four
highest rating categories by S&P (AAA, AA, A and BBB) or Moody's (Aaa, Aa, A and
Baa) (or which, if unrated, are determined by the investment adviser to be of
comparable quality). Debt securities rated BBB by S&P or Baa by Moody's are
generally considered to be investment grade securities although they may have
speculative characteristics and changes in economic conditions or circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade debt obligations. In selecting common
stock for purchase by the Fund, the investment adviser will analyze trends in
industries and companies, earning power, growth features, quality and depth of
management, marketing and manufacturing skills, financial conditions and other
investment criteria.
The Asset Allocation Fund may also invest up to 20% of its total assets in
foreign securities, either directly or indirectly through ADRs and EDRs. The
Fund may write covered call options, purchase asset-backed securities and
mortgage-backed securities and enter into foreign currency exchange
transactions.
As a temporary defensive measure, the Fund may invest without limitation in
cash, "money market" instruments and obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities at such times and in such
proportions as, in the opinion of the investment adviser, prevailing market and
economic conditions warrant.
Investments in foreign securities involve higher costs for the Fund than
investments in U.S. securities, including higher transaction costs as well as
the imposition in some cases of additional taxes by foreign governments. For
example, fixed commissions on foreign stock exchanges are generally higher than
the negotiated commissions on U.S. exchanges and the Fund may be subject in some
cases to withholding and/or transfer taxes. In addition, foreign investments may
include additional risks associated with currency exchange rates, less complete
financial information about the issuers, less market liquidity, and political
instability. Future political and economic developments, the possible imposition
of withholding taxes on interest income, the possible seizure or nationalization
of foreign holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions, might adversely affect the payment
of principal and interest on foreign obligations.
Although the Asset Allocation Fund may invest in securities denominated in
foreign currencies, the Fund values its securities and other assets in U.S.
dollars. As a result, the net asset value of the Fund's shares may fluctuate
with U.S. dollar exchange rates as well as with price changes of the Fund's
securities in the various local markets and currencies. Thus, an increase in the
value of the U.S. dollar compared to the currencies in which the Fund makes its
investments could reduce the effect of increases and magnify the effect of
decreases in the price of the Fund's securities in their local markets.
Conversely, a decrease in the value of the U.S. dollar will have the opposite
effect of magnifying the effect of increases and reducing the effect of
decreases in the prices of the Fund's securities in their local markets. In
addition to favorable and unfavorable currency exchange-rate developments, the
Fund is subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.]
<PAGE>
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American Skandia Life Assurance Corporation
Attention: Concierge Desk [Galaxy Annuity Customer Service]
For Written Requests:
P.O. Box 883
Shelton, Connecticut 06484
For Electronic Requests:
[email protected]
================================================================================
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT
CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY
DESCRIBED IN PROSPECTUS ASAP2 [GAL4]-PROS (05/97).
================================================================================
================================================================================
================================================================================
-------------------------------------------------------
(print your name)
-------------------------------------------------------
(address)
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(city/state/zip code)
<PAGE>
ADDITIONAL INFORMATION: Inquiries will be answered by calling your
representative or by writing to:
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
at
P.O. Box 883
Shelton, Connecticut 06484
or
http://[email protected]
Issued by: Serviced at:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 [1-800-444-3970]
Telephone: 1-800-752-6342 [1-800-444-3970]
http:\www.AmericanSkandia.com http:\www.AmericanSkandia.com
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: (203) 926-1888
http:\www.AmericanSkandia.com
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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."), 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.
<TABLE>
<CAPTION>
Item 16. Exhibits and Financial Statement Schedules:
<S> <C> <C> <C>
Exhibits Page
1 Underwriting agreement incorporated by reference to Post-Effective
Amendment No. 1 to Registration Statement No. 33-26122, filed March 1,
1990
2 Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable
3 Articles of incorporation and by-laws incorporated by reference to Pre-Effective
Amendment No. 2 to Registration Statement No. 33-19363, filed July 27, 1988
4 Instruments defining the rights of security holders, including indentures, incorporated by
reference to Post-Effective Amendment No. 1 to Registration Statement No. 33-87010, filed April 20, 1995.
5 Opinion re legality (included as Exhibit 23b)
6 - 9 Not applicable
10 Material contracts (Investment Management Agreement)
(a) Agreement with J.P. Morgan Investment Management Inc. incorporated by reference to
Post-Effective Amendment No. 5 to Registration Statement No. 33-26122, filed April 23, 1991
Filed via EDGAR with this Registration Statement
(b) Agreement with Fleet Investment Advisors Inc., incorporated by reference to the initial filing
of Registration Statement No. 33-86918 filed December 1, 1994
Filed via EDGAR with this Registration Statement
11 - 22 Not applicable
23a Consent of Deloitte & Touche LLP [to be filed by amendment]
23b Opinion & Consent of Werner & Kennedy [to be filed by amendment]
24 Power of Attorney
(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
(i) Filed via EDGAR with Pre-effective Amendment No. 1 to Registration Statement No.
333-00941, filed April 26, 1996
(b) For Directors Mazzaferro, Moberg, Soderstrom and Tracy incorporated by reference to initial
Registration Statement No. 33-86918, filed December 1, 1994
(i) Filed via EDGAR with Pre-effective Amendment No. 1 to Registration Statement No.
333-00941, filed April 26, 1996
(c) For Director Svensson incorporated by reference to initial Registration Statement No.
33-88360, filed January 10, 1995
(i) Filed via EDGAR with Pre-effective Amendment No. 1 to Registration Statement No.
333-00941, filed April 26, 1996
(d) For Directors Brunetti, Collins and Michael incorporated by reference to initial
Registration Statement No. 333-00941, filed February 15, 1996
25 - 28 Not applicable
</TABLE>
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An index to the financial statement schedules is omitted because it is not
required or is not applicable.
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.
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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.
<PAGE>
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Exhibits
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit 10 Investment Management Agreements
(a) Agreement with J.P. Morgan Edgar Filing
(b) Agreement with Fleet Investment Advisors Edgar filing
Exhibit 23a Consent of Deloitte & Touche LLP
[to be filed by amendment]
Exhibit 23b Opinion and Consent of Werner & Kennedy
[to be filed by amendment]
<PAGE>
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, February 25, 1997.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Registrant
By:/s/ M. Patricia Paez Attest:/s/ Diana D. Steigauf
M. Patricia Paez, Corporate Secretary Diana D. Steigauf
<TABLE>
<CAPTION>
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.
Signature Title Date
<S> <C> <C>
(Principal Executive Officer)
Jan R. Carendi* Chief Executive Officer, February 25, 1997
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and February 25, 1997
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Vice President and February 25, 1997
David R. Monroe Controller
(Board of Directors)
Jan. R. Carendi* Gordon C. Boronow* Malcolm M. Campbell*
Jan. R. Carendi Gordon C. Boronow Malcolm M. Campbell
Henrik Danckwardt* Amanda C. Sutyak* Wade A. Dokken*
Henrik Danckwardt Amanda C. Sutyak Wade A. Dokken
Thomas M. Mazzaferro** Gunnar Moberg** Bayard F. Tracy**
Thomas M. Mazzaferro Gunnar Moberg Bayard F. Tracy
Anders Soderstrom** C. Ake Svensson*** Lincoln R. Collins****
Anders Soderstrom C. Ake Svensson Lincoln R. Collins
Nancy F. Brunetti****
Nancy F. Brunetti
*/**/***/****By: /s/M. Patricia Paez
M. Patricia Paez
<FN>
*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.
****Pursuant to Powers of Attorney filed with the initial filing of Registration Statement No. 333-00941.
</FN>
</TABLE>
INVESTMENT MANAGEMENT AGREEMENT
This agreement, dated October 25, 1990, by and between J.P. Morgan Investment
Management Inc. 522 Fifth Avenue, New York, Now York, 10036 ("JPMIM") and
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Tower One Corporate Drive, Shelton,
Connecticut 06484 ("Skandia"), sets forth the terms pursuant to which JPMIM will
provide Investment management services with respect to certain assets to be
maintained by Skandia as described below.
1. Investment Description
(a) Skandia desires to employ certain assets ("Assets") to fund the
liabilities it incurs under certain annuity plans it issues ("Liabilities").
These Assets may be maintained in one or more non-utilized separate accounts
established by Skandia under Title 38, Section 38-145a of the Connecticut
General Statutes. The Liabilities may be created under group or individual
contracts. The annuity plans may be offered and issued by Skandia pursuant to
one or more registration statements under the Securities Act of 1933.
(b) Skandia desires to invest and reinvest the Assets of each separate
account in accordance with:
(i) the Investment Policy which Skandia has provided to JPMIM, as may be
amended from time to time by Skandia and provided in writing to JPMIM; and
(ii) any prospectus as may be in effect from time to time in
relation to sales of annuities to be funded by the Assets in such separate
account. Skandia will provide copies of such prospectus as may from time to time
be amended.
(c) Skandia's goal is to achieve rates of return for the invested
Assets that will allow Skandia to recover its expenses over the time periods
assumed in the pricing of each annuity plan, obtain a profit and meet its
Liabilities, including supporting the "Rates" guaranteed under such plan or
plans. As to deferred annuities that are in their accumulation phase, "Rates"
means any interest rate guaranteed to be credited from time to time for the
account of contract owners or certificates holders. As to immediate annuities or
deferred annuities in their payout phase, "Rates" means both periodic payments
under such annuities as well as any guaranteed surrender values. Skandia
understands and agrees that JPMIM can give no assurance that Skandia's goal will
be achieved.
2. Appointment
Skandia hereby appoints JPMIM to manage the Assets. Skandia wishes to benefit
from JPMIM's investment expertise, investment analysis, strategies and
recommendations. JPMIM accepts such appointment pursuant to the terms of this
Agreement. Skandia retains the right to appoint other investment managers with
respect to any of it assets other than designated Assets.
3. Duties of the Parties
(a) JPMIM shall act in strict conformity with the Investment Policy
provided by Skandia, and will provide notice to Skandia in the event of any
occurrence which would prevent JPMIM from acting in strict conformity with such
Investment Policy. The timeliness of any such notice shall be in accordance with
the standard of care described in Paragraph 6 of this agreement
(b) Skandia will determine Rates and reserve levels to be maintained by
Skandia in relation to the default risk of the Assets ("Reserves") for the
annuity plans. Skandia will consult frequently with JPMIM regarding the rates of
return obtainable from various possible portfolios of investment of the Assets,
the degree to which such possible portfolios of investments match the
corresponding Liabilities, and the levels of risk inherent in such possible
portfolios. It is also understood that Skandia will rely in large part on the
information and analysis provided by JPMIM regarding such possible portfolios in
determining the Rates and Reserves, and that provision of such information and
analysis is subject to the standard of care described In Paragraph 6.
(c) Skandia will inform JPMIM of:
(i) changes in the Liabilities under any plan and any changes in the
amounts available for investment;
(ii) the durations of the Liabilities under each plan;
(iii) the rates of return assumed by Skandia in the establishment of any
Liabilities;
(iv) whether the immunized portfolio structure, as defined below, is to be
monitored separately for each plan or for any aggregation of plans; and
(v) any other information necessary from Skandia for JPMIM to meets its
duties and render the services to be provided pursuant to this Agreement.
(d) JPMIM will supervise the investment of the Assets and will conduct
a continuing program of evaluation of both the quality of the investments and
the degree to which an immunized portfolio structure(s) is maintained.
(e) It is understood that immunized portfolio structure means that:
(i) the durations of a portfolio of Assets should match the durations of
the corresponding Liabilities within the parameters determined by Skandia and
provided to JPMIM In writing;
ii) the convexity of the portfolio of Assets generally will be equal to or
greater than the convexity of the portfolio of corresponding Liabilities;
iii) the present value of the cash flows from such a portfolio should be
equal to or greater than the present values of the corresponding Liability cash
flows; and
(iv) JPMIM will attempt to minimize the immunization risk due to
non-parallel shifts in the yield curve.
(f) JPMIM shall make investment decisions regarding the Assets,
including but not limited to the determination of the specific issuers and
issues of securities to be held as Assets, as well as the timing of all attempts
to purchase or sell securities.
(g) Subject to the Investment Policy, JPMIM, in its discretion and
without obligation on its part to give prior notice to Skandia, shall, through
accounts with brokers or dealers that JPMIM may select buy, sell, exchange,
convert or otherwise trade in any stocks, bonds and other securities.
(h) JPMIM will provide Skandia with all reports as agreed to by the
parties. Skandia may from time to time amend such reporting requirements.
(i) JPMIM shall act in strict conformity with the Investment Advisers
Act of 1940, as the same may be amended from time to time and any other
applicable regulatory requirements applicable to JPMIM.
4. Assets
The Assets shall initially consist of those listed, if any, in Schedule A to
this Agreement plus all additions thereto, investments, reinvestments and
proceeds of the sale thereof, including, without limitations, all dividends,
interest and appreciation, if any, on investments less withdrawals from and
depreciation of, if any, the investments.
5. Valuation
In computing the market value of all securities in the separate accounts, each
security listed on any national securities exchange will be valued at the last
reported sale price on the valuation date based upon the reported consolidated
transactions on national securities exchanges. Listed stocks not traded on such
date and all unlisted stocks regularly traded in the over-the-counter market
will be valued at the mean of the latest available bid and asked price
quotations furnished to JPMIM by such source as may be deemed appropriate by
JPMIM. Any other securities will be valued in such manner as determined in good
faith by JPMIM to reflect their fair market value.
6. Standard of Care
(a) In rendering the services described herein, JPMIM shall use its
best efforts, exercise its best judgment, and act with the skill, prudence and
diligence and in a manner consistent with the standards of other highly
qualified investment managers acting in similar circumstances. JPMIM shall not
be liable for any error of judgment or for any loss suffered by Skandia in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect JPMIM against
any liability to Skandia to which JPMIM would otherwise be subject by reason of
willful misconduct or negligence on its part in the performance of its duties or
by reason of JPMIM's reckless disregard of its obligations and duties under this
Agreement.
(b) JPMIM will discharge its duties under this Agreement solely in the
interest of, and for the exclusive purpose of and benefit of, Skandia.
7. Custody of Assets
Skandia shall have sole discretion over the appointment of a custodian
of the Assets.
8. Confidential Relationship
All information and advice furnished by either party to this Agreement known to
be confidential or which the parties should have reason to know is confidential
shall be treated as such and shall not be disclosed to third parties except as
may be required by law during the term of this Agreement and subsequent to the
termination of this Agreement.
9. Trading for JPMIM's Own Account
JPMIM shall promptly notify Skandia of any purchases or sales by or on behalf of
JPMIM for its own accounts or accounts of affiliates, if such purchases or sales
are made, respectively, at about times when JPMIM is selling or purchasing such
securities for one or more of the separate accounts.
10. Allocation of Brokerage
In executing transactions for the separate accounts and selecting brokers or
dealers, JPMIM will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any transaction for
the separate accounts, JPMIM will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, JPMIM may consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended {the "Exchange Act"}) provided to the separate accounts and/or other
accounts over which JPMIM or an affiliate exercises investment discretion. JPMIM
must disclose to Skandia all such commissions or other compensation paid for
such transactions or services.
11. Compensation
In consideration of the services rendered pursuant to this Agreement, Skandia
will pay JPMIM in advance on a quarterly basis, a fee computed on the basis of
the market value of the total Assets as of the last day of the preceding quarter
in accordance with the fee schedule attached to this Agreement as Schedule B.
The fee schedule may be amended from time to time by JPMIM upon thirty (30) days
written notice to Skandia. In the event of termination of this Agreement, fees
will be prorated to the date of termination and any unearned portion of prepaid
fees will be refunded to Skandia. Notwithstanding the above, the first quarter's
fee shall be computed on the basis of the market value of the total Assets on
the date services are first rendered hereunder. If the services during the first
calendar quarter are less than a full quarter, the compensation shall be
prorated. For the purpose of determining fees payable to JPMIM, the value of any
separate account's total Assets shall be computed at the times and in the manner
specified in the Prospectus as from time to time in affect for the plan being
funded by Assets in such separate account.
12. Expenses
JPMIM will bear all expenses in connection with the performance of its services
under this Agreement, with no right of reimbursement from Skandia.
13. Representations and Warranties
(a) JPMIM represents and warrants to Skandia that it is a registered
investment adviser under the Investment Advisers Act of 1940.
(b) Skandia represents and warrants to JPMIM: (i) that is has the authority
to appoint JPMIM to manage the Assets as contemplated hereunder; and (ii) that
this Agreement is in compliance with all laws and regulations applicable to
Skandia.
14. ADV Form
Skandia acknowledges receipt of Part II of JPMIM's form ADV more than
forty-eight (48) hours prior to the date of the execution of this Agreement.
15. Termination
This Agreement may be terminated by either party without cause upon thirty (30)
days' written notice.
16. Non-Assignability
No assignment (as that term is defined in the Investment Advisers Act of 1940)
of this Agreement shall be made by JPMIM without the written consent of Skandia.
17. Notices
All notices, instructions, and advices with respect to any of the matters
contemplated by this Agreement may be deemed duly given when delivered to:
(a) American Skandia Life Assurance Corporation
Tower One, Corporate Drive
Shelton, Connecticut 06484
Attn: Michael C.S. Dismorr
Executive Vice President
(b) J. P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Attn: Paul J. Brignola
Vice President
I8. Entire Agreement: Amendment
This Agreement states the entire Agreement of the parties with respect to the
subject matter thereof and supersedes all other agreements or understandings
with respect to such subject matter, and may not be modified or amended except
by a writing signed by the parties to this Agreement.
19. Governing Law
This Agreement shall be governed by, and construed in accordance with the laws
of the State of New York.
20. Effective Date
This Agreement shall become effective on the day and year first above written.
IN WITNESS WHEREOF, Skandia and JPMIM have executed this Investment Management
Agreement on the day and year first above written.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/______________________
Michael C.S. Dismorr
Executive Vice President
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By: /s/ _______________________
Paul J. Brignola
Vice President
<PAGE>
SCHEDULE B
COMPENSATION
The fee to be paid by Skandia to JPMIM for the Investment management services
provided pursuant to the Agreement to which this Schedule is attached is as
follows:
.30 of 1% on the first $75 million of the total Assets
.25 of 1% on the next $75 million of the total Assets
.22 of 1% on the next $150 million of the total Assets
.15 of 1% on the balance
However, starting one year from the effective date of the Agreement to which
this Schedule is attached, there will be a minimum annual fee of $75,000.00.
These fees are calculated and charged at the end of each calendar quarter at
one-fourth of the applicable annual rate.
<PAGE>
SCHEDULE A
Assets at inception of the agreement (All assets listed, other than
U.S. Treasury Notes, are bonds of the listed issuers).
CUSIP # Description
912827-TJ-1 U. S. Treasury Note
912827-XC-1 U. S. Treasury Note
912827-YG-1 U. S. Treasury Note
912827-YY-2 U. S. Treasury Note
373334-CD-1 Georgia Power Co.
452092-BE-8 Illinois Power Co.
060716-AL-1 Bank of Boston Corp.
20033R-BG-3 Comdisco Inc.
201615-BT-7 Commercial Cr Group, Inc.
239753-AR-7 Dayton Hudson Corp.
320194-AE-3 First Fidelity Bancorp
345399-ZG-7 Ford Motor Credit Corp.
590188-CT-3 Merrill Lynch & Co. Inc.
783549-AX-6 Ryder System Notes
8935OL-BD-3 Transamerica Financial
960394-AK-0 Westinghouse
<PAGE>
AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT
The Investment Management Agreement by and between J.P. Morgan Investment
Management Inc. ("JPMIM") and American Skandia Life Assurance Corporation, dated
October 25, 1990 is hereby amended. The Agreement is amended by the addition of
the following:
Skandia specifically authorizes JPMIM:
(a) to purchase, sell, hold and generally deal in and with all
futures contracts (and options on such contracts), including,
without limitation, futures contracts with respect to
financial instruments and any group or index of securities (or
any interest therein based upon the value thereof), and in
connection therewith to deposit or cause to be deposited any
Assets as collateral with any agent, all on such terms and
conditions as JPMIM shall determine; and
(b) to grant, purchase, sell, exercise, permit to expire, permit
to be held in escrow, and otherwise to acquire, dispose of,
hold and generally deal in any manner with and in all forms
of options in any combination, all on such terms and
conditions as JPMIM shall determine.
Skandia agrees and understands that any such trading is subject to the
following conditions:
1. In accordance with the rules and regulations of the
Commodity Futures Trading Commission ("CFTC") and other regulations, JPMIM is
authorized to and may reveal Skandia's identity, address and estimated net worth
to any broker through which futures contracts or options are traded, and JPMIM
is authorized on Skandia's behalf to execute a Customer Application.
2. In accordance with CFTC regulations, Skandia will submit to
JPMIM a signed Risk Disclosure Statement and an Options on Futures Risk
Disclosure Statement for each broker through which futures contracts and/or
options are traded for Skandia's account. Skandia is well aware of the risks
involved in futures contracts and options trading.
3. JPMIM is authorized to select the brokerage firms through
which futures contracts and options are traded for Skandia's account and to sign
as our agent any account agreements or other documents required or deemed
appropriate by such brokers or by JPMIM. Skandia will instruct JPMIM as to
whether such accounts are to be opened on behalf of any of Skandia's separate
accounts. In connection with the opening of each account with each broker
through which futures contracts and/or options are traded for Skandia's account,
Skandia specifically authorizes JPMIM to execute on Skandia's behalf Customer,
Procedural and Safekeeping Agreements and Customer's Options Agreements. When
orders are placed with such brokers, JPMIM will issue suitable instructions (as
hereinafter defined) to Connecticut National Bank ("CNB") or other custodian
appointed by Skandia ("Custodian") regarding deliveries, receipts, acceptances
and payments.
4. Skandia understands that the CFTC requires that anyone
trading in futures contracts must advance collateral to meet initial and
maintenance margins. In addition, collateral may be required for trading in
options.
5. Skandia understands that the CFTC requires that anyone
trading in futures contracts meet a daily variation margin. Such variation
margin is satisfied in cash. JPMIM is hereby authorized to instruct CNB or any
other Custodian to deliver funds by Federal Funds Wire or other method JPMIM
chooses to an account designated by the broker to meet the daily variation
margin for Skandia's account.
Skandia will cause CNB or any other Custodian to accept JPMIM's instructions in
connection with transactions in futures contracts and options, and Skandia
agrees that CNB or any other Custodian shall be under no duty or obligation to
review or question any such instructions.
This Amendment shall become effective on December 31, 1990. Skandia and JPMIM
have executed this Amendment on December 31,1990.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/ _____________________________
Michael C.S. Dismorr
Executive Vice President
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By: /s/ _____________________________
Paul J. Brignola
Vice President
INVESTMENT MANAGEMENT AGREEMENT
This agreement, dated April 7, 1994, by and between FLEET INVESTMENT ADVISORS
INC., 100 Westminster Street, Providence, Rhode Island 02903 ("FIA") and
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Tower One Corporate Drive, Shelton,
Connecticut 06484 ("Skandia"), sets forth the terms pursuant to which FIA will
provide investment management services with respect to certain assets to be
maintained by Skandia as described below.
1. Investment Description.
(a) Skandia desires to employ certain assets ("Assets") to fund the
liabilities it incurs under certain annuity plans it issues ("Liabilities").
These Assets may be maintained in one or more non-unitized separate accounts
established by Skandia under Title 38, Section 38-145a of the Connecticut
General Statutes. The Liabilities may be created under group or individual
contracts. The annuity plans may be offered and issued by Skandia pursuant to
one or more registration statements under the Securities Act of 1933.
(b) Skandia desires to invest and reinvest the Assets of each separate
account in accordance with:
(i) the Investment Policy (attached as Exhibit A) which Skandia has
provided to FIA as may be amended from time to time by Skandia and provided in
writing to FIA; and
(ii) any prospectus as may be in effect from time to time in relation to
sales of annuities to be funded by the Assets in such separate account. Skandia
will provide copies of such prospectus as may from time to time be amended.
(c) Skandia's goal is to achieve rates of return for the invested
Assets that will allow Skandia to recover its expenses over the time periods
assumed in the pricing of each annuity plan, obtain a profit and meet its
Liabilities, including supporting the "Rates" guaranteed under such plan or
plans. As to deferred annuities that are in their accumulation phase, "Rates"
means any interest rate guaranteed to be credited from time to time for the
account of contract owners or certificates holders. As to immediate annuities or
deferred annuities in their payout phase, "Rates" means both periodic payments
under such annuities as well as any guaranteed surrender values. Skandia
understands and agrees that FIA can give no assurance that Skandia's goal will
be achieved.
2. Appointment.
Skandia hereby appoints FIA to manage the Assets. Skandia wishes to
benefit from FIA's investment expertise, investment analysis, strategies and
recommendations. FIA accepts such appointment pursuant to the terms of this
Agreement. Skandia retains the right to appoint other investment managers with
respect to any of its assets other than designated Assets.
3. Duties of the Parties.
(a) FIA shall act in strict conformity with the Investment Policy
provided by Skandia, and will provide notice to Skandia in the event of any
occurrence which would prevent FIA from acting in strict conformity with such
Investment Policy. The timeliness of any such notice shall be in accordance with
the standard of care described in Paragraph 6 of this agreement.
(b) Skandia will determine Rates and reserve levels to be maintained by
Skandia in relation to the default risk of the Assets ("Reserves") for the
annuity plans. Skandia will consult frequently with FIA regarding the rates of
return obtainable from various possible portfolios of investment of the Assets,
the degree to which such possible portfolios of investments match the
corresponding Liabilities, and the levels of risk inherent in such possible
portfolios. It is also understood that Skandia will rely in large part on the
information and analysis provided by FIA regarding such possible portfolios in
determining the Rates and Reserves, and that provision of such information and
analysis is subject to the standard of care described in Paragraph 6.
(c) Skandia will inform FIA on at least a weekly basis of:
(i) changes in the Liabilities under any plan and any changes in the
amounts available for investment;
(ii)the durations of the Liabilities under each plan;
(iii) the rates of return assumed by Skandia in the establishment of any
Liabilities;
(iv)whether the immunized portfolio structure, as defined below, is to be
monitored separately for each plan or for any aggregation of plans; and
(v) any other information necessary from Skandia for FIA to meets its
duties and render the services to be provided pursuant to this Agreement.
(d) FIA will supervise the investment of the Assets and will conduct a
continuing program of evaluation of both the quality of the investments and the
degree to which an immunized portfolio structure(s) is maintained.
(e) It is understood that immunized portfolio structure means that:
(i) the durations of a portfolio of Assets should match the durations of
the corresponding Liabilities within the parameters determined by Skandia and
provided to FIA in writing;
(ii)the convexity of the portfolio of Assets generally will be equal to or
greater than the convexity of the portfolio of corresponding Liabilities;
(iii) the present value of the cash flows from such a portfolio should be
equal to or greater than the present values of the corresponding Liability cash
flows; and
(iv)FIA will attempt to minimize the immunization risk due to non-parallel
shifts in the yield curve.
(f) FIA shall make investment decisions regarding the Assets, including
but not limited to the determination of the specific issuers and issues of
securities to be held as Assets, as well as the timing of all attempts to
purchase or sell securities.
(g) Subject to the Investment Policy, FIA, in its discretion and
without obligation on its part to give prior notice to Skandia, shall, through
accounts with brokers or dealers that FIA amy select, buy, sell, exchange,
convert or otherwise trade in any stocks, bonds and other securities.
(h) FIA will provide Skandia with all reports as agreed to by the
parties. Skandia may from time to time amend such reporting requirements.
(i) FIA shall act in strict conformity with the Investment Advisers Act
of 1940, as the same may be amended from time to time, and any other applicable
regulatory requirements applicable to FIA.
4. Assets.
The Assets shall initially consist of those listed, if any, in Exhibit
B to this Agreement plus all additions thereto, investments, reinvestments and
proceeds of the sale thereof, including, without limitation, all dividends,
interest and appreciation, if any, on investments less any withdrawals from and
depreciations of the investments.
5. Valuation.
In computing the market value of all securities in the separate
accounts, each security listed on any national securities exchange will be
valued at the last reported sale price on the valuation date based upon the
reported consolidated transactions on national securities exchanges. Listed
stocks not traded on such date and all unlisted stocks regularly traded in the
over-the-counter market will be valued at the mean of the latest available bid
and asked price quotations furnished to FIA by such source as may be deemed
appropriate by FIA. Any other securities will be valued in such manner as
determined in good faith by FIA to reflect their fair market value.
6. Standard of Care.
(a) In rendering the services described herein, FIA shall use its best
efforts, exercise its best judgment, and act with the skill, prudence and
diligence and in a manner consistent with the standards of other highly
qualified investment managers acting in similar circumstances. FIA shall not be
liable for any error of judgment or for any loss suffered by Skandia in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect FIA against any
liability to Skandia to which FIA would otherwise be subject by reason of
willful misconduct or negligence on its part in the performance of its duties or
by reason of FIA' reckless disregard of its obligations and duties under this
Agreement.
(b) FIA will discharge its duties under this Agreement solely in the
interest of, and for the exclusive purpose of and benefit of, Skandia.
7. Custody of Assets.
Skandia shall have sole discretion over the appointment of a custodian
of the Assets.
8. Confidential Relationship.
All information and advice furnished by either party to this Agreement
known to be confidential or which the parties should have reason to know is
confidential shall be treated as such and shall not be disclosed to third
parties except as may be required by law during the term of this Agreement and
subsequent to the termination of the Agreement.
9. Allocation of Brokerage.
In executing transactions for the separate accounts and selecting
brokers or dealers, FIA will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any transaction for
the separate accounts, FIA will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, FIA may consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended
{the "Exchange Act"}) provided to the separate accounts and/or other accounts
over which FIA or an affiliate exercises investment discretion. FIA must
disclose, on an annual basis, to Skandia all such commissions or other
compensation paid for such transactions or services.
10. Compensation.
In consideration of the services rendered pursuant to this Agreement,
Skandia will pay FIA in advance on a quarterly basis, a fee computed on the
basis of the market value of the total Assets as of the last day of the
preceding quarter in accordance with the fee schedule attached to this Agreement
as Exhibit C. The fee schedule may be amended from time to time by FIA upon
thirty (30) days written notice to Skandia. In the event of termination of this
Agreement, fees will be prorated to the date of termination and any unearned
portion of prepaid fees will be refunded to Skandia. Notwithstanding the above,
the first quarter's fees shall be computed on the basis of the market value of
the total Assets on the date services are first rendered hereunder. If services
are provided during the first calendar quarter for a period shorter than a full
quarter, the compensation shall be prorated. For the purpose of determining fees
payable to FIA, the value of any separate account's total Assets shall be
computed at the times and in the manner specified in the Prospectus as from time
to time in effect for the plan being funded by Assets in such separate account.
11. Expenses.
FIA will bear all expenses in connection with the performance of its
services under this Agreement, with no right of reimbursement from Skandia.
12. Representations and Warranties.
(a) FIA represent and warrants to Skandia that it is a registered
investment adviser under the Investment Advisers Act of 1940.
(b) Skandia represents and warrants to FIA: (i) that it has the
authority to appoint FIA to manage the Assets as contemplated hereunder; and
(ii) that this Agreement is in compliance with all laws and regulations
applicable to Skandia.
13. Form ADV.
Skandia acknowledges receipt of Part II of FIA' form ADV more than
forty-eight (48) hours prior to the date of the execution of this Agreement.
14. Termination.
This Agreement may be terminated by either party without cause upon
thirty (30) days' written notice.
15. Non-Assignability.
No assignment (as that term is defined in the Investment Advisers Act
of 1940) of this Agreement shall be made by FIA without the written consent of
Skandia.
16. Notices.
All notices, instructions, and advices with respect to any of the
matters contemplated by this Agreement may be deemed duly given when delivered
to:
(a) American Skandia Life Assurance Corporation
Attention: Bayard Tracey, Senior Vice President
Tower One, Corporate Drive
Shelton, Connecticut 06484
(b) Fleet Investment Advisors Inc.
Attention: David Lindsay, Senior Vice President
75 State Street
Boston, MA 02106
17. Entire Agreement: Amendment.
This Agreement states the entire Agreement of the parties with respect
to the subject matter thereof and supersedes all other agreements or
understandings with respect to such subject matter, and may not be modified or
amended except by a writing signed by the parties to this Agreement.
18. Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Connecticut.
19. Effective Date.
This Agreement shall become effective on the day and year first above
written.
IN WITNESS WHEREOF, Skandia and FIA have executed this Investment
Management Agreement on the day and year first above written.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: ______________________________________
/s/ Bayard Tracy
Its Senior Vice President
FLEET INVESTMENT ADVISORS INC.
By: ______________________________________
/s/ Harold A. Mackinney Jr.
<PAGE>
EXHIBIT A
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INVESTMENT POLICY FOR THE MARKET VALUE
ADJUSTED ANNUITY SEPARATE ACCOUNT
A. Investment Objectives
The investment objectives of the separate account assets associated with the
Market Value Adjusted Annuity product managed by FIA (the "Funds") are within
the following guidelines, to:
1. provide a target total rate of return for the Funds of an amount above
the then current return on United States Securities, such target total rate to
be determined by periodic consultations between Skandia and FIA,
2. provide a rate to the holders of certain annuity plans (the "Customers")
issued by Skandia, competitive with similar products;
3. enable Skandia to meet its primary commitment to the Customers (a fixed
sum at maturity); and
4. minimize defaults as defined in paragraph B.5. below.
B. Guidelines Applicable to Investment of Assets
The applicable guidelines for the investment of the Funds include the
following:
1. FIA will manage the Funds in accordance with the requirements of the
appropriate United States of America ("U.S."), and applicable state regulatory
authorities ("Regulations"). Skandia assumes responsibility to furnish FIA with
all other regulations and to furnish, in a timely manner, any amendments or
changes made to such other regulations. FIA may rely solely on the applicability
and accuracy of the regulations furnished by Skandia;
2. FIA shall manage the Funds so as to maintain, within a reasonable
tolerance, an immunized portfolio structure (asset/liability duration match) at
all times;
3. subject to subparagraphs 1 through 2, above, FIA may invest the Funds in cash
(U.S. Dollars), money market instruments (as defined in paragraph (a) below),
U.S. Government obligations (as defined in paragraph (b) below), municipal
obligations, short, intermediate and long-term corporate obligations, Eurodollar
corporate obligations, futures (including, but not limited to, Treasury futures,
and index futures), and options on futures, on fixed income securities and on
indices thereof. Futures and options will not be utilized for speculative
purposes.
a) Investments in money market instruments shall include banker's
acceptances, certificates of deposit and Eurodollar certificates of deposit of
banks rated B/C by Keefe, Bruyette and double-A by Standard & Poor's and
Moody's, and that have a minimum of one billion dollars in assets, commercial
paper and letter-of-credit commercial paper rated Al-P1 by Standard & Poor's and
Moody's, and short-term obligations of the U.S. Government and its agencies.
b) Investments in obligations of the U.S. Government, its agencies and
instrumentalities include obligations of the Government National Mortgage
Association, the Federal Home Loan Banks, the Federal National Mortgage
Association, and the Student Loan Marketing Association the Federal Home Loan
Mortgage Corporation, and the Resolution Trust Corporation, as well as any other
entity whose debt instruments are full faith and credit obligations of the U.S.
Government. Obligations of the U.S. Government also include receipts issued by
the U.S. Treasury that evidence ownership in either the future interest payments
or the future principal payments on underlying U.S. Treasury securities. FIA, in
its judgment, shall determine acceptable maturities for the U.S.
Government obligations it purchases for the Fund;
4. FIA shall only purchase fixed income securities that are in one of the top
four generic lettered rating classifications as established by either Standard &
Poor's or Moody's Investors Service, Inc., except for the Federal agencies
listed in 3.b., above. In addition:
a) FIA may or may not sell a fixed income security that falls below one of
these top four generic lettered rating classifications subsequent to purchase,
and
b) investments in fixed income securities shall not exceed 25% of the
market value of the Assets of the Fund in any one industry and shall be
restricted to 10% of Assets of the Fund investments in any one issuer at the
time of purchase (percentages are calculated with respect to purchase cost);
5. FIA will sell from the Fund, and treat as a default, any fixed income
security that declines in market value by 25% or more (in relation to its
purchase cost), independent of general interest rate movements.
<PAGE>
EXHIBIT B
INITIAL ASSETS
Units SMV(ml) Security Description Cusip Coupon
3385 3.385 Cash USD 3.390
483 0.492 Select Auto Loan 91-2 81617HAB 7.650
1000 1.039 Ryder System Inc. 783549AX 9.200
608 0.635 FNMA 8 1/2% 15s 8.500
1000 1.133 Comdisco Inc Mtn 20033RBG 9.990
1000 1.181 Chrysler Corp 171196AM 10.950
1000 1.160 Florida Nat'l Bank 341018AB 9.875
1000 1.146 Chemical Bank New York 163798AH 9.750
1000 1.193 Security Pacific Mtn 81482EAG 10.300
1545 1.446 FNMA 6 1/2% 30N 99TBC135 6.500
1500 1.439 GNMA 7 % 30N 7.000
495 0.711 US Treasury Bonds 912810DQ 12.000
1000 1.178 Ford Capital BV 345220AB 9.500
1000 0.873 US West Communications 912920AC 6.875
Maturity Qual Sect Type Price Yield Parallel
10MAY94 AAA CS L 100.000 3.390 0.09
15JUL96 AAA Auto E 101.375 5.836 0.73
15MAR98 BAA I O 103.500 5.388 0.90
01JUL03 AGCY FN15 O 103.750 6.386 1.05
30JUN97 BAA I N 109.545 6.671 2.69
01AUG17 BAA I Os 116.285 6.882 3.74
15MAY99 BAA B N 112.297 6.975 3.93
15JUN99 A B N 111.697 7.024 4.02
15MAY01 A B N 115.906 7.385 5.03
01MAR24 AGCY FN30 O 93.063 8.001 5.32
01SEP23 AGCY GN30 O 95.344 8.017 6.49
15MAY05 TREA TR N 139.125 6.902 6.70
01JUN10 A I N 114.608 7.884 8.49
15SEP33 AA TEL O 87.000 7.959 11.32
Twist Concave Convex
0.15 0.08 0.00
0.53 0.11 0.01
0.70 0.12 -0.07
0.86 0.93 -1.19
1.08 1.21 0.09
1.24 1.29 -0.92
1.00 2.55 0.20
1.00 2.64 0.21
0.86 3.94 0.33
0.83 3.38 0.42
0.73 3.53 0.47
0.68 5.93 0.63
0.58 7.19 1.07
0.60 5.55 1.36
Such Assets shall also consist of those assets allocated to such non-unitized
separate accounts in support of annuity contracts issued pursuant to Skandia's
Registration Statement No. 33-67614 (the "Galaxy Annuity") on Form S-1, or other
Skandia Registrations of the Galaxy Annuity. At such time as the Assets under
management of FIA reach or exceed $70 million, Skandia in the exercise of its
sole discretion, may from time to time remove the Initial Assets, or any part
thereof, from FIA's management under this Agreement.
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EXHIBIT C
FEES
The fee to be paid by Skandia to FIA for the investment management services
provided in accordance with the Agreement to which this schedule is attached is
as follows:
.25% of 1% on the first $150 million of the total Assets
.22% of 1% on the next $150 million of the total Assets
.15% of 1% on the balance
These fees are calculated and charged at the end of each calendar quarter at
one-fourth of the applicable annual rate.
