Supplement to Prospectus Dated May 1, 1998
Supplement dated December 31, 1998
This Supplement should be retained with the current Prospectus for your variable
annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). If you do not have a current prospectus, please contact
American Skandia at 1-800-SKANDIA.
A. CHANGES TO VARIABLE INVESTMENT OPTIONS
1. Effective December 31, 1998 OppenheimerFunds, Inc. will be the new
portfolio sub-advisor for the Robertson Stephens Value + Growth portfolio.
In connection with this change the portfolio's name is changed to "AST
Oppenheimer Large-Cap Growth."
2. Effective January 1, 1999 Janus Capital Corporation will be the new
portfolio sub-advisor for the Founders Capital Appreciation portfolio. In
connection with this change the portfolio's name is changed to "AST Janus
Small-Cap Growth."
3. Effective January 4, 1999, the AST Kemper Small-Cap Growth portfolio of
American Skandia Trust ("AST") will be available as a variable investment
option under your Annuity.
The following information is added to the table entitled "Underlying Mutual Fund
Portfolio Annual Expenses (as a percentage of average net assets)":
<TABLE>
<CAPTION>
Management Management Other Other Total Annual Total Annual
Fee Fee Expenses Expenses Expenses Expenses
after any without any after any without any after any without any
applicable applicable applicable applicable applicable applicable
reimbursement reimbursement reimbursement reimbursement reimbursement reimbursement
- ------------------------------------------------------------------------------------------------------------------------------------
American Skandia Trust
<S> <C> <C> <C> <C> <C> <C>
AST Kemper Small-Cap Growth1 N/A 0.95% 0.40% 0.60% 1.35% 1.55%
AST Oppenheimer Large-Cap Growth2 N/A 0.90% N/A 0.23% N/A 1.13%
AST Janus Small-Cap Growth3 N/A 0.90% N/A 0.23% N/A 1.13%
</TABLE>
(1) This Portfolio had not commenced operations as of the date of this
Prospectus. "Other expenses" shown are based on estimated amounts for the
fiscal year ending December 31, 1999.
(2) Prior to December 31, 1998, the Investment Manager had engaged Robertson,
Stephens & Company Investment Management, L.P. as Sub-advisor for the
Portfolio, and the total Investment Management fee was at the annual rate
of 1.00% of the average daily net assets of the Portfolio. As of December
31, 1998, the Investment Manager engaged OppenheimerFunds, Inc. as
Sub-advisor for the Portfolio, and the Investment Management fee is
payable at the annual rate of 0.90% of the first $1 billion of the average
daily net assets of the Portfolio, plus .85% of the Portfolio's average
daily net assets in excess of $1 billion. The Management Fee in the above
chart reflects the current Investment Management fee payable to the
Investment Manager.
(3) Prior to January 1, 1999, the Investment Manager had engaged Founders
Asset Management, LLC as Sub-advisor for the Portfolio (formerly the
Founders Capital Appreciation portfolios).
The following information is added to the table entitled "Expense Examples":
Examples (amounts shown are rounded to the nearest dollar)
ASAP (12/98) VASUPP199
<PAGE>
If you surrender your Annuity at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
After:
Sub-accounts 1 yr. 3 yrs.5 yrs. 10 yrs.
AST Kemper Small-Cap Growth 104 148 190 317
AST Oppenheimer Large-Cap Growth 102 142 179 294
AST Janus Small-Cap Growth 102 142 179 294
If you do not surrender your Annuity at the end of the applicable time period or
begin taking annuity payments at such time, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
After:
Sub-accounts 1 yr. 3 yrs.5 yrs. 10 yrs.
- ------------
AST Kemper Small-Cap Growth 29 88 150 317
AST Oppenheimer Large-Cap Growth 27 82 139 294
AST Janus Small-Cap Growth 27 82 139 294
<PAGE>
The following is added to the section entitled "INVESTMENT OPTIONS - Underlying
Mutual Fund: American Skandia Trust":
Sub-account Underlying Mutual Fund Portfolio
AST Kemper Small-Cap Growth AST Kemper Small-Cap Growth
AST Oppenheimer Large-Cap Growth AST Oppenheimer Large-Cap Growth
AST Janus Small-Cap Growth AST Janus Small-Cap Growth
4. Effective December 31, 1998, the name of the Twentieth Century Strategic
Balanced portfolio of AST and the Twentieth Century International Growth
portfolio of AST are changed to AST American Century Strategic Balanced
portfolio and AST American Century International Growth portfolio,
respectively. The names of the respective sub-accounts are changed
accordingly. The new portfolio and sub-account names will appear on all
statements and reports for periods beginning on or after January 4, 1999.
Effective December 31, 1998, each portfolio of AST will have the prefix
"AST" added to the portfolio name. The AST prefix will appear on the
effected portfolio(s) on all statements and reports for periods beginning
on or after January 4, 1999. The names of the respective sub-accounts are
changed accordingly.
Effective December 31, 1998, the name of the Neuberger&Berman Mid-Cap Value
portfolio of AST and the Neuberger&Berman Mid-Cap Growth portfolio of AST
are changed to AST Neuberger Berman Mid-Cap Value portfolio and AST
Neuberger Berman Mid-Cap Growth portfolio, respectively. The names of the
respective sub-accounts are changed accordingly. The new portfolio and
sub-account names will appear on all statements and reports for periods
beginning on or after January 4, 1999.
B. SHORT DESCRIPTIONS - APPENDIX B
The following short descriptions of the AST Kemper Small-Cap Growth Portfolio,
AST Oppenheimer Large-Cap Growth Portfolio and the AST Janus Small-Cap Growth
Portfolio are to be added:
AST Janus Small-Cap Growth Portfolio:
The investment objective of the Portfolio is capital appreciation. The Portfolio
pursues its objective by normally investing at least 65% of its total assets in
securities issued by small-sized companies. Small-sized companies are those that
have market capitalizations of less than $1.5 billion or annual gross revenues
of less than $500 million. Companies whose capitalization or revenues fall
outside these ranges after the Portfolio's initial purchase continue to be
considered small-sized for the purposes of this policy. The Portfolio may also
invest in stocks of larger companies with potential for capital appreciation.
The Portfolio will invest substantially all of its assets in common stocks to
the extent the Sub-advisor believes that the relevant market environment favors
profitable investing in those securities. The Sub-advisor generally takes a
"bottom up" approach to building the Portfolio. In other words, it seeks to
identify individual companies with earnings growth potential that may not be
recognized by the market at large. Although themes may emerge in the Portfolio,
securities are generally selected without regard to any defined industry sector
or other similarly defined selection procedure. Realization of income is not a
significant investment consideration.
Because the Portfolio invests primarily in common stocks, the fundamental risk
of investing in the Portfolio is that the value of the stocks it holds might
decrease. Smaller or newer issuers, such as those in which the Portfolio
invests, are more likely to realize more substantial growth as well as suffer
more significant losses than larger or more established issuers. Investments in
such companies can be both more volatile and more speculative. The Portfolio is
designed for long-term investors who seek capital appreciation and who can
tolerate the greater risks associated with investments in foreign and domestic
common stocks. The Portfolio is not designed as a short-term trading vehicle and
should not be relied upon for short-term financial needs. The Sub-advisor tries
to reduce the risk of the Portfolio through diversification of the Portfolio's
assets, so that the effect of any single holding on its overall portfolio value
is reduced. In addition, the Portfolio will not invest 25% or more of its total
assets in any particular industry (excluding U.S. government securities).
AST Oppenheimer Large-Cap Growth Portfolio:
The investment objective of the Portfolio is to seek capital appreciation. The
Portfolio does not invest to seek current income. The Fund seeks its investment
objective by emphasizing investment in common stocks issued by established
large-capitalization "growth companies" that, in the opinion of the Sub-advisor,
have above average earnings prospects but are selling at below-normal
valuations. The Portfolio normally will invest at least 65% of its total assets
in securities of issuers with market capitalizations of more than $3 billion,
and will maintain a median market capitalization of more than $5 billion.
"Growth companies" may be developing new products or services, or expanding into
new markets for their products. While they may have what the Sub-advisor
believes to be favorable prospects for the long-term, they normally retain a
large part of their earnings for research, development and investment in capital
assets. Therefore, they tend not to emphasize the payment of dividends.
The Portfolio is designed for investors who are investing for the long term. It
is not intended for investors seeking assured income or preservation of capital.
The Portfolio attempts to limit market risks by diversifying its investments,
that is, by not holding a substantial amount of the stock of any one company and
by not investing too great a percentage of the Portfolio's assets in any one
company.
<PAGE>
AST Kemper Small-Cap Growth Portfolio:
The investment objective of the Portfolio is to seek maximum appreciation of
investors' capital from a portfolio primarily of growth stocks of smaller
companies. The Portfolio's investment portfolio will normally consist primarily
of common stocks and securities convertible into or exchangeable for common
stocks, including warrants and rights. Current income will not be a significant
factor. The Portfolio is designed as a long-term investment involving
substantial financial risk commensurate with potential substantial gains.
Because many of the securities in the Portfolio may be considered speculative in
nature by traditional investment standards, substantially greater than average
market volatility and investment risk may be involved.
The Portfolio seeks attractive areas for investment opportunity arising from
such factors as technological advances, new marketing methods, and changes in
the economy and population. Currently, the Sub-advisor believes that such
investment opportunities may be found among the following: (a) companies engaged
in high technology fields such as electronics, medical technology and computer
software and specialty retailing; (b) companies having a significantly improved
earnings outlook as the result of a changed economic environment, acquisitions,
mergers, new management, changed corporate strategy or product innovation; (c)
companies supplying new or rapidly growing services to consumers and businesses
in such fields as automation, data processing, communications, and marketing and
finance; and (d) companies having innovative concepts or ideas.
In addition to investing in common stocks, the Portfolio may also invest to a
limited degree in preferred stocks and debt securities when they are believed by
the Sub-advisor to offer opportunities for capital growth.
At least 65% of the Portfolio's total assets normally will be invested in the
equity securities of smaller companies, i.e., those having a market
capitalization of $1.5 billion or less at the time of investment, many of which
would be in the early stages of their life cycle. Investments in securities of
companies with small market capitalizations are generally considered to offer
greater opportunity for appreciation and to involve greater risk of depreciation
than securities of larger companies. Because the securities of small-cap
companies are not as broadly traded as those of companies with larger market
capitalizations, they are often subject to wider and more abrupt fluctuations in
market price.
The Portfolio intends to invest primarily in growth stocks. Growth stocks are
stocks of companies whose earnings per share are expected by the Sub-advisor to
grow faster than the market average. Growth stocks tend to trade at higher price
to earnings (P/E) ratios than the general market, but the Sub-advisor believes
that the potential of the stocks in which the Portfolio invests for above
average earnings more than justifies their price.
The Portfolio invests primarily in securities that are publicly traded in the
United States, but may invest up to 25% of its total assets in foreign
securities that are traded principally in securities markets outside the U.S.
C. NOTICE OF SUBSTITUTION
American Skandia has filed an application with the Securities and Exchange
Commission ("SEC") to substitute the following "Replaced Portfolio/Sub-Account"
with the "Substitute Portfolio/Sub-Account".
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
REPLACED PORTFOLIO/SUB-ACCOUNT SUBSTITUTE PORTFOLIO/SUB-ACCOUNT
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
<S> <C>
Partners Portfolio of Neuberger&Berman Advisers Management AST Neuberger Berman Mid-Cap Value Portfolio of American
Trust/AMT Partners Sub-account Skandia Trust/AST NB Mid-Cap Value Sub-account
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
Alger Small Capitalization Portfolio of The Alger American AST Kemper Small Cap Growth portfolio of American Skandia
Fund/AA Small Capitalization Sub-account Trust/AST Kemper Small Cap Growth Sub-account
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
Stein Roe Venture Portfolio of American Skandia Trust/Stein Roe AST T. Rowe Price Small Company Value Portfolio of
Venture Sub-account American Skandia Trust/AST T. Rowe Price Small Company
Value Sub-account
- ----------------------------------------------------------------- ------ -----------------------------------------------------------
</TABLE>
In the application to the SEC, American Skandia is seeking permission to allow
transfers from the Replaced Portfolio/Sub-account to any other investment
options available under the Annuity for a period of 60 days prior to any
substitution without the imposition of any transfer fee. Under the proposed
substitution, such transfers would not count in determining whether the maximum
number of free transfers have been exceeded. Furthermore, under the proposed
substitution, the transfer of Account Value from the Replaced
Portfolio/Sub-account to the Substitute Portfolio/Sub-account would likewise not
be subject to a transfer fee nor count in determining whether the maximum number
of free transfers have been exceeded. The proposed substitution will not affect
your rights or our obligations under the Annuity. American Skandia will bear any
expenses in connection with the proposed substitution.
<PAGE>
In anticipation of the proposed substitution, the Replaced
Portfolio/Sub-accounts will no longer be offered as investment options in
Annuities issued on or after January 4, 1999. Contract Owners with Account Value
allocated to the Replaced Portfolio/Sub-account on January 4, 1999 may remain in
the Sub-Account until the earliest to occur of: (1) the date they transfer
Account Value out of the Replaced Portfolio/Sub-account; or (2) the date the
proposed substitution is completed. Contract Owners who have a dollar-cost
averaging, bank drafting, rebalancing or asset allocation program in effect as
of January 4, 1999, that includes the Replaced Portfolio(s)/Sub-account(s), will
be able to continue such pre-scheduled transactions until the date the proposed
substitution is completed.
D. APPENDIX C - PRIOR CONTRACT
The new variable investment options are available to the PSA Contracts described
herein. The following information is added to the table entitled "Expense
Examples":
Examples
(amounts shown are rounded to the nearest dollar)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
AST Kemper Small-Cap Growth 99 139 181 318
AST Oppenheimer Large-Cap Growth 97 132 170 296
AST Janus Small-Cap Growth 97 132 170 296
</TABLE>
If you do not surrender your contract you would pay the following expenses on a
$1,000 investment, assuming 5% annual return on assets: -
<TABLE>
<CAPTION>
Sub-accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
AST Kemper Small-Cap Growth 29 89 151 318
AST Oppenheimer Large-Cap Growth 27 82 140 296
AST Janus Small-Cap Growth 27 82 140 296
</TABLE>
