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. NOTICE OF SUBSTITUTION
American Skandia has filed an application with the Securities and Exchange
Commission ("SEC") to substitute the following "Replaced Portfolio/Sub-Account"
of the Alliance Variable Products Series Fund, Inc. with the "Substitute
Portfolio/Sub-Account" of American Skandia Trust.
<TABLE>
<CAPTION>
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REPLACED PORTFOLIO/SUB-ACCOUNT OF ALLIANCE VARIABLE SUBSTITUTE PORTFOLIO/SUB-ACCOUNT OF AMERICAN
PRODUCTS SERIES FUND, INC. SKANDIA TRUST
-------------------------------------------------------- ------ -----------------------------------------------------
<S> <C> <C> <C>
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U.S. Government/High Grade Securities portfolio AST PIMCO Total Return Bond portfolio
AVP U.S. Government/High Grade Securities sub-account AST PIMCO Total Return Bond sub-account
-------------------------------------------------------- ------ -----------------------------------------------------
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Total Return portfolio AST T. Rowe Price Asset Allocation portfolio
AVP Total Return sub-account AST T. Rowe Price Asset Allocation sub-account
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International portfolio AST T. Rowe Price International Equity portfolio
AVP Total Return sub-account AST T. Rowe Price International Equity sub-account
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Short-Term Multi-Market portfolio AST PIMCO Limited Maturity Bond portfolio
AVP Short-Term Multi-Market sub-account AST PIMCO Limited Maturity Bond sub-account
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Growth and Income portfolio AST Lord Abbett Growth and Income portfolio
AVP Growth and Income sub-account AST Lord Abbett Growth and Income sub-account
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Premier Growth portfolio AST JanCap Growth portfolio
AVP Premier Growth sub-account AST JanCap Growth sub-account
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Money Market portfolio AST Money Market portfolio
AVP Money Market sub-account AST Money Market sub-account
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North American Government Income portfolio AST T. Rowe Price International Bond portfolio
AVP North American Government Income sub-account AST T. Rowe Price International Bond sub-account
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Global Dollar Government portfolio AST T. Rowe Price International Bond portfolio
AVP Global Dollar Government sub-account AST T. Rowe Price International Bond sub-account
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Utility Income portfolio AST Lord Abbett Growth and Income portfolio
AVP Utility Income sub-account AST Lord Abbett Growth and Income sub-account
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Global Bond portfolio AST T. Rowe Price International Bond portfolio
AVP Global Bond sub-account AST T. Rowe Price International Bond sub-account
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Growth Investors portfolio AST T. Rowe Price Asset Allocation portfolio
AVP Growth Investors sub-account AST T. Rowe Price Asset Allocation sub-account
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Conservative Investors portfolio AST T. Rowe Price Asset Allocation portfolio
AVP Conservative Investors sub-account AST T. Rowe Price Asset Allocation sub-account
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Growth portfolio AST JanCap Growth portfolio
AVP Growth sub-account sub-account AST JanCap Growth sub-account
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Worldwide Privatization portfolio AST Putnam International Equity portfolio
AVP Worldwide Privatization sub-account AST Putnam International Equity sub-account
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</TABLE>
In the application to the SEC, American Skandia is seeking permission to allow
transfers from the Replaced Portfolio/Sub-account to the Substitute
Portfolio/Sub-account or any other portfolio of American Skandia Trust offered
as a Sub-account 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.
Alliance (12/98)
B. NEW PORTFOLIOS/SUB-ACCOUNTS
In connection with the proposed substitution outlined above, effective as of
February 1, 1999, American Skandia will be making all of American Skandia Trust
portfolios available as sub-accounts under your Annuity. Additional information
will be provided about each of the substitute portfolios before the substitution
date.
Below is a table of the Underlying Mutual Fund Portfolio Annual Expenses for the
portfolios of the American Skandia Trust that will be available as of February
1, 1999. Unless otherwise indicated, the expenses shown below are for the year
ending December 31, 1998. "N/A" indicates that no entity has agreed to reimburse
the particular expense indicated. The expenses of the 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
on both a reimbursed and not reimbursed basis, if applicable. See the prospectus
or statement of additional information of the underlying mutual fund for
details.
<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
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PORTFOLIOS
<S> <C> <C> <C> <C> <C> <C>
AST Lord Abbett Growth and Income N/A 0.75% N/A 0.18% N/A 0.93%
AST JanCap Growth 0.88% 0.90% N/A 0.18% 1.06% 1.08%
AST Money Market 0.45% 0.50% 0.15% 0.19% 0.60% 0.69%
AST T. Rowe Price Asset Allocation N/A 0.85% N/A 0.28% N/A 1.13%
AST T. Rowe Price International Equity N/A 1.00% N/A 0.26% N/A 1.26%
AST T. Rowe Price International Bond N/A 0.80% N/A 0.31% N/A 1.11%
AST PIMCO Total Return Bond N/A 0.65% N/A 0.21% N/A 0.86%
AST PIMCO Limited Maturity Bond N/A 0.65% N/A 0.23% N/A 0.88%
AST Putnam International Equity N/A 0.88% N/A 0.27% N/A 1.15%
OTHER AVAILABLE PORTFOLIOS OF AMERICAN SKANDIA TRUST
AST Lord Abbett Small Cap Value(1) N/A 0.95% N/A 0.37% N/A 1.32%
AST Janus Overseas Growth N/A 1.00% N/A 0.35% N/A 1.35%
AST Janus Small-Cap Growth N/A 0.90% N/A 0.23% N/A 1.13%
AST Federated High Yield N/A 0.75% N/A 0.23% N/A 0.98%
AST T. Rowe Price Natural Resources N/A 0.90% N/A 0.26% N/A 1.16%
AST T. Rowe Price Small Company Value N/A 0.90% N/A 0.26% N/A 1.16%
AST Founders Passport N/A 1.00% N/A 0.35% N/A 1.35%
AST INVESCO Equity Income N/A 0.75% N/A 0.20% N/A 0.95%
AST American Century International Growth N/A 1.00% N/A 0.75% N/A 1.75%
AST American Century Strategic Balanced N/A 0.85% 0.40% 0.50% 1.25% 1.35%
AST Putnam Value Growth & Income N/A 0.75% N/A 0.48% N/A 1.23%
AST Putnam Balanced N/A 0.74% N/A 0.29% N/A 1.03%
AST Cohen & Steers Realty(1) N/A 1.00% N/A 0.29% N/A 1.29%
AST Bankers Trust Enhanced 500(1) N/A 0.60% 0.20% 0.29% 0.80% 0.89%
AST Marsico Capital Growth(2) N/A 0.90% N/A 0.21% N/A 1.11%
AST Neuberger Berman Mid-Cap Value(3) N/A 0.90% N/A 0.25% N/A 1.15%
AST Neuberger Berman Mid-Cap Growth(4) N/A 0.90% N/A 0.24% N/A 1.14%
AST Oppenheimer Large-Cap Growth(5) N/A 0.90% N/A 0.23% N/A 1.13%
AST Kemper Small-Cap Growth(6) N/A 0.95% 0.40% 0.60% 1.35% 1.55%
</TABLE>
(1) These Portfolios commenced operations in January 1998. "Other Expenses"
shown are based on estimated amounts for the fiscal year ending December 31,
1998.
(2) This Portfolio commenced operations in December 1997. "Other Expenses" shown
are based on estimated amounts for the fiscal year ending December 31, 1998.
(3) Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio, and the total
Investment Management fee was at the annual rate of .75% of the first $50
million of the average daily net assets of the Portfolio, plus .60% of the
Portfolio's average daily net assets in excess of $50 million. As of May 1,
1998, the Investment Manager engaged Neuberger Berman Management
Incorporated as Sub-advisor for the Portfolio, and the Investment Management
fee is payable at the annual rate of 0.90% of the average daily net assets
of the Portfolio. The Management Fee in the above chart reflects the current
Investment Management fee payable to the Investment Manager.
(4) Prior to May 1, 1998, the Investment Manager had engaged Berger Associates,
Inc. as Sub-advisor for the Portfolio, and the total Investment Management
fee was at the annual rate of .75% of the average daily net assets of the
Portfolio. As of May 1, 1998, the Investment Manager engaged Neuberger
Berman Management Incorporated as Sub-advisor for the Portfolio, and the
Investment Management fee is payable at the annual rate of 0.90% of the
average daily net assets of the Portfolio. The Management Fee in the above
chart reflects the current Investment Management fee payable to the
Investment Manager.
<PAGE>
(5) 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.
(6) 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.
C. SHORT DESCRIPTION OF INVESTMENT OBJECTIVES
SUBSTITUTE PORTFOLIOS
AST Lord Abbett Growth and Income: long-term growth of capital and income while
attempting to avoid excessive fluctuations in market value. Normally,
investments will be made in common stocks of seasoned companies which are
expected to show above-average growth and which the Portfolio's sub-advisor
believes to be in sound financial condition.
AST JanCap Growth: growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its objective by emphasizing
investments in common stocks.
AST Money Market: to maximize current income and maintain high levels of
liquidity. The Portfolio attempts to accomplish its objective by maintaining a
dollar-weighted average maturity of not more than 90 days and by investing in
securities which have effective maturities of not more than 397 days.
AST T. Rowe Price Asset Allocation: to seek a high level of total return by
investing primarily in a diversified group of fixed income and equity
securities. Under normal conditions over the long-term, the Portfolio expects to
allocate its assets so that approximately 40% of its assets will be in fixed
income securities and approximately 60% in equity securities.
AST T. Rowe Price International Equity: to seek total return of its assets from
long-term growth of capital and income, principally through investments in
common stock of established, non-U.S. companies. The Portfolio intends to
diversify broadly among countries and to normally have at least three different
countries represented in the Portfolio.
AST T. Rowe Price International Bond: 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 will
invest at least 65% of its assets in high-quality, non dollar-denominated
government and corporate bonds outside the United States. 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 (commonly referred to
as "junk bonds").
AST PIMCO Total Return Bond: to seek to maximize total return consistent with
preservation of capital. The Portfolio will invest in a diversified portfolio of
fixed-income securities of varying maturities with a portfolio duration from
three to six years.
AST PIMCO Limited Maturity Bond: to seek to maximize total return, consistent
with preservation of capital and prudent investment management. The Portfolio
will invest in a diversified portfolio of fixed income securities of varying
maturities with a portfolio duration from one to three years.
AST Putnam International Equity: 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 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.
OTHER AVAILABLE PORTFOLIOS OF AMERICAN SKANDIA TRUST
AST Lord Abbett Small Cap Value: to seek long-term capital appreciation.
Investments will be primarily made in equity securities which are believed to be
undervalued. Under normal circumstances, the Portfolio will invest at least 65%
of its assets in common stocks issued by smaller, less well-known companies,
with market capitalizations of less than $1 billion. Smaller companies may carry
more risk than larger companies.
AST Janus Overseas Growth: 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.
AST Janus Small-Cap Growth: seeks capital appreciation. The Portfolio pursues
its objective by normally investing at least 65% of its total assets in
securities issued by small-sized companies. The Portfolio may also invest in
stocks of larger companies with potential for capital appreciation.
AST Federated High Yield: 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 (BBB or lower) fixed rate corporate debt
obligations. Investments of this type are subject to a greater risk of loss of
principal and interest than investments in higher rated securities and are
generally considered high risk. Lower-rated or unrated bonds are commonly
referred to as "junk bonds."
AST T. Rowe Price Natural Resources: 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. 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.
AST T. Rowe Price Small Company Value: to provide long-term capital appreciation
by investing primarily in small-capitalization stocks that appear to be
undervalued. 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. Investing in small companies involves greater risk, as well as greater
opportunity, than is customarily associated with more established companies.
AST Founders Passport: to seek capital appreciation. The Portfolio invests
primarily in securities issued by foreign companies which have market
capitalizations or annual revenues of $1 billion or less. At least 65% of the
Portfolio's assets will normally be invested in foreign securities representing
a minimum of three countries. The Portfolio will normally invest a significant
proportion of its assets in the securities of small and medium-sized companies,
which involves greater risk than is customarily associated with more established
companies.
AST INVESCO Equity Income: to seek high current income while following sound
investment practices. Capital growth is a secondary consideration. The Portfolio
seeks to achieve its objective by investing in securities which will provide a
relatively high-yield and stable return and which, over the years, may also
provide capital appreciation. The Portfolio normally will invest at least 65% of
its assets in dividend-paying, marketable common stocks of domestic and foreign
industrial issuers.
AST American Century International Growth: to seek capital growth. The Portfolio
will invest primarily in issuers in developed markets. 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 different countries outside
the United States.
AST American Century Strategic Balanced: to seek capital growth and current
income. It is the intention of the Portfolio's sub-advisor 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.
AST Putnam Value Growth & Income: to seek capital growth with current income as
a secondary 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 invest up to 20% of its assets in securities traded in foreign
markets.
AST Putnam Balanced: to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds which will produce both capital
growth and current income. The Portfolio may invest in almost any type of
security or negotiable instrument, including cash or money market instruments.
The portion of the Portfolio's assets invested in equity securities and fixed
income securities will vary from time to time in light of the Portfolio's
investment objective, changes in interest rates and economic of other factors.
Under normal market conditions, it is expected that at least 25% of the
Portfolio's total assets will be invested in fixed income securities.
AST Cohen & Steers Realty: to maximize total return through investment in real
estate securities. The Portfolio pursues its investment objective of maximizing
total return by seeking, with approximately equal emphasis, capital appreciation
(both realized and unrealized) and current income. Under normal circumstances,
the Portfolio will invest substantially all of its assets in the equity
securities of "real estate companies". Real estate companies include those
companies that derive at least 50% of its revenues from the ownership,
construction, financing, management or sale of commercial, industrial, or
residential real estate or that has at least 50% of its assets in such real
estate.
AST Bankers Trust Enhanced 500: to outperform the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500(R)") through stock selection resulting
in different weightings of common stocks relative to the index. The Portfolio
will include the common stocks of companies included in the S&P 500(R). While
the majority of the issues held by the Portfolio will have neutral weightings to
the S&P 500, approximately 100 will be over- or under-weighted relative to the
index. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500,"
and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been
licensed for use by American Skandia Investment Services, Incorporated and
Bankers Trust. The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Portfolio.
AST Marsico Capital Growth: to seek capital growth. Income realization is not an
investment objective and any income realized on the Portfolio's investments,
therefore, will be incidental to the Portfolio's objective. The Portfolio will
pursue its objective by investing primarily in common stocks in industries and
companies the sub-advisor believes are experiencing favorable demand for their
products and services, and which operate in a favorable competitive and
regulatory environment.
AST Neuberger Berman Mid-Cap Growth: to seek capital appreciation. The Portfolio
invests in a diversified portfolio of common stocks believed to have the maximum
potential for long-term above-average capital appreciation. Under normal
conditions, the Portfolio primarily invests in the common stocks of companies
with equity market capitalizations from $300 million to $10 billion at the time
of investment. The Portfolio does not seek to invest in securities that pay
dividends or interest, and any such income is incidental.
AST Neuberger Berman Mid-Cap Value: to seek capital growth. The Portfolio seeks
capital growth through an investment approach that is designed to increase
capital with reasonable risk. The Portfolio invests principally in common stocks
of medium to large capitalization established companies, using a value-oriented
investment approach. The Sub-advisor looks for securities believed to be
undervalued based on strong fundamentals, including a low price-to-earnings
ratio, consistent cash flow, and the company's track record through all parts of
the market cycle.
AST Oppenheimer Large-Cap Growth: seeks capital appreciation. The Portfolio does
not invest to seek current income. The Portfolio emphasizes investment in common
stocks issued by established large-capitalization growth companies. For purposes
of the Portfolio, large-cap companies have market capitalizations greater than
$5 billion. Investment opportunities may be sought among securities of smaller,
less well-known companies. This Portfolio is not intended for investors seeking
assured income or preservation of capital.
AST Kemper Small-Cap Growth: seeks maximum appreciation of investors' capital
from a portfolio primarily of growth stocks of smaller companies. The Portfolio
seeks maximum appreciation of investors' capital. Current income will not be a
significant factor. 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. The Portfolio is designed as a
long-term investment involving substantial financial risk commensurate with
potential substantial gains.
