Filed with the Securities and Exchange Commission on April 29, 1997
Registration No. 33-56770 Investment Company Act No. 811-8248
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
Registration Statement under The Securities Act of 1933
Post-effective Amendment No. 7
and/or
Registration Statement under The Investment Company Act of 1940
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 2 SUB-ACCOUNTS)
(Exact Name of Registrant)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Name of Depositor)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484
(Address of Depositor's Principal Offices)
(203) 926-1888
(Depositor's Telephone Number)
M. PRISCILLA PANNELL, CORPORATE SECRETARY
One Corporate Drive, Shelton, Connecticut 06484
(Name and Address of Agent for Service of Process)
Copy To:
JOHN T. BUCKLEY, ESQ.
WERNER & KENNEDY
1633 Broadway, New York, New York 10019 (212) 408-6900
Approximate Date of Proposed Sale to the Public:
MAY 1, 1997OR AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT.
It is proposed that this filing become effective: (check appropriate space)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of rule 485
60 days after filing pursuant to paragraph (a) (i) of rule 485
on ______________ pursuant to paragraph (a) (i) of Rule 485
75 days after filing pursuant to paragraph (a) (ii) of Rule 485
on _____________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities to be Price Offering Registration
to be Registered Registered Per Unit Price Fee
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American Skandia Life Assurance
Corporation Annuity Contracts Indefinite* Indefinite* -- $0
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*Pursuant to Rule 24f-2 of the Investment Company Act
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2. The Rule
24f-2 Notice for Registrant's fiscal year 1996 was filed within 90 days of the
close of the fiscal year.
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WFee
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CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
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N-4 Item No. Prospectus Heading
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis or Highlights Highlights
4. Condensed Financial Information Condensed Financial Information, Advertising
5. General Description of Registrant, Depositor Investment Options, Investment Allocation Services,
and Portfolio Companies Operations of the Separate Account, The Company, Appendix A
6. Deductions Charges Assessable Against the Annuity, Charges Assessed
Against The Assets, Charges of the Underlying Mutual Funds
7. General Description of Variable Annuity Contracts Purchasing Annuities, Rights, Benefits and
Services, Modification
8. Annuity Period Annuity Payments
9. Death Benefit Death Benefit
10. Purchases and Contract Value Purchasing Annuities, Account Value
11. Redemptions Distributions, Pricing of Transfers and Distributions, Deferral of Transactions
12. Taxes Investment Allocation Services Charge,
Certain Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Additional Information Contents of the Statement of
Additional Information
SAI Heading
15. Cover Page Statement of Additional Information
16. Table of Contents Table of Contents
17. General Information and History General Information Regarding
American Skandia Life Assurance Corporation
18. Services Independent Auditors
19. Purchase of Securities Being Offered Noted in Prospectus under Sales Charge,
Exchange Contracts, Breakpoints,
Skandia's Systematic Investment Plan
and Sale of the Annuities
(Continued)
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CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
N-4 Item No. SAI Heading
20. Underwriters Principal Underwriter
21. Calculation of Performance Data Calculation of Performance Data
22. Annuity Payments Noted in Prospectus under Annuity Payments
23. Financial Statements Financial Statements
Part C Heading
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Directors and Officers of the Depositor Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Persons Controlled by or Under Common
Control with the Depositor or Registrant Control with the Depositor or Registrant
27. Number of Contractowners Number of Contractowners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
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WRAP FEE N4
This Prospectus describes a type of variable 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 interests in a group annuity or as individual contracts. 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. It is available from us without
charge upon request. The contents of the Statement of Additional Information are
described on Page 36. 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 may be assessed all or some of the following
charges, if applicable: (a) a sales charge (see "Sales Charge"); (b) a
maintenance fee (see "Maintenance Fee"); and (c) a tax charge (see "Tax
Charges"). It is then allocated to the investment options you select, except in
certain jurisdictions where allocations of initial Purchase Payments are
temporarily allocated to the AST Money Market 2 Sub-account (see "Allocation of
Your Initial Net Purchase Payment"). However, Purchase Payments received during
the "free-look" period may be allocated to other Sub-accounts under certain
conditions (see "Allocation of Net Purchase Payments"). You may transfer Account
Value between investment options (see "Investment Options" and "Transfers").
Account Value may be distributed as periodic annuity payments in a "payout
phase". Such annuity payments can be guaranteed for life (see "Annuity
Payments"). During the "accumulation phase" (the period before any payout
phase), you may surrender the Annuity for its Account Value or make withdrawals
(see "Distributions"). Such distributions may be subject to tax, including a tax
penalty. A death benefit may be payable during the accumulation phase (see
"Death Benefit").
Account Value increases or decreases daily to reflect investment performance and
the deduction of charges. No minimum amount is guaranteed (see "Account Value").
The investment options, which we may change, are Class 2 Sub-accounts of
American Skandia Life Assurance Corporation Variable Account B ("Separate
Account B") (see "Operations of the Separate Account"). Various charges are
assessed against the assets in the Sub-accounts. Each Sub-account invests
exclusively in an underlying mutual fund or a portfolio of 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, AST
Money Market, Federated Utility Income, Federated High Yield, 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).
The Annuity is designed to be used with investment allocation services.
Providers of such services assist you in making allocation and transfer
decisions, or are engaged by you to make allocation and transfer decisions on
your behalf. You should consider whether such services are appropriate for your
needs.
We guarantee fixed annuity payments. We also guarantee any adjustable annuity
payments we may make available (see "Annuity Payments").
(continued on page 2)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
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FOR FURTHER INFORMATION CALL 1-800-752-6342
Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
AC-PROS (05/97)
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Taxes on gains during the accumulation phase may be deferred until you begin to
take distributions from your Annuity. Distributions before age 59 1/2 may be
subject to a tax penalty. In the payout phase, a portion of each annuity payment
may be treated as a return of your "investment in the contract" until it is
completely recovered. Transfers between investment options are not subject to
taxation. The Annuity may also qualify for special tax treatment under certain
Sections of the Code, including, but not limited to, Sections 401, 403 or 408
(see "Certain Tax Considerations").
Purchase Payments under these Annuities are not deposits or obligations of, or
guaranteed or endorsed by, any bank or bank subsidiary, 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 investment options are subject to investment risks,
including possible loss of principal.
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TABLE OF CONTENTS
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DEFINITIONS................................................................................................................6
HIGHLIGHTS.................................................................................................................8
AVAILABLE INFORMATION......................................................................................................9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................................9
CONTRACT EXPENSE SUMMARY..................................................................................................10
EXPENSE EXAMPLES..........................................................................................................13
CONDENSED FINANCIAL INFORMATION...........................................................................................14
Unit Prices And Numbers of Units.......................................................................................14
Yields On Money Market Sub-Account.....................................................................................16
INVESTMENT OPTIONS........................................................................................................16
INVESTMENT ALLOCATION SERVICES............................................................................................18
OPERATIONS OF THE SEPARATE ACCOUNT........................................................................................18
INSURANCE ASPECTS OF THE ANNUITY..........................................................................................19
CHARGES ASSESSABLE AGAINST THE ANNUITY....................................................................................19
Sales Charge...........................................................................................................19
Maintenance Fee........................................................................................................19
Tax Charges............................................................................................................20
Transfer Fee...........................................................................................................20
Allocation Of Annuity Charges..........................................................................................20
CHARGES ASSESSED AGAINST THE ASSETS.......................................................................................20
Administration Charge..................................................................................................20
Mortality and Expense Risk Charges.....................................................................................20
CHARGES OF THE UNDERLYING MUTUAL FUNDS....................................................................................20
PURCHASING ANNUITIES......................................................................................................20
Uses Of The Annuity....................................................................................................21
Application And Initial Payment........................................................................................21
Skandia's Systematic Investment Plan...................................................................................21
Periodic Purchase Payments.............................................................................................21
Right to Return the Annuity............................................................................................22
Allocation of Net Purchase Payments....................................................................................22
Owner, Annuitant and Beneficiary Designations..........................................................................22
ACCOUNT VALUE.............................................................................................................23
RIGHTS, BENEFITS AND SERVICES.............................................................................................23
Additional Purchase Payments...........................................................................................23
Changing Revocable Designations........................................................................................23
Allocation Rules.......................................................................................................23
Transfers..............................................................................................................24
Dollar Cost Averaging................................................................................................24
Rebalancing............................................................................................................25
Distributions..........................................................................................................25
Surrender............................................................................................................25
Partial Withdrawals..................................................................................................25
Systematic Withdrawals...............................................................................................26
Minimum Distributions................................................................................................26
Death Benefit........................................................................................................26
Annuity Payments.....................................................................................................27
Qualified Plan Withdrawal Limitations................................................................................28
Pricing of Transfers and Distributions.................................................................................29
Voting Rights..........................................................................................................29
Transfers, Assignments or Pledges......................................................................................29
Reports to You.........................................................................................................30
THE COMPANY...............................................................................................................30
SALE OF THE ANNUITIES.....................................................................................................30
Distribution...........................................................................................................30
Advertising............................................................................................................30
CERTAIN TAX CONSIDERATIONS................................................................................................31
Our Tax Considerations.................................................................................................31
Tax Considerations Relating to Your Annuity............................................................................31
Non-natural Persons..................................................................................................31
Natural Persons......................................................................................................31
Distributions........................................................................................................32
Loans, Assignments and Pledges.......................................................................................32
Gifts................................................................................................................32
Penalty on Distributions.............................................................................................32
Annuity Payments.....................................................................................................33
Tax Free Exchanges...................................................................................................33
Transfers Between Investment Options.................................................................................33
Estate and Gift Tax Considerations...................................................................................33
Generation-Skipping Transfers........................................................................................33
Diversification......................................................................................................33
Federal Income Tax Withholding.......................................................................................34
Tax Considerations When Using Annuities in Conjunction with Qualified Plans............................................34
Individual Retirement Programs.......................................................................................34
Tax Sheltered Annuities..............................................................................................34
Corporate Pension and Profit-sharing Plans...........................................................................34
H.R. 10 Plans........................................................................................................34
Tax Treatment of Distributions from Qualified Annuities..............................................................35
Section 457 Plans....................................................................................................35
OTHER MATTERS.............................................................................................................35
Deferral of Transactions...............................................................................................35
Resolving Material Conflicts...........................................................................................35
Modification...........................................................................................................35
Misstatement of Age or Sex.............................................................................................36
Ending the Offer.......................................................................................................36
Legal Proceedings......................................................................................................36
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.......................................................................36
APPENDIX A SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT
OBJECTIVES AND POLICIES.................................................................................................1
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DEFINITIONS: The following are key terms used in this Prospectus. Other terms
are defined in this Prospectus as they appear.
ACCOUNT VALUE is the value of each allocation to a Sub-account prior to the
Annuity Date, plus any earnings, and/or less any losses, distributions and
charges thereon. Account Value is determined separately for each Sub-account,
and then totaled to determine Account Value for your entire Annuity.
ADVISOR is a person or entity: (a) registered as such under the Investment
Advisers Act of 1940 and, where applicable, under equivalent state law or
regulation regarding the registration and regulation of investment advisors; or
(b) that may provide investment advisory services but is exempt from such
registration.
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, the certificate evidencing your participation in a group
annuity or an individual annuity contract. 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.
IN WRITING is in a written form satisfactory to us and filed at the Office.
ISSUE DATE is the effective date of your Annuity.
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 sales charge,
initial maintenance fee and/or charge for taxes.
OFFICE is our business office, American Skandia Life Assurance Corporation, P.
O. Box 883, One Corporate Drive, 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 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 and certain other annuities we
offer.
SYSTEMATIC WITHDRAWAL is one of a plan of periodic withdrawals of Account Value
during the accumulation phase. Such a plan is subject to our rules.
UNIT is a measure used to calculate your Account Value in a Sub-account prior to
the Annuity Date.
UNIT PRICE is used for calculating: (a) the number of Units allocated to a
Sub-account; and (b) the value of transactions into or out of a Sub-account or
benefits based on Account Value in a Sub-account prior to the Annuity Date. Each
Sub-account has its own Unit Price which will vary each Valuation Period to
reflect the investment experience of that Sub-account.
VALUATION DAY is every day the New York Stock Exchange is open for trading or
any other day that the Securities and Exchange Commission requires mutual funds
or unit investment trusts to be valued.
VALUATION PERIOD is the period of time between the close of business of the New
York Stock Exchange on successive Valuation Days.
"We", "us", "our" or "the Company" means American Skandia Life Assurance
Corporation.
"You" or "your" means the Owner.
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HIGHLIGHTS: The following are only the highlights of the Annuity being offered
pursuant to this Prospectus. A more detailed description follows these
highlights.
(1) Investment Options: We currently offer multiple investment options
in the accumulation phase. Each of these investment options is a Class 2
Sub-account of Separate Account B. Each Sub-account invests exclusively in an
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 A. Certain 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, AST
Money Market, Federated Utility Income, Federated High Yield, 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).
(2) Operations of the Separate Account: In the accumulation phase, the
assets supporting the Account Values maintained in the Sub-accounts are held in
our Separate Account B. These Sub-accounts are all Class 2 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 fund portfolios. In the payout phase, fixed annuity payments, and any
adjustable annuity payments we may make available, are guaranteed by our general
account. For more information, see the section entitled Operations of the
Separate Account.
(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 Assessable Against the Annuity: The Annuity charges which
may be assessable under certain circumstances are a sales charge, a 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 Assessable Against the
Annuity, including the following subsections: (a) 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, the mortality and
expense risk charges and the investment allocation services charge. 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
portfolio assesses various charges, including charges for investment management
and investment advisory fees. These charges generally differ between portfolios
within an underlying mutual fund. You will find additional details in the fund
prospectuses and statements 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 we require
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 is 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 the initial Purchase Payment and any other Purchase Payments received
during the "free-look" period to the AST Money Market 2 Sub-account. Where
permitted by law in such jurisdictions, we will allocate such Purchase Payments
according to your instructions without any temporary allocation to the AST Money
Market 2 Sub-account, if you execute a return waiver. Certain designations must
be made, including an Owner and an Annuitant. You also may make certain other
designations that apply to the Annuity if issued. These designations include a
contingent Owner, a Contingent Annuitant, a Beneficiary, and a contingent
Beneficiary. See the section entitled Purchasing Annuities, including the
following subsections: (a) Uses of the Annuity; (b) Application and Initial
Payment; (c) Periodic Purchase Payments; (d) Skandia's Systematic Investment
Plan; (e) Right to Return the Annuity; (f) Allocation of Net Purchase Payments;
and (g) Owner, Annuitant and Beneficiary Designations.
(8) Account Value: In the accumulation phase your Annuity has an
Account Value. Your total Account Value as of a particular date is the sum of
your Account Value in each Sub-account. 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. For more information, see the section
entitled Account Value.
(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. Additional Purchase Payments
may be made using bank drafting. 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 may
offer rebalancing during the accumulation phase (see "Dollar Cost Averaging" and
"Rebalancing"). During the accumulation phase, surrender and partial withdrawals
are available. 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) Bank Drafting; (c) Changing Revocable Designations; (d) Allocation Rules;
(e) Transfers; (f) Dollar Cost Averaging; (g) Rebalancing; (h) Distributions
(including: (i) Surrender; (ii) Partial Withdrawals; (iii) Systematic
Withdrawals; (iv) Minimum Distributions; (v) Death Benefit; (vi) Annuity
Payments; and (vii) Qualified Plan Withdrawal Limitations); (i) Pricing of
Transfers and Distributions; (j) Voting Rights; (k) Transfers, Assignments and
Pledges; and (l) Reports to You.
(10) The Company: American Skandia Life Assurance Corporation is a
wholly owned subsidiary of American Skandia Investment Holding Corporation,
whose indirect parent is Skandia Insurance Company Ltd. Skandia Insurance
Company Ltd. is a Swedish company that holds a number of insurance companies in
many countries. The predecessor to Skandia Insurance Company Ltd. commenced
operations in 1855. For more information, see the section entitled The Company.
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, P.O. Box 883, Shelton, CT 06484. You also
may forward such a request electronically to our Customer Service Department or
call us at 1-(800)-752-6342. 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 and the Statement of Additional information are
part of the registration statement we filed with the Securities and Exchange
Commission ("SEC") regarding this offering. Additional information on us and
this offering is available in this registration statement 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 P.O. Box 883, Shelton,
Connecticut, 06484. Our phone number is 1-(800) 752-6342. 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. More detail regarding the expenses of the
underlying mutual fund portfolios may be found either in the prospectuses for
the underlying mutual funds or, when available, in the annual report 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>
<S> <C>
Your Transaction Expenses
Sales Charge Maximum of 1.50% of each Purchase Payment.
Maintenance Fee Smaller of $35 or 2% of: (a) the initial Purchase Payment;
and (b) each Annuity Year after the first, the Account Value.
It applies to the initial Purchase Payment only if such Purchase
Payment is less than $50,000. It is assessed as of the first
Valuation Period of each Annuity Year after the first only
if, at that time, the Account Value of the Annuity is less
than $50,000.
Tax Charges Dependent on the requirements of the applicable jurisdiction.
Transfer Fee $10 for each transfer after the twelfth in any Annuity Year.
</TABLE>
Annual Expenses of the Sub-accounts (as a percentage of average daily net
assets)
<TABLE>
<CAPTION>
<S> <C>
Mortality and Expense Risk Charges 0.65%
Administration Charge 0.25%
Total Annual Expenses of the Sub-accounts 0.90%
</TABLE>
The Annuity was designed initially to be used with investment allocation
services provided by an Advisor. From the date of the initial offering on
November 16, 1993 until July 1, 1994 a 1.00% investment allocation services
charge was assessed against the Sub-accounts. As of July 1, 1994 the investment
allocation services charge is no longer assessed against the Sub-accounts. The
expense information in the table has been restated to reflect current fees.
Underlying Mutual Fund Portfolio Annual Expenses (as a percentage of average net
assets)
Unless otherwise indicated, the expenses shown below are for the year ending
December 31, 1996. "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
prospectuses or statements of additional information of the underlying mutual
funds for details.
<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> <C> <C> <C> <C> <C>
American Skandia Trust
Lord Abbett Growth and Income N/A 0.75% N/A 0.22% N/A 0.97%
JanCap Growth N/A 0.90% N/A 0.20% N/A 1.10%
AST Janus Overseas Growth(1) N/A 1.00% N/A 0.42% N/A 1.42%
AST Money Market 0.45% 0.50% 0.15% 0.21% 0.60% 0.71%
Federated Utility Income N/A 0.67% N/A 0.26% N/A 0.93%
Federated High Yield N/A 0.75% N/A 0.28% N/A 1.03%
T. Rowe Price Asset Allocation N/A 0.85% N/A 0.35% N/A 1.20%
T. Rowe Price Int'l Equity N/A 1.00% N/A 0.30% N/A 1.30%
T. Rowe Price Natural Resources N/A 0.90% N/A 0.40% N/A 1.30%
T. Rowe Price Int'l Bond(2) N/A 0.80% N/A 0.36% N/A 1.16%
T. Rowe Price Small Co. Value(1) N/A 0.90% N/A 0.37% N/A 1.27%
Founders Capital Appreciation N/A 0.90% N/A 0.26% N/A 1.16%
Founders Passport N/A 1.00% N/A 0.36% N/A 1.36%
INVESCO Equity Income N/A 0.75% N/A 0.23% N/A 0.98%
PIMCO Total Return Bond N/A 0.65% N/A 0.24% N/A 0.89%
PIMCO Limited Maturity Bond N/A 0.65% N/A 0.24% N/A 0.89%
Berger Capital Growth N/A 0.75% N/A 0.26% N/A 1.01%
Robertson Stephens Value + Growth(3)N/A 1.00% N/A 0.33% N/A 1.33%
Twentieth Century Int'l Growth(1) N/A 1.00% N/A 0.42% N/A 1.42%
Twentieth Century Strategic Balanced(1)
N/A 0.85% N/A 0.33% N/A 1.18%
AST Putnam Value Growth & Income(1) N/A 0.75% N/A 0.33% N/A 1.08%
AST Putnam Int'l Equity(4) N/A 0.89% N/A 0.27% N/A 1.16%
AST Putnam Balanced(5) N/A 0.75% N/A 0.24% N/A 0.99%
The Alger American Fund
Growth N/A 0.75% N/A 0.04% N/A 0.79%
Small Capitalization N/A 0.85% N/A 0.03% N/A 0.88%
MidCap Growth N/A 0.80% N/A 0.04% N/A 0.84%
Neuberger & Berman Advisers
Management Trust
Partners N/A 0.84% N/A 0.11% N/A 0.95%
Montgomery Variable Series
Emerging Markets(6) 0.23% 1.25% 1.22% 1.22% 1.45% 2.47%
</TABLE>
(1) These Portfolios were first offered publicly in January 1997. Expenses shown
are based on estimated amounts for the current fiscal year.
(2) Prior to May 1, 1996, the Investment Manager had engaged Scudder, Stevens &
Clark, Inc. as Sub-advisor for the Portfolio, for a total Investment Management
fee payable at the annual rate of 1.00% of the average daily net assets of the
Portfolio. As of May 1, 1996, the Investment Manager engaged Rowe Price-Fleming
International, Inc. as Sub-advisor for the Portfolio, for a total Investment
Management fee payable at the annual rate of .80% 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.
(3) This Portfolio commenced operation in May, 1996. Expenses shown are
estimated.
(4) Prior to October 15, 1996, the Investment Manager had engaged Seligman
Henderson Co. as Sub-advisor for the Portfolio, for a total Investment
Management fee payable at the annual rate of 1.0% of the average daily nets
assets of the Portfolio. The Investment Manager had also voluntarily agreed to
waive a portion of its fee equal to .15% on assets in excess of $75 million. As
of October 15, 1996, the Investment Manager engaged Putnam Investment
Management, Inc. as Sub-advisor for the Portfolio, for a total Investment
Management fee payable at the annual rate of 1.0% of the average daily net
assets of the Portfolio not in excess of $75 million; plus .85% of the
Portfolio's average daily net assets over $75 million. The Management Fee in the
above chart reflects the current Investment Management fee payable to the
Investment Manager.
(5) Prior to October 15, 1996, the Investment Manager had engaged Phoenix
Investment Counsel, Inc. as Sub-advisor for the Portfolio, for a total
Investment Management fee payable at the annual rate of .75% of the average
daily net assets of the Portfolio not in excess of $75 million; plus .65% of the
Portfolio's average daily net assets in excess of $75 million. As of October 15,
1996, the Investment Manager engaged Putnam Investment Management, Inc. as
Sub-advisor for the Portfolio, for a total Investment Management fee payable at
the annual rate of .75% of the average daily net assets of the Portfolio not in
excess of $300 million; plus .70% of the Portfolio's average daily net assets in
excess of $300 million. The Management Fee in the above chart reflects the
current Investment Management fee payable to the Investment Manager.
(6) This portfolio commenced operation on February 2, 1996, therefore expenses
shown are estimated and annualized and should not be considered representative
of future expenses; actual expenses may be greater than shown.
The purpose of the above table is to assist you in understanding the various
costs and expenses that you would bear directly or indirectly as an investor in
the Portfolio(s).
The underlying mutual fund portfolio information was provided by the underlying
mutual funds. The Company has not independently verified such information.
EXPENSE EXAMPLES: The examples which follow are designed to assist you in
understanding the various costs and expenses you may bear directly or
indirectly. The examples reflect expenses of our Sub-accounts, as well as those
of the underlying mutual fund portfolios.
The examples shown assume that: (a) the maximum sales charge applies (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 ACTUAL FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUND
PORTFOLIOS - ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
Sub-accounts are referred to below by their specific names.
Examples (amounts shown are rounded to the nearest dollar)
Whether or not you surrender your Annuity at the end of the applicable time
period or begin taking annuity payments at such time, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on assets:
If your initial Purchase Payment is at least $50,000 and at the beginning of
each Annuity Year your Account Value is $50,000 or higher, so that the
maintenance fee does not apply:
<TABLE>
<CAPTION>
Sub-Accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
JanCap Growth 2 35 77 122 245
AST Janus Overseas Growth 38 87 138 278
LA Growth and Income 2 34 73 115 232
AST Money Market 2 30 62 96 193
Fed Utility Inc 2 33 72 113 226
Fed High Yield 2 34 75 118 238
T. Rowe Price Asset Allocation 2 36 80 127 255
T. Rowe Price International Equity 2 37 83 132 265
T. Rowe Price Natural Resources 2 37 83 132 265
T. Rowe Price International Bond 2 36 79 125 252
T. Rowe Price Small Company Value 37 83 131 263
Founders Capital Appreciation 2 36 79 125 252
Founders Passport 38 85 135 272
INVESCO Equity Income 2 34 74 116 233
PIMCO Total Return Bond 2 33 71 111 223
PIMCO Limited Maturity Bond 2 33 71 111 223
Berger Capital Growth 2 34 74 117 235
RS Value + Growth 2 38 85 134 269
AST Putnam Value Growth & Income 35 77 121 243
AST Putnam International Equity 36 79 125 252
AST Putnam Balanced 34 74 117 235
Twentieth Century Strategic Balanced 36 80 126 254
Twentieth Century International Growth 38 87 138 278
AA Growth 2 32 68 106 213
AA Small Capitalization 2 33 71 111 223
AA MidCap Growth 2 33 70 109 219
NB Partners 2 34 73 114 229
MV Emerging Markets 2 39 88 140 282
</TABLE>
If your initial Purchase Payment is below $50,000 and at the beginning of each
Annuity Year your Account Value is below $50,000, so that the maintenance fee
applies:
<TABLE>
<CAPTION>
Sub-Accounts After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
JanCap Growth 2 37 82 129 259
AST Janus Overseas Growth 40 91 145 292
LA Growth and Income 2 35 77 122 245
AST Money Market 2 32 67 104 206
Fed Utility Inc 2 35 77 121 243
Fed High Yield 2 36 80 126 253
T. Rowe Price Asset Allocation 2 38 85 134 269
T. Rowe Price International Equity 2 39 88 139 279
T. Rowe Price Natural Resources 2 39 88 139 279
T. Rowe Price International Bond 2 37 83 132 265
T.Rowe Price Small Company Value 38 87 138 276
Founders Capital Appreciation 2 37 83 132 265
Founders Passport 39 89 142 285
INVESCO Equity Income 2 35 78 123 246
PIMCO Total Return Bond 2 35 76 119 237
PIMCO Limited Maturity Bond 2 35 76 119 237
Berger Capital Growth 2 36 79 124 249
RS Value + Growth 2 39 89 141 283
AST Putnam Value Growth & Income 36 81 128 256
AST Putnam International Equity 37 83 132 265
AST Putnam Balanced 36 79 124 247
Twentieth Century Strategic Balanced 37 84 133 266
Twentieth Century International Growth 40 91 145 292
AA Growth 2 34 73 114 227
AA Small Capitalization 2 34 75 118 236
AA MidCap Growth 2 34 74 116 233
NB Partners 2 35 77 121 243
MV Emerging Markets 2 40 92 147 294
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units in the
Sub-accounts that commenced operations prior to January 1, 1997 are shown below,
as is yield information on the AST Money Market 2 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.
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 2 Sub-accounts of Separate
Account B that commenced operations prior to January 1, 1997 and are being
offered pursuant to this Prospectus; and (b) the number of Units outstanding in
each 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
LA AST
Growth Putnam AST Fed
JanCap and International Founders Money Utility
Growth 2 Income 2 Equity 2 Passport 2 Market 2 Income 2
(1993) (1993) (1993) (1995) (1993) (1993)
------ ------ ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/96 574,520 671,510 408,066 278,460 1,292,931 103,416
as of 12/31/95 384,701 498,080 452,589 137,991 968,666 164,976
as of 12/31/94 187,924 238,128 199,313 0 880,903 86,555
as of 12/31/93 17,956 9,793 12,521 0 36,093 467
Unit Price
as of 12/31/96 $16.59 $15.32 $12.27 $11.49 $11.14 $12.81
as of 12/31/95 13.04 13.04 11.29 10.27 10.70 11.59
as of 12/31/94 9.54 10.21 10.36 0 10.23 9.27
as of 12/31/93 10.13 10.13 10.23 0 10.00 10.10
</TABLE>
<TABLE>
<CAPTION>
Sub-Account and the Year Sub-Account Operations Commenced
T. Rowe T. Rowe T. Rowe T. Rowe
Fed AST Price Price Price Price
High Putnam Asset International Natural International
Yield 2 Balanced 2 Allocation 2 Equity 2 Resources 2 Bond 2
(1993) (1993) (1993) (1993) (1995) (1993)
------ ----- ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/96 433,739 186,453 82,655 959,467 140,275 213,216
as of 12/31/95 300,107 239,737 89,787 610,851 27,379 127,373
as of 12/31/94 122,508 114,927 74,058 301,423 0 25,171
as of 12/31/93 0 6,185 0 0 0 0
Unit Price
as of 12/31/96 $12.75 $13.27 $13.44 $11.82 $14.31 $11.11
as of 12/31/95 11.32 12.04 11.98 10.44 11.04 10.58
as of 12/31/94 9.56 9.91 9.80 9.49 0 9.61
as of 12/31/93 0 10.04 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Sub-Account and the Year Sub-Account Operations Commenced
PIMCO PIMCO
Founders INVESCO Total Limited Berger
Capital Equity Return Maturity Capital AA
Appreciation 2 Income 2 Bond 2 Bond 2 Growth 2 Growth 2
(1993) (1993) (1993) (1995) (1993) (1993)
------ ------ ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/96 271,845 283,889 1,203,159 424,713 100,758 569,960
as of 12/31/95 221,840 293,340 846,356 399,158 89,474 506,542
as of 12/31/94 96,278 150,719 256,950 0 3,419 177,825
as of 12/31/93 0 0 0 0 0 4,589
Unit Price
as of 12/31/96 $16.71 $14.38 $11.60 $10.71 $14.15 $15.57
as of 12/31/95 14.04 12.39 11.32 10.41 12.27 13.86
as of 12/31/94 10.69 9.62 9.62 0 9.95 10.26
as of 12/31/93 0 0 0 0 0 10.25
</TABLE>
<TABLE>
<CAPTION>
Sub-Account and the Year Sub-Account Operations Commenced
AA AA Robertston Montgomery
Small MidCap NB Stephens Emerging
Cap 2 Growth 2 Partners 2 Value & Growth 2 Markets
(1993) (1993) (1995) (1996) (1996)
----- ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C>
as of 12/31/96 462,016 315,296 425,664 119,830 39,355
as of 12/31/95 321,334 204,227 230,034 0 0
as of 12/31/94 187,387 61,104 0 0 0
as of 12/31/93 17,264 3,255 0 0 0
Unit Price
as of 12/31/96 $14.68 $16.44 $15.52 $10.92 $10.29
as of 12/31/95 14.22 14.82 12.09 0 0
as of 12/31/94 9.94 10.36 0 0 0
as of 12/31/93 10.55 10.67 0 0 0
</TABLE>
Information is not shown above for Sub-accounts that had not commenced
operations prior to January 1, 1997.
The financial statements of the Class 2 Sub-accounts being offered to you are
found in the Statement of Additional Information.
Yields On Money Market Sub-Account: Shown below are the current and
effective yields for a hypothetical contract. The yield is calculated based on
the performance of the AST Money Market Class 2 Sub-account during the last
seven days of the calendar year ending prior to the date of this Prospectus. At
the beginning of the seven day period, the hypothetical contract had a balance
of one Unit. The current and effective yields reflect the recurring charges
against the Sub-account. Please note that current and effective yield
information will fluctuate. This information may not provide a basis for
comparisons with deposits in banks or other institutions which pay a fixed yield
over a stated period of time, or with investment companies which do not serve as
underlying funds for variable annuities.
Sub-account Current Yield Effective Yield
AST Money Market 2 4.04% 4.12%
INVESTMENT OPTIONS: During the accumulation phase, we offer a number of
Sub-accounts as investment options. These are all Class 2 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 mutual funds portfolio. The Sub-accounts and the underlying
mutual fund portfolios in which they invest are as follows:
<TABLE>
<CAPTION>
Underlying Mutual Fund: American Skandia Trust
<S> <C> <C> <C> <C> <C>
Sub-account Underlying Mutual Fund Portfolio
JanCap Growth 2 JanCap Growth
AST Janus Overseas Growth 2 AST Janus Overseas Growth
LA Growth and Income 2 Lord Abbett Growth and Income
AST Money Market 2 AST Money Market
Fed Utility Inc 2 Federated Utility Income
Fed High Yield 2 Federated High Yield
T. Rowe Price Asset Allocation 2 T. Rowe Price Asset Allocation
T. Rowe Price International Equity 2 T. Rowe Price International Equity
T. Rowe Price Natural Resources 2 T. Rowe Price Natural Resources
T. Rowe Price International Bond 2 T. Rowe Price International Bond
T. Rowe Price Small Company Value 2 T. Rowe Price Small Company Value
Founders Capital Appreciation 2 Founders Capital Appreciation
Founders Passport 2 Founders Passport
INVESCO Equity Income 2 INVESCO Equity Income
PIMCO Total Return Bond 2 PIMCO Total Return Bond
PIMCO Limited Maturity Bond 2 PIMCO Limited Maturity Bond
Berger Capital Growth 2 Berger Capital Growth
RS Value + Growth 2 Robertson Stephens Value + Growth
AST Putnam Value Growth & Income 2 AST Putnam Value Growth & Income
AST Putnam International Equity 2 AST Putnam International Equity
AST Putnam Balanced 2 AST Putnam Balanced
Twentieth Century Strategic Balanced 2 Twentieth Century Strategic Balanced
Twentieth Century International Growth 2 Twentieth Century International Growth
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Growth 2 Growth Portfolio
AA Small Capitalization 2 Small Capitalization
AA MidCap Growth 2 MidCap Growth
Underlying Mutual Fund: Neuberger & Berman
Advisers Management Trust
Sub-account Underlying Mutual Fund Portfolio
NB Partners 2 Partners
Underlying Mutual Fund: Montgomery Mutual Fund Portfolio
Sub-account Underlying Mutual Fund Portfolio
MV Emerging Markets 2 Montgomery Variable Series: Emerging Markets Fund
</TABLE>
We may make other underlying mutual fund portfolios 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 will be disclosed in its prospectus. However, addition of a
portfolio in an underlying mutual fund 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. Certain portfolios may not be available in all jurisdictions. A summary
of the investment objectives of such underlying mutual fund portfolios is found
in Appendix A. 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 only 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 quality 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 statement of
additional information for such underlying mutual fund. Also included in such
information is the investment policy of each mutual fund 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 portfolio
will meet its investment objective.
Shares of the underlying mutual fund portfolios 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 Concierge Desk, 1-800-752-6342 or
writing to us at either P.O. Box 883, Attention: Concierge Desk, Shelton,
Connecticut, 06484-0883, or to our electronic mail address which is
[email protected].
INVESTMENT ALLOCATION SERVICES: The Annuity was designed to be used with
investment allocation services provided by an Advisor. From the date of the
initial offering on November 16, 1993 until July 1, 1994 a 1.00% investment
allocation services charge was assessed against the Sub-accounts. As of July 1,
1994 the investment allocation services charge is no longer assessed. It may
still suit your needs to engage an Advisor for investment allocation services in
relation to the Annuity. Any arrangements for compensation for such services is
exclusively your responsibility. In certain situations you may be subject to
income taxes and penalties for withdrawals from your Account Value to pay
advisory fees. You may also pay your Advisor from sources other than the
Annuity. However, we will accommodate requests by Owners to pay over partial
withdrawals to Advisors that provide investment allocation services, subject to
our rules and requirements.
We treat partial withdrawals as taxable distributions unless: (a) your Annuity
is being used in conjunction with what is designed to be a "qualified"
retirement plan (plans designed to meet the requirement of Sections 401, 403 or
408 of the Code); and (b) in relation to plans pursuant to Sections 403 or 408,
you and your Advisor provide representations In Writing to us limiting the
source of the Advisor's compensation to the assets of an applicable qualified
retirement plan, and making certain other representations.
OPERATIONS OF THE SEPARATE ACCOUNT: In the accumulation phase, assets supporting
Account Values are held in our Separate Account B established under the laws of
the State of Connecticut. Separate Account B consists of multiple Sub-accounts.
In the payout phase, assets supporting fixed annuity payments and any adjustable
annuity payments we make available are held in our general account.
We are the legal owner of assets in the separate account. Income, gains and
losses, whether or not realized, from assets allocated to the separate account,
are credited to or charged against 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 the 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 the separate account are subject
to the requirements of applicable state laws.
The Sub-accounts offered pursuant to this Prospectus are all Class 2
Sub-accounts of Separate Account B. Each class of Sub-accounts in Separate
Account B has a different level of charges assessed against such Sub-accounts.
The amount of our obligations in relation to allocations to the Sub-accounts are
based on the investment performance of such Sub-accounts. However, the
obligations themselves are our general corporate obligations.
Separate Account B Class 2 Sub-accounts are registered with the SEC under the
1940 Act (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 underlying mutual fund or mutual fund
portfolio. Some of the Class 2 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
the underlying mutual fund portfolios in the prospectuses for such funds.
Portfolios added to an underlying mutual fund 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 fund portfolios. We do not
guarantee the investment results of any Sub-account. There is no 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.
INSURANCE ASPECTS OF THE ANNUITY: As an insurance company we bear the insurance
risk inherent in the Annuity. This includes: (a) the risks that mortality and
expenses exceed our expectations; and (b) the investment and re-investment risks
in relation to the assets supporting fixed and adjustable annuity obligations.
We are subject to regulation that requires reserving and other practices in a
manner that minimizes the insurance risk.
CHARGES ASSESSABLE AGAINST THE ANNUITY: The Annuity charges which are assessed
or may be assessable under certain circumstances are: (a) the sales charge; (b)
the maintenance fee; (c) a charge for taxes; and (d) a transfer fee. These
charges are allocated according to our rules. Charges are also assessed against
the Sub-accounts and the underlying mutual fund portfolios. We also may charge
you for special services, such as dollar cost averaging, Systematic Withdrawals,
Minimum Distributions, and additional reports. As of the date of this
Prospectus, we do not charge you for any special services.
Sales Charge: We may assess a sales charge on certain annuity plans. We
may offer various annuity plans which differ as to both the sales charge and the
specified interest rate applicable to the minimum death benefit (see Death
Benefit). The sales charge and specified interest rate applicable to the minimum
death benefit for the annuity plan being offered to you is specified on the page
of this Prospectus immediately preceding the Table of Contents. The maximum
charge is 1.50% of each Purchase Payment.
From time to time we may reduce the amount of any sales charge when Annuities on
a particular annuity plan 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 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; and (g) parents of any such person noted in (b) through
(e) above; and (h) such person's child or other legal dependent under the age of
21.
Any elimination of the sales charge or any reduction to the amount of such
charges will not discriminate unfairly between Annuity purchasers. We will not
make any changes to this charge where prohibited by law.
Maintenance Fee: A maintenance fee equaling the lesser of $35 or 2% may
be assessed against: (a) the initial Purchase Payment; and (b) each Annuity Year
after the first, the Account Value. It applies to the initial Purchase Payment
only if less than $50,000. It is assessed as of the first Valuation Period of
each Annuity Year after the first only if, at that time, the Account Value of
the Annuity is less than $50,000.
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 3 1/2% 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
any Annuity Year.
Allocation Of Annuity Charges: Any applicable sales charge is deducted
from each Purchase Payment. 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. Tax charges are assessed against the entire
Purchase Payment or Account Value as applicable. The initial maintenance fee, if
applicable, is assessed against the initial Purchase Payment. After the first
Annuity Year, any applicable 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. 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 equal to any taxes which
may be imposed upon the Sub-accounts.
Administration Charge: We assess each Class 2 Sub-account, on a daily
basis, an administration charge. The charge is 0.25% 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: The mortality risk charge for Class
2 Sub-accounts is 0.30% per year and the expense risk charge for such
Sub-accounts is 0.35% per year. These charges are assessed in combination each
day against each Sub-account at the rate of 0.65% 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: The underlying mutual funds assess
various charges for investment management and investment advisory fees. These
charges generally differ between portfolios within an underlying mutual fund.
You will find additional details in each fund prospectus 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. 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 (rollovers or
transfers for individual retirement accounts and individual retirement annuities
- - "IRAs"; Simplified Employee Pensions). With respect to tax sheltered annuities
purchasers of the contracts for such purposes should seek competent advice as to
eligibility, limitations on permissible amounts of Purchase Payments and other
tax consequences associated with the contracts. In particular, purchasers should
consider that the contract provides an increasing minimum death benefit. It is
possible that such death benefit could be characterized as an incidental death
benefit. If the death benefit were so characterized, this could result in
currently taxable income to purchasers. In addition, there are limitations on
the amount of incidental death benefits that may be provided under a
tax-sheltered annuity. Even if the death benefit under the contract were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her tax-sheltered annuity plan. 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. 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.
These requirements may include a properly completed Application. We may issue an
Annuity without completion of an Application for certain classes of Annuities,
where permitted by law.
The minimum initial Purchase Payment we accept for Annuities that are not to be
used with various retirement plans designed to meet the requirements of certain
Sections of the Code is $10,000 unless you authorize the use of bank drafting.
We accept lower amounts for Annuities that are designed to be used in
conjunction with such retirement plans. 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 $1,000,000. 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. 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 $10,000 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. This also applies to annuities designed to be used in
conjunction with various retirement plans. 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; and (b) 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 sales
charge, maintenance fee and/or any tax charge deducted. This is the "standard
refund". We return the greater of the "standard refund" or any Purchase Payments
received less any withdrawals if necessary to meet Federal requirements for IRAs
or certain state law requirements. We tell you how we determine the amount
payable under any such right at the time we issue your Annuity.
Allocation of Net Purchase Payments: All allocations of Net Purchase
Payments are subject to our allocation rules (see "Allocation Rules").
Allocation of your initial Net Purchase Payment and any Net Purchase Payments
received during the "free-look" period 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
to the AST Money Market 2 Sub-account; and (b) at the end of such "free-look"
period we reallocate Account Value according to your then most recent allocation
instructions to us, subject to our allocation rules. However, where permitted by
law in such jurisdictions, we will allocate such Net Purchase Payments according
to your instructions, without any temporary allocation to the AST Money Market 2
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 Payment received less any withdrawals. Instead, you only
are entitled to the return of the "standard refund" (see "Right to Return the
Annuity").
Owner, 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.
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. These include, but are 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 permitted 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. 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 at the time of the death upon which proceeds become payable or in the
absence of any Beneficiary designation, the proceeds will vest in you or your
estate.
ACCOUNT VALUE: In the accumulation phase your Annuity has an Account Value. Your
total Account Value is the sum of your Account Value in each investment option.
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.
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) bank drafting; (c) changing revocable
designations; (d) transferring Account Values between investment options; (e)
receiving lump sum payments, Systematic Withdrawals or Minimum Distributions,
annuity payments and death benefits; (f) transferring or assigning your Annuity;
(g) exercising certain voting rights in relation to the underlying mutual fund
portfolios in which the Sub-accounts invest; and (h) 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 or any other transaction
for which we accept instructions by telephone 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. 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 a
Owner's death; (b) a new Owner or Annuitant who does not meet our then current
underwriting guidelines; (c) a new Annuitant subsequent to the Annuity Date if
the annuity option selected includes a life contingency; and (d) 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. 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 to the transaction and close out your balance in
that investment option. 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.
Should you either: (a) request any rebalancing services we may offer (see
"Rebalancing"); or (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 we require that 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 allocation instructions In Writing for
all subsequent Purchase Payments.
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
any Annuity Year, including transfers transacted as part of any rebalancing,
market timing, asset allocation or similar program which 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.
All transfers of your Account Value occurring during the same Valuation Period
are counted as one transfer for purposes of determining the number of transfers
in an Annuity Year. 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 with appropriate authorization.
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 a 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
fund portfolios; or (b) we are informed by the underlying mutual fund 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 an affected underlying mutual fund
portfolio or portfolios.
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 to
you for transfers or allocations of Net Purchase Payments during any period in
which you authorize a third party that provides market timing services to act on
your behalf. We give you and/or 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.
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 $20,000 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 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.
Rebalancing: We may 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 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
anniversary. If a transfer is requested prior to the date Account Values are to
be rebalanced while an automatic rebalancing program is in effect, 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 calendar quarter if
Account Value is being maintained in the AST Money Market 2 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 investment option at any time.
However, you may not choose to allocate less than 5% of Account Value to any
investment option.
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
investment options when using a rebalancing program. You may not simultaneously
participate in rebalancing and dollar cost averaging. Rebalancing also is not
available when a program of Systematic Withdrawals of earnings or earnings plus
principal is in effect.
For purposes of determining the number of transfers made in any Annuity Year,
all rebalancing transfers made on the same day are treated as one transfer. We
reserve the right to charge a processing fee for signing up for this service.
To elect to participate or to terminate participation in automatic rebalancing,
we may require instructions In Writing at our Office in a form satisfactory to
us.
Distributions: Distributions available from your Annuity during the
accumulation phase include surrender, partial withdrawals, Systematic
Withdrawals, (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 Account Value is
permitted during the accumulation phase. Your Annuity must accompany your
surrender request.
Partial Withdrawals: You may withdraw part of your Account
Value. The minimum partial withdrawal is $100. The Account Value that must
remain in the Annuity as of the date of this transaction is $1,000. If the
amount of the partial withdrawal request exceeds the maximum amount available,
we reserve the right to treat your request as one for a full surrender.
Systematic Withdrawals: We offer Systematic Withdrawals of
earnings only, principal plus earnings or a flat dollar amount. You may choose
at any time to begin such a program.
We offer Systematic Withdrawals on a monthly, quarterly, semi-annual or annual
basis. Systematic Withdrawals are not available while you are taking any Minimum
Distributions (see "Minimum Distributions"). Systematic Withdrawals of earnings
only or principal plus earnings is not available while you are using a
rebalancing, asset allocation or similar type program.
The Account Value of your Annuity must be at least $25,000 when we accept your
request for a program of Systematic Withdrawals. The minimum for each Systematic
Withdrawal is $100.
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". 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. We
pay Minimum Distributions annually. Minimum Distributions will be taken from the
investment options you select. The $100 minimum for Systematic Withdrawals does
not apply to Minimum Distributions.
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). For applicable deaths occurring prior to age 85 of the deceased, the
death benefit is the greater of (a) or (b), where: (a) is your Account Value;
and (b) is the minimum death benefit. The minimum death benefit is the total of
each Purchase Payment growing daily at the equivalent of a specified interest
rate per year starting as to each Purchase Payment on the date it is allocated
to the Account Value, less the total of each withdrawal, of any type, growing
daily at the equivalent of the same specified interest rate per year, starting
as of the date of each such withdrawal. However, this minimum death benefit may
not exceed 200% of (A) minus (B), where: (A) is the total of all Purchase
Payments received; and (B) is the total of all withdrawals of any type.
We may offer various annuity plans which differ as to both the specified
interest rate applicable to the minimum death benefit and the sales charge (see
"Sales Charge"). The specified interest rate applicable to the minimum death
benefit and the sales charge for the annuity plan being offered to you is
specified on the page of this Prospectus immediately preceding the Table of
Contents.
In all jurisdictions, for applicable deaths occurring on or after age 85 of the
deceased, the death benefit is the Account Value. The amount of the death
benefit is determined as of the date we receive In Writing "due proof of death".
The following constitutes "due proof of death": (a)(i) a certified copy of a
death certificate, (ii) a certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or (iii) any other proof satisfactory
to us; (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.
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 permitted by law. If the Owner is 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. We will commute any remaining "certain" payments and pay
a lump sum if elected by you or, in the absence of specific instructions by you,
by the Beneficiary.
In the payout phase, we distribute any payments due subsequent to the death of
any Owner at least as rapidly as under the method of distribution in effect as
of the date of such Owner's death.
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 Annuitants subject to New York
and Pennsylvania law, the Annuity Date may not exceed the first day of the
calendar month following the Annuitant's 85th 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. 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. Such rate is not less than 3% of
interest per year. Interest is credited to your Account Value between the date
Account Value is applied to an annuity option and the Annuity Date. Annuity
options in addition to those shown are available with our consent. The minimum
initial amount payable is the minimum initial annuity amount we allow under our
then current rules. Should you wish to receive a lump sum payment, you must
request to surrender your Annuity prior to the Annuity Date (see "Surrender").
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below. Except where a lower amount is
required by law, the minimum monthly annuity payment is $50.
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. No minimum number of payments is guaranteed
under this option. 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. After the
first death, income is payable 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 (a) times (b);
where: (a) is 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; and (b) is 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. Generally 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 are 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, the Company is
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 Company; 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 Company.
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
Valuation Period such transactions are so scheduled. "Scheduled" transactions
include transfers under a dollar cost averaging program, Systematic Withdrawals,
Minimum Distributions, transfers previously scheduled with us at our Office
pursuant to any on-going rebalancing, asset allocation or similar program, and
annuity payments.
(2) We price "unscheduled" transfers and partial withdrawals as of the
Valuation Period we receive In Writing, 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 and death benefits as of the Valuation Period
we receive at our Office all materials we require for such transactions and such
materials are satisfactory to us (see "Surrenders" and "Death Benefits").
The pricing of transfers and distributions includes the determination of the
applicable Unit Price for the Units transferred or distributed. Unit Prices may
change each Valuation Period to reflect the investment performance of the
Sub-accounts. Payment is subject to our right to defer transactions for a
limited time 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
fixed or adjustable annuity payments.
We will vote shares of the underlying mutual fund 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 portfolio will be determined
as of the record date for such underlying mutual fund portfolio as chosen by its
board of trustees or 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 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 Sub-accounts 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.
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 as soon as possible and no later than the date
below to assure proper accounting to your Annuity. For transactions for which we
immediately send confirmations, we assume all transactions are accurate unless
you notify us otherwise within 10 days from the date you receive the
confirmation. For transactions that are only confirmed on the quarterly
statement, we assume all transactions are accurate unless you notify us within
10 days from the date you receive the quarterly statement. All transactions
confirmed immediately or by quarterly statement are deemed conclusive after the
applicable 10 day period. 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.
THE COMPANY: American Skandia Life Assurance Corporation (ASLAC) is a stock
insurance company domiciled in Connecticut with licenses in all 50 states. It is
a wholly-owned subsidiary of American Skandia Investment Holding Corporation
(ASIHC), whose ultimate parent is Skandia Insurance Company Ltd., a Swedish
company. The Company markets its products to broker-dealers and financial
planners through an internal field marketing staff. In addition, the Company
markets through and in conjunction with financial institutions such as banks
that are permitted directly, or through affiliates, to sell annuities.
The Company is in the business of issuing annuity policies, and has been so
since its business inception in 1988. The Company currently offers the following
annuity products: a) certain deferred annuities that are registered with the
Securities and Exchange Commission, including variable annuities and fixed
interest rate annuities that include a market value adjustment feature; b)
certain other fixed deferred annuities that are not registered with the
Securities and Exchange Commission; and c) fixed and adjustable immediate
annuities.
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. ASM, Inc. may offer Annuities directly to potential
purchasers. 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.
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 and the source of performance information
regarding the underlying mutual funds 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.
Performance information is based on past performance only and is no indication
of future performance. Performance should not be considered a representation of
performance in the future. Performance 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 fund portfolios and upon
prevailing market conditions and the response of the underlying mutual fund
portfolios to such conditions. Actual performance will also depend on changes in
the expenses of the underlying mutual fund portfolios. Such changes are
reflected, in turn, in the Sub-account which invest in such underlying mutual
fund portfolio. In addition, the amount of charges assessed against each
Sub-account will affect Sub-account 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. See "Calculation of Performance Data" in the Statement of
Additional Information.
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 maximum sales charge or maximum
maintenance fees.
Advertisements we distribute may also compare performance 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 underlying mutual fund portfolios. 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 or ratings may
help you in evaluating our ability to meet our obligations to 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 as an agent or
nominal owner for a natural person who is the beneficial owner. 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: Generally, 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
policyholder 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.
Amounts received under a contract on its complete surrender, redemption, or
maturity are includible in gross income to the extent that they exceed the cost
of the contract, i.e., they exceed the total premiums or other consideration
paid for the contract minus amounts received under the contract that were not
reportable as gross income.
Loans, Assignments and Pledges: Any amount received directly
or indirectly as a loan from, or 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.
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 income
tax purposes as a distribution.
Penalty on Distributions: Subject to certain exceptions, any
distribution from an annuity not used in conjunction with qualified plans 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 received
as an annuity on or after the annuity start date 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.
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.
Estate and Gift Tax Considerations: You should obtain
competent tax advice with respect to possible federal and state gift tax
consequences flowing from the ownership and transfer of annuities.
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 annuity payout for a period
not to exceed the lesser of 6 months or the period permitted by law. If we defer
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 separate accounts; (c) deregister Separate Account
B under the 1940 Act; (d) operate Separate Account B as a management investment
company under the 1940 Act or in any other form permitted by law; (e) make
changes required by any change in the Securities Act of 1933, the Exchange Act
of 1934 or the 1940 Act; (f) make changes that are necessary to maintain the tax
status of your Annuity under the Code; (g) make changes required by any change
in other Federal or state laws relating to retirement annuities or annuity
contracts; and (h) discontinue offering any variable investment option at any
time.
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 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.
Legal Proceedings: As of the date of this Prospectus, neither we nor
ASM, Inc. were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION: The following are the
contents of the Statement of Additional Information:
(1)General Information Regarding American Skandia Life Assurance
Corporation
(2) Principal Underwriter
(3) Calculation of Performance Data
(4) Unit Price Determinations
(5) Independent Auditors
(6) Legal Experts
(7) Financial Statements
<PAGE>
APPENDIX A
APPENDIX A 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
grade), mortgage-backed and asset-backed securities, zero-coupon bonds,
indexed/structured notes, high-grade commercial paper, certificates of deposit
and repurchase agreements. Securities of foreign issuers, including securities
of foreign governments and Euromarket securities, also may be purchased.
Although it is the general policy of the JanCap Growth Portfolio to purchase and
hold securities for capital growth, changes will be made whenever the
Portfolio's sub-advisor believes they are advisable. Because investment changes
usually will be made without reference to the length of time a security has been
held, a significant number of short-term transactions may result.
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. 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 (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 to be high risk. The fixed rate corporate debt obligations
in which the Portfolio intends to invest 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 are regarded as
predominantly 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 or securities
that may be in default. 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.
AST Money Market Portfolio: The investment objective of the AST Money Market
Portfolio are to maximize current income and maintain high levels of liquidity.
The 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.
T. Rowe Price International Equity Portfolio: The investment objective of the T.
Rowe Price International Equity Portfolio is to seek a 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. The Portfolio may also
invest in a variety of other equity-related securities, such as preferred
stocks, warrants, and convertible securities, as well as corporate and
governmental debt securities, when considered consistent with the Portfolio's
investment objective and program.
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 investment objective of the T.
Rowe Price International Bond Portfolio is 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. 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 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.
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. 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 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.
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. The Portfolio may engage
in short-term trading and therefore normally will have annual portfolio turnover
rates which are considered to be high. Investment in such companies may involve
greater risk than is associated with more established companies. The Portfolio
may invest in convertible securities, preferred stocks, bonds, debentures, and
other corporate obligations, when these investments offer opportunities for
capital appreciation.
Founders Passport Portfolio: The investment objective of the Founders Passport
Portfolio is to seek 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. Investments in small and
medium-sized companies involve greater risk than is customarily associated with
more established companies.
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 which are considered to be high.
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 at least 65% 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. 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 higher than that of
other investment companies seeking current income with capital growth as a
secondary consideration.
PIMCO Total Return Bond Portfolio: The investment objective of the PIMCO Total
Return Bond Portfolio is to seek to maximize total return, consistent with
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 10% of its assets in fixed income
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. 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, such as Taiwan, South Korea and
Mexico). Investing in the securities of issuers in any foreign country involves
special risks. The Portfolio will limit its investments in newly industrialized
countries to 10% of its assets.
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; 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, such as Taiwan, South Korea
and Mexico). Investing in the securities of issuers in any foreign country
involves special risks. The Portfolio will limit its investments in newly
industrialized countries to 5% of its assets.
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
traded in foreign markets. The Portfolio may also purchase ADRs and 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.
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.
Smaller companies may present greater opportunities for capital appreciation,
but may also involve greater 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 and to protect
against changes in the value of specific portfolio positions.
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 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 and other factors. However, under normal
market conditions, it is expected that at least 25% of the Portfolio's total
assets will be invested in fixed income securities, which for this purpose
includes debt securities, preferred stocks and that portion of the value of
convertible securities attributable to the fixed income characteristics of those
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 ADRs and
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 total 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. 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
Alger American Small Capitalization 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 within the Russell 2000 Growth Index or the S&P SmallCap 600
Index, updated quarterly. Both indexes are broad indexes of small capitalization
stocks. 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 this combined range, 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. 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 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 Advisers Managers
Trust in which the portfolio invests. Therefore, the following information is
presented in terms of the applicable series of Neuberger & Berman Advisers
Management Trust).
AMT Partners Portfolio: The investment objective of the AMT Partners Portfolio
is to seek capital growth. This investment objective is non-fundamental.
AMT Partners Portfolio invests primarily in common stocks of medium to large
capitalization established companies, using the value-oriented investment
approach. The Portfolio 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
including a low price-to-earnings ratios, consistent cash flow, and the
company's track record through all parts of the market cycle.
AMT Partners Portfolio may invest up to 15% of its net assets, measured at the
time of investment, 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 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 emerging markets
companies. Under normal conditions, the Emerging Markets Fund maintains
investments in at least six emerging market countries at all times and invests
no more than 35% of its total assets in any one emerging market country. The
Manager currently regards the following to be emerging market countries: Latin
American (Argentina, Brazil, Chile, Colombia, Costa Rica, Jamaica, Mexico, Peru,
Trinidad and Tobago, Uruguay, Venezuela); Asia (Bangladesh, China, India,
Indonesia, Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka,
Taiwan, Thailand, Vietnam); southern and eastern Europe (Czech Republic, Greece,
Hungary, Poland, Portugal, Russia, Turkey); the Middle East (Israel, Jordan);
and Africa (Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, South Africa,
Tunisia, Zimbabwe). In the future, the Fund may invest in other emerging market
countries.
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, 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. The Fund's aims are to invest in those countries that are expected to
have the highest risk/reward trade-off when incorporated into a total portfolio
context. 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 derivative 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.
This Fund may invest in certain debt securities issued by the governments of
emerging market countries that are, or may be eligible for, conversion into
investments in emerging market companies under debt conversion programs
sponsored by such governments. If such securities are convertible to equity
investments, the Fund deems them to be equity derivative securities.
<PAGE>
This prospectus contains a short description of the contents
of the Statement of Additional Information. You have the right
to receive from us such Statement of Additional Information.
To do so, please complete the following, detach it and forward
it to us at:
American Skandia Life Assurance Corporation
Attention: Concierge Desk
For Written Requests:
P.O. Box 883
Shelton, Connecticut 06484
For Electronic Requests:
[email protected]
For Requests by Phone:
1-(800)-752-6342
================================================================================
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER
DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN THE PROSPECTUS.
WFEE-PROS (5/97)
================================================================================
================================================================================
-----------------------------------------------------------------
(print your name)
-----------------------------------------------------------------
(address)
-----------------------------------------------------------------
(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
[email protected]
Issued by: Serviced by:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 1-800-752-6342
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
STATEMENT OF ADDITIONAL lNFORMATION
The investment options hereunder, registered under the Securities Act of 1933
and the Investment Company Act of 1940, are issued by AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION VARIABLE ACCOUNT B (CLASS 2 SUB-ACCOUNTS) and AMERICAN
SKANDIA LIFE ASSURANCE CORPORATION
THIS STATEMENT OF ADDITIONAL INFORMATlON IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTlON WITH THE PROSPECTUS FOR THE
AMERICAN SKANDIA LIFE VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW
BEFORE lNVESTING. FOR A COPY OF THE PROSPECTUS SEND A WRITTEN REQUEST TO
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, P.O. BOX 883, SHELTON, CONNECTICUT
06484-0883, OR TELEPHONE 1-800-752-6342. OUR ELECTRONIC MAIL ADDRESS IS
[email protected].
Date of Prospectus: May 1, 1997
Date of Statement of Additional Information: May 1, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Item Page
General Information Regarding American Skandia Life Assurance Corporation 1
Principal Underwriter 1
Calculation of Performance Data 2
Unit Price Determinations 7
Independent Auditors 7
Legal Experts 7
Financial Statements - 7
</TABLE>
GENERAL INFORMATION REGARDING AMERICAN SKANDIA LIFE ASSURANCE CORPORATION:
American Skandia Life Assurance Corporation ("we", "our" or "us") is a
wholly-owned subsidiary of American Skandia Investment Holding Corporation
(formerly Skandia U.S. Investment Holding Corporation) whose indirect parent is
Skandia Insurance Company Ltd. (formerly Skandia Group Insurance Company Ltd.).
Skandia Insurance Company Ltd. is part of a group of companies whose predecessor
commenced operations in 1855. Skandia Insurance Company Ltd. is a major
worldwide insurance company operating from Stockholm, Sweden which owns and
controls, directly or through subsidiary companies, numerous insurance and
related companies. We are organized as a Connecticut stock life insurance
company, and are subject to Connecticut law governing insurance companies. Our
mailing address is P.O. Box 883, Shelton, Connecticut 06484.
PRINCIPAL UNDERWRITER: American Skandia Marketing, Incorporated ("ASM, Inc.")
serves as principal underwriter for the Annuities. We, ASM, Inc. and American
Skandia Investment Services, Incorporated ("ASISI"), the investment manager of
the American Skandia Trust, are wholly-owned subsidiaries of American Skandia
Investment Holding Corporation. Most of the Class 1 Sub-accounts of Separate
Account B invest in portfolios offered by American Skandia Trust.
AC-SAI (05/97)
<PAGE>
Annuities may be sold by agents of ASM, Inc. or agents of securities brokers or
insurance brokers who enter into agreements with ASM, Inc. and who are legally
qualified under federal and state law to sell the Annuities in those states
where the Annuities are to be offered. The Annuities are offered on a continuous
basis. ASM, Inc. is registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker dealer and is a member of the
National Association of Securities Dealers, Inc. ASM, Inc. currently receives no
underwriting commissions.
CALCULATION OF PERFORMANCE DATA: We may advertise the performance of
Sub-accounts using two types of measures. These measures are "current and
effective yield", which may be used for money market type Sub-accounts, and
"total return", which may be used with other types of Sub-accounts. The
following descriptions provide details on how we calculate these measures for
Sub-accounts:
(1) Current and effective yield: The current yield of the AST Money
Market 2 Sub-account is calculated based upon a seven day period ending on the
date of calculation. The current yield of this Sub-account is computed by
determining the change (exclusive of capital changes) in the Account Value of a
hypothetical pre-existing allocation by an Owner to this Sub-account (the
"Hypothetical Allocation") having a balance of one Unit at the beginning of the
period, subtracting a hypothetical maintenance fee, and dividing such net change
in the Account Value of the Hypothetical Allocation by the Account Value of the
Hypothetical Allocation at the beginning of the same period to obtain the base
period return, and multiplying the result by (365/7). The resulting figure will
be carried to at least the nearest l00th of one percent.
This Sub-account computes effective compound yield according to the method
prescribed by the Securities and Exchange Commission. The effective yield
reflects the reinvestment of net income earned daily on assets of this
Sub-account. Net investment income for yield quotation purposes will not include
either realized or capital gains and losses or unrealized appreciation and
depreciation.
(2) Total Return: Total return for the other Sub-accounts is computed
by using the formula:
P(1+T)n = ERV
where:
P = a hypothetical allocation of $1,000;
T = average annual total return;
n = the number of years over which total return is being measured; and
ERV = the Account Value of the hypothetical $1,000 payment as of the
end of the period over which total return is being measured.
Some of the underlying mutual fund portfolios existed prior to the inception of
the Sub-accounts. Performance quoted in advertising regarding such Sub-accounts
may indicate 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.
The performance quoted regarding the Sub-accounts is "Standard Total Return".
Standard Total Return is shown below assuming the maximum sales charge applies
in all cases. However, performance figures are provided on the basis of: (a) the
maintenance fee applying at issue and in all subsequent years; and (b) not
applying at any time (the initial Purchase Payment is greater than $50,000 and
the Account Value at the beginning of each Annuity Year is above that amount).
Performance of the Sub-accounts quoted in advertisements for annuity plans that
assess less than the maximum sales charge will be based on the sales charge for
the applicable plan.
In addition to quotation in an advertisement of Standard Total Return, we may
quote in the same advertisements the performance of the Sub-accounts on the
basis of "Non-standard Total Return". "Non-standard Total Return" is based on
the return of the Sub-accounts assuming no sales charge and no maintenance fee.
Total Return Percentages For Periods Of 1, 3, 5 and 10 Years As Well As
Inception-to-date ("ITD"), With All Periods Ending December 31, 1996
Standard Total Return information is provided below only for those Sub-accounts
which invest in underlying mutual fund portfolios that were operational as of
December 31, 1996. The inception date for the underlying mutual fund portfolios
and the performance of such portfolios prior to the inception dates of the
Sub-accounts shown are provided by the underlying mutual funds. The return shown
for Sub-accounts which began operations after the applicable underlying mutual
fund portfolio is hypothetical and is based on performance information provided
by such funds. "N/A" means "not applicable" and indicates that the underlying
mutual fund portfolio was not in operation for the applicable period. The
Annuity was designed initially to be used with investment allocation services
provided by an Advisor. From the date of the initial offering on January 6, 1993
until July 1, 1994 a 1.00% investment allocation services charge was assessed
against the Sub-accounts. As of July 1, 1994 the investment allocation services
charge is no longer assessed against the Sub-accounts. The performance
information below reflects the impact of the 1.00% investment allocation
services charge for the period it was assessed.
<TABLE>
<CAPTION>
Standard Total Return
(Assuming maximum sales charge and maximum maintenance fees)
Incep-
1 3 5 10 tion-to-
Yr. Yr. Yr. Yr. Date
<S> <C> <C> <C> <C> <C>
JanCap Growth 2 24.87% 17.08% N/A N/A 16.20%
AST Janus Overseas Growth 2 N/A N/A N/A N/A -1.65%
LA Growth and Income 2 15.41% 14.03% N/A N/A 13.02%
Fed Utility Income 2 8.62% 7.51% N/A N/A 8.11%
Fed High Yield 2 10.61% 7.71% N/A N/A 7.74%
T. Rowe Price Asset Allocation 2 10.18% 9.62% N/A N/A 9.66%
T. Rowe Price International Equity 2 11.17% 5.02% N/A N/A 5.05%
T. Rowe Price Natural Resources 2 27.17% N/A N/A N/A 22.57%
T. Rowe Price International Bond 2(1) 3.26% N/A N/A N/A 3.26%
T. Rowe Price Small Company Value 2 N/A N/A N/A N/A -1.65%
Founders Capital Appreciation 2 16.85% 17.86% N/A N/A 17.94%
Founders Passport 2(2) 9.96% N/A N/A N/A 7.49%
INVESCO Equity Income 2 13.99% 12.12% N/A N/A 12.18%
PIMCO Total Return Bond 2 0.79% 4.38% N/A N/A 4.40%
PIMCO Limited Maturity Bond 2 1.25% N/A N/A N/A 3.09%
Berger Capital Growth 2 13.26% N/A N/A N/A 16.04%
RS Value + Growth 2 N/A N/A N/A N/A 7.44%
AST Putnam Value Growth & Income 2 N/A N/A N/A N/A -1.65%
AST Putnam International Equity 2(3) 6.80% 5.53% 7.48% N/A 9.38%
AST Putnam Balanced 2(4) 8.33% 9.02% N/A N/A 8.74%
Twentieth Century Strategic Balanced 2 N/A N/A N/A N/A -1.65%
Twentieth Century International Growth 2 N/A N/A N/A N/A -1.65%
AA Growth 2 10.38% 14.18% 14.92% N/A 17.17%
AA Small Capitalization 2 1.52% 10.92% 9.39% N/A 18.63%
AA MidCap Growth 2 8.98% 14.74% N/A N/A 22.10%
NB Partners 2 26.04% N/A N/A N/A 19.67%
MV Emerging Markets 2 N/A N/A N/A N/A 4.18%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Standard Total Return
(Assuming maximum sales charge and no maintenance fee)
Incep-
1 3 5 10 tion-to-
Yr. Yr. Yr. Yr. Date
<S> <C> <C> <C> <C> <C>
JanCap Growth 2 25.06% 17.26% N/A N/A 16.41%
AST Janus Overseas Growth 2 N/A N/A N/A N/A -1.50%
LA Growth and Income 2 15.58% 14.20% N/A N/A 13.20%
Fed Utility Income 2 8.78% 7.67% N/A N/A 8.28%
Fed High Yield 2 10.77% 7.87% N/A N/A 7.90%
T. Rowe Price Asset Allocation 2 10.34% 9.78% N/A N/A 9.82%
T. Rowe Price International Equity 2 11.33% 5.18% N/A N/A 5.21%
T. Rowe Price Natural Resources 2 27.36% N/A N/A N/A 22.79%
T. Rowe Price International Bond 2(1) 3.42% N/A N/A N/A 3.44%
T. Rowe Price Small Company Value 2 N/A N/A N/A N/A -1.50%
Founders Capital Appreciation 2 17.02% 18.04% N/A N/A 18.12%
Founders Passport 2(2) 10.12% N/A N/A N/A 7.68%
INVESCO Equity Income 2 14.16% 12.29% N/A N/A 12.35%
PIMCO Total Return Bond 2 0.94% 4.54% N/A N/A 4.56%
PIMCO Limited Maturity Bond 2 1.40% N/A N/A N/A 3.28%
Berger Capital Growth 2 13.43% N/A N/A N/A 16.28%
RS Value + Growth 2 N/A N/A N/A N/A 7.60%
AST Putnam Value Growth & Income 2 N/A N/A N/A N/A -1.50%
AST Putnam International Equity 2(3) 6.96% 5.69% 7.64% N/A 9.55%
AST Putnam Balanced 2(4) 8.49% 9.18% N/A N/A 8.91%
Twentieth Century Strategic Balanced 2 N/A N/A N/A N/A -1.50%
Twentieth Century International Growth 2 N/A N/A N/A N/A -1.50%
AA Growth 2 10.55% 14.35% 15.09% N/A 17.34%
AA Small Capitalization 2 1.67% 11.09% 9.55% N/A 18.83%
AA MidCap Growth 2 9.14% 14.91% N/A N/A 22.30%
NB Partners 2 26.23% N/A N/A N/A 19.86%
MV Emerging Markets 2 N/A N/A N/A N/A 4.33%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-standard Total Return
(Assumes no sales charge or maintenance fees)
Incep-
1 3 5 10 tion-to-
Yr. Yr. Yr. Yr. Date
<S> <C> <C> <C> <C> <C>
JanCap Growth 2 26.94% 17.85% N/A N/A 16.83%
AST Janus Overseas Growth 2 N/A N/A N/A N/A 0.00%
LA Growth and Income 2 17.33% 14.78% N/A N/A 13.57%
Fed Utility Income 2 10.42% 8.21% N/A N/A 8.73%
Fed High Yield 2 12.44% 8.41% N/A N/A 8.45%
T. Rowe Price Asset Allocation 2 12.01% 10.33% N/A N/A 10.38%
T. Rowe Price International Equity 2 13.02% 5.71% N/A N/A 5.74%
T. Rowe Price Natural Resources 2 29.28% N/A N/A N/A 23.90%
T. Rowe Price International Bond 2(1) 4.98% N/A N/A N/A 4.02%
T. Rowe Price Small Company Value 2 N/A N/A N/A N/A 0.00%
Founders Capital Appreciation 2 18.79% 18.63% N/A N/A 18.71%
Founders Passport 2(2) 11.79% N/A N/A N/A 8.66%
INVESCO Equity Income 2 15.88% 12.86% N/A N/A 12.91%
PIMCO Total Return Bond 2 2.46% 5.06% N/A N/A 5.09%
PIMCO Limited Maturity Bond 2 2.93% N/A N/A N/A 4.22%
Berger Capital Growth 2 15.15% N/A N/A N/A 17.08%
RS Value + Growth 2 N/A N/A N/A N/A 9.24%
AST Putnam Value Growth & Income 2 N/A N/A N/A N/A 0.00%
AST Putnam International Equity 2(3) 8.58% 6.22% 7.97% N/A 9.77%
AST Putnam Balanced 2(4) 10.13% 9.73% N/A N/A 9.36%
Twentieth Century Strategic Balanced 2 N/A N/A N/A N/A 0.00%
Twentieth Century International Growth 2 N/A N/A N/A N/A 0.00%
AA Growth 2 12.22% 14.92% 15.44% N/A 17.57%
AA Small Capitalization 2 3.21% 11.65% 9.88% N/A 19.05%
AA MidCap Growth 2 10.79% 15.49% N/A N/A 22.80%
NB Partners 2 28.13% N/A N/A N/A 20.51%
MV Emerging Markets 2 N/A N/A N/A N/A 5.92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-standard Total Return
(Assumes no sales charge and maximum maintenance fees)
Incep-
1 3 5 10 tion-to-
Yr. Yr. Yr. Yr. Date
<S> <C> <C> <C> <C> <C>
JanCap Growth 2 26.76% 17.67% N/A N/A 16.62%
AST Janus Overseas Growth 2 N/A N/A N/A N/A -0.15%
LA Growth and Income 2 17.15% 14.61% N/A N/A 13.39%
Fed Utility Income 2 10.26% 8.05% N/A N/A 8.55%
Fed High Yield 2 12.28% 8.25% N/A N/A 8.29%
T. Rowe Price Asset Allocation 2 11.84% 10.17% N/A N/A 10.21%
T. Rowe Price International Equity 2 12.85% 5.55% N/A N/A 5.58%
T. Rowe Price Natural Resources 2 29.09% N/A N/A N/A 23.68%
T. Rowe Price International Bond 2(1) 4.82% N/A N/A N/A 3.85%
T. Rowe Price Small Company Value 2 N/A N/A N/A N/A -0.15%
Founders Capital Appreciation 2 18.61% 18.46% N/A N/A 18.54%
Founders Passport 2(2) 11.62% N/A N/A N/A 8.47%
INVESCO Equity Income 2 15.71% 12.69% N/A N/A 12.74%
PIMCO Total Return Bond 2 2.31% 4.91% N/A N/A 4.93%
PIMCO Limited Maturity Bond 2 2.78% N/A N/A N/A 4.03%
Berger Capital Growth 2 14.98% N/A N/A N/A 16.84%
RS Value + Growth 2 N/A N/A N/A N/A 9.07%
AST Putnam Value Growth & Income 2 N/A N/A N/A N/A -0.15%
AST Putnam International Equity 2(3) 8.42% 6.06% 7.81% N/A 9.60%
AST Putnam Balanced 2(4) 9.97% 9.57% N/A N/A 9.19%
Twentieth Century Strategic Balanced 2 N/A N/A N/A N/A -0.15%
Twentieth Century International Growth 2 N/A N/A N/A N/A -0.15%
AA Growth 2 12.05% 14.75% 15.26% N/A 17.39%
AA Small Capitalization 2 3.06% 11.48% 9.72% N/A 18.85%
AA MidCap Growth 2 10.62% 15.32% N/A N/A 22.60%
NB Partners 2 27.94% N/A N/A N/A 20.32%
MV Emerging Markets 2 N/A N/A N/A N/A 5.76%
</TABLE>
(1) Prior to May 1, 1996, Scudder, Stevens & Clark, Inc. served as Sub-advisor
to the Portfolio (formerly, the AST Scudder International Bond Portfolio). As of
May 1, 1996, Rowe Price-Fleming International, Inc. has served as Sub-advisor to
the Portfolio. The performance information provided in the above chart, computed
for the period May 3, 1994 (commencement of operations) to May 1, 1996, reflects
that of the Portfolio as sub-advised by Scudder, Stevens & Clark, Inc. Such
performance information is historical and is not intended to indicate future
performance of the Portfolio.
(2) As of October 15, 1996, Founders Asset Management, Inc. has served as
Sub-advisor to the Portfolio, now named the Founders Passport Portfolio. The
performance information provided in the above chart reflects that of the
Portfolio as sub-advised by the prior Sub-advisor, Seligman Henderson Co.,
computed as of June 30, 1996. Such performance information is historical and is
not intended to indicate future performance of the Portfolio.
(3) As of October 15, 1996, Putnam Investment Management, Inc. has served as
Sub-advisor to the Portfolio, now named the AST Putnam International Equity
Portfolio. The performance information provided in the above chart reflects that
of the Portfolio as sub-advised by the prior Sub-advisor, Seligman Henderson
Co., computed as of June 30, 1996. Such performance information is historical
and is not intended to indicate future performance of the Portfolio.
(4) As of October 15, 1996, Putnam Investment Management, Inc. has served as
Sub-advisor to the Portfolio, now named the AST Putnam Balanced Portfolio. The
performance information provided in the above chart reflects that of the
Portfolio as sub-advised by the prior Sub-advisor, Phoenix Investment Counsel,
Inc., computed as of June 30, 1996. Such performance information is historical
and is not intended to indicate future performance of the Portfolio.
Some of the underlying portfolios may be subject to an expense reimbursement or
waiver that in the absence of such reimbursement or waiver would reduce the
portfolio's performance.
The performance quoted in any advertising should not be considered a
representation of the performance of any Sub-accounts in the future since
performance 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 fund portfolios and upon prevailing market conditions and the
response of the underlying mutual fund portfolios to such conditions. Actual
performance will also depend on changes in the expenses of the underlying mutual
fund portfolios. In addition, the amount of charges against each Sub-account
will affect performance.
The information provided by these measures may be useful in reviewing
the performance of the Sub-accounts, and for providing a basis for comparison
with other annuities. These measures may be less useful in providing a basis for
comparison with other investments that neither provide some of the benefits of
such annuities nor are treated in a similar fashion under the Internal Revenue
Code.
UNIT PRICE DETERMINATIONS: For each Sub-account the initial Unit Price is
$10.00. The Unit Price for each subsequent period is the net investment factor
for that period, multiplied by the Unit Price for the immediately preceding
Valuation Period. The Unit Price for a Valuation Period applies to each day in
the period. The net investment factor is an index that measures the investment
performance of and charges assessed against a Sub-account from one Valuation
Period to the next. The net investment factor for a Valuation Period is: (a)
divided by (b), less (c) where:
(a) is the net result of:
(1) the net asset value per share of the underlying mutual
fund portfolio shares held by that Sub-account at the end of the current
Valuation Period plus the per share amount of any dividend or capital gain
distribution declared and unpaid by the underlying mutual fund portfolio during
that Valuation Period; plus or minus
(2) any per share charge or credit during the Valuation Period
as a provision for taxes attributable to the operation or maintenance of that
Sub-account.
(b) is the net result of:
(1) the net asset value per share plus any declared and unpaid
dividends per share of the underlying mutual fund portfolio shares held in that
Sub-account at the end of the preceding Valuation Period; plus or minus
(2) any per share charge or credit during the preceding
Valuation Period as a provision for taxes attributable to the operation or
maintenance of that Sub-account.
(c) is the mortality and expense risk charges and the administration
charge.
We value the assets in each Sub-account at their fair market value in accordance
with accepted accounting practices and applicable laws and regulations. The net
investment factor may be greater than, equal to, or less than one.
INDEPENDENT AUDITORS: Deloitte & Touche LLP, Two World Financial Center, New
York, New York 10281-1433, independent auditors, have audited the financial
statements of American Skandia Life Assurance Corporation and American Skandia
Life Assurance Corporation Variable Account B (Class 2 Sub-accounts). Audited
financial statements regarding American Skandia Life Assurance Corporation as of
December 31, 1996 and 1995, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and for Variable Account B (Class 2 Sub-accounts) are
included herein. The financial statements included herein have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report herein,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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.
FINANCIAL STATEMENTS FOR SEPARATE ACCOUNT B (CLASS 2 SUB-ACCOUNTS): The
financial statements which follow are those of American Skandia Life Assurance
Corporation Variable Account B (Class 2 Sub-accounts) for the year ended
December 31, 1996. There are other Sub-accounts included in Variable Account B
that are not available in the product described in the applicable prospectus.
To the extent and only to the extent that any statement in a document
incorporated by reference into this Statement of Additional Information is
modified or superseded by a statement in this Statement of Additional
Information or in a later-filed document, such statement is hereby deemed so
modified or superseded and not part of this Statement of Additional Information.
We furnish you without charge a copy of any or all the documents incorporated by
reference in this Statement of Additional Information, including any exhibits to
such documents which have been specifically incorporated by reference. We do so
upon receipt of your written or oral request. Please address your request to
American Skandia Life Assurance Corporation, Attention: Concierge Desk, P.O. Box
883, Shelton, Connecticut, 06484. Our phone number is 1-(800) 752-6342. You may
also forward such a request electronically to our Customer Service Department at
[email protected].
<PAGE>
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statements of financial condition
of American Skandia Life Assurance Corporation and subsidiary (a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1996 and 1995,
and the related consolidated statements of operations, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Skandia Life
Assurance Corporation and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche, LLP
New York, New York
March 10, 1997
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
1996 1995
ASSETS
Investments:
Fixed maturities - at amortized cost $ 10,090,369 $ 10,112,705
Fixed maturities - at market value 87,369,724 0
Investment in mutual funds - at market value 2,637,731 1,728,875
Short-term investments - at amortized cost 18,100,000 15,700,000
Total investments 118,197,824 27,541,580
Cash and cash equivalents 14,199,412 13,146,384
Accrued investment income 1,958,546 194,074
Fixed assets 229,780 82,434
Deferred acquisition costs 438,640,918 270,222,383
Reinsurance receivable 2,167,818 1,988,042
Receivable from affiliates 691,532 860,991
Income tax receivable - current 0 563,850
Income tax receivable - deferred 17,217,582 0
State insurance licenses 4,712,500 4,862,500
Other assets 2,207,171 1,589,006
Separate account assets 7,734,439,793 4,699,961,646
Total Assets $ 8,334,662,876 $ 5,021,012,890
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 36,245,936 $ 30,493,018
Annuity policy reserves 21,238,749 19,386,490
Income tax payable 1,124,151 0
Accounts payable and accrued expenses 65,198,965 32,816,517
Payable to affiliates 685,724 314,699
Future fees payable to parent 47,111,936 0
Payable to reinsurer 79,000,262 64,995,470
Short-term borrowing-affiliate 10,000,000 10,000,000
Surplus notes 213,000,000 103,000,000
Deferred contract charges 272,329 332,050
Separate account liabilities 7,734,439,793 4,699,961,646
Total Liabilities 8,208,317,845 4,961,299,890
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 122,250,117 81,874,666
Unrealized investment gains and losses, net (319,631) 111,359
Foreign currency translation, net (263,706) (328,252)
Retained earnings (deficit) 2,678,251 (23,944,773)
Total Shareholder's Equity 126,345,031 59,713,000
Total Liabilities and Shareholder's Equity $ 8,334,662,876 $ 5,021,012,890
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
------------ ------------ ------------
REVENUES:
Annuity charges and fees $ 69,779,522 $ 38,837,358 $ 24,779,785
Fee income 16,419,690 6,205,719 2,111,801
Net investment income 1,585,819 1,600,674 1,300,217
Annuity premium income 125,000 0 70,000
Net realized capital gains/(losses) 134,463 36,774 (1,942)
Other 34,154 64,882 24,550
------------ ------------ ------------
Total Revenues 88,078,648 46,745,407 28,284,411
------------ ------------ ------------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 613,594 555,421 369,652
Increase/(decrease) in annuity policy reserves 634,540 (6,778,756) 5,766,003
Cost of minimum death benefit reinsurance 2,866,835 2,056,606 0
Return credited to contractowners 672,635 10,612,858 (516,730)
------------ ------------ ------------
4,787,604 6,446,129 5,618,925
------------ ------------ ------------
Expenses:
Underwriting, acquisition and other insurance expenses 49,765,661 35,820,524 18,792,720
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 10,790,716 6,499,414 3,615,845
------------ ------------ ------------
60,706,377 42,469,938 22,558,565
------------ ------------ ------------
Total Benefits and Expenses 65,493,981 48,916,067 28,177,490
------------ ------------ ------------
Income (loss) from operations before federal income taxes 22,584,667 (2,170,660) 106,921
Income tax (benefit) expense (4,038,357) 397,360 247,429
------------ ------------ ------------
Net income (loss) $ 26,623,024 $ (2,568,020) $ (140,508)
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
----------- ----------- -----------
Additional paid-in capital:
Balance at beginning of year 81,874,666 71,623,932 71,623,932
Additional contributions 40,375,451 10,250,734 0
----------- ----------- -----------
Balance at end of year 122,250,117 81,874,666 71,623,932
----------- ----------- -----------
Unrealized investment gains and losses:
Balance at beginning of year 111,359 (41,655) 0
Change in unrealized investment gains and losses, net (430,990) 153,014 (41,655)
----------- ----------- -----------
Balance at end of year (319,631) 111,359 (41,655)
Foreign currency translation:
Balance at beginning of year (328,252) 0 0
Change in foreign currency translation, net 64,546 (328,252) 0
----------- ----------- -----------
Balance at end of year (263,706) (328,252) 0
----------- ----------- -----------
Retained earnings (deficit):
Balance at beginning of year (23,944,773) (21,376,753) (21,236,245)
Net income (loss) 26,623,024 (2,568,020) (140,508)
----------- ----------- -----------
Balance at end of year 2,678,251 (23,944,773) (21,376,753)
----------- ----------- -----------
TOTAL SHAREHOLDER'S EQUITY $ 126,345,031 $ 59,713,000 $ 52,205,524
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1996 1995 1994
--------------- --------------- ---------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 26,623,024 $ (2,568,020) $ (140,508)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Increase/decrease) in annuity policy reserves 1,852,259 (4,667,765) 6,004,603
Increase/(decrease) in policy contract claims
Amortization of bond discount 27,340 23,449 21,964
Amortization of state insurance licenses 150,000 150,000 150,000
Change in due to/from affiliates 540,484 (347,884) 256,779
Change in income tax payable/receivable 1,688,001 (600,849) 36,999
Increase in other assets (765,511) (409,927) (742,041)
Increase in accrued investment income (1,764,472) (20,420) (44,847)
Increase in reinsurance receivable (179,776) (1,988,042) 0
Increase in accounts payables and accrued expenses 32,382,448 1,063,137 13,396,502
Increase in deferred acquisition costs (168,418,535) (96,212,774) (83,986,073)
Decrease in deferred contract charges (59,721) (117,654) (71,117)
Increase in foreign currency translation, net (77,450) (328,252) 0
Deferred income taxes (16,903,477) 0 0
Realized (gain)/loss on sale of investments (134,463) (36,774) 1,942
------------- -------------- -------------
Net cash used in operating activities (125,039,849) (106,061,775) (65,115,797)
------------- ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturities (96,812,903) (614,289) (1,989,120)
Proceeds from sales and maturities of available-for-sale fixed maturities 8,732,390 0 0
Proceeds from maturities of held-to-maturity fixed maturities 215,000 100,000 2,010,000
Purchase of shares in mutual funds (2,160,347) (1,566,194) (922,822)
Proceeds from sale of shares in mutual funds 1,273,640 867,744 38,588
Net sale (purchase) of short-term investments (2,400,000) 8,300,000 (4,600,000)
Investments in separate accounts (2,789,361,685) (1,609,415,439) (1,365,775,177)
------------- ------------- -------------
Net cash used in investing activities (2,880,513,905) (1,602,328,178) (1,371,238,531)
------------- ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 40,375,451 10,250,734 0
Surplus notes 110,000,000 34,000,000 49,000,000
Increase in future fees payable to parent 47,111,936 0 0
Short-term borrowing
Increase in payable to reinsurer 14,004,792 24,890,064 28,555,190
Proceeds from annuity sales 2,795,114,603 1,628,486,076 1,372,873,747
------------- ------------- -------------
Net cash provided by financing activities 3,006,606,782 1,697,626,874 1,450,428,937
------------- ------------- -------------
Net increase/(decrease) in cash and cash equivalents 1,053,028 (10,763,079) 14,074,609
Cash and cash equivalents at beginning of year 13,146,384 23,909,463 9,834,854
------------- ------------- -------------
Cash and cash equivalents at end of year $ 14,199,412 $ 13,146,384 $ 23,909,463
============= ============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 11,177,120 $ 995,496 $ 161,398
============= ============= =============
Interest paid $ 7,094,767 $ 540,319 $ 557,639
============= ============= =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
1. BUSINESS OPERATIONS
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), which in turn is a wholly-owned subsidiary
of Skandia Insurance Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, American Skandia Marketing,
Incorporated. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
The Company's consolidated financial statements include the accounts of
Skandia Vida, S.A. de C.V. ("Skandia Vida"), a life insurance company
domiciled in Mexico, which was formed in 1995 by the ultimate parent
Skandia Insurance Company Ltd. The Company has a 99.9% ownership
interest in Skandia Vida, which is a start up company with expectations
of selling long term savings products within Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles. Intercompany transactions and balances have been
eliminated in consolidation.
B. Investments
The Company has classified its fixed maturity investments as
either held-to-maturity or available-for-sale. Investments
classified as held-to-maturity are investments that the
Company has the ability and intent to hold to maturity. Such
investments are carried at amortized cost. Those investments
which are classified as available-for-sale are carried at
market value and changes in unrealized gains and losses are
reported as a component of shareholder's equity.
The Company has classified its mutual fund investments as
available-for-sale. Such investments are carried at market
value and changes in unrealized gains and losses are reported
as a component of shareholder's equity.
Short-term investments are reported at cost which approximates
market value.
Realized gains and losses on disposal of investments are
determined by the specific identification method and are
included in revenues.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. Cash Equivalents
The Company considers all highly liquid time deposits
purchased with a maturity of three months or less to be cash
equivalents.
D. State Insurance Licenses
Licenses to do business in all states have been capitalized
and reflected at the purchase price of $6 million less
accumulated amortization. The cost of the licenses is being
amortized over 40 years.
E. Fixed Assets
Fixed Assets consisting of furniture, equipment and leasehold
improvements are carried at cost and depreciated on a straight
line basis over a period of three to five years. Accumulated
depreciation amounted to $32,641 and $3,749 at December 31,
1996 and 1995, respectively. Depreciation expense for the
years ended December 31, 1996 and 1995 was $28,892 and $3,749
respectively.
F. Recognition of Revenue and Contract Benefits
Annuity contracts without significant mortality risk, as
defined by Financial Accounting Standard No. 97, are
classified as investment contracts (variable, market value
adjusted and certain immediate annuities) and those with
mortality risk (immediate annuities) as insurance products.
The policy of revenue and contract benefit recognition is
described below.
Revenues for variable annuity contracts consist of charges
against contractowner account values for mortality and expense
risks and administration fees and an annual maintenance fee
per contract. Benefit reserves for variable annuity contracts
represent the account value of the contracts and are included
in the separate account liabilities.
Revenues for market value adjusted annuity contracts consist
of separate account investment income reduced by benefit
payments and change in reserves in support of contractowner
obligations, all of which is included in return credited to
contractowners. Benefit reserves for these contracts represent
the account value of the contracts, and are included in the
general account liability for future contractowner benefits to
the extent in excess of the separate account liabilities.
Revenues for immediate annuity contracts without life
contingencies consist of net investment income. Revenues for
immediate annuity contracts with life contingencies consist of
single premium payments recognized as annuity considerations
when received. Benefit reserves for these contracts are based
on the Society of Actuaries 1983 Table-a with assumed interest
rates that vary by issue year. Assumed interest rates ranged
from 6.5% to 8.25% at both December 31, 1996 and 1995.
Annuity sales were $2,795,114,000, $1,628,486,000 and
$1,372,874,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Annuity contract assets under management
were $7,764,891,000, $4,704,044,000 and $2,661,161,000 at
December 31, 1996, 1995 and 1994, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Deferred Acquisition Costs
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
deferred and amortized in relation to the present value of
estimated gross profits. These costs include commissions, cost
of contract issuance, and certain selling expenses that vary
with production. Details of the deferred acquisition costs for
the years ended December 31 follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Balance at beginning of year $270,222,383 $174,009,609 $ 90,023,536
Acquisition costs deferred
during the year 190,995,588 106,063,698 85,801,180
Acquisition costs amortized
during the year 22,577,053 9,850,924 1,815,107
------------ ------------ ------------
Balance at end of year $438,640,918 $270,222,383 $174,009,609
============ ============ ============
</TABLE>
H. Deferred Contract Charges
Certain contracts are assessed a front-end fee at the time of
issue. These fees are deferred and recognized in income in
relation to the present value of estimated gross profits of
the related contracts. Details of the deferred contract
charges for the years ended December 31 follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Balance at beginning of year $332,050 $449,704 $520,821
Contract charges deferred
during the year 42,740 21,513 87,114
Contract charges amortized
during the year 102,461 139,167 158,231
-------- -------- --------
Balance at end of year $272,329 $332,050 $449,704
======== ======== ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
I. Separate Accounts
Assets and liabilities in Separate Account are shown as
separate captions in the consolidated statement of financial
condition. Separate Account assets consist of long-term bonds,
investments in mutual funds and short-term securities, all of
which are carried at market value.
Included in Separate Account liabilities is $644,233,883 and
$586,233,752 at December 31, 1996 and 1995, respectively,
relating to annuity contracts for which the contractholder is
guaranteed a fixed rate of return. Separate Account assets of
$644,233,883 and $588,835,051 at December 31, 1996 and 1995,
respectively, consisting of long term bonds, short term
securities, transfers due from general account and cash are in
support of these annuity contracts, as pursuant to state
regulation.
J. Income taxes
The Company is included in the consolidated federal income tax
return with all Skandia Insurance Company Ltd. subsidiaries in
the U.S. The federal and state income tax provision is
computed on a separate return basis as adjusted for
consolidated items such as net operating losses which are
utilized in the consolidated federal income tax return in
accordance with the provisions of the Internal Revenue Code,
as amended. Prior to 1995, the Company filed a separate income
tax return.
K. Translation of Foreign Currency
The financial position and results of operations of the
Company's foreign operations are measured using local currency
as the functional currency. Assets and liabilities of the
operations are translated at the exchange rate in effect at
each year-end. Statements of operations and shareholder's
equity accounts are translated at the average rate prevailing
during the year. Translation adjustments arising from the use
of differing exchange rates from period to period are included
in shareholder's equity.
L. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant
estimates and assumptions are related to deferred acquisition
costs and involve policy lapses, investment return and
maintenance expenses. Actual results could differ from those
estimates.
M. Reinsurance
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provides additional
capacity for growth in supporting the cash flow strain from
the Company's variable annuity business. The reinsurance is
effected under quota share contracts.
The Company reinsures certain mortality risks. These risks
result from the guaranteed minimum death benefit feature in
the variable annuity products.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
3. INVESTMENTS
The amortized cost, gross unrealized gains (losses) and estimated
market value of available-for-sale and held-to-maturity fixed
maturities and equity securities by category as of December 31, 1996
and 1995 are shown below. All securities held at December 31, 1996 are
publicly traded.
Investments in fixed maturities as of December 31, 1996 consist of the
following:
Held-to-Maturity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $ 4,299,803 $88,268 $22,937 $ 4,365,134
Obligations of
State and Political
Subdivisions 250,119 229 0 250,348
Corporate
Securities 5,540,447 0 62,660 5,477,787
----------- ------- ------- -----------
Totals $10,090,369 $88,497 $85,597 $10,093,269
=========== ======= ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $14,508,780 0 $ 79,745 $14,429,035
Obligations of
State and Political
Subdivisions 202,516 26 0 202,542
Other Government
Obligations 5,047,790 0 7,440 5,040,350
Corporate
Securities 68,101,413 83,312 486,928 67,697,797
----------- ------- -------- -----------
Totals $87,860,499 $83,338 $574,113 $87,369,724
=========== ======= ======== ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The amortized cost and market value of fixed maturities, by contractual
maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
<S> <C> <C> <C> <C>
Amortized Market Amortized Market
Cost Value Cost Value
Due in one year or less $ 697,626 $ 699,861 $ 5,047,790 $ 5,040,350
Due after one through five years 9,138,036 9,143,290 29,864,609 29,756,002
Due after five through ten years 254,707 250,118 52,948,100 52,573,372
----------- ----------- ----------- -----------
Total $10,090,369 $10,093,269 $87,860,499 $87,369,724
=========== =========== =========== ===========
</TABLE>
Investments in fixed maturities as of December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
Held-to-Maturity
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $ 4,304,731 $183,201 $1,778 $ 4,486,154
Obligations of
State and Political
Subdivisions 256,095 0 3,165 252,930
Corporate
Securities 5,551,879 13,252 346 5,564,785
----------- -------- ------ -----------
Totals $10,112,705 $196,453 $5,289 $10,303,869
=========== ======== ====== ===========
</TABLE>
Proceeds from sales and maturities of fixed maturity investments during
1996, 1995 and 1994, were $8,947,390, $100,000 and $2,010,000,
respectively.
There were no gross gains and losses realized during the years ended
December 31, 1996, 1995 and 1994.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The cost, gross unrealized gains (losses) and market value of
investments in mutual funds at December 31, 1996 and 1995 are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
1996 $2,638,695 $ 59,278 $60,242 $2,637,731
========== ======== ======= ==========
1995 $1,617,516 $111,686 $ 327 $1,728,875
========== ======== ======= ==========
</TABLE>
Proceeds from sales of investments in mutual funds during 1996, 1995
and 1994 were $1,273,640, $867,744 and $38,588, respectively.
Mutual fund gross realized gains and losses were as follows:
Gross Gross
Gains Losses
1996 $139,814 $ 5,351
======== =======
1995 $ 65,236 $28,462
======== =======
1994 $ 510 $ 2,452
======== =======
4. NET INVESTMENT INCOME
Additional information with respect to net investment income for the
years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Fixed maturities $ 836,591 $ 629,743 $ 616,987
Mutual funds 143,737 59,895 12,049
Short-term investments 92,987 256,351 142,421
Cash and cash equivalents 591,666 730,581 633,298
Interest on policy loans 5,274 4,025 1,275
---------- ---------- ----------
Total investment income 1,670,255 1,680,595 1,406,030
Investment expenses 84,436 79,921 105,813
---------- ---------- ----------
Net investment income $1,585,819 $1,600,674 $1,300,217
========== ========== ==========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES
The significant components of income tax expense are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Current tax expense $12,865,120 $397,360 $247,429
Deferred tax (benefit) expense (16,903,477) 0 0
------------- -------- --------
Total income tax (benefit) expense ($ 4,038,357) $397,360 $247,429
============= ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's deferred tax
balance as of December 31, 1996 and 1995, are as follows:
<TABLE>
<S> <C> <C>
1996 1995
---- ----
Deferred Tax (Liabilities):
Deferred acquisition costs ($103,072,477) ($57,399,960)
Payable to reinsurer (23,025,326) (19,802,861)
Policy Fees (491,640) (308,304)
Unrealized investment gains 0 (38,976)
------------ -----------
Total (126,589,443) (77,550,101)
------------ -----------
Deferred Tax Assets:
Net separate account liabilities 121,092,798 72,024,094
Reserve for future contractowner benefits 12,686,078 10,672,556
Other reserve differences 4,527,886 1,492,044
Deferred compensation 4,392,526 2,169,060
Surplus notes blocked interest 548,730 0
Unrealized investment losses 172,109 0
Foreign exchange translation 141,996 114,888
Deferred contract charge 95,315 116,218
AMT credit carryforward 0 286,094
Other 149,587 0
------------ -----------
Total 143,807,025 86,874,954
------------ -----------
Net before valuation allowance 17,217,582 9,324,853
Valuation allowance 0 (9,324,853)
------------ -----------
Net deferred tax balance $ 17,217,582 $ 0
============ ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Management believes that based on the taxable income produced in the
current year and the continued growth in annuity products, the Company
will produce sufficient taxable income in the furture to realize its
deferred tax assets. As such, the Company released the deferred tax
valuation allowance of $9,324,853 established as of December 31, 1995.
The income tax expense was different from the amount computed by
applying the federal statutory tax rate of 35% to pre-tax income from
continuing operations as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Income (loss) before taxes $22,584,667 ($2,170,660) $106,921
Income tax rate 35% 35% 35%
----------- ----------- ---------
Tax expense at federal
statutory income tax rate 7,904,633 (759,731) 37,422
Tax effect of:
Change in valuation allowance (9,324,853) 1,680,339 365,288
Dividend received deduction (2,266,051) (477,139) 0
Other (352,086) (46,109) (155,281)
----------- ---------- --------
Income tax (benefit) expense ($ 4,038,357) $ 397,360 $247,429
============ ========== ========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) have been charged to the Company at cost by
American Skandia Information Services and Technology Corporation, an
affiliated company; and likewise, the Company has charged operating
costs to American Skandia Investment Services, Incorporated, an
affiliated company. Operating costs for these items was $11,581,114,
$12,687,337 and $8,524,840 for the years ended December 31, 1996, 1995
and 1994, respectively. Income received for these items was $1,148,364,
$396,573 and $248,799 for the years ended December 31, 1996, 1995 and
1994, respectively. Amounts receivable from affiliates under this
arrangement were $548,792 and $857,156 as of December 31, 1996 and
1995, respectively. Amounts payable to affiliates under this
arrangement were $619,089 and $304,525 as of December 31, 1996 and
1995, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
7. FUTURE FEES PAYABLE TO PARENT
On December 17, 1996 the Company sold to its Parent, effective
September 1, 1996, certain rights to receive future fees and charges
expected to be realized on the variable portion of a designated block
of deferred annuity contracts issued during the period January 1, 1994
through June 30, 1996. In connection with this transaction, the Parent
issued collateralized notes in a private placement which are secured by
the rights to receive future fees and charges purchased from the
Company.
Under the terms of the Purchase Agreement, the rights sold provide for
the Parent to receive 80% of future mortality and expense charges and
contingent deferred sales charges, after reinsurance, expected to be
realized over the remaining surrender charge period of the designated
contracts (generally, 6.5 years). The Company did not sell the right to
receive future fees and charges after the expiration of the surrender
charge period.
The proceeds from the sale have been recorded as a liability and are
being amortized over the remaining surrender charge period of the
designated contracts using the interest method. The present value at
September 1, 1996 (discounted at 7.5%), of future fees and charges
expected to be realized on the designated contracts was $50,221,438.
Payments representing fees and charges realized during the period
September 1, 1996 through December 31, 1996 in the aggregate amount of
$3,109,502, were made by the Company to the Parent. Interest expense of
$42,260 has been included in the statement of operations.
Expected payments of future fees payable to Parent are as follows:
Year Ending
December 31, Amount
1997 $ 9,308,527
1998 9,782,558
1999 10,002,274
2000 10,061,058
2001 6,412,114
2002 1,392,003
2003 153,402
-----------
Total $47,111,936
The Commissioner of the State of Connecticut has approved the sale of
future fees and charges; however, in the event that the Company becomes
subject to an order of liquidation or rehabilitation, the Commissioner
has the ability to stop the payments due to the Parent under the
Purchase Agreement, subject to certain terms and conditions.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. LEASES
The Company leases office space under a lease agreement established in
1989 with American Skandia Information Services and Technology
Corporation. The lease expense for 1996, 1995 and 1994 was $1,583,391,
$1,218,806 and $961,080, respectively. Future minimum lease payments
per year and in aggregate as of December 31, 1996 are as follows:
1997 1,413,180
1998 1,571,400
1999 1,571,400
2000 1,740,750
2001 and thereafter 6,527,813
-----------
Total $12,824,543
9. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains cash, bonds and notes on deposit
with various states. The carrying value of these deposits amounted to
$3,766,564 and $3,267,357 as of December 31, 1996, and 1995,
respectively. These deposits are required to be maintained for the
protection of contractowners within the individual states.
10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $275,835,076, $132,493,899 and
$95,001,971 at December 31, 1996, 1995 and 1994, respectively.
The statutory basis net loss was $5,405,179, $7,183,003 and $9,789,297
for the years ended December 31, 1996, 1995 and 1994, respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. At December 31, 1996, no amounts may be
distributed without prior approval.
11. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Company contributions to this plan on
behalf of the participants were $850,111, $627,161 and $431,559 for the
years ended December 31, 1996, 1995 and 1994, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The Company and it's affiliate cooperatively have a long-term incentive
plan where units are awarded to executive officers and other personnel.
The program consists of multiple plans. A new plan is instituted each
year. Generally, participants must remain employed by the Company or
its affiliates at the time such units are payable in order to receive
any payments under the plan. The accrued liability representing the
value of these units is $9,212,369 and $4,600,831 as of December 31,
1996 and 1995, respectively. Payments under this plan were $601,603 for
the year ended December 31, 1996.
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$244,601 in 1996 and $139,209 in 1995.
12. REINSURANCE
The effect of the reinsurance agreements on the Company's operations
was to reduce annuity charges and fee income, death benefit expense and
policy reserves. The effect of reinsurance for the years ended December
31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------
<S> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
Gross $87,369,693 $814,306 $779,070
Ceded 17,590,171 179,766 106,435
----------- -------- --------
Net $69,779,522 $634,540 $672,635
=========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------ ----------------
<S> <C> <C> <C> <C>
Annuity Change in Annuity Return Credited Annuity
Charges and Fees Policy Reserves to Contractowners Charges and Fees
Gross $50,334,280 ($4,790,714) $10,945,831 $30,116,166
Ceded 11,496,922 1,988,042 332,973 5,336,381
----------- ---------- ----------- -----------
Net $38,837,358 ($6,778,756) $10,612,858 $24,779,785
=========== =========== =========== ===========
</TABLE>
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
13. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for
cash. Surplus notes outstanding as of December 31, 1996 were as
follows:
Issue Interest
Date Amount Rate
December 29, 1993 $ 20,000,000 6.84%
February 18, 1994 10,000,000 7.28%
March 28, 1994 10,000,000 7.90%
September 30, 1994 15,000,000 9.13%
December 28, 1994 14,000,000 9.78%
December 19, 1995 10,000,000 7.52%
December 20, 1995 15,000,000 7.49%
December 22, 1995 9,000,000 7.47%
June 28, 1996 40,000,000 8.41%
December 30, 1996 70,000,000 8.03%
------------
Total $213,000,000
Payment of interest and repayment of principal for these notes is
subject to certain conditions and requires approval by the Insurance
Commissioner of the State of Connecticut.
Interest expense on surplus notes was $10,087,347, $5,789,893 and
$3,016,905 for the years ended December 31, 1996, 1995 and 1994,
respectively. Interest approved and paid during 1996 was $6,438,867.
Interest accrued at December 31, 1996 amounted to $3,648,480, of which
$2,080,680 has been approved and paid in 1997. The remaining $1,567,800
was not approved for payment. The 1995 and 1994 amounts were approved
at December 31, 1995 with stipulation that they be funded through a
capital contribution from the parent.
14. SHORT-TERM BORROWING
During 1993, the Company received a $10 million loan from Skandia AB, a
Swedish affiliate. Upon renewal during 1995 the loan became payable to
the Parent rather than Skandia AB. The loan matures on March 10, 1997
and bears interest at 6.46%. The total interest expense to the Company
was $642,886, $709,521 and $569,618 and for the years ended December
31, 1996, 1995 and 1994, respectively, of which $206,361 and $219,375
was payable as of December 31, 1996 and 1995, respectively.
15. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities
are subject to discretionary withdrawal with market value
adjustment by contractholders. Separate account assets which are
carried at market value are adequate to pay such withdrawals
which are generally subject to surrender charges ranging from
8.5% to 1% for contracts held less than 8 years.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company on a quarterly basis:
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C>
1996 March 31 June 30 September 30 December 31
---- ----------- ----------- ------------ -----------
Premiums and other insurance
revenues $16,605,765 $20,452,733 $22,366,166 $26,933,702
Net investment income 455,022 282,926 270,092 577,779
Net realized capital gains 92,072 13,106 5,606 23,679
----------- ----------- ----------- -----------
Total revenues $17,152,859 $20,748,765 $22,641,864 $27,535,160
=========== =========== =========== ===========
Benefits and expenses $12,725,411 $ 9,429,735 $17,007,137 $25,191,857
=========== =========== =========== ===========
Net income $ 2,658,941 $ 7,695,490 $ 2,538,513 $14,470,976
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C>
1995 March 31 June 30 September 30 December 31
---- ----------- ----------- ------------ -----------
Premiums and other insurance
revenues $ 8,891,903 $10,066,478 $11,960,530 $14,189,048
Net investment income 551,690 434,273 293,335 321,376
Net realized capital gains (losses) (16,082) (370) 44,644 8,582
----------- ----------- ----------- -----------
Total revenues $ 9,427,511 $10,500,381 $12,298,509 $14,519,006
=========== =========== =========== ===========
Benefits and expenses $11,438,798 $ 9,968,595 $11,600,587 $15,908,087
=========== =========== =========== ===========
Net income (loss) ($ 2,026,688) $ 531,486 $ 678,312 ($ 1,751,130)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C>
1994 March 31 June 30 September 30 December 31
---- ----------- ----------- ------------ -----------
Premiums and other insurance
revenues $ 5,594,065 $ 6,348,777 $ 7,411,686 $ 7,631,608
Net investment income 252,914 336,149 264,605 446,549
Net realized capital gains (losses) 0 (30,829) 25,914 2,973
----------- ----------- ----------- -----------
Total revenues $ 5,846,979 $ 6,654,097 $ 7,702,205 $ 8,081,130
=========== =========== =========== ===========
Benefits and expenses $ 5,701,460 $ 7,883,829 $ 8,157,535 $ 6,434,666
=========== =========== =========== ===========
Net income (loss) $ 104,636 ($ 1,257,768) ($ 503,793) $ 1,516,417
=========== =========== =========== ===========
</TABLE>
As described in Note 5, the valuation allowance relating to deferred
income taxes was released during the three months ended December 31,
1996.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B -- Class 2 and the
Board of Directors of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statement of assets and liabilities of the
sub-accounts of American Skandia Life Assurance Corporation Variable Account
B -- Class 2, referred to in Note 1, as of December 31, 1996, and the related
statements of operations and of changes in net assets for the periods presented.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996 with the managers of
the mutual funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the sub-accounts of American Skandia Life
Assurance Corporation Variable Account B -- Class 2, referred to in Note 1, as
of December 31, 1996, the results of their operations and the changes in their
net assets for the periods presented in conformity with generally accepted
accounting principles.
/s/DELOITTE & TOUCHE LLP
New York, New York
February 24, 1997
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in mutual funds at market value (Note 2):
Neuberger & Berman Advisers Management Trust (NBAMT):
Partners Portfolio - 400,857 shares (cost $6,169,436)................................................. $ 6,606,120
The Alger American Fund (AAF):
Small Capitalization Portfolio - 165,789 shares (cost $6,862,310)..................................... 6,782,427
Growth Portfolio - 258,503 shares (cost $8,586,935)................................................... 8,874,420
MidCap Growth Portfolio - 242,750 shares (cost $5,105,896)............................................ 5,182,707
American Skandia Trust (AST):
Putnam International Equity Portfolio - 260,464 shares (cost $4,746,291).............................. 5,006,120
Founders Passport Portfolio - 275,092 shares (cost $3,153,578)........................................ 3,199,320
Lord Abbett Growth and Income Portfolio - 599,115 shares (cost $9,415,732)............................ 10,286,806
JanCap Growth Portfolio - 507,191 shares (cost $9,312,938)............................................ 9,530,113
Money Market Portfolio - 14,403,702 shares (cost $14,403,702)......................................... 14,403,702
Federated Utility Income Portfolio - 103,234 shares (cost $1,217,597)................................. 1,324,495
Federated High Yield Portfolio - 455,743 shares (cost $5,118,398)..................................... 5,528,158
Putnam Balanced Portfolio - 187,570 shares (cost $2,325,661).......................................... 2,474,053
T. Rowe Price Asset Allocation Portfolio - 83,687 shares (cost $1,016,174)............................ 1,110,530
T. Rowe Price International Equity Portfolio - 939,232 shares (cost $10,894,831)...................... 11,336,534
T. Rowe Price International Bond Portfolio - 217,293 shares (cost $2,266,919)......................... 2,368,496
T. Rowe Price Natural Resources Portfolio - 138,703 shares (cost $1,941,580).......................... 2,007,038
Founders Capital Appreciation Portfolio - 270,309 shares (cost $4,442,842)............................ 4,541,187
INVESCO Equity Income Portfolio - 291,810 shares (cost $3,686,542).................................... 4,082,421
PIMCO Total Return Bond Portfolio - 1,256,159 shares (cost $13,640,662)............................... 13,955,932
PIMCO Limited Maturity Bond Portfolio - 420,977 shares (cost $4,427,749).............................. 4,550,763
Berger Capital Growth Portfolio - 99,060 shares (cost $1,419,080)..................................... 1,425,467
Robertson Stephens Value + Growth Portfolio - 119,108 shares (cost $1,287,034)........................ 1,308,993
Montgomery Variable Series (Montgomery)
Emerging Markets Fund - 38,012 shares (cost $397,440)................................................. 404,834
------------
Total Invested Assets......................................................................... 126,290,636
Receivable from American Skandia Life Assurance Corporation................................................... 213,120
------------
Total Assets.................................................................................. $126,503,756
============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
2
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENT OF ASSETS AND LIABILITIES (CONCLUDED)
AS OF DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
LIABILITIES
Payable to American Skandia Trust................................................................................. $ 58,465
Payable to Neuberger & Berman Advisers Management Trust........................................................... 89,931
Payable to Alger American Fund.................................................................................... 64,927
--------
Total Liabilities................................................................................. $213,323
--------
NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
UNIT
CONTRACTOWNERS' EQUITY UNITS VALUE
- ---------------------- --------- ------
<S> <C> <C> <C>
NBAMT - Partners................................................................... 425,664 $15.52 $ 6,606,120
AAF - Small Capitalization......................................................... 462,016 14.68 6,782,427
AAF - Growth....................................................................... 569,960 15.57 8,874,420
AAF - MidCap Growth................................................................ 315,296 16.44 5,182,707
AST - Putnam International Equity.................................................. 408,066 12.27 5,006,120
AST - Founders Passport............................................................ 278,460 11.49 3,199,242
AST - Lord Abbett Growth and Income................................................ 671,510 15.32 10,286,806
AST - JanCap Growth................................................................ 574,520 16.59 9,530,113
AST - Money Market................................................................. 1,292,931 11.14 14,403,702
AST - Federated Utility Income..................................................... 103,416 12.81 1,324,495
AST - Federated High Yield......................................................... 433,739 12.75 5,528,158
AST - Putnam Balanced.............................................................. 186,453 13.27 2,474,053
AST - T. Rowe Price Asset Allocation............................................... 82,655 13.44 1,110,530
AST - T. Rowe Price International Equity........................................... 959,467 11.82 11,336,534
AST - T. Rowe Price International Bond............................................. 213,216 11.11 2,368,496
AST - T. Rowe Price Natural Resources.............................................. 140,275 14.31 2,006,988
AST - Founders Capital Appreciation................................................ 271,845 16.71 4,541,187
AST - INVESCO Equity Income........................................................ 283,889 14.38 4,082,421
AST - PIMCO Total Return Bond...................................................... 1,203,159 11.60 13,955,932
AST - PIMCO Limited Maturity Bond.................................................. 424,713 10.71 4,550,763
AST - Berger Capital Growth........................................................ 100,758 14.15 1,425,432
AST - Robertson Stephens Value + Growth............................................ 119,830 10.92 1,308,993
Montgomery Emerging Markets........................................................ 39,355 10.29 404,794
------------
Total Net Assets....................................................... $126,290,433
============
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
NBAMT AAF - SMALL
TOTAL PARTNERS CAPITALIZATION AAF GROWTH
------------ ---------- -------------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends............................................... $ 1,567,398 $ 9,869 $ 0 $ 5,412
Expenses
Mortality and Expense Risks Charges and Administrative
Fees (Note 4)......................................... (1,027,070) (42,355) (64,449) (76,489)
------------ ---------- ------------ ----------
NET INVESTMENT INCOME (LOSS)................................ 540,328 (32,486) (64,449) (71,077)
------------ ---------- ------------ ----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales....................................... 375,187,584 6,772,325 67,136,977 7,919,716
Cost of Securities Sold................................... 366,060,531 6,133,551 66,701,542 7,175,161
------------ ---------- ------------ ----------
Net Gain (Loss)......................................... 9,127,053 638,774 435,435 744,555
Capital Gain Distributions Received....................... 1,607,492 123,366 35,078 221,754
------------ ---------- ------------ ----------
NET REALIZED GAIN (LOSS).................................... 10,734,545 762,140 470,513 966,309
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period....................................... 3,578,518 46,158 30,900 263,943
End of Period............................................. 4,451,309 436,684 (79,883) 287,485
------------ ---------- ------------ ----------
NET UNREALIZED GAIN (LOSS).................................. 872,791 390,526 (110,783) 23,542
------------ ---------- ------------ ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 12,147,664 $1,120,180 $ 295,281 $ 918,774
============ ========== ============ ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
------------------------------------------------------------------
AST - PUTNAM AST - LORD
AAF - MIDCAP INTERNATIONAL AST - FOUNDERS ABBETT GROWTH
GROWTH EQUITY PASSPORT AND INCOME
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends............................................... $ 0 $ 89,569 $ 6,043 $ 82,715
Expenses
Mortality and Expense Risks Charges and Administrative
Fees (Note 4)......................................... (45,413) (51,647) (26,441) (80,750)
----------- ---------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................................ (45,413) 37,922 (20,398) 1,965
----------- ---------- ---------- ----------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales....................................... 16,314,887 4,634,164 3,843,825 6,980,369
Cost of Securities Sold................................... 15,890,465 4,446,281 3,608,724 6,127,010
----------- ---------- ---------- ----------
Net Gain (Loss)......................................... 424,422 187,883 235,101 853,359
Capital Gain Distributions Received....................... 108,978 105,417 0 167,109
----------- ---------- ---------- ----------
NET REALIZED GAIN (LOSS).................................... 533,400 293,300 235,101 1,020,468
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period....................................... 7,083 161,629 (3,510) 475,761
End of Period............................................. 76,811 259,829 45,742 871,074
----------- ---------- ---------- ----------
NET UNREALIZED GAIN (LOSS).................................. 69,728 98,200 49,252 395,313
----------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 557,715 $ 429,422 $ 263,955 $ 1,417,746
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------
AST - JANCAP AST - MONEY
GROWTH MARKET
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends............................................... $ 9,058 $ 619,894
Expenses
Mortality and Expense Risks Charges and Administrative
Fees (Note 4)......................................... (70,063) (117,911)
----------- ------------
NET INVESTMENT INCOME (LOSS)................................ (61,005) 501,983
----------- ------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales....................................... 20,966,290 151,682,698
Cost of Securities Sold................................... 19,158,299 151,682,698
----------- ------------
Net Gain (Loss)......................................... 1,807,991 0
Capital Gain Distributions Received....................... 290,532 5,776
----------- ------------
NET REALIZED GAIN (LOSS).................................... 2,098,523 5,776
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period....................................... 513,810 0
End of Period............................................. 217,175 0
----------- ------------
NET UNREALIZED GAIN (LOSS).................................. (296,635) 0
----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,740,883 $ 507,759
=========== ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
5
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENT OF OPERATIONS (CONT'D)
FOR THE PERIODS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------
AST - T. ROWE
AST - FEDERATED AST - FEDERATED AST - PUTNAM PRICE ASSET
UTILITY INCOME HIGH YIELD BALANCED ALLOCATION
--------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends............................................ $ 67,045 $ 152,797 $ 59,816 $ 22,688
Expenses
Mortality and Expense Risks Charges and
Administrative Fees (Note 4)....................... (14,253) (38,289) (26,825) (10,764)
----------- ----------- ---------- ---------
NET INVESTMENT INCOME (LOSS)............................. 52,792 114,508 32,991 11,924
----------- ----------- ---------- ---------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales.................................... 2,994,459 2,356,263 1,524,529 813,363
Cost of Securities Sold................................ 2,876,207 2,109,915 1,369,689 672,818
----------- ----------- ---------- ---------
Net Gain (Loss)...................................... 118,252 246,348 154,840 140,545
Capital Gain Distributions Received.................... 0 0 101,187 3,905
----------- ----------- ---------- ---------
NET REALIZED GAIN (LOSS)................................. 118,252 246,348 256,027 144,450
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period.................................... 143,675 249,956 170,848 117,104
End of Period.......................................... 106,898 409,760 148,392 94,356
----------- ----------- ---------- ---------
NET UNREALIZED GAIN (LOSS)............................... (36,777) 159,804 (22,456) (22,748)
----------- ----------- ---------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 134,267 $ 520,660 $ 266,562 $ 133,626
=========== =========== ========== =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------
AST - T. ROWE AST - T. ROWE PRICE AST - T. ROWE AST - FOUNDERS
PRICE INTERNATIONAL INTERNATIONAL PRICE NATURAL CAPITAL
EQUITY BOND RESOURCES APPRECIATION
------------------- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends.......................................... $ 56,377 $ 20,640 $ 418 $ 17,030
Expenses
Mortality and Expense Risks Charges and
Administrative Fees (Note 4)..................... (88,323) (18,311) (8,108) (36,421)
----------- ----------- ----------- ------------
NET INVESTMENT INCOME (LOSS)........................... (31,946) 2,329 (7,690) (19,391)
----------- ----------- ----------- ------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales.................................. 29,931,453 1,019,302 6,128,507 27,333,873
Cost of Securities Sold.............................. 28,956,281 984,736 5,950,558 26,482,109
----------- ----------- ----------- ------------
Net Gain (Loss).................................... 975,172 34,566 177,949 851,764
Capital Gain Distributions Received.................. 0 26,170 490 34,491
----------- ----------- ----------- ------------
NET REALIZED GAIN (LOSS)............................... 975,172 60,736 178,439 886,255
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period.................................. 174,263 46,583 8,578 72,657
End of Period........................................ 441,703 101,577 65,458 98,345
----------- ----------- ----------- ------------
NET UNREALIZED GAIN (LOSS)............................. 267,440 54,994 56,880 25,688
----------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 1,210,666 $ 118,059 $ 227,629 $ 892,552
=========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------
AST - PIMCO
AST - INVESCO TOTAL RETURN
EQUITY INCOME BOND
-------------- - ----------
<S> <C> <C>
INVESTMENT INCOME:
Income
Dividends.......................................... $ 69,496 $ 257,359
Expenses
Mortality and Expense Risks Charges and
Administrative Fees (Note 4)..................... (37,286) (114,360)
---------- ---------
NET INVESTMENT INCOME (LOSS)........................... 32,210 142,999
---------- ---------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales.................................. 2,863,150 5,642,946
Cost of Securities Sold.............................. 2,439,880 5,317,021
---------- ---------
Net Gain (Loss).................................... 423,270 325,925
Capital Gain Distributions Received.................. 94,033 282,246
---------- ---------
NET REALIZED GAIN (LOSS)............................... 517,303 608,171
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period.................................. 338,504 627,375
End of Period........................................ 395,879 315,270
---------- ---------
NET UNREALIZED GAIN (LOSS)............................. 57,375 (312,105)
---------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 606,888 $ 439,065
========== =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
7
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENT OF OPERATIONS (CONCLUDED)
FOR THE PERIODS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------
AST - ROBERTSON
STEPHENS MONTGOMERY
AST - PIMCO VALUE + GROWTH EMERGING MARKETS
LIMITED MATURITY AST - BERGER (MAY 23* THRU (MAY 19* THRU
BOND CAPITAL GROWTH DEC. 31, 1996) DEC. 31, 1996)
---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income
Dividends............................................. $ 17,438 $ 2,686 $ 0 $ 1,048
Expenses
Mortality and Expense Risks Charges and Administrative
Fees (Note 4)....................................... (43,493) (10,778) (2,941) (1,400)
---------- ---------- --------- ---------
NET INVESTMENT INCOME (LOSS).............................. (26,055) (8,092) (2,941) (352)
---------- ---------- --------- ---------
REALIZED GAIN (LOSS) ON INVESTMENT:
Proceeds from Sales..................................... 4,878,847 2,659,335 569,847 220,459
Cost of Securities Sold................................. 4,793,786 2,414,014 547,411 222,375
---------- ---------- --------- ---------
Net Gain (Loss)....................................... 85,061 245,321 22,436 (1,916)
Capital Gain Distributions Received..................... 6,960 0 0 0
---------- ---------- --------- ---------
NET REALIZED GAIN (LOSS).................................. 92,021 245,321 22,436 (1,916)
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period..................................... 32,616 100,585 0 0
End of Period........................................... 123,014 6,387 21,959 7,394
---------- ---------- --------- ---------
UNREALIZED GAIN (LOSS).................................... 90,398 (94,198) 21,959 7,394
---------- ---------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $ 156,364 $ 143,031 $ 41,454 $ 5,126
========== ========== ========= =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
NBAMT
TOTAL GROWTH
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 540,328 $ 555,257 $ 0 $ (9,224)
Net Realized Gain (Loss)............................ 10,734,545 5,890,840 0 318,256
Net Unrealized Gain (Loss) On Investments........... 872,791 3,497,440 0 (8,784)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 12,147,664 9,943,537 0 300,248
----------- ----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 55,211,471 41,366,505 0 249,123
Net Transfers Between Sub-accounts.................. 0 0 0 (1,107,325)
Surrenders.......................................... (25,759,045) (10,154,466) 0 (172,730)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 29,452,426 31,212,039 0 (1,030,932)
----------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 41,600,090 41,155,576 0 (730,684)
NET ASSETS:
Beginning of Period................................. 84,690,343 43,534,767 0 730,684
----------- ----------- ----------- ----------
End of Period....................................... $126,290,433 $84,690,343 $ 0 $ 0
=========== =========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
NBAMT - LIMITED NBAMT
MATURITY BOND BALANCED
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ 100,627 $ 0 $ 8,713
Net Realized Gain (Loss)............................ 0 120,258 0 234,012
Net Unrealized Gain (Loss) On Investments........... 0 (13,949) 0 8,253
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 206,936 0 250,978
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 1,140,483 0 284,133
Net Transfers Between Sub-accounts.................. 0 (3,293,409) 0 (1,369,431)
Surrenders.......................................... 0 (336,036) 0 (105,668)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (2,488,962) 0 (1,190,966)
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (2,282,026) 0 (939,988)
NET ASSETS:
Beginning of Period................................. 0 2,282,026 0 939,988
----------- ----------- ----------- -----------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
NBAMT AAF SMALL
PARTNERS CAPITALIZATION
------------------------------- -------------------------------
YEAR ENDED JUN. 12* THRU YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (32,486) $ (3,299) $ (64,449) $ (27,252)
Net Realized Gain (Loss)............................ 762,140 12,103 470,513 1,015,080
Net Unrealized Gain (Loss) On Investments........... 390,526 46,158 (110,783) (65,649)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 1,120,180 54,962 295,281 922,179
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 1,753,409 425,638 1,788,314 1,553,855
Net Transfers Between Sub-accounts.................. 1,820,705 2,305,986 1,519,731 607,263
Surrenders.......................................... (868,668) (6,092) (1,390,196) (377,209)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 2,705,446 2,725,532 1,917,849 1,783,909
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 3,825,626 2,780,494 2,213,130 2,706,088
NET ASSETS:
Beginning of Period................................. 2,780,494 0 4,569,297 1,863,209
----------- ----------- ----------- -----------
End of Period....................................... $ 6,606,120 $ 2,780,494 $ 6,782,427 $ 4,569,297
=========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
11
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
AAF AAF - MIDCAP
GROWTH GROWTH
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (71,077) $ (20,259) $ (45,413) $ (13,020)
Net Realized Gain (Loss)............................ 966,309 402,867 533,400 359,458
Net Unrealized Gain (Loss) On Investments........... 23,542 185,826 69,728 (22,628)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 918,774 568,434 557,715 323,810
----------- ----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 2,670,879 1,852,564 1,443,610 1,602,947
Net Transfers Between Sub-accounts.................. (5,210) 3,091,666 1,392,250 658,117
Surrenders.......................................... (1,731,694) (314,980) (1,238,393) (190,122)
----------- ----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 933,975 4,629,250 1,597,467 2,070,942
----------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 1,852,749 5,197,684 2,155,182 2,394,752
NET ASSETS:
Beginning of Period................................. 7,021,671 1,823,987 3,027,525 632,773
----------- ----------- ----------- ----------
End of Period....................................... $ 8,874,420 $ 7,021,671 $ 5,182,707 $ 3,027,525
=========== =========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
AST - PUTNAM AST - FOUNDERS
INTERNATIONAL EQUITY PASSPORT
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED MAY 1* THRU
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 37,922 $ (19,083) $ (20,398) $ (3,035)
Net Realized Gain (Loss)............................ 293,300 (50,447) 235,101 4,501
Net Unrealized Gain (Loss) On Investments........... 98,200 224,005 49,252 (3,510)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 429,422 154,475 263,955 (2,044)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 1,391,140 502,827 1,063,401 735,596
Net Transfers Between Sub-accounts.................. (583,996) 2,930,457 974,405 686,043
Surrenders.......................................... (1,340,672) (541,960) (519,444) (2,670)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... (533,528) 2,891,324 1,518,362 1,418,969
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... (104,106) 3,045,799 1,782,317 1,416,925
NET ASSETS:
Beginning of Period................................. 5,110,226 2,064,427 1,416,925 0
----------- ----------- ----------- -----------
End of Period....................................... $ 5,006,120 $ 5,110,226 $ 3,199,242 $ 1,416,925
=========== =========== =========== ===========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
AST - LORD ABBETT AST
GROWTH AND INCOME JANCAP GROWTH
------------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 1,965 $ 6,418 $ (61,005) $ (13,547)
Net Realized Gain (Loss)............................ 1,020,468 421,029 2,098,523 184,745
Net Unrealized Gain (Loss) On Investments........... 395,313 452,371 (296,635) 512,327
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 1,417,746 879,818 1,740,883 683,525
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 2,495,239 1,668,658 2,468,165 1,244,816
Net Transfers Between Sub-accounts.................. 1,131,309 1,893,405 2,308,853 1,692,035
Surrenders.......................................... (1,252,199) (377,686) (2,004,892) (395,583)
----------- ----------- ----------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 2,374,349 3,184,377 2,772,126 2,541,268
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 3,792,095 4,064,195 4,513,009 3,224,793
NET ASSETS:
Beginning of Period................................. 6,494,711 2,430,516 5,017,104 1,792,311
----------- ----------- ----------- -----------
End of Period....................................... $10,286,806 $ 6,494,711 $ 9,530,113 $ 5,017,104
=========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
13
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
AST AST - FEDERATED
MONEY MARKET UTILITY INCOME
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 501,983 $ 403,040 $ 52,792 $ 35,295
Net Realized Gain (Loss)............................ 5,776 0 118,252 86,997
Net Unrealized Gain (Loss) On Investments........... 0 0 (36,777) 154,937
------------ ------------ ---------- ----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 507,759 403,040 134,267 277,229
------------ ------------ ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 24,653,319 17,791,010 106,504 319,742
Net Transfers Between Sub-accounts.................. (15,809,346) (14,985,879) (324,626) 795,403
Surrenders.......................................... (5,315,782) (1,856,209) (503,562) (282,918)
------------ ------------ ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 3,528,191 948,922 (721,684) 832,227
------------ ------------ ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 4,035,950 1,351,962 (587,417) 1,109,456
NET ASSETS:
Beginning of Period................................. 10,367,752 9,015,790 1,911,912 802,456
------------ ------------ ---------- ----------
End of Period....................................... $ 14,403,702 $ 10,367,752 $ 1,324,495 $ 1,911,912
============ ============ ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------------------------------------------------------------------------------------------------
AST - FEDERATED AST - PUTNAM
HIGH YIELD BALANCED
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 114,508 $ 36,775 $ 32,991 $ 18,429
Net Realized Gain (Loss)............................ 246,348 94,485 256,027 39,693
Net Unrealized Gain (Loss) On Investments........... 159,804 253,131 (22,456) 162,279
---------- ---------- ---------- ----------
Net Increase (Decrease) In Net Assets Resulting From 520,660 384,391 266,562 220,401
Operations........................................ ---------- ---------- ---------- ----------
1,315,835 1,084,243 321,006 145,633
CAPITAL SHARE TRANSACTIONS: 1,150,445 1,503,618 (321,244) 1,766,825
Transfers of Annuity Fund Deposits.................. (857,167) (744,530) (678,425) (385,500)
Net Transfers Between Sub-accounts.................. ---------- ---------- ---------- ----------
Surrenders.......................................... 1,609,113 1,843,331 (678,663) 1,526,958
---------- ---------- ---------- ----------
Net Increase (Decrease) In Net Assets 2,129,773 2,227,722 (412,101) 1,747,359
Resulting From Capital Share Transactions......... 3,398,385 1,170,663 2,886,154 1,138,795
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... $ 5,528,158 $ 3,398,385 $ 2,474,053 $ 2,886,154
NET ASSETS: ========== ========== ========== ==========
Beginning of Period.................................
End of Period.......................................
- ---
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
- ----------------------------------------------------------------------------------------------------------------------------
AST - PHOENIX AST - T. ROWE
CAPITAL GROWTH PRICE ASSET ALLOCATION
------------------------------- ------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ (615) $ 11,924 $ 4,985
Net Realized Gain (Loss)............................ 0 56,753 144,450 35,938
Net Unrealized Gain (Loss) On Investments........... 0 4,589 (22,748) 108,000
---------- --------- ---------- ----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 60,727 133,626 148,923
---------- --------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 60,791 490,225 172,468
Net Transfers Between Sub-accounts.................. 0 (261,192) (128,423) 229,988
Surrenders.......................................... 0 (74,041) (460,908) (201,312)
---------- --------- ---------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (274,442) (99,106) 201,144
---------- --------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (213,715) 34,520 350,067
NET ASSETS:
Beginning of Period................................. 0 213,715 1,076,010 725,943
---------- --------- ---------- -----------
End of Period....................................... $ 0 $ 0 $ 1,110,530 $ 1,076,010
========== ========= ========== ==========
</TABLE>
See Notes to Financial Statements.
* Date Operations Commenced.
15
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
AST - T. ROWE PRICE AST - T. ROWE PRICE
INTERNATIONAL EQUITY INTERNATIONAL FUND
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (31,946) $ (31,360) $ 2,329 $ (276)
Net Realized Gain (Loss)............................ 975,172 189,759 60,736 5,671
Net Unrealized Gain (Loss) On Investments........... 267,440 246,132 54,994 49,460
----------- ---------- ---------- ----------
Net Increase (Decrease) in Net Assets Resulting From
Operations........................................ 1,210,666 404,531 118,059 54,855
----------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 3,165,312 1,831,025 915,037 507,501
Net Transfers Between Sub-accounts.................. 2,083,722 1,815,568 231,046 582,592
Surrenders.......................................... (1,502,981) (530,840) (242,913) (39,481)
----------- ---------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting From Capital Share Transactions......... 3,746,053 3,115,753 903,170 1,050,612
----------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 4,956,719 3,520,284 1,021,229 1,105,467
NET ASSETS:
Beginning of Period................................. 6,379,815 2,859,531 1,347,267 241,800
----------- ---------- ---------- ----------
End of Period....................................... $11,336,534 $ 6,379,815 $ 2,368,496 $ 1,347,267
=========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------
AST - T. ROWE PRICE
NATURAL RESOURCES AST - FOUNDERS
------------------------------ CAPITAL APPRECIATION
MAY 19* THRU -------------------------------
YEAR ENDED DEC. 31, YEAR ENDED YEAR ENDED
DEC. 31, 1996 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (7,690) $ (408) $ (19,391) $ (7,045)
Net Realized Gain (Loss)............................ 178,439 623 886,255 541,659
Net Unrealized Gain (Loss) On Investments........... 56,880 8,578 25,688 18,540
---------- -------- ---------- ----------
Net Increase (Decrease) in Net Assets Resulting From
Operations........................................ 227,629 8,793 892,552 553,154
---------- -------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 499,779 25,830 695,104 746,112
Net Transfers Between Sub-accounts.................. 1,123,429 268,840 361,745 984,142
Surrenders.......................................... (146,207) (1,105) (523,510) (197,318)
---------- -------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting From Capital Share Transactions......... 1,477,001 293,565 533,339 1,532,936
---------- -------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 1,704,630 302,358 1,425,891 2,086,090
NET ASSETS:
Beginning of Period................................. 302,358 0 3,115,296 1,029,206
---------- -------- ---------- ----------
End of Period....................................... $ 2,006,988 $302,358 $ 4,541,187 $ 3,115,296
========== ======== ========== ==========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------------
AST - INVESCO AST - PIMCO
EQUITY INCOME TOTAL RETURN BOND
------------------------------- ------------ -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 32,210 $ 1,405 $ 142,999 $ 18,798
Net Realized Gain (Loss)............................ 517,303 127,379 608,171 79,082
Net Unrealized Gain (Loss) On Investments........... 57,375 349,846 (312,105) 639,196
---------- ---------- ----------- ----------
Net Increase (Decrease) in Net Assets Resulting From
Operations........................................ 606,888 478,630 439,065 737,076
---------- ---------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 1,183,947 927,382 3,866,953 2,886,195
Net Transfers Between Sub-accounts.................. (401,900) 1,068,051 2,717,770 4,398,745
Surrenders.......................................... (942,233) (287,508) (2,647,351) (913,097)
---------- ---------- ----------- ----------
Net Increase (Decrease) in Net Assets
Resulting From Capital Share Transactions......... (160,186) 1,707,925 3,937,372 6,371,843
---------- ---------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 446,702 2,186,555 4,376,437 7,108,919
NET ASSETS:
Beginning of Period................................. 3,635,719 1,449,164 9,579,495 2,470,576
---------- ---------- ----------- ----------
End of Period....................................... $ 4,082,421 $ 3,635,719 $13,955,932 $ 9,579,495
========== ========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
17
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
AST - PIMCO LIMITED AST - EAGLE
MATURITY BOND GROWTH EQUITY
--------------------------------- ---------------------------------
YEAR ENDED MAY 8* THRU YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (26,055) $ (3,646) $ 0 $ (628)
Net Realized Gain (Loss)............................ 92,021 2,172 0 16,968
Net Unrealized Gain (Loss) On Investments........... 90,398 32,616 0 (571)
--
----------- ---------- --------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 156,364 31,142 0 15,769
--
----------- ---------- --------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 1,952,390 297,651 0 22,262
Net Transfers Between Sub-accounts.................. (351,846) 3,834,604 0 (45,656)
Surrenders.......................................... (1,360,357) (9,185) 0 (8,511)
--
----------- ---------- --------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 240,187 4,123,070 0 (31,905)
--
----------- ---------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 396,551 4,154,212 0 (16,136)
NET ASSETS:
Beginning of Period................................. 4,154,212 0 0 16,136
--
----------- ---------- --------
End of Period....................................... $ 4,550,763 $ 4,154,212 $ 0 $ 0
=========== ========== == ========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
- -------------------------------------------------------------------------------------------------------------
AST - ROBERTSON
AST - BERGER STEPHENS
CAPITAL GROWTH VALUE + GROWTH
------------------------------- ---------------
YEAR ENDED YEAR ENDED MAY 23* THRU
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996
------------- ------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ (8,092) $ (5,289) $ (2,941)
Net Realized Gain (Loss)............................ 245,321 39,803 22,436
Net Unrealized Gain (Loss) On Investments........... (94,198) 100,554 21,959
----------- ----------- ----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 143,031 135,068 41,454
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 670,780 337,296 185,569
Net Transfers Between Sub-accounts.................. (312,426) 627,438 1,113,978
Surrenders.......................................... (173,968) (35,815) (32,008)
----------- ----------- ----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 184,386 928,919 1,267,539
----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 327,417 1,063,987 1,308,993
NET ASSETS:
Beginning of Period................................. 1,098,015 34,028 0
----------- ----------- ----------
End of Period....................................... $ 1,425,432 $ 1,098,015 $1,308,993
=========== =========== ==========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
- -----------------------------------------------------------------------------------------------------------------------------
AVP AVP
ST MULTI-MKT PREMIER GROWTH
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ (2,555) $ 0 $ (5,917)
Net Realized Gain (Loss)............................ 0 (3,664) 0 286,514
Net Unrealized Gain (Loss) On Investments........... 0 20,879 0 3,688
------- --------- ------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 14,660 0 284,285
------- --------- ------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 31,165 0 207,367
Net Transfers Between Sub-accounts.................. 0 (283,372) 0 (997,887)
Surrenders.......................................... 0 (41,818) 0 (224,679)
------- --------- ------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (294,025) 0 (1,015,199)
------- --------- ------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (279,365) 0 (730,914)
NET ASSETS:
Beginning of Period................................. 0 279,365 0 730,914
------- --------- ------- -----------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======= ========= ======= ===========
</TABLE>
- --------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
19
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
AVP AVP - U.S. GOV'T
GROWTH & INCOME HIGH GRADE SECURITIES
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ 1,166 $ 0 $ 6,264
Net Realized Gain (Loss)............................ 0 204,460 0 119,620
Net Unrealized Gain (Loss) On Investments........... 0 5,287 0 1,643
------- --------- ------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 210,913 0 127,527
------- --------- ------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 126,547 0 66,402
Net Transfers Between Sub-accounts.................. 0 (926,998) 0 (830,445)
Surrenders.......................................... 0 (72,002) 0 (173,603)
------- --------- ------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions........................ 0 (872,453) 0 (937,646)
------- --------- ------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (661,540) 0 (810,119)
NET ASSETS:
Beginning of Period................................. 0 661,540 0 810,119
------- --------- ------- ---------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======= ========= ======= =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
AVP AVP
TOTAL RETURN INTERNATIONAL
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ (428) $ 0 $ (1,668)
Net Realized Gain (Loss)............................ 0 27,033 0 5,806
Net Unrealized Gain (Loss) On Investments........... 0 2,375 0 11,504
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 28,980 0 15,642
-------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 15,460 0 3,176
Net Transfers Between Sub-accounts.................. 0 (166,251) 0 (320,600)
Surrenders.......................................... 0 (35,161) 0 (56,218)
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions........................ 0 (185,952) 0 (373,642)
-------- --------- -------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (156,972) 0 (358,000)
NET ASSETS:
Beginning of Period................................. 0 156,972 0 358,000
-------- --------- -------- ---------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======== ========= ======== =========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------
SVL SVL - CAPITAL
BOND GROWTH
------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ 36,885 $ 0 $ (241)
Net Realized Gain (Loss)............................ 0 49,316 0 30,414
Net Unrealized Gain (Loss) On Investments........... 0 14,556 0 (601)
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 100,757 0 29,572
-------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 81,738 0 2,999
Net Transfers Between Sub-accounts.................. 0 (731,953) 0 (123,277)
Surrenders.......................................... 0 (163,053) 0 (42,330)
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Capital Share Transactions........................ 0 (813,268) 0 (162,608)
-------- --------- -------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (712,511) 0 (133,036)
NET ASSETS:
Beginning of Period................................. 0 712,511 0 133,036
-------- --------- -------- ---------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======== ========= ======== =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
21
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------------
SVL SVL
BALANCED INTERNATIONAL
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ 1,023 $ 0 $ (14,209)
Net Realized Gain (Loss)............................ 0 11,126 0 188,293
Net Unrealized Gain (Loss) On Investments........... 0 (569) 0 37,761
--------- -------- --------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 11,580 0 211,845
--------- -------- --------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 20,059 0 449,850
Net Transfers Between Sub-accounts.................. 0 (62,709) 0 (1,691,446)
Surrenders.......................................... 0 (32,817) 0 (269,216)
--------- -------- --------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (75,467) 0 (1,510,812)
--------- -------- --------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (63,887) 0 (1,298,967)
NET ASSETS:
Beginning of Period................................. 0 63,887 0 1,298,967
--------- -------- --------- -----------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
========= ======== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-------------------------------------------------------------------
JAS JAS - AGGRESSIVE
GROWTH GROWTH
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1996 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ 8,759 $ 0 $ 5,554
Net Realized Gain (Loss)............................ 0 165,083 0 272,516
Net Unrealized Gain (Loss) On Investments........... 0 (1,295) 0 (72,580)
-------- --------- -------- -----------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 172,547 0 205,490
-------- --------- -------- -----------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 201,988 0 190,963
Net Transfers Between Sub-accounts.................. 0 (648,651) 0 (1,134,726)
Surrenders.......................................... 0 (88,402) 0 (104,507)
-------- --------- -------- -----------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (535,065) 0 (1,048,270)
-------- --------- -------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (362,518) 0 (842,780)
NET ASSETS:
Beginning of Period................................. 0 362,518 0 842,780
-------- --------- -------- -----------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======== ========= ======== ===========
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------
JAS - WORLDWIDE JAS
GROWTH BALANCED
------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)........................ $ 0 $ (1,734) $ 0 $ 1,228
Net Realized Gain (Loss)............................ 0 109,660 0 31,987
Net Unrealized Gain (Loss) On Investments........... 0 1,996 0 6,245
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets Resulting From
Operations........................................ 0 109,922 0 39,460
-------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits.................. 0 166,350 0 2,195
Net Transfers Between Sub-accounts.................. 0 (464,669) 0 (106,274)
Surrenders.......................................... 0 (78,076) 0 (182,758)
-------- --------- -------- ---------
Net Increase (Decrease) In Net Assets
Resulting From Capital Share Transactions......... 0 (376,395) 0 (286,837)
-------- --------- -------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS............... 0 (266,473) 0 (247,377)
NET ASSETS:
Beginning of Period................................. 0 266,473 0 247,377
-------- --------- -------- ---------
End of Period....................................... $ 0 $ 0 $ 0 $ 0
======== ========= ======== =========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
23
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------
MONTGOMERY
EMERGING
JAS FLEXIBLE JAS SHORT-TERM MARKETS
INCOME BOND ------------
----------------------------- ----------------------------- MAY 19* THRU
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31,
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 1996
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income (Loss)...................... $ 0 $ 16,903 $ 0 $ 27,728 $ (352)
Net Realized Gain (Loss).......................... 0 44,727 0 9,105 (1,916)
Net Unrealized Gain (Loss) On Investments......... 0 18,592 0 6,252 7,394
--------- --------- --------- ----------- --------
Net Increase (Decrease) In Net Assets Resulting
From Operations................................. 0 80,222 0 43,085 5,126
--------- --------- --------- ----------- --------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits................ 0 20,194 0 1,364,271 115,554
Net Transfers Between Sub-accounts................ 0 (480,612) 0 (1,708,024) 309,629
Surrenders........................................ 0 (66,925) 0 (134,795) (25,515)
--------- --------- --------- ----------- --------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions................. 0 (527,343) 0 (478,548) 399,668
--------- --------- --------- ----------- --------
TOTAL INCREASE IN NET ASSETS........................ 0 (447,121) 0 (435,463) 404,794
NET ASSETS:
Beginning of Period............................... 0 447,121 0 435,463 0
--------- --------- --------- ----------- --------
End of Period..................................... $ 0 $ 0 $ 0 $ 0 $404,794
========= ========= ========= =========== ========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
24
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
American Skandia Life Assurance Corporation Variable Account B -- Class 2 (the
"Account") is a separate investment account of American Skandia Life Assurance
Corporation ("American Skandia"). The Account is registered with the SEC under
the Investment Company Act of 1940 as a unit investment trust. The Account
commenced operations December 16, 1993.
As of December 31, 1996 the Account consisted of twenty-three sub-accounts, each
of which invests only in a single corresponding portfolio of either the
Neuberger and Berman Advisers Management Trust, The Alger American Fund, the
American Skandia Trust or the Montgomery Variable Series (the "Trusts").
Neuberger and Berman Management, Inc. is the advisor for the Neuberger and
Berman Advisers Management Trust. Fred Alger Management, Inc. is the advisor for
The Alger American Fund. American Skandia Investment Services Incorporated is
the investment manager for the American Skandia Trust, while Putnam Investment
Management Inc., Lord Abbett & Co., Janus Capital Corporation, Federated
Investment Counseling, Phoenix Investment Counsel, Inc., J. P. Morgan Investment
Management Incorporated, T. Rowe Price Associates Inc., Rowe Price-Fleming
International, Inc., Founders Asset Management, Inc., INVESCO Trust Company,
Pacific Investment Management Company, Berger Associates, Inc. and Robertson,
Stephens & Company Investment Management L.P. are the sub-advisors. Montgomery
Asset Management, L.P., is the advisor for the Montgomery Funds III. The
investment advisors are paid fees for their services by the respective Trusts.
The following two Class 2 sub-accounts commenced operations in 1996: the
Robertson Stephens Value + Growth on May 23 and the Montgomery Emerging Markets
on May 19.
During 1996, changes in investment advisors were made by proxy in certain
underlying funds. As a result the names of the following sub-accounts were
changed: Scudder International Bond changed to T. Rowe Price International Bond
on May 1, 1996; Seligman Henderson International Equity to Putnam International
Equity on October 15, 1996; Phoenix Balanced changed to Putnam Balanced on
October 15, 1996 and the Seligman Henderson International Small Cap changed to
Founders Passport on October 15, 1996.
The following twenty-one sub-accounts ceased operations on December 29, 1995:
the NBAMT-Growth; the NBAMT-Limited Maturity Bond; the NBAMT-Balanced; the
AST-Phoenix Capital Growth; the AST-Eagle Growth Equity; the AVP-Short-Term
Multi-Market; the AVP-Premier Growth; the AVP-Growth & Income; the AVP-U.S.
Government/High Grade Securities; the AVP-Total Return; the AVP-International;
the SVL-Bond; the SVL-Capital Growth; the SVL-Balanced; the SVL-International;
the JAS-Growth; the JAS-Aggressive Growth; the JAS-World-Wide Growth; the
JAS-Balanced; the JAS-Flexible Income and the JAS-Short-Term Bond.
2. VALUATION OF INVESTMENTS
The market value of the investments in the sub-accounts is based on the net
asset values of the Trust shares held at the end of the current period.
Transactions are accounted for on the trade date and dividend income is
recognized on an accrual basis. Realized gains and losses on sales of
investments are determined on a first-in first-out basis.
3. INCOME TAXES
American Skandia does not expect to incur any Federal income tax liability on
earnings, or realized capital gains attributable to the Account, therefore, no
charges for Federal income taxes are currently deducted from the Account. If
American Skandia incurs income taxes attributable to the Account, or determines
that such taxes will be incurred, it may make a charge for such taxes against
the Account.
25
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
NOTES TO FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
Under current laws, American Skandia may incur state and local income taxes (in
addition to premium tax) in several states. The company does not anticipate that
these will be significant. However, American Skandia may make charges to the
Account in the event that the amount of these taxes change.
4. CONTRACT CHARGES
The following contract charges are paid to American Skandia:
Mortality and Expense Risk Charges -- Charged daily against the Account at
an annual rate of .65% of the net assets.
Administrative Fees -- Charged daily against the Account at an annual rate
of .25% of the net assets.
Maintenance Fee -- A maintenance fee equaling the lesser of $35 or 2% may
be assessed against: (a) the initial Purchase Payment; and (b) each Annuity
Year after the first, the Account Value. It applies to the initial Purchase
Payment only if less than $50,000. It is assessed as of the first Valuation
Period of each Annuity Year after the first only if, at that time, the
Account Value of the Annuity is less than $50,000.
26
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
27
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
NOTES TO FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
5. CHANGES IN THE UNITS OUTSTANDING
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------------------------------
NBAMT - LIMITED
NBAMT - GROWTH MATURITY BOND NBAMT - BALANCED
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 0 76,158 0 231,497 0 97,266
Units Purchased..................... 0 21,029 0 109,675 0 26,464
Units Transferred Between
Sub-accounts...................... 0 (83,108) 0 (308,596) 0 (114,178)
Units Surrendered................... 0 (14,079) 0 (32,576) 0 (9,552)
-------- ------- -------- -------- ------- --------
Units Outstanding End of the Year... 0 0 0 0 0 0
======== ======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------------------------------
AAF AST - PUTNAM AST - FOUNDERS
MIDCAP GROWTH INTERNATIONAL EQUITY PASSPORT
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 1* THRU
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 204,227 61,104 452,589 199,313 137,991 0
Units Purchased..................... 91,889 111,398 119,692 46,746 96,763 72,430
Units Transferred Between
Sub-accounts...................... 96,003 45,805 (50,835) 259,303 89,864 66,470
Units Surrendered................... (76,823) (14,080) (113,380) (52,773) (46,158) (909)
------- ------- -------- ------ ------- --------
Units Outstanding End of the Year... 315,296 204,227 408,066 452,589 278,460 137,991
======= ======= ======== ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
---------------------------------------------------------------------------------------------
AST - FEDERATED AST - FEDERATED AST - PUTNAM
UTILITY INCOME HIGH YIELD BALANCED ASSET
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 164,976 86,555 300,107 122,508 239,737 114,927
Units Purchased..................... 9,080 31,714 110,782 102,869 26,190 14,069
Units Transferred Between
Sub-accounts...................... (28,299) 74,384 94,474 145,895 (25,472) 147,198
Units Surrendered................... (42,341) (27,677) (71,624) (71,165) (54,002) (36,457)
-------- ------- -------- -------- ------- -------
Units Outstanding End of the Year... 103,416 164,976 433,739 300,107 186,453 239,737
======== ======= ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
--------------------------------------------------------------------------------------------
AST - FOUNDERS
AST - T. ROWE PRICE AST - T. ROWE PRICE CAPITAL APPRECIATION
INTERNATIONAL BOND NATURAL RESOURCES ----------------------------
----------------------------- ----------------------------- YEAR ENDED
YEAR ENDED YEAR ENDED YEAR ENDED MAY 19* THRU DEC. 31, YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year............................... 127,373 25,171 27,379 0 221,840 96,278
Units Purchased...................... 86,518 49,331 39,114 2,488 44,714 58,187
Units Transferred Between
Sub-accounts....................... 21,799 56,647 84,470 25,033 39,299 83,179
Units Surrendered.................... (22,474) (3,776) (10,688) (142) (34,008) (15,804)
------- ------- ------- ------ ------- -------
Units Outstanding End of the Year.... 213,216 127,373 140,275 27,379 271,845 221,840
======= ======= ======= ====== ======= =======
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AAF - SMALL
NBAMT - PARTNERS CAPITALIZATION AAF - GROWTH
---------------------------- ---------------------------- ----------------------------
YEAR ENDED JUN. 12* THRU YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 230,034 0 321,334 187,387 506,542 177,825
Units Purchased..................... 129,982 36,516 121,589 113,725 184,688 135,786
Units Transferred Between
Sub-accounts...................... 127,801 193,958 114,030 55,814 (5,662) 219,573
Units Surrendered................... (62,153) (440) (94,937) (35,592) (115,608) (26,642)
------- ------- ------- ------- -------- -------
Units Outstanding End of the Year... 425,664 230,034 462,016 321,334 569,960 506,542
======= ======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
-----------------------------------------------------------------------------------------
AST - LORD ABBETT
GROWTH & INCOME AST - JANCAP GROWTH AST - MONEY MARKET
---------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 498,080 238,128 384,701 187,924 968,666 880,903
Units Purchased..................... 180,992 138,629 167,517 99,388 2,262,773 1,692,225
Units Transferred Between
Sub-accounts...................... 80,234 153,819 150,130 133,317 (1,451,535) (1,426,490)
Units Surrendered................... (87,796) (32,496) (127,828) (35,928) (486,973) (177,972)
------- ------- -------- ------- ---------- ----------
Units Outstanding End of the Year... 671,510 498,080 574,520 384,701 1,292,931 968,666
======= ======= ======== ======= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AST - PHOENIX AST - T. ROWE PRICE AST - T. ROWE PRICE
CAPITAL GROWTH ASSET ALLOCATION INTERNATIONAL EQUITY
---------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 0 23,203 89,787 74,058 610,851 301,423
Units Purchased..................... 0 5,700 39,234 15,761 286,364 182,552
Units Transferred Between
Sub-accounts...................... 0 (22,408) (10,449) 19,141 196,584 182,488
Units Surrendered................... 0 (6,495) (35,917) (19,173) (134,332) (55,612)
------- ------- ------- ------- -------- -------
Units Outstanding End of the Year... 0 0 82,655 89,787 959,467 610,851
======= ======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AST - INVESCO AST - PIMCO TOTAL AST - PIMCO LTD.
EQUITY INCOME RETURN BOND MATURITY BOND
---------------------------- ---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 8* THRU
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the
Year.............................. 293,340 150,719 846,356 256,950 399,158 0
Units Purchased..................... 91,446 78,361 345,533 268,109 187,300 29,331
Units Transferred Between
Sub-accounts...................... (31,826) 89,676 244,821 409,444 (33,820) 370,820
Units Surrendered................... (69,071) (25,416) (233,551) (88,147) (127,925) (993)
------- ------- --------- ------- -------- -------
Units Outstanding End of the Year... 283,889 293,340 1,203,159 846,356 424,713 399,158
======= ======= ========= ======= ======== =======
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
29
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B -- CLASS 2
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
5. CHANGES IN THE UNITS OUTSTANDING
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AST - EAGLE AST - BERGER AST - ROBERTSON STEPHENS
GROWTH EQUITY CAPITAL GROWTH VALUE + GROWTH
----------------------------- ----------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAY 23* THRU-
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996
------------- ------------- ------------- ------------- ------------------------
<S> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the Year..... 0 1,634 89,474 3,419 0
Units Purchased............................. 0 1,853 49,001 29,846 17,235
Units Transferred Between Sub-accounts...... 0 (2,684) (24,425) 59,519 105,829
Units Surrendered........................... 0 (803) (13,292) (3,310) (3,234)
------- ------ ------- ------ -------
Units Outstanding End of the Year........... 0 0 100,758 89,474 119,830
======= ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AVP - TOTAL RETURN AVP - INTERNATIONAL SVL - BOND
----------------------------- ----------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the Year...... 0 16,344 0 33,633 0
Units Purchased.............................. 0 1,465 0 290 0
Units Transferred Between Sub-accounts....... 0 (14,355) 0 (28,561) 0
Units Surrendered............................ 0 (3,454) 0 (5,362) 0
------ ------- -------- ------ -------
Units Outstanding End of the Year............ 0 0 0 0 0
====== ======= ======== ====== =======
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------
SVL - BOND
-------------
YEAR ENDED
DEC. 31, 1995
-------------
<S> <C>
Units Outstanding Beginning of the Year...... 75,644
Units Purchased.............................. 7,937
Units Transferred Between Sub-accounts....... (67,415)
Units Surrendered............................ (16,166)
--------
Units Outstanding End of the Year............ 0
========
<CAPTION>
----------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------
JAS - GROWTH JAS - AGGRESSIVE GROWTH
------------------------------ -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year...... 0 34,594 0 62,288
Units Purchased.............................. 0 17,766 0 13,717
Units Transferred Between Sub-accounts....... 0 (44,966) 0 (68,934)
Units Surrendered............................ 0 (7,394) 0 (7,071)
-------- ------- -------- ------
Units Outstanding End of the Year............ 0 0 0 0
======== ======= ======== ======
<CAPTION>
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------
JAS -
WORLDWIDE
GROWTH
-------------------------------
YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995
------------- -------------
<S> <C> <C>
Units Outstanding Beginning of the Year...... 0 22,365
Units Purchased.............................. 0 12,733
Units Transferred Between Sub-accounts....... 0 (28,908)
Units Surrendered............................ 0 (6,190)
------- --------
Units Outstanding End of the Year............ 0 0
======= ========
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AVP-SP AVP - GROWTH
Multi-Mkt AVP - PREMIER GROWTH & INCOME
---------------------------- ----------------------------- ---------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the Year..... 0 30,330 0 75,250 0
Units Purchased............................. 0 3,360 0 16,214 0
Units Transferred Between Sub-accounts...... 0 (29,048) 0 (70,502) 0
Units Surrendered........................... 0 (4,642) 0 (20,962) 0
------- ------- ------- ------- ---------
Units Outstanding End of the Year........... 0 0 0 0 0
======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
AVP - GROWTH AVP - U.S. GOV'T/ SVL - CAPITAL
& INCOME HIGH GRADE SECURITIES GROWTH
-------------- ------------------------------ -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Units Outstanding Beginning of the Year..... 65,886 0 85,679 0 9,998
Units Purchased............................. 10,154 0 6,617 0 108
Units Transferred Between Sub-accounts...... (69,773) 0 (75,458) 0 (7,486)
Units Surrendered........................... (6,267) 0 (16,838) 0 (2,620)
------- ---------- ---------- ------- -------
Units Outstanding End of the Year........... 0 0 0 0 0
======= ========== ========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
SVL
SVL - BALANCED INTERNATIONAL
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year..... 0 6,471 0 122,549
Units Purchased............................. 0 1,745 0 41,598
Units Transferred Between Sub-accounts...... 0 (5,086) 0 (140,158)
Units Surrendered........................... 0 (3,130) 0 (23,989)
--------- ------- ---------- ----------
Units Outstanding End of the Year........... 0 0 0 0
========= ======= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
JAS - FLEXIBLE
JAS - BALANCED INCOME
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Year..... 0 23,225 0 45,477
Units Purchased............................. 0 197 0 1,880
Units Transferred Between Sub-accounts...... 0 (8,428) 0 (41,119)
Units Surrendered........................... 0 (14,994) 0 (6,238)
------- ------- --------- -------
Units Outstanding End of the Year........... 0 0 0 0
======= ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CLASS 2 SUB-ACCOUNTS INVESTING IN:
----------------------------------------------------------------------------------------
JAS - SHORT-TERM MONTGOMERY
BOND EMERGING MARKETS
---------------------------------- ----------------
YEAR ENDED YEAR ENDED MAY 19* THRU
DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Units Outstanding Beginning of the Year..... 0 43,662 0
Units Purchased............................. 0 133,413 11,452
Units Transferred Between Sub-accounts...... 0 (164,153) 30,452
Units Surrendered........................... 0 (12,922) (2,549)
--------- ---------- --------
Units Outstanding End of the Year........... 0 0 39,355
========= ========== ========
</TABLE>
- --------------------------------------------------------------------------------
* Date Operations Commenced.
31
PART C
OTHER INFORMATION
<PAGE>
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits:
<S> <C> <C> <C>
(a) All financial statements are included in Parts A & B of this Registration Statement.
(b) Exhibits are attached as indicated.
(1) Copy of the resolution of the board of directors of Depositor
authorizing the establishment of the Registrant for Separate
Account B (previously filed in the initial Registration
Statement of Registration Statement No.
33-19363, filed December 30, 1987).
(2) Not applicable. American Skandia Life Assurance Corporation maintains custody of all assets.
(3) (a) Form of Revised Principal Underwriting Agreement between American Skandia Life Assurance Corporation and
American Skandia Marketing, Incorporated, formerly Skandia Life Equity Sales Corporation (previously
filed in Post-Effective Amendment No. 3 to Registration Statement No. 33-44436, filed April 20, 1993).
(b) Form of Revised Dealer Agreement (previously filed in Post-Effective Amendment No. 3 to Registration
Statement No. 33-44436, filed April 20, 1993).
(4) Copy of the form of the Annuity (previously filed in Pre-Effective Amendment No. 1 to this Registration Statement
filed November 9, 1993).
(5) Copy of the application form used with the annuity contracts (previously filed in Post-Effective Amendment No. 4,
filed February 17, 1995).
(6) (a) Copy of the certificate of incorporation of American Skandia Life Assurance Corporation (previously
filed in Pre-Effective Amendment No. 2 to Registration Statement No. 33-19363, filed July 27, 1988).
(b) Copy of the By-Laws of American Skandia Life Assurance Corporation (previously filed in Pre-Effective
Amendment No. 2 to Registration Statement No. 33-19363, filed July 27, 1988).
(7) Not applicable.
(8) Agreements between Depositor and:
(a) Neuberger & Berman Advisers Management Trust (previously filed in Post-Effective No. 5 to Registration
Statement No. 33-19363, filed February 28, 1990).
(i) Filed via EDGAR with Post-effective Amendment No. 4 to Registration Statement No. 33-87010, filed
February 25, 1997
(b) The Alger American Fund (previously filed in Post-Effective No. 5 to Registration Statement No.
33-19363, filed February 28, 1990).
(c) Alliance Variable Products Series Fund, Inc. (previously filed in Pre-Effective Amendment No. 1 to
Registration Statement No. 33-44436, filed March 30, 1992).
(d) American Skandia Trust (previously filed in Post-Effective Amendment No. 5 to Registration Statement No.
33-19363, filed February 28, 1990. At such time, what later became American Skandia Trust was known as
the Henderson Global Asset Trust).
(i) Filed via EDGAR with Post-effective Amendment No. 4 to Registration Statement No. 33-87010, filed
February 25, 1997
(e) The Montgomery Funds III filed via EDGAR in the Initial Registration Statement to Registration Statement
No. 333-08853, filed July 25, 1996
(9) Opinion and consent of Werner & Kennedy.
(10) Consent of Deloitte & Touche LLP.
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of Performance (previously filed in Pre-Effective
Amendment No. 1 to this Registration Statement filed November 9, 1993).
(14) Financial Data Schedules.
</TABLE>
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor: The Directors and Officers of the Depositor are as follows:
<S> <C> <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)
Cindy C. Ciccarello Vice President, Vice President,
38 Customer Service Customer Service:
American Skandia Life
Assurance Corporation
Ms. Ciccarello joined us in 1997. She previously held the position of Assistant
Vice President at Phoenix Duff & Phelps from 1996 to 1997 and positions of
Director and Operations Manager at Phoenix Equity Planning Corporation from 1989
to 1996.
Lincoln R. Collins Senior Vice President, Senior Vice President,
36 Product Management Product Management:
Director (since February, 1996) American Skandia Life
Assurance Corporation
William F. Cordner, Jr. Vice President, Vice President,
50 Customer Focus Teams Customer Focus Teams:
American Skandia Life
Assurance Corporation
Mr. Cordner joined us in 1996. He previously held the position of Vice President
at United Healthcare from 1993 to 1996 and Vice President at The Travelers
Insurance Company from 1990 to 1993.
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.
Brian L. Hirst Vice President, Vice President,
49 Corporate Actuary Corporate Actuary:
American Skandia Life
Assurance Corporation
Mr. Hirst joined us in 1996. He previously held the positions of Vice President
from 1993 to 1996 and Second Vice President from 1987 to 1992 at Allmerica
Financial.
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 J. 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.
Polly Rae Vice President, Vice President,
34 Service Development Service Development:
American Skandia Life
Assurance Corporation
Rodney D. Runestad Vice President Vice President:
47 American Skandia Life
Assurance 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
</TABLE>
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.
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant: The Depositor does not directly or indirectly control any person.
The following persons are under common control with the Depositor by American
Skandia Investment Holding Corporation:
(1) American Skandia Information Services and Technology
("ASIST"): The organization (formerly known as Skandia U.S.
Business Services Corporation) is a general business
corporation organized in the State of Delaware. Its primary
purpose is to provide various types of business services to
American Skandia Investment Holding Corporation and all of its
subsidiaries including computer systems acquisition,
development and maintenance, human resources acquisition,
development and management, accounting and financial reporting
services and general office services.
(2) American Skandia Marketing, Incorporated ("ASM, Inc."): The
organization is a general business corporation organized in
the State of Delaware. It was formed primarily for the purpose
of acting as a broker-dealer in securities. It acts as the
principal "underwriter" of annuity contracts deemed to be
securities, as required by the Securities and Exchange
Commission, which insurance policies are to be issued by
American Skandia Life Assurance Corporation. It provides
securities law supervisory services in relation to the
marketing of those products of American Skandia Life Assurance
Corporation registered as securities. It also may provide such
services in relation to marketing of certain public mutual
funds. It also has the power to carry on a general financial,
securities, distribution, advisory, or investment advisory
business; to act as a general agent or broker for insurance
companies and to render advisory, managerial, research and
consulting services for maintaining and improving managerial
efficiency and operation.
(3) American Skandia Investment, Services, Incorporated ("ASISI"):
The organization is a general business corporation organized
in the state of Connecticut. The organization is authorized to
provide investment service and investment management advice in
connection with the purchasing, selling, holding or exchanging
of securities or other assets to insurance companies,
insurance-related companies, mutual funds or business trusts.
It's primary role is expected to be as investment manager for
certain mutual funds to be made available primarily through
the variable insurance products of American Skandia Life
Assurance Corporation.
(4) Skandia Vida: This subsidiary American Skandia Life Assurance
Corporation was organized in March, 1995, and began operations
in July, 1995. It offers investment oriented life insurance
products designed for long-term savings through independent
banks and brokers.
Item 27. Number of Contract Owners: As of December 31, 1996 there were 1,710
owners of contracts.
Item 28. Indemnification: Under Section 33-320a of the Connecticut General
Statutes, the Depositor 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 Depositor. 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 reasonably 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 Depositor 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 Registrant's
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 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 such an 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 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.
Registrant hereby undertakes as follows: Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of Registrant pursuant
to the foregoing provisions, or otherwise, 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, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid by a director,
officer or controlling person of 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, unless in the opinion
of Registrant's counsel the matter has been settled by controlling precedent,
Registrant will 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.
Item 29. Principal Underwriters:
(a) At present, ASM, Inc. acts as principal underwriter only for annuities
to be issued by ASLAC.
(b) Directors and officers of ASM, Inc.
<TABLE>
<CAPTION>
Name and Principal Business Address Positions and Offices with Underwriter
<S> <C>
Gordon C. Boronow Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kimberly A. Bradshaw Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chief Executive Officer
Skandia Insurance Company Ltd. and Chairman of the
Sveavagen 44, S-103 50 Stockholm, Sweden Board of Directors
Daniel R. Darst Senior Vice President,
American Skandia Life Assurance Corporation National Marketing Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Paul DeSimone Vice President, Corporate
American Skandia Life Assurance Corporation Controller and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Wade A. Dokken President,
American Skandia Life Assurance Corporation Chief Marketing Officer
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Walter G. Kenyon Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lawrence Kudlow Senior Vice President,
American Skandia Life Assurance Corporation Chief Economist
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
N. David Kuperstock Vice President and Director
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Daniel LaBonte Vice President,
American Skandia Life Assurance Corporation Associate Marketing Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Thomas M. Mazzaferro Executive Vice President and
American Skandia Life Assurance Corporation Chief Financial Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Kristen E. Newall Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Brian O'Connor Vice President, National Sales
American Skandia Life Assurance Corporation Manager, Internal Wholesaling
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
M. Priscilla Pannell Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Don Thomas Peck Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Heidi Ann Richardson Vice President,
American Skandia Life Assurance Corporation Portfolio Marketing Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Hayward Sawyer Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Christian Thwaites Vice President,
American Skandia Life Assurance Corporation Qualified Plans
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Bayard F. Tracy Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager and
One Corporate Drive, P.O. Box 883 Director
Shelton, Connecticut 06484-0883
Tamara L. Wood Vice President, National
American Skandia Life Assurance Corporation Sales Director, Special Products
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
</TABLE>
Item 30. Location of Accounts and Records: Accounts and records are maintained
by ASLAC at its principal office in Shelton, Connecticut.
Item 31. Management Services: None
Item 32. Undertakings:
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old so long as payments under the annuity contracts may be accepted and
allocated to the Sub-accounts of Separate Account B.
(b) Registrant hereby undertakes to include either (1) as part of any enrollment
form or application to purchase a contract offered by the prospectus, a space
that an applicant or enrollee can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a Statement
of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) American Skandia Life Assurance Corporation ("Depositor") hereby represents
that the aggregate fees and charges under the annuity contracts are reasonable
in relation to the services rendered, the expenses expected to be incurred and
the risks assumed by the Depositor.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of the Registration Statement and
has duly caused this Registration Statement to be signed on its behalf, in the
Town of Shelton and State of Connecticut, on this 29th day of April, 1997.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 2 SUB-ACCOUNTS)
Registrant
By: American Skandia Life Assurance Corporation
By:/s/ Mary Priscilla Pannell Attest:/s/ Diana D. Steigauf
Mary Priscilla Pannell, Corporate Secretary Diana D. Steigauf
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By:/s/ Mary Priscilla Pannell Attest:/s/ Diana D. Steigauf
Mary Priscilla Pannell, Corporate Secretary Diana D. Steigauf
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature Title Date
(Principal Executive Officer)
Jan R. Carendi* Chief Executive Officer, April 29, 1997
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 29, 1997
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Vice President and April 29, 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/ Mary Priscilla Pannell
Mary Priscilla Pannell
<FN>
*Pursuant to Powers of Attorney filed with Post-Effective Amendment No. 2 to Registration Statement No. 333-00941
</FN>
</TABLE>
EXHIBITS
As noted in Item 24(b), various exhibits are incorporated by reference
or are not applicable. The exhibits included are as follows:
No. 4 EDGAR filing of the form of the Annuity
No. 9 Opinion and consent of Werner & Kennedy
No. 10 Consent of Deloitte & Touche LLP
No. 13 EDGAR filing of the Calculation of Performance
No. 14 Financial Data Schedules
WF/CRT (3/93)-01
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
SHELTON, CONNECTICUT
(A Stock Company)
This certificate (the "Annuity") is a summary of the provisions of a group
annuity contract. The contract owner and contract are as shown in the Schedule
made part of this Annuity.
RIGHT TO CANCEL
You may return this Annuity to our Office or to the representative who solicited
its purchase for a refund within twenty-one days after you receive it. The
amount of the refund will equal the then current Account Value plus any sales
charge, maintenance fee and any tax charge deducted as of the date we receive
the cancellation request. You bear the investment risk during this period.
Signed for American Skandia Life Assurance Corporation:
Secretary President
GROUP DEFERRED ANNUITY
NON-PARTICIPATING
VARIABLE INVESTMENT OPTIONS IN THE ACCUMULATION PERIOD
FIXED ANNUITY PAYMENTS IN THE PAYOUT PERIOD
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES ARE BASED ON THE INVESTMENT
PERFORMANCE OF THE
SUB-ACCOUNTS ARE BASED ON THE INVESTMENT PERFORMANCE AND ARE, THEREFORE, NOT
GUARANTEED. PLEASE REFER TO THE SECTION ENTITLED "ACCOUNT VALUE" FOR A MORE
COMPLETE EXPLANATION.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS ..................................................................4
INVESTMENT OF ACCOUNT VALUE...................................................5
OPERATION OF THE SEPARATE ACCOUNT.............................................5
CHARGES ...............................................................6
YOUR RIGHTS, OWNERSHIP, AND DESIGNATION OF BENEFICIARY........................7
PURCHASE PAYMENTS.............................................................8
ACCOUNT VALUE ...............................................................8
ALLOCATION RULES..............................................................9
TRANSFERS ...............................................................9
DISTRIBUTIONS ................................................................9
GENERAL PROVISIONS...........................................................12
ANNUITY TABLES ..............................................................14
A copy of any enrollment form and any riders and endorsements are attached.
<PAGE>
SCHEDULE
ANNUITY NUMBER: [001-00001] ISSUE DATE: [JUNE 1, 1990]
PARTICIPANT: [JOHN DOE] DATE OF BIRTH: [OCTOBER 21, 1940] SEX: [MALE]
[PARTICIPANT: [MARY DOE] DATE OF BIRTH: [OCTOBER 15, 1940] SEX: [FEMALE]
ANNUITANT: [JOHN DOE]
ANNUITANT'S DATE OF BIRTH: [APRIL 01,1934] ANNUITANT'S SEX: [MALE]
ANNUITY DATE: [MAY 01, 2019]
CONTINGENT ANNUITANT: AS FILED WITH US (OR LATER CHANGED, IF NOT IRREVOCABLE)
BENEFICIARY: AS FILED WITH US (OR LATER CHANGED, IF NOT IRREVOCABLE)
PURCHASE PAYMENT: [$25,000] NET PURCHASE PAYMENT: [$24,625]
MINIMUM ADDITIONAL PURCHASE PAYMENT: [$100]
MINIMUM WITHDRAWAL AMOUNT: [$100]
MINIMUM ANNUITY PAYMENT: [$50] PER MONTH
MINIMUM DEATH BENEFIT INTEREST RATE: [5%]
AUTOMATIC SUB-ACCOUNT: [AST MONEY MARKET]
TRANSFER FEE: [$10 PER TRANSFER AFTER THE TWELFTH IN AN ANNUITY YEAR]
SALES CHARGE: [1.5% OF EACH PURCHASE PAYMENT]
MAINTENANCE FEE: [IN THE FIRST ANNUITY YEAR, THE MAINTENANCE FEE IS THE
LESSER OF $35 AND 2% OF THE INITIAL PURCHASE PAYMENT. AFTER THE FIRST ANNUITY
YEAR, THE MAINTENANCE FEE IS THE LESSER OF $35 AND 2% OF THE ACCOUNT VALUE AT
THE BEGINNING OF EACH ANNUITY YEAR. THE FEE IS ONLY APPLICABLE AFTER THE FIRST
ANNUITY YEAR IF ACCOUNT VALUE FOR THE VALUATION PERIOD THE FEE IS DUE IS LESS
THAN $50,000.]
MORTALITY AND EXPENSE RISK CHARGE: [0.65% PER YEAR OF THE AVERAGE DAILY
TOTAL VALUE OF EACH SUB-ACCOUNT]
INVESTMENT ALLOCATION SERVICE CHARGE: [1% PER YEAR OF THE AVERAGE DAILY
TOTAL VALUE OF EACH SUB-ACCOUNT]
ADMINISTRATIVE CHARGE: [0.25% PER YEAR OF THE AVERAGE DAILY TOTAL VALUE OF
EACH SUB-ACCOUNT]
SEPARATE ACCOUNT: [AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE
ACCOUNT B, CLASS 2 SUB-ACCOUNTS ONLY]
OWNER: [AMERICAN SKANDIA INSURANCE TRUST]
CONTRACT: [010]
OFFICE: AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
ONE CORPORATE DRIVE - P.O. BOX 883, SHELTON, CONNECTICUT 06484
Telephone: 800-541-3087
<PAGE>
DEFINITIONS
Account Value: The value of each allocation to a Sub-account prior to the
Annuity Date plus any earnings, and/or less any losses, distributions, and
charges thereon. Account Value is determined separately for each Sub-account and
then totaled to determine Account Value for your entire Annuity.
Accumulation Period: The period of time from the Annuity Date through and
including the 15th day prior to the Annuity Date.
Advisor: A person or entity: (a) registered as such under the Investment
Advisors Act of 1940 and, where applicable, under equivalent state law or
regulation; or (b) that may provide investment advisory services and is exempt
from such registration.
Annuitant: The person upon whose life this Annuity is issued.
Annuity Date: The date on which annuity payments are to commence.
Annuity Years: Continuous 12 month periods commencing on the Issue Date and
each anniversary of the Issue Date.
Beneficiary: The person designated as the recipient of the death benefit.
Contingent Annuitant: The person named to become the Annuitant on the
Annuitant's death prior to the Annuity Date.
In Writing: In a written form satisfactory to us and filed at the Office.
Issue Date: The effective date of your participation under the contract
shown in the Schedule in relation to the rights and benefits evidenced by this
Annuity.
Net Purchase Payment: A Purchase Payment less any applicable sales charge,
any initial maintenance fee and any charge for taxes.
Office: The location shown in the Schedule where all requests regarding
this Annuity are to be sent.
Owner: The person or entity shown as Owner in the Schedule unless later changed,
that owns the master group contract under which an Annuity is issued.
Payout Period: The period starting on the Annuity Date during which the
Annuity is paid.
Purchase Payment: A cash consideration you give to us for the rights,
privileges and benefits outlined in this Annuity.
Separate Account: The variable account shown in the Schedule used in
relation to Sub-accounts.
Sub-account: A division of the Separate Account shown in the Schedule. We
use Sub-accounts to calculate variable benefits under this Annuity.
<PAGE>
Unit: A measure used to calculate your Account Value in a Sub-account until
15 days prior to the Annuity Date.
Unit Price: 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: 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. The Separate Account determines the time
during the Valuation Day for valuing the Separate Account.
Valuation Period: The period of time between the close of business of the
New York Stock Exchange on successive Valuation Days.
we, us, our: American Skandia Life Assurance Corporation.
you, your: The participant shown in the Schedule.
INVESTMENT OF ACCOUNT VALUE
In the Accumulation Period we offer a range of variable options as ways to
invest your Account Value. These are all Sub-accounts of the Separate Account
shown in the Schedule. You may maintain Account Value in multiple Sub-accounts,
subject to the limits set out in the Allocation Rules section of this Annuity.
You may transfer Account Value between Sub-accounts, subject to the requirements
set out in the Transfers section. Transfers may be subject to a fee.
OPERATION OF THE SEPARATE ACCOUNT
In the Accumulation Period, assets supporting Account Values are held in the
Separate Account.
We are the legal owner of assets in the Separate Account. Income, gains and
losses, whether or not realized, from assets allocated to the Separate Account,
are credited to or charged against 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 the 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 annuity
obligations, which include your class of Annuities.
The Separate Account consists of multiple Sub-accounts. This Separate Account
was established by us pursuant to Connecticut law. This Separate Account may
also hold assets of other annuities issued by us with values and benefits that
vary according to the investment performance of this Separate Account.
The amount of our obligations in relation to allocations to the Sub-accounts are
based on the investment performance of such Sub-accounts. However, the
obligations themselves are our general corporate obligations.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (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 the Separate Account.
<PAGE>
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to change the investment
policy of any or all Sub-accounts, add Sub-accounts, eliminate Sub-accounts,
combine Sub-accounts, or to substitute underlying mutual funds or portfolios of
underlying mutual funds, subject to any required regulatory approvals.
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.
We reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of contracts to which this Annuity
belongs, to another separate account. If this type of transfer is made, the term
"Separate Account" as used in this Annuity, shall mean the separate account to
which the assets were transferred.
CHARGES
General: The charges which are or may be assessed against your Annuity are the
sales charge, the maintenance fee, tax charges, and the transfer fee. The
charges assessed against the Sub-accounts are the administration charge, the
mortality and expense risk charges, and the investment allocation services
charge. A charge for taxes may also be assessed against the Sub-accounts.
Maintenance Fee: This is an annual fee, if applicable, as shown in the
Schedule.
Sales Charge: We may assess a sales charge. The amount, if applicable, of
any such charge is as shown in the Schedule.
Tax Charges: In several states a tax is payable. We will deduct the amount
of tax payable, if any, from your Purchase Payments or Account Value.
Transfer Fee: We charge the transfer fee shown in the Schedule.
Allocation Of Annuity Charges: Any applicable sales charge is deducted from each
Purchase Payment. The transfer fee is assessed against the Sub-accounts in which
you maintain Account Value immediately after 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. Tax charges are assessed against the entire Purchase Payment or
Account Value as applicable. The maintenance fee, if applicable, is assessed
against the initial Purchase Payment. After the first Annuity Year, any
applicable 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.
Administration Charge: We charge for administering each Sub-account. We assess
this charge each day at the daily equivalent of the rate shown in the Schedule
against the daily total value of each Sub-account.
Mortality and Expense Risk Charges: We assess mortality and expense risk charges
against each Sub-account. We assess these charges each day at the daily
equivalent of the rate shown in the Schedule against the daily total value in
each Sub-account.
Investment Allocation Services Charge: We assess each Sub-account on a daily
basis, a charge for investment allocation services. We assess these charges each
day at the daily equivalent of the rate shown in the Schedule against the daily
total value in each Sub-account. We pay the portion of the investment allocation
services charge attributable to your Annuity to the Advisor you name if: (a)
such payment is permitted by law; and (b) a signed investment allocation
services agreement between you, an Advisor, and us is in effect. Prior to any
such agreement taking effect: (a) the Advisor must satisfy our requirements; and
(b) you, the Advisor and we must all sign an investment allocation services
agreement. We pay Advisors periodically. You may name only one Advisor during
any period for which we pay the charge.
<PAGE>
YOUR RIGHTS, OWNERSHIP, AND DESIGNATION OF BENEFICIARY
Ownership, Annuitant and Beneficiary Designations: You may exercise the rights,
options and privileges granted participants by the contract as shown in the
Schedule or permitted by us. Your rights are subject to the rights of any
assignee recorded by us and of any irrevocably designated Beneficiary.
If more than one participant is named, all rights reserved to participants are
then held jointly. We require the consent In Writing of all joint participants
for any transaction for which we require the written consent of a participant.
You may name a contingent participant. However, the designation takes effect
only on or after the Annuity Date. Where required by law, we require the consent
In Writing of the spouse of any person with a vested interest in an Annuity.
Designations are subject to various regulatory or statutory requirements
depending on the use of the Annuity. 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.
You must name an Annuitant. However, we do not accept designation of joint
Annuitants. You may name more than one Contingent Annuitant. If the participant
is an individual and is not the designated Annuitant, the participant
immediately becomes the Contingent Annuitant if the Contingent Annuitant
predeceases the Annuitant or if a Contingent Annuitant is not designated. If
there is more than one participant, all of whom are natural persons, the oldest
of any such participants not named as the Annuitant immediately becomes the
Contingent Annuitant if the Contingent Annuitant predeceases the Annuitant or if
a Contingent Annuitant is not designated. If the participant is an entity and no
Contingent Annuitant is designated, the death benefit is payable upon the
Annuitant's death.
You may designate more than one primary and more than one contingent
Beneficiary. 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 a death occurs requiring payment of the
death benefit, the proceeds will become payable to the contingent Beneficiary.
If no Beneficiary is alive when a death occurs requiring payment of the death
benefit or in the absence of any Beneficiary designation, the proceeds will vest
in you or your estate.
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 participant, contingent participant, Annuitant, Contingent
Annuitant and Beneficiary designations by sending a request In Writing. 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 participant subsequent to the
death of the participant or the first of any joint participants to die, except
where a spouse-Beneficiary has become the participant as a result of a
participant's death; (b) a new participant or Annuitant who does not meet our
then current underwriting guidelines; (c) a new Annuitant subsequent to the
Annuity Date if the annuity option selected includes a life contingency; and (d)
a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity.
Common Disaster: If a participant is a natural person and if any Beneficiary
dies with the participant in a common disaster, it must be proved to our
satisfaction that the participant died first. Unless information provided
indicates otherwise, the Annuity is treated as though the Beneficiary died
first. If: (a) the participant is not a natural person; (b) no Contingent
Annuitant has been designated; and (c) the Annuitant and the Beneficiary die in
a common disaster, then it must be proved to our satisfaction that the Annuitant
died first. Unless provided otherwise, the proceeds are payable as if the
Beneficiary died before the Annuitant.
<PAGE>
PURCHASE PAYMENTS
Initial Purchase Payment: Issuance of an Annuity represents our acceptance of
both an initial Purchase Payment and any enrollment of a participant. The amount
of your initial Net Purchase Payment evidenced by this Annuity is shown in the
Schedule. Your initial Net Purchase Payment is subject to our allocation rules
(see "Allocation Rules").
Additional Purchase Payments: The minimum for any additional Purchase Payment is
as shown in the Schedule. Additional Purchase Payments may be paid at any time
before the Annuity Date. Subject to the allocation rules herein, we allocate
additional Net Purchase Payments according to the instructions you provide with
each additional Purchase Payment. Should no instructions be received, we shall
return your Additional Purchase payment.
ACCOUNT VALUE
General: In the Accumulation Period your Annuity has an Account Value. Your
total Account Value is the sum of your Account Value in each Sub-Account. 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.
Units: The number of Units attributable to this Annuity 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
affected Sub-account as of the Valuation Period applicable to such transaction.
Unit Price: For each Sub-account the initial Unit Price was $10.00. The Unit
Price for each subsequent period is the net investment factor for that period,
multiplied by the Unit Price for the immediately preceding Valuation Period. The
Unit Price for a Valuation Period applies to each day in the period.
Net Investment Factor: Each Sub-account has a net investment factor. The net
investment factor is an index that measures the investment performance of and
charges assessed against a Sub-account from one Valuation Period to the next.
The net investment factor for a Valuation Period is (a) divided by (b), less
(c); where:
(a) is the net result of :
(1) the net asset value per share of the underlying mutual fund shares
held in the Sub-account at the end of the current Valuation Period
plus the per share amount of any dividend or capital gain
distribution declared by the underlying mutual fund during that
Valuation Period; plus or minus
(2) any per share charge or credit during the Valuation Period as a
provision for taxes attributable to the operation or maintenance
of the Sub-account.
(b) is the net result of :
(1) the net asset value per share of the underlying mutual fund shares
held in the Sub-account at the end of the preceding Valuation
Period; plus or minus
(2) any per share charge or credit during the preceding Valuation
Period as a provision for taxes attributable to the operation or
maintenance of the Sub-account.
(c) is the mortality and expense risk charge, the investment allocation
services charge, and the administration charge.
We value the assets in the Sub-accounts at their fair market value in accordance
with accepted accounting practices and applicable laws and regulations. The net
investment factor may be greater than, equal to, or less than one.
<PAGE>
ALLOCATION RULES
You may allocate your Account Value among the Sub-accounts we make available. In
the Accumulation Period, you may maintain Account Value in a maximum of 10
available Sub-accounts. Should you request a transaction that would leave less
than any minimum amount we then require in a Sub-account, we reserve the right,
to the extent permitted by law, to add the balance of your Account Value in the
applicable Sub-account to the transaction and close out your balance in that
Sub-account.
Withdrawals of any type are taken pro-rata from the Sub-accounts based on the
then current Account Values in such Sub-accounts unless we receive other
instructions from you prior to such withdrawal.
TRANSFERS
In the Accumulation Period you may transfer Account Value between Sub-accounts,
subject to our allocation rules herein. We charge the transfer fee shown in the
Schedule. Your transfer request must be In Writing unless you satisfy our
requirements permitting transfers based on instructions we receive over the
phone.
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf. We may suspend or cancel such acceptance
at any time. We give you prior notification of any such suspension or
cancellation. We may restrict the Sub-accounts that will be available to you for
transfers or allocations of Net Purchase Payments during any period in which you
authorize such third party that provides market timing services to act on your
behalf. We give you 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 reserve the right to limit the number of transfers in any Annuity Year for
all existing or new participants. We also reserve the right to limit the number
of transfers in any Annuity Year or to refuse any transfer request for a
participant or certain participants if we believe that: (a) excessive trading by
such participant or participants 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
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 any affected
underlying mutual funds.
DISTRIBUTIONS
Surrender: Surrender of your Annuity for its Account Value is permitted
during the Accumulation Period. You must send your Annuity and surrender request
In Writing to our Office.
Partial Withdrawals: You may withdraw part of your Account Value during the
Accumulation Period. The minimum withdrawal is as shown in the Schedule under
the section entitled "Minimum Withdrawal Amount." The Account Value that must
remain in the Annuity as of the date of this transaction is as shown in the
Schedule. If the amount of the partial withdrawal request exceeds the maximum
amount available, we reserve the right to treat your request as one for a full
surrender.
We may offer systematic partial withdrawals subject to our rules.
<PAGE>
Death Benefit: In the Accumulation Period, a death benefit is payable. It is
payable on the death of a participant if the participant is an individual. If
there is more than one participant, such participants being natural persons, the
death benefit is payable upon the first death of such participants. If the
Annuity is owned by an entity, the death benefit is payable upon the Annuitant's
death, if there is no Contingent Annuitant. For applicable deaths occurring on
or after age 85 of the deceased, the death benefit is the Account Value. For
applicable deaths occurring prior to age 85 of the deceased, the death benefit
is the greater of (a) or (b), where:
(a) is the Account Value; and
(b) is the minimum death benefit.
The minimum death benefit is the total of Each Purchase Payment growing daily at
the equivalent of the interest rate shown in the Schedule as applied in
determining the minimum death benefit, starting as to each Purchase Payment on
the date it is allocated to the Account Value, less the total of each
withdrawal, of any type, growing daily at the interest rate shown in the
Schedule, starting as of the date of each such withdrawal. However, this minimum
death benefit may not exceed 200% of (A) minus (B), where: (A) is the total of
all Purchase Payments received; and (B) is the total of all withdrawals of any
type.
The death benefit is determined as of the date we receive In Writing due proof
of death.
If the death benefit becomes payable prior to the Annuity Date due to a
participant's death and the Beneficiary is the spouse, then in lieu of receiving
the death benefit, the participant's spouse may elect to be treated as a
participant and continue the Annuity.
In the event of a participant's death, the benefit must be distributed within
five years of the date of death or over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Distribution
after a participant's death 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. If the participant is an individual, the participant
becomes the Contingent Annuitant if the Contingent Annuitant predeceases the
Annuitant or if no Contingent Annuitant has been designated. If there is more
than one participant, all of whom are natural persons, the oldest of any such
participants not named as the Annuitant immediately becomes the Contingent
Annuitant if the Contingent Annuitant predeceases the Annuitant or if a
participant does not designate a Contingent Annuitant.
In the Payout Period, subsequent to the death of the Annuitant, we continue to
pay any "certain" payments (payments not contingent on the continuance of any
life) to the Beneficiary.
In the Payout Period, we distribute any payments due subsequent to a
participant's death or the death of any participant at least as rapidly as under
the method of distribution in effect as of the date of such participant's death.
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.
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments. Your choice of Annuity Date and annuity option may be limited
depending on your use of the Annuity. 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.
<PAGE>
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) 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. Such rate is not less than 3% of interest per
year. Interest is credited between the date Account Value is applied to an
annuity option and the Annuity Date. Annuity options in addition to those shown
are available with our consent.
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below. Except where a lower amount is
required by law, the minimum monthly annuity payment is as shown in the
Schedule. In the absence of election prior to proceeds becoming due, the
Beneficiary may make such an election. However, if you made an election, the
Beneficiary may not alter such election. Such election must be made In Writing
within one year after proceeds are payable.
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.
(a) 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
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
others payments nor death benefits would be payable.
(b) 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.
(c) Option 3 - Payments Based on Joint Lives: Under this option, income is
payable periodically during the joint lifetime of two key lives. After the first
death, income is payable periodically during the remaining lifetime of the
survivor, ceasing with the last payment prior to the survivor's death.
(d) 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.
The first periodic payment is determined by multiplying the portion of (a) times
(b); where: (a) is the Account Value being allocated to purchase annuity
payments (expressed in thousands of dollars) as of the close of business of the
fifteenth day preceding the Annuity Date, plus interest at not less than 3% per
year from such date to the Annuity Date; and (b) is the amount of the first
periodic payment per $1,000 of value obtained from our then current annuity
rates for that type of annuity and for the frequency of payment selected. These
rates will not be less than those shown in the Annuity Tables shown herein.
We reserve the right to require submission prior to commencement of any annuity
payments of evidence satisfactory to us of the age of any key life upon whose
life payment amounts are calculated.
<PAGE>
Pricing Of Transfers And Distributions: We "price" transfers and distributions
on the Valuation Periods indicated below. The pricing of transfers and
distributions includes the determination of the applicable Unit Price for the
Units transferred or distributed. Unit Prices may change each Valuation Period
to reflect the investment performance of the Sub-accounts.
(a) We price "scheduled" transfers and distributions as of the Valuation
Period such transactions are so scheduled. "Scheduled" transactions include
transfers or withdrawals of any type under an automatic program of scheduled or
automatic transfers or withdrawals.
(b) We price "unscheduled" transfers and partial withdrawals as of the date
we receive In Writing at our Office the request for such transactions.
(c) We price surrenders, and death benefits as of the Valuation Period we
receive at our Office all materials we require for such transactions and such
materials are satisfactory to us.
GENERAL PROVISIONS
Entire Contract: This contract shown in the Schedule, including any attached
riders or endorsements, the attached copy of any enrollment form and any
supplemental applications and endorsements are the entire contract. As to your
Annuity, the contract also includes the copy of any enrollment form attached to
your Annuity. All statements made in any application are deemed to be
representations and not warranties. No statement is used to void the Annuity or
defend against a claim unless it is contained in any application or any
supplemental application or any enrollment form.
Only our President, a Vice President or Secretary may change or waive any
provisions of the contract or any Annuity. Any change or waiver must be In
Writing. We are not bound by any promises or representations made by or to any
other person.
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 are based, we make
adjustments to conform to the facts. Any underpayments by us will be remedied on
the next payment following correction. Any overpayments by us will be charged
against future amounts payable by us under your Annuity.
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. 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.
Non participation: The contract does not share in our profits or surplus
earnings.
Deferral of Transactions: We may defer any annuity payment for a period not to
exceed the greater of 6 months or the period permitted by law. If we defer such
a distribution for more than thirty days, we pay interest of at least 4% per
year on the amount deferred. We may defer 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 other deferral period begins on
the date such distribution or transfer would otherwise have been transacted.
All transactions into, out of or based on any Sub-account may be postponed
whenever (1) the New York Stock Exchange is closed, except for 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.
<PAGE>
Elections, Designations, Changes and Requests: All elections, designations,
changes and requests must be In Writing and are effective only after they have
been approved by us, subject to any transactions made by us before receipt of
such notices. We inform you of any changes to the contract shown in the Schedule
that materially affect your rights. We reserve the right to require that this
Annuity be returned to our Office for endorsement of any change to such contract
or any change affecting only this Annuity.
Claims of Creditors: To the extent permitted by law, no payment under the
contract shown in the Schedule or any Annuity thereunder is subject to the
claims of the creditors of the Owner, you or any other participant, Annuitant or
Beneficiary.
Proof of Survival: Any annuity payment is subject to evidence satisfactory to us
that the payee is alive on the date such payment is otherwise due.
Tax Reporting: We intend to make all required regulatory reports regarding
taxable events in relation to this Annuity. Such events may include, but are not
limited to: (a) annuity payments; (b) payment of death benefits; (c) surrender
of value from an Annuity in excess of the tax basis; and (d) assignments.
Facility of Payment: We reserve the right, in settlement of full liability, to
make payments to a guardian, relative or other person if a payee is legally
incompetent.
Reports to You: We provide reports to you during the Accumulation Period. We
will provide you with reports at least once each quarter. You may request
additional reports. We reserve the right to charge up to $50 for each such
additional report.
Reserved Rights: In addition to rights specifically reserved elsewhere in this
Annuity, we reserve the right to any or all of the following: (a) combine a
Sub-account with other Sub-accounts; (b) combine the Separate Account shown in
the Schedule or a portion thereof with other separate accounts; (c) deregister
the Separate Account shown in the Schedule under the Investment Company Act of
1940; (d) operate the Separate Account shown in the Schedule as a management
investment company under the Investment Company Act of 1940 or in any other form
permitted by law; (e) make changes required by any change in the Securities Act
of 1933, the Exchange Act of 1934 or the Investment Company Act of 1940; (f)
make changes that are necessary to maintain the tax status of your Annuity under
the Internal Revenue Code; and (g) make changes required by any change in other
Federal or state laws relating to retirement annuities or annuity contracts.
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.
<PAGE>
ANNUITY TABLES
The attached tables show the minimum dollar amount of each monthly payment for
each $1,000 applied under the options. The amounts payable when annuity payments
commence may be higher, based on our then current assumptions as to interest,
expenses and mortality, but will not be lower.
Under options one and two, the amount of each payment depends on the age and
sex, if applicable, of the payee at the time the first payment is due. Under
option three, the amount of each payment depends on the age and sex, if
applicable, of both payees at the time the first payment is due. No election can
be changed once payments begin.
The tables shown are based on interest at 3% per year compounded annually and
the 1983a Individual Annuity Mortality Table set back one year for males and two
years for females or the appropriate variation of such Table with genderless
rates when applicable to the Annuity in order to meet Federal requirements in
relation to the usage of such Annuity.
The payee's settlement age is the payee's age, last birthday, on the date of the
first payment, minus the age adjustment. The age adjustments are shown below.
They are based on the date of the first payment. The age adjustment does not
exceed the age of the payee.
Attained Age
Annuitization Year Set Back
2000 - 2009 1
2010 - 2019 2
2020 and later 3
<PAGE>
Amount of Monthly Payment For Each $1,000 Applied
<TABLE>
<CAPTION>
First and Second Options
Single Life Annuities with
Male Payee with Female Payee with
Monthly Payments Guaranteed Monthly Payments Guaranteed
--------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
None 120 180 240 None 120 180 240
Age $ $ $ $ $ $ $ $
---
50 4.19 4.15 4.10 4.03 3.79 3.78 3.76 3.73
55 4.61 4.54 4.45 4.32 4.10 4.08 4.04 3.99
60 5.15 5.03 4.87 4.65 4.52 4.47 4.40 4.30
65 5.91 5.67 5.36 4.97 5.08 4.98 4.85 4.65
70 6.98 6.44 5.87 5.23 5.85 5.65 5.38 5.00
75 8.46 7.32 6.31 5.40 6.98 6.50 5.94 5.28
80 10.57 8.18 6.62 5.48 8.66 7.50 6.41 5.43
Third Option
Joint and Last Survivor Annuity
Age of Female Payee
Age of 35 40 45 50 55 60 65 70 75 80
Male Payee $ $ $ $ $ $ $ $ $ $
----------
50 3.15 3.27 3.39 3.53 3.67 3.79 3.91 4.00 4.07 4.12
55 3.17 3.29 3.44 3.60 3.78 3.96 4.13 4.27 4.39 4.47
60 3.18 3.31 3.47 3.66 3.88 4.11 4.35 4.57 4.76 4.91
65 3.19 3.33 3.50 3.70 3.95 4.23 4.55 4.87 5.18 5.44
70 3.19 3.34 3.52 3.74 4.01 4.33 4.72 5.16 5.62 6.05
75 3.20 3.34 3.53 3.76 4.04 4.40 4.85 5.39 6.02 6.68
80 3.20 3.35 3.53 3.77 4.07 4.45 4.94 5.57 6.35 7.26
Fourth Option
Payments for a Designated Period
Amount of Amount of Amount of Amount of
No. of Monthly No. of Monthly No. of Monthly No. of Monthly
Years Payments Years Payments Years Payments Years Payments
----- -------- ----- -------- ----- -------- ----- --------
10 9.61 16 6.53 22 5.15 28 4.37
11 8.86 17 6.23 23 4.99 29 4.27
12 8.24 18 5.96 24 4.84 30 4.18
13 7.71 19 5.73 25 4.71
14 7.26 20 5.51 26 4.59
15 6.87 21 5.32 27 4.47
</TABLE>
<PAGE>
WF/CRT (3/93)-17 17
<PAGE>
WF/CRT (3/93)-18 18
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Shelton, Connecticut
(A Stock Company)
GROUP DEFERRED ANNUITY
NON-PARTICIPATING
VARIABLE INVESTMENT OPTIONS IN THE ACCUMULATION PERIOD
FIXED ANNUITY PAYMENTS IN THE PAYOUT PERIOD
IN THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES
ARE BASED ON THE INVESTMENT PERFORMANCE OF
THE SUB-ACCOUNTS ARE BASED ON THE INVESTMENT
PERFORMANCE AND ARE, THEREFORE, NOT GUARANTEED.
PLEASE REFER TO THE SECTION ENTITLED "ACCOUNT VALUE"
FOR A MORE COMPLETE EXPLANATION.
(212) 408-6900 Letterhead
Werner & Kennedy
1633 Broadway
New York, NY 10019
April 28, 1997
American Skandia Life Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
Re: Post-effective Amendment No. 7 to Form N-4 filed by American Skandia
Life Assurance Corporation, Depositor, and American Skandia Life
Assurance Corporation Variable Account B (Class 2 Sub-Accounts),
Registrant
Registration No.: 33-56770
Investment Company No.: 811-8248
Dear Mesdames and Messrs.:
You have requested us, as general counsel to American Skandia Life
Assurance Corporation ("American Skandia"), to furnish you with this opinion in
connection with the above-referenced registration statement by American Skandia,
as Depositor, and American Skandia Life Assurance Corporation Variable Account B
(Class 2 Sub-Accounts) ("American Skandia Variable Account B Class 2
Sub-Accounts) as Registrant, under the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registration Statement No.
33-56770, Investment Company Act No. 811-8248, (the "Registration Statement") of
a certain Variable Annuity Contract (the "Contract") that will be issued by
American Skandia through American Skandia Variable Account B (Class 2
Sub-Accounts).
We have made such examination of the statutes and authorities,
corporate records of American Skandia, and other documents as in our judgment
are necessary to form a basis for opinions hereinafter expressed.
In our examinations, we have assumed to genuineness of all signatures
on, and authenticity of, and the conformity to original documents of all copies
submitted to us. As to various questions of fact material to our opinion, we
have relied upon statements and certificates of officers and representatives of
American Skandia and others.
Based upon the foregoing, we are of the opinion that:
1. American Skandia is a validly existing corporation under the laws of the
State of Connecticut.
American Skandia
Life Assurance Corporation
Page 2
2. American Skandia Variable Account B (Class 2 Sub-Accounts) is validly
existing as a separate account pursuant to the laws of the State of Connecticut.
3. The form of the Contract has been duly authorized by American Skandia,
and has been or will be filed in states where it is eligible for approval, and
upon issuance in accordance with the laws of such jurisdictions, and with the
terms of the Prospectus and the Statement of Additional Information included as
part of the Registration Statement, will be valid and binding upon American
Skandia.
We represent that the above-referenced Post-effective Amendment No. 7 to
the Registration Statement does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b) of Rule 485.
We hereby consent to the use of this opinion as an exhibit to the
above-referenced Registration Statement of American Skandia on Form N-4 under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, and to the reference to our name under the heading "Legal Experts"
included in the Registration Statement.
Very truly yours,
/s/WERNER & KENNEDY
(W&K33-56770)
Exhibit 10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-effective Amendment No. 7 to Registration
Statement No. 33-56770 of American Skandia Life Assurance Corporation Variable
Account B (Class 2 Sub-Accounts) on Form N-4 of our report dated March 10, 1997,
included and incorporated by reference in the Annual Report on Form 10-K of
American Skandia Life Assurance Corporation for the year ended December 31,
1996, to the use of our report dated March 10, 1997 relating to American Skandia
Life Assurance Corporation appearing in the Prospectus, which is part of this
Registration Statement, and to the use of our report dated February 24, 1997
relating to American Skandia Life Assurance Corporation Variable Account B -
Class 2 appearing in the Statement of Additional Information, which is also part
of this Registration Statement. We also consent to the reference to us under the
heading "Independent Auditors" appearing in such Statement of Additional
Information.
/s/ Deloitte & Touche LLP
New York, New York
April 28, 1997
Calculation of Performance Information for Advertisement of Performance
The Registrant expects to use inception-to-date performance data, as well as 1
year, 3 year, 5 year and 10 year figures. While the Sub-accounts to be offered
are new, standard performance data will be based on: (a) the charges assessed
against the annuities and the Sub-accounts; and (b) the performance of the
underlying mutual fund portfolios from the inception of such portfolios.
Non-standard performance data will be based on the performance of the
Sub-accounts only, and will not take into consideration any applicable sales
charges or maintenance fees. Non-standard return will only be used when
accompanied by standard return data. The Registrant also expects to use current
and effective yield performance data in advertising the money-market type
account.
Current and effective yield is to be calculated for a hypothetical Annuity and
based on the performance of any money-market type Sub-accounts during the last
seven days of the calendar quarter ending prior to the date of the
advertisement. At the beginning of such period, the hypothetical Annuity is
assumed to have a balance of one Unit in the money market-type Sub-account.
(a) The current yield will be computed by determining the net change,
exclusive of capital changes, in the value of the aforementioned Unit during the
seven-day period, subtracting a hypothetical charge reflecting the charges
against an Annuity, and dividing the difference by the value of the Unit at the
beginning of the seven-day period to obtain a base period return, and then
multiplying such base period return by (365/7) with the resulting yield figure
carried to at least the nearest 100th of one percent.
(b) The effective yield is determined by taking the base period return
noted above and compounding by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the formula
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7 ]- 1.
Standard and non-standard return will be calculated as of the end of each
calendar quarter. The formulas for calculating standard return for periods of
1-year, 3 years and from inception-to-date are shown below. The formulas for
periods of 5 and 10 years would follow the pattern for the 3 year period.
Standard return for the class of contracts being offered in an advertisement
that includes performance data will at least show figures based on the maximum
charges and fees for that class. Annuities may be offered to certain groups or
under group contracts where various charges and fees may be eliminated or
reduced. Therefore, advertising to persons eligible for such Annuities will be
shown performance data related to the particular class of contract being
offered. In addition to the data based on maximum applicable charges,
performance data may be provided based on the assumption that no maintenance fee
applies because the Purchase Payment and Account Value are in excess of $50,000.
In the formulas that follow, Class I represents Annuities subject to the maximum
charges and fees. Class II represents Annuities subject to the maximum sales
charge but no applicable maintenance fee. The formulas assume a single Purchase
Payment of $1,000.
The formulas are as shown on the following pages.
<PAGE>
A. Standard Total Return: 1-Year; Class I
Standard Total Return = (1 - x)(1+ y)(1 - z) -1; where:
x = The maximum sales charge of 1.50%;
y = Sub-account total return for the year ending on the last Valuation
Period of the most recent calendar quarter; and
z = 0.2% This percentage is the maximum $35 maintenance fee converted to a
percentage of assets for the period. Such conversion assumes an average purchase
payment based: (a) on an estimated average purchase payment of $17.500, for
total return as quoted prior to June 30, 1994; and (b) for total return
quotations provided on or after June 30, 1994, on an average payment based on
Annuity sales in the prior calendar year for the applicable annuity plan for
which the initial purchase payment is under $50,000.
B. Standard Total Return 1-Year; Class II
Standard Total Return = (1 - x)(1 + y) -1; where:
x = The maximum sales charge of 1.50%; and
y = Sub-account total return for the year ending on the last
Valuation Period of the most recent calendar quarter.
C. Non-standard Total Return 1-Year; Either Class
Non-standard Total Return = Sub-account total return for the
year ending on the last Valuation Period of the most recent
calendar quarter.
D. Standard Total Return 3 Years; Class I
Standard Total Return = [(l - x)(1 + y)(1 - z)3] 1/3 1; where:
x = The maximum sales charge of 1.50%;
y = Sub-account total return for the 3-year period
ending on the last Valuation Period of the most
recent calendar quarter; and
z = 0.2% This percentage is the maximum $35
maintenance fee converted to a percentage of
assets for the period. Such conversion assumes
an average purchase payment based: (a) on an
estimated average purchase payment of $17,500,
for total return as quoted prior to June 30,
1994; and (b) for total return quotations
provided on or after June 30, 1994, on an
average payment based on Annuity sales in the
prior calendar year for the applicable annuity
plan for which the initial purchase payment is
under $50,000.
E. Standard Total Return 3 Years; Class II
Standard Total Return = [(1 - x)(1 + y)] 1/3 - 1; where: x =
The maximum sales charge of 1.50%; and
y = Sub-account total return for the 3-year period
ending on the last Valuation Period of the most
recent calendar quarter.
F. Non-standard Total Return 3 Years; Either Class
Non-standard Total Return = Sub-account total return for the
3-year period ending on the last Valuation Period of the most
recent calendar quarter.
G. Standard Total Return Inception-to-date; Class I
Standard Total Return = [(l - x)(1 + y)(1 - z)T]365/N - 1;
x = The maximum sales charge of 1.50%;
y = Sub-account total return for the period beginning on the
"inception date" (the date operations commenced) for the
applicable underlying mutual fund and ending on the last
Valuation Period of the most recent calendar quarter;
z = 0.2% This percentage is the maximum $35 maintenance fee
converted to a percentage of assets for the period. Such
conversion assumes an average purchase payment based: (a) on
an estimated average purchase payment of $17,500, for total
return as quoted prior to June 30, 1994; and (b) for total
return quotations provided on or after June 30, 1994, on an
average payment based on Annuity sales in the prior calendar
year for the applicable annuity plan for which the initial
purchase payment is under $50,000;
N = The number of days from the inception date to the last
Valuation Period of the most recent calendar quarter; and
T = The duration in years of an Annuity as if issued on the
inception date and in force on the Valuation Period of the
most recent calendar quarter.
H. Standard Total Return Inception-to-date; Class II
Standard Total Return = [(1 - x)(1 + y)]365/N - 1; where:
x = The maximum sales charge of 1.50%;
y = Sub-account total return for the period beginning on the
inception date for the applicable underlying mutual fund and
ending on the last Valuation Period of the most recent
calendar quarter; and
N = The number of days from the inception date to the last
Valuation Period of the most recent calendar quarter.
I. Non-standard Total Return Inception-to-date; Either Class
Non-standard Total Return = Sub-account total return for the period
beginning on the date operations commenced for the applicable underlying
mutual fund and ending on the last Valuation Period of the most recent
calendar quarter.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> Separate Account B Class 2
</LEGEND>
<CIK> 916725
<NAME> ASLAC Sep Acct B Class
<MULTIPLIER> 1
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 121,839,327
<INVESTMENTS-AT-VALUE> 126,290,636
<RECEIVABLES> 213,120
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,503,756
<PAYABLE-FOR-SECURITIES> 213,323
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 213,323
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 126,290,433
<DIVIDEND-INCOME> 1,567,398
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,027,070)
<NET-INVESTMENT-INCOME> 540,328
<REALIZED-GAINS-CURRENT> 10,734,545
<APPREC-INCREASE-CURRENT> 872,791
<NET-CHANGE-FROM-OPS> 12,147,664
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 41,600,090
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 87,369,724
<DEBT-CARRYING-VALUE> 97,950,868
<DEBT-MARKET-VALUE> 97,462,993
<EQUITIES> 2,637,731
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 118,197,824
<CASH> 14,199,412
<RECOVER-REINSURE> 2,167,818
<DEFERRED-ACQUISITION> 438,640,918
<TOTAL-ASSETS> 8,334,662,876 <F1>
<POLICY-LOSSES> 57,484,685
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 213,000,000
<COMMON> 2,000,000
0
0
<OTHER-SE> 124,345,031
<TOTAL-LIABILITY-AND-EQUITY> 8,334,662,876 <F2>
125,000
<INVESTMENT-INCOME> 1,585,819
<INVESTMENT-GAINS> 134,463
<OTHER-INCOME> 86,233,366 <F3>
<BENEFITS> 4,787,604
<UNDERWRITING-AMORTIZATION> 22,577,053
<UNDERWRITING-OTHER> 27,188,608
<INCOME-PRETAX> 22,584,667
<INCOME-TAX> (4,038,357)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,623,024
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Included in Total Assets are Assets Held in Separate Accounts of
$7,734,439,793.
<F2> Included in Total Liabilities and Equity are Liabilities Related to Separate Accounts of $7,734,439,793.
<F3> Other income includes annuity charges and fees of $69,779,522 and fee income of $16,419,690.
</FN>
</TABLE>
